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Please begin with an informative title:

Separating Utopian Goals from Working Models.

In Part 1 (DailyKos, AMC, Is a Non-exploitive Economy Based on Worker-Owned Cooperatives Possible, http://www.dailykos.com/..., Sun Jul 24, 2011) we analyzed the dynamics of developing a cooperative economy as an alternative to a competitive capitalist economy. Under Capitalism, economic growth is based on competition and the accumulation of monetary profit. This is increasingly proving to be an unsustainable form as money is accumulated in the hands of a few at the expense of the general well-being of global society.

Currently 100 million people are members of 47,000 cooperatives in the United States. Globally cooperatives employ more than 100 million people and have over 800 million members. While still part of the private ownership capitalist model, a cooperative economy is rooted in the democratic wishes of the workers (people power vs. money power) and might eventually provide a transition toward an economy based on societal cooperation to maximize the use of material goods for all. In other words, creating goods and services people want (fixing the bridges, cleaning up the air, providing good schools) for society in general instead of amassing individual monetary wealth for a few.

Since cooperatives are still subject to the dictates of the capitalist society under which they operate, most worker-owned and managed cooperatives vary to a greater or lesser degree from the “pure” cooperative model.  While some of these variations can be explained by the particular situation of a particular cooperative –the type of enterprise, the needs and wishes of the worker-owners, etc. and do not threaten the democratic or equitable nature of the cooperative, most of the deviations are determined by regulations/laws of the particular state or country and the competitive capitalist environment in which the cooperative has to operate.  

Two different models of cooperative networks:

This post (part II of the article) will compare: 1) The state sponsored model in Venezuela where funding and regulations that define cooperatives originate in the political process and 2) the Evergreen Initiative private sector model in Cleveland, Ohio which uses a network of existing industries and community nonprofits to drive cooperative development.

Because of its importance as a model to the overall development of cooperative networks, we will also refer back to the Mondragon Model in Spain which was discussed generally in Part 1 and in detail in an excellent diary by T Pau in the AMC (Mondragon Miracle, sun Jul 3l, 2011,http://www.dailykos.com/...).

This piece analyzes how each model deals with the major problems that are barriers to the development of a cooperative economy within a capitalist economy. The point is not to judge, at this juncture, the superiority of one model over the other, but to see how different models are affected by and operate in practice given the economic and ideological environment in which they have developed.

1) How do the different models raise capital for economies of scale?

To have a fully developed cooperative economy, the major industries must be worker-owned and managed. Worker/producer coops breakdown into those that produce commodities which are capital intensive, and those that produce services, which are generally labor intensive. Obtaining the capital and economies of scale necessary for capital intensive projects is one of the major problems the cooperative movement has faced.  Original accumulation of capital that financed the industrial revolution was a combination of primitive accumulation through exploitation of the transatlantic slave  trade, and of imperialist exploitation of cheap raw materials and resources in third world countries, first in Latin America, then in Africa and finally, in the Middle East.  

Since the current global economy is controlled by the Multinationals and banks through financial institutions such as the World Bank, the International Monetary Fund and the World Trade organization, new models of economic development must develop new sources of financing if they don’t want to be absorbed into the existing capitalist model.

2) How much control do workers have over their workplace?

While the cooperative movement is innately oriented toward democracy and principles of social cooperation, many people confuse the movement for worker-owned enterprises with worker-managed enterprises (cooperatives). Many conservative capitalists are eager to encourage worker-ownership (Employee Stock Ownership Plan) as a way to bust unions, provide incentives to increase production and worker and capital retention (workers-ownership profits are tied up in their retirement plan and cannot be accessed until they retire). In most cases, the workers do not own a majority of the stock and share stock ownership with outside (non-worker) shareholders for whom profit is still the primary motive.  Even as owners, they generally do not manage their plants and have no control over policy decisions (to move a plant to another country) or the hiring and firing of workers.

Cooperatives, on the other hand,  are defined by the International Cooperative Alliance’s Statement on Cooperative Identity as “autonomous associations of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through jointly owned and democratically controlled enterprises.” Anarcho-syndicalists suggest that, unlike profit oriented enterprises, cooperatives which are worker-owned and managed enterprises, where each worker owners one share and has one vote, will create a transformative economic form that could replace a capitalist system based on profit accumulation.  Based on the ideas of economic democracy and voluntary cooperation without class conflict or labor exploitation, anarchists focused on organizing from the ground up, establishing locally managed cooperatives, further linked through confederations of unions, cooperatives and communities.

