Pieces to a New System: Participatory Budgeting and Worker Cooperatives


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by Alexander Kolokotronis

 

There are alternatives: economic, political, and cultural. The trick of any ruling elite is to convince just enough people that there are no such alternatives. There is no magic bullet alternative; no singular alternative institution that by itself can transform or transcend a system. Yet, in combination, as a set, and in a network, such alternative institutions carry the possibility of both building and fomenting system-change.
           

In all likelihood a single type of alternative institution will not do the job. In fact, any one type would likely be subsumed to the logic of capitalism, and/or the State. Historically, this has been borne out in both democratic employee-owned firms and community participatory governance institutions. In the United States the former took place in the northwest where plywood worker cooperatives. These cooperatives degenerated into capitalist firms due to the combination of their great success and inadequate legal structuration. With the latter, there is the possibility of fermenting a xenophobic localism and provincialism. Thus, the importance of mapping already-existing alternative institutions.

Two alternative institutions key to societal transformation are: participatory budgeting, and worker cooperatives.

The International Cooperative Alliance defines a cooperative as "an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise." As such, a worker cooperative is an enterprise that is owned, controlled and democratically operated by its employees. Accordingly, cooperatives are generally guided by seven principles: "voluntary and open membership; democratic member control; member economic participation; autonomy and independence; education, training and information; cooperation among cooperatives; and concern for community."

According to the Participatory Budgeting Project, participatory budgeting (PB) is "a democratic process in which community members directly decide how to spend part of a public budget." Or, as put by Student Organization for Democratic Alternatives (a student group in New York that advocates for PB and worker cooperatives), PB is a democratic process wherein "people meet, discuss and propose things they'd like to see implemented and funding in their communities." Started in the Brazilian city of Porto Alegre in 1989, it is one powerful example of present-day direct and participatory democracy and governance.


San Francisco Bay Area

In charting the development of worker cooperatives and participatory budgeting it is important to start here at home.           

The United States Federation of Worker Cooperatives (USFWC) estimates there are 350 worker cooperatives in the United States. It is also estimated that forty of these worker cooperatives are immigrant-run and owned. Numerous examples of such can be found in the Bay Area.

With approximately thirty dues-paying worker cooperatives comprising the Network of Bay Area Worker Cooperatives (NoBAWC; pronounced "No Boss") the San Francisco Bay Area is a major site of democratic employee-ownership. The total amount of worker cooperatives in the Bay Area is unknown. Nonetheless, they range from radical book-publishers such as AK Press in Oakland, to cafes such as Alchemy Collective in Berkeley, to even a bakery called Arizmendi in San Francisco which has five "sister" worker cooperatives across the Bay Area.

Yet, one of the best examples of empowerment through worker-ownership can be found in the efforts of Prospera. Formerly known as Women's Action Gaining Economic Security (WAGES), Prospera is an Oakland, California based non-profit "dedicated to empowering low-income Latina immigrants through cooperative business ownership." Many find worker cooperatives are a means to tackle the feminization of poverty. As a 11 July, 2014 Yes! Magazine notes, "women comprise two-thirds of all minimum-wage workers." Of this amount, 26.2 percent are white women, while 35.8 percent and 46.6 percent are African-American and Latina, respectively. To combat this, Prospera itself has incubated five immigrant-owned and run cleaning worker cooperatives with over 100 worker-owners in total. These worker-owners earn approximately double to triple the incomes they had previously made.

The Bay Area has also seen the growing implementation of participatory budgeting. Currently three districts in San Francisco have incorporated PB. Yet, it is Vallejo -- another Bay Area city -- that is moving full steam ahead with the implementation of PB. In 2012 Vallejo was the first city in the United States to establish PB city-wide with the community deciding how to spend $3.2 million USD. PB has recently come under attack from local politicians, though. Nonetheless, there has been pushback by residents to, at minimum, keep PB as is.


