Cooperative America (1997)


     This document has been made available in electronic
     format by the International Co-operative Alliance ICA     

                              APRIL 1997

                         Co-operative America

                              by David Thompson

Co-operation is an indelible part of the American heritage.  

One of the earliest models of co-operative communities on the
North American continent were the unique cliff dwelling
communities of the Southwest.  

Centuries later, the Pilgrim Fathers adopted the Mayflower
Compact in 1620, the first written confirmation of democracy
in the New World.  Later, the Pilgrims built their common
house, community gardens and shared endeavours to create their
"city on a shining hill".  

As the settlers developed new townships they fostered mutual
insurance companies, volunteer fire departments and numerous
co-operative organizations to strengthen their communities. 
The Amish people communally building their barns, farmers in
the Midwest threshing wheat together are all part of the
American picture.  Many of the images speak strongly of people
practising self help, cooperation and democracy.

Today, co-operatives in the USA are a sizable sector within
the economy.  In 1996, the top 100 co-ops in the USA will have
sales for the first time surpassing 100 billion dollars.  The
extent of the size of the co-op sector is not widely known to
the public nor to most co-op members.  

Yet, the impact is immense - there are over 45,000 co-operatives and credit unions in
operation serving over 100 million members, seventy million in credit unions alone. About
40% of the US population is a member of a co-op or credit union.  More Americans own shares
in co-operatives than own shares on the stock market.  

The brand names of many US co-operatives are well known to the
American public and in many overseas markets;  Associated
Press, Sunkist (citrus), Blue Diamond (almonds), Land O'Lakes
(dairy products), Ocean Spray (fruit drinks), Sun Maid
(raisins), Tru-Value and ACE (hardware) and many more. 
However, few Americans know that these brand names are owned
by co-operative organizations.

Recently, some agricultural co-operatives have promoted in
their TV advertising that they are farmer owned. The results
have been powerful.  One agricultural co-op discovered that
consumers were 90% more likely to buy their products over an
equivalent brand if they knew it was farmer owned. In a world
of multi-national choices in the marketplace a market niche
for co-op products is its emphasis on being locally owned or
being farmer owned.   

A 1994 national Gallup Poll showed extensive support for and
trust in co-operative organizations. "Marketing our Co-operative Difference" or MOCA is a
growing topic at co-op meetings in the USA.

Let's now look at some unique aspects of the US co-operative

Housing Co-operatives

To millions of people around the world, New York City brings
images of towering skyscrapers and a city that never sleeps. 
Nearly two million New Yorkers live in 600,000 housing co-op
units.  Co-operative housing in New York meets many needs and
all levels of income groups.  Both low-income service workers
and millionaire stock brokers in the canyons of Wall Street go
home to their housing co-ops. 

Fortunately, one model created in the late 1920's, by the
Amalgamated Clothing Workers Union of America made it through
the Depression. No matter how difficult, Amalgamated Housing
made sure they paid the mortgage every month. When the
Depression ended the co-op model was alive and the members of
the 1400 unit co-op in the Bronx were ready to tell their
story. Ordinary working people had triumphed and secured a new
model of co-operative housing. 

Other NY unions listened to Amalgamated and in 1951 they
formed the United Housing Foundation (UHF) to sponsor low and
moderate income co-op housing. For the next fifty years, the
New York City based trade unions became the co-operative
housing leaders in America. In 1965, UHF reached a new
pinnacle when they built a 5.860 unit co-op and named it
Rochdale Village. 