3) How can a cooperative model compete with global capital in a free market economy?

As capitalist corporations have grown into multinationals, creation of maximum profit is based on financial aspects only.  Buying and trading of corporations and stock become further and further removed from the production of actual commodities. Profit becomes abstracted from the underlying real economy. Management increasingly ties wealth and profit to “money wealth” at expense of the wealth creation based on producing products and services people want made under humane, democratic conditions.  Considerations for a safe commodity of value, for retaining an experienced workforce do not apply. With the increased domination of financial capital, CEOs go for immediate, short-term maximization of profit by cutting workers at plants to increase the cost benefit ratio and moving plants and outsourcing jobs in pursuit of cheap labor. profits.

Cooperatives offer a much more grounded way of encouraging democratization in the work place, stabilizing the workforce by emphasizing the group ethos over the individual.  Since the “stakeholders” are the workers, it is in their interests to make the actual product they produce successful.  This stabilizes the economy from the productive end.  Instead of maximizing money profit, it maximizes the use value of the goods produced—that is, the workers are rewarded by improving goods, keeping the enterprise solvent. In worker-owned cooperatives the orientation is toward building profitability by emphasizing the  use value for the workers as a whole rather than monetary value for an individual.   Instead of chasing around the globe looking for bigger monetary profits, cooperatives tend to focus on their local economy, where their life is. The workers’ goals often include a sense of how their work fits into the community.  They buy from other local producers, they are concerned about the education their kids will get in local schools, they are concerned about how their workplace effects the environment and the health of their neighbors. The shift in direction from financial profit for a few to the value of the enterprise to all the workers helps locally developed cooperative communities resist the pull of profit driven capitalism.

Intro

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VENEZUELA: THE STATE MODEL

There were 181,000 cooperatives officially registered in Venezuela as of the end of last year—an astonishing figure that puts the South American nation at the top of the list of countries in the world with the most cooperatives. Over 99 percent of Venezuela's cooperatives have registered since President Hugo Chávez Frias took office in 1999.

The cooperative boom is key to the shift by the Venezuelan government towards an economy based on the inclusion of traditionally excluded sectors of society and the promotion of alternative business models as part of its drive towards what Chávez calls “socialism of the 21st century.”

The Venezuelan model most closely follows the Marxist model which says that any new economy must get political control of the State if it is to succeed.  While the Bolivarian revolution was not a complete revolution in the Marxist sense, Chavez’s democratically elected government controls a majority of the National Assembly, has the authority to govern based on a new constitution which was written and passed by a majority of the citizens of Venezuela and which contains a number of socialist principles of equity and  citizen participation.  The Chavez government also has control of the major productive industries (oil, cement, etc.) as well as the support of the military (as was seen when the United States attempted to overthrow Chavez in a military coup).

Because of this unique situation, the Bolivarian government has the ability to institute and fund, through the public sector, a large scale cooperative movement which was first addressed extensively in the AMC by Justina (Sun Apr 17, 2011 at 05:31 PM EDT, http://www.dailykos.com/...).

History:

At the time that Chavez was elected in 1998, poverty had been on a slow but constant rise since the middle half of the century. Its capital, Caracas, is surrounded by poor barrios that house almost half of its population of nearly 5 million in substandard conditions. Under externally imposed neo-liberal policies, Venezuela's poor were left with few options in a society that former vice-minister of popular economy (MINEP) Juan Carlos Loyo, described last year as “profoundly individualistic ... profoundly unequal, and discriminatory.”

The cooperatives created under the Bolivarian cooperative law did not come about in isolation.  Venezuela already had a strong cooperative movement which developed under the influence of liberation theology (part of the impetus of the Mondragon cooperative movement in spain). One example is  CECOSESOLA which started as a funeral co-op in the late 1960s and now has over 300 associated workers, 20,000 associated members, and is composed of over 80 cooperatives (savings, agricultural, production, civil associations, organizations, and a puppet crew).

