Economics professor Richard D. Wolff says workplace co-operatives, where employees help determine corporate decisions, are “the core of socialism.”

Members of the Bedford Farm Bureau Co-op Association say their organization is purely capitalist.

“As far as co-ops being close to socialism, I don’t see that connection at all,” Bedford Farm Bureau Co-op general manager Jim Shade said.

“I’m not saying I understand socialism 100%, but from what I understand, I think co-ops promote the advantages of capitalism the best – the better you can run your business and free-market your products when you sell them, the better off the business is.”

The Bedford Farm Bureau Co-op, based at 102 Industrial Ave., Bedford, includes 690 farmers who are its owners, stockholders and customers.

Each member has an equal vote to elect the co-op’s 12-member board of directors.

The co-op buys from farmers and offers products, including fertilizer to compete as an alternative to private companies. The co-op’s profits come back to members in the form of patronage refunds based on how much a member buys from the co-op.

Shade said the co-op gives farmers more power to negotiate.

“That’s one of the major goals of the co-op,” he said. “If a farmer has three suppliers of fertilizer for his business, and all of them are privately owned and for maximum profit, who helps drive that price down?

If he comes to the co-op and our goal is to lower the price to those farmers that own us, then our goal is to help keep those three private companies honest in their price and what their profit is.

“And that was truly the fundamental that started the agricultural co-ops. As we grow and get bigger, we have better buying power to buy inputs collectively better. As far as co-ops being close to socialism, though, I don’t see that connection at all.”

Socialism is a prominent theme in 2020 politics, especially in the presidential election. At President Donald Trump’s reelection rally Tuesday in Johnstown, his use of the word to describe his political rivals elicited shouts of contempt from the crowd at John Murtha Johnstown-Cambria County Airport.

But there is growing interest in a socialism-inspired business model: the co-operative.

Richard D. Wolff, a professor of economics emeritus at University of Massachusetts-Amherst, advocates a grassroots, bottom-up form of socialism that is focused on bringing democratic principles to the workplace.

His idea of socialism mirrors the standard definition of the economic system – that it is characterized by social ownership of the means of production (including cooperative ownership) and workers’ self-management of enterprises.

“And that becomes what you appeal to the working class with,” he said. “You say look, your life will be fundamentally different – and the socialist argument is fundamentally better – if when you go to work every day you have two job descriptions: one of them is to do the particular task that you are assigned that day like every other worker. But the other one is that you are a part of what runs the enterprise. You are an equal voice alongside everybody else in making the big decisions that used to be made by the minority of capitalists, but now are going to be made by you.”

Equal Exchange, a worker co-op based in Massachusetts, is the oldest and largest “fair trade” coffee company in the United States. “Fair trade” refers to the price paid to a producer in comparison to the profits made in turn by the buyer, who might refine and then resell those goods.

‘Shared resources’

In Philadelphia, Frankie Pondolph, 30, works remotely for the Equal Exchange co-op and is one of its more than 132 worker-owners. She works in the citizen-consumer department, holding events to help educate customers about what her operation is.

The co-op sells coffee, tea, chocolate, bananas and avocados supplied internationally by farmers who are also members of co-ops and are paid “fair trade” rates by Equal Exchange for their produce.

“I’m a worker/owner of equal exchange, so I own stock in the co-op – and I’m also an employee,” Pondolph said.

“In some ways, we operate like a typical business, we have a strong management structure, so I have a boss who works on my team.”

There are also vice presidents and founders, but one of the co-op’s core values is democracy, she said.

“We vote on bigger decisions,” she said.

Decisions are made by a two thirds majority of worker-owners.

“Everyone has one vote and one share in equal exchange,” she said. “It’s not like the founder of the company has more say in terms of voting and decision making than say someone like myself who has only been at equal exchange for five years. We all have one vote, one share.”

Pondolph was drawn to work for Equal Exchange for its mission of working with farmers on its supply chain.

“We build relationships with the same producers,” she said.

“We’ve been working since 1986 to connect consumers to where their food comes from.

“We’ve become, as consumers, committed to getting food cheaply and quickly. Seeing bananas from Ecuador that are five for less than a dollar, you might wonder about the people behind the product. Equal Exchange exists to challenge the mindset of easy consumerism and dig deeper into where their food is coming from.”

A main concern of Equal Exchange, she said, is consolidation or monopolization of the food system in the United States.