When Co-op City opened in the Bronx in 1972, union sponsored
co-operative housing reached its greatest height.  It's 15,382
units and almost 50,000 residents created a new city that owed
the largest single housing mortgage in the world.  Co-op City
has its own schools, shopping centres, power plant, post
offices, places of worship, office buildings and police force. 
With Co-op City completed, United Housing Foundation had built
nearly 50,000 co-op units in twenty years of breathtaking

Senior Housing Co-ops

In Detroit, Co-operative Services Inc. (CSI) developed a
senior housing model focused on providing senior housing at
below market rate rents. Walk into the lobby of a CSI
community and you will sense the vitality of this outstanding
organization. The strength of CSI is its active resident
participation, a pattern which exudes from the grass roots to
the top of the organization.  From its first building in 1965,
CSI committed itself to involving its resident members in the
activities and governance of the organization. As a result,
many cities seek CSI as a development partner. Today, CSI
operates 40 housing co-ops in four states and houses over 5500

What is most unique is that as CSI has grown it has invested
even heavier in the co-op ethos as its guide. CSI greatly
differs from some co-ops which as they get larger tend to be
inversely disinterested in promoting their co-operative
aspects. Democracy at CSI is the foundation for all decision
making and the basis for it's operating philosophy. To become
a member, you invest a one time, refundable fee of $100. From
that moment on you have one vote in the activities of CSI. 
The march of democracy begins on your floor all the way to the
national board. The residents of each building elect
representatives to the National Co-operative Congress and all
members vote annually to elect the board.

Farms, Families and Friends

There is probably no better place to plant seeds of co-operation than in the fertile soil of
rural Minnesota. Deep in the heart of Populist America, good ideas and co-ops have a history
of being made for each other. Today, a new wave of co-ops are sweeping across Minnesota and
beyond to Wisconsin, Iowa and North and South Dakota.  

The new phenomenon, named Homestead Housing Center has an
excited base -- the seniors of rural America.  Homestead has
built over 20 projects (ranging from 16-30 unit complexes) in
less than four years with another ten on the drawing board. 

Previous to a Homestead Housing Co-op coming to town usually
the only choice for middle income rural and farming people
looking for senior housing was to move to a major city. 
Retirement meant moving hundreds of miles away from their
farms, families, and friends. In addition each retiree that
left their home also left their rural community."When they
leave," says Vaughan Sinclair, organizer of the first
Homestead Co-op in St. James, Minnesota, "they take their bank
accounts, their shopping lists, their church donations and
their leadership with them." The Homestead co-op's occupants
are all too young and too active to be in nursing homes.
However, they appreciate not having to keep up their houses
anymore. Quite often they state that they could not have taken
the loneliness of one more winter on the farm or the mowing of
one more lawn. Homestead Housing co-ops deal with one other
major problem of senior housing. Of the senior housing in
rural America almost all of it is for low income seniors.
There are few facilities for moderate income seniors and
almost all of them are rental.  Resources need to be available
to rural America to halt the large out-migration of seniors to
the larger cities.  The Homestead model is showing us the way. 

One by one the characteristics that shaped the Homestead
Housing Center began to form.  The first was that there needed
to be a local board of directors willing to raise local
pre-development money, market the co-op, work with the local
authorities and give credence to the project. The smartest
initial idea was inviting a range of different co-op
organizations to become sponsors of the local effort. As a
result, each Homestead project gains immediate board capacity,
local trust and respect. 

Each of the Homestead co-ops is independent and owned outright
by the local resident members or their families. Eligible
occupants must be 55 and older. Each unit has one vote in the
election of the board and affairs of the co-op. The future for
Homestead is one of great challenge. The need is evident and
the requests for help more than can be handled. Clearly the
co-operative model has great potential to provide a future for
senior citizens in the communities where they have spent most
of their lives. The ability to remain independent and to live
an active life is the gift given by the Homestead model.  

Mobile Home Parks

In many parts of the USA, especially the Northeast, South and
West, mobile home parks are an important supply of housing. 
They cost 35% less than conventionally constructed housing. 
Currently, mobile homes (also known as manufactured housing)
account for one third of all single family homes built in the
United States. Because most are built for mobile home parks
they have a significant impact upon the market. 

However, mobile home parks create an underlying tension
between the owner of the park  and the owner of the mobile
home who is actually no more than a tenant renting space. 
Quite often, co-operatives arise out of the conflict between
landlord and renter. Over the past decade, residents have
bought 100 mobile home parks in California. These parks are
home to over 6000 units. The same actions are taking place in
Florida where there are over 200 resident owned mobile home
parks. Because the idea makes so much sense, some mobile home
communities are now being built from the beginning as co-operatives.  

