HOSTILE TAKEOVERS CO-OP STYLE

Okay, let’s start from the premise that, by most US standards, I would probably be considered way left of center. In fact, just about any time I read a statement by Professor Noam Chomsky—perhaps America’s most eminent left-winger—regarding social ethics and values, I can barely contain my applause and find myself thinking, “Couldn’t have said it better myself!” (No surprise, since Professor Chomsky is, among many other things, one of the world’s foremost experts in linguistics). I mean I’m not talking armed-revolution Che Guevara leftist, but certainly far enough left that if the far-right choir boys like O’Reilly, Limbaugh and Beck were to read my comments, they might certainly refer to me as “a leftwing loon” (just as I might consider them overpaid mouthpieces for corporate fascism and pandering stooges to the me-first wealth-hoarders that comprise the nefarious upper one percent).

But here in Argentina, I’ve quite often been considered (accused of being) just the opposite, a “gorilón” (literally ‘big gorilla’), the term used to describe defenders of US-type political and economic ideals (the other catch-all term here for anything the slightest bit Yankee is “neo-liberal” and it is frequently spat out like a cuss word), which are widely considered to be synonymous with economic and cultural imperialism and overall exploitation of the working class. Gorilón is also the epithet attached to just about anyone who doesn’t toe the line of the majority Peronist Party, and certainly anyone who is an opponent of the current Kirchner regime. (Guilty as charged).

Somewhere in between these two caricature-like descriptions lies the truth about me. I am clearly liberal, but try, above all, to see each situation from an individual viewpoint and issue the most objective opinion I can, within the limits of “objectivity” that each person’s own background, education and life experience permit. Which is probably why, when I received an invitation from a Facebook friend to “like” a group that supports workers’ taking over bankrupt firms they once worked for and turning them into worker cooperatives, I was immediately in two (or more) minds about it. I couldn’t “like” it, but neither could I rule out situations in which I would consider it a positive possibility for serious consideration. What concerned me most was where the idea of how this might be done was coming from, and it was coming from my own backyard, in Argentina.

In her all-encompassing arrogance and lack of self-assessment, Argentina’s President Cristina Kirchner, on more than one occasion, during her first term in office, suggested that Western leaders, including US President Barack Obama, might be taking their cue from her and her late husband (and president before her), Néstor Kirchner, in dealing with their own political and economic crises. Considering the state of impending and ongoing political and economic crisis which has accompanied her in the first year of her second term as a result of her autocratic, devil-may-care brand of governance, such suggestions seem ever more delusional, especially considering how legal insecurity in Argentina has grown in almost direct proportion to the Kirchner administration’s penchant for holding onto power at any cost.

In the trickle-down from that kind of contempt for the hard and fast rules of democracy regarding basic tenets of freedom and justice, one of the institutions that has suffered some serious blows—through land occupations, government takeovers, etc.—has been respect for private property.  So when I read that the international co-op group in question was, indeed (and incredibly) following the lead of cooperatives formed in Argentina after workers took over the installations of the bankrupt former employers, it set off alarm bells.   

What’s a Co-op? A cooperative (or co-op) is, simply defined, an independent association of people who decide to cooperate with each other for mutual benefit. Co-ops can act as non-profits in strictly social or cultural endeavors, but most often are economic institutions, nearly always based originally on some social need.

The idea of the cooperative is certainly nothing new. It’s basically a throwback to ancient tribal governance, in which so-called “primitive peoples” set up a cooperative order for their societies, a more or less (depending on the tribe) “pecking order” by which to allot jobs, duties, resources, etc., and so, maintain the peace, harmony and security of their social groups. Actual “trade” was largely external (‘non-domestic’), probably based on internal surplus and external requirements, and was for the mutual profit of the tribe. Or that is, at least, the popular anthropological theory. 

