Amid Global Financial Turmoil, Cooperatives Show Resilience

Akito Yoshikane

The United Nations observed the 14th annual International Day of Cooperatives on July 4, just a few days before the Group of 8 economic summit in L’Aquila, Italy.

Although the G8 meeting and International Day of Cooperatives focused on how to best navigate economic recovery, their respective approaches to mitigating the impacts of the financial crisis are quite different.

While the G8 nations — United States, Britain, France, Italy, Japan, Germany, Canada and Russia — stress trade liberalization and imparting a global legal standard of market principles, cooperatives by nature have been focused on localized and democratic member development.

And here’s the kicker: Cooperatives have been relatively resilient to the current financial turmoil.

According to a June report (PDF link) by the International Labor Organization, a UN agency devoted to global labor issues, cooperatives have been faring well: Agricultural and consumer co-ops have reported surpluses and revenue; banking cooperatives and credit unions have been relatively sound; and membership continues to increase.

The reason, according to the report, is that the cooperative economic model based on consumer-ownership isn’t as driven by the need to earn profits for other investors and managers. In essence, when workers become investors, they hold themselves in check since they’re underpinned by shared economic incentives.

The UN passed a resolution in late 1994 to commemorate member-owned businesses, but more recently co-ops have gained steam as a viable economic alternative.

Last October, former U.S. Federal Reserve Chairman Alan Greenspan admitted before Congress that there was a flaw in the [economic] model” that led to the financial collapse – the idea that banks would be self-regulating to protect their shareholders and institutions out of self-interest.

In contrast, a recent statement by UN Secretary General Ban Ki-moon highlights the virtues of cooperatives that have been able to withstand the current crisis:

In countries hit by the financial crisis, the cooperative bank and credit union sector expanded lending when other financial institutions had to cut back, easing the impact of the credit freeze on the most vulnerable. This highlights the importance of strong alternative business models and institutional diversity for the resilience of the financial system.

Hagen Henry, chief of the UN’s International Labor Organization’s Cooperatives Branch, said that with a few exceptions, cooperative enterprises across all sectors and regions are relatively more resilient to the current market shocks than their capital-centred [sic] counterparts.”

The International Cooperative Alliance, a non-governmental federation, estimates that more than 800 million people use the cooperative system for their livelihoods. In places like the Middle East and Asia, where construction and manufacturing jobs have constricted, workers are turning to co-ops for autonomous economic development.

Like the cooperative model, the G8 summit also stressed people first” to emphasize the maintenance of social safeguards and unemployment in determining their policies. But the recurrent criticism surrounding the G8 meetings — that by strongly advocating market capitalism they are both parochial and hegemonic — continues to be a source of tension.
Despite having similar messages, the transparent and democratic model of cooperatives among members offers a compelling contrast to the top-down approach brought by a handful of wealthy nations.

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Akito Yoshikane is a freelance writer based in Chicago.
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