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Explainer: Why cooperative business models contribute to a fair sharing economy

From small local repair cafés, tool libraries and neighbourhood gardens to leading well-known car and apartment sharing platforms, what is correctly or incorrectly understood as part of the “sharing economy” has grown in the last decade. The sharing movement has spread globally. There is an increasing number of initiatives in many different countries that cover many different areas of life, such as sharing things you don’t use that often, like tools or your car, or sharing space, be it a garden or a working place with other people, to sharing more intangible things like the ownership of a company or that of a building.

The reason why so many different individuals started to embrace the sharing economy idea in so many different places came from the aspiration to achieve a fairer and more sustainable society where people are more socially connected to each other. By sharing, swapping, lending, renting and gifting, what lies (or used to lie) behind the concept of sharing economy is the hope to change what we consume and how we consume.

Yet, the initial enthusiasm and hope of building a better society through the collaborative economy is now often replaced by harsh criticism and disappointment. Indeed, in the past few years, we have seen a lot of companies, such as Uber to give the most common example, actually reproducing what is now seen as a more exploitative, more unsustainable and more unequal form of neoliberalism. And so, the sharing economy ideals have been co-opted by big corporate interests from companies like Google or Amazon. Achieving monopoly through tax avoidances and with the lack of regulations, those giants saw an economic opportunity in the “sharing economy” and are looking for more profit rather than to create a fairer society.

However, these companies are not actually sharing anything. Therefore, they should not be included in what the concept of sharing economy encompasses. Because, as we have stated before, real sharing includes sharing responsibility and risk, and sometimes also profit and decision-making. If this does not happen, as it is the case with Uber or AirBnb for instance , that is definitely not sharing, but business as usual, or even worse: abuse or exploitation. After all, it is their investors such as Google and Amazon who receive the profit and get the biggest say in decision-making, while the workers are the ones bearing the risks and the low salary.

In this respect and against these drawbacks, it is time, as Juliet Schor urges in her famous essay “Debating the Sharing Economy”, to “democratise the ownership and governance of sharing platforms to fulfil the transformative potential of the sharing economy”. This means that, for such companies as Uber to fall under what we understand as true sharing practices, they could, for instance, be sharing the ownership of their company. This form of company, called cooperative, has existed for decades and is gaining support all over the world.

To understand what a cooperative is, we must first distinguish it from the currently dominant enterprise model. In what we will call a “normal” model of enterprise, the company is controlled by external shareholders who have invested money in the company and own a share in it (equity share). The decisions and policies related to the company are made by a board of directors and corporate officers who have financial or business ties with the organisation. The profits made by the company are then returned to the different shareholders based on their investment shares. Basically, the main purpose of such company is simply to maximize its profit and the shareholders’ returns.

In a co-op model, the company or corporation is owned and democratically controlled by the people who use it and/or work in it. Every member of the coop has one vote and whether they are customers, employees or residents, they all have an equal say in what the business does. There is no hierarchy in the decision-making process. In that way, a co-op is able to make fair, humane decisions that make sense and are beneficial for all the members. Moreover, any profit or benefit is reinvested in the company or the returns are shared among the members of the co-op and the larger community, not among the investors or individual owners like in “normal” enterprises. As co-owners, members are thus able to decide what to do with the profits: for example, it could be to raise their own salaries, or to invest in the local economy and community.

In a nutshell, it is a system based on solidarity. Cooperatives are driven by values where the individual and the community predominate over capital and they seek to create more sustainable enterprises.

And the great thing is that every activity can be run by a cooperative: the production and sale of goods, finance, housing, services to individuals, energy management, provision of common services, absolutely everything.

So, stay tuned for the next follow-up articles on housing cooperatives, workers’ cooperatives, bank cooperatives and food cooperatives. We will be interviewing people living, working or buying in cooperatives who will give their opinion on them and tell us why they like them so much!

PS For a simple overview of the differences between regular businesses and cooperatives, check out this fact sheet.

By: Teresa Iglesias
Photo by David Noe on Unsplash