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

March, 1998
(Source: ICA Review, Vol. 91 No. 1, 1998, pp.73-83)

Government Restructuring and Implications for Civil Society - the Co-op Alternative
by John Restakis*

Over the last decade Canada, like other industrialized nations, has experienced a radical re-evaluation of the role of government. This has had profound effects on public services, individual citizens, and the broader civil society.

This paper explores an alternative model for the delivery of public services and by extension, for the meaning and role of public goods and civil society. It centres on the unique role co-operative models have played both in the evolution of public goods and services, and in the redefinition of such services today. 1

Alternative Service Delivery & Debate over Public Goods
The near universal search for alternative ways of delivering public services means a good deal more than cutting costs or making government more efficient. It also calls into question many of the values, powers, and social relationships that together comprise what may loosely be called the "social contract" - that arrangement of rights and responsibilities that defines our social and political system. Although it is the least articulated, it is the changing nature of this social contract that is at the heart of the re-definition of government.

In Canada, as elsewhere, the notion of "alternative service delivery" (ASD) is only the most recent formulation of a process that has been engaging governments for a long time. This is not new. What is new is the emergence of a widespread perception that the traditional roles and responsibilities of governments are inadequate to meet the challenges of our times. Even more, there is a growing sense that government as such has lost its credibility, and this loss of faith has grown to encompass public institutions in general.

By contrast, the language and values of the market and the private sector have gained increased currency both in government and among the broader public. The application of these values to the provision of public services now constitutes one of the most seminal public debates in the reconstruction of Canadian public policy. Much of this debate centres on the issue of privatization - the provision of public goods by the private sector.

For many, privatization has become the emblem of a new model of governance. And although alternative delivery models are quite various (ranging from direct delivery by government to the contracting out of services and outright privatization), private sector models have gained the lion's share of attention. The role of the broader public and, more explicitly, of civil society and the social economy has figured far less prominently in the proposed alternatives to current models of governance.

The ASD debate in Canada is moving beyond the traditional issues of cutting costs and improving efficiency. It is also becoming concerned with increasing government responsiveness and accountability, and this has implications for strengthening civil society. It is in this connection that the co-operative alternative makes its most important contribution to the ASD debate.

Just as the adoption of private sector models for the delivery of public services has deep and abiding consequences, so does the adoption of co-operative models. In reality, each of these approaches signifies an important difference in outlook with respect to the nature of public goods, of public accountability, of governance, of the role of citizens, of the meaning and evolving role of civil society.

Why the Co-operative Model? ------------------------------------ Co-operatives are merely one aspect of civil society. But they are unique, insofar as they embody both social and economic objectives. Because of this, the co-operative sector shares many of the features of both the private and the public sectors. It is this blending of a commercial orientation with social concerns that makes co-operatives a unique alternative for the delivery of public services.

The contribution that co-operatives bring to the ASD debate can be viewed from two important perspectives. First, co-operatives place the issue of government responsiveness and accountability in the forefront of the ASD debate. The democratic governance of co-operatives and their accountability to their members sets an important standard against which other ASD options may be measured.

Co-operative alternatives challenge governments to address the issue of performance and public accountability in ways that go beyond mere contractual agreements and improved reporting mechanisms. This applies both to internal governance structures involving employee/employer relations, and the manner in which bureaucracies relate to citizens.

Secondly, co-operative alternatives affirm the central role of civil society in the creation of public goods and services. They offer a mechanism for engaging citizens and communities in the restructuring of public services, and a means through which governments can invest in the creation of social capital. Co-operatives highlight the fact that the success of ASD is in large measure dependent on a strong civil society capable of playing a role which is often assumed, but rarely articulated or developed in practice.

These two features of government restructuring - government responsiveness and accountability, and the relation to citizens and the broader civil society - are fundamental to the manner in which public services are having to adapt to the new challenges of governance. As pointed out by other commentators2 the public sector, like the private sector, must transform from a centralized, command driven, internally accountable system to one that is flexible, innovative, and responsive to citizens and other stakeholders.

