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Interview with Ethan Earle, U.S. Director of The Working World


On cooperatives and the difficulty of obtaining investors

By Luis Fernando Arce, Chief Interviewer

Two men shaking hands

http://www.flickr.com/photos/76029035@N02/6829381157/

An interview about what The Working World has done with cooperatives in Argentina and elsewhere, the micro-credit system they’ve implemented and the difficulties of being involved in this movement.  Another topic of discussion is how the cooperative movement in general is a viable alternative to traditional capitalism.

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You went to work in The Working World in Argentina first, correct?

I did, yes. I met Brendan Martin who is the founder and the international director of the organization in late 2007 or 2008, and began first interning for the organization and then took on a more official role [as a vote agent?] and also working in key locations for the law office in Argentina, which was at the end of 2008. Eventually my last six or eight months I worked there before moving back to the United States; I also served as the loan coordinator, which is a position that oversaw all the different investments we were making. And at the end of 2010 beginning of 2011, I moved back to the U.S. to open our Working World site here in New-York.

Was that before or after Nicaragua?

That was after Nicaragua. For Nicaragua we sent somebody there for exploratory purposes in mid-2008 and made our first loans there right at the beginning of 2009. It was still mostly a one or two person team with a little bit of occasional support for the first couple of years. In the last year or so we have solidified the team and have four people on staff there in addition to other part-times, interns and collaborators and other friends of the work we are doing.


So are a lot of the people working there on a volunteer basis or salaried workers?

We have currently 10 or 11 on a salaried-staff status between the three countries. When I moved back to the U.S., and Brendan began to spend more of his own time here, we decided to defer most of our own salaries for a period of time. We are now earning a little bit of money but nothing approaching full or even part-time salary. We are a small group and everyone’s doing bits and pieces of work in different ways; still on a volunteer basis in Nicaragua. Argentina is a much more traditional organizational structure at this juncture, where we have four people on staff full-time (in Nicaragua five or six), and then an accountant doing part-time work for us and a lawyer doing a tiny bit of work for us, as well.

Despite being a small team, you guys are doing some pretty amazing work, especially in Argentina.

Yeah, definitely. Argentina is sort of our biggest organization in terms of percentage of budget and also very much in the amount of work we are going to do. I think we are going to go over a million dollars in the loans this year, if I’m not mistaken.

Where do all your funds come from?

It’s sort of a smorgasbord of funding up to this point. It’s still a story that is unfinished and that we are trying to actively work on in a couple of different ways. Originally, the money was Brendan’s. He had been working on Wall Street for a number of years and essentially went down to Argentina with Avi Lewis in late 2004, excited to see in what ways they could support the bourgeoning recuperated factories movement that was taking place… He had a background in cooperatives and, more broadly, in trying to support more democratic working structures and looking for ways to engage finance on a more democratic level to support those working structures. And what was happening in Argentina – though there was a lot of activist support at the grassroots levels – is that there wasn’t really a whole lot of institutional support and definitely little finance available to these recovered factories. And they were in a position where many of them were trying to run large factories that had been gradually recapitalized over the course of years, sometimes decades, and they were being turned away by conventional banks, often times because they weren’t legally owning the means of production at the time and also for ideological reasons. At the same time, we were considered too large and unusual for traditional micro finance. So Brendan and Avi went down to Argentina with some of these ideas in mind regarding trying to create a finance tool to suit the needs of the organizations, and what emerged out of that was our first loan.

So basically it was Brendan who funded it at the beginning, from his pocket?

Yes, sorry, I got off on a tangent. [Laughs]. The first money came from Brendan, then we brought in a couple of angel donors who have given us long term support (wealthy individuals interested in the work we are doing and willing to finance part of our operational budget without strings attached, at least to this point). That was our earliest moneys: Brendan’s and angels donors… Subsequently we’ve been able to widen our financing a bit, first through government financing in Argentina through the Ministry of Social Development which gives us certain amount of money to work with some of the most low income cooperatives that we support.

Was that under [Nestor] Kirchner’s presidency?