“The goal is transformation,” says long-time CECOSESOLA organizer, Gustavo Salas Romer, “The economy is secondary.” Unlike the Bolivarian government cooperatives, however, the early cooperatives were self-financed without help from government or charities.
During the pre-Bolivarian 1970s, co-op members were labeled subversives, the cooperative was infiltrated by agents from the Venezuelan secret service. The struggle destroyed many co-ops.  When Chávez was elected, members of CECOSESOLA along with dozens of Venezuela's nearly 800 cooperatives began to push hard to get co-op norms established in the new Constitution.

Special Law of Cooperative Associations in 2001.

This law made it easier to form cooperatives, and, in the words of former Cooperative Superintendent (SUNACOOP) Carlos Molina, “transformed cooperatives into a fundamental tool of social inclusion,” targeting the poorest and least educated members of society.  

Why cooperativism? “Because cooperativism goes further than purely economic activity, and is based on productive relations which are collective, in solidarity, and above all else inclusive,” says Molina.

The broader support network.Not only does the government fund and regulate cooperatives directly, but the drive toward a cooperative economy is evident throughout Venezuela’s social programs. The government has set up a number of social “Missions” to help citizens with their educational, health, housing and employment needs.

The Venezuelan government began promoting the creation of co-ops by prioritizing them for government contracts, offering grants and loans with little or no interest, and eliminating income tax requirements for co-ops. Cooperative numbers immediately began to grow.

The same year, the Venezuelan government began to promote what it called “Endogenous Development” (economic development from within), directly in contrast to the neoliberal model imposed during the 1990s, which promoted privatization and corporate ownership. 130 Nuclei of Endogenous Development (NUDEs)are located across the country as centers of local development.

At the pilot Venezuelan NUDE in western Caracas, Fabricio Ojeda, more than 40 worker-collectives intermingle with the government health mission, Barrio Adentro, and the low-priced government-sponsored food store, Mercal. Many of the programs target special groups that have been excluded due to social discrimination (i.e., there is a special Afro-Venezuelan Mission).

Banco Mujer is a lesson in grassroots organizing  and reflects the bottom up goal of the Bolivarian project. Banco Mujer was established to help women get micro-loans.  At the request of  a group of women, the bank sends a representative to discuss establishing a cooperative. The women have the choice to register as cooperative or become an associative economic unit, a slightly less collective form.  The discussion takes place in the women’s homes. The representative goes to the women in their local community., the women do not have to go to the bank.

The most important aspect of Banco Mujer’s approach is that all decisions are left up to the women. The representatives raises the issues relevant to how the cooperative will operate. Are we single mothers? How do our husbands feel about us working (issues of domestic violence frequently come up when husbands do not want their wives to work and support networks for these problems must be established)? How many children do we have?  How does our being black or indigenous impact our goals? How does our being a rural group differ from an urban collective?  The representatives, who come from all different classes, races and backgrounds,  are carefully chosen so that issues of class and race rarely become problems. Only after a number of meetings, the establishment of an investment plan and meetings to teach basic economic and planning skills is the loan awarded.  Monitoring and follow up are provided.

Vuelvan Caras

A cooperative job-training program which began in 2004, it is the largest effort to intensify cooperative development in Venezuela in recent years and resulted in the formation of 8,000 cooperatives, or worker-collectives, formed by the nearly 300,000 graduates.  

Estrella Ramirez, a disabled unemployed single mother signed up for a free literacy program through Mission Robinson.  Three months later, her teacher encouraged her to enroll her in the government's new cooperative job-training program, Vuelvan Caras (About Face). Ramirez with her fellow Vuelvan Caras graduates received an $80,000 zero-interest loan from the Venezuelan National Institute for Small and Medium Industry to buy 20 sewing machines and purchase their first materials for their new cooperative, Manos Amigas. The government provided a prime location—free of charge—from which to run their cooperative, in a rundown building in downtown Caracas. They invested part of their loan in fixing up their space on the fourth floor. Meanwhile, many cooperative members continue to study in the government education missions, Ribas and Sucre.

In contrast to most factories in Latin America, the atmosphere is relaxed. There is no punch-card. When someone is suspected of abusing the system, the matter is taken up in a general assembly before all Manos Amigas members.

As is the norm under the 2001 Venezuelan Cooperative Law, a president, secretary, and treasurer are elected yearly. The co-op holds a general assembly once a month, and decisions are made by consensus or by majority. “No one is boss, everyone is part of the team,” said one member.  Other textile cooperatives have voted to work less, to allow more time for continued study and time with families. Larger co-ops have set up daycare centers to care for the children of the cooperative workers.