New York City

There have been similar developments in New York in terms of immigrant-run and owned worker cooperatives. Specifically, this can be seen with cleaning worker cooperatives Si Se Puede!, Pa'lante Green Cleaning, Apple Eco-Cleaning, and EcoMundo Cleaning.

New York City is also home to the largest worker cooperative in the United States: Cooperative Home Care Associates (CHCA). Founded in 1985, the Bronx-based CHCA employs a staff of over 2,000 while assisting over 4,000 elderly people. Forming a partnership with 1199 SEIU, CHCA has also been a leader in building bridges between worker cooperatives and labor unions. Together they're working to promote worker-ownership, as well as institute best-practices across the home care industry.

In New York, however, another momentous development has taken place: passage of the $1.2 million USD Worker Cooperative Business Development Initiative as part of the Fiscal Year 2015 New York City budget. Setting a historic precedent, the Initiative aims to spur on the incubation of another twenty-eight worker cooperatives through the various on-the-ground incubator organizations. If successful, there will be over fifty worker cooperatives in New York City. This has included Worker-Owned Rockaway Cooperatives, or WORCs. The WORCs are an attempt to make worker cooperatives part of the revitalization process in Rockaway, Queens. Thus far, two of five worker cooperatives have been launched: a construction cooperative called Roco Mia, and a bakery named La Mies.

Simultaneously, New York has also seen a significant rise in the implementation of participatory budgeting. Only two years ago PB was used in four city council districts. Currently PB is in twenty-four of fifty-one districts, with constituents directly deciding upon the usage of $25 million USD. As pbnyc.org notes, "voting in participatory budgeting is open to all residents 16 years of age and older, removing tradition obstacles of full civic participation such as youth, income states, English-language proficiency and citizenship status." In fact, even those as young as eleven years old can participate in the neighborhood assemblies wherein residents suggest ideas and proposals. This aspect of PB has generally held up across the United States, including in Vallejo.

Chicago

PB has also slowly expanded in Chicago. Currently, PB operates in four of the fifty wards of Chicago. Due to brain cancer, teacher and popular labor leader Karen Lewis was prevented from challenging incumbent Rahm Emmanuel in the Chicago mayoral election. Her platform was expected to include participatory budgeting.

According to a 23 September, 2014 DNAinfo article "Lewis said she would call for the 'restoration of participatory democracy,' giving Chicago residents a voice in everything from the Board of Education's annual budget to the city's annual budget." Lewis went as far as to state "Instead of giving us something and saying 'Here's what it is, comment on it and we're going to do what we do anyway,' [let's have] participatory budgeting."

Lewis's speech was given at an event held at New Era Windows Cooperative. New Era underwent a profound transformation. In 2008, when it was known as Republic Windows and Doors, the business was caught in the midst of a financial scandal as its private owners attempted to fire the workers with only three-day notice. Reminiscent of the old syndicalist vision, the workers of New Era held a number of direct actions from 2008 to 2012, including a six-day sit-down strike in 2008. In aggregate, the direct actions paved the way to cooperativization. Conversion to a worker cooperative was cemented when The Working World (a cooperative revolving loan fund) stepped in, providing a loan of $665,000 USD. The conversion received wide scale media attention, including from Democracy Now!.


New England

New Era was no isolated case of business conversions to worker cooperatives. In fact, conversions are being deeply analyzed and strategized for the growth of cooperatives by various organizations across the United States. Why?

Democracy at Work Institute (DAWI) cites a 5 July, 2013 New York Times article by Gar Alperovitz. In it Alperovitz states  “Every year 150,000 to 300,000 businesses owned at least in part by boomers become candidates for employee takeovers as their owners hit retirement age. That means that over the next 15 years retiring boomers could help create two to four million new worker-owned businesses nationwide." Other organizations, such as the New York City Network of Worker Cooperatives (the New York City worker cooperative business association) and Sustainable Economies Law Center, among many more, have incorporated conversions into their expansionary outlook and strategy.           

