Cooperative Economics

From Cultivate.Coop

Cooperative economics is a field of economics, co-operative studies, and political economy, which is concerned with Cooperatives.


Notable theoreticians who have contributed to the field include Robert Owen,[1] Pierre-Joseph Proudhon, Charles Gide,[2] Beatrice and Sydney Webb,[3] J.T.W. Mitchell, Peter Kropotkin,[4] Paul Lambart,[5]Jaroslav Vanek,[6]David Ellerman,[7] Race Mathews,[8] David Griffiths,[9] and G.D.H. Cole.[10] Historical co-operative movements, such as the Rochdale Pioneers, have also contributed to the field.

Co-operative federalism versus co-operative individualism

A major historical debate in co-operative economics has been between co-operative federalism and co-operative individualism. In an Owenite village of cooperation or a commune, the residents would be both the producers and consumers of its products. However, for a co-operative, the producers and consumers of its products become two different groups of people, and thus, there are two different sets of people who could be defined as its 'users'. As a result, we can define two different modes of co-operative organisation: Consumer cooperatives, in which the consumers of a co-operative's goods and services are defined as its users (including food co-operatives, credit unions, etc.), Worker cooperatives, in which the producers of a co-operatives goods and services are defined as its users. (Some consider worker co-operatives, which are owned and run exclusively by their worker owners as a third class, others view this as part of the producer category.) .

This in turn led to a debate between those who support Consumers' Co-operatives (known as the Co-operative Federalists) and those who favor Producers Co-operatives (pejoratively labelled ‘Individualist' co-operativists by the Federalists[11] ).[12]

Co-operative Federalism

Co-operative Federalism is the school of thought favouring consumer co-operative societies. Historically, its proponents have included JTW Mitchell and Charles Gide, as well as Paul Lambart and Beatrice Webb. The co-operative federalists argue that consumers should form co-operative wholesale societies (Co-operative Federations in which all members are co-operators, the best historical example of which being The Co-operative Group in the United Kingdom), and that these co-operative wholesale societies should undertake purchasing farms or factories. They argue that profits (or surpluses) from these co-operative wholesale societies should be paid as dividends to the member co-operators, rather than to their workers.[13]

Co-operative Individualism

Co-operative Individualism is the school of thought favouring workers' co-operative societies. The most notable proponents of this latter being, in Britain, the Christian Socialists, and later writers like Joseph Reeves, putting this forth as a path to State Socialism.[14] Where the Co-operative Federalists argue for federations in which consumer co-operators federate, and receive the monetary dividends, rather, in co-operative wholesale societies the profits (or surpluses) would be paid as dividends to their workers.[13] The Mondragón Cooperative Corporation are an economic model commonly cited by Co-operative Individualists, and a lot of the Co-operative Individualist literature deals with these societies.

Please note that these two schools of thought are not necessarily in binary opposition a priori, and that hybrids between the two positions are possible.[13]

Other schools

Retailers' cooperatives

In addition to customer vs. worker ownership, retailers' cooperatives also utilize organizations of already constituted corporations as collective owners of the produce.

Socialism and anarchism

Socialists and anarchists see society as one big cooperative, and feel that goods produced should be distributed equitably to all members of the society, not necessarily through a market. All the members of a society are considered to be both producers and consumers. Socialists tend to favor government administration of the economy, while anarchists favor decentralizing power, either locally, or through labor unions and consumer associations.

Utopian socialists feel socialism can be achieved without class struggle and that cooperatives should only include those who voluntarily choose to participate in them. Some participants in the kibbutz movement and other intentional communities fall into this last category.

Legal Contract Theory and Neoclassical Concepts

Over several decades, some theorists have addressed the concern of "ownership of the firm," restoring the human rights-related notion of human beings at work beginning with the premise of legal status in a democracy. The argument is related to the philosophical perspective of Immanuel Kant in which human beings cannot legitimately be objectified as means to someone else´s ends. David Ellerman refers to the concept as the "labor theory of property." He in particular has since extended the analysis to orthodox, neoclassical economics and the basic equation of economic production, Q= f(K,L). Ownership rights to the component variables have been implicitly applied according to conventional assumptions of corporate firms. Upon analysis and explicit identification of these variables and the additional socioeconomic barrier confounding factors, however, the orthodox philosophical position is demystified and the viability of alternative, democratic ownership contracts is philosophically demonstrable within the terminology of orthodox, neoclassical economics.

Capitalist Regulation

Capitalist regulation theory articulates the origin and necessity of societal institutions as a result of production relations.[15] For co-operative economic philosophy, the work provides an excellent philosophical basis for understanding the role of society´s governmental organizations.

Social Economics

Economic philosophers have been concerned with various social dimensions of economics excluded by the assumptions of earlier systems like Adam Smith's. The 18th Century thought of Thomas Malthus and John Stuart Mill included important social considerations, as did the work of Sismondi.[16] Many modern heterodox economists could be included in this category, including Michel Chossudovsky´s "globalization of poverty," James Crotty´s "market-led stagnation," William Dugger´s "corporate hegemony," Warren S. Gramm´s "breakdown of law," Michael Hudson´s "superimperialism," J.K. Galbraith and his concept of "countervailing power," and Thorstein Veblen´s work.

