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When Co-op Principles Go Digital

These are excerpts from an article originally published in Platform Cooperative Consortium. Read the full article here.


By Trebor Scholz
Associate Professor of Culture and Media
The New School, Schools of Public Engagement

Picture a scenario in which the economy truly fosters equality and democracy for all. But, in order to realize such vision, many barriers must be overcome. For instance, couriers who deliver our meals often feel isolated and invisible in the gig economy. They face substantial power imbalances, safety risks, and have no control over the systems they rely on. Amidst the reality of inadequate labor laws, we witness the scourge of low wages, abusive work conditions, and lack of job security and benefits. These challenges reveal the need for an economic system that values worker and community well-being.

While there is no shortage of books that critically analyze the platform economy, only a small number of people have taken the leap to envision and help build near-term alternatives. The challenges of the platform economy are complex and multifaceted, and various theories of change propose to create a more equitable system. From unionization and worker councils to employee ownership, many ideas have been put forward. Regulation is also critical, but it can be a slow process, and workers need solutions that can benefit them today, next week, and beyond. But how? While there is no one-size-fits-all solution, combining different approaches may be the key to bringing about real change.

Many decades ago, in the 1930s, a great spirit of self-reliance and mutual aid was on display in rural regions of the United States, where electric cooperatives were formed to bring power to underserved areas. Today, these cooperatives have electrified over 42% of the country, showing the potential for cooperatives to address pressing needs. When faced with crises, people often turn to each other to meet their needs, rather than relying on safety nets provided by markets, governments, or families. In these situations, cooperatives can emerge as a way to provide support and fulfill the needs of those involved, without necessarily trying to eliminate competition or outcompete established players.

Cooperatives attract people for various reasons. While some seek to fulfill their immediate economic concerns, others are driven by the desire to challenge or destroy the capitalist system. Despite ideological differences, cooperatives serve as a rare point of consensus that brings people together to collectively address shared challenges.

Since the 19th century, when industrialization was reshaping communities, the cooperative framework has guided many groups. The Rochdale Equitable Pioneers Society, founded in 1844, established principles like democratic decision-making, fair profit distribution, and member education that still shape the modern cooperative movement. The International Cooperative Alliance estimates that over 1 billion people worldwide are affiliated with cooperatives, indicating a significant impact on the global economy despite the fact that they are hidden in plain sight.

Many “platform cooperatives” belong to a subset of labor-managed cooperatives that provide an alternative to traditional platform businesses. The commonly used definition reads as follows:

Platform cooperatives are businesses that sell goods or services primarily through a website, mobile app, or protocol. They rely on democratic decision-making and shared platform ownership by workers and users.

In the world of the cooperative digital economy, over 542 projects are thriving in 49 countries and that includes only the ones known to us. Balancing their cooperative identity with the development of successful digital businesses is a genuine challenge for many platform cooperatives. Historically, the cooperative movement has been rigid in adhering to cooperative principles but less open to digital experimentation. In contrast, some technologists and entrepreneurs have been too lenient with cooperative rhetoric. The cooperative principles, long-standing and steadfast, ought to be the yardstick against which cooperative identity is measured in both traditional and digital settings. A quick reminder:

1.    Voluntary and Open Membership
2.    Democratic Member Control
3.    Member Economic Participation
4.    Autonomy and Independence
5.    Education, Training, and Information
6.    Cooperation among Cooperatives
7.    Concern for Community

Let’s talk about them. First penned by the Rochdale pioneers, a group of 28 weavers in Rochdale, they started out as guidelines for cooperatives, but over time they evolved into the seven principles we know today. These nearly 200-year-old principles, which were last revised in 1995 by their global steward, the International Cooperative Alliance, serve as a compass for cooperatives as they pursue their purpose. They are fundamental values and should be understood as operating guidelines that are adaptable to various contexts. Considering the principles in the context of the digital economy can help us identify potential tensions and alignments and navigate the constantly evolving online economy. Having a set of guiding principles, such as these, is significant because it can help to ensure continuity of values.

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Independence and Autonomy

The next cooperative principle emphasizes the importance of maintaining independence and autonomy, with cooperatives being self-help organizations fully controlled by their members. This can be challenging for platform cooperatives, as they must balance the need for external funding and regulatory support with the need to maintain democratic control by their members. Notably, leading cooperative scholars like Jonathan Birchall have stressed the significance of autonomy and independence for cooperatives, particularly from the government. So what do we do with the following examples?

