Developing Democracy: Cooperatives and Democratic Theory

Developing Democracy: Cooperatives and Democratic Theory

This is an Author's Original Manuscript of an article accepted by Taylor & Francis Group and forthcoming in International Journal of Urban Sustainable Development. Once published, it will be

available online: http://dx.doi.org/10.1080/19463138.2014.951048.

Abstract: Impoverished communities often suffer not only from the lack of wealth, but also from a

kind of democratic deficit. To be poor means not only not having money, but also being buffeted by

the winds of fortune, with little sense of control over the major forces that commonly affect people’s

lives. As a model of development, cooperatives have been promoted not only as a model for

community wealth-building, but also as a form of empowerment due to their inherently democratic

nature. But how democratic are they, really? This paper explores this question from the perspective

of democratic theory, using a theoretical framework developed by the 19th century political

economist William Thompson, who laid out the principles on which the cooperative movement is

based. An important element of Thompson’s theory is that the cooperative structure alters the socio-

economic relations of their members, aligning their interests with one another on the basis of a

strong principle of equality. It is this alignment of interests on the basis of equality that gives

cooperatives their strongly democratic character. However, the paper finds that the democratic

nature of cooperatives is challenged by a number of factors. These include internal dynamics, such

as managerialism and size, and external dynamics such as the tensions that may arise between

workers and consumers, or between members’ interests and those of the broader community. The

existence of these tensions and dynamics means that an effective community wealth-building

strategy needs to incorporate mechanisms for the harmonization of interests and the integration of

different perspectives in a network model that promotes internal exchange and integration.

Keywords: community wealth-building, democratic theory, cooperatives, William Thompson,

empowerment, democratic practices

10,992 words

http://dx.doi.org/10.1080/19463138.2014.951048

Developing Democracy: Cooperatives and Democratic Theory

Cameron County, Texas, at the southern tip of the state, where the Rio Grande river meets

the Gulf and on the border with Mexico, has consistently been identified as the poorest or second-

poorest urban county (population over 250,000) in the nation. Cameron and Hidalgo County, its

neighbour to the west, are the only urban counties in the nation with median annual household

income of under $25,000 (for comparison, median household income in Texas is over $42,000 and

in the U.S. it is over $46,000). As might be expected, these counties also have the highest poverty

rates in the country, at over 41%. The colonia Cameron Park, which is surrounded by Brownsville

(the main city in Cameron County), has been identified as the poorest urban settlement (over 1,000

households) in the country, with median household income of under $17,000, for an average per

capita income of just $4,100 (Poverty 2009).

These statistics, dire as they are, do not tell the full story of poverty in Deep South Texas.

Poverty is not only a financial condition, but it is also a political condition. Poor people—and, more

broadly, poor communities—suffer from a kind of democratic deficit, best understood as the

inability to have a sense of control over their own fate. Poor individuals face innumerable obstacles

to escaping their condition—lack of skills and/or education, limited access to health care and legal

services, and little chance to act in a proactive manner on the basis of long time horizons in a way

that could get them to a better place. Often at the whims of unscrupulous employers, they are

economically, financially, and socially disempowered. Similarly, poor communities often find

themselves limited in choices and unable to take proactive steps to improve conditions. The standard

model of development for low-income communities involves using public subsidies to attract

employers, who usually offer mostly low-skill, low-wage jobs that do little more than replace direct

public assistance and fail to add much, if anything, to the local economic base. With little or no

meaningful stake in the city, net earnings are exported to distant corporate headquarters (and then

on to investors around the world), and little regard is given to the effects of the business on the

surrounding community. When the subsidies end, or the economic winds shift, the employer goes

Developing Democracy 3

somewhere else in search of new subsidies, and, a new hole having been made in the local economy,

the city goes in search of a new company in an effort to fill the gap and start the cycle again

(Alperovitz, 2013, pp. 53-4).

An alternative model of development, referred to as community wealth strategies,1 aims at

improving the ability of communities and individuals to increase asset ownership, anchor jobs

locally, strengthen the municipal tax base, prevent financial resources from “leaking out” of the area,

and ensure local economic stability. Such a model of development not only creates jobs, but

develops them from the ground up, drawing upon the assets—human and otherwise—of the

community and the institutions that serve it. Capital is rooted in the community, so it can’t just pick

up and go elsewhere. Further, because they are built from the ground up and strongly connected to

the community, community wealth strategies can be designed to promote a greener, cleaner,

healthier community.

While there are a number of community wealth building strategies, including community

development corporations, community development banks, various forms of public ownership, and

employee stock ownership plans (ESOPs) to name a few, this paper will focus on cooperatives.

Cooperatives may be seen as the ne plus ultra of community wealth building, because they not only

help to develop and retain wealth in the community, they also build empowerment, thereby

addressing the political aspects of poverty. Cooperatives do this because they are inherently

democratic in a way that is absent from other forms of community wealth building. This democratic

character comes out of the institutional structure of the cooperative in two ways: first in its formal

organization, which requires that all members of the cooperative have an equal voice in its

governance; but also in an informal way, by reorienting relationships within the community of

members that are based on cooperation and shared interest, rather than competition and individual

interest. This reorientation leads to a kind of “spill-over effect” that affects members’ relations in the

1 The term was coined by the Democracy Collaborative, based at the University of Maryland, which maintains

the Community Wealth website: www.community-wealth.org. See also Dubb (2005).

http://www.community-wealth.org/


broader community in various ways.

