The Need for Alternative Employment

By Gary Moffatt

Those of us who are seriously concerned about social change must find ways to bring it about ourselves, rather than waiting for the state to do so.

This is nowhere more obvious than in the matter of finding people jobs. The state has no intention of allowing everyone to work and never did; there were large number of unemployed even in the "golden days"' of the 1950s and 60s, and many politicians are by no means unhappy with the drastic increases m unemployment since then.

None of the major political parties have offered policies which would make more than a slight dent in the numbers of unemployed.

The reasons for this callousness were explained not too long ago with unusual candor (by political standards) by Alberta Manpower Minister Ernest Isley, who told a press conference that unemployment is good for the economy because it controls wage levels and increases productivity (Globe & Mail July 7, 1984, p.1) Saying that he would not want unemployment removed from Alberta, he told the reporters that during the period of relatively low unemployment in the 60s "productivity of workers dropped because the pressure wasn't there to do a good job". Unemployment is also good (he said) from a humanitarian point of view because "here's psychological value to successfully finding employment." While admitting that Alberta's present 12 per cent unemployment rate is too high, Isley said he would feel "comfortable" with 6 per cent (that's one worker in every 17).

Few politicians would state this viewpoint so forthrightly, but Alberta being virtually a one-party state its bosses can afford a little candour. So we learn that it is desirable for one worker in every 17 to be without a livelihood "pour encourager les autres," and, if the number rises to one in every eight (the present 12 per cent), this is too bad but our overpaid politicians can live with it; like Liberace, they'll cry all the way to the bank.

The only way we can create basic social changes is by creating the sort of society we envision, not downwards by winning control of the state, but bottom upwards by creating the sort of society for ourselves (and whoever cares to join us) that we ultimately wish for all.

We cannot expect large numbers of people to join our attempt to build an alternative economy until we have demonstrated the possibility of so doing. Those who have steady income don't need it, and those who don't are (not without reason) skeptical of social reformers who come to them with utopian visions.

So we must start by creating an alternative economy among ourselves.

An alternative economy would enable movement people to integrate their bread labour with their social change work. Failure to do this was one of the main reasons the Student Union for Peace Action failed in the mid-1960s, despite its valid social analysis, after three year of highly committed activity.

Perhaps three years is the longest people can work together on abstract causes that can't be related to their personal lives. For let's face it, Third World exploitation and the threat of nuclear annihilation are abstractions to us; we hear about them but we don't experience them on a day-to-day basis. If working for social change is something outside the rhythm of our daily lives, something we drop our real lives to do for a while, it will be pretty impossible to sustain interest once we come to realize that a lifetime's work is required.

An incident in Ottawa brought this situation into focus. Abie Weisfeld, a member of the local peace movement, was sentenced to thirty days in jail for spray-painting the local Litton office during a mass rally against the Cruise test. A couple of days later, visitors learned that he was being grossly mistreated -- solitary confinement, starvation diet, cancellation of customary "time off for good behaviour" etc., -- because he had refused to fill in a form divulging information he regarded as personal.

Plans were immediately launched, with considerable enthusiasm, for a demonstration and 24-hour vigil focusing not only on his situation but the whole need for prison abolition.

Then word came that Abie would get out of solitary and have his parole restored, and the demonstration and vigil were immediately cancelled. The prison system continues to mistreat thousands of people but because the link to their daily lives was removed (a personal acquaintance was no longer being tortured) people lost interest.

Only by relating the social change movement to peoples' daily lives can we hope to sustain the interest necessary for on-going commitment to it.


Structures for Co-operative Employment

As the realization spreads that a growing number of people will be denied the opportunity of holding a salaried job, and the more socially aware people begin to question what they have to do in order to obtain a salary, it is predictable that more and more small groups of people will come together to consider some means of becoming self or co-operatively employed.

Some of them will have ideas for a joint enterprise, others will be hoping that someone else has a workable suggestion, all will be asking themselves whether they are seriously prepared to risk energy and capital on whatever plan the group comes up with.