There was also another crucial factor in the strategizing of conversions within the worker cooperative movement: Island Employee Cooperative (IEC) in Maine. With 62 worker-owners, IEC is the largest worker cooperative in Maine. From the towns of Deer Isle and Stonington, IEC was formed out of three rural Maine businesses: Burnt Cove Market, V&S Variety and Pharmacy, and The Galley. According to the Cooperative Development Institute, these businesses have provided "the community with a full array of groceries, hardware, prescription drugs, pharmacy items, craft supplies, and other goods and services."

Being one of the larger firms in the area, converting and combining into a worker cooperative was not just simply about manifesting the vision of democratic employee-ownership. Buying and converting the businesses -- which were purchased from retiring owners Vern and Sandra Seile -- was also about keeping jobs in the community. An article from 17 November 2014 from Shareable notes that "For every $1,000 spent at a food coop, $1,606 goes into the local economy." While IEC is not a food cooperative, cooperatives in general prove to be a means of keeping funds and resources in the community.

The Valley Alliance of Worker Cooperatives (VAWC) has also had a hand in conversions. According to its website VAWC has converted five "traditionally owned businesses" into worker cooperatives. VAWC contains eight member cooperatives in the area of Western Massachusetts and Southern Vermont. Solar power installation, recycling and trash, body care products, and printing are some of the industries these cooperatives are in. Boston has a number of worker cooperatives as well. This is indicated by the Worker-Owned and Run Cooperative Network of Greater Boston (WORC'N). In its directory it includes approximately fifteen cooperatives.

In January of 2014 Boston also launched the first youth PB in the United States. All city residents within the ages of twelve to twenty-five have deliberative and decision-making power over $1 million USD. This year's first ever youth PB included the decision to fund playground upgrades, art walls, laptops at schools, and sidewalks.

Nearby Boston, in Cambridge, Massachusetts, it was announced that $500,000 USD would be allocated through PB.


Jackson, Mississippi

While Karen Lewis was planning a run for mayor based, in part, on a platform of instituting participatory democracy, Chokwe Lumumba won the mayoral election of Jackson, Mississippi on such a platform. Despite raising five times less the amount of money than his main primary opponent, Lumumba was catapulted to victory through grassroots work.

Part of the Malcolm X Grassroots Movement (MXGM) (which itself calls for the creation of worker cooperatives), Lumumba pushed for a heavy dosage of participatory governance and workplace democracy. In fact, as a June 2014 Jacobin article notes, Lumumba went as far as to advocate for "the new organs of people’s power, absolute and direct democracy, to replace existing structures."

In the interview portion of the article Lumumba himself states "people should become more and more involved in reforming and changing the structures that surround them and the people that surround them — determining who handles structures, and how they should be elected, and who should be elected — until the people’s power becomes the same as, becomes simultaneous with, the development of government." Lumumba proved that one successfully run a lowly-funded political campaign based on a policy platform of building participatory governance and economic democracy. For Lumumba, participatory democracy and solidarity economy weren't meant to be a simple supplement, but the pillars of a new society.          

Lumumba died early in 2014. Nonetheless, as indicated by the "Jackson Rising: New Economies Conference," Cooperation Jackson and its parent-organization MXGM are still touting and actively seeking to build the "Mondragon of the South."


Spain

What is Mondragon? Mondragon is likely one the first names you will hear in introductory cooperative circles. Founded in 1956, and consisting of 85,000 worker-owners, Mondragon is the world's most successful worker cooperative. Based in the Basque region, Mondragon is a cooperative of cooperatives -- specifically 110 worker cooperatives across a whole range of industries. Mondragon even has its own cooperative university.  

Generating €12.5 billion EUR in revenue in 2013, Mondragon is comprised of 289 organizations and enterprises in total, though, as Mondragon states on its website, "Any company interested in joining Mondragon must already be or must become a cooperative." In being a transnational enterprise, the rate at which cooperativization occurs varies. There are varying legal and cultural conditions; many places still do not accord a legal status to cooperatives.

