2012 – Not Business As Usual
Could Cooperatives Become the Fastest Growing Business Model?
In his 2009 book, Lords of Finance, Liaquat Ahamed described how the finance ministers in England, France, Germany, and the U.S. struggled to maintain the gold standard following the First World War, and how their failure to recognize that they were living in a fundamentally different world than the one they had known before, contributed to the Great Depression. For over a decade they tried to sustain and resuscitate an economic corpse.
It seems we are in a similar decade today--a period of substantial co-operative opportunity. The excesses of capitalism continue to erode confidence in that model, and yet those excesses have not been adequately addressed. At the same time, the collapse of centralized government planning in the final decades of the last century is still fresh.
The time is ripe for a model that isn’t business as usual.
In addition to these economic changes, we see similarly encouraging social change.
Technology encourages collaboration and co-operation to emerge as a dominant form of action. Wikipedia, and its mischievous brother Wikileaks, are examples of co-operation for collective benefit. Facebook and Twitter are tools for forming communities with people of common interests: not just to share photos, but to achieve urgent action. This technology is also serving the uprising of people who just can’t take any more in the Middle East and North Africa. People have begun to trust everyone more than they trust anyone. “Asking the audience” gives them better results than “phoning a friend”.
Acting in this way on urgent matters daily predisposes people to the merits of the co-operative approach as a social and business model that can improve their lives.
A shift in favored economic models isn’t without historical precedence. One commentator recently pointed to a cyclical pattern in modern history indicating the ascendancy of different economic models. It might be a little Western-centric, but it reflects general truths about the dominant economic powers of the respective periods.
It’s hard today to remember that we didn’t always live surrounded by a corporate ideology, that perhaps unbridled capitalism really only began to gallop away in the 1980s in response to a perceived excessive regulatory environment that in turn was a reaction to a period during and just after the Second World War when we looked to government to take on big things.
Prior to that we witnessed a period of the flowering of co-operatives, mutuals and labor unions, which grew itself in part from a realization that the industrial revolution had come at too high a price.
It was during that heyday of co-operatism that ICA was founded, in 1895.
If we’re reading the signs correctly, and if there is some legitimacy in this cyclical pattern of reaction to excesses of the past, then we might be at the beginning of a period that has the potential to see co-operatives respected and favored. The ICA global board is beginning to explore the vision that the co-operative could become, by the end of this decade, the fastest-growing business model.
If that occurs, it won’t just happen. And if it occurs, it won’t look like the end of the XIX Century. It won’t look like today. What would have to happen for the next decade to herald this sort of opportunity?
For one, co-operation might replace consumerism as the dominant rhetoric. The prevailing business model today perceives individuals as “people who consume things.” Even the poor are seen as a business opportunity at the bottom of the pyramid: they simply consume things in smaller, more frequently purchased packages. When did we become calloused to this imagery?
The insistence on sustainability could drive this change. The threat of climate change cries out for immediate collective action and each generation feels the pressure of that urgency more keenly. There is a growing confusion or even embarrassment around being known as a consumer.
Second, a co-operative decade could be accelerated if there is an increasing demand for transparency. Co-operatives are inclined to be transparent. It is not just that our governance structure encourages this; we also have substance when you look through the lens. We benefit competitively from transparency. Our products are sustainably produced and reliably sourced. They hold up to scrutiny. As a result, in an era of transparency, the co-operative name will serve as one of the indicia of trust, both on the selling and on the sourcing end.
In this next period, co-operatives could become more global. Over time, the value we place on “local” as a proxy for “trusted” will give way to increasing confidence in globally-sourced products and services – in part, because technology will make it practical for shoppers to identify the specific source of global products. As shoppers can today in some co-operatives scan the individual meat package and see the farmer who produced it, so they will be able to do with products sourced from overseas.
It will change, too, as governments who today expect the co-operative marketing organizations in their countries to sell domestic agricultural co-operative goods come to acknowledge their inability to be food self-sufficient – and allow their domestic co-operatives to source some products from foreign co-operatives, as an acceptable policy compromise.
As a result, co-operative-to-co-operative business will grow. Already we see this emerging. The BRICS co-operatives (from Brazil, Russia, India, China, and now South Africa) have begun to meet regularly and have recently agreed to develop Memoranda of Understanding on co-operative trade. This will drive the co-operative development agenda because it will require reliable product sources and predictable market access. Co-operatives will lead this agenda, rather than respond to compromised government and IGO agendas.