The importance of democracy can be understood in terms of the “community capitals” Flora

and Flora (2013) identify. Two key features of a community are the way it shapes the interactions of

its members and the provision of a set of vital resources that, when invested in productive ways,

become various forms of capital (10). Democracy affects communities and community capital in

significant ways. First, by instantiating a kind of political equality among members, democracy

affects their interactions. Second, it enhances the social elements of community capital—social

capital and political capital—in important ways, as will be discussed in greater detail below.

Their democratic character is a fairly common point in discussions of cooperatives and

community development.2 But it turns out that while cooperatives may be inherently democratic,

there are also inherent weaknesses and threats that tend to undermine their democratic potential.

After all, cooperatives are first and foremost economic enterprises that must be economically

successful in order to have a positive impact on the community. This may come into conflict (or

appear to) with the social and political objectives that are important to many cooperatives and to the

cooperative movement as a whole. There is also substantial diversity within the cooperative

movement itself, ranging from consumer cooperatives with millions of members, such as the

Cooperative Group in the UK or REI in the US; to multi-billion dollar agricultural producer

cooperatives that are composed of autonomous producers; to worker cooperatives that may have

fewer than a dozen employees-owners. What democracy means, and how it is embodied, will be

different in these different settings. Finally, because the members of the cooperative may only

comprise a portion of the larger community, there can develop tensions between those who are

members and the rest. The argument of the paper, then, has to do with identifying these threats,

tensions and other challenges, and presenting ideas about how they might be addressed.

The first part of this paper will examine the theoretical foundations of the cooperative

movement, as this will help to clarify how the tensions and challenges develop. The second part

2 See, e.g., Gonzales and Phillips (2013).


looks at the cooperative movement today, both in terms of its breadth and extent, and in terms of its

organization, including what it means to be a “cooperative” in today’s terms. The third part

considers the cooperative movement with respect to democratic theory, and identifies some of the

challenges that are inherent in the operationalization of that theory. The fourth section will discuss

three possible ways of addressing those problems, and the conclusion will return to Brownsville to

consider how the theory might be applied in practice.

1. The Ideological Foundation of the Cooperative Movement

The theoretical foundations for the cooperative movement were most clearly articulated in

the early 19th century by the Irish social reformer William Thompson.3 Thompson was a strong

advocate of a modified form of the cooperative community model first proposed by Robert Owen.

These cooperative, or “Owenite” communities as they are commonly known, were largely autarkic

communities of 500–2000 people that included housing, production of finished goods, agriculture,

education and childcare.4 The property of the community was owned in common by its members,

who shared both in the production necessary to fulfil their material needs and in its distribution. The

community was to be governed democratically, and all members would have to have an effective

voice in its governance.

Central to Thompson’s conception of the cooperative community is an on-going practice of

internal, indirect and informal exchange. Everyone in the community contributes in their own way

to the benefit of the community, and everyone enjoys those benefits. Thus it is a social process where

each individual may see him- or herself as acting within a network of interaction. This is similar, in a

sense, to Marx’s idea of the social process of production or the “social division of labour” (Marx,

3 Thompson was somewhat apologetic about being a member of the “idle classes,” but at the same time saw

himself as an intellectual laborer who made a productive contribution to society through his efforts

(Thompson, 1996, p. 1).

4 Thompson’s 1830 work, Practical Directions, lays out detailed plans for such communities, including the

schedule of crop rotation, construction of the housing (which would include central heating) and even health-

related concerns, including contraception (Thompson, 1830). Thompson’s plan was specifically endorsed by

the 1st Cooperative Congress in 1831 as the model for the development of cooperatives in the British Isles

(Owen, 1831).


1967, p. 132), but instead of being a secret process that “goes on behind the backs of the producers”

(Marx, 1967, p. 135), it is direct, open, and apparent to all the members of the community.

Thompson considers exchange that comes about through mutual cooperation to be indispensable for

the “evolution of morality, of beneficence” (Thompson, 1968). A system of mutual exchange

enables people to see that cooperation “is necessary to their mutual happiness: he becomes interested

in the success of their joint labours; he feels a sympathy in their exertions; his feelings are carried out

of himself…mutual satisfaction is produced, mutual sympathy is excited…a pleasurable association is

formed, and the discovery is made that the happiness of others is not necessarily opposed to our

own, but is frequently inseparably connected with it [making people] more social…more

benevolent” (Thompson, 1968, p. 50).

The key to Thompson’s system is the way that it alters the relationship between the members

of the community as compared to the liberal capitalist model. Members of the community encounter

one another not on the basis of a conflict of interests as either competitors for scarce resources or

instruments for personal gain, but as equals whose interests are aligned. This alignment takes place

through the particular structure of the institutional context in which this encounter occurs, and that

institutional structure establishes the conditions of their encounter. Within this context—the context

of the cooperative community—democracy can be understood at its most radical level, as the

enactment of equality. In other words, within the cooperative community, democracy is

instantiated not only in its formal governance, but in the everyday interactions of people, whose

relations are premised on mutuality and equality, which are developed, fostered, and maintained

through the community’s egalitarian institutional structure.

