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Bendable Business

Issue: 65 Section: Business ottawa, Kingston Topics: cooperatives, economy

December 4, 2009

Bendable Business

Cooperatives less likely to break in economic crises

by Amanda Wilson

Cooperatives have been able to use the challenging economic situation to deepen commitment to their values, not dilute them. Illustration by Heather Meek.

OTTAWA—Mondragon Internacional (MCC), the world’s largest worker cooperative, has been the focus of a lot of media coverage in recent months, inciting discussion on how worker cooperatives have been affected by, and are responding to, the global economic crisis.

On October 27, 2009 the United Steelworkers announced a framework agreement with Mondragon to develop unionized worker cooperatives in the manufacturing sector in the US. Under the agreement, both parties have pledged to develop a model that combines the collective bargaining system with the “one worker, one vote” hallmark of cooperatives. While it will not be the first time worker cooperatives have looked to unionization, the scale and formal partnership of the Mondragon-Steelworkers proposal is without precedent and could signal a way for cooperatives and unions to work collaboratively in weathering economic storms.

Perhaps even more surprising, The Economist recently published an article on how Mondragon is coping with the current economic crisis. According to the article, cooperatives can react more quickly to such a crisis because workers decide themselves to cut wages or take unpaid leave, avoiding the delays of formal negotiations with labour unions.

Mondragon is the world’s largest worker cooperative, located in the Basque region of Spain. Started in 1956 by five workers, and inspired by the work of local priest Don José María Arizmendiarrieta, it has grown into a complex of over a hundred worker cooperatives, a cooperative bank, and housing and social cooperatives. It now employs approximately 34,000 people and is one of the largest producers of domestic appliances, machine tools and automotive parts in Spain.

However, Mondragon is not your average worker cooperative, and not everyone thinks that it is a great model to look to. While many people on the left assert that the prospering Mondragon is an example of how cooperatives present an alternative business model that puts its workers above profits (it is referred to as an “empire of egalitarianism” in a September, 2009 article by Kelly and Massena in Yes Magazine), there is also growing criticism that Mondragon is straying from its cooperative principles by centralizing decision-making, developing partnerships with capitalist firms and hiring more non-member workers.

So, beyond the mammoth Mondragon, how are smaller, less powerful worker cooperatives weathering the economic crisis?

The International Organization of Industrial, Artisanal and Service Producers’ Co-operatives (CICOPA) reported that cooperatives have been more resilient in the face of the economic crisis than other business models. Based on a survey it conducted of its members, CICOPA found that while cooperatives have experienced a downturn in production and sales, they have experience almost no job losses, focusing instead on adaptation measures such as a reduction in hours or wages.

CICOPA attributes this resilience to the combination of flexibility and security of the worker cooperative model. Participating in decisions about the future of their workplace, workers—who are also owners—collectively decide what they are willing to sacrifice for the long-term viability of the business, and ensure that this is achieved equitably. By contrast, in a traditional capitalist businesses, managers and owners may simply inform workers of a decision to cut wages or hours, lay off staff or force labour concessions to save profits, leaving workers outside the decision-making but front and center in the effects of re-structuring.

The fundamental goal of cooperatives is to provide employment for members, as opposed to other business models, which seek profits or return on investments above all.

Three worker cooperatives in Ottawa and Kingston have come up with creative ways to make ends meet. Though they were not easily made, these choices have kept their cooperatives alive and, in some cases, stronger.

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A recent addition to Ottawa’s Centertown neighborhood, the Umi Cafe, is a cooperatively-run coffee shop, selling light meals and drinks, as well as hosting music and political events in the evenings.

Sergio Guerra, one of the directors of Umi, says the shop was hit hardest by the recession about a year ago when the Ottawa bus drivers strike made the economic situation all the more difficult, grinding the entire downtown to a halt. Without public transit, Umi saw fewer people coming through their door. During the worst of it—late fall and winter of last year—the worker-members faced the choice of either shutting down the business or not getting paid. Guerra says Umi didn’t loose a single worker; everyone stayed, even with low wages, because they were committed to the cooperative and their investment.

They also drew on the neighbourhood and called a meeting where they presented the coffee shop’s financial situation as well as what they needed to stay afloat. The community responded, raising the necessary funds to keep Umi alive, a testament to the solidarity built between the cafe and the neighborhood. For its part, Umi has increased the variety of its products to entice passersby into the cafe.

