Article 81: Cooperatives 101 Part 1: What Are Cooperatives and Why Do They Matter
Opening: The Problem with Extraction
Every day, money flows out of our communities. It leaves through corporate chains, online retailers, and investor-owned businesses. The profits disappear into distant shareholders' pockets, never to return. Our neighborhoods grow poorer while distant investors grow richer.
This is not accidental. It is how capitalism works. Extraction is the engine. Communities are the fuel.
There is another way. Cooperatives keep wealth circulating locally. They put decision-making in the hands of the people who actually use the business. Workers, consumers, neighbors; all have a voice. All share in the benefits.
Cooperatives are not charity. They are not utopian dreams. They are practical, proven businesses that exist right now, in every state, in every sector. Millions of Americans already belong to cooperatives. You probably do too, and do not even know it.
This is the first of five articles on cooperatives. We will cover the basics here. Then we will dive into worker cooperatives, consumer cooperatives, housing cooperatives, and platform cooperatives. By the end, you will understand not just what cooperatives are, but how to start one in your own community.
What Is a Cooperative
A cooperative is a business owned and controlled by the people who use it. These people are called members. Each member has one vote, regardless of how much money they invested. This is the core principle: one member, one vote.
Contrast this with a traditional corporation. In a corporation, voting power depends on shares owned. One share, one vote. The person with the most shares controls everything. Workers have no say. Customers have no say. Only shareholders matter.
In a cooperative, the business exists to serve members, not to maximize returns for distant investors. Profits are either reinvested in the business or distributed to members based on their use of the cooperative, not their investment.
The Seven Cooperative Principles
The international cooperative movement has agreed on seven principles. These guide cooperatives worldwide:
- Voluntary and open membership: Anyone can join who can use the cooperative's services. No discrimination.
- Democratic member control: Members control the cooperative through voting. One member, one vote.
- Member economic participation: Members contribute equitably to capital. They control that capital. Profits are distributed based on use, not investment.
- Autonomy and independence: Cooperatives are self-help organizations controlled by members. If they partner with other organizations, they maintain democratic control.
- Education, training, and information: Cooperatives educate their members, elected representatives, and employees. They share knowledge about cooperation.
- Cooperation among cooperatives: Cooperatives serve members best by working together through local, national, and international structures.
- Concern for community: Cooperatives work for sustainable development of their communities through policies members approve.
These principles are not abstract ideals. They are practical guidelines that thousands of successful cooperatives follow every day.
Why Cooperatives Matter Now
We face multiple crises. Climate change accelerates. Wealth inequality reaches historic levels. Communities fracture as jobs disappear and main streets empty. Mental health suffers as people feel powerless over their economic lives.
Cooperatives address these problems directly. They keep wealth local. They give people democratic control over their work and consumption. They build community resilience. They prove that business can serve people instead of extracting from them.
Research shows cooperatives are more resilient during economic downturns. They are less likely to relocate or close because members live in the community. They make decisions based on long-term stability, not quarterly returns.
Cooperatives also reduce inequality. By distributing profits to members and paying fair wages, they narrow the gap between owners and workers. In worker cooperatives, there are no owners separate from workers. Everyone owns together.
Types of Cooperatives
Cooperatives come in many forms. The main types are:
Worker cooperatives: Owned and controlled by the people who work there. Each worker-member has a vote. Profits are shared among workers. Examples include cheese factories in Wisconsin, tech companies in California, and cleaning services in New York.
Consumer cooperatives: Owned by the people who buy from them. Grocery co-ops, credit unions, and outdoor gear cooperatives like REI are consumer co-ops. Members get dividends based on purchases.
Housing cooperatives: Owned by residents. Instead of owning individual units, members own shares in the cooperative that owns the building. They have the right to occupy a unit. Common in New York City and other urban areas.
Producer cooperatives: Owned by producers who join together to process or market their products. Agricultural cooperatives are common examples. Farmers pool resources to buy supplies or sell crops.
Platform cooperatives: Digital platforms owned by users. Ride-share apps, freelance marketplaces, and social networks can be structured as cooperatives. This is an emerging field with huge potential.
Multi-stakeholder cooperatives: Include different types of members. A food cooperative might have worker-members, consumer-members, and producer-members all participating in governance.
We will explore each type in detail in subsequent articles. This article focuses on the fundamentals that apply to all cooperatives.
Common Misconceptions
Many people have never heard of cooperatives, or have wrong ideas about them. Let us clear up common misconceptions:
Misconception: Cooperatives are charities or nonprofits
Reality: Cooperatives are for-profit businesses. They differ from corporations in ownership and governance, not in their ability to make money. Many cooperatives are highly profitable. They just distribute profits differently.
Misconception: Cooperatives cannot scale
Reality: Some of the largest businesses in the world are cooperatives. Mondragon Corporation in Spain employs over 80,000 workers across hundreds of cooperatives. Ocean Spray, Land O'Lakes, and Ace Hardware are all cooperatives. Credit unions serve over 130 million Americans.
Misconception: Democratic decision-making is too slow
Reality: Cooperatives make decisions efficiently by delegating day-to-day operations to managers. Members vote on major decisions and elect boards. Many cooperatives report faster decision-making because workers on the ground have authority to act.
Misconception: Cooperatives are only for certain industries
Reality: Cooperatives exist in every sector: agriculture, manufacturing, retail, healthcare, housing, finance, technology, art, and more. Any business can be a cooperative if the people involved choose that structure.
Misconception: Starting a cooperative is too complicated
Reality: Starting a cooperative takes work, but the steps are clear. Many organizations provide free or low-cost technical assistance. Cooperative laws exist in most states. The path is well-trodden.
