Exponentially Growing Cooperatives

Random idea:

What if you did the following: start an organization to help workers buy out their employers. Workers write in if they’re interested, the organization reviews applications, and then uses the funds available to help the workers with the most viable proposals. This doesn’t come in the form of a loan; instead they just buy the business outright and let the cooperative get started without the workers needing to raise capital, and without any debt.

The twist is this: they have to write into their charter that the business will never back off from worker control, and that it will permanently set aside a portion of its profits to go back into the cooperative buying fund. I’m thinking it would have to be net profits, so that if a cooperative is struggling to make ends meet they’re exempt. Don’t want to drive allies out of business after all. This would mean that it would take a while to start actually recouping the money given to a business. However, the plus side is that once a cooperative does get going, it’s a long-term income stream. So while you’d have to start out with a decent amount of capital, once the system got rolling there would be a steady funding stream available. The more cooperatives you helped start, the more money would be coming in.

This is analogous to the recent proposal to reform public universities in Oregon: instead of making students take out loans to pay for their education as they receive it, they sign up to give a certain percentage of their income to their alma mater over a longer period. Thus students who are struggling aren’t burdened by debt, while students who do very well can subsidize the next generation’s education. It moves away from a simple transactional arrangement, where a student or a cooperative is given a loan that they eventually have to pay back, and towards a social contract type arrangement, where resources are simply transferred from those who have them to those who don’t, with the expectation (contractually enforced) that if the have-nots become haves, they will pay it forward.

This gets around one of the big problems with trying to change the economy using cooperatives: they don’t tend to expand very much. While a conventional business has the incentive to expand forever so long as each expansion adds marginal profit, a cooperative only has the incentive to expand as long as they’re increasing, or at least maintaining, their average productivity per worker. This is because if gains are spread reasonably evenly among a cooperative’s employee-owners, any expansion that decreases average productivity would tend to decrease the gains per each existing worker. So unless workers are devoted to expansion for non-financial reasons, there is a tendency for cooperatives to stay small and focus on promoting the interests of people already involved, rather than pushing for wider change. This is great for members of those cooperatives, but less helpful for society at large.

This model could start benefiting workers by creating new cooperatives almost immediately, and would automatically be on track to grow indefinitely; first slowly, and then ever more quickly as more cooperatives begin paying back into the fund.

Thoughts? Reasons this would be a disaster? Tweaks (or major overhauls)? Offers to give me a million bucks to get started on this?

PS Additional Co-op resources:




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