EXTERNAL CAPITAL = EXTERNAL CONTROL
REPARATIONS & REDISTRIBUTION
Generally, capital is understood as some form of asset, traditionally referring to financial assets or assets that are ultimately convertible into money had or owed. As capitalism has increased its influence in all spheres of life - including our relationships with each other and the earth, some people have developed conceptions of capital theoretically outside the financial context. “Social capital” is a term now used to refer to the relational wealth a person has in a social system; the depth and quality of relationships, level of influence in a community, the level of trust they have from others. This concept of capital in a social and relational context is employed by many in the Cooperative Movement; though, often without considering its deeper implications. This oversight is likely because exploring social capital does align with striving to understand how strong social systems are built, how they function optimally, and appreciating how relationships benefit us as individuals and groups are worthy endeavors. However, while the things that social capital describes are absolutely essential for the wellbeing of individuals and the survival of humanity; they are fundamentally different from transactional goods like currency that we understand as capital and to which we apply behaviors incongruent with the practice of relating with one another. People can never “afford” to trade away relationships. The value of a person to themselves or to someone else cannot be quantified. As a result, for the purposes of this exploration of capital, the discussion both rejects the application of capitalist concepts to people and relationships and thereby focuses solely on financial capital, which can be broken down a number of ways - most simply as currency (e.g. cash), debt (e.g. credit, cash owed), and equity (e.g. ownership stake).
For the vast majority of cooperatives, the capital contributed by its members is the core element of the organization’s financial portfolio. However, in times like start-up, crisis, expansion, and other instances of cooperative development, a cooperative may need to solicit capital from an external source. Cooperatives are often ineligible for conventional capital products (e.g. loans, grants) offered by for-profit banking institutions and even non-profit grantmakers by virtue of their enterprise model or a lack of corporate status. Alchemy Collective (Worker, USA), after having successfully scaled their enterprise from nothing to operating their bespoke coffee cart in a rented storefront, was unable to get a loan from the financiers in their neighborhood despite their clear track record and collateral. The “Cooperative Credit Union” that was on the same street as their storefront would not lend to their cooperative. Even supposedly cooperative financiers will deem coopyouth enterprises ineligible for reasons that are often not clearly articulated, suggesting perhaps a bias against young people with less experience than the average enterprise entrepreneur. Similarly, during the Covid-19 pandemic, both Red Root (Worker, Philippines) and Knowledge Worker (Worker, Denmark) found themselves ineligible for government lending programs to support businesses due to their use of the cooperative model. Given the common determination that cooperatives are “ineligible” for most capital sources, many cooperatives are forced to pursue DIY or creative funding options that draw capital directly from their own communities (e.g. canvassing the neighborhood for contributions, throwing a fundraising party). This type of funding strategy can also build social cohesiveness and strengthen the cooperative’s collective vision, but it can also drain a group of their energy and capacity depending on the success of the endeavors. Still further, there are funds for which youth cooperatives may be specifically eligible, cooperative or not, that are worth considering.
EXTERNAL CAPITAL = EXTERNAL CONTROL
A key reason cooperatives may pursue unconventional sources of capital (e.g. direct, individual donations) is the tendency of most conventional capital products and services to require some level of outside control of the enterprise by the financier. Outside control or influence over a cooperative almost universally amounts to degradation of the organization’s Cooperative Identity. As outlined in “Relationships of Coercion,” the style of control executed by loan providers and grant makers can range from dictating how the organization must be structured, how its decisions must be made, how any money is to be spent, and/or how its money is to be tracked and reported. Not all external capital will exercise degrading external control, but the relationship of control to capital is so normalized within capitalistic culture that it is important to be aware of the potential of its influence.
An especially egregious and widespread form of control exerted by funders, particularly when doing business with cooperatives, is the mandating of “personal guarantees.” A personal guarantee is a loan contract that makes an individual signer liable for any and all losses that the cooperative might experience. In these situations, this essentially restructures the cooperative by corrupting the distribution of “ownership” among the members to a single or few people, as risks and benefits are no longer shared equitably by members - as the loan contract ultimately implicitly and explicitly trumps internal policies, which is contrary to the Cooperative Identity. Knowledge Worker (Worker, Denmark) was forced to have its managing member sign a personal guarantee for loans when the cooperative’s portfolio weakened as a result of the Covid-19 pandemic. The ultimate impact of this arrangement on the cooperative is not yet known, but the staff person reported that their emotional and working relationships within the cooperative have been affected.
A form of external capital control relatively common within the Cooperative Movement for youth cooperators is the relationship between a coopyouth organization and a larger, wealthier host institution (e.g. national federation). Often, these host institutions will provide a small amount of money for the youth organization to use, which is often explicitly or implicitly conditioned. Specifically and commonly, the coopyouth enterprise will design itself to allow in any young person in their geographic area as a member. The host organization refuses to allow the coopyouth group to self-determine its membership, typically stating that only youth who are formally affiliated with one of the host’s dues-paying members can be eligible for membership. The justification for this position being that dues-payment is the only form of economic participation in the cooperative, and those youth unconnected to a dues payment are undeserving of membership or its benefits. The over-association of ownership with a single fiscal transaction is an oversimplification of economic participation, as well as in conflict with the needs-based orientation of cooperativism as well as the First Principle of “Voluntary and Open Membership.” There are existing practices - such as sweat equity - used within cooperatives for members lacking in fiscal capital or when fiscal capital is not the primary need of the cooperative. Moreover, youth becoming acquainted with and trained in cooperative philosophy and practice contributes to the viability (fiscal and otherwise) of the Cooperative Movement over time, in fact, youth participation is needed to sustain the movement into the future. This can easily be considered a form of participation in the economic functions of the cooperative. Finally, individual youth typically do not need the majority of the benefits provided by host organizations or their dues-paying members, as they and the dues amounts themselves are most often designed to meet the needs of well-established cooperative enterprises or professional-class individuals. As a result, it is important that autonomy and values be clearly articulated between coopyouth and a host organization to avoid entering into a dynamic in which the host feels entitled to exercising control and violating the cooperative’s right to self-determination by virtue of their providing financial support.
REPARATIONS & REDISTRIBUTION
The Cooperative Movement and all its members exist within capitalism’s ecosystem of impact. Capitalism is an economic system that has committed harm against various peoples, as well as continues to perpetuate inequitable and unjust distribution of wealth. There are two methods of capital distribution that cooperatives can and should undertake to both address and correct the harmful impacts of capitalism, past and present - reparations and redistribution of wealth, respectively. Reparations consists of those that benefited at the literal and figurative expense of others in the past (e.g. businesses, governments, and people that profited from the slave trade) giving their accumulated wealth to those communities that were harmed and exploited in the past. While individuals directly responsible for committing some past harms are deceased, there are businesses, governments, and people that continue to unduly benefit from those past harms by still possessing and leveraging stolen wealth - which ultimately is both a form of reparations and redistribution. To actively combat and transform the inequitable distribution of wealth - in real time - within capitalism, it is necessary to redirect financial flows from the wealthy to the poor. Redistributing wealth is one corrective mechanism for cooperatives that have become capitalistic to use to regain their integrity and realign with the Cooperative Identity. It is essential to note that when wealth is redistributed, so, too, is power. The systematic disempowerment of certain peoples to the benefit of others is the fundamental wrong being righted, capital is simply a symptom of this imbalance and a tool to use to move towards a cure.