Cooperatives today, however, are quite different from the autarkic communities Thompson

envisioned. The most significant difference is that the notion of a self-sufficient community of 500–

2000 people has largely been abandoned in favour of an enterprise model in which members of the

cooperative own equal shares and democratically control the enterprise. As enterprises, cooperative


societies are independent economic entities that benefit their members through the redistribution of

surplus revenue. While the abandonment of the cooperative community model came at the loss, or

at least moderation, of some of its ideals, it has enabled the expansion of the cooperative model on a

vast scale. The advantage of the economic enterprise model is that it is not limited to small-scale

communities providing basic goods to local populations. In fact, it became possible for any kind of

economic activity to be organized as a cooperative. While its particular form may be quite different,

there can be little doubt that the size and extent of the cooperative movement today far surpasses

anything Thompson could have imagined.

In terms of their democratic character, the question of significance with regard to

cooperatives today is whether, or the degree to which, they establish the conditions for the radical

encounter of equality Thompson theorized—in other words, the degree to which they establish the

conditions for this radical democratic experience. This is not only a theoretical but also an empirical

question, because cooperatives today take a wide diversity of forms and the principles that govern

them are implemented very differently depending on the type of cooperative as well as factors such

as size and location.

2. The Modern Cooperative Movement

Two features of the cooperative movement today stand out: Its size and its diversity. Over a

billion people worldwide are members of cooperatives, according to the International Cooperative

Alliance, the apex organization for cooperative associations worldwide (ICA, 2012).5 The ICA bills

itself as “the world’s largest non-governmental organization” (ICA, 2009), with 233 member

organizations from over 100 countries worldwide. The ICA reports that, “The United Nations

estimated in 1994 that the livelihood of nearly 3 billion people, or half of the world’s population, was

made secure by co-operative enterprise” (ICA, 2012). In 2002, the International Labour

5 Founded in 1895, the ICA is one of the only working-class based organizations to have survived both world

wars and the Cold War, and was one of only three organizations given special reporter status by the U.N. at its

founding.


Organization (ILO), citing cooperatives’ role in promoting social empowerment, specifically

endorsed the cooperative as a model for economic development (ILO, 2002), and the year 2012 was

designated by the U.N. as the International Year of the Cooperative (IYC).

The movement is well-established in all of the world’s leading economies. For example,

there are over 30,000 cooperatives in the U.S., holding over $3 trillion in assets, generating over

$650 billion in revenue, and paying some $75 billion in wages and benefits to about 2 million

employees (Deller and others, 2009). In other parts of the world they are even more significant

economic actors: One out of every three families in Japan is a member of a cooperative; in

Singapore fifty percent of the population belongs to a cooperative. In Québec, 70% of the population

is a member of at least one cooperative (ICA 2012). They are also important parts of the economies

of developing nations. For example, cooperatives account for 45 percent of the Kenyan economy,

according to a recent report by the UN Secretary-General (2009). All cooperatives are expected to

adhere to a set of principles promulgated by the ICA, which define the distinctive character of a

cooperative. Not all cooperatives follow all of the principles, but they are nonetheless important in

setting out the general parameters for what can and what cannot be called a “cooperative.”

2.1 The Cooperative Principles

In 1995, the International Cooperative Alliance adopted a revised set of Cooperative

Principles6 as part of a Statement of Cooperative Identity (ICA, 2006a). The ICA reserves for itself

“final authority for defining co-operatives and for elaborating the principles upon which co-

operatives should be based,” noting that, in doing so, they also attempt to “explain how co-operative

principles should be interpreted in the contemporary world” (MacPherson, 1995, p. 5).

The Statement of Cooperative Identity reflects, if not always the reality, at least the

aspirations of the cooperative movement. It defines “the co-operative” as “an autonomous

6 At its founding in 1895 the ICA adopted a set of principles that were called the “Rochdale Principles.” These

were revised through similar processes 1937 and 1966 (MacPherson, 1995, p. 5). With the adoption of the

1995 principles, the reference to Rochdale in the title was formally removed, although some people still refer to

them by their old name.


association of persons united voluntarily to meet their common economic, social, and cultural needs

and aspirations through a jointly-owned and democratically-controlled enterprise” (ICA, 2006a).

Stated values include “self-help, self-responsibility, democracy, equality, equity, and solidarity”

(ICA, 2006a). In the white paper accompanying the Principles the ICA states that, despite the

history of revision to their principles, consistent in them is “a fundamental respect for all human

beings and a belief in their capacity to improve themselves economically and socially through

mutual self-help,” stating further that “democratic procedures applied to economic activities are

feasible, desirable, and efficient” and that “democratically-controlled economic organisations make

a contribution to the common good” (MacPherson, 1995, p. 6). The principles themselves include

the following: that membership in the cooperative is open and voluntary; democratic governance on

a one-person one-vote basis (with some caveats); that members contribute equally to the capital of

the enterprise—and control that capital democratically—and that at least some portion of that

capital is the “common property of the co-operative”; and that capital raised from outside investors

does not carry with it ownership or control rights. Additional principles call for cooperatives to

engage in educational activities, especially regarding the cooperative principles themselves, as wellas

cooperation among cooperatives and sustainable development practices (MacPherson, 1995, p. 4).

In the Statement can be seen at least the vestiges of Thompson’s principles. Over the course

of over 150 years they have been weakened, but this is not the only difference between the

cooperative movement of Thompson’s day and our own. As might be expected, over this period the

character of the movement itself, and a number of its dimensions, changed substantially.

2.2 Cooperatives todayAs the ICA points out, “The co-operative model of

enterprise can be applied to any business activity” (ICA, 2006b). In addition to their growth in

numbers, cooperatives have attained substantial diversity of form. Some classification can be made.