The Ideal vs. the Real.

Unfortunately, the reality of the cooperative boom is not without its problems. According to last fall's first Venezuelan Cooperative Census, less than 40 percent of the cooperatives registered at the time were actually functioning.

Many of the discrepancies come from businesses that registered and either never got off the ground or failed to comply with the cooperative law. In rare cases, so-called “ghost cooperatives” registered and received loans from the government before disappearing with the cash. Venezuelan cooperative totals are growing at hundreds per week, and former SUNACOOP director Molina verified last year that they have no hope of being able to audit them all.

Another reason for the low rate of success is inherent in the Bolivarian philosophy.  Unlike other loans, the Bolivarian approach of funding is more like an entitlement program – groups are often given loans to develop coops based on their neediness, instead of their viability or ability to pay back the loan.  They are often given with little or no collateral and at no interest.  If one wanted to, one could say that the Bolivarian approach has had a 40% success rate, substantially reducing poverty – more than most traditional poverty entitlement programs.

Another challenge is the resistance of the capitalist sector in Venezuela which still controls much of the state and local government apparatus. In spite of the legal support for cooperatives at the National level,  bureaucratic state and local authorities can hold up various licenses that cooperatives need to survive and grow, sometimes due to political differences with the Bolivarian government, sometimes as part of a residual culture which will not provide the required license unless a bribe (unaffordable to the poorest coops) is offered.

Part of the solution to the bureaucratic stonewalling of cooperatives was The Law of Communal Councils (consejos comunales) passed by the National government in April 2006 and reaffirmed and updated, after  two elections widely contested by the Capitalist class in Venezuela, in November of 2009.  The Communal councils empower local citizens to form neighborhood-based elected councils that initiate and oversee local policies and projects towards community development.

Communal councils convene and coordinate existing community organizations as well as promote the creation of new work committees, cooperatives and projects as needed in defense of collective interests and the integral development of the community.

The jurisdiction of each council is limited only by size to a self-defined geography housing under 400 families, All key council decisions are made via discussion and majority vote within a citizens' assembly with at least 30% of the adult community present.

Councils are highly autonomous and, although they are often required to coordinate with municipal administrations and receive funds from various levels of government, can frequently side-step these bodies and gain funding directly from the National Government. Over 19,500 councils have already been registered throughout the country and billions of dollars have been distributed to support their efforts.

Individualism vs. Collective Consciousness.

Some of the cooperative movement’s problems are internal. In Esmeralda Ramirez’s coop, only half of the nearly 30 founders remain. The greatest challenge is individualism, say numerous cooperative members. It's difficult to change overnight. Venezuelan cooperatives’ economic exchange largely takes place through a somewhat regulated capitalist market, a situation that undermines both the implementation of genuine workplace democracy and the development of members’ collective consciousness. Indeed, traditional cooperatives in this study are only partial cooperatives, often run by families, operating only a few days a week or corrupted by permanently hiring labor. The more traditional cooperatives also carry-over patriarchal attitudes and the women members are frequently not involved in the actual cooperative work.

A study of 14 cooperatives both state sponsored and private social enterprises in operation for at least one year, found that members’ interest in participation is strongly tied to the extent that formal and substantive workplace participation has been established in their cooperatives. The two oldest cooperatives benefit from the highest levels of members’ motivation because they have the most consolidated mechanisms for workplace democracy.

Levels of workplace democracy are also strongly tied to levels of members’ participation in political and social organizations in their communities. Such workers feel more prepared to participate and are more willing to assume initiative and responsibility. However, in both traditional and new cooperatives, it is common to find members who have become active organizers in their communities after joining their cooperatives.

The study also showed that cooperatives with the largest membership have been less successful in achieving genuine workplace democracy. Equality in access to information, work roles, and control over the decision-making process, as well as collective monitoring, become more difficult to implement as the size of the cooperative increases.

One study observed that when large previously existing enterprises are taken over and turned into cooperatives by liberal or socialist leaning states (Venezuela, Argentina, Nicaragua), unless the state actively works to change the previous capitalist culture, the new “cooperative” will continue to operate under traditional autocratic boss/worker relations even if the financial structures are publicly owned.  In one case, some of the workers did not even know they were members of a cooperative.