In India, the government of the Southern state of Kerala plans to establish 4,000 platform cooperatives as part of the Comprehensive Programme for Employment of the Educated Unemployed, to create more equitable relationships between platforms and providers. The Kerala Food Platform, which is currently still a blueprint, is coming out of the same context. It is being developed to create a cooperative network consisting of thousands of primary agricultural cooperatives, 3,000 banks, totaling 11,000 cooperatives. The aim is to improve soil quality and well-being of small farmers by sharing knowledge and resources among participants. The project aims to connect farmers, who have small landholdings of 0.18 hectares on average, which is roughly the size of two basketball courts or slightly smaller than a tennis court. The government in Kerala is facilitating this cooperative network to provide necessary resources and support to these farmers. This alliance of small cooperative players allows them to compete in the market. However, this also raises questions about the balance between the involvement of government and the autonomy of cooperatives.

Let’s shift our attention from India to Italy. During the pandemic, the municipal government of Bologna brought together unions, co-ops, the university, store and restaurant owners, and food delivery couriers to create the platform cooperative Consegne Etiche. This cooperative emphasizes sustainable and transparent delivery services, prioritizing fair pay and representation. They even wrote a manifesto about digital labor. Although Consegne Etiche did not approach this project sufficiently as a business, it’s a positive example of how municipalities can facilitate the creation of cooperative networks and coordinate stakeholders for shared benefit. Similar to the approach in Kerala, the municipality in this case facilitated the process of bringing together stakeholders to form a platform cooperative, rather than creating it themselves.

Or look at Brazil where President Luiz Inácio Lula da Silva encouraged the creation of platform worker co-ops to address income inequality and the precarious nature of gig work. He cited the success of Coomappa, a taxi platform cooperative in Araraquara that takes only a 5% cut of the revenue, provides benefits such as insurance discounts and legal services to its drivers, who earn 40% more than they would on other platforms. Similar to the approaches taken in Kerala and Bologna, the mayor of Araraquara encouraged taxi drivers to establish a cooperative, demonstrating a facilitation role. Lula views cooperatives as a practical solution for municipalities to partner with in creating initiatives that offer gig workers the benefits and protections they require.

However, one may wonder how cooperatives can maintain their autonomy not only from government but also venture capital while seeking funding. An example of a successful cooperative that has received non-controlling vc-funding is Savvy Cooperative. Savvy, founded in 2018, is a digital health platform coop and online community that connects patients and caregivers with health industry organizations seeking input and feedback. Members participate in research activities and receive compensation for their time and insights, promoting patient-centered research and advocating for greater patient representation in healthcare decision-making. Savvy’s VC funding, a true rarity in co-op circles, is noteworthy because the principle of independence and autonomy emphasizes that cooperatives should be financially independent without taking controlling financial interest from third parties, which would otherwise follow the extractive shareholder logic of capitalism. While such investments are generally avoided in the platform co-op world, the success of Savvy Cooperative shows that it’s possible to find creative solutions. In a recent policy paper my co-authors and I also suggested the idea of non-controlling investments by municipalities in platform cooperatives. This would further engage the municipality in the work of the cooperative without removing member control. But to be completely clear none of this changes the fact that controlling venture capital is diametrically opposed to the ethos of platform cooperatives.

In any case, the collaboration between cooperatives and local governments is essential to promote the growth of platform worker co-ops and provide gig workers with the benefits and protections they require. This approach has been seen in various cities, including Araraquara, Kerala, and Bologna, where local governments facilitated the establishment of cooperatives for gig workers. This kind of collaboration with municipalities and governments is a particular sweet spot, and one of the most successful examples of this is Drivers Cooperative in New York City.

The United States’ largest worker cooperative, Drivers Cooperative, has emerged as a trailblazer for creating a more equitable and sustainable ride-hail industry. Established in 2019, it has over 8,000 drivers today and they have already served more than 200,000 trips. Drivers Cooperative has raised close to 2 million dollars. The funding sources for platform cooperatives in general include member contributions, crowd equity, and loans, with some loans being provided by cooperative banks and credit unions.

Drivers Cooperative works very closely with the city of New York and has taken on rides for the Metropolitan Transport Authority which services people with disabilities. This tight-knit collaboration with the city of New York has allowed the platform co-op to survive. Drivers Cooperatives makes use of city procurement in this way which allows it to compete not solely through business from individuals that hail a ride. The platform pays drivers $30 per hour, ensuring they are compensated fairly, regardless of ridership. Passengers also enjoy an average of 10% lower fares compared to other ride-hail platforms. Drivers Cooperative operates democratically, with each member, regardless of seniority, having one vote. In addition, the co-op has an ambition to launch a global federation of worker-owned ride-hailing platforms by offering their digital infrastructure to cooperatives worldwide.

So, looking at New York City, Araraquara, Kerala, and Bologna, it is clear that close collaboration between municipalities and platform cooperatives is crucial for their survival and success.

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These are excerpts from an article originally published in Platform Cooperative Consortium. Read the full article here.