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Re: [tlug] Introduction to (Tech) Worker Cooperatives, 09:00AM on Sunday, July 12th JST

On Thu, 16 Jul 2020 at 15:31, Stephen J. Turnbull <> wrote:

 > Under a bottom up model, this consensus has to be reached by a very
 > large group of people, essentially all stakeholders.

Not true in worker cooperatives.  Customers and society at large are
excluded from decision-making.

Has it escaped your attention that I was talking about the Raiffeisen model?

What I said there is 100% correct under the Raiffeisen governance model.

Here again we seem to have a terminology issue.

In Switzerland, there is a very large supermarket and department store chain called Coop, which is short for Cooperative.

And yet, Coop are not a cooperative, not in any imaginable way. They are a for-profit joint-stock corporation under Swiss law.

Then there is the Cooperative Group and the Cooperative Bank in the UK.

Neither of those are cooperatives.

The name cooperative is not protected under UK nor under Swiss law.

Anybody can call themselves a cooperative. It is without any consequence.

How did that happen?

A long time ago, those enterprises started out as cooperatives. Eventually the demutualised (in the Swiss case) or watered down their by-laws to the point that there was nothing cooperative left (in the UK cases), de-facto a demutualisation, becoming a cooperative only in name.

And there are many shades of grey in between those examples and the Raiffeisen model.

I will not insist that only the Raiffeisen model deserves the moniker cooperative, but if the basic tenet of worker ownership and decision making is not met, then why would we choose to call it a worker cooperative at all? I think there has to be some substance when bestowing that moniker on an entity.

> Individual cooperatives are organised within a federation of
 > cooperatives through which certain assets (infrastructure,
 > know-how, intellectual property, marketing etc) are shared.

And pricing policy == monopoly power. 

There is no monopoly for the simple reason that there are other banks operating in the Austrian and German market, likewise for other industries.

And then there is the impact of the profit cap combined with one-shareholder-one-vote.

The management has no interest in raising prices simply because they cannot keep the profits anyway.

And the shareholder assembly will not vote for a management board if they present any kind of business policy by which profits are to be raised because the shareholders too cannot keep those profits, yet as customers, they will have to pay the higher prices. It makes no sense to them.

Most shareholders in Volksbanks and Raiffeisenbanks hold shares not for maximising dividends, which they cannot do by law anyway due to the profit cap, but because they want a local bank that works for the locals. They know that if the local cooperative banks was no longer there, they would either not have any bank in their village at all, or they would get higher prices and lousy service, not customised to the locals needs.

If a management board of a Volksbank or Raiffeisenbank back in the early 2000s had suggested to their shareholders

"There are these instruments we can buy in the US, securitised mortgages, it brings phenomenal returns in the 10 and 20 percent range"

the shareholders would have refused that, because they are not interested in their local bank doing risky business in other places.

They are shareholders in the bank because they want their bank to do local business at reasonable cost with a bit of dividend.

That's built into the model.

And that is why it just works.

These have been in operation since the 1860s. They went through two world wars and the great depression without one of them failing or needing government assistance.

Under the original Raiffeisen model, there was a fourth pillar: UNLIMITED LIABILITY for all shareholders.

Yes, you read that right UNLIMITED LIABILITY.

For those local villagers this meant, if the bank goes bust, they will lose their houses.

In the 19th century, limited liability was a relatively new invention and it was seen as an incentive to reckless risk taking. And in a way, it is.

So the coops back then were all based on unlimited liability.

Conservative governments in the 1920s changed the law to impose limited liability on all coops.

Fortunately, the remaining three pillars (profit cap, democratic voting, widespread ownership) have proven sufficient to prevent reckless risk taking.

But perhaps this gives you an idea about the mindset. It is a different mindset. Not the American dream mindset. It is a mindset that not everything needs to make a profit, that some things are better run as common goods for the benefit of the community, as long as it is at least cost neutral.
I suspect this model doesn't work as well without government
regulation in network industries.  Cf. buttcoin, which was designed as
a federated distributed money supply, but has turned out to be a
monopolized pyramid scheme for betting on the stupidity of later-
comers.  Although nobody has ever spent Satoshi's original pile, maybe
that was the idea from the get-go....

Not sure which model you are talking about there, but the Raiffeisen model needs very little regulation: Only the incorporation laws that you can incorporate as a coop, the basic governance rules (the aforementioned three pillars) and the prohibition of demutualisation. No more than that.

Of course, once you have a legal framework where there is no way to incorporate a coop and you have to incorporate under other forms and then impose cooperative governance by articles of incorporation and/or by-laws, then of course there is (1) plenty of room to get the by-laws wrong and the cooperative governance may not work or it may deteriorate and (2) always the possibility for a hostile takeover that will then be followed by demutualisation.

This is what happened to all the UK's building societies. They were all coops once. Even well run. Then came the 1980s and Thatcherism/Reaganomics, and the so called big bang, and in the following frenzy, the big banks made offers to the building society owners that were so out of this world that the owners couldn't refuse and sold out. The corporate owners then changed the by-laws and the coops were no more.

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