The most significant differentiation is based on the particular stakeholder group that constitutes its

owner/members: Consumer cooperatives, owned by those who purchase the goods or use the


services of the cooperative (including credit unions, as well as retail and service enterprises such as

grocery stores, and utilities such as electrical and telecommunications cooperatives); producer

cooperatives, which are typically primarily engaged in distribution and marketing, are owned by

people or enterprises who are engaged in producing similar goods (this includes agricultural

cooperatives, as well as independent craftspeople and artisans); and worker cooperatives, owned and

governed by the people who carry out the functions of the enterprise—i.e., the workers.7 Each of

these implement the Cooperative Principles somewhat differently.8

Of the three types, worker cooperatives may best fulfil the original intent of the early British

cooperative movement in that they address the problem of the subordination of labour to capital.

However, they have had the least success in the developed economies in part because of problems of

access to capital. In general they are fairly small enterprises with up to a few dozen members. The

one great exception, Mondragón (based in the Basque region of Spain), with 85,000 employees

around the world, is a significant departure from the norm.

Consumer cooperatives are the most directly descended from the Rochdale model and in

many ways are the “face” of the cooperative movement. As retail stores they may be the most public

(especially if “co-op” is a part of their name, like the Davis Food Co-op in Davis, California), but

they are also unquestionably the largest in terms of number of members. Over 98% of all co-op

7 The NCBA identifies a fourth type of cooperative, referred to as Purchasing/Shared Services Cooperatives,

which are “owned and governed by independent business owners, small municipalities and, in some cases,

state governments that band together to enhance their purchasing power, lowering their costs and improving

their competitiveness and ability to provide quality services” (NCBA, 2006). However, this particular type of

cooperative may be unique to the U.S., as it is excluded from the UN report’s summary of types of

cooperatives, and it is the most distant from the Rochdale model (Secretary-General, 2009). While it includes

some very significant companies—including both Ace and True Value Hardware—because these may be

thought of as pseudo-cooperatives with respect to the Principles, they can be left out here. It is unclear what

effect this might have on statistics regarding the size and extent of cooperatives in the U.S. For his sake,

Birchall identifies six basic forms: consumer, credit, agriculture, worker, housing and health. But for the most

part, at least, credit cooperatives (also known as credit unions) and housing and health cooperatives can all be

understood as varieties of consumer cooperatives focused on providing services instead of retail operations.

8 Much of what follows is based on the cooperative sector in the U.S. There are some structural differences

elsewhere, but none of these are particularly significant. What may be different is the distribution of

membership among the different categories. Although I have not seen any firm analysis of this question, the

consumer cooperative sector may be stronger in the U.S. and Britain than elsewhere.


memberships in the U.S. are in consumer co-ops, and they account for 92% of all cooperatives

(Deller and others, 2009). Again, diversity is significant: They may range from a buying club of a

few dozen people, to REI (Recreational Equipment, Inc.), one of the world’s largest cooperatives

with nearly five million members. Besides retail stores, other common forms include utilities

(especially electricity in rural areas), housing cooperatives and credit unions. In fact, about 80

million of the 120 million members of consumer co-ops in the U.S. are in credit unions.9

While consumer cooperatives may predominate, some of the best-known cooperative brands

are producer cooperatives, although most Americans would probably be surprised to learn that they

are co-ops. Some of these, including Sunkist, Ocean Spray and Land O’Lakes, are very large

companies.10 About 30% of all agricultural produce in the U.S. is handled by cooperatives, including

some 90% of all dairy. As was mentioned above, while agriculture clearly dominates this sector,

there are other kinds of producer cooperatives, including, for example, of craftspeople and artisans.

Despite significant differences in nature, what they have in common is that they are associations of

independent producers whose primary reason for coming together is marketing and distribution of

their goods.11

3. Democracy and the Cooperative Movement

The Cooperative Principles clearly state that cooperatives are to be governed democratically

on the basis of one person-one vote and, by and large, this requirement is met.12 However, this is a

9 Many members of credit unions may have no idea that the institution at which they do their banking is a kind

of cooperative, or how it differs from banks and other financial institutions. It certainly failed the mother-in-

law test: In a recent conversation it was revealed that my mother in law, someone who conforms to many of

the traditional notions of a “typical American citizen,” had no idea what a cooperative was, despite the fact

that she had worked at a credit union for several years.

10 For example, with annual revenue of over $7 billion in 2006, Land O’Lakes is the largest agricultural

cooperative in the U.S. and 38th largest overall in the world (Kashef, 2008).

11 The term “producer cooperative” is sometimes used to refer to worker cooperatives. See, for example,

Wright (2010, p. 373). In my usage, a producer cooperative is made up of independent producers for the

purpose of marketing and distribution, not for production. A worker cooperative is an enterprise owned by the

people who work there, engaged in a work of many hands (either production- or service-oriented), as distinct

from a group of independent producers.

12 An exception is agricultural cooperatives where voting rights are connected to the volume of produce


very weak standard, and it is reasonable to ask just how democratic the cooperative movement really

is. There is no direct answer to this, for two reasons. First, the answer depends on how one defines

democracy. Some consider democracy to be an electoral mechanism whereby the members of an

association (such as a state) choose representatives who will represent the interests of their

constituents within the relevant political institutions. Others argue for more participatory systems

that establish the means by which the members of the association are able to take an active role in

their governance (see, e.g., Held, 1996; Pateman, 1970). Those who hold the former view would be

inclined to accept a fairly minimal degree of participation by members, while adherents of the latter

perspective would set a much higher standard and find a much lower level of democracy as a result.

