The power of the co-operative business model

19 October 2016

An opinion piece by Andrew Leigh MP and Senator Chris Ketter (ALP) on the power and role of co-operatives. Senator Ketter chaired the Senate inquiry into co-operative, mutual and member-owned firms. Andrew Leigh is the shadow assistant treasurer and the shadow minister for charities and not-for-profits. First published in the Sydney Morning Herald. 

A few years ago, a group of community activists in one of the most disadvantaged parts of Canberra decided to set up a bulk-billing medical practice. They chose to make it a co-operative – recognising that its purpose wasn’t to make a buck for the shareholders, but instead to address a social need.

Today, the National Health Co-op operates across seven locations in Canberra, and will soon be opening a practice in rural NSW. Its approach brings together ancillary services, such as podiatrists, pathologists and dieticians – so patients don’t have to schlep off somewhere else to get a blood test or begin a diabetes management plan. The National Health Co-op is also in discussions with two other states about opening practices. It’s an innovative model for health care, and it’s growing fast.

Co-ops, and mutuals such as credit unions, are member-owned enterprises that exist and often compete in the same markets as investor-owned enterprises. Co-operatives are a voluntary association of people, democratically run for the members, and for the pursuit of a common social, cultural or economic goal.

Co-operatives have been around for hundreds of years. In 1498, the Shore Porters Society started in Aberdeen to help unload goods from ships. In 1769, the Fenwick Weavers’ Society in Scotland was established to sell oatmeal to members at a discount. In the mid-1800s, German credit unions were established to provide banking services. In colonial Australia, co-operatives provided much of the social safety net – in an era before the pension and unemployment benefits.

Today, co-operatives operate sugar mills, run university bookstores, buy wine, and sell apples. Four out of five Australians are members of co-operatives. A recent estimate of the economic value of the top 100 co-operative and mutual enterprises found they had a turnover of $25 billion, and $108 billion of assets. Co-operatives can either plough the profits back into the business (these are called “non-distributive”) or allocate them across members (these are called “distributive”).

Co-operatives are a flexible structure with the potential to not only create economic value, but also to foster community. In a nation where both living standards and social capital have been going backwards over recent years, co-operatives have a lot to offer. There is also some evidence that employees in worker-owned firms are more productive and more satisfied with their jobs.

Read more in The Sydney Morning Herald.