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Cooperative Model

By Simon Gorbaty

Since January, 14 food service workers including myself and some of the current employees at the New Moon Café in downtown Olympia have prepared to buy the café and turn it into a cooperative business. As of August 1, the restaurant has been entirely owned and operated by the workers. Throughout the past seven months we have come to understand paradigms do not shift easily, and by shifting from a traditional business to a cooperative the challenge of having a more sustainable organization has taken on new meanings.

Despite the rhetoric, businesses claiming to adopt environmentally conscious practices make moderate gains at best and predominantly fail to implement effective sustainable development policies. No matter how honest the intention, the organizational and managerial structure of most businesses presents a barrier to truly incorporating sustainable practices.

Businesses, big and small, look to sustainable development for major cost savings, reduced risks, and opportunities to increase competitive advantage, while reaping the social and environmental benefits. Sustainability is more complicated than tweaking the controls, making small gains, or improving upon the efficiencies already existing within a linear, hierarchical business model. These types of organizations are not designed to manage a sustainable system.

A more comprehensive framework ensuring sustainable development requires an organization to see sustainability not as a separate unit with its own function, but as a way of thinking that permeates every aspect of the organization. This requires a fundamental paradigm shift in how organizations function internally, within the economy and the environment.

Worker-owned cooperatively managed businesses can and should facilitate this transition. Unlike marketing, producer or consumer cooperatives, such as the Olympia Food Coop, worker cooperatives are owned entirely by the workers and decisions affecting the business are made democratically by the workers.

Jeff Gates, author of The Ownership Solution, sees an inherent advantage worker cooperatives possess when incorporating sustainable development because, "people are likely to become better stewards of all those systems of which they are a part - social, political, fiscal, cultural and natural - as they gain a personal stake in the economic system, with the rights and responsibilities they imply." Worker cooperatives have a greater potential to incorporate sustainable practices because sustainability is woven into the fabric of the organization and the workers know how sustainability systemically affects design, purchasing, production, and all other functions of the business.

The linear hierarchical business model is the dominant and sometimes only form of organization our culture, government and banking system accepts. When they encounter something different, their first reaction is to resist. Throughout this entire process we have met resistance, but have found alternatives to overcome them.

Buying a business is not cheap and raising capital is not easy. This is true for any business whether it is a limited liability company (LLC), partnership, or corporation. Taking out loans is the most common way businesses are funded, but typically require a personal guarantor and some type of collateral. In a worker-owned cooperative, everyone is responsible thus making no single person the guarantor. In addition, members of the cooperative typically have very few assets to use as collateral. For these reasons it becomes very hard for worker-owned cooperatives to receive loans.

As a response, each person in the cooperative personally donated as much money as they could. We ran an online crowd funding campaign and were able to eventually work with alternative lending institutions, such as Twin Star Credit Union, to secure a small loan. The community support for the project was enormous and we would not have been able to raise the necessary capital without it.

Cooperatives encounter governmental and regulatory barriers and discrepancies in tax codes because of the definitional gray area of the members being both workers and owners. This affected every step of the process down to registering the cooperative. Even with RCW 23.78 outlining and defining cooperatives as a unique business, the Secretary of State website only provides information for setting up LLCs, partnerships and corporations.

We were able to overcome many of these administrative hurdles with the help of the Northwest Cooperative Development Center (NWCDC). Located in Olympia, the NWCDC's mission is to assist new and existing cooperative businesses in Washington, Oregon, Idaho and Hawaii. Throughout our startup process they have helped us develop a business plan, compile useful financial data, and provide us with ways to improve our organizational structure.

I hope the challenges we encountered when creating the New Moon Cooperative will make it easier to form other cooperative businesses in Olympia. Cooperatives are changing dominant business practices. By changing the nature of business and creating a cooperative and integrated economy where people have a say in what happens around them we are moving forward to a healthier, more sustainable, and stronger community.

Simon Gorbaty is a second year Masters in Public Administration student at The Evergreen State College, a member of the New Moon Cooperative and a part of the New Moon Cooperative's financial committee. For more information, contact Simon at blackmooncollective@gmail.com.


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Updated 2015/01/07 21:14:22