The co-operative model provides government agencies with a formula which maximizes innovation and local empowerment without sacrificing the values of community, consensus, and shared responsibility. This is particularly important in relation to the role of employees and public sector unions which, up until now, have paid dearly and gained little from the restructuring process in Canada.

Co-operative models in which employees can take on the role of true partners would do much to rebuild a sense of trust and mutual purpose between governments and their employees. Multi-stakeholder models of co-op organization are specifically designed to address these issues.

In addition, co-operatives allow for the adoption of commercial strategies while retaining those values of the public sector which are most compatible with public expectations, for the corporate cultures of the public and private sectors are radically different. Private sector firms, oriented toward the maximization of profit and accountability to shareholders, understand little the broader and more complex allegiances to community and what John Ralston Saul calls the "disinterest of the public good".3

Co-operatives reflect the civic values of openness, solidarity, and collective interest which formally animate the policies and practices of the public sector. In a more general sense, perhaps the most important contribution that the co-operative model can make to the ASD debate is to show that public goods are not exclusively the preserve of the state. Co-operatives show how public goods can be affirmed while also freeing the notion of "public" from an exclusive association with government agencies. 4

If alternative public governance structures exist, the down-sizing of government does not have to mean the elimination of public goods.

The Co-operative Experience
In Canada, there are over 14 million members of co-operatives whose combined assets are well over $100 billion. And, although less visible, co-operatives are active in as many sectors of national economies as capital- owned firms. As pointed out in a recent paper by Ian Macpherson,5 there is no structural factor that delimits the possibilities of co-operative activity. The co-operative model is enormously adaptable and can be applied to virtually any social or economic activity.

The rich diversity of co-operatives sometimes masks the underlying feature which all co-operatives share, namely collective ownership over an enterprise or service. This blending of economic and social purposes has a special relevance for the issue of alternative service delivery, not only in the limited sense of the appropriateness of the co-op model for any given service, but for the broader question of democratic governance and the re alignment of state roles and responsibilities.

Co-operatives may be the most promising means for both preserving the public nature of goods and services, and for applying the best aspects of business practice to reduce costs and improve service quality. There are two key reasons for this.

First, as enterprises co-operatives have to respond to the same market and commercial pressures that any business must address in order to remain viable. The co-operative advantage however, lies in the fact that unlike capital-owned firms, co-operatives place member needs above profits. This forces co-operatives to continually innovate and lead ahead of market forces to serve the changing needs of their members.

Second, as social organizations co-operatives must respond to member priorities. But unlike non-profit organizations which often place services ahead of economics, co-operatives are businesses that have to ensure that services are economically viable.

In addition, the co-operative formula of one member one vote provides a direct accountability to users that is lacking in traditional non-profits. It is this accountability structure that has kept co-operatives and credit unions providing services to many communities in Canada that have long since been abandoned by private firms and banks.

The democratic governance of co-operatives provides a unique mechanism to retain those features of public services that protect the interests of their users. It is this same governance structure that eliminates the inherent conflict of interest when public services are delivered by private interests.

That co-operatives lend themselves to this kind of service is shown by the intimate role co-ops have played domestically and internationally in the generation of programs and services now provided by the state. In Canada, the earliest forms of public health insurance, public education, and public housing were provided by co-operatives for their members. Later, these social innovations were adopted by the state and transformed into universal programmes.

In other sectors, the co-operative model has been paramount in furthering the collective interest through the creation of what are now major public institutions.

- Medicare - Canada's universal public health system - grew out of the co-operative health insurance strategies pioneered in Saskatchewan.

- Agricultural marketing through the Canadian Wheat Board grew directly out of co-operatives developed by farmers on the Canadian prairies.

- Co-op housing, which was a unique partnership between government and the co-operative sector, is still the most successful and cost effective means of providing quality, low cost housing.

- Canadian Press remains the single most important source of news and information for Canada's news industry and the public it serves.

The application of co-ops as a paradigm for delivering public goods and services is also being used to improve the quality of programmes that are still recognized to be state responsibilities. This is true for example with social co-ops, which deliver both training and employment for populations that have not been served well through state systems.

