An Italian Region Where Co-Ops Produce a Third of GDP (2016)
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In regard to Retail, this has led to a long-term spat between Mr. Bernardo Caprotti, the CEO of Esselunga until 2013, and COOP, the Retail cooperative mentioned in the article. Esselunga is a large retail chain, particularly popular in the center-north. In 2007, Mr. Caprotti wrote a book called “Falce e Carrello” (literally sickle and shopping cart, a play on falce e martello, Italian for sickle and hammer) which became sort of a bestseller. In the book he accused COOP of unfair market practices to block the expansion plans of Esselunga in the so-called red regions, with Emilia Romagna as the central stage for these accusations. Although Caprotti passed away in 2016, a lawsuit brought by COOP against him is still ongoing. First and Second grade had opposite results so far. The case is now being examined by the Italian Appeal Court, which will have a final say on the case.
I’d just like to add that the COOP’s supermarkets are probably the best food shopping experience you can think of. If you’re visiting Emilia Romagna, just get into one. You’ll see that the stereotypes about Italian food quality and variety are true!
Edit: toyg’s comment, below, has a great take on the critical points of the COOP system. (Just to clarify: Caprotti’s accusations were driven by opposing ideology and personal grievances, but they weren’t completely unfactual)
Btw I was a member of a UK tech worker coop - Poptel
One amusing anecdote when one of our guys went out to Italy to try and sell the idea of the .coop domain to coops he got the view that some of them thought the internet was a CIA plot
As an italian I am not here to deny this.
I have to point out, however, that Esselunga-branded products are usually very good in quality.
Edit: I am not affiliated with Esselunga, but I have heard a lot of cool stories from people working there.
At scale, Emilia co-ops are the same as any other business: they want to make money, screw workers. The veneer of social conscience is pretension, these days. A lot of jobs (most?) higher in the food chain are assigned through old-boys’ networks and political patronage (which is common even in the private sector, in Italy). Most large coop groups are struggling and surviving only with mergers. As the political system that allowed them to get established (stable 50-year left-wing governments across the whole region) slowly crumbled, their markets were blown open to competition, and they reacted by turning into more and more traditional businesses - or going bankrupt under clouds of political scandal.
A lot of people in the area think this type of development has fundamentally betrayed its origins and should be reformed at the very least.
EDIT: re-reading, I might have been a bit unfair. Coops had a tremendous social impact, until around the early 1980s. They were part and parcel of a development model that had little to envy to Scandinavian social democracy. It's just that they eventually changed, as all institutions do, prioritizing self-preservation and enrichment over their social role. This is particularly true for larger ones (generally in construction, food distribution, maintenance services, banking, and insurance).
I'm a fan of co-ops, but gave up on the idea of replacing the private sector with it. If there's a market for them, they can compete easily (usually through quality). I'm inclined to see them as better agents for social welfare programs [1].
I'd like to hear from the author why they focus on some (in foreign eyes) romantic region in Italy and don't look at the dryer examples of large-scale co-ops that exist throughout the rest of Europe:
Germany's and Switzerland's biggest retailers are co-ops (Rewe, Edeka and Migros, Coop). Italy's biggest retailer is also a co-op. German co-op retail-banks claim 20% market share. Austria's Reiffeisen Bank is the country's third largest bank. The world's biggest sugar-producer Südzucker is a co-op. The list of old co-ops that have scaled over time is long and studying them I think would provide much needed insight if we are to claim the "advancedness" of co-ops.
Specifically all the scandals that have popped-up, like the "co-op-Scandal" of the late 1980s, one of Germany's biggest cases of financial fraud.
[1] For example don't let the city/state build cheap housing, rather subsidize housing co-ops. Once you do that, you get political entanglement in return and in general the imbalance of the private-sector being marginalized. But I prefer that anytime over government housing. Germany is full of both (co-ops and city-run housing, with the latter being usually run-down and the former trumping median private-sector housing while being 30%++ cheaper).
Public sector inefficiency is well studied. Co-ops efficiency however not so much, at least for me.
Attempt at answering: Co-ops try to provide affordable quality housing thus gains are usually reinvested via repair work and they don’t engage in selling their housing stock on the free market. Property they built, usually stays theirs forever. I think the biggest leverage on prices comes from land allocated to them by a city. As most shareholders are also renters they push the co-op leadership into keeping rents low and over time prices can diverge quite a lot from free market rates.
I don't see the lower returns as particularly damaging - there has been too much speculation in real state in recent decades. But that might not be the case once (if) returns get lower.
Now technically you could argue that the outcome would be the same if you lived more expensively and you were an investor in some other for-profit housing with high returns. But that’s usually not the case, as the cash amounts you’d need initially are too high for most people.
There are also private housing stock examples for that behaviour: gentrification theory sees the so-called "pioneers" who move into low-quality neighbourhoods. They are doing much of the work improving quality-of-live/attractiveness that later on others will reap the benefits from like real-estate developers and long-time landlords.
source: My native language is also Italian
(edit: which "maps" to concurrency, by the unwritten rules of how English and German map their respective loan words from Latin, but translates perfectly to competition, but not at all to concurrency)
That is the most common meaning, but "concorrenza" also has a very uncommon one, which is indeed "concurrency".
This is not much of a surprise though. The Latin origin of both words is "cum currere" which means "run together. Why it got to mean competition in Italian I don't know.
(It must be noted though that the verb "concorrere" keeps the meaning of running together and does not mean to compete. For that the verb is "competere")
But no one would use "concorrenza" for "concurrency" in Italy. The best substitutes that come to mind are "parallelismo", or, less common "concomitanza".
(Yes, I'm Italian too)
https://www.collinsdictionary.com/us/dictionary/italian-engl...
Languages don't line up 1-to-1
(I'm from Oregon)
Laungages are fun, aren't they?
But notice that in the example you linked, there is the pronoun "mi" (to me). A pronoun that indicates the recipient is required for that meaning (it would be a dative case in Latin or other langage with cases).
"To compete with someone" instead requires the preposition "con" (with)
That seems obvious? To compete, you have to "run" (perform whatever activity you compete in) "together" (same activity, same time) with the other guy? Most literal example is a (running) race, which is a competition, literally featuring people running together.
While the German eventuell means possibly, the English word means that something will happen definitely, but at a later, unspecified time.
This can be confusing even to people who are well versed in both languages.
Also, it doesn't dispose of the concept of owner. It's exactly like a publicly traded company with shareholders. The only difference is that the shareholders are restricted.
Also, I spent half my childhood growing up in the heavily unionized Chicago area, and half in the vehemently anti-union Deep South. In both regions adults always complained about the corruption and inefficiency of unions. Which always perplexed me because as a naive (though arguably objective observer), both private and public works projects in the Deep South were immensely more inefficient than in the Chicago land area. They took longer and seemed of lesser quality even though often less ambitious. And while as an adult I understand the truth in the complaints about unions--there often is corruption and especially inefficiency and back-scratching--the outcomes aren't necessarily worse than in non-union systems, and sometimes much better. It depends on the larger context.
That said, there are plenty of worker-owned coops in the U.S. I recently discovered that Litehouse Foods is one such business. I wanted to know if Costco would keep selling Litehouse's awesome and reasonably priced freeze-dried herbs, so spent an evening Googling everything Litehouse related. I've been buying Litehouse freeze-dried herbs at Safeway when on sale for a couple of years. The grocery retail prices (sale or not) are competitive with online and mail-order freeze-dried manufacturers, but the Costco prices were so incredibly low-priced that I was curious how sustainable it could be. I never could figure out if Costco will continue selling those herbs, so last time I was at Costco I bought enough freeze-dried garlic, basil, parsley, oregano, thyme, dill, green onion and red onion to fill up two entire shelves in the kitchen.
* Anti-meritocratic
* Abused as vehicles for tax avoidance
* Harm competition (indeed, avoiding, minimizing, or killing competition arguably encompasses the majority of sales and business strategies)
* Pay low wages, especially relative to management, and particularly relative to upper management.
* Rely heavily on political connections, sometimes to the point of classic quid pro quo corruption.
My point was merely that all of those characterizations not only could be made of private corporations, in some economic markets private industry can be even more abusive than other forms of organization.
You can't compare actual coops to the imaginary, Platonic ideal of free market capitalist enterprise. You have to compare it to what capitalist enterprise would actually look like in that region if it displaced the coops. The dynamics that breed corruption won't disappear. A more heavily capitalist, investor-owned system could result in any number of possible outcomes, some worse and some better, and it's not at all obvious which would be more likely.
The first thought that entered my mind when I read his criticism was that maybe he should ask migrant Mexican farmworkers in California if they'd like to swap places with the Italian coop members. I suspect that California agriculture produces more output at a lower price than in the Emilia-Romagna region, but recent political trends the world over should make it clear that maximizing short-term economic efficiency isn't politically viable, regardless of whether it objectively maximizes overall social wealth. And regardless of whether it maximizes long-term wealth equality--we'll never see those fruits if the social and political fabric disintegrate.
Coops reward politically inclined members who can rally crowds. They are not meritocracies at all.
Coops compete with others in the same way any other corporation would. In fact, employees who are members are more motivated to play dirty (a.k.a. cheat) than regular employees in a corporation.
Coops are just as subject to corruption. Just look at the coop connections with the mafia in Italy.
How is this the case? I was under the impression that since workers were company members they would exert more pressure to increase wages.
And no, Italian law makes desperately little sense.
We BADLY needed a union, management was only interested in serving themselves, which they could do well enough 'cause few members voted.
Remember that corruption and Co-ops have a long history in the U.S - early Life Insurance companies, many of which survive, were formed as Co-ops 'cause they founders knew the policy holders wouldn't show up to vote: therefore management could pay themselves very well and structure the company to serve themselves.
This worked beautifully while managers and political directors were ideologically motivated and somewhat honest: the sectors making money were financing massive expansion everywhere else, pushing the model, and because workers were similarly motivated, overall costs were always pretty low, generating virtuous dynamics.
Then three things happened: the USSR collapsed, irreversibly killing the dream; long-term effects of bad hiring policies finally came to bear (historically, if you attempted a career in The Party and failed, someone would find you a job in a cooperative, regardless of your actual skills); and the wartime generation (people who had literally fought in the mountains and been persecuted under fascism) was naturally replaced by more cynical and greedy boomers.
Cooperatives slowly migrated towards a more traditional corporate setup, but worker compensation (unsurprisingly) was not adjusted. Coincidentally, Italy has been economically fragile since the late '80s, but because of the political implications, cooperatives tend to avoid redundancies (they do happen, but they are somewhat rarer than elsewhere); people value that security, so they kept voting with the boss. There are indications that this might have changed recently, but tbh I'm not close enough anymore to say whether that's true.
Then you get to this parallel in laissez faire market economy, where low end service jobs are routinely undercut using single-client subcontractors who are self-employed only in name. Interesting to see how very different paths can lead to very similar results.
I don't see how this is any different from non-cooperative companies.
It is true that coops ae inherently political as all the members should be taking part in the internal democracy.
I think co-ops are great for actual workers (i witnessed myself the best side of this), but once they grow they inevitably onboard a lot of other people and the whole concept goes a bit out of the window.
There is also the pathology of a cooperative that needs to change to survive, but it’s forbidden doing so by members. E.g. a transport coop with a lot of buggy-whip technicians will find it hard to switch to a car-based model, because “buggy-whippers” are not going to vote themselves out of a job.
Then I got to the tech industry and found I worked best in small, decentralized teams without a lot of top-down control and decision making. Plus it doesn't hurt if everybody has some equity. It seemed like the same phenomenon at work.
This. Doesn't this hold for so many professions or just so many things we do in life?
What an excellent interview and what good to see such a positive insight on (a part) of Italy's economy. In the aftermath of the financial crisis in 2008 a lot of Italy bashing (together with basically all Southern European EU countries) has been going on, most of it completely based on stereotypes.
Also makes me wonder if cooperations like these are one of the reasons why (Northern) Italian design is so damn good.
The somewhat-distributed coop model traditionally helped and incentivised STEM-oriented schools. Emilia has some of the best engineering schools in the country, both at university level and below, and a huge network of engineering-based companies working in industrial automation and precision instruments - including the Motor Valley of Ferrari-Lamborghini-Ducati fame. Even there, you really remember the cars designed by Bertone and Pininfarina, studios based further North.
"The founding principle was based on common economic action as part of a general vision of society not based on individualism and self-interest".
The result is an inefficient system that incentivizes inequality and lowers productivity, protecting the interests of the insiders in detriment to society.
And, from what I hear from Italian friends, they are usually linked to the local mafia group.
None of the above sound bad in themselves.
In many areas we could do with less competition, more tariffs, and more cultural protection and subsidies.
Actually, all of them are bad in themselves. Government-granted monopolies reduce innovation and consumer surplus, inhibit competition and stagnate an economy, leaving it weak and unable to compete internationally.
> In many areas we could do with less competition, more tariffs, and more cultural protection and subsidies.
No, we could not.
The question isn't which abstract model is better, the question is how we build some sort of conventions that work better than what is happening now.
Oh, sure, there's potential for improvement. But so far there hasn't been a model that works better, and every single time that government-protected monopolies were tried, they failed with disastrous results.
Every single new model tried has failed miserably.
But that also doesn't mean there aren't ways to improve the current model.
This has no basis on the real world. Many of the largest companies in the world are subsidized by the government, including in the US. For example, Boeing/Airbus is a de-facto duopoly, subsidized by taxpayers. The biggest problems of these companies is that they are owned by private individuals. Having them formed as coops solves a major issue. While not perfect, I don't see these coops as any worse than other companies.
And it has plenty of evidence in the real world, just look at AT&T, cable companies, ISPs, mail carriers, etc.
And look at monopoly pricing.
> The biggest problems of these companies is that they are owned by private individuals. Having them formed as coops solves a major issue.
No, it doesn't. Coops are also owned by shareholders, and with government protection, they are monopolies, extracting economic rents from consumers. And economic rents are always, always bad.
Where is your pension/ 401k invested pray?
Only if one believes in the free market ideology and have no other measure of what's valuable than monetary.
And even then, it's a stretch. All the big economies (the US first and foremost) grew to what they are by using tons of subsidies, tariffs and so on. And even now they use non-economic advantages (diplomatic and military pressure for one) to maintain their status.
Furthermore, in a corporate structure, those at the bottom of the rung have absolutely zero say in what upper management does.
No, coops here survive because of government protection against competition.
> The real key factor here is that coops at least open up the possibility of workers sharing in the profits generated by their labor.
No, they don't. A coop can be of owners, as it is frequently the case in Italy. A coop of small farms, each employing a dozen people, doesn't necessarily bring any benefit to those employees, only to the owners.
And it leaves them vulnerable to competition from outside, which then require even more government protection, hindering trade and economic development.
Coops aren't any different.
Though some of the Italian statistics were ambiguous as to whether they included non-worker-owned coops (perhaps even deceptively so!), the main thrust of the article was clearly about worker-owned coops
While cooperatives in the United States claim about 130
million memberships, these are by and large within consumer
and producer-owned co-ops, not cooperative workplaces. Only
around 7,000 people nationwide are part of worker co-ops.Your talking a producer coop which a lot of the US ones are including one that supplies KFC.
That's incorrect. The Capitalist structure enables multiple avenues of labor competition, one of which is to pay more than the next company to get the workers you need, and to pay workers more, ie take better care of them, to keep them happy. These approaches are extraordinarily common.
That so many businesses offer health insurance benefits - such that half of all Americans get their health insurance from their employer - wasn't always a legal requirement (and in many cases still isn't). That happened out of labor competition. It's no different than numerous other competitive benefits that companies choose to offer.
Google, Microsoft, Netflix, et al. often pay programmers extraordinary salaries to attract the best. The competition between companies has driven salaries to the moon. See: AI talent.
The SAS Institute, as one example model, has been doing profit sharing for four decades, and it has proven to be a wildly successful Capitalist approach.
Walmart has used the over-paying approach for decades. By intentionally paying more than they absolutely have to based on state / federal minimum wage requirements, to lure labor away from smaller businesses that can't match what Walmart can pay. Walmart has had a voracious appetite for labor over the last 30 years, the sole means to keep 2.x million people on the payrolls, is to out-compete on pay.
Speaking from experience of having seen it up close across multiple decades, if the federal minimum wage is $7.25 and you pay even just $9.25 or $10.50 instead, you will attract considerably superior employees versus if you pay the minimum. And the quality gap between those two types of employee, is surprisingly vast. Even if you're running a very thin margin business with minimum ability to pay high wages, a convenience store for example, paying a few dollars more per hour is well worth it because it produces a big leap in the quality of employees you can hire.
I find it a rather sad state of affairs that you need private health insurance in the first place.
While I agree with you that competition for some skills that are in high demand tends to push wages up significantly for those who are lucky enough to possess such skills, for majority of jobs where there is ample supply of workers, companies certainly favour distributing profits to management, dividends and financial engineering like share buybacks rather than spending it on the workers.
In an employee owned organisation you would assume the worker/owners would get higher compensation, but it seems like their governance is also often corrupted and in reality they can be worse places to work at.
It is interesting to see if governance models using technology (like blockchain based equity and voting, like http://aragon.one) for organisations prove to be more resistant to corruption and can usher new ways of organising ownership and work.
You might be confusing it with laissez faire, which isn't necessarily a free market.
https://www.kff.org/private-insurance/issue-brief/trends-in-employer-sponsored-insurance-offer-and-coverage-rates-1999-2014/
https://aspe.hhs.gov/basic-report/overview-uninsured-united-states-summary-2011-current-population-survey
Make of that what you will (the implications are complex), but realize that in terms of labor market dynamics and relative to what's theoretically economically optimal, the predominance of employer-sponsored healthcare is a very... odd... outcome, and hardly an exemplar of the benefits of free market enterprise. In as much as it was beneficial it required external, non-market[1] pressures, and in any event it's hardly praiseworthy.
[1] I'll assume for the sake of argument that government-enforced union arbitration is more market antagonistic than the government-enforced limited liability of corporate stockholders. But in my view I don't see how the laws which make it viable for unions to bargain collectively in the labor market are worse than laws which make capitalist financing viable.
I thought it happened out of a tax break and things never went back to normal.
https://www.peoplekeep.com/blog/part-1-the-history-of-u.s.-e...
Um... no? The point of a coop is to make money, just like a joint-stack corporation. In fact, a co-op is a joint stock corporation where the owners are also workers.
> They are (usually government-sanctioned or government-protected) producer organizations
Coops have no government protection, at least no more than mega corporations. Recall that it was GM who was determined to be 'too big to fail', not Mondragon.
Protection comes in many forms, such as special tax structures, protected denominations and excessive regulation.
In America, it is routine for large companies to negotiate tax deals with local governments. Many American companies pay no local tax at all. Local authorities do this as a 'gift' to make companies stay. It's wrong everywhere, but it has nothing to do with co-ops.
In my opinion, we are truly shooting ourselves in the foot by giving banks a monopoly on financing.
Credit is the blood in the body economic, and by making banks an accessory to every credit transaction we greatly reduce its flow through the economy.