The Economic Impact of Cooperatives
Across the United States, cooperative organizations of all shapes and sizes are working to benefit not only their members’ financial well-being, but also the communities in which they operate:
- Credit union members pay fewer and smaller fees, while enjoying lower rates on loans and higher rates on savings. In Minnesota alone, credit unions estimate that yearly savings add up to $76 per member, for $144 million in total benefits per year.
- In the highly competitive retail grocery industry, co-ops thrive by doing a better job of satisfying the needs of their communities—through product selection, customer service, outreach and education, community involvement and support for other local producers.
- Farmer co-ops play a vital role in ensuring that America’s farmers and ranchers remain economically successful and sustainable—employing hundreds of thousands of Americans.
- Worker co-ops have higher success rates; receive better pay, benefits, professional development and working conditions; and have greater job security than conventional businesses. What’s more, the money earned stays in the community rather than being shipped off to absentee owners.
- Affordable homeownership programs operated by limited equity co-ops are better at preserving affordability than community land trusts and programs using deed restrictions. Also, these co-ops report substantially lower foreclosure rates than conventional lending, according to a study by the Urban Institute.
Better at Weathering the Economic Downturn
The recent economic downturn had profound impacts on businesses in almost all sectors and industries. Interestingly, co-ops have proven to be better at weathering the economic storm:
- Co-op grocers were able to take actions to ease the effects of the recession that many conventional grocers couldn’t, such as lowering prices and avoiding increases. In good economic times and bad, shoppers remain passionate about co-op grocers and the sense of community they inspire.
- Agricultural co-ops in supply and grain marketing as well as marketing and processing co-ops, such as Land O’Lakes and CHS have seen very strong financial performance in the past few years.
- Worker co-ops fared better than conventional businesses throughout the downturn. Most worker co-ops have grown and added jobs—as more workers have sought alternatives to the conventional job market and the growing sense of outrage over wealth disparities fueled increased public interest in worker cooperatives.
- Membership in credit unions grew nationally by 1.3 million in 2011. Credit unions are thriving in spite of the ‘banking crisis’ as a result of a ‘flight to safety’ mindset with many traditional banking consumers flocking to credit unions. Credit unions never stopped lending, as did many banks, and their loan quality remains far better than that of other financial institutions.
- There are increasing numbers of new food co-ops, particularly in communities underserved by conventional supermarkets. Although start-up capital has become harder to find, co-ops that did secure funding have flourished—less than 10 percent of the co-ops that opened in the last six years have failed (a far lower rate than other forms of small businesses).
- Co-ops enjoy the advantage of ‘patient capital.’ During the downturn, members were generally more interested in long-term investments than finding quick profits. Likewise, co-op boards—made up of consumers—did not sanction the types of risky loans or investments that have plagued many banks, especially those outside the co-op’s service area or realm of expertise.
- NCB (National Cooperative Bank) reports that of its 4,386 co-op building loans, none were in foreclosure as of June 30, 2011, with a combined delinquency rate of less than 0.01 percent. Many commercial banks realized the impact of their risky lending too late—after record numbers of defaults. In contrast, NCB has continued making loans based on diligent analysis.