THE ECONOMICS OF CO-OPS and COOPERATION- First Things First Series- 7

Posted on January 26, 2014by 

© 2014 by Dan Nowman Niswander

First Things First Series

 “Workers’ self-directed enterprises (WSDEs) are a response to capitalism’s failure to deliver economic prosperity and socialism’s failure to deliver economic democracy.”


Economist, Author, Media Host, and Professor Richard Wolff


The first exposure for many of us to the subject of economics may have seemed very dull and uneventful or at best a boring part of academic life.  Then there is economic inequality, ever widening income gaps and accumulated wealth disparity. These words are now part of the vernacular of millions of people due to the social movements that manifested in the second decade of the 21st century such as the Arab Spring, the 99% Movement, Occupy Wall Street, and the worldwide wave of ‘occupy’ and other types of activist groups that started spreading around the globe in the fall of 2011.

That being said, there have been some groups at various times of history and at various places around the world even that had already been experimenting and implementing community based projects of all sorts including alternative economic models to those used by the so-called ‘status quo.’

I am not an economist, so I am not giving any kind of professional advice, but I do encourage those interested in economics to research the topic and learn about classic economics, as well as Keynesian, Austrian, and Marxist philosophies. They each offer interesting perspectives on the subject; all of which are worthy of genuine note as well as realistic critique.


Some people praise capitalism as if it has no flaws or is just the best economic model possible under any circumstances and criticize socialism as if it has no redeeming and even successful historic or current qualities whatsoever.  For many people still in the United States, socialism seems like a dirty word while communism now seems like an unspoken dirty word. For the sake of credibility let alone analysis for solutions of crises, it is important to realize the pros and cons of any subject matter, and economics is no different.

In the U.S.A., there has been a history of the critique of capitalism and the economic practices of corporatism since its’ beginnings. Even Founding Father Thomas Jefferson said he hoped to “crush in its birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.”  (1)

In so-called modern communist China, perhaps the biggest economy in the world as of 2014, as well as communist Russia, capitalism dominates despite what words are used otherwise. However, 19th century German philosopher, economist and journalist Karl Marx warned that capitalism is the “dictatorship of the bourgeoisie.” The plutocrats (as they are now sometimes called) do control and run the global system, and it was Marx’s belief and evaluation from past socio-economic systems that eventually capitalism would self-destruct and have to be replaced by another system because it would produce masses of economically disconnected and disenfranchised people.


Fast forward to the twenty first century and for millions that has become a day-to-day reality. As of this writing in 2014 and into the sixth year of an economic recession, downturn, or what some are calling depression, no truly effective solutions are even being suggested let alone constructed and implemented as the numbers of the under-employed, the unemployed, re-unemployed, and newly poor are increasing month- by -month and year- by -year.

Over and over the U.S. government spending is offset by what is called austerity measures primarily focusing on cuts in social programs (that benefit the least fortunate) for the purpose of reducing the deficit that the spending creates. All the while extensive economic stimuli from the government time and time again goes to the wealthiest corporations and the rich, or as some refer to as the 1%, while their own personal tax responsibility remains relatively low as it has been for quite some time now. As of this writing, single incomes over $400,000 are taxed at around 39% which is barely above the standard rate of 35% for everyone below that and the capital gains tax (on surplus income from profits) has only been raised from 15% to 20%. (2)

During the Great Depression of the 1930’s, the tax rates on the rich were on the rise and actually peaked at 95% by 1945.  (3)

Of course the taxes collected were used to create the New Deal program that had to be implemented twice during the Roosevelt Administration in order for it to be effective. The various programs such as Civilian Conservation Corps, Unemployment Insurance, and Social Security benefits actually saved the country at that juncture from what could have been eventual financial disaster (worse than what already transpired) and even from potential revolution in the streets.

The current economic crisis since 2008 is global and the potential for major disaster seems to loom at any point and could happen anywhere in the world… environmentally, economically, etc.



We currently rely on systems that circulate what is called legal tender while operating in a so-called democratic free market capitalist economic system, but is that what is really manifesting itself?

Regardless of what the belief or economic theory is, hundreds of millions of people in the U.S.A. and around the world who want to work can’t find jobs and especially good paying jobs because it seems little to nothing is being done to address that issue. Not every person has the skills and resources to inherently be entrepreneurial or self-employed and most people don’t even know how the so-called traditional economic system actually works. Thousands to millions of people that have been released from the workforce for one reason or another are finding that the skills and talents that kept them gainfully employed for so long are becoming obsolete or are continuing to be shipped overseas so they find themselves in a quandary.


As I mentioned briefly in a previous blog of my First Things First Series, there are growing numbers of models and community-based projects in development for the purpose of creating alternative economies (see blog #6).

In this article, I focus on basics of business concepts called worker co-ops, also known as WSDEs (worker’s self-directed enterprises).


Economist, Media Host, Author, and Professor Richard Wolff speaks to a captivated audience in Hollywood, California on January 18th, 2014.


A worker co-op or worker’s self directed enterprise can be described as a labor managed organization or company that operates with “the objective of creating and maintaining sustainable jobs and generating wealth, to improve the quality of life of the worker-members, dignify human work, allow workers’ democratic self-management and promote community and local development.” (4)

Historically, worker co-ops have already been created in numerous parts of the world including the United States and the discussion about how well they can function as well as the unlimited possibilities for creating more of them is perhaps becoming more popular than ever.

A WSDE is essentially different from a regular capitalistic corporate enterprise in that the workers are the members and/or owners who make the decisions about what is produced, how it is produced and even where it is produced and not ten to fifteen people in a standard corporate board of directors usually disconnected from day-to-day operations that workers participate in. They can also decide the income gap between the highest paid and the lowest paid workers. An entire WSDE can democratically invest or contribute to political issues or candidates that they feel truly do serve workers’ and the community’s best interests.

Spain’s Mondragon Corporation began in the 1950’s as a simple worker self-directed enterprise to address the massive unemployment in the Basque region as a result of a Spanish civil war and then World War II. They currently operate with over 100,000 workers as members and the structure includes various companies and entities consisting of factories, a bank, and even a university. They are one of the biggest and most successful companies in the country even during economic crisis. The first priority is the well-being of the co-op members who are workers and owners. Yes, it is priority over company monetary profits and it shouldn’t be thought of as too good to be true.

Zappos in Las Vegas is an online retailer whose CEO created what is called a holacracy, a self-governing operating system without a top-down hierarchy that has eliminated any need for job titles and traditional managers.  Holacracy comes from the Greek wordholon meaning ‘a whole that’s part of a greater whole.’ A design of four hundred business ‘circles’ are currently in the process of implementation and employees may have any number of roles in those circles and it also distributes power more evenly and is said to create ‘radical’ transparency.  Zappos employs about 1,500 and so far is the biggest company using a holacracy.  (5)

Trying new business and economic models such as worker owned cooperatives or worker self-directed enterprises and limiting or eliminating hierarchy leads to real human progress as well as the advancement and creation of new technologies.  The Internet continues to open up endless possibilities as an incredible tool.  I’d like to think that the most important global as well as cultural development is the experience of people coming together to work together in cooperation so as to complete mutually beneficial goals on amassive scale.



(2) Forbes Magazine

(3) Tax Prof Blog

(4) Wikipedia (as part of the definition of worker co-operative)


Additional source information comes from

“Economic Prosperity and Economic Democracy: The Worker Co-Op Solution” and  “The Great Austerity Shell Game”

by Richard Wolff.


@ The Last Bookstore- downtown Los Angeles- 2013

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