Second, cooperatives are autonomous organizations, and each one is organized differently and

operates under different conditions. This makes any evaluation of the “movement” problematic.

One point to keep in mind is that democracy comes into play in cooperatives in both their

internal organization as well as in their external relations (that is, in their relations with and impact

on the community). These interact with one another in dynamic ways. Two factors are of particular

importance with respect to democratic practices both internally and externally: size and the type of

cooperative.

3.1 Democracy in their internal organization

The democratic character of the cooperative community in Thompson’s theory comes

mostly from the relations obtained in the community itself and in the regular interactions of its

members. They would have formal political institutions, with elected boards of directors, but the

democratic nature of the community lies mostly in the deep equality of the members., Democracy,

in this context, can be understood as a principle of social interaction, whereby individuals recognize

one another as social equals and neither as instruments nor as competitors. Thompson recognizes

that not everyone is equal in an absolute or complete sense (he recognizes, for example, the

delivered by each member, but even here there are limits to how big of a differential there can be.


existence of differences in experience and ability), but they are equal as members of the community,

such that no one may exercise domination over anyone else, and no one except children is seen as

subordinate to anyone else.

One question, then, in considering how Thompson’s theory applies to the contemporary

cooperative movement is the extent to which it relies on the autarkic nature of the cooperative

community. Lacking the intensive engagement of a community in which all members live, work and

play together, modern cooperatives will clearly not have the same degree of interconnectedness

among the membership. The cooperative communities as Thompson envisioned them were easily

identifiable as communities. To what extent do today’s autonomous enterprises still constitute a kind

of “community”? In what ways, and to what degree, do cooperatives today affect character of the

relationships between the members of this “community”?

The notion of social capital provides a familiar way (in the social sciences) of discussing the

ways different forms of social organization “facilitate coordination and cooperation for mutual

benefit” (Putnam, 1995, p. 67). As Majee and Hoyt (2011) note, “cooperatives promote interaction.

This interaction enables members to use their knowledge of each other and of the cooperative to

engage in peer monitoring” (p. 51). However, not all cooperatives promote interaction—build social

capital—in the same ways or to the same degree.

Relationships between members are likely to be weaker in producer and consumer

cooperatives because there is less interaction between them. For producer cooperatives, the

cooperative often little more than an instrument through which they are able to more effectively

market their goods, and any one producer need not have much to do with the other members at all,

except when conducting business pertaining to the cooperative. The services the cooperative

provides, from soils management and seed distribution to marketing and distribution of consumer

goods, introduce important elements of interdependency that may contribute to the bonding element

of social capital, but, especially in the larger cooperatives, these services are provided by professional

managers and employees hired by the cooperative, and may or may not involve direct interaction


among members.

Consumer cooperatives, as retail establishments, may be open to members and non-members

alike, and except for a small core of people who are particularly active, members may not know who

in the store at any given time is a member or not. Relations in worker cooperatives, on the other

hand, can be expected to be much more intensive, and involve a much higher degree of

interdependence, which would tend to establish conditions to build stronger connections which

support more strongly democratic practices. That said, informal hierarchies are likely to develop

over time, as some workers gain higher status due to their long tenure and experience, or if particular

skill sets give some positions a higher status than others. Small worker cooperatives may be expected

to have very high levels of interrelation, but in a large cooperative (such as some of the Mondragón

coops), this may be quite low.

There is a general question that arises here about the compatibility of hierarchy and

democracy. Normally, a hierarchy is understood as a particular sort of distribution of power,

wherein power becomes more concentrated toward the top of the hierarchy. However, in a worker

cooperative (where the issue may be most clearly drawn), there will be a tension between the

fundamental equality of the members and the establishment of differential positions. The nature of

different functions may establish an effective hierarchy, as some functions are task-specific while

others involve coordination and cross internal boundaries. Consider, for example, bookkeeping. This

is a general task, which affords the person who performs it certain authority over others in the

company (for example, in determining the way accounts are kept, which may have some far-

reaching implications). An approach some cooperatives have taken is to rotate tasks among

employees, but there are problems associated with this that may undermine the organization, as not

everyone is equally skilled at performing certain tasks. Static assignments, however, may lead to the

development of power centres (“fiefdoms”) that undermine the democratic character of the

enterprise. Underlying this is the question of whether the members of the cooperative are effectively

able to hold other members accountable—a question similar, in many ways, to questions of public


sovereignty within a representative democracy.

Size is a significant factor, regardless of type. The larger the cooperative, the less connection

its members are likely to feel with it, the more alienated it becomes from them, the less it must rely

on member involvement and the more it must rely on professional management. While increasing

professionalization in management may have positive aspects with regard to ensuring the long-term

viability of an enterprise, it also has problematic tendencies as it leads to a class of officials whose

interests, focus and concerns may come to be different from those of the membership, and it can

loosen members’ sense of responsibility to the organization.

The question of the type of democracy is significant here, as well. For legal reasons, it may

be necessary for all U.S. cooperatives, regardless of their size or type to have designated officers and

a board of directors; in this case they are no different from Thompson’s model described above.