Speaking adequately about Mondragon, its governance structures and bodies, its unionization, and its numerous past and present ventures and projects exceeds the scope of this article. In fact, it would likely take a book, and there have been books written on Mondragon alone. Many have been overwhelmingly positive, while others have been critical, however, Mondragon has undergone internal reforms this last decade so as to spur on further participation and to stay true to its constitution as an alternative mode of production and organization.

Two important things to note with Mondragon: its connection with United States cooperative movement, and its response to market failures and difficulties. As it regards the latter, this can be seen with the failure of Fagor. Rather than responding to crisis by simply laying employees off, Mondragon retained workers of the failed firm at 80 percent of their salary while seeking to relocate them to new positions. This is in sharp contrast to the average firm, which, in an age of neoliberalism, often seeks any excuse to cut down its workforce and ramp up lean production. Since the 2008 financial crisis such can be found in both the private and public sector.

As to Mondragon's presence in the United States cooperative movement, it has its own United States office with Mondragon USA, and it has partnered with a number of organizations. This includes a partnership with the 1.2 million member United Steelworkers (USW) union. In its 2014 constitutional convention, the USW passed Resolution No. 27 on Worker Ownership and Workers Capital, which states "Our union will continue to promote and develop unionized, worker-owned Union co-ops." Mondragon has also been involved with the scaling up of the cooperative movement in Cincinnati, Ohio (In Ohio, both Cleveland and Cincinnati are pioneering a new strategy for cooperative development through, in part, utilizing their universities as "anchor institutions," which aim to hold down and create community wealth).

Mondragon is not the only worker cooperative in Spain though. According to a 7 May 2014 CICOPA (International Organisation of Industrial, Artisanal and Service Producers’ Cooperatives) article, 734 worker cooperatives were created in Spain in 2013, following the creation of approximately 500 the year before. In a 2009 International Labor Organization (ILO) report titled 'Resilience of the Cooperative Business Model in Times of Crisis,' there were "18,000 worker cooperatives employing 300,000 people." Adding the recent upsurge in launched worker cooperatives in Spain, it is reasonable to estimate that the number has increased to over 20,000.

In Spain PB has been more widely implemented than in the United States. This includes cities such as Madrid, Sevilla, and Malaga. In a mapping of participatory budgeting around the world, Tiago Peixoto notes that PB is used in over fifty cities and towns around Spain. The Participatory Budgeting Project notes in its own map that in Sevilla "From 2004-2013, residents decided on roughly 50% of local spending for their city districts, for capital projects and programs."


Emilia-Romagna Region, Italy

PB has also spread widely in Italy. Peixoto notes that in Parma "citizens have access to the information about the PB process and to all of the proposals for the allocation of the budget." There has been heavy inclusion of online features to PB with a map allowing "citizens to visualize the location of the proposed projects and to access further information about them (e.g. purpose, scope)."  Voting may be done online as well "by providing ID number and date of birth, which allows the system to identify the eligible voters (i.e. Parma residents)." In Parma citizens have two votes: "one vote for one of the projects proposed in the district of residence" and one "for projects that are considered to be of general interest."

Yet, even more notable than PB in the Emilia-Romagna region is the degree to which worker cooperatives have taken hold. According to a piece from Kent State university citing University of Bologna economist Stefano Zamagni, "about 30% of the GDP in the region and up to 60% of the GDP in some cities like Imola." The Kent State study notes that there are 8,000 cooperatives in Emilia-Romagna, and Erbin Crowell in his article "Cooperating Like We Mean It: The Co-operative Movement In Northern Italy," notes that approximately two-thirds of these are worker cooperatives.

In her article, "Financing the New Economy," Abby Scher notes that Italy "requires cooperatives, by law, to contribute 3 percent of their annual surpluses toward the loan fund of their choice to develop the cooperative sector," with this portion remaining untaxed. This is merely one example of how Italy has tailored policy around growing the cooperative sector.

 

France

As reported by The Guardian on 3 October, 2014 Paris will now open up € 20 million EUR of its municipal budget to be allocated through PB. It has also been implemented in the outskirts of Paris as well as in cities such as Poitiers.