The Economics of Cooperation
Cooperatives work because they align incentives. In a traditional business, owners want low wages and high prices. Workers want high wages. Customers want low prices. These interests conflict.
In a cooperative, these groups are the same people. Worker-owners want fair wages and a successful business. Consumer-owners want quality products at fair prices and a store that stays open. The conflicts do not disappear, but they become internal discussions rather than adversarial negotiations.
This alignment produces different behaviors. Cooperatives tend to:
- Pay workers better relative to profits
- Reinvest more in local communities
- Make decisions for long-term stability over short-term gains
- Treat customers as members rather than targets
- Share information transparently with members
Studies show worker cooperatives have higher productivity than conventional firms. Workers who have a stake in outcomes work differently. They solve problems instead of hiding them. They suggest improvements. They train each other well.
Consumer cooperatives build loyalty that conventional businesses cannot match. Members who have a voice and share in profits return again and again. They tell friends. They defend the cooperative during hard times.
Legal Structures
Cooperatives need legal recognition. Most states have cooperative corporation laws. These provide the framework for democratic governance and member ownership.
Some cooperatives organize as LLCs with operating agreements that specify democratic control. Others incorporate under specific cooperative statutes. The best choice depends on your state and your specific situation.
Federal tax law recognizes cooperatives under Subchapter T of the Internal Revenue Code. This allows cooperatives to avoid double taxation by distributing profits to members as patronage dividends, which are taxed only once at the member level.
You do not need a lawyer to start a cooperative, but legal advice helps. Many states have cooperative development centers that provide low-cost or free assistance. The key is documenting your democratic structure clearly in your founding documents.
Real Examples: Cooperatives Already Working
You do not have to imagine cooperatives working. They are everywhere:
Credit unions: If you bank at a credit union, you already belong to a cooperative. Credit unions are financial cooperatives owned by depositors. They return profits as better rates and lower fees.
REI: The outdoor gear retailer is a consumer cooperative with over 23 million members. Members receive annual dividends based on purchases.
Ocean Spray: The cranberry cooperative includes over 700 farmer-members across the United States and Canada.
Land O'Lakes: This farmer-owned cooperative is one of the largest agribusinesses in the world.
Ace Hardware: The world's largest hardware retailer is a cooperative owned by independent hardware store owners.
Equal Exchange: A worker cooperative selling fair trade coffee, chocolate, and tea. Workers make decisions democratically and share profits.
Evergreen Cooperatives: A network of worker cooperatives in Cleveland, Ohio, creating living-wage jobs in low-income neighborhoods.
Cooperative Home Care Associates: The largest worker cooperative in the United States, employing over 2,000 home care workers in New York, Bronx, and Philadelphia.
These are not experiments. They are established businesses proving the cooperative model works at scale.
Get Started: Your First Steps
You do not need to start a cooperative today to benefit from this knowledge. But if you want to move from learning to doing, here are concrete first steps:
1. Identify a cooperative you already belong to
Do you bank at a credit union? Shop at REI? Buy from a local food cooperative? You are already a cooperative member. Learn about your existing cooperatives. Attend a member meeting. Vote in board elections. Understand how your voice matters.
2. Find cooperatives in your area
Search for local cooperatives. Food co-ops, worker co-ops, housing co-ops. Visit them. Talk to members. Ask about their experiences. Most cooperative members love talking about their businesses.
3. Connect with cooperative organizations
The United States Federation of Worker Cooperatives (usfwc.coop) provides resources and networks. The National Cooperative Business Association (ncba.coop) serves all types of cooperatives. Many states have cooperative development centers offering free technical assistance.
4. Read cooperative bylaws
Ask a local cooperative if you can see their bylaws. This document shows how democratic governance works in practice. You will see voting procedures, membership requirements, profit distribution. This is the blueprint.
5. Gather interested people
If you want to start a cooperative, find others who share your interest. Cooperatives require multiple members. Start with conversations. Host a meeting. Explore shared needs. Is there a business that would serve your group well as a cooperative?
6. Attend a cooperative training
Many organizations offer introductory workshops. The Democracy at Work Institute offers training for worker cooperatives. Cooperative development centers host regular sessions. Online resources abound.
7. Start small
Your first cooperative does not need to be a factory or a bank. It could be a buying club. A shared tool library. A childcare cooperative. Small cooperatives teach the principles that scale to larger ventures.
Resources
Organizations:
- United States Federation of Worker Cooperatives: usfwc.coop
- National Cooperative Business Association: ncba.coop
- Cooperative Development Institute: cd.coop
- Democracy at Work Institute: datus.coop
- Federation of Southern Cooperatives: fsc.coop (focus on Black farmers and cooperatives)
Books:
- "Owning Our Work" by Stephen Dubofsky and Karen Pittelman
- "The Cooperative Solution" by Tessa Altman
- "We Own the Future" edited by Kate Khatib and others
- "Survival Strategies of Worker Cooperatives" by Virginie Perotin
Online:
- Cooperative.com (NCBA resource hub)
- Worker.coop (USFWC resource hub)
- Grassroots Economic Organizing: geo.coop (news and analysis)
Closing: Cooperation Is Natural
Cooperation is not radical. It is natural. Humans survived by cooperating for thousands of years. The extractive capitalist model is the historical anomaly, not the cooperative one.
When we build cooperatives, we are not creating something foreign. We are returning to something familiar. We are building businesses that serve people. We are keeping wealth in our communities. We are practicing democracy in our daily economic lives.
The next article covers worker cooperatives in detail. We will explore how workers can own their workplaces, make decisions together, and build businesses that serve them instead of distant shareholders.
For now, notice the cooperatives around you. Recognize that another world is not only possible; it already exists. Your task is to find it, learn from it, and build more of it.
The revolution will be cooperative. Or it will not come at all.