Solidarity Economics

The modern response to modern practices of exploitation, particularly by corporate executives and those supported by them, has lead to new crisis and opportunities among employees and a fresh definition of democratic work by Latin American philosophers and activists. The sequence of crises marked by such dynamics as national and international socioeconomic inequities and injustices lead to the founding of groups in Latin America such as the MST Brazilian Landless Movement in 1979[17] and the Recovered Factory Movement in Argentina in 2001. In response to international financial policies aligned with nationalist privileged groups through the World Economic Forum, World Bank/IMF, and World Trade Organization circles, the World Social Forum was founded by Latin American and European activists in 2001. Representatives of democratic organizations and enterprises then advanced existing efforts to define an inclusive and participatory movement for co-operative enterprise, entrepreneurship, and activism in terms of Solidarity Economics.[18]

Fair Trade Certification

International commodity markets have conventionally suffered from price swings involving at least supply and demand dynamics, along with socioeconomic and political factors. Negotiations in the late 19th Century lead to early commodity agreements to manage supply with minimal success. The founding of the U.N. after World War II lead to new rounds of negotiations.[19] At the level of entrepreneurial social enterprise, efforts at the end of the war also included efforts to improve terms of trade for artisans by groups like Ten Thousand Villages and Oxfam, and by the 1970s already included small farmers. By the 1980s, the difficulties faced especially by small scale coffee farmers as a result of price volatility and inequities in the supply chain lead to innovation by social entrepreneurs of a religious and non-profit organization.[20] These social entrepreneurs established the certification of commodities produced according to criteria which provided terms according to social accounting calculations, including sufficient levels of payment, income, services, co-operative organizing, and community development payment.[21] By at least 2004, efforts to relate co-operative economic theory to international fair trade systems dynamics had begun.[22]

Ecological Economics

All economic philosophy and social science addresses the behavior of the human biological species and its unique cultures and its elaborate use of natural resources, elements of which have been acknowledged by foundational philosophers including Aristotle, Adam Smith, Thomas Malthus, Karl Marx, and John Stuart Mill. Most recently, theorists building largely from preparatory work by Kenneth Boulding and pioneering work by N. Georgescu-Roegen, E.F. Schumacher, and Herman Daly have begun to recognize the role of ownership concepts, such as employee and community ownership.[23] The discipline of ecosocialism has also been advancing.[24] With the differential histories of the physical and biological sciences, economic theorists in the late 19th Century were exposed first to the more sophisticated concepts of mechanical physics. They began to develop their philosophical mathematics according to this bias, which was convenient for economic enterprises.

Environmental consciousness has developed along several paths, including European and US birding societies, conservationists, and industrial pollution. In the early 1990´s an International Congress in Paris on nature protection resulted from the organizing efforts of various established associations and pioneered the modern issue at the international level. Other landmarks were reached when advocates formed the IUCN in 1948 with UNESCO involving biologist Julian Huxley, 1970´s Earth Day, and then the 1972 UN Stockholm Conference.[25]

Ecological economics has resulted from the incorporation of the laws of the hard sciences into economic philosophy, identifying concepts beyond the previously established field of environmental and natural resource economics. With the work of pioneering scholars like Herman Daly and Robert Constanza, two major events occured in the 1980s as the World Bank opened an environmental department and the International Society of Ecological Economics was founded.

Black Political Economics

Some theorists with a focus on underserved, economically disadvantaged, or Afro-American U.S. communities have already recognized the development and potential contribution of the co-operative business model to community development in the U.S.[26]

Stakeholder Capitalism

Thought by corporate management theorists had achieved a breakthrough by R.E. Freeman by 1984 in which broader stakeholder involvement in economic enterprises began to gain new academic recognition. Diverse kinds of societal and shareholder members are impacted by economic activity, and participatory, co-operative strategies can be identified from pension funds, non-profit organizational campaigns, whole cost accounting indicators, and employee-owned firms.[27][28]

Social Constructionism

Developed by social scientists and philosophers considering the diverse social psychological elements in social phenomena, its application to co-op economic philosophy provides an multidisciplinary approach. Selected conceptual categories for analysis include “cognitive liberation,” “public discourse,” and “frame alignment.”[29] A variation formulated by scholars in international relations theory is called "social constructivism."[30]

Religious Thought

Theological influences to co-operative economic philosophy are foundational to the discipline, given capitalism´s basis in Western Christian thought. The Rochdale Pioneers, although working men, were associated with one or more churches.[31] The conceptual father of the Mondragon Co-operative Corporation was Padre Jose Maria Arizmendiarrieta, an Catholic priest following a non-conformist thought process.[32] Buddhist thought has been employed by E.F. Schumacher, while Gandhi´s Hindu-influenced ideas provides another well known example.[33]

Co-operative Commonwealth

In some Co-operative economics literature, the aim is the achievement of a Co-operative Commonwealth; a society based on cooperative and socialist principles. Co-operative economists - Federalist, Individualist, and otherwise - have presented the extension of their economic model to its natural limits as a goal.

