What if employees co-owned the business where they work?

A quiet consensus is emerging across the political divide: Bernie Sanders and Paul Ryan both advocate enabling Americans to co-own the businesses where they work

coops
‘New co-ops are forming, empowering people in industries from low-wage housecleaning to craft brewing.’ Illustration: Sebastien Thibault

What do Bernie Sanders and Paul Ryan have in common? Mr Ryan recently learned he has some Jewish ancestry, but there is at least one other thing, tucked between their otherwise diametrically opposed visions for the US economy: both advocate enabling more Americans to co-own the businesses where they work.

Mr Ryan has been a longtime co-sponsor of bills supporting employee stock-ownership plans, or ESOPs, through which millions of workers reap the profits they help create, on top of their wages. Mr Sanders, meanwhile, is among those on the left now crafting ambitious bills to promote employee ownership nationwide. Americans seem divided on just about everything, but if the two of them can agree that we should co-own more of the businesses we rely on, maybe the rest of us can too.

In the 10 years since the onset of the global financial crisis, people have been rediscovering this powerful way of doing business. A new generation became interested in co-operative and worker-owned business on the tail-end of Occupy Wall Street, when activists around the country turned to co-ops as a way to earn livelihoods in keeping with their values. The Black Lives Matter policy platform refers to co-ops dozens of times.

Many of these activists, however, didn’t realize at first how broad a legacy they had to build on. Since the decades following the civil war, farmers have been forming co-ops to bypass big city capitalists, obtaining credit and supplies on their own terms. Meanwhile, urban labor unions built co-operative stores and apartments to ease the hardships of factory workers. Most rural communities in this country only gained access to electricity through co-ops they built and still own themselves.

Because electric co-ops serve districts that tend to vote solid red, Republicans have become some of their most dependable allies. Indiana co-ops, for instance, speak fondly of the vice-president, Mike Pence.

In the first half of the 20th century, the federal government passed enabling legislation for farmer co-ops, credit unions and rural electric companies. It produced newsreels and pamphlets promoting the co-op model as the next stage of development and democracy.

The onset of the cold war drove the co-op movement more underground. Some regarded it as a kind of communism. But co-ops remained a bedrock of the economy, through firms ranging from Land O’Lakes and Ace Hardware to the Associated Press and – at least at first – Visa. With the help of Democrats and Republicans in Congress, employee ownership flourished in companies such as Southwest Airlines, Publix Super Markets and countless regional manufacturers. Co-ops can provide local businesses with economies of scale to compete with big-box chains, and employee ownership has shown measurable advantages for worker productivity.

After the financial crisis, people moved their money from Wall Street banks to credit unions. Older co-ops and ESOPs have been advertising their ownership structures again. As millions of business owners retire in a “silver tsunami”, some are selling to their employees as a way to keep the businesses grounded in their communities – and to walk away with cash for retirement.

New co-ops are forming, too, empowering people in industries from low-wage housecleaning to craft brewing. “Platform co-ops” are a new breed tech startups using the equity and accountability of user ownership as an alternative to the business models of Silicon Valley. Among them are a stock-photo platform owned by photographers, Stocksy United and several co-op cryptocurrencies.

Politicians are starting to mobilize on this front, behind the headlines of gridlock and polarization. Cities from New York to Richmond, California, have begun supporting co-op development and worker ownership. National leaders are taking part, too.

nathan schneider
Pinterest
‘Amid the mayhem of the 2016 election, expanding employee ownership was on both the Democratic and Republican party platforms.’ Photograph: Nation Books

Amid the mayhem of the 2016 election, expanding employee ownership was on both the Democratic and Republican party platforms. Then, as the 115th Congress opened in 2017, Republican representative Ed Royce called on his colleagues to “get the co-operative narrative into every bill we can”. Supporting credit unions helped justify reducing regulations on small and regional banks earlier this year. In May, Democratic senator Kirsten Gillibrand and others introduced the Main Street Employee Ownership Act, which is a step toward making co-ops and ESOPs as easy to form and finance as anything else. It is now poised to become law as part of the 2019 defense budget, and other bills have already been written to draw these models further into the mainstream.

A decade since Wall Street malfeasance spurred a global crisis, we have yet to see meaningful change in the way business is done. Co-ops and ESOPs are a strategy for distributing wealth more equitably and accountably. They present a fresh opportunity for beleaguered labor unions. But they are also none other than self-help and free enterprise – freer, even, than the kind that serves just the wealthiest shareholders.

Both major parties are posturing for the next election with increasingly polarizing flavors of radicalism. Together, however, they could choose to advance the even more radical tradition of co-ownership.

  • Nathan Schneider is the author of Everything for Everyone: The Radical Tradition That Is Shaping the Next Economy