Co-operation and Regional Economic Development
In British Columbia, and in Canada generally, the dominant model for regional economic development has been almost obsessively focused on the success or failure of individual firms. Businesses are viewed as individual entities in competition with each other. Most of the economic development thinking, planning, programs and policy have been focused around how to make individual businesses more competitive and more successful.
This traditional economic development practice operates on a number of assumptions that I think are seriously flawed.
What I am proposing is that we take another look at this, and think about geographical regions as economic agents. Rarely has there been an approach focusing on regions as economic entities, or local governments as catalysts and coordinators of regional economic development.
Co-operation among firms and the co-operative as a form of enterprise democratically owned and controlled by its members have generally been absent as strategic tools in traditional approaches to development.
Over the last 20 years, we have begun to recognize the crucial role of a regional approach and its importance in fostering the success of both individual firms and strategic sectors that can compete in a global marketplace. The role of regional and local governments is key in this strategy, as is the use of co-operative models of development.
Rather than operating in isolation, businesses and other agents can be linked in a networking system for mutual benefit and shared markets. Sectors are more than firms sharing a market. They offer a supportive structure. With enough numbers, a region or a sector reaches critical mass and becomes more than the sum of its participants. Industry clusters drive innovation and development.
We can find key examples of the cooperative approach in Emilia Romagna in northern Italy, the Ruhr region of Germany, and the cluster economies of Seattle, Silicon Valley and other locals in the U.S.
What has developed in Emilia Romagna stands as an excellent model for what might be applied here in British Columbia. This region of northern Italy is similar in enterprise composition to the economy we have here, with the majority of its enterprise conducted by small businesses. In Emilia Romagna they y have identified groups of firms that share markets and have developed their capacity as sectors able to compete globally.
We also have seen cluster development in the U.S. where enough firms and other economic agents in a region or sector have been linked to establish a resilient economy. Those regions are by comparison far more stable than single, competing firms through the rise and fall of the general economy. They tend to do better precisely at times when the economic environment declines.
The notion of regional and sectoral development through the application of cooperative strategies is especially relevant to the configuration of business in British Columbia. It is precisely small firms that most need system support to compete and survive in the global economy.
Of all of the provinces in Canada, British Columbia is the most dependent on the success of small firms. Small businesses account for 28% of the province’s GDP. 98% of all businesses in BC are small, that is they have fewer than 50 employees, and the majority of those are ‘micro-businesses’. 98% of the jobs in British Columbia are generated by small businesses.
To be effective, regional development requires a high degree of cooperation. Government involvement is absolutely essential to facilitate this level of collaboration.
The discussion to this point has underscored the importance of cooperation as a general principle. The principles of cooperation are embodied in the establishment of co-operatives. Co-operatives are democratically owned and operated entities that abide by a set of provincially legislated and widely practiced rules. Co-operatives have a long, established history in BC and in Canada. They present a successful alternative to traditional, top-down enterprises.
It is not generally realized that co-operatives actually have a higher survival rate than other forms of enterprise. Co-ops have an over-five year survival rate of 64% as opposed to a 36% survival rate for private firms. The ratio holds for businesses of ten years and older. By sector, 85% of consumer co-ops, 77% of producer co-ops and 44% of worker co-ops survive beyond five years. The rates of survival beyond ten years remain high.
Worker co-ops, where those who work in the enterprise are also owners, have been a particularly good fit in rural economies. A worker co-op may be formed as an entirely new enterprise, or it may serve a role in rescuing an industry already located in the region.
Lack of succession for small firms, the family businesses, is one of the primary sources of enterprise and job loss. Worker co-ops can serve as a key strategy for ensuring the survival of these small firms by transferring succession to employees.
There are numerous models for establishing a worker co-op as a succession strategy. These include an outright worker buyout; a partnership between workers and other partners; or a staged process involving existing managers/owners. Resources for training, planning, financing, and incorporation are available to groups who are considering forming such a co-operative.
Worker co-ops can also serve as a means for protecting against plant closures. Often, plant closures have little to do with the viability of a plant. A closure may be due to insufficient capital return to shareholders, or there may be competing corporate and regional interests. For instance, it may be a question of outsourcing work to a region with lower costs. We can look at the examples of the Eurocan pulp and paper mill in Kitimat, and the Harmac pulp mill in Nanaimo.
Social co-operatives are emerging as a key response to the decline in social services. They are beginning to fill gaps in health care, elder care, funeral care, and community services. Co-ops have been formed to provide family services, and training and employment for marginalized groups.
Characteristically, in social cooperatives service users are members and have control rights. There are multiple stakeholders including caregivers, users, and community members.
A social co-op is a co-op that provides social care not only to members, but to the broader community. They are often more innovative and cost effective than traditional models because they promote:
Whether as a set of principles, or within a specific, operational co-operative, the mindset of cooperation offers alternative solutions to the challenges before us.