The European experience is instructive. In Italy alone, over 2,000 social co-ops provide training and employment to 50,000 people from such marginalized groups as the disabled, the formerly incarcerated, and the long term unemployed. Social co-ops are also being used to provide needed services to the elderly, to youth, and to the homebound.

There has been an extraordinary variety of co-operatives that have emerged from the restructuring of public services in Europe. Indeed, the co-op solution has been seen by politicians and officials alike as a way of improving management and therefore service quality rather than simply a way of cutting costs.6 Two examples from England help to illustrate the point.

North East Direct Access is a resettlement centre for homeless single men near Durham in north-East England. Seen as uneconomic, this facility was to be closed by the UK Department of Health and Social Security. After a bitter struggle involving the local co-operative development agency (Durham CDA), the employees took over ownership. They simplified the management and pay structure, found enormous cost savings in suppliers' contracts, generated a sense of ownership among the residents, developed new services (such as single rooms and meals) and are now operating at a profit. As of 1996, the co-op was in a position to extend the premises to accommodate more residents.

The community services department of Greenwich Borough Council in South East London operated 7 community centres and swimming pools when it was forced by legislation to put their services out to compulsory competitive tender. Experience had shown that this process often resulted in cuts in services along with workforce reductions and increases in price.

As a response to this legislation, the Council decided to turn its community services department over to employee ownership. Despite a reduced grant from the Council, the new company - Greenwich Leisure - has succeeded in expanding rather than closing any centres, while keeping pay and conditions as good as they were under public ownership. The company now has 120 worker-members plus 300 part-time workers, and turns over 10 million dollars a year.

In summary, illustrations of public goods either initiated or delivered by co-operatives are easy to find. What is far more challenging is remedying the widespread ignorance of the co-op model to governments and citizens in time to match the scale and speed at which public services are being devolved to the private sector.

Public Goods and Interest
The controversy that surrounds the privatization of public services is but an extension of the fundamental concern regarding the nature of public goods and the stewardship of these goods by government. The "redefinition" of government has also meant the abdication of government from the provision of goods and services that, since World War II, have come to be regarded as essential to its proper role, and to the protection of public assets.

This is not to say that the role of government should not change. Rather, the question has become "How does the redefinition of government serve the public interest?" And while there has been much rhetoric regarding "citizen- centered governance" and improved service to the "consumer", little has been done to ensure that the public role abdicated by government will be replaced by private alternatives.

Until recently, it was widely felt that the proper repository of public goods was in public institutions, the foremost of these being government. This has changed. The true significance of the changes now shaking the public sector is just this: government can no longer be expected to act as the sole steward of public goods. If this is so, how is the public interest to be protected, and more to the point, what is the role of civil society in recreating the institutions, both social and ideological, that are the source and sustenance of public goods?

In the narrower language of public administration, two fundamental issues surround this question of public interest. First, how do alternative delivery systems ensure public accountability over public goods and services? And second, where are the structures and organizations in the broader society to ensure that the roles and responsibilities once provided by government will be replaced?

In the redefinition of government in Canada, these are the primary challenges facing government on the one hand and civil society on the other.

Government Restructuring and Civil Society
The changing role of government involves important assumptions and consequences for civil society and the social economy. Civil society encompasses the whole length and breadth of voluntary associations that together form those bonds of relationship that are the bedrock of community, collective responsibility, and public citizenship. However, civil society is a far more muted, and pervasive, presence in our society.

Civil society and the social economy accounts for an immense amount of economic activity whose primary purpose is to meet social objectives. It has been estimated that the volunteer labour that is generated by the social economy in Canada represents the equivalent of 615,000 full time jobs.7

Civil society is also the source of what has now come to be recognized as "social capital" - that store of social relationships and conventions that create trust, mutual assistance, and social solidarity. As Robert Putnam has described so well, social capital is what allows societies to undertake collective actions. And it is this capacity that has profound political and economic ramifications; creating democratic institutions, and establishing the norms and conditions that underlie the viability of all economic transactions.

