When we imagine ways to improve our economic leverage within the economy, the majority of people picture starting their own business, picking up a second job, or looking for ways to restructure their debt. Rarely do we consider cooperating with our friends and community members to reduce our costs on necessary goods and services, or to more broadly provide services for which we can receive compensation. Yet Cooperative businesses, or Coops, are everywhere, and in every sector of our economy.
Overview of Coops
Reaching as far back as the mid-1700s, cooperatively organized businesses and ventures have provided many advantages to those who formed them: collective purchasing power for better bulk discounts, collective bargaining power to gain fair prices for services rendered or purchased, distribution of capital expenditures to acquire the means of production for skilled labor, even creating a means of lending and supporting economic initiatives via collective credit systems. Each of these missions represent today a different type of cooperative business – and each enjoy their own privileges, legislation, and incentives.
In the modern USA, we define and regulate the use of cooperatives less consistently than in the EU – in large part due to our shorter cultural history centered around capital and expansion. Specifically, the EU has a regulatory body that oversees the operations and cross-border activities of cooperatives to facilitate a more global focus. They also prioritize principles and outcomes, meaning that cooperatives have greater flexibility in how they operate and structure themselves as compared to their USA counterparts.
In the States, we regulate cooperatives at the state level, and have very little guidance or oversight at the federal level beyond the respective entries in our tax code. This means that the founding and mission of certain cooperatives may not be feasible in a given state. Some states permit great flexibility in the establishment and operation of cooperatives, others limit their formation by industry, purpose, or financing. It is nearly impossible in a short article such as this to cover all of the nuances of state cooperative statutes – but this summary will suffice for our purposes.
Types of Coops
The form of cooperative activity with which most of us are the most familiar are agricultural producer and purchasing coops. Most astute readers will remember stories from 8th grade social studies and high school American History, regaling us with the railroad price fixing scandals of the late 1800s. Producers coops formed to create collective bargaining power with the railroads for purchase of transportation to markets. While often oversimplified, this is a form of collectively purchasing the means of “production”, and unlike a corporation did not restrict the voting power of any one farmer.
Producer coops went on to expand their missions beyond merely distributing the costs of producing and creating collective bargaining power. Because cooperatives aggregate economic value – both in the form of capital and resource – they became a means of financing the community. Collective bargaining power means that coops could negotiate better bulk pricing for supplies, equipment, and insurance. Coops began purchasing equipment for members to share, and the members’ dues each year gave the coop an operating budget.
Coops Evolved
This method of distributing economic burdens, facilitating transactions, and aggregating value was not lost on the finance world, and the predecessors to modern Credit Unions evolved in tandem with the producer cooperatives. Now individuals could pool their resources to set their own interest rates, bargain for insurance discounts, and keep the money they earned and spent within their communities.
Meanwhile, consumers liked the idea of collective bargaining and bulk purchase, and the first bulk buying coops came about to provide dairy, cheese, grains, and dry goods to people living in cities and suburbs without the same access to the knowledge for or means of production. These buying or purchasing coops are what we now know as our local CSA, coop grocery store, etc.
All together, systems of collective support and work evolved our current network of utility, farm credit, credit union, grocery, and even housing cooperatives. This form of organization exists in every business sector and in every part of our international economy.