The most significant factor limiting the emergence of collective consciousness in the cooperatives is the level of internal conflict, which also coincides with the size of the cooperatives, the lack of cohesion among cooperative members and the lack of “collective” training. Indeed, the cooperatives with the most intense internal conflict were indeed those from the Vuelvan Caras program. Many of the problems in the Vuelvan Caras cooperatives are directly linked to its quick development and lack of adherence to the proposed model in its efforts to increase cooperative participation on a large scale, especially for the disadvantaged.

Coops are supposed to be formed by persons who have spent at least six months together in a classroom environment that promoted solidarity and egalitarianism. But the reality is that, given that significant numbers of participants who left the program before the training period ended, many Vuelvan Caras graduates entering cooperatives had never spent time together.

Another source of conflict in Vuelvan Caras cooperatives is that some government instructors crossed the fine line between providing support and imposing their views, thus delegitimizing the cooperatives’ coordinators. In one case, it was the instructors who nominated the first group of coordinators, leaving the assembly only the power to approve the decision. Further, in cooperatives where income distribution was egalitarian some members felt that other members did not do their share. In cooperatives where there are systems of collective monitoring, egalitarian distribution did not result in free riding.

Government officials acknowledge that the design and implementation of the first cycle of Vuelvan Caras was highly improvised. Instructors were hired without a selective process to ensure that they were technically and ideologically prepared to teach students from the most marginalized sectors of the Venezuelan society. Also, all Vuelvan Caras cooperatives in the study cited had received their sociopolitical education either in a hurry at the end of the program, afterwards, or not at all.

THE EVERGREEN INITIATIVE: THE PRIVATE SECTOR/ANCHOR INSTITUTION MODEL

What is an appropriate path to economic development for de-industrialized cities where the loss of a manufacturing economy has left many people adrift? How can people who live and work in cities build robust local economies that are based upon democratic principles? It was in Cleveland, Ohio, a region that is the fifth poorest in the United States with a combined median household income of  $18,500 and a poverty rate of 30% , that the idea of the Evergreen Initiative was born.  The victim of the flight of the manufacturing industry combined with white flight to the suburbs, The Evergreen Initiative is a consciously designed network of worker cooperatives in Cleveland Ohio.
The Evergreen Initiative, begun in 2009, is funded and designed by local private sector businesses and nonprofit institutions. The concept, according to the Evergreen Initiative, is that shared ownership of the local economy not only helps root wealth in communities, keeping resources from “leaking out” of the area, but can be an engine for creating new endogenous wealth. Cooperative businesses are one of the more natural firm types that fit within the model of economic democracy. According to a white paper produced by the Cleveland foundation,

“Rather than a trickle down strategy, Evergreen focuses on economic inclusion and  building a local economy from the ground up; rather than offering public subsidy to induce corporations to bring what are often low-wage jobs into the city, the Evergreen strategy is catalyzing new businesses that are owned by their employees; rather than concentrate on workforce training for employment opportunities that are largely unavailable to low-skill and low-income workers, the Evergreen Initiative first creates the jobs, and then recruits and trains local residents to take them.”
Of the truly democratically governed cooperatives, few in the U.S. have reached significant scale in terms of number of firms created, people employed, or revenue generated or were not able to stay viable over the long-term. “The history of worker coops is a mixed bag,” says Gar Alperovitz, co-founder of the Democracy Collaborative. “[Individual] coops have often tended to break down… or they get taken over if they are successful.”

The Evergreen Initiative consciously based it’s model on the Mondragon cooperative network in Spain (see DK).  Through the development of economically integrated networks of cooperatives rather than a single cooperative, Mondragon has been able to reach significant scale and demonstrate long-term sustainability, without losing it’s democratic principles. A single worker owned and managed cooperative on its own is most likely doomed to fail in a highly competitive global economy. However, an ecosystem of several worker cooperatives and support organizations can create an infrastructure that leads to sustained growth and expansion (4)

Based on principles of community wealth building and sustainability, the Evergreen Initiative is launching  ten 50-person worker cooperatives in a variety of sectors over the next five years. Within the cooperative movement such a community wide effort is called a cooperative “incubator.”

Unlike the Venezuelan model, however, where funding and planning for such a network comes primarily from the State, the Evergreen model utilizes a network of private, for profit and nonprofit institutions, along with (but not primarily reliant on),  state funding sources to provide the capital for a network of cooperatives.