These features of social solidarity and civic values are what make civil society the natural foundation for democratic governance and the creation of public goods. Put another way, public services and responsive government are but extensions of the values that most typify civil society.

Co-operation is both an expression of, and an investment in, social capital. It is not surprising therefore, that it is precisely in those societies where co-operation and social solidarity is most pronounced that government is most effective and most valued, and where economic development is most advanced.8

To be sure, co-operatives are only one aspect of the myriad of social organizations that make up civil society. But their blending of social and economic mandates places them in a unique position to respond to the challenges government restructuring poses to civil society.

The down-sizing of government is often accompanied by a simplistic hope that voluntary organizations will step in to catch those people who have fallen through the social safety net, and to help those for whom governments are no longer responsible.

For, just as many public services now provided by government were once provided by civil society, so will much of the burden for replacing public services fall on this sector. Contrary to expectation however, volunteerism has been in decline and the number of social organizations that have been forced to close their doors is steadily increasing.9 Civil society is undergoing a crisis in Canada, and this is even more pronounced in the U.S. and those countries where free market ideology has taken the strongest hold over public policy.

What is required is a means whereby civil society can recreate the capacity to generate public goods, and in the context of the decline of state support, to assess carefully which responsibilities should remain with the state, and which could benefit from delivery in other ways.

In the past, it has always been in response to precisely these kinds of challenges that co-operatives have been established. Today, the co-op model is one strategy that can help galvanize the capacities of the social economy, and provide a means for governments to strengthen the sector that is their natural ally in the provision of public goods.

- Co-operatives offer social organizations an organizational form that can help them strengthen their links to members, communities, and stakeholders.

- The co-op model enables organizations to strengthen their viability by linking efficient economic practice to social purposes.

- The co-op model offers both government and social organizations a mechanism for sharing responsibility and authority over the delivery of public goods.

This is not an argument for the downloading of public programmes to social organizations. The role of the state as provider of universal public services cannot be replicated by social organizations. Rather, it is an argument for recognizing the vital role of civil society as both a source and support to social programmes.

Without investment in civil society, the social organizations which are the incubators of public goods and services will atrophy. Co-operatives are an important model for ensuring that civil society can grow and respond to the challenges it faces, and more particularly, to offer a mechanism through which "citizen-centered governance" can actually be applied.

Challenge to the Co-op Sector: Seizing the Opportunity ------------------------------------------------------------------ One of the effects of the ASD debate has been to spotlight the crucial importance of the voluntary sector in Canada. It is ironic that although co-operatives are probably the best organized group in this sector, they are also the most focused on their own issues and concerns related to the operation and survival of their enterprises.

In Canada, there is a certain ambivalence within the sector regarding the whole issue of co-operative development. And, while this has been changing in recent years, it is still true that the sector has yet to find its footing regarding its true role in promoting, and investing in, co-operative development in new areas. This is further complicated by the fact that alternative service delivery touches on roles and responsibilities that many feel should properly remain within government.

Co-operatives, like other enterprises, must address increasing competition, the demand for improved productivity and technological change, and the capitalization of their operations. It is not surprising that the social objectives of co-operatives sometimes suffer. But, like private sector firms, co-operatives must be proactive to survive. This means applying their unique strengths to new markets and a changing social economy.

If the sector is to play a significant role in strengthening public goods in a time of radical change, it needs to re-affirm its traditional commitment to its social mandate. And this, far from being an act of charity, needs to be understood as the extension of a successful economic model to market opportunities in the public sector in new ways.

Why not assert that it makes good economic and social sense to do so from the standpoint of social innovation? For, if the private sector can turn public services into profit-making ventures, how much more can co-operatives provide these same services more efficiently, at less cost, and with greater accountability to their users?

The co-operative sector must also find the means to invest in public sector co-operative development. For, while some funds are currently being committed to new co-op development through a variety of programmes in Canada, they remain unco-ordinated and lacking in strategic focus. But more importantly, the sector needs to create innovative, viable development initiatives that are worthy of investment and support.