Eli Whitney, father of the Industrial Revolution

In more modern eras there have been hundreds of examples of cooperative-type social structures, but the one that is considered a classic early example of a highly successful co-op is the Rochdale Society of Equitable Pioneers.  The Rochdale Society was established in England in 1844. Like the globalization, computerization and robotics trends that are today forcing so many downsized workers to have to seek other alternatives for making a living, the nineteenth-century Industrial Revolution was doing the same thing to many of the manufacturing workers and artisans of those times. Also like many of the unemployed workers of today, who once thought their competencies would provide them with a way to make a good living for the rest of their lives, many skilled workers and tradesmen in the times of the Industrial Revolution also found themselves, all of the sudden, grossly underemployed and impoverished. The founding core of the Rochdale Society was made up of about thirty such workers around a third of whom were weavers downsized by the industrial age inventions of the likes of American Eli Whitney (1765-1825) and other stars of the industrialization era. (By the way, after inventing the cotton gin and a viable textile milling machine, Whitney himself got “downsized” through patent infringement and spent the rest of his days applying the idea of “interchangeable parts” that he had long championed to making standardized firearms and selling them to the US government for its Continental Army).

Like many other people put out of work by the newfangled equipment of the industrialization craze, the Rochdale Society wasn’t a union or guild bent on taking back what it had lost as a skilled labor force, but simply a cooperative group of individuals pooling their mental and (meager) financial resources to try and figure out how to survive in a world that had dealt them a raw and unappreciative hand. So their founding idea was a simple one: to combine their resources in such a way as to permit them to buy basic food items that they could no longer individually afford to purchase from middlemen. The method they finally struck upon was not only buying enough for themselves, but also enough to sell and thus pay for their own consumer needs. Each managed to scrape together £1.00 to buy into the venture, and, just before Christmas, opened a tiny shop with a very limited but affordable supply of sugar, butter, flour, oatmeal and candles to sell to the working public.

Why it Worked. First conceived as a mere survival tactic, the idea nevertheless quickly caught on in such a way as to make the Rochdale cooperative a sort of Industrial Revolution-style Mickey D’s. Within a very short time the co-op’s stores began to also stock more expensive high-quality items like tea and tobacco. And within a few short years, England saw the emergence of hundreds, and then, over a thousand cooperatives based on the Rochdale model.

The first Rochdale co-op store. Photo by Sacrletharlot69 via Wikipedia.

This was, however, no accident or mere stroke of luck. What was different about the Rochdale Society, in comparison with failed co-op ventures of earlier years, was that it had a strong “franchise model” based on a set of hard and fast rules for mutual cooperation that its founders laid down from the outset. These rules were called The Rochdale Principles. Some of the more salient premises of the Rochdale pact that survive today in what are considered sound bases for the establishment of successful co-ops include: open membership and general non-discriminatory treatment, motivation and rewards, democratic governance through member control, member economic participation, autonomy and independence in the co-op’s governance and operations, information transparency, provision of education and training to members, cooperation with other cooperatives, and general concern for the community.

Since that time co-ops of all kinds—from farming and electric power to finance and entrepreneurial—have been formed and have tended to have a better general track record for stability and endurance than any other type of business. Reliable studies have shown that the survival rate for new businesses in certain major economies beyond their first ten years is only about two in ten, while co-ops fair far better at four in ten. And what is, perhaps, most important about them is the self-determination that is at their core: They frequently—if not always—fill a need that neither business nor government has been willing or capable of filling. So it is that co-ops have brought such standard of living improvements as electric power, telecommunications, cheap financing and agricultural marketing and trade to segments of society which would otherwise have remained relegated to a more backward existence for much longer, because of where they ranked on the list of institutional priorities.

In my native United States, in the years since World War II, the Cold War Red Scare—in which anti-communist witch-hunts were rife—and the advent of extreme corporate capitalism and its unhealthy influence on government following the fall of the Berlin Wall, have often given cooperatives a bad rap, mostly because of paranoia about their being based  on the premise of economic democracy, which is all about fair distribution of wealth, and which is often erroneously equated with some sinister Marxist plot to destroy capitalism. It is actually a philosophy that has to do with taking economic decision-making out of the hands of a tiny élite of corporate shareholders and putting it into the hands of a much broader segment of real stakeholders, which makes it not the enemy of, but an alternative to a system that, of late, has shown serious signs of failure.