Student Housing Co-operatives

There are over 165 student housing co-operatives in the USA. 
Today, over 10,000 students live in student co-operative
housing and the number is growing. In almost all case's
student co-operatives provide the lowest cost housing in their
market. A number of student housing co-ops serve target
populations such as language clubs, married students, or
graduate students. The co-ops are a way for students to learn
the practical responsibilities of management, finance and
co-op education. Student co-ops are also great recruiting
grounds - many of the student co-op leaders end up going to
work in the co-op sector.

Housing co-operatives in the USA today are at the forefront of
efforts to meet specialized housing needs and to create
affordable communities. Whether it be seniors, students or
single parents, they are leading the way in creating home

Health Care Co-operatives

When Money Magazine's July 1993 issue ranked the 10 best HMO's
in America two of them were co-operative health plans.  Almost
75% of the citizens of Minneapolis-St. Paul are members of
managed care programs, the highest concentration of any major
metropolitan area. As a result, employer costs were the lowest
of 13 major cities surveyed by benefits consultants Foster
Higgins and reported in the May 17, 1993 issue of Fortune
magazine. Not surprisingly the leading HMO in the Twin Cities
is Health Partners, a co-operative with over 640,000 members.  

Writing in World Monitor (April, 1992) about "A Cure for
Health Care Costs", Alain C. Einthoven, one of the leading
experts on managed care, uses Group Heath Co-operative of
Puget Sound as one of his three models of effectiveness. 
Einthoven refers to a five year Rand study which showed that
as an HMO, Group Health Co-operative of Puget Sound cared for
its patients at a cost 28% less than fee for service and
produced equal health outcomes. Group Health Co-operative of
Puget Sound, incorporated in 1945, is the 6th oldest HMO and
serves over a half million people.  

The key stage of co-operative health care began among the
farmers of Elk City, Oklahoma. There, in 1929, a determined
young Doctor from Syria, Dr. Michael Shadid came up with a
simple idea that made economic sense. Invite members of the
community to buy a $50 share and pay $25 in dues each year to
the co-operative hospital and give every member and their
family free medical care. Thus was born the first co-operative
hospital in the USA.

During the 1940's Dr. Shadid went as a missionary to every
corner of America.  Shadid stated, "No agency except an
association for patients seems to be so motivated as to
provide the proper relationship between the doctors and the
purchasers of medical service."   

Writing in his book, Principles of Co-operative Medicine, 
Shadid laid out the four fundamental principles.

* Group Medical Practice
* Preventative Medicine
* Periodic Payment
* Consumer Co-operative Control

One of the bitterest battles in US medical history resulted in
a 1940 US Supreme Court judgment which entirely favoured the
Washington DC. based co-op, Group Health Association. The
result allowed co-operative health care to become the most
important consumer controlled step in the progress of American
medicine. Today almost two million people are served by co-op
controlled health care organizations.

Another important form of consumer controlled health care
present throughout America are Community Health Centres. 
Almost 600 co-operative community health centres now serve
over 6 million Americans. Their focus is on low income and
migrant populations in both urban and rural areas. In an era
of cutbacks the centres have vastly increased their capacity. 
Through innovation, cooperation, local partnerships and
efficient use of government resources the centres have become
important players in the health industry. These centres with
their locally controlled boards depend greatly on the
volunteer efforts of local health care professions and
community support.  

Health Purchasing Co-operatives 

As health care costs have risen for every segment of the
industry the co-op concept is increasingly being adopted by
groups of smaller players to achieve market power. One format
is the employer sponsored health care network which has
similarities to a purchasing co-operative. By joining
together, small to mid sized employers can lower their costs,
aggregate their purchasing power and provide their employers
with better programs. The networks get competitive bids and
sign three year contracts with a set rate schedule. 

The Alliance, a Colorado member-owned co-operative provides
service to over 100,000 employees. The co-op estimates that
savings to its 500 corporate members was $3 million in their
first two years of operation. The Employers Health Purchasing
Co-op based in Seattle began business in 1993. After one year,
there are over 250 corporate members and the co-op serves over
300,000 employees. 

