What Is A Co-op And Why Should You Care?

September 4th 2015

Bill Kilby

You have probably walked by your local food co-op or, quickly used an ATM at a credit union, or maybe you have heard mention of cooperatives by Sen. Bernie Sanders (I-Vt.). However, you may not be aware of cooperatives' history in social justice and community rebuilding. For example, just last year New York City agreed to invest $1.2 million in worker-owned enterprises, as they’ve become a “postcrisis development model” for communities devastated by Hurricane Sandy.

How cooperatives work.

The largest wave of U.S. cooperatives operated throughout the 1960s and 1970s, as an outgrowth of that period’s robust counterculture. However, cooperative businesses still exist in many forms: credit unions, publicly owned utilities, nonprofit corporations, and even community supported agriculture all borrow traits from worker cooperatives. Many function so seamlessly that we take them for granted, or we mistake them for conventional businesses. A 2014 study from the University of Wisconsin found that there are nearly 30,000 varieties of cooperative enterprises doing business in the U.S. today, paying out an estimated $75 billion in annual wages. Political economist Gar Alperovitz estimates that 120 million Americans do some form of business with cooperatives.

So how do they function? Basically, cooperatives are democratic workplaces where each employee has an equal say in management decisions and profits are shared equally among worker-owners. Joining a co-op usually requires a small investment to support a cooperative’s capital needs (for example, ovens for a cooperative bakery), along with a large investment of time and energy to keep a co-op practically sustainable. In return for taking on the hard work of collaboratively managing a business—from fundraising and marketing, to production and sales—co-op members receive a vote in determining company policies governing wages, benefits, division of labor, and everything else.

How cooperatives work for social justice.

Although cooperatives surged in the wake the of Civil Rights and anti-war movements, they’ve been employed as a tool for social justice in the U.S. since the 1800s. Professor Jessica Gordon Nembhard has extensively documented the role of cooperatives in the Black struggle for civil equality; from the Underground Railroad, to W.E.B. Du Bois’ call for “racial economic cooperation,” to the co-op organizing work of civil rights leaders such as Ella Baker and Fannie Lou Hamer, cooperatives have served as a means of Black economic development and empowerment in spite of lasting institutional discrimination.

More recently, black organizers in Jackson, Mississippi founded Cooperation Jackson to foster cooperative development and “economic democracy” for those disenfranchised from living-wage employment opportunities. This summer rap artist and activist Killer Mike (Michael Render) expressed his support for social justice through cooperative-like methods in an interview with Tavis Smiley. "[I]f you want to see change, then you have to start to focus economically on how can we change our communities," Render said. "How can we self-segregate our dollar? How can we get one million Black people in one weekend to take $100 and move it to one Black bank? That’s what I’m interested in seeing."


Cooperatives also hold tremendous appeal for income inequality activists: the average pay ratio between the highest- and lowest-paid worker-owners in cooperatives is between 3:1 and 5:1, with minimum cooperative pay typically higher than the local minimum wage. Contrast this with the average CEO to lowest-paid worker pay ratio of 600:1 in corporations. Cooperatives can also create affordable community assets where corporations find it unprofitable. In Greensboro, North Carolina, residents created a cooperative grocery store to replace the corporate chain that skipped town, and in Cleveland, Ohio, Evergreen Cooperatives is selling affordable homes to its members.

Cooperatives vs. competitive economics.

While the structural benefits of cooperatives are easy to understand, the effort required to nurture one from scratch should not be underestimated. Making decisions democratically takes more time than it does for chief executives to make unilateral policy. Fundraising is also a significant obstacle, as commercial banks are disinclined to lend to community enterprises, meaning that co-ops must typically rely on small contributions to slowly scale up. Additionally, business law in most states is ill-suited for worker cooperatives, rendering them ineligible for certain opportunities such as government contracts. Only last week did California amend its corporations code to allow for worker cooperatives, joining merely eleven other states which recognize co-ops.

However, recent examples have demonstrated that co-ops can survive even in crowded markets like New York. For communities willing to do the work, co-ops may be an effective option for creating social and economic opportunity.

Interested in developing your own cooperative? Check out these resources: