In Northern Italy's Emilia Romagna region co-ops produce 30 percent of the GDP. Here are six things we can learn from it.
Bologna, Emilia Romagna. Photo by Tomas Kohl.
By John Duda
Jul 6, 2016
Picture a day like this: You wake up and head to your job at a small company you own and manage together with your fellow workers, doing high-tech, advanced manufacturing that’s too specialized for bigger factories. For lunch, you swing by a restaurant owned by another worker cooperative, this one a national-scale firm that serves millions of customers each year. Back at work, you’ve got a meeting with a local agricultural co-op that’s contracted your company to help design some more efficient processing material for the food they produce and export across the world. Afterward, you meet up with your partner, who works in a social cooperative jointly owned by caregivers and the elders who live and receive care there. The two of you swing by the local grocery store—part of a national chain owned by its millions of customers—and pick up a bottle of co-op-produced wine. This is a day in the life of the cooperative economy in Northern Italy’s Emilia Romagna region.
Emilia Romagna, a region with nearly 4.5 million people whose capital is the medieval university city of Bologna, has one of the densest cooperative economies in the world. About two out of every three inhabitants are co-op members, together producing around 30 percent of the region’s GDP.
Doing business through co-ops is one of the clearest ways to democratize our economic institutions. But as anyone who has developed or worked in a cooperative will tell you, co-ops aren’t magic. Building institutions that go against the grain of corporate capitalism while managing to survive in the markets it creates is not easy to pull off. There’s plenty of room to fail, and even more room to do better. 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.
That’s why it’s helpful to learn from countries where the cooperative economy is more developed and more densely integrated than in the United States—not because they’re utopian, post-capitalist wonderlands, but because they’ve got the hard-won experience that can teach other co-op creators how to scale up the community-owned economy effectively and creatively.
How did Northern Italy’s complex, intertwined, and resilient cooperative network develop and grow? That’s the question Vera Zamagni, professor of economic history at the University of Bologna, has been trying to answer throughout her career as one of Emilia Romagna’s foremost cooperative scholars.
In her work, Zamagni shows that Emilia Romagna’s co-op economy is a product of organizing going back to at least the 1850s, developing in conjunction with a rich, high-value-added agricultural tradition and surviving despite a brutal historical encounter with fascism.
When an Italian dairy cooperative can raise more than $6 million in financing by issuing bonds backed by aging wheels of Parmesan cheese—as one did earlier this year when the Parmesan market proved too uncertain for banks—it’s easy to feel like we’ve fallen through the looking glass. We can’t exactly replicate what the people of Emilia Romagna have created, but there’s plenty we can learn. Here are six key lessons for building a cooperative-rich economy.
1. Build ecosystems, not monoliths.
For many U.S. co-op advocates, the Basque Country’s Mondragon—which has tens of thousands of worker-owners and cooperative businesses linked into a single, giant cooperative corporation—is the go-to reference for convincing people that co-ops can scale. Not for Zamagni. “North America is fond of the Mondragon corporation because it resembles more closely the typical American corporation in size, but with different management principles,” she says. But it’s a unique case that has never been replicated elsewhere.
In Emilia Romagna, the cooperative movement is more a networked ecosystem than a single, overarching corporation. This has key advantages. If you can’t build a giant firm because the sector you are working in requires flexibility and specialization, or if the people involved are simply uninterested in being part of a giant corporation, then, Zamagni says, the network form can give you all the advantages of scale without overcentralization. In Italy, the cooperative movement is not a single company, but a whole interwoven fabric of “horizontal, vertical, [and] complementary networks” that support each other financially.
For those aspiring to build co-ops in the United States, the ecosystem pattern—in which different cooperative businesses and development efforts interact in a loose web of mutual support—is likely a much better place to start than trying to replicate the more monolithic approach of an initiative like Mondragon. A networked ecosystem—decentralized and resilient—can harness energy and interest at different levels and in different sectors to develop, grow, and thrive.
2. Raise capital from customers.
If the amount of worker cooperatives in Emilia Romagna is impressive, the scale of consumer cooperatives in Italy’s retail sector is awe-inspiring. Coop is the largest retail chain in Italy, with its supermarkets and “hypermarkets” claiming close to 20 percent of market share, and the whole enterprise is owned by its 7.4 million consumer members across the country. How did it get so big?
The answer is, as it turns out, crowdfunding. According to Zamagni, in the wake of a 1971 law that exempted co-ops from certain kinds of banking limitations, Coop was able to raise a lot of money in small amounts from many, many members. Coop became the Italian retail leader in part because it could tap its already sizable membership base for the loans it needed to expand. This kind of bottom-up lending covered more than half the funds Coop needed for a critical two-decade-long expansion effort in the ’80s and ’90s.
3. Tap the care work market.
Many people worry—with good reason—that cooperatives won’t be able to compete with traditional corporations without abandoning their social mission. But focusing on cooperatives as market-driven enterprises might be a mistake. In Italy, social co-ops are on the rise, not as a way to produce goods and services for sale, but as a way to more effectively deliver social services.
Zamagni explains that bureaucratic welfare services were high-cost and low-quality, so citizens started self-organizing to deliver key care-related services themselves, which the government then helped formalize with new laws for multi-stakeholder cooperatives. This allowed caregivers and those receiving care to work together to govern the delivery of services.
The results have been impressive. In Bologna, for instance, as much as 85 percent of the city’s social services are provided through social co-ops. Some of the most interesting segments in the film WEconomics: Italy, which profiles Bologna’s co-op economy, revolve around social co-ops. The filmmakers take us inside a child care cooperative and an equally vibrant elder care cooperative. Both are workplaces built around compassion—not profit—and are designed with the interests of workers and those receiving care in mind. Here, cooperatives are community institutions that humanize social services in a way that neither state nor market mechanisms alone could.
Care work is already a key sector for the much smaller U.S. worker-co-op movement, accounting for somewhere close to a third of the 7,000 or so worker-owners in the United States. But the Italian example shows we can think a lot bigger.
4. Politics matter.
The growth of Italian co-ops has been fueled by deep connections to broader sets of political commitments and values. The largest two federations, Legacoop and Confcooperative, are organized with strong historic ties to the Italian Communist Party and the Catholic Church. For Zamagni, these “strong communitarian ideologies” helped people set up businesses grounded in solidarity rather than pure profit.
Interestingly, because Italy has had two or three competing cooperative foundations with different sets of political values since the period after World War II, funding cooperatives has not been identified with one particular political camp. By law, cooperatives in Italy have to contribute a share of their profits to a cooperative federation to fund the further development of more cooperatives, but they get to pick which one. The pluralism here is worth noting—people have different reasons for wanting to democratize the economy, and it might be OK if they build parallel organizations to do so.
5. Policy matters too.
In a video released this February, Carrier workers in Indianapolis confront a seemingly heartless corporate functionary who explains that their jobs are being eliminated for the good of the company’s bottom line. In the United States, that’s usually the end of the story, but Italian cooperative law opens up more possibilities.
Under the Marcora Law, the money due to workers as unemployment insurance can be used as capital to cooperatize their workplace instead. With the help of the law, more than 9,000 workers who would have otherwise been out of a job have instead created 257 new worker-owned businesses in the past 30 years, like WBO Italcables in Naples, a steel factory cooperatized in December 2015 after its multinational owners shuttered the plant.
With a suite of complementary policies facilitating access to capital, cooperatives in Italy have been able to expand far more than they would have if they were playing by the same rules as non-cooperative enterprises. Zamagni highlights in particular the 1977 bill that exempted profits saved by cooperatives from corporate taxation and the law that obligated cooperatives to shift 3 percent of profits to one of the cooperative development funds managed by major co-op umbrella federations, greatly accelerating both the amount of money co-ops could reinvest in themselves and the larger movement. The Marcora Law to save jobs by turning companies into co-ops doesn’t make sense in isolation. It only works in conjunction with a robust, well-funded cooperative development ecosystem and with the policies that make cooperatives recognizable under the laws that support them with public subsidies.
6. Co-ops aren’t a magic bullet.
With all of this cooperative energy, you might make the mistake of thinking that the Italian economy is doing amazingly well. It’s not. The Euro debt crisis is still far from over, and youth unemployment in Italy has been staggeringly high at more than 40 percent.
While the youth unemployment rate in Emilia Romagna is still high, it is nowhere near the catastrophic levels in Southern Italy, where in 2014 some regions saw nearly 60 percent of people aged 15-24 in the labor force unable to find work.
A 2013 report from the European Research Institute on Cooperative and Social Enterprises showed that “during the course of the crisis … the growth patterns of the various cooperative forms differed greatly from that of other forms of enterprise.” The analysis demonstrated an “anti-cyclical function” of cooperatives.
During the first four years of the ongoing European crisis, the report shows that cooperatives actually created a net increase in jobs. Employment in Italian cooperatives increased by 8 percent between 2007 and 2011. Furthermore, this “anti-cyclical” performance appears to be “caused primarily by the creation of new cooperatives.” In other words, as the global economy crumbled, people in Italy turned to cooperatives for a way forward.
As confidence in the current economic system continues to erode—with 70 percent of Americans believing the economy is rigged against them—we should pay close attention to the lessons Italy can teach us about how cooperatives can be a part of an alternative.