The Consortium believes that business interests and social goals not only can co-exist, but, by working together, increase the success of the project in a way that State run efforts to eliminate poverty cannot.  To this end, their mission includes environmental goals to “green” the neighborhood and reduce crime rates,  as well as providing good, living wage jobs and democratically controlled workplaces. According to the consortium, economic democracy does not reject the role of markets, but rather de-emphasizes the primacy of the profit maximizing motive among economic decision makers.

Anchor Institutions.

The Evergreen initiative is designed to meet not only its goal of job creation in a depressed area, but to also meet the needs of the few remaining affluent institutions local to the area from its heyday as a manufacturing center. These industries (hospitals, universities, nursing homes, cultural institutions)are  known as “anchor” institutions because they  “anchor” the community’s economy by providing a consumer base for the new cooperatives and the job growth they will generate. Basically an import substitution model,  the effort is unique in that Evergreen is building on the purchasing power of the area’s large hospital, university and other anchor institutions, which buy some $3 billion of goods and services a year—virtually none of which, until recently, had come from local business.

The Evergreen Cooperatives and their anchor institutions are linked through the Cleveland Foundation, a nonprofit corporation, and the Evergreen Cooperative Development Fund, a revolving loan fund established for the express purpose of creating a second generation of  new cooperatives from the profits of the early cooperatives.
The Evergreen Cooperative's geographic reach is, at first glance, relatively small, it’s specificity is critical to the model. In the case of Cleveland, it encompasses what is known as "Greater University Circle," a collection of the six impoverished neighborhoods surrounding the anchor institutions. By focusing on a small area the benefits of employment are more concentrated in neighborhoods and therefore more readily apparent, for one, and businesses that participate in the model tend to be uniquely suited to their environment.

Progress.

Although the Evergreen Initiative started only recently, it has already experienced some growth and anticipates more. As of August 2010, not one year since opening, the Evergreen Laundry (a mid sized capital intensive commercial laundry) and Solar (which installs solar panels and sells solar energy to the large commercial establishments in the area as well as weatherizing homes) employ more than twenty residents and anticipated increasing the number of local employees to 50 per cooperative.  Based on first year growth, Ohio Solar is already expected employ more than 100 people in the next 3-4 years, doubling the original projection. The Greater University Circle Neighborhood Voice, a bi-weekly print and online news source focusing on the University Circle-area neighborhoods, has just started printing. Later this year the plan calls for the opening of  another co-op advancing large-scale urban agriculture—something missing in an area that spends $7 billion on food shipped in from California, Arizona, and even Hawai‘i. Evergreen City Growers will build and operate a year-round hydroponic greenhouse located in the heart of Cleveland capable of producing more than 3 million heads of fresh lettuce and nearly 1 million pounds of basil per year. The company will employ about 50 local low-income residents If Evergreen reaches its five-year goal of launching ten firms with 50 employees each, then 1% of all GUC residents will be an Evergreen worker-owner. However, Evergreen’s long-term goal is to build at least 100 firms, so that the scale of impact is tenfold. To date it has raised $15 million dollars from nonprofit foundations and anchor institutions. Based on it’s initial four year record, Evergreen has clearly demonstrated it’s ability to raised sufficient capital to create economies of scale and capital intensive projects.

The Evergreen Initiative has also held true to its goal of creating good local jobs for low income and minority members of the community, many with little education and previous incarceration records. Initially, each worker is hired for a six-month probationary period at $8.00 per hour. After a successful performance review, the employee is offered the opportunity to become a part-owner of the firm. The cost to “buy in” to the firm is $3,000 and is paid through a 50-cent per hour levy in their upgraded $10.50 an hour salary once they become a worker-owner. As a worker-owner they receive full health insurance, a vote in governance, and a share of the profits. After eight years, employees are expected to own about $65,000 in assets.

Evergreen vs. Mondragon – Similarities and Differences in Private Sector Models.

While the Evergreen Initiative has several key similarities to the Mondragon model on which it is based --originally developed in a locally homogeneous minority community, designed to create jobs in a depressed economic area, based on the development of a network of worker owned and managed cooperatives  --  it differs from the Mondragon model in several key ways:

1)  Mondragon based its plan on the development of human capitol. It educated and trained  the workers first. It then established a credit union (Caja Laboral Popular) made up of workers and built upon member savings and social security. The workers determined the nature of the projects and slowly built, with some initial state funding, the capital to support their cooperatives.