Despite this, they may choose to govern themselves in a highly participatory manner. But as they

grow, even a cooperative that puts participatory mechanisms of governance in place may slowly

devolve into a thin, representative model, especially with the rise of a class of professional managers

that exercises operational control. Over time, fewer and fewer members may attend meetings

relating to governance, deferring decision-making to an elected board of directors (who may defer to

the judgment of the professional managers); eventually, participation in elections may decline to a

point where only a few members are involved even at that level. 13

Bemoaning the relatively low rates of participation in large consumer cooperatives, Lambert

comes to the conclusion that the question of democracy does not hinge on the number of people

who show up for meetings or vote in elections. For Lambert, the presence of democratic procedures

is sufficient, as he considers the “essence of democracy” to be the possibility for the expression of

opposition. As long as that possibility exists, even when “the members may appear to be sunk in

13 For example, only a little more than one percent of REI’s 4.7 million members participated in a recent

election for members of the board of directors (Walker, 2011).


apathy,” the cooperative has not lost its democratic character (Lambert, 1963, p. 73).14 However,

apathy is not generally considered to be a sign of a healthy democracy, and it would at least suggest

that the cooperative does not promote the sense of interrelatedness that is essential to establishing a

democratic ethos within the cooperative.

With the exception of the so-called New Generation agricultural cooperatives, most

cooperatives maintain a level of fundamental equality built into their structure, because all members

contribute an equal amount to the capital when they join and have equal voting rights. For producer

and consumer cooperatives, members benefit proportionally based on their usage, or patronage, of

the cooperative, which means that those who have greater resources (producers who produce more

and consumers who spend more) will receive a greater absolute benefit. In this sense, then, the

cooperative will not address structural inequalities among members. If part of the point of

developing a cooperative is to attempt to address those structural inequalities, then these types of

cooperatives may not be effective—although in either case, by returning net revenue to the

community they would still be preferable to corporate development in which profits are entirely

exported from the community. Worker cooperatives, however, where pay differentials tend to be

much lower than in traditional capitalist firms, would be a much more effective means for

addressing these structural inequalities.

3.2 Democracy in their external relations

Cooperatives may be said to promote democracy in their external relations where they

contribute to a more egalitarian, open and democratic society, and also to the degree that they act as

“schools of democracy” in which members gain exposure to and experience with democratic

procedures and participation.15 The extent to which cooperatives do so will again depend on a

14 To my knowledge, no research has been done to date on member participation rates in the governance of

cooperatives.

15 I focus exclusively on consumer and worker cooperatives in what follows, mostly because most producer

cooperatives are agricultural and rural, and this paper is primarily concerned with redevelopment in urban

areas. While they may have significant social effects (they may be largely responsible for preserving the

institution of the family farm), these are less broad in scope. For considerations of space it seems prudent to


number of factors, such as their size and type, as well as their internal organization.

Writing about cooperative communities, Thompson notes that the members “have not

ceased to be members of the great general community in which they live. They take no monastic

vows of voluntary seclusion from the world.… The sympathies of such communities will be

enlarged…. By reason, by generosity, they will always seek to promote the public good”

(Thompson, 1968, p. 434). In the contemporary literature this is referred to as the “spill-over effect”

in which the democratic practices of the cooperative help to produce more civic-minded citizens and

a more participatory ethos.16 These effects include, as Pateman puts it, “the development of the sense

of political efficacy…the broadening of outlook and interests, the appreciation of the connection

between private and public interest [and] the gaining of familiarity with democratic procedures and

the learning of political (democratic) skills.” However, as she notes, obtaining these benefits requires

“higher level participation” (Pateman, 1970, p. 74).17 In other words, the spill-over effects are either

limited to those relatively few members who are able to participate at these higher levels, or the

cooperative must be organized in such a way as to enable and encourage broad-based participation.

Here again size is clearly a factor: It is simply easier to have high levels of participation in smaller

organizations (for example, through participatory, assembly-style meetings for governance and

management) than in large ones (which are more likely to rely on representative governance and

professional management).

The ability of cooperatives to build local wealth—community wealth-building—can shift the

dynamics of power within a community in a more democratic direction in a couple of ways. First, to

the extent that wealth is equated with political power, they perform a democratizing function by

addressing inequalities of wealth. Second, the cooperative itself may be able to play an important

political role as a local institution that can act in the interests of its members. As Flora and Flora

remove them here.

16 See, for example, Schur (2003).

17 It should be noted that she is discussing participation in industrial firms, not cooperatives.


(2013) make clear, in most communities, especially small cities like those found in Cameron

County, business leaders play an important role in the political life of the community. The leaders of

a successful cooperative may rightfully see themselves as community leaders, then, in a double

sense—on the one hand as leaders of the community of cooperative members (who are themselves

members of the community), and on the other hand leaders of a significant business in the

community who may have a broader impact through informal and formal social and political

institutions. Finally, the dynamics of power will be affected to the extent that local ownership in the

cooperative displaces what Flora and Flora refer to as “absentee ownership” and the power that

corporate directors with no direct connection to the community are able to exercise through their

control of economic assets (2013, pp. 161-163).

In considering the external dynamics between a cooperative and a community, the size and

type of a cooperative are again seen as significant. Consumer cooperatives, it may be assumed, are

strongly connected to their community—after all, to the degree that they are successful, they are the

community. All members of the community are welcome to become members, and the greater the

correspondence between the community and the membership, the greater the success of the

cooperative. Indeed, in the early part of the last century consumer cooperative advocates such as the

Webbs (1921) in Britain and J.P. Warbasse (1942) in the U.S. advocated for what they called the

“cooperative commonwealth” in which all production and distribution would be organized through

consumer cooperatives. Warbasse argues that, ultimately, the network of consumer cooperatives, by

and for whom the nation’s production is organized, will “substitute cooperative democracy for the

state” (Warbasse, 1942, p. 137). With cooperatives coordinating and addressing distributional issues,

the political frameworks would be recognized as superfluous and would simply wither away

(Warbasse, 1942, ch. X).