Worker cooperatives are also on the rise in France with its new policy implementation. Leading the round of new policies is, according to CICOPA, a law favoring workers in the buyout of firms with less than 250 workers. The law has introduced a requirement to "provide information when the company owner decides to sell his business" so as to allow the workers to submit a bid. This law of "preferential right" is part of a package of policies intended to result in a "cooperative shockwave," or, in other words, the doubling of the amount of worker cooperatives in France within five years. The number of worker cooperatives in France currently stands at approximately 2,300.

 

South America: Cuba, Venezuela, and Argentina

Cuba dawned the cover of the 24th-30th March issue of The Economist. The title read "Cuba hurtles towards capitalism" with an accompanying ten-page "special report." Since then, the periodical has made little to no mention of the waves of worker cooperative conversions. According to CICOPA, between 2012 and mid-2014, 498 worker cooperatives have been approved by the Cuban government, with plans for much more. Some in Cuba see worker cooperatives as a means to revive a stagnant economy.

According to 21 November, 2014 article from Venezuela Analysis, there are an estimated 90,000 cooperatives with one million members today. Alongside this, Venezuela has seen the rise of a system of Communal Councils (CC), which bears some similarity to the ethos of PB if not even more direct control. According 30 June, 2013 article by Dario Azzellin, anywhere between 10-450 families can form a CC, depending on whether such families lie within an indigenous, rural, or urban zone. By 2013, approximately 44,000 communal councils have been setup.

Famously, in 2001, Argentina was home to a number of factory "recuperations," wherein over 200 businesses where taken over by their workers and converted into worker cooperatives. These 200-plus worker cooperatives are composed of over 12,000 worker-owners. The cooperative movement as a whole has been growing of late in Argentina as well. Also, Argentina has increasingly incorporated PB. Most significantly, this has taken place in Buenos Aires, however, more innovative efforts have been undertaken in La Plata. According to Peixoto, 30 percent of La Plata's budget is directly decided upon, while the residents are permitted to "present a list of options for the allocation of the remaining 70 percent of the budget."

 

Conclusion

Neither PB or worker cooperatives are magic bullets of change, however, in combination, they present viable alternatives to the existing dominant order. PB is only contingently part of the State, and worker cooperatives are still required to compete with capitalist firms. Yet, the contingency of the current alignment and placement of these alternative institutions allows us to analyze and situate them within a more forward-looking manner. Cooperatives have proven to weather market failures and crises better than capitalist firms, while PB constitutes a more transparent and hands-on alternative to politics as usual. As such, cooperatives and PB both prove to be alternatives that can exist right now as well as work towards the future.

A major reason for the Left to push for these alternatives institutions wholesale is that they provide the wider populace with a vision beyond hyper-individualism, manifested in politics as representative governance and in economics as individualistic entrepreneurship. The Left has not only failed in times of stability, but it has failed during times of crisis due to its inadequacy in presenting viable alternatives, let alone vision. Participatory budgeting and worker cooperatives are not simply institutions that the Left can tailor policy around, but are also institutions that can capture the public imagination when the next crisis comes. If system-change is to be achieved it is necessary that institutional alternatives are made real and tangible, especially ones that hold the potential to move us beyond capitalism and the State. Constructing alternative institutions is necessary for building experience and providing a guiding vision; these are prerequisites for practicable system change and transition. Constructing in itself is both a means of building solidarity and overcoming present conditions. In addition, overnight transformation usually wreaks of brutality and shoddy implementation; historically this has resulted in violent regression. Building and implementing alternative institutions allows us to more adequately and creatively put together a new system -- a new whole -- as its parts and pieces begin to emerge and come into place.

 

Alexander Kolokotronis is a BA/MA philosophy student at Queens College, City University of New York. He is the founder of Student Organization for Democratic Alternatives, a Worker Cooperative Development Assistant at Make the Road NY, and the Student Coordinator for NYC Network of Worker Cooperatives.This piece originally appeared in the GC Advocate of the Graduate Center of the City University of New York.

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