Evergreen Fund managed by Shorebank, an existing private nonprofit enterprise, capital
from the City of Cleveland, foundation grants and “anchor institutions (private hospitals, universities, etc.). In the Evergreen Initiative, the leading force is the consortium of Anchor institutions and nonprofits who designed the program. Thus the type of cooperatives, who is hired and the working conditions will be initially determined by the needs of the consumers and the social goals of the philanthropic foundations instead of the workers.

2) While Mondragon cooperatives are organized in primary and secondary cooperative groups, establishing horizontal networks with the workers as the primary focus. Evergreen cooperatives are established as individual cooperatives selling unrelated
products that are networked with anchor institutions, non-profits, and city agencies, establishing a vertically integrated network with the Consortium institutions at the top.

3) Mondragon was started in the Basque country of Spain The Basque’s had a nationalist orientation with their own language and a tradition of political radicalism and were  homogeneous in terms of ethnicity & culture. While the Evergreen Cooperatives are based primarily in an African American low-income community, which provides some ethnic homogeneity, it is significantly more racially, culturally, and economically diverse and situated in an economic tradition of capitalism and big industry.

4) While Mondragon has, over the past 60 years been effected by the pressures of developing in a capitalist economy to the extent that, as it has grown, it has become somewhat more hierarchical and somewhat less worker controlled, it still remains a strong example of how a strong network of cooperatives can establish social, egalitarian and democratic cooperative values within the capitalist system.

Problems Associated with External Leadership.

The Evergreen model is inherently more hierarchical. While the cooperatives are 100% worker-owned and eventually designed to be worker-controlled, they are embedded a larger structure where other stakeholders function in primary positions. Through the Department of Community Development, and a host of non-profits, Evergreen has been able to quickly erect a network of “support” entities. One foundation leads, another agency funds, one non-profit builds governance, and another handles finances. A set of formerly independent local organizations has re-oriented their individual activities to the common goal of launching cooperatives. Thus, presently, Evergreen is led by outsiders—leaders of organizations that are not based in the Greater University Circle neighborhoods. As a result, the local community was excluded from taking early positions of leadership. This contrasts with the Mondragon experience, which was driven by internal community leaders.

Though Evergreen’s worker-owners are predominantly low-income African-Americans,
current managers and the core leaders are predominantly middle- to upper-class whites.
The leadership team admit they need to address the challenge of recruiting skilled managers of color and creating clear promotional pathways for worker-owners into leadership positions.

The consortium recognizes that the network must create a governance structure that
creating a representative board with a clear jurisdiction that defines how the leadership team and other support organizations will participate in decision making over time.
At some point, developers who drive the start-up phase of a network must eventually either join the cooperative or devolve their decision making power to the members and worker-owners. One solution that has been suggested is to allow non-cooperative network leaders to run for positions on the member-elected board.

Originally, the Consortium was supposed to turn over management to the individual cooperatives within three years.  They have, not however, at this point done so.  The cooperative developers feel that the workers do not yet have sufficient expertise and commitment and that more time is required.  Some members of the consortium, however, feel that the problem stems from the fact that the workers have not been given a real sense of ownership and decision making.

Because the network dictates norms, practices and policies for individual firms, it is
critical that the network is strongly democratic for worker-owners. Otherwise the effort will create a false sense that individual workers have real control of their firms when they do not. This would undermine the creation of a culture of collective ownership.

CONCLUSION

It is clear from the above discussion that both the State sponsored and privately  sponsored cooperative models still have some problems with hierarchical structuring which can limit workers’ role in decision making and corrupt the very essential nature of participatory democracy. The bureaucratic dangers in the State model are evident. However, the capitalist environment in which the Evergreen Initiative has to operate makes it much more vulnerable to a long term loss of cooperative values.  While it might be a good progressive model for providing stability and good jobs in at the local level in a floundering economy, it’s long term projection as a transformative model is greatly compromised.

Recommendations for State sponsored models.

While the State sponsored models have often had problems of insufficiently developed educational components and oversight, especially in the large cooperatives, these can be corrected through an adequate desire by a socially oriented state, if the people pressure the government.

