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CC#2.1. Understanding Cooperatives

May 5, 2022

What are cooperatives?

Cooperatives are “autonomous associations of people voluntarily united to meet their economic, social and cultural needs and aspirations, through a jointly managed enterprise”. They are similar to DAOs (Decentralized Autonomous Organizations – self-running organizations that are transparent, democratic, decentralized and managed through smart contracts), except they are more grounded in the real, offline world.

The cooperative movement has a long and rich history, dating back to the 18th century. The first cooperatives were created in response to the Industrial Revolution, when working conditions were often poor and workers had little power to negotiate for better pay or working conditions. The cooperative model was seen as a way to empower workers and give them more control over their work lives. The cooperative movement has grown steadily since then. There are now over 1 billion people involved in cooperatives around the world, with a total asset base of over $2 trillion, making cooperatives the largest business model on the planet.

How do cooperatives work?

Cooperatives are member-owned and democratically governed by the people who use their services or purchase their products. This means that decisions about how the cooperative is run, what products or services it offers, and how its profits are distributed are made by the members themselves. In order to ensure that all members have an equal say in these decisions, cooperatives typically operate under the principle of one member, one vote. This ensures that everyone has an equal say regardless of how much they have invested in the cooperative.

Cooperatives are typically created with the following goals:

  • to pool resources in order to create something that none of the members could have created alone
  • to share risk and opportunity among the members
  • to provide services or products that the members need
  • to create jobs and support the local economy
  • to act as a social network that keeps the members involved with each other and helps them feel part of a community

The seven principles of cooperatives

Co-ops come in many shapes and sizes, but all are based on 7 principles. These are a set of guiding values that define the philosophy and practices of the cooperative movement and serve as a framework for cooperatives around the world to operate in a consistent way.

  1. Voluntary and Open Membership: Cooperatives are open to all people who share the values and principles of the cooperative movement, regardless of race, religion, or political affiliation.
  2. Democratic Member Control: They are governed by their members, who have an equal say in decision-making and control over the resources of the business.
  3. Member Economic Participation: They are businesses owned and controlled by their members, who also share in any profits or losses generated by the business.
  4. Autonomy and Independence: They are independent organizations, controlled by their members and not subject to outside control.
  5. Education, Training and Information: They provide education and training for their members so that they can participate effectively in the business and make informed decisions about their cooperative.
  6. Cooperation among Cooperatives: They work together to promote the values and principles of the movement, and to support the growth and success of each other.
  7. Concern for Community: They are committed to providing benefits to their communities, beyond just the goods and services they offer to their members. This can include supporting local businesses, creating jobs in the community, or using sustainable practices that protect the environment. By building strong relationships with the communities they serve, cooperatives can create lasting positive change.

What are the benefits of cooperatives?

Cooperatives offer a number of advantages over traditional businesses. One of the most important is that they are democratically governed, giving the members a say in how they are run. This allows them to better meet the needs and interests of their customers, while also ensuring that everyone has an equal voice in decision-making.

Cooperatives are also often more sustainable than traditional businesses, as they reinvest any profits back into the business rather than distributing them among investors or shareholders. This helps to ensure that the cooperative can continue to operate and serve its members into the future.

The cooperative movement continues to grow and adapt in response to the changing needs of society. For example, the rise of the sharing economy has created new opportunities for cooperatives to provide services that meet the needs of their members.

But perhaps most importantly, cooperatives offer a unique model for business that is built on principles of democracy, equality, and solidarity. Although they are often misunderstood as communist or socialist organizations, co-ops are the economic model of the future, with more and more people turning to them in order to create sustainable, socially responsible businesses that can better serve their communities.

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