In terms of the democratization of their society, consumer cooperatives may have broader

effects than worker cooperatives since they tend to be larger, that is, they have more members.

However, they are likely to be more weakly democratic and less likely to have a direct impact on


people’s lives, because members are less likely to have a strong sense of attachment to the

cooperative, and because, unless it is comprehensive in its offerings and the only game in town, the

cooperative may be just one of several retail establishments patronized by members. Furthermore,

people more readily self-identify based on their employment (what they “do”), rather than what or

how they consume, so the sense of community fostered by consumer cooperatives may be weaker.

Because worker cooperatives are more likely to operate in a more democratic manner (being

generally smaller and having a stronger sense of shared interests) and more egalitarian in economic

terms, they are more likely to contribute to the democratization of society. However, because the

workers themselves both benefit most directly (in an economic sense) and are able to exercise full

control over the cooperative, they are, as the Webbs suggest, more likely to fall into the self-

interested logic of the traditional capitalist model (pp. 185–6), which would undermine their

democratic potential. If worker cooperatives do not do this, it may reflect more of the effects of

socialization within the culture of the cooperative than a change in the structural conditions.

Some take it on faith that cooperatives—in particular, worker cooperatives18—do contribute

to a more democratic society, but this cannot be taken for granted. Indeed, there is no particular

reason why, understood as autonomous enterprises, cooperatives would be any different from any

other sort of enterprise. What Gonzales says with respect to Italian worker cooperatives could be

said about them more generally: “Though guided by strong ethical commitments to solidarity and

democratic control, at heart, cooperatives are business enterprises dedicated to serving the collective

though the private interests of their members” (Gonzales, 2010, p. 230). As Kaswan (2013)

discusses, an ideologically-driven cooperative may develop an “oppositional character” that may in

fact alienate it from its local community (pp. 281–2). The very intensity of democratic practices in

the cooperative may lead members to develop a dismissive or apathetic attitude toward the more

diluted democratic institutions of local, state and national government; furthermore, the failure of a

18 See, for example, Wright (2010).


cooperative because of excessive emphasis on ideology over solvency may lead to members

becoming cynical or disenchanted with the idea of democracy more generally. The central point,

then, is that there is an intensity/extensity trade-off when it comes to the democratic character of

cooperatives both internally and in their impact on their communities. Size appears to be the most

significant factor. The smaller the organization, the higher the level of interaction, interdependence

and participation, and therefore the stronger effects. These members, then, might be expected to

have a larger direct impact on their community. In larger organizations the impact might be less

intense and therefore more diffuse, but spread over a larger population. Cooperative type works

hand-in-hand with size. Worker cooperatives, which are generally smaller, are likely to have a

higher degree of internal interaction and interdependence, as well as democratic participation. That

said, there is a clear and direct relationship between their size and their ability to promote the

economic development of their community. But, however large they may be, they will almost

always still be smaller than consumer cooperatives. Unless quite small, consumer cooperatives

cannot be expected to have a high degree of interaction or promote a sense of interdependence as do

worker cooperatives. The degree of democratic participation is also likely to be less, and the

economic impact on the community will likely be less.

5. Democratic Networks of Exchange

The question is whether there is a means by which some of these tensions can be resolved or

abated, so the benefits can be experienced while avoiding many of the drawbacks. The answer to this

may be in adopting a federated or network model of development. The classic example of this is

Mondragón, the large-scale worker cooperative based in the Basque region of Spain made up of 258

companies (Mondragón, 2012, p. 5). At the centre of Mondragón is the Caja Laboral, which in

addition to providing financial services and asset management provides technical support for new

and existing cooperatives. The federated structure enables Mondragón to take advantage of

substantial size, with over €33 billion in total assets at the end of 2010 (Mondragón, 2011, p. 10)

while incorporating significant levels of democratic participation at all levels. Although there have


been problems with worker apathy (Cheney, 1999), particularly in the larger cooperatives,19

according to a recent account Mondragón owes much of its success to its democratic character

(Arando and others, 2011, p. 242). However, Mondragón, while the most-often cited, is not the only

example of a successful network. In Québec, the Conseil québécois de la co-opération et de la

mutualité (CQCM) has been effective in bringing together a large cooperative movement, organized

in eleven regional development groups (Diamantopoulos, 2011, p. 18). The CQCM has been

remarkably effective at developing new cooperatives of various types, having “assisted the launch of

over a thousand new cooperatives and created or maintained over 11,000 jobs in the past 15 years”

(Diamantopoulos, 2011, p. 18).

A third model has recently been developed by the Democracy Collaborative and is centred

around the Evergreen cooperatives in Cleveland, Ohio. The so-called Cleveland Model, based at

least in general terms on the Mondragón system, is explicitly a model for the development of worker

cooperatives in an impoverished community. The Cleveland Foundation provided seed funding,

which was leveraged to obtain additional financing to develop the first three cooperatives—a

commercial laundry, a solar energy installation and home weatherization company, and a

commercial greenhouse—that are connected to one another through a non-profit organization that

acts, much like Caja Laboral does for Mondragón, as a financial hub for the network, as well as

providing basic administrative support, including in the crucial areas of human resources and

training.