“You look at the merger of Amazon and Whole Foods and what that meant for the food landscape in the United States – the amount of power and control they have now, especially during the pandemic with people ordering online,” she said.

Asked about socialism, she didn’t use the term but said, “I think the values of co-ops and working together and thinking about shared resources – that’s the space I see worker-owned cooperatives and cooperatives in general being strong in, especially now during the pandemic and seeing the amount of wealth that top businesses have been able to make off the pandemic,” she said.

Pondolph said benefits of working for a co-op like Equal Exchange include a living wage, work-life balance and flexibility for scheduling and vacation time.

Growth of cooperatives

Wolff has been interviewed on NPR about socialism. With his 2019 book “Understanding Socialism,” he hoped to help overcome the negative connotations of the social and economic theory and see a new socialism emerge for the 21st century.

“Around the world and here in the U.S., we’ve had this taboo basically since 1945 – anything having to do with socialism was demonized, dismissed, and treated as somehow you were disloyal or not a good American or crazy or some combination of all those unpleasant things,” he said in an interview with The Tribune-Democrat.

“With or without socialized ownership and planning or government regulation, 21st century socialism focuses on and prioritizes something else – the transformation of workplaces from capitalism’s hierarchical internal structures to fully democratic cooperatives,” he wrote.

Wolff stressed that co-ops are not a new idea. They have long existed within the U.S. capitalist system and include credit unions, farmer co-ops and utility co-ops.

“But the speed of cooperatives’ growth has become much, much faster in the 21st century,” he said. “So for example, in 2004 an association of co-ops was organized in the United States. It’s called the United States Federation of Worker Co-ops – USFWC. It’s a functioning association. Most countries have something equivalent to that. It’s a way for worker co-ops to help each other, to do business with one another.”

With more than 200 business and organizational members representing close to 6,000 workers spanning dozens of industries across the country, the USFWC, is building a movement for democratic worker ownership, its website said.

Melissa Hoover helped start and grow the USFWC and is the founding executive director of the Democracy at Work Institute, the think-tank started by the USFWC that expands worker cooperatives as a strategy to address economic inequality.

Speaking with The Tribune-Democrat, she avoided applying the term socialism to the co-operative movement.

“There is a challenge to capitalism embedded in the cooperative form, but I would also say the form itself is embedded within capitalism at the moment,” she said. “So it’s a tough line to tread.”

She anticipated many cooperatives would not want to be framed within a context of socialism.

REA Energy co-op in Ebensburg declined an interview, not wanting to get into politics, an REA representative said.

A worker cooperative in the manufacturing industry that started about five years ago in another rural conservative state, North Carolina, also declined interviews.

“Unfortunately, being an organization that is located in a rural area, we are politely going to pass on this opportunity,” the co-op’s representative wrote in an email. “We feel, given our location, that framing our work in this light may not be strategically advantageous for us at this time. We want to continue to focus our efforts and energies on building good jobs and good companies.”

Members as investors

Hoover places co-operatives somewhere outside both capitalism and socialism. “Or inside both capitalism and socialism,” she said.

Cooperatives are “pluralistic” – with shared authority – and driven by human needs and values, not political ideology, she said.

“At the turn of the century, rural people needed electricity, so the rural electric co-ops wired this country,” Hoover said. “And that’s because nobody saw profit in doing it and the government wasn’t going to do it. So cooperatives owned by communities did that. The same is true in today’s labor market. What people need are jobs that pay them enough money to live. They need some degree of control over their work lives.”

Co-ops can be and are entrepreneurial, she said.

“They are intended to create surplus, so it’s why I resist the definition (socialist) from a technical standpoint,” she said. “But it’s also honoring the DNA of the form. It’s been true throughout history, that to the right, people sort of dismiss co-ops as socialist and to the left people dismiss co-ops as capitalist.”

Worker cooperatives exist within a capitalist economy as small businesses but operate according to a starkly different logic than investor capitalist businesses, she said.

“In investor capitalist businesses, the business’ only job – by law – is to maximize the investor’s share value,” Hoover said. “But in a cooperative, investors are the members.

“So the job of the business is not to generate profit for an outside investor, it is to maximize benefit for its members.”

Hoover said there is not just an interest in cooperatives, there is a growing need.

“I think the interest in cooperatives does signal some of the failings of late-stage capitalism,” Hoover said. “The interest in co-operatives and owning your work is a rejection of the kind of extraction and consolidation we see in Amazon, for example. They have consolidated their industry, and many industries they’ve taken over, because they are extracting people’s labor and not paying them at fair value for it.”

