THE PROMISE OF ECONOMIC DEMOCRACY IN PRACTICE: THE ROLE OF COOPERATIVES IN SUSTAINABLE AND EQUITABLE COMMUNITY DEVELOPMENT by Aaron G. Lehmer A Thesis Presented to The Faculty of Humboldt State University In Partial Fulfillment of the Requirements for the Degree Master of Arts In Social Science: Globalization and the Environment May, 2003 ii ABSTRACT THE PROMISE OF ECONOMIC DEMOCRACY IN PRACTICE: THE ROLE OF COOPERATIVES IN SUSTAINABLE AND EQUITABLE COMMUNITY DEVELOPMENT by Aaron G. Lehmer Master of Arts in Social Science: Globalization and the Environment This thesis seeks to demonstrate the real and prospective benefits — in terms of economic equity and environmental sustainability — of democratically organized, cooperative business enterprises. For purposes of clarity and focus, the study analyzes those arrangements that explicitly grant worker-owners and/or co-op members official voice in economic decision-making within such institutions. “Official voice” refers to the sanctioned presence of members or elected representatives with the power to influence or direct ongoing operations, finances and investments, policies, and/or economic priorities. Using primary and secondary research methods — including in-person interviews and telephone/e-mail conversations (as approved on January 31, 2001 in conformity with Humboldt State University’s Human Research Subjects protocols, IRB #01-04), along with research and analysis from a wide range of journals, books, articles, and websites — the thesis documents a series of case studies in selected regions with a special focus on agricultural co-ops, health care co-ops, and financial co-ops (i.e., credit unions). iii The first chapter provides an introductory overview of the undemocratic character of the corporate-dominated global economy at the turn of the century and the limitations this reality has placed on peoples and communities seeking sustainable and equitable economic development. The second chapter summarizes the historical emergence of cooperatives as a response to the problems caused by top-down corporate globalization, and outlines the various benefits, both socially and environmentally, that cooperative institutions offer from a community development perspective. Three subsequent chapters examine the history and relative performance of various types of cooperatives, with an emphasis on assessing the extent to which benefits are more equitably distributed within their host communities and the degree to which environmental protection and sustainable resource use become explicit concerns compared with corporate arrangements. The study concludes that cooperatives, through their democratic structure, help combat the problems associated with traditional corporate enterprise by empowering ordinary workers, citizens, and communities to make choices that are more attuned to their concerns and priorities — not those of absentee owners and shareholders. As a countervailing force to top-down, corporate decision-making, cooperatives serve as living examples of economic democracy in practice, and should be promoted at the level of public policy as means for achieving more ecologically sustainable and socially equitable community development. iv TABLE OF CONTENTS CHAPTER PAGE 1: CORPORATE-LED GLOBALIZATION — RESTRICTING SOCIAL AND ............... 1 ECOLOGICAL CHOICE FOR COMMUNITIES AROUND THE WORLD Putting Corporate Globalization in Context: The Overpowering Influence of ............... 1 Transnational Corporations on Development Overexploitation of Nature, the Limits of Free Market Environmentalism and ............. 5 the Narrowing of Economic Choice Under Corporate Governance Growing Income Inequality, Loss of Democratic Control and Economic .................... 16 Instability Under Corporate-Led, Neoliberalism 2: THE COOPERATIVE ALTERNATIVE — HARMONIZING THE DIVERSE .......... 45 INTERESTS OF OWNERS, WORKERS, COMMUNITIES, AND THEIR ENVIRONMENTS A Brief History of Cooperatives, Related Organizational Developments, and ............. 45 the Role of International Law Co-ops as Means of Giving Democratic Voice to Workers and Communities ............. 54 and Creating a Broad Range of Stakeholders Cooperatives’ Effects on Employment Opportunities, Workers’ Incomes and ............ 62 Benefits, and Productivity Cooperatives’ Effects on Natural Resource Conservation and Environmental ............ 79 Health and Safety 3: AGRICULTURAL COOPERATIVES VS. CORPORATE AGRIBUSINESS ............. 90 The Growing Cost of Corporate Agriculture to Farmers, Rural Communities, ............ 90 and the Natural Environment Background on Agricultural Cooperatives in the Americas ......................................... 95 U.S. Midwestern Farmers’ Co-ops vs. ConAgra ........................................................ 