Clearly, some of the most important innovations in the health
care system have occurred from the bottom up. Co-operative
models have emerged to ensure that the smaller players can
continue to play an effective role. Through co-operation, the
consumer, the small employer and the low income community
health center have all found a way to increase their capacity
to serve. They are one of the few consumer voices that can
speak to the issue of people and health care.  

Rural Electric Co-operatives

America's 1000 rural electric co-ops provide electricity to
over 25 million people. These systems bring power to about 12
million farms, homes, commercial enterprises and other
organizations throughout much of rural America. A typical
rural electric co-op is about 40 years old, with 2000 miles of
line and 8000 consumer members in portions of three counties. 
These systems own and operate more than half the electric
distribution lines in America. Rural electric co-operatives
provide electricity to 90% of the land mass of the United
States.  However, America has changed greatly since many of
the rural electric co-operatives were started. In the span
from 1940-1965, 20 million people moved off the farm and
countless millions more abandoned rural America. Today, nearly
eight families out of ten served by rural electric co-operatives are not directly involved
in production agriculture.  

In the mid 1980's NRECA began to give priority to economic
development, job creation and quality of rural life. This
focus was based upon seeing NRECA's local and regional members
as part of a bottom up strategy for development. There would
be no future for rural electric co-ops if rural communities
lost their economic capacity. The need was there and the
co-ops were ready to take up the challenge. By 1990, the co-operative efforts were having an
effect. From a base of 23% of the co-ops being involved in economic development in 1984 the
numbers had risen to 74% by 1990.  

For example, Ogelthorpe Power Corporation, a co-operative in
Georgia had a 26 person economic team that helped locate 300
new businesses in 12 years. The Jackson County Electric Co-operative in Wisconsin, was the
main force behind setting up a commercial center and an industrial park. The outcome was
more jobs, services, taxes and guaranteed customers for the electric co-op. 

Rural Telephone Co-ops

Rural telephone co-ops serve much of America.  There are about
260 rural telephone co-ops, serving 1. 2 million people in 31
states. Telephone co-ops today are, with rare exceptions,
equipped with state of the art technology. Non-Bell systems,
including the co-operatives, have converted 92% of their
central offices to digital equipment (compared with figures in
the 50% and 60% for several Bell Operating Companies).

A number of telephone co-ops have installed or are installing
fiber optic cable. Many co-ops have cable and cellular
subsidiaries. They have taken a strong lead in developing
interactive video and distance learning systems for rural
school systems, and are making possible advanced medical
diagnostics to aid rural doctors. Businesses, especially
telemarketers, are relocating to rural areas because of the
quality of the work force and of the telecommunications

An example of the new role of telephone co-operatives is
occurring at Steelville, Missouri. For many years it appeared
that Steelville was dying. Its population of 1,470 citizens
realized they had to help themselves or watch the town die. 
According to an AP story, "The big key to Steelville's success
has been the local telephone company, a co-operative that
citizen shareholders for their own quirky reasons had always
maintained independently." The local co-op bid on a regional
cellular phone franchise, won and then re-sold the franchise.
The co-op then upgraded its technology and plied the remainder
into a community development corporation.  Since then the
corporation has seeded a number of public projects.  The
co-op, the development corporation and a re-activated local
leadership have brought about a revitalization of Steelville's
Main Street and the community.  The role the telephone co-op
played in Steelville is being re-enacted all across America.  

Many of today's telephone co-operatives began after the 1949
passage of the Telephone Amendment to the Rural
Electrification Act, which made Rural Electrification
Administration (REA) funds available for telephone systems. 
Existing telephone systems were not able to or willing to
serve many sparsely populated areas. Citizens in hundreds of
communities came together to create their own telephone
systems. Rural telephone companies cover 40% of the land mass
of the USA and have at best 6 subscribers a mile compared to
cities with 130 subscribers a mile. 

