Could Workers’ Cooperatives Tackle Global Poverty?
Poverty can be understood as an expression of extreme inequality, and one of today’s pressing challenges is the growing divergence in income between individuals worldwide. In 2022, the poorest half of the world’s total population shared just 8.5% of global wealth, a disparity that has doubled over the last 20 years, continuing to push more individuals under the poverty line every day. However, experiments with self-management organizational models known as workers’ cooperatives proved to bear potential in countering prevalent trends of inequality, while providing positive externalities that markedly improve the livelihood of communities, regions and nations at large.
What Are Workers’ Cooperatives?
A workers’ cooperative represents an organizational structure where the workers collectively own and democratically govern an enterprise. The first registered workers’ cooperative dates back to 1844 England, with the Rochdale Equitable Pioneers. Today, workers’ cooperatives have become a global phenomenon, operating across various sectors of the economy, and encompassing enterprises of various scales that can range from being composed of as few as two members to as many as tens of thousands. However, the fundamental objective of all workers’ cooperatives remains to establish optimal working conditions that enhance the quality of life for workers and their surrounding communities, being founded on collective ownership with each member afforded an equal place within the corporation and equitable pay.
The most prominent cooperatives today include Emilia-Romagna in Italy, Suma Wholefoods in London and Mondragon in Spain. Enduring the test of time, cooperatives’ structures maintain open membership, democratic control, profit-sharing mechanisms and an ability to mobilize reserve funds for security during economic downturns, making them more resilient than other organizational models.
A Federation-Wide Experiment
The largest example of an economy based on workers’ cooperatives was the Yugoslav self-management model, where the entire economy was composed of cooperatives. Workers in each cooperative exercised self-management and were represented in the wider economy through each corporation’s workers’ council. While over time the Yugoslav model deteriorated, the former republic was able to consistently maintain a Gini indicator — a statistical measure quantifying income inequality and economic concentration — of under 0.25 throughout the 1950s and 60s.
Between 1952 and 1965, Yugoslavia’s workers’ directed economic system also achieved the fastest economic growth rate in the world, outpacing the growth in output of every other state at the time, while keeping inequality markedly low throughout the federation.
Workers’ Cooperatives Today
Currently, the Basque region is home to the most successful example of a workers’ owned and directed enterprise. Mondragon Cooperatives is currently the world’s largest worker-owned and managed cooperative in the world. In 2012, Mondragon accounted for 3.7% of total employment in Spain and accounted for 3.6% of GDP while maintaining an income ratio of 9:1 between the CEO and the cooperatives’ lowest-paid worker.
Mondragon significantly improved livelihoods in the Basque region, insulating it from prevalent poverty rates in Spain through contributions to local employment, pay and equality through processes of workplace democracy and profit reinvestment. The conglomerate even grew to become the seventh largest business in Spain in terms of both sales and the number of workers, in addition to being one of the top 10 places to work in Europe.
Furthermore, studies from workers’ cooperatives in the U.K., Québec and Italy have testified to the correlation between broad-based employee ownership and higher productivity rates, improved overall firm performance, higher survival rates and greater employment stability. The studies also pointed to positive externalities that workers’ cooperators bear to their local communities including improved education, reduced poverty and greater equality.
Looking Ahead
In the current struggle against wealth inequality, one can learn much from the Yugoslav self-management experiment as well as today’s burgeoning cooperatives. Contemporary states are provided with an alternative organizational model with the potential to generate more equal societies that demand little to no compromise on economic productivity.
– Nadia Asaad
Photo: Flickr