In order to consolidate themselves, Venezuelan cooperatives (and all democratic workplaces in general) also ought to institute mechanisms of coordination among themselves and with communities.In order to consolidate themselves, Venezuelan cooperatives (and all democratic workplaces in general) ought to institute mechanisms of coordination among themselves and with communities. One recommendation is that all enterprises give part of their profits to help the community which is currently not part of the cooperative law. There is the danger, however, that this would stress fledgling cooperatives, especially those with minimal resources.

In spite of the fact of the low success rate, the mere size of the cooperative movement and financial commitment to it from the government has resulted is a definite lessening of poverty and a stronger social orientation by the people.  This is clear from the fact that the Communal Council plan was defeated in 2008, but, through education and with the support of the people, was reaffirmed in 2009.
The biggest danger to the cooperative model in Venezuela or any socialist leaning state is the constant pressure from global capitalist forces to over-throw  the entire State apparatus, to which those of us who support socially oriented societies must be constantly vigilant.

Recommendations for privately funded models.

There are also some efforts to overcome these limits of the privately funded models such as the evergreen Initiative.  Several states have enacted laws which are being proposed nationally which would create Corporation B type socially responsible for profit entities which would legally be entitled to withhold part of the profit to provide social benefits and could not be sued by other shareholders if they failed to make profit their primary consideration.
Decentralization and grouping cooperatives in accordance to their similarities, as is done in the Mondragon cooperative network to insure some homogeneity among cooperative members also increases horizontal networking and can limit excessive vertical networking leading to lack of workplace democracy.

A third choice.

At this time, unions have not been involved in either the Mondragon or Evergreen model and due to CIA involvement in the AFL-CIO internationally, there is some question as to the role unions have played in cooperative development.  In the past 25 years, the United Steelworkers have already experimented with transforming several closed union shops into cooperatives. Recently, however, the United Steelworkers signed an agreement to set up cooperatives in conjunction with Mondragon in the United States and a recent spin-off of the Evergreen Model is being established in Pittsburgh to rehire workers from a closed textile shop with the help of SEIU. The influence and possible development of a hybrid cooperative/union model will be discussed in Part 3.

(An Informal Partial Bibliography)

The State Model:

1) http://www.yesmagazine.org/.... Michael Fox, Venezuela’s Co-op Boom, May 11,2011.

2) Personal Interviews with Cooperative Members and representatives of Banco Mujer, Venezuela (Caracas & Lora, 2008). Rapp, Margaret. rap8643@aol.com

3) http://monthlyreview.org/.... Camila Piñeiro Harnecker.Workplace Democracy and Collective Consciousness: An Empirical Study of Venezuelan Cooperatives. 2007, Volume 59, Issue 06 (November)

4) The Lavaca Collective, Sin Patron: /stories from Argentina’s Worker-Run Factories,  Buenes Aires, Argentina @2004 lavaca Collective. Transl. @ 2007 Haymarket Books, www.haymarketbooks.org.

5) Castenada, Nora and the Women’s Development Bank of Venezuela, Creating a Caring Economy. Crossroads Books @ 2006 Global Wolmen’s Strike.

6) Personal Interviews with cooperative members from Nicaragua (Managua, Grenada, 1999).  Rapp, Margaret. rap8643@aol.com.

Private Sector Models:

1) Personal Interview with Evergreen Initiative cooperative developers. Eastern Conference for Workplace Democracy (http://east.usworker.coop). Margaret Rapp, July 10, 2011. rap8643@aol.com .

2) SteelValley.Org Green Coop Industrial Laundry Wins $250,000 from Heinz in Pittsburgh. 6/10/2011

3) The Rise Of Shared Ownership And The Fall Of Business As Usual
Jeffrey Hollender, Mon Jun 27, 2011

4) Ted Howard, Lillian Kuri and India Pierce Lee, The Evergreen Cooperative Initiative of Cleveland, Ohio:Writing the Next Chapter for Anchor-Based Redevelopment Initiatives. The Cleveland Foundation

White Paper Prepared for The Neighborhood Funders Group Annual Conference, Minneapolis, MN. September 29 – October 1, 2010

5) www.Community-Wealth.org.Howard, Ted  and Steve Dubb, and Gar Alperowitz,  The New Economy, the Summer 2009 issue of YES! Magazine.

NEXT MONTH: Part 3 -  The historic and current relationship between trade unions and cooperatives.

Extended (Optional)

Originally posted to Anti-Capitalist Meetup on Sun Sep 18, 2011 at 03:06 PM PDT.

Also republished by Anti-Capitalist Chat.

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