At the outset, they must confront the fact that there is no easy or sure-fire way to set up such a business, or else such businesses would be much more common than they are. A majority of new businesses - some estimates run as high as 80 per cent - fail in the first few years.

It is likely that this group of people who have come together will be composed primarily of young adults of middle-class background. The children of affluent families are usually set up in some relatively secure trade or profession by their parents, and those of poor families rarely have a chance to put together enough capital to start a business (also, there too busy trying to survive to consider society's need for an alternative economy.) Older middle-class people tend to be already incorporated into the economy, and even those who lose their jobs are likely to be imbued with traditional values which preclude their effective participation in co-operative alternatives.

Since young adults are not notorious for their capacity to remain committed to a project over a period of years, particularly when its immediate returns are few, there must a high level initial commitment re-inforced by an ongoing joint study program to deepen the members' awareness of the need for fundamental social change and the possibilities of moving in this direction by becoming economically independent of the System.

The people who form such a group should expect to work together for at least a year before actual steps to launch a business are taken. For one thing, it will take a fairly long period of working at menial jobs to accumulate the funds necessary to start. This is probably a good thing, since it will give the participants a chance to test their own and one another's commitment; someone who suddenly decides to blow the money s/he has saved for a business share on a stereo is not likely to make a good working partner.

Also, this time frame will give the people involved time to explore the practical prospects of whatever business they are considering (if possible becoming employed in it). They will also have to consider what form of compact they wish to make with one another. What follows is based on a preliminary research of some of the more basic options open.


Incorporation

Incorporation, like marriage, is an invitation to the state to assume control of the relationship between contracting parties, admitting that our trust in one another is less than our faith in the institutions of a social system we despise. Unfortunately, there is ample precedent for suspecting that people who do not set out in joint business ventures intending to cheat one another often wind up doing so.

Incorporation has certain advantages: If the group wishes to functions as a co-operative it can legally call itself a co-opera-tive or co-op only after incorporating (though without incorporation it may still function as a co-op.)

The co-operative movement strongly recommends incorporation. It provides a legal status for operations. It clarifies the operation's taxable position. It allows for limited liability, if desired (under a partnership liability of individual partners is unlimited.) It allows for protection of the co-operative and its members, who otherwise are singly responsible for all the organization's debts. In some cases it qualifies an organization for loans or otherwise unobtainable forms of development assistance. The hypothetical group we are considering should not rely on this possibility, but it bears looking into.

Incorporation legally binds the organization to the province's legislation (if it is a co-op, this means the co-opera-tive legislation, which demands yearly reporting and adherence to the Co-operative Act and regulations.) While studying the form their venture will assume, the group must familiarize itself with these laws and decide whether it wishes to commit itself to their observance.


Workers' Co-operatives

Workers can start a co-operative by developing a new business or buying an existing one from its owners. The predominant characteristic of a worker co-op is that each of the workers is a co-owner. There is no outside ownership of voting shares, though there can be outside investment through preferred shares or loans. Each worker has one common voting share. A workers' co-operative is essentially the ownership of the shares, which enables the workers to choose management and make the final decisions.

Like any other form of co-operative: one member one vote, membership open to all, savings are distributed to the members in proportion to use of the co-op rather than investment, there is limited return on member investment, a continuous education program must be pursued by and for the members, co-operatives are expected to co-operate with one another. Many co-ops require a unanimous vote on extremely important decisions, which sometimes requires long meetings and putting off decisions.

There are three basic sources of capital to start a co-operative business:

(1) The workers themselves buying shares. Under the present Co-operatives Act in Ontario co-ops can only give return on investment of 10 per cent, which means that from an investment standpoint a worker would be better off investing in bonds than a workers' co-op (though the co-op, unlike bonds, offers the prospect of a salary).

(2) Outside investment capital. This is hard to obtain as outside investors have no voice in the running of a co-operative, no tax incentives and limited return on the investment.

(3) Bank loans. Since banks aren't receptive to alternative forms of management, this is hard to obtain.