According to Guerra, the cooperative model—with its commitment to outreach and solidarity—was invaluable during the difficult economic times. Without support from the neighbourhood the cafe’s survival was uncertain.

They also consulted other cooperatives and received advice and support that might be unlikely from traditional competitive businesses. “Without that help and solidarity we wouldn’t have been able to do it, in other businesses it's all about competition,” says Guerra.

Also, as a co-op, it is in Umi’s interest to educate and empower its members; in return, members are committed to the survival of the business. The cooperative model helps to ensure that the perspectives of members are incorporated into the very direction the co-op takes.

Sergio says they’ve come a long way in a year: “We’ve proven that we can exist and we can grow.”

He finds humour in their difficulties, saying sometimes it feels like they are on the set of a sitcom: “We’re in season two, and its been very entertaining, not only thinking about the bottom line.”

La Siembra Cooperative, another worker co-op, manufactures and distributes organic fair trade chocolate and sugar products. La Siembra has twice been awarded the Worldwide Democratic Workplace Award by WorldBlu, a not-for-profit social enterprise offering programs, services and awards for democratic workplaces. Cailtin Peeling, the cooperative’s Marketing Communications Manager, reports that while La Siembra has been facing some challenging times, they’ve been able to use the challenges as an opportunity to explore new products and re-affirm their commitment to supporting their production partners in the South.

La Siembra was facing declining sales and stalled growth and was hit hard by the fluctuating US exchange rate. The co-op reacted by focusing its energy on areas where it was still seeing strong sales: baking products. La Siembra found that people still wanted to support organic fair trade products, but were doing so in a more affordable way.

That focus led several of their producer co-op partners to increase manufacturing capacity, allowing them to sell a higher value-added product instead of the raw materials. A producer co-op in Peru now manufactures chocolate chips to send to La Siembra, as opposed to the raw cocoa powder, allowing more of the revenue to stay with the producer in Peru. During the most difficult period, many of the workers at La Siembra took a voluntary reduction in hours.

Peeling says La Siembra has been able to use the tough economic situation to deepen its commitment to its values, not dilute them, by connecting with producer cooperative partners in new ways, and supporting the increased capacity of these co-ops to manufacture their own products. She says, “It's been a tough time but we’ve been really motivated for a longer–term vision.”

The Sleepless Goat, a worker cooperative cafe in downtown Kingston, has gone through a difficult year. While it hasn’t seen a reduction in overall sales, rising food costs and a realization that some menu items were in fact losing money, the Goat had to increase prices. Dave Burling, a worker-owner, says that while the cafe wants to keep menu prices accessible, without the increase the Goat likely would have gone out of business.

It has also been forced to make modest reductions in the number of staff working particular shifts, and has canceled its contract with overnight cleaners.

A sole owner of a business may decide it is in her interest to close up shop; however, the workers at the Sleepless Goat were committed to keeping their doors open, acting in their own collective self-interest to keep themselves employed. “Frankly, if the Goat had been a capitalist business it probably would have closed six months ago,” says Burling.

While difficult, the plan seems to have paid off: the Goat has recovered from the economic shock of last year. The cafe foresees some hurdles, including planned street closures due to construction, and the upcoming increase in minimum wage. Nevertheless, Burling is optimistic, saying that experience has shown that the cooperative model can adapt to change.

Worker cooperatives, like any businesses, are not immune to crises in the economy. They do seem to be surviving better than other business models, however. While every worker cooperative is different, the structure provides more freedom and control to adapt to a changing economic environment. What a cooperative does with that flexibility depends on its values and commitments and the strength of its community. At the very least, the cooperative structure gives workers choices in how to address the challenges they face, allowing them to take their fate into their own hands.

Amanda Wilson lives in Ottawa. She is interested in questions of alternative organizations of work and non-capitalist production and exchange models. She has an MA in Labour Studies.

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The Dominion is a monthly paper published by an incipient network of independent journalists in Canada. It aims to provide accurate, critical coverage that is accountable to its readers and the subjects it tackles. Taking its name from Canada's official status as both a colony and a colonial force, the Dominion examines politics, culture and daily life with a view to understanding the exercise of power.

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