Credit Unions

Credit Unions are consumer owned financial co-operatives and
the largest co-operative sector in by membership. Today there
are 70 million members of over 12,000 credit unions and they
continue their strong growth trends. Total assets are about 8%
of total commercial bank assets. Total credit union savings
are over $250 billion. The credit union share of the consumer
savings market rose from 6.8% in 1991 to nearly 8%  in 1996.
The credit union share of the total consumer credit market is
13.% and the total auto loan market is 19%. Loans outstanding
are over $150 billion. One third of the credit unions, serving
83% of the membership now offer a full range of services. In
1992, the Credit Union National Organization launched a
multi-year campaign to extend service to more Americans,
especially those of modest means. Called Operation Moonshot,
the campaign aims at increasing credit union membership to 100
million by the year 2000. Rapid change has been the hallmark
of the credit union movement for the past two decades. In
1970, there were 23.687 credit unions. Since then
consolidation and merger have halved that number.  Smaller
credit unions have accepted merger and consolidation as a step
towards offering their membership a stronger credit
union link.  

Credit Unions break down into 3 types or fields of membership;
occupational or workplace base 80%, associational base at 14%
and community base at 6%. Over half of the credit unions have
less than $10 million in assets, slightly more than 500 credit
unions have above $100 million in assets. Almost all credit
unions affiliate with their State Credit Union Leagues, in
turn the State League's representatives elect the Board of
Directors of the Credit Union National Association (CUNA).  

In 1935, CUNA formed the Credit Union Mutual Insurance Society
(CUNA Mutual) declaring the debt shall die with the debtor. 
Today,  CUNA Mutual is one of the largest insurance companies
in North America and writes more credit life insurance than
any other company in the world. The society provides a wide
range of insurance services to credit union members
everywhere. The Group's total insurance in force is more than
$90 billion.  

Community Development Credit Unions

In 1993, at a White House Ceremony, President Clinton
introduced the Community Development Banking and Financial
Institutions Act. This legislation calls for government
funding of $300 million in assistance to community based
lenders over the course of four years. A key objective of the
Act is to encourage a broader role for community development
credit unions (CDCUs). CDCU's are community based financial
co-operatives. The Federation of Community Development Credit
Unions hopes the new legislation will give birth to 100 new
CCDUs over the next five years. 

For a number of different reasons the idea of a CDCU is being
listened to. With the departure of many banks from rural areas
and minority areas in the cities there are a growing number of
people who need the services of a credit union. The 1992 LA
Riots reminded everyone that a lack of financial institutions
investing in low income areas is part of the problem and that
development of CCDU's are part of the solution.  After years
of few CCDU's being chartered, the National Credit Union
Administration has chartered 11 since October, 1992.  

Over the past 20 years a number of the CCDU's have chosen
innovative paths to rebuild their communities.  A focus on
supporting the enterprises of their members placed CCDUs at
the forefront of the interest in micro-enterprise development. 
With a little, these groups have achieved a lot.  Today, there
are about 300 credit unions with $500 million in assets
serving nearly one million members which fall into the
category of CDCUs.  Look for many more in the nineties. 

My presentation today is about the most diverse co-operative
sector in the world operating within a nation seen as the
capital of the free enterprise system. What it shows is that
co-operatives allow and encourage millions of Americans to be
in business - together through their co-operatives.  It also
shows that the big business behind the small business on Main
Street is a co-operative supplying the locally owned; grocery
store, hardware store, stationary store, the fast food
franchise. The franchisee owners of Kentucky Fried Chicken,
Dunkin's Donuts, Burger King, Dairy Queen and others have all
adopted the co-op model. Some of the franchise co-op
conventions I attend have more co-op fervour and fever than
you could believe.  

Yet is more than that, it is the everlasting story of
cooperation, of the little people coming up against barriers
and taking matters into their own hands. It is a story time
and time again of people knowing that they have it within
themselves to solve their own problems. It is a country of
citizens with a tradition of helping each other. It is the
America not known to the rest of the world. Thank you for
allowing me to share the story of Co-operative America.

/prsentation made to United Kingdom Co-operative Council
Meeting, Manchester, November 1996/