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Cooperatives as a Way of Dealing with the Fiscal Crisis: Opportunities for Puerto Rico

EDITOR’S NOTE: We continue our publication of the ASPA Founders’ Forum Fellow (FFF) papers with this piece, number 11 of 12. As stated previously, the papers will appear in alphabetical order, with two papers posted each week until all 12 are online.

Urayoan Jordan Salivia

Cooperatives associations have been an instrument for people to provide themselves goods and services and create a fair distribution of power and wealth.  These enterprises, promoters of self-management, unify people with a common social or economical issue to craft a solution by themselves.  Their members may be users of goods or services, workers, or both.  Such members are the owners of the cooperative and they collectively decide what to do in the organization, how to do it, and when to do it, in a one-person-one-vote system no matter how much shares any of them may have in the organization.

The world is full of examples about the burgeoning of cooperatives.  After the economical collapse in Argentina in 2001, a lot of companies were abandoned or in bankruptcy.  Workers took control of many of these companies, turned them into workers’ cooperatives, and guaranteed this way their jobs.  The Basque Country in Spain has one of the most successful cooperative enterprises with 218 companies and over 70,000 workers by 2005.  According to the International Cooperative Alliance, 25% of the United States population are members of a cooperative.  In Puerto Rico there are several types of cooperatives, the largest sector being the savings and credit cooperatives (like Credit Unions) with a total of 119 cooperatives of this type around the island.

Recognition of Cooperatives’ Contributions
Many organizations and governments have recognized the important role of cooperatives associations in society.  In 2009, Department of Public Information of the United Nations, for example, proclaimed 2012 as the International Year of Cooperatives under the slogan “Co-operatives enterprises build a better world”, recognizing this way the socio-economic contribution of these enterprises.  The Legislative Assembly of Puerto Rico mentioned the high public interest the cooperatives have, since they work in a parallel way with the principles and democracy that are instrumental to the socio-economic development of the country, according to Ley General de Sociedades Cooperativas.

Outcomes of Cooperatives
Cooperatives around the world have demonstrated to be a good source of positive outcomes in their communities.  These enterprises have the capacity of empowering people and give them participation experience in a democratic controlled organization, which later foster citizen participation in public affairs.  Also, cooperatives are known for being an instrument to generate jobs, reduce poverty, and provide a space for social inclusion, says the Department of Public Information of the United Nations in 2011.  In Puerto Rico cooperatives have achieve to generate jobs and self-employment, foster self-management, create housing, supermarkets, and provide many other services.

In sum, cooperatives contribute to society creating public value.  They are an alternative for governments in order to seek the same outcome.

Cooperatives and Public Administration: An Alternative to Deal with Financial Crisis
Cooperatives are a way of privatizing services, but in a collective way.  A fear toward privatization is that costs of privatized services increase because the owner is profit oriented.  But cooperatives in Puerto Rico, which are by law non-profit organizations (although there could be “profits” which are distributed among the members considering the shares they have in the organization and their sponsorship to the services rendered), are managed by its users and do not need to make any profit, just deliver the services in the best way possible.  In other words, if costs were to be increased, it means that members would be increasing costs to themselves.

The government of Puerto Rico has been trying to handle the fiscal crisis with several measures.  One of these measures has been the creation of Public-Private Alliances which implement a semi-privatization model in order to reduce government size and costs to handle the fiscal crisis.  However, although the cooperatives are explicitly included as possible participants in these alliances, they (and other non-profit entities) are expected to have a limited role since they are in a disadvantaged position compared to for-profit private entities, which have more resources and the capability of lobbyist.  However, the private sector has not been able to achieve the expected results.  Given the cooperatives’ outcomes described above, the government of Puerto Rico could rely more on cooperatives associations in its endeavors.  The cooperative model is applicable to any area: education, health, utility services, insurances, financial, agriculture, fishing, housing, and many others.  Some services rendered by the government could be handled by cooperatives.  A pilot project could be established in order to study and analyze the impact of this proposed collective privatization.  Allowing people to provide some of these services from cooperatives would reduce costs for the government and taxes for population.  Cooperatives would be helping the government to achieve many common goals: create jobs, reduce the risk of arbitrary increase of services costs, the capital stays in the locality being productive to the respective population, and produce many others benefits already mentioned.  Cooperatives could even reduce the risk of corruption that comes from official secrets since they are open with all its members about their affairs, facilitating accountability.

In Puerto Rico, the government has been severely criticized because the excessive control over cooperatives, paternalistic attitude, and the frequently preference to favor wealthy private interests.  And yet, cooperatives enterprises in Puerto Rico are among the most trusted enterprises in the island.  A model which people trust is a good start to implement new ideas to alleviate the current financial crisis.

But in order to do this, the government of Puerto Rico needs a change of attitude toward people being in charge of their own production and stop the paternalistic and controlling vision over them.  People can do more than just being passive and receivers of services without any participation other than being clients.  The essence of this recommendation is to give power to the citizens.  Cooperatives are an organized way to do it.

Urayoan Jordan Salivia is a student at the University of Baltimore. Email: [email protected]

Constructive comments and responses to the papers are encouraged and can be submitted directly to the scholar at their email address, or by clicking on Post A Comment below each article.

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