Cooperatives in Times of Crisis

The 2008 global financial crisis was the greatest economic shock to the world economy since the great depression. The crisis not only tested the foundations of the capitalist economic system; it also presented a severe test for the cooperative economic model. So how did cooperatives do? How did they cope, and what strategies did they use to weather the storm? In general, did they fare better than capitalist businesses? Or worse? To answer these questions, two Italian researchers, Chiara Carini and Maurizio Carpita, analysed a huge economic-performance data set collected from Italian capitalist and cooperative businesses in the industrial sector covering the peak crisis years: 2008–10.

As we saw in an earlier post, the Italian cooperative sector is huge, and it is also rapidly growing. While the number of employees in Italian corporations stayed roughly the same between 2001 and 2010, and the number of employees in Italian partnership businesses declined by 28%, the number of employees in Italian cooperatives grew by 15% in the same period. (p. 15) This large number of cooperatives means that Italian economic researchers are in a position to compare capitalist and cooperative businesses using large, robust data-sets, something that would not be possible in countries like the US or Canada where cooperatives are relatively much more rare.

The authors used this data to make several generalization about cooperatives during the crisis:

Cooperatives successfully maintained employment during the crisis. Cooperatives lost only 1.2% of their employees between 2008 and 2010, while corporations lost 5% and partnerships lost 10.8%. (p. 16)

Cooperatives focused on maintaining employment while corporations focused on maximizing profits. Taking turnover, employment and profit data together, the authors added support to the general observation that cooperatives tend to prioritize community values like maintaining employment while corporations tend to focus more narrowly on maximizing profits. (pp. 17, 19)

Cooperatives made investments roughly as often as corporations. During the crisis, 34.2% of cooperatives reported making investments to improve their performance, compared to 31.8% of corporations, and 24.7% of partnerships, further refuting the prediction that cooperatives tend to under-invest. (p. 20)

More cooperatives made organizational innovations during the crisis while more corporations were investing in R&D. This is an interesting and perhaps unexpected distinction. Of cooperatives, 11.9% reported making organizational, managerial and/or commercial innovations during the crisis, while slightly fewer corporations (9.5%) and many fewer partnerships (4.3%) reported implementing similar innovations. At the same time, while 11.1% of corporations reported investing in R&D during the crisis, only 6.4% of cooperatives and 3.0% of partnerships did the same.

This is a massive study that clearly shows that cooperatives can be as resilient, and often even more resilient, than capitalist businesses during an economic crises. From the perspective of this blog, the principal weakness in this study is that the authors analysed all cooperatives together. Consumer cooperatives, producer cooperatives and worker cooperatives have quite different priorities in some respects that arise from their different ownership structures, and it would be particularly interesting to see if worker-owned businesses reacted differently or fared differently in the crisis compared to other types of cooperatives under similar economic stress.

Chiara Carini and Maurizio Carpita. (2014) “The impact of the economic crisis on Italian cooperatives in the industrial sector.” Journal of Co-operative Organization and Management 2: 14–23.

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