107 v TABLE OF CONTENTS (Continued): CHAPTER PAGE 4: COOPERATIVE HEALTH CARE VS. CORPORATE HEALTH MAINTENANCE ... 128 The Worsening State of the World’s Health, Soaring Health Care Costs, .................. 128 Dwindling Benefits, and the Swelling Underserved Under Corporate Management Background on Health Care Co-ops in Selected Regions ........................................... 137 U.S.: Washington State’s Group Health Cooperative vs. Aetna ................................. 147 5: CREDIT UNIONS VS. BANKS .................................................................................. 164 Under-investment, Redlining, and Unaccountable Community Financing ................ 164 by Banks and Traditional Lending Institutions Background on Credit Unions in the United States .................................................... 172 Credit Unions vs. Banks in Fees for Services and Lending ........................................ 186 U.S.: Coast Central Credit Union of Northern California ........................................... 190 CONCLUSION: LESSONS FROM THE COOPERATIVE EXPERIENCE: .................. 196 REVEALING THE UNTAPPED POTENTIAL OF SOCIAL DEMOCRACY vi LIST OF TABLES TABLE PAGE 1: Credit Union vs. Bank Fees 187 2: Credit Union vs. Bank Loans 189 1 CHAPTER 1: CORPORATE-LED GLOBALIZATION – RESTRICTING SOCIAL AND ECOLOGICAL CHOICE FOR COMMUNITIES AROUND THE WORLD Putting Corporate Globalization in Context: The Overpowering Influence of Transnational Corporations on Development he growing concentration of wealth and ownership of resources — both within T countries’ domestic markets as well as internationally — is posing ever-growing challenges to nations and communities seeking to secure environmentally sustainable and broadly distributed benefits to their citizenry from economic development. The extreme consolidation of such ownership, made possible through the awesome, state-backed power of transnational business enterprise, is now effectively driving the evolution of the global economy, defining and restricting the range of socioeconomic and ecological choices of peoples around the world. Among most Western economists and development planners, the twin problems of growing inequality and persistent poverty are said to be principally the result of an innocent, but serious lack of capital in the “developing” world. Typically, the best means cited to address this is a heavy-handed package of top-down, economic structural adjustment policies, a roll-back of domestic regulations on foreign investment, and increased international aid, particularly in the form of condition-laden, high-interest loans. Rarely is it suggested that the ever-growing imbalance of power between rich and poor, between corporations and small businesses, and between highly developed and underdeveloped nations serves as an enduring set of obstacles to poverty alleviation. 2 In recent years, much-needed light has been cast on the socially and environmentally suspect policies and activities of the World Trade Organization (WTO), the International Monetary Fund, and the World Bank. These international, quasi- governmental institutions have been criticized by public interest organizations for foisting export-led development strategies on less industrialized nations; undermining their general capacity to provide crucial social services and environmental protections; denying them the ability to control their own monetary and investment policies; and constraining their economic development prospects with discriminatory tariffs, burdensome debt repayment schedules, and harsh austerity programs. All of these forces have conspired to prevent more evenly shared and sustainable economic development from taking root, both internationally and domestically. While casting public light upon them is of utmost importance, it is also becoming increasingly imperative to examine critically the growing power and influence of the limited liability corporation, arguably the most dominant economic institution of modern times. A critical assessment of the corporation is particularly urgent given its function of enabling, if not boosting, the persistence of destitution and ecologically suspect development throughout much of the so-called Third World. Although there has been renewed interest in corporate accountability (e.g., divestiture campaigns, boycotts, charter revocation drives) to combat such effects, comparably little attention has been paid to how the very structure of the corporation helps to further wealth disparity within and among nations. In The Post-Corporate World, economist David C. Korten argues that the growing concentration of power held by corporations and international financial 3 institutions is stripping societies of their