Thompson’s theory suggests that a consideration of the democratic character of these three

models would take into account the way they structure the relationships among members, and

particularly in the way, or the degree to which, the different elements engage in exchange with each

other. While similar, each of these models offers strengths and weaknesses for cities like Brownsville

that may be looking to adopt a community wealth-building model that based on cooperative

19

It should also be noted that there are also issues with non-member employees, particularly in facilities outside of

Mondragón’s home base in Spain, but this falls outside of the current discussion.


enterprises.

In the first place, it should be noted that many of the primary strengths of CQCM and

Mondragón come from their size which, as discussed above, has positives and negatives. However,

if their autonomy is protected, the network model can enable small cooperatives to thrive while

enjoying the benefits of scale. However, while it may be obvious it should be noted that these

advantages only come with size, which means that they are not available until the network has

grown. Still, planners should note that, as the Cleveland model demonstrates, the network structure

can be built into the model from the beginning. In other words, rather than developing cooperatives

as independent enterprises, the network should be part of the design from the start.

The Cleveland model raises another challenge, that of paternalism, as the experts and

specialists—professional managers—at the centre of the support organization may come to exercise

control in a way that undermines the democratic nature of the cooperatives. Traditionally,

cooperatives come into existence because a group of like-minded individuals decide to pool their

resources (as producers, consumers or workers) and share the benefits that come from their united

efforts. It is, in a very direct sense, a bottom-up model of collective self-help. The Cleveland model,

however, upends this, imposing the institutional structure from above, and then bringing people into

it. The creators of the model, who may not themselves be from the community, may inadvertently

limit the degree to which community members, or members of the cooperatives themselves, are

empowered, for fear that their vision may be upset. This fear may not be unreasonable: Many

people, and especially those whose lives have been marked by a long and deep history of profound

poverty, disempowerment and subjugation, may not be used to engaging in democratic practices like

those used in most cooperatives. The democratic ethos must be learned, and the habits of

subordination unlearned. In deeply impoverished communities, the temptations of short-term gain at

the expense of long-term success may be difficult to deny. Yet the success of the cooperative depends

on the members accepting this sort of long-term vision, even at the expense of their short-term

interests.


It should also be recognized that a federation is not the same as a network. Federation

implies a coming together of autonomous units and does not imply (necessarily) any interaction

between those units beyond what may be in the interests of the members qua members. A network,

on the other hand, implies a higher level of interaction, even some level of integration. The

Mondragón and Cleveland models can be seen as federations—there are not many synergies

between a commercial laundry and a commercial greenhouse, for example—while the CQCM has

more of the features of a network. Diamantopolous notes that the CQCM built “inter-cooperative

involvements at the regional level [developing] cross-sectoral movement cohesion, vision, and

agency [and creating] a unified, modern, and developmental cooperative bloc” (p. 18). By fostering

inter-cooperative exchange, the CQCM has a stronger democratic orientation, as it promotes a

greater degree of mutuality than do Mondragón or Evergreen.

6. Conclusion

Places like Brownsville and Cameron County suffer from systemic problems. Systemic

change is required to address these problems. Traditional development strategies make it too easy for

large corporations to take advantage of the desperation of impoverished communities to extract

resources and leave the community worse off than before. As a community wealth-building strategy,

cooperatives ensure that the resources of the community stay in the community, and at the same

time they offer the potential of addressing the political deficits as well as the economic ones.

Empowerment for cooperative members may come in a number of different forms, as the

democratic practices in the cooperative may give them valuable skills as well as a sense of political

efficacy, and through its wealth-building it may help address the problems of inequality that

undermine democratic systems in many communities.

The analysis presented here suggests, however, that the empowerment potential for

cooperatives—understood as democratic engagement—varies considerably. In particular, the type

and size of the cooperatives will affect their democratic character. Other factors may also be

important. When cooperatives arise from the grassroots, they can be understood as inherently


democratic because this means a group of people voluntarily associating with one another to address

a common interest or concern, and while not guaranteed, democratic practices will generally go

hand in hand with this. However, as has been discussed, when they are developed intentionally, in a

top-down manner as a method of community development, their democratic character is not

assured. In this case, democracy itself has to be developed.

For those who seek to promote development that not only addresses the economic needs of a

community but that also wish to empower it through the development of democratic institutions, it

is tempting to consider cooperatives as a powerful solution that can have substantial effects, both

economically and politically. And so they may well be. However, as I have tried to show in this

paper, this is not guaranteed.

The network and federation models offer some valuable options for addressing the tension

between intensity and extensity for democratic practices. The real key lies in identifying ways to

attain the highest possible levels of interaction and interdependence within the cooperatives, even as

the network or federation grows and expands. The CQCM and Mondragón both offer attractive

models for large-scale cooperative systems, but of what such development can produce, not a

starting point. The Cleveland model provides a clear idea of a way to get started, although not every

community is fortunate enough to have a community foundation with as deep pockets as the

Cleveland Foundation.

Even if imperfect, there is little question that an extensive system of cooperatives—or even a

single cooperative—can have a positive effect on a community. Indeed, the U.N. refers to these

effects in their resolution establishing the IYC, noting that cooperatives, “promote the fullest

possible participation in the economic and social development of all people, including women,

youth, older persons, persons with disabilities and indigenous peoples, are becoming a major factor

of economic and social development and contribute to the eradication of poverty” (General

Assembly, 2010).


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Developing Democracy: Cooperatives and Democratic Theory

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