See Also

Further reading


This page originally adapted from Wikipedia's page on Cooperative Economics.[1]

  1. Owen, Robert, "A New View of Society" (originally published in 1813/1814), in Gartrell, V.A. (ed.), "Report to the County of Lanark / A New View of Society", Ringwood: Penguin Books, 1970.
  2. Gide, Charles; as translated from French by the Co-operative Reference Library, Dublin, "Consumers' Co-Operative Societies", Manchester: The Co-Operative Union Limited, 1921
  3. Potter, Beatrice, "The Co-operative Movement in Great Britain", London: Swan Sonnenschein & Co., 1891.
  4. Mutual Aid: A Factor of Evolution (1902), Freedom Press, London, 1988 Edition; isbn 0-900384-36-0
  5. Lambert, Paul; as translated by Létarges, Joseph; and Flanagan, D.; “Studies in the Social Philosophy of Co-operation”, (originally published March 1959), Manchester: Co-operative Union, Ltd., 1963.
  6. Vanek, J. 1970. The general theory of labor-managed market economies. Ithaca, NY: Cornell University Press.
  7. Ellerman, D. 1972. Introduction to normative property theory. Review of Radical Political Economics 4(2 Summer): 49–67.
  8. Mathews, Race, "Building the society of equals : worker co-operatives and the A.L.P.", Melbourne: Victorian Fabian Society, 1983.
  9. Charles, Graeme, and Griffiths, David, “The Co-operative Formation Decision: Discussing the Co-operative Option”, Frankston: Co-operative Federation of Victoria Ltd., 2003 and 2004
  10. Cole, G.D.H., “The British Co-operative Movement in a Socialist Society: A Report for the Fabian Society”, London: George Allen & Unwin Ltd., 1951., and Cole, G.D.H., “A Century of Co-operation”, Oxford: George Allen & Unwin for The Co-operative Union Ltd., 1944.
  11. Lewis, p. 244.
  12. This analysis is based on a discussion by Gide, Charles; as translated from French by the Co-operative Reference Library, Dublin, "Consumers' CoOperative Societies", Manchester: The Cooperative Union Limited, 1921, pp. 192-203.
  13. 13.0 13.1 13.2 This analysis is based on a discussion by Gide, Charles, pp. 192-203.
  14. Reeves, Joseph, “A Century of Rochdale Cooperation 1844-1944”, London: Lawrence & Wishart, 1944.
  15. Aglietta, Michel.Italic text A Theory of Capitalist Regulation: The U.S. Experience. New York, NY: Verso, 1999.
  16. Mark A. Lutz. Economics for the Common Good: Two Centuries of Economic Thought in the Humanistic Tradition. 1999.
  17. Joao Pedro Stedile, "Landless Battalions," New Left Review, 15, May, 2002.
  18. Paul Singer, "The Recent Rebirth of the Solidary Economy in Brazil," University of Coimbra, Portugal, 2001,
  19. Michael Barratt Brown, Fair Trade (London: Zed, 1993).
  20. Nicholls, Alex and Charlotte Opal. Fair Trade: Market-Driven Ethical Consumption London: Sage 2004.
  21. Marlike Kocken, “Sixty Years of Fair trade,” European Fair Trade Association, November, 2006,
  22. Anna Milford, “Coffee, Co-operatives and Competition: The Impact of Fair trade,” Michelsen Institute of Development Studies and Human Rights, 2004,
  23. CASSE, Enough is Enough: Ideas for a Sustainable Economy in a World of Finite Resources, Center for the Advancement of the Steady-State Economy, 2010.
  24. Costas Panayatokis, "Working More, Selling More, Consuming More: Capitalism´s Third Contradiction," in Leo Panitch and Colin Leys eds. Socialist Register 2007: Coming to Terms With Nature. 2007.
  25. Boardman, Robert. International Organization and the Conservation of Nature. Indiana University Press, 1981.
  26. Curtis Haynes Jr. and Jessica G. Nembhard, “Cooperative Economics- A Community Revitalization Strategy,” Review of Black Political Economics, Summer 1999, 47-71.
  27. William Greider, The Soul of Capitalism. New York: Simon & Schuster, 2003.
  28. Corey Rosen, John Case, Martin Staubus. Equity: Why Employee Ownership is Good For Business. Harvard Business Press, 2005.
  29. Klandermans, B. “The Social Construction of Protest and Multiorganizational Fields.” In A.D. Morris and C.M. Mueller eds. Frontiers in Social Movement Theory. New Haven, CT: Yale University, 1992.
  30. Wendt, A. Social Theory of International Politics. Cambridge, UK: Cambridge University, 1999.
  31. Landis, B. Y. Bethlehem and Rochdale: The Churches and Consumer Cooperation. Chicago, IL: The Cooperative League of the U.S.A., 1944.
  32. William Whyte, Making Mondragon: The Growth and Dynamics of the Worker Cooperative Complex, ILR Press, 1991.
  33. Ishii, K., “The Socioeconomic Thoughts of Mahatma Gandhi: As an Origin of Alternative Development,” Review of Social Economy, 59:3, Sept. 2001, 297-312.