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Can cooperatives help us create an equitable economy?

Can cooperatives help us create an equitable economy?

By Salvador Menjivar | LinkedIn | Twitter

Salvador is Beneficial State Foundation’s Executive Director based in Oakland, CA.

There are many different types of cooperatives in the U.S. and some have been more successful than others in establishing roots in the communities where they reside. Contrary to popular narratives, co-ops are as American as apple pie, and they have a long history in the United States.

In 1752, Benjamin Franklin founded the country’s first federally-recognized cooperative business—the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Moreover, by refusing to ensure houses not up to fire safety standards, the company set new criteria, which would eventually be incorporated into building codes and zoning laws, for housing safety.

Cooperatives also played a key role in the South for enslaved Africans and African Americans seeking to build lives for their families following the Civil War. W.E.B. Du Bois often spoke of cooperative economics in his work, and recognized the Underground Railroad as a co-op in which abolitionists shared resources to help enslaved Africans escape. Vigilance committees within the Underground Railroad provided food, clothing and shelter, and raised revenue so these resources could be readily available for runaways. Additional cooperatives were later established to help build wealth within Black communities, such as the Freedom Quilting Bee in Alberta, Alabama, which helped African American women earn money collectively, enabling its members to purchase land and a factory. Ownership of their labor allowed some of the women to make enough money to purchase their freedom from sharecropping.

Contrary to popular narratives, co-ops are as American as apple pie, and they have a long history in the United States.

Today, co-ops are defined as legal entities created and operated with the intention of benefiting their members. There are multiple cooperatives structures which are commonly used today: consumer co-ops, worker owned co-ops, employee owned businesses, and real estate co-ops.

REI is a well know consumer co-op, where people come together to buy products at better prices. Worker-owned coops are increasing, but still rare in the U.S.; according to some sources there are just over 300.

Alabama Freedom Quilting Bee, Encyclopedia of Alabama

Employee Stock Option Plans (ESOP) are slightly different than co-ops—cooperative structures grant each member or worker-owner an equal share of the business AND an equal vote in decision-making, regardless of pay or seniority. In the case of an ESOP employees are granted the option of acquiring company stock, usually at a discounted prize. However, the objective of an ESOP is usually to reward employees for the growth and profitability of the business, not to create a distrusted ownership of the company. Kelly-Moore Paint is one of the most widely-recognized companies with an employee stock ownership program.

Real estate co-ops facilitate the ownership of housing by members, making property ownership more affordable. For example, the NYC Real Estate Investment Cooperative (NYC REIC) consists of more than 400 members who “are pooling their money and power to secure space for community, small business, and cultural use” in New York City. In California, the East Bay Permanent Real Estate Cooperative was born out of a collaboration between the People of Color Sustainable Housing Network and the Sustainable Economies Law Center. The East Bay Real Estate Cooperative is “designed to remove land from the speculative market, create permanently affordable housing and commercial space…and assert democratic control into the development process in the face of mass displacement in the Bay Area,” says Chris Tittle, Director of Organizational Resilience at the Law Center.

Some of the most successful co-ops in the U.S are financial co-ops, also known as credit unions, and they can provide a great alternative to traditional big banks. Credit unions are not-for-profit institutions that either invest profits back into the organization or distribute profits among members as dividends in the form of earned interest. Technically, credit unions are owned by their account holders, known as members. As not-for-profit institutions, credit unions pay no state or federal taxes, meaning they can charge lower interest rates than banks for most financial services. Today, more than 100 million Americans are members of credit unions in the U.S.

It’s time for a new economic system—one that balances the needs of all its stakeholders.

Co-ops offer great hope for addressing one of the biggest problems of our current economic system: the concentration of wealth among a shrinking number of investors in big corporations and banks. From 1979 to 2007, “paycheck income of the top 1 percent of US earners increased by over 256 percent.” During the same period of time, “the bottom 90 percent of earners saw little increases to their average income, with a dismal 21 percent increase from 1979 to 2015.

Stagnant wages in the U.S. are just one of many factors that have made home ownership a lofty goal for countless working-class families. Homeownership remains a significant driver of wealth in the United States, which is why many housing rights advocates are looking at collective ownership models that make home ownership a possibility for people who have historically been excluded from the housing market. In general, co-ops offer an opportunity for communities to reimagine what ownership looks like with a lense towards equity.

Cooperatives represent a solution that can help increase ownership within untapped communities, build generational wealth, and foster economically resilient neighborhoods. A robust and innovative co-op movement is one of the keys to an equitable economic system that abandons models which value profits over people and the planet. It’s time for a new economic system—one that balances the needs of all its stakeholders, including workers, community, the environment, and even investors.

This blog post reflects the author’s personal views and opinions, and does not represent the views and opinions of Beneficial State Bank and/or Beneficial State Foundation.