Can Cooperatives Save the World?

“After the Crisis: Cooperatives and the Civil Economy” focused on the importance of the civic economy and how cooperatives can be an alternative to capitalist firms. However, much more can be said about the impact of cooperative firms. One interesting aspect is that production cooperatives could be a great tool for governments to fight against poverty.The key characteristic of a production cooperative is that it belongs to the workers. In organizational terms, the owners and the workers are the same person. This implies that the profit of the organization is divided between the workers. For similar profit levels, this organization would offer workers better income. The most productive workers in this industry would have an interest in working in the cooperative, increasing the efficiency of those organizations. At the same time, capitalist firms would have to raise wages to avoid losing the more productive employees. This would create upward pressure on salaries. On the macro-level this would help to fight income inequalities and reduce low wage employment.

There are limits to the magic of cooperative firms. First, they would need to represent a significant part of the labour market or, at least, of the low income labour market. Around 20% should be enough to have a competitive pressure. Second, in today’s globalized world, capitalist firms have a significant advantage—they can delocalize. According to Joseph Stiglitz, a Nobel-prize winning American economist, delocalizing is using free trade to avoid national labour regulations, such as a minimum wage, at home. This means that capitalist firms could compete against cooperatives by exploiting foreign populations in developing countries. In such a scenario, the rise of cooperative enterprises would result in increased delocalization, at least for non-service firms.

For cooperatives to have a significant and positive impact on the national work market, regulations need to be adopted that limit the ability of firms to exploit foreign populations. For example, a tax could be charged on goods that have been produced in a country where labour laws and minimum wages are lower than Canada. This would raise the price of those goods, or reduce the profits of the firm, effectively limiting foreign population exploitation. It is evident that this approach is too simple to be applicable in the real world, but it is worth exploring this path.

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