Fourth, co-operatives will increasingly be seen as a solution. We will see them operating increasingly in difficult sectors. When the U.S. looked at solutions for what to do with Fannie Mae and Freddie Mac – the service organizations that were at the center of the housing maelstrom – various government agencies recommended that Congress consider re-constituting them as co-operatives. That recommendation hasn’t so far gained final approval, but the important point is that the best minds looking at one of the most daunting domestic issues facing the U.S. government recognized the co-operative with respect and as a potential solution.
Governments in country after country are acknowledging that mutuality, community, co-operation and voluntarism are welcome signposts that help show the way through the current maze. But of course that can’t be used as a pretense to allow government to abrogate its own responsibilities.
Finally, a co-operative decade would be spurred by continued recognition that the governance structure of a business really does make a difference. There is today an awareness that corporate social responsibility (CSR) is too often an attempt to add a veneer of respectability to a business model driven singularly by profit. We know that companies that adopt CSR measure their success by whether it is driving the bottom line. It’s just putting lipstick on a pig. The dynamics of shareholder returns and management incentive compensation have kept it from becoming robust. We need to remind the public that true accountability only comes from a different governance structure.
The opportunity for a co-operative decade ripens as we see these trends harden: impatience with consumerism; the insistence of sustainability; a demand for transparency, for information; global co-operation; seeing co-operatives as solutions; disgust at unprincipled excess. If disgust at the recent excesses turns to resignation or acceptance, the co-operative decade dissolves. Keep disgust alive! Demutualization should be a dirty word, akin to default and bankruptcy.
The time to shape the next quarter-century is now.
Three ways co-operatives are different
Perhaps many people unfairly think of co-operatives as small affairs run by alter-mundos with good intentions but amateurish business sense. The truth is that the co-operative is a serious business model with scale. The ICA’s Global300 Report shows that the 300 largest co-operatives in the world now have aggregated revenues of $1.6 trillion – the equivalent of the world’s ninth-largest economy. People are often surprised to learn that some very well-known names are co-operatives, including Ocean Spray, Sunkist, Land O’ Lakes, Associated Press, Ace Hardware and Mutual of Omaha.
Co-operatives are values-based: sustainability is core to this way of doing business; fair banking lies at the origins of financial co-operatives. The values are integral to the business model. They’re not a marketing strategy to provide a veneer of respectability.
The members, who benefit from the co-operative, govern it. The co-operative model ensures equality of ownership and, therefore, equality of power distribution in the enterprise. At a time when people – especially young people – are looking for a voice, when they are looking for impact, they’ll find this model is not only an effective governance model…it’s a compelling one.
It starts with increased public awareness of the co-operative as a values-based business model that can operate at scale. This is a prerequisite to actualizing this vision. We must convince the public that the co-operative is a modern business form, that it can serve a modern society. And we have to change policymakers’ perspective of co-operatives.
There are challenges ahead in rewriting the “Grand Narrative” that is collapsing. One of them concerns regulations promulgated by policymakers who can’t differentiate the co-operative governance and risk model from the excesses of the corporate form. The danger is that they could apply to co-operatives regulations intended to prevent the reoccurrence of corporate meltdowns, thereby undermining our very purposes.
Japanese co-operatives today, for example, face threats to the historical exemptions they have enjoyed from anti-competitive regulations that have allowed them to serve their members when no-one else would. The exemptions have allowed the farm co-operatives to build a network of 115 hospitals across rural Japan for underserved communities and that have allowed them to insure their members’ businesses and property.
Globally, the International Accounting Standards Board and the US-based Financial Accounting Standards Board flirt with harmonization that could sweep up co-operatives in well-intended, but misguided, reforms.
The United Nations declared 2012 to be the International Year of Co-operatives and this is a tremendous opportunity for the ICA. By using it strategically, and with a little luck, the co-operative could become the fastest-growing model by the end of this decade and we just might be able to create a blueprint that would let us pivot from a Co-operative Year to a Co-operative Decade.
Perhaps we can even create a solid enough base to change this cycle to one of permanence.
Charles Gould has been Director General of the Interco-operative Alliance since 2010. The world’s largest nongovernmental organization, the ICA unites, represents and services all cooperatives sectors in the world. The organization raises awareness, advocates policy, maintains best practices and provide technical assistance. Prior to his appointment at ICA, Gould was CEO of Volunteers of America a health care, housing and human services organized based in Washington, DC.
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