What is required here is a broadening of vision and leadership. And this leadership needs to be asserted at the level of individual co-ops, at the sectoral level, and most importantly, at the level of inter sectoral umbrella organizations.

The changes now transforming the public sector are signs of the deeper transformation which is re-moulding Canadian society. Co-operatives must find a new message and a clear voice to become the innovative influence they could be. The fact that the sector is now turning its attention to public services, and engaging governments in a serious dialogue on the role of co-operatives and civil society is an early mark of the leadership role co-operatives can play.

The Challenge to Government
The primary challenge facing governments during this time of "re-definition" and "re-structuring" is how to retain their credibility and the trust of the public. For if it is generally accepted that the role of government and the delivery of public services must change, it is also true that this acceptance is based on the belief that change is in the public interest.

The risk in restructuring is that the erosion of public services coupled with the abdication of government's traditional role as provider of public goods, will result in even less support for government and the role it plays. The real challenge, therefore, is: how can governments engage the citizenry to join their efforts in reshaping public services for the better?

What is urgently needed is some careful thought on alternatives that restore trust. How then, do governments provide alternatives that can clearly be shown to be in the public interest?

- Governments must be able to show that alternative delivery systems protect, or even increase, public accountability. The sense that public goods and services will no longer be open to public scrutiny and account is certain to increase public cynicism. This is especially true for essential services.

- Governments must show that alternatives protect or enhance services.

- Governments must show that alternative delivery models are cost effective.

- Alternative delivery models must provide a realistic means whereby citizens may have a direct role in shaping the services which are being delivered.

- Governments must be seen to be serving the whole of the public, not only selected interests. Any notion that "restructuring" is resulting in favoritism either to certain segments of users, or to privileged providers of the services, immediately compromises claims to serving the public interest.

Essentially, if a new relationship between the state and the public is to be forged, it must re-create notions of governance and citizenship in ways that both involve the public and provide it with the means to share in the re-shaping and the delivery of public services. Co-operatives should be recognized as an essential tool in this process.

Summary and Conclusion ------------------------------- The co-operative model is only one of many alternatives that governments can utilize to address the political, fiscal, and service challenges they face. The co-operative sector would be the first to point this out. But the neglect of this model is part of a broader devaluation of civil society and the social economy. In effect, governments are undermining their connections to the one sector that is most in keeping with the character and aims of public goods.

For its part, the co-op sector in Canada has been slow to make its case for a citizen-centered approach to alternative service delivery. But co-operatives are now beginning to recognize the vital role they can play in reshaping public services from the vantage point of civil society. For the co-operative sector this represents an opportunity to expand its economic and social aims into a sector that structurally, and historically, it is uniquely equipped to serve.

1. Much of this material is the result of CAPS (Co-op Alternatives for Public Services) - a national project sponsored by the Canadian Co-operative Association (CCA), le Conseil Canadien de la Co-operation (CCC), and the Institute for Public Administration of Canada (IPAC), to explore the role of co-ops in the delivery of public services. The CAPS research papers, including the findings of a series of round tables conducted across Canada on this subject, are scheduled for publication in summer of '98.

2. Gilles Paquet, Lise Pigeon. In Search of a New Covenant, 1997

3. John Raulston Saul, The Unconscious Civilization, 1996

4. Evert A. Lindquist, Restructuring Governance: The "ASD" Debate and Co-operative Alternatives in Canada, 1997

5. Ian Macpherson, Establishing a Policy Framework - Co-operation as a Form of Alternative Service Delivery

6. Toby Johnson, Co-operative Initiatives in Public Sector Restructuring - An International Perspective, 1996

7 David P. Ross, How Valuable is Volunteering? Perception 4, pp. 17-18

8 Robert Putnam, Making Democracy Work, Civic Traditions in Modern Italy, 1993

9 Profile of a Changing World - 1996 Community Agency Survey, The Municipality of Metropolitan Toronto, The Social Planning Council of Metropolitan Toronto, City of Toronto, 1997.

* Mr. Restakis is Region Manager for the Canadian Co-operative Association, British Columbia region. He has been the driving force behind efforts to apply co-operative models to the delivery of public services in Canada.