• Chelsea Rustrum

Digital Cooperatives 101 – An Introduction

Updated: Feb 21

As I begin to discover and understand cooperative business models, I’m going to share my learnings with you. As a sharing economy enthusiast, consultant, writer, author, and community builder – I’ve been recently dismayed at how for-profit models of “sharing” are becoming more and more corrupt and beholden to the money that backs them. While I believe the movement toward people sharing time, resources, space, and stuff is a beautiful transition toward a more humanitarian economy, an economy with a face, values, and most importantly – value backing it, I believe the cooperative business model as an overlay to the sharing economy and beyond will be at the forefront of real, lasting social change.

While most people in the U.S. have barely heard of cooperatives beyond credit unions, farming collectives, and some restaurants or retail – the cooperative movement is huge, especially when you look at the numbers worldwide.

The top 300 cooperatives worldwide are responsible for 1 trillion dollars in sales – and cooperatives provide 100 million jobs globally. Not bad.

A move toward cooperatives requires a 180-degree shift from individualism to collectivism – and a move away from a beilef that’s been reinforced in America for the past several hundred years. The belief is “Cooperation is better for everyone.” With 1% of the population holding 40% of the wealth in this country and the top 10% owning 80% of all financial assets, I’d say we’re ready for something new. And cooperation is natural – individualism and all of this libertarian “mineness” is simply the result of drawing borders on land, building fences around agriculture, which created and sealed this idea of ownership.

I digress.

As a fairly young person who is intelligent, driven, and specialized in many ways – there is a part of me that knows I can start a multi-million dollar+ company, sit at or near the top and pay other people to keep things running. I can be the elite 1% – I can profit and sip expensive wine, have a big bank account, and the approval of society, the safety of wealth, and the ability and power to gift to who ever I choose. But for me – that’s not good enough. That’s replicating a model that places importance on me, while holding others down in a sort of wage enslavement so that I might become “rich.” I can’t and I won’t. I’m not against having money, but I am against putting together a top-down organization where I and a few other privelidged people spin a profit at the cost of suppliers, reducing wages, increasing fees, and/or ignoring externalities as costs. Don’t get me wrong, many small businesses operate wonderful social services for communities while maintaining family income, but this is not what I’m talking about.

As we enter an ever increasing digital age – how do we take the mom-and-pop mentality to scalable business models that work for thousands, if not millions of people? These companies often require very few employees and little brick-and-mortar overhead, but what they do require is the participation of many people to create and provide and the goods and services.

In all of my research, the clearcut, time-proven answer is through cooperatives. And this isn’t something that will require additional legislature, waiting for approval, or the creation of new systems. You can start a cooperative now. And you can even convert an existing business to a cooperative. Cooperatives make money and respond to a market driven economy just like other businesses, but what they do differently and what’s built-in is that they put people first.

I never thought I’d be anything close to an anarchist, but it turns out – cooperatives follow a lot of the same principles as the anarchist movement, which is really just about cooperation at the core. The thing I like about cooperatives, in contrast to much of what seems to happen in anarchist communities, is that it works in the traditional economy. It works with what we already have and integrates values into the economy in a way that no other business model does.

Cooperatives date back to the 1800’s – and the 7 Principles of Cooperatives commonly used today were put together by the Rochdale Pioneers from England in 1844.

7 Principles of Cooperatives: Rochdale Pioneers, from England

  1. Voluntary & Open Membership

  2. No gender, social, political, or religious discrimination

  3. Anyone is able to join and through merit of skills, they are brought into being a member

  4. Democratic Organization

  5. Active participation in decision making

  6. Decisions are made collectively through differing governance models

  7. Member Economic Participation

  8. Members share in profits

  9. Everyone buys a share (money can  be taken out of earnings each month to become full members over time)

  10. Autonomy

  11. Controlled by members

  12. Even when capital infused, must remain in control of members

  13. Education, Training & Information

  14. Continuing education

  15. Constant “upskilling”

  16. Cooperation Among Cooperatives

  17. Utilize services of other cooperatives

  18. Strategic alliances and resource sharing

  19. Concern for Community

  20. Creating jobs

  21. Addressing economic inequality in communities

  22. Keeping business local

There is something called the Madison Principles, which are also used in the formation and understanding of creating a cooperative.

Something else I recently learned is the difference between profit and surplus in a cooperative. When profit is generated by the members of a cooperative, it is called surplus and is not taxed within the organization (only when distributed on individual level). Whereas, if you have employees in a cooperative, the extra money that is generated by employees is deemed typical profit. I’m sure this will be of importance in later lessons.

If you’re curious about existing cooperatives and want to understand how this works better, check out the cooperatives in the U.S.

One of the things I found the most interesting is the research that shows that cooperative members actually act differently in their community than typical employees. They tend to take more ownership for things and take what they’ve learned through the structure of cooperatives to their local communities.

I personally think cooperatives need better marketing – a sexier approach and more digital examples to prove that this model not only works, but also provides a sustainable means for equitable incomes and true sharing.

I know that there are different types of cooperatives, hybrid models, and a zillion different approaches to how they are structured. As I learn more, I’ll report back.

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