Are cooperatives more virtuous than corporations?

Growing up in Saskatoon during the 1970s, cooperatives were a major part of our daily lives. We bought groceries, hardware, and gas at Co-op, we banked at the credit union, we even bought chicken feed from the Wheat Pool. Indeed, an important part of our family lore includes a story about how my mom once ran out of gas, with us kids in the back seat, because she refused to stop and fill up at any of the “American multinational corporations” along the route, but was trying to make it to the Co-op station.

The status of cooperatives in Western Canada gave rise to one of the major points of divergence between the Canadian and British left in the 20^th century. Whereas the U.K. Labour Party’s Clause 4 committed it to “common ownership of the means of production, distribution, and exchange,” which was generally understood to mean public ownership, the Co-operative Commonwealth Federation (CCF) in Canada distinguished itself by affirming a commitment to “social ownership,” which included both public and cooperative management of the economy. It was only much later, especially after the CCF was rebranded as the New Democratic Party (NDP), that unions came to play a more important role. Its primary impetus, in the early days, came from the cooperative sector – especially the tradition of mutual insurance among farmers.

(Incidentally, one can still see this cleavage on the left. Zohran Mamdani was just elected mayor of New York City with an eye-catching pledge to create city-owned grocery stores. But why public ownership? If food prices are to be blamed on the greed of capitalist grocers, why not promote cooperatives? To ask the question is, unfortunately, also to answer it – New York already has a whole bunch of cooperative grocery stores, including the world-famous Park Slope Food Co-op. Of course, it already has a bunch of publicly-subsidized private grocery stores as well... The concept of a “supply chain” is unfortunately an abstraction that is unavailable to populist thinking.)

Growing up in the midst of all this agrarian socialism has given me a strong sentimental attachment to the cooperative movement. And so, when the Canadian Centre for the Study of Cooperatives at the University of Saskatchewan invited me to give their annual MacPherson lecture last year, I jumped at the opportunity. Part of it was just the chance to visit Saskatoon, which I had not been back to for many, many years. Part of it was the opportunity to talk about cooperatives with people who know a great deal about the nuts and bolts of organizing and running them. And so I whipped up a paper (“Are Cooperatives More Virtuous than Corporations?”), which has now been published in Politics, Philosophy and Economics. Anyone looking for some long-form reading for the weekend is encouraged to check it out.

Those who are familiar with my views on the corporation will know that my answer to the question posed in the title is basically “no.” It has been suggested, by some of my colleagues, that it was a bit cheeky of me to give a paper that attempts to deflate the moral claims of cooperatives at a centre that is not just dedicated to studying them, but also, if we’re being serious, to promoting them. I disagree, not just because it’s important to look the world in the eye, but also because of a crucial distinction that I make in the paper, between the benefits that cooperatives provide to their members and the benefits that they provide to society more generally.

I have absolutely no doubt that cooperatives provide enormous benefits to their members (as I put it in the paper, “it is a truism that cooperatives are better for their members – if they weren’t, then their members wouldn’t be their members”). Thus there is good reason to ensure that the law is neutral between different organizational forms. We do not want people to be stuck transacting with a corporation when they could be better off organizing a cooperative. My point is that there are very few additional benefits, to society in general, above and beyond the benefits that are enjoyed by the members. Cooperatives are good for their owners, just as corporations are good for their owners, with the implication that neither is intrinsically better than the other. The appearance of superior virtue for the cooperative form is most often based on differential sympathy, and in particular, a rather striking lack of sympathy for investors as a constituency. If one adopts an impartial perspective, treating the economic interests of all individuals equally, there is no real basis for this asymmetry.

That’s the gist of the argument. The details are more complicated, which is why it’s a journal article and not a blog post.

Pictured is Saskatoon, as seen from Murray Fulton’s window at the Canadian Centre for the Study of Cooperatives. This is why everywhere else I’ve ever lived has felt crowded.