At present there are very few alternate channels for worker co-ops to get start-up money. In Ontario, credit unions are not permitted to engage in such enterprises, and there are few government programs to aid workers co-ops. Whereas Quebec and Saskatchewan both have legislation for workers' co-ops which provides a structure and a model for workers who are contemplating a buy-out of an existing business or setting up a new business, Ontario's government is disinclined to pass such legislation despite lobbying by the co-operative movement.

Co-operative legislation in Canada, and particularly in Ontario, has been designed to meet the needs of co-operative associations of consumers, producers, marketers, services groups and financial groups, but not of workers. The concept of workers' co-ops is relatively recent in Canada, though they have been tried with some degree of success in Europe (for instance, France has close to 500 worker-owned businesses, Italy more than 2500.) There is no definition of a worker co-op under present law in Ontario, and since the present Co-operatives Act of Ontario defines a co-op in terms of the service it provides, workers' co-ops must define employment as a service provided for their members.

Many ventures choose to incorporate under the Corporations Act instead, but as it does not recognize control of a company based on the membership of the workers this is also unsatisfactory.


Working Co-operatives

A slight variation on the workers' co-operative is the working co-operative, which differs in that each worker invests an equal amount of money (not required for a workers' co-op), and the money goes not directly to starting the business but rather to a central trust company which doubles as a source of capital for new industries and a provider of expert management sources for the new industry, ensuring that it will be failure-free and profitable right from the start. The workers have a "Contract of Association" with the central trust company, and consensus management is used. Managers of various phases of the operation -- market research, sales, purchasing, accounting etc. -- are chosen on the basis of knowledge, eliminating "status managers".

The most successful such experiment has been in the Basque region of Spain where the city of Mondragon has created a network of about 100 industrial worker co-ops involving 22,000 worker-owners. Since 1956 there have been no business failures, only one strike and only two months in which unemployment insurance was drawn by worker co-operators.

Unfortunately no such central trust companies can exist under present Canadian legislation, and again those lobbying for changes in the law must contend with the reluctance of politicians to allow people to become self-reliant. Also, the success of a central trust company in planning industries for hundreds of worker-owners each would not necessarily be duplicated in setting up industries for very small groups.


Community Development Corporations

Given the unsatisfactory status of workers' co-operative legislation, this is an alternative path to establishing a legal identity that should be considered. It is expensive and time consuming to start such a corporation, likely requiring an outlay of several hundred dollars even if a sympathetic lawyer willing to donate legal services can be found. Once started, however, the corporation could launch any number of business ventures on behalf of the group of people it had defined itself as serving. Although it is not required to do so, the corporation could provide consultative services to the new businesses similar to those which the central trust company would supply a project such as Mondragon.

This model would not be appropriate for a small group wishing to start several small businesses. For example, the Come Home to the Valley Community Development Corporation was formed to encourage and assist the process of self-directed economic and social development within Renfrew Country, and has worked to start up small business there; a corporation could identify a social rather than a geographical unit of society it wished to serve.

A group of people considering starting a self-employment project together should, while accumulating the necessary, funds, keep an eye on the progress of those attempting to give workers' co-operatives a legal status and investigate posible structures an sources of advice.


Sources:
Thanks to Ken Kendall and Vicky Davis for personal consultation in compiling this information. Papers used include:
Steve Schildroth: The Story Behind Worker Co-ops in Ontario, Catholic New Times, 3 June 1984
T. Webb: Public in the Co-operative Sector, published by Tara Policy Alternatives.
Association for Creating Enterprises, 245 Queen St. Ottawa: A Third Way: Community Economic Development, a resource book on alternative community enterprises in Ottawa.
J E Reed: Resourcing the Co-operative Enterprise. Co-operative Union Canada 1982.
J.E. Reed: How to Start a Co-operative. Co-operative-Union of Canada 1982.
A Co-operative Development Strategy for Canada; report ' of the National Task Force on Co-operative Development. May ' 1984.

A longer version of this article first appeared in the newsletter Network. Network is no longer publishing.

(CX3574)

Published in Connexions Digest #50, December 1989.

Subject Headings

Alternatives  Co-operative Development  Co-operatives  Economic Alternatives  Employment  Social Alternatives  Unemployment  Unemployment/Coping Strategies  Worker Ownership  Workers' Co-operatives