Pros and Cons. Anyway, enough with Co-ops 101: What we’re interested in here are worker cooperatives, in which, basically, an enterprise is owned and operated by those who actually produce what it makes. If that were the plan for a business starting from scratch in today’s highly entrepreneurial world, I would be all for it since, ideally, the cooperative system tends to foster a lot of things that big business is only just now learning about, after decades of arm-twisting and foot-dragging: things like cutting waste, assuming full accountability to the actual owners (the shareholders) and to the surrounding community, social commitment, respect for worker rights, social inclusion, product quality improvement for reasons other than increased profits and legal impositions, and so on, as well as the loyalty of the capital involved to the place where it is produced (i.e., a cooperative doesn’t just shut down operations in, say, Ohio or Texas, or North Carolina, in order to reopen them in a maquiladora  on the opposite side of the Río Grande, where it can get away with exploiting cheap labor, abysmal working atmospheres and much lower environmental standards. Nor does it have fat cat executives pulling down multi-million-dollar pay packages plus sumptuous perks at the top.

But that wasn’t the proposal that came my way via Facebook.

Working World. The cause I was requested to “like” by my Facebook friend was that of The Working World. And let me just say that, right off the bat, I was indeed tempted to click the LIKE button. The Working World describes itself as “a non-profit organization that provides investment capital and technical support for worker cooperatives using an innovative finance model.” The group explains how its model works as follows: “We support worker cooperatives using a finance model that puts money at the service of people, not the other way around. We help design, fund, and carry out productive projects, only requiring that cooperatives pay us back with the revenues the investments generate. As active partners, we are more motivated to ensure that these projects are successful, or in other words, that finance is only used as a tool to create real, lasting wealth for those that it serves. Upon return, all investment money is reintegrated to our locally-based revolving loan fund to be overseen by the cooperatives and the community it serves.”

So far, so good. But delving deeper into the little I could find out about the organization, I came across some articles regarding its work in the United States and the world. What particularly grabbed my attention was one posted by Steve Wong on the group’s blog in which he praised certain co-op operations that he had observed on a trip to Argentina to visit Working World affiliates (or potential affiliates). These were, according to the author of the article, “recovered businesses” which Wong describes as follows:  “For those who don’t know, the recovered businesses began as bankrupt companies that were occupied and reopened by workers after the Argentine economic crisis in 2001. While their paths have been difficult and fraught with challenges, as a movement these cooperatives have succeeded, going out of business less frequently than their traditional counterparts and serving as important anchors of employment in local communities throughout Argentina.”

The question here, however, isn’t whether or not the resulting worker co-ops have done a better job than their former employers in operating their businesses, but of how they got those businesses in the first place. And it is worthy of concern that The Working World seems to consider the Argentine “model” one that might well be worthy of replication elsewhere. “Occupation” models are a hallmark, for instance, of the current governing movement that has ruled the country for the past decade. And political as well as economic motives have been cited for at least one of the worker occupations that the group mentions: the fact that the factory in question was started in the late 1970s under the former military regime taking advantage of incentives the de facto government offered, and that its owner also took advantage of backing from the later democratic administration of Carlos Menem, the corruption and failed privatizations of which have made it a frequent target in the current administration’s efforts to buoy its own popularity levels.

But the point is not how inept or corrupt the former owners of occupied properties might have been. These are only sad or scandalous anecdotes in the process that led to their failure. What is indeed important is that any “model” that encourages the hostile takeover of private property is a dangerous precedent and one that can easily play into the power games of governments which don’t respect the law or the basic rules of democracy either.

Clearly, with what we know now about the kind of corporate corruption that has led to the world crisis that first broke in 2007, the rules of how business is done have to change. And this is also true of the noxious effects that globalization has fostered in terms of undermining worker rights and the democratic health of labor unions. But transformation needs to come through democratic channels, by encouraging, lobbying for, and demanding changes in the laws that govern business—with one such change being the placement of workers at the top of the list of a company’s creditors, so as to give them the legal clout necessary to negotiate such takeovers, while respecting the property rights of the former owner. If de facto takeovers of bankrupt businesses become the norm, then it is only one small step to businesses (and other sorts of private property) being snatched from their owners’ hands on the strength of any excuse at all, and that, to an autocratic populist government like Argentina’s current one, which has repeatedly demonstrated its bent for ignoring the law in this respect, would be a powerful temptation in dealing with its political enemies in business.