‘Become their own boss’

The first federal-level bipartisan legislation that highlights worker cooperatives was passed in 2018.

The Main Street Employee Ownership Act was in support of small businesses that save jobs and invest in their workers and communities by transitioning to an employee-owned business form such as a cooperative or an Employee Stock Ownership Plan, a press release said.

Wolff said worker co-ops are an option when owners retire.

“Imagine a Mr. and Mrs. Smith,” he said. “They started a company 30 years ago in, maybe, Pennsylvania. They want to retire. They employ 211 people. They hired them. They know them. They could sell to another company, but they don’t know what that new company will do to their neighbors who have been working there.

“So what’s left? People like me say there is another option.

“You could sell your business to your own employees, you could convert it from a typical capitalist business to a worker co-op. That way, your workers keep their jobs. Even better, they keep their jobs because they are going to become their own boss, that’s what a worker co-op is – when the workers are also the employers. When I tell people that’s an option, you should see their face, it’s like the sun comes out.”

Wolff said there are ways to raise money to enable the workers to buy the enterprise from the employer.

And in his book, he mentions advocacy by U.S. Sen. Bernie Sanders for legislative support that would include lending workers funds at an affordable rate to buy such enterprises.

Cooperatives in Italy and Spain show the potential for large-scale democratic, worker-owned enterprise, researchers said.

“Cooperatives in Italy have a substantial presence in all sectors of the economy,” according to research by Vera Negri Zamagni, professor of economic history at the University of Bologna and adjunct professor at the School of Advanced International Studies Europe of the Johns Hopkins University in Italy.

Contacted by email, Zamagni emphasized the pluralistic quality of the Italian cooperatives.

“Cooperatives in Italy are not only connected with socialism, but also with Catholic Social Thought and even with liberal thought,” she said in an email.

“Still today, we have three federations that mostly act together, but are based on different ideological inspirations.”

Her 2019 paper, “Why we need cooperatives to make the business world more people-centered,” discusses what she sees as the advantages of cooperatives over capitalist corporations.

Worker co-ops often face difficulty in advancing capital and operating democratically when they reach a large scale, she wrote.

Worker co-ops tend therefore to be present only in small businesses. But there is one exception, she wrote, the Mondragon cooperative corporation in the Basque region of Spain.

Wolff has been to Mondragon, he said.

“It is the most successful and the biggest worker co-op in the world,” he said. “It was started in 1956 in the town of Mondragon by a Roman Catholic Priest together with six workers. They started a co-op. Fast forward to today. The Mondragon Corp. is one of the biggest corporations in all of Spain.”

Mondragon has four divisions: finance, industry, retail and knowledge, its website says. It currently consists of 96 self-governing cooperatives, more than 81,000 people. It is the leading business group in the Basque Country and the 10th-largest in Spain.

“I’m not advocating worker co-ops in the naive idea that this is nirvana, that this is everything perfect. None of that,” Wolff said. “But I prefer the problems I think worker co-ops have to the kinds of problems capitalism has displayed to me.”

Promise, with contradictions

Wolff said problems he foresees with a fully democratic economy include questions that have no easy answer.

“What happens when a person rides on the work of another?” he said. “What happens if we have a cooperative but we are not cooperating?

“How are you going to work out the relationships between worker co-ops on one hand and the communities in which they exist on the other? If you are going to really talk about democracy, well then the people in the community who are affected by what the enterprise does or doesn’t do need to have some say ... And I don’t know how that is going to work.”

Hoover also pointed to Mondragon as an example of the promise and the contradiction of operating a large-scale worker-owned enterprise in the global economy.

But when Mondragon employed overseas factories to stay competitive at their scale in the global economy, those values were tested, she said.

“Those workers in those overseas factories often don’t have access to the same rights and membership opportunities as the Mondragon workers in Spain, and that’s part of the problem in being caught up in global capitalist manufacturing,” she said. “It’s based on being able to pay workers in other parts of the world that make less money a lower wage.”

Despite the cooperative business’ potential to reframe socialism and erase its taboo, as Wolff advocates, Hoover avoids loading co-ops with labels – socialist, capitalist or other.

“I think in all of those cases, it’s really missing the point that it’s just flawed human beings creating an economic system,” she said. “There’s nothing magic about it.”

Russ O'Reilly is a reporter for The Tribune-Democrat. Follow him on Twitter @RussellOReilly.

 

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