Yes. And that was – I could be wrong – maybe in 2009, when we still had an active relationship with them. And more recently, in a shining moment for the organization, two different federation of cooperatives actually had extra money that they had a mandate to use to support the growth of other worker cooperatives in the area, and they actually cast that money over to us, which was a real affirmation of the quality of the work that we’d been doing, and our integrity and the extent to which we were seen as a group genuinely responsive to the needs of the movement, as opposed to trying to impose its own vision on the social movement. We’ve also, more recently, been looking for solidarity investment from individuals and also from organizations; so we’ve been bringing in money, loaned money, that we’re given for a relatively long period of money, with friendly terms and potentially no interest rates or very low interest return. The idea is that most of the return for the investor is a social return, being able to show that we’ve been doing good things, that we have a high 97% return rate without ever asking the coops to pay us back…

Have you had any trouble finding investors? Because they are, I guess you could argue, sacrificing a profitable return in exchange for social return, no?

We’re not looking for people that are trying to go after big profit. I think when you get to a point where, you know, social investors are looking for the 15 or 20 percent return, then you have to sort of wonder how social that is….We’re certainly looking for people that…fit the right portfolio; simply people that have some money in the bank and that can figure they can contribute this much to a good cause.

[pullquote]To a certain degree, we’re trying to change the mentality of what we really need to be investing in[/pullquote]

Well that’s what I’m asking, if you’ve had difficulty findings these type of social investors?

We’ve had some success and some difficulties. I’d be lying to say that people are beating down our door to give us their investments, but at the same time I can say that we do have a moderately-sized group of regular investors up to this point. It is also a project that we’ve only been pursuing since we came to the U.S., for a variety of reasons; it’s a bit more complicated when you are taking that money and taking it to a foreign country and trading it for pesos, particularly when talking about a country with that kind of history of inflation… Argentina has a bad history of devaluation dating about ten years ago.

Have you looked at social impact bonds as a way to fund your organization? Or heard of them?

No, we’ve been engaging with some of the major social impact networks, but no, not that familiar with social impact bonds… What are they?

It’s still in an experimental stage, mostly in the U.K. It is quite similar to what you’re describing. It started around the prison system. Basically it tries to get the private sector to invest in not for profit organizations and projects, but the idea is to invest in programs where you would see a tangible result. So around the prison system, for instance, they would invest in programs that would keep ex-convicts from rescinding and returning to jail, and based on that success, they’d get a return… So that’s why there’s been difficulty getting investors there, because it won’t give back a financial return, per se.

I do think that it’s a difficulty in some ways, particularly when you take seasoned investors with a particular idea of what an investment has to look like. To a certain degree, we’re trying to change the mentality of what we really need to be investing in. Looking outside of individual returns, thinking genuinely in investing in society at large or in a particular sector of the economy or particular region. Something that we have been looking at and pursuing is something that sort of acts as a crowd-sourcing tool, but focuses on particular regions. There are programs that focus on an entrepreneur in the South Bronx, for instance… and you can support this individual entrepreneur from wherever in the world, but instead of being worried around an individual, [our program] worries about cooperative-growth in the South Bronx… and that’s where we’re trying to get people… maybe high profile individuals, maybe organizations, but it is to say this is what investment means to me… and finding really concrete ways to anchor wealth and institutions that lead to wealth creation in that community.

Since you mentioned the Bronx, let me ask you, how developed is the cooperative movement in the United States?

I think that the cooperative movement is a lot more developed than it gets credit for. I do think that it can be larger, but there is some really interesting larger cooperative support organizations out there, and you also see to a large degree something that happens with co-ops across the spectrum – they tend to be more sub altered than other organizations – beneath the surface so that perhaps you don’t really know they’re there although they’re right under your noses. Often, cooperatives don’t seem to have the same sort of growth imperative – some have called it the cancerous growth imperative – of so many parts of capitalism and neoliberal capitalism, where it is just growth with an end to growth as an end to growth. And at a more basic level, it just means some of these cooperative aren’t so outward looking – they stay in one place to do their work – maybe you know them as traditional business – but they don’t occupy a large part in public consciousness… But I think that that’s changing in some places…[indiscernible: particularly the ever grey model]… in Cleveland has been high profile success; in California, in the Bay Area, there are a lot of interesting things going on. So it’s hard to compare one place to another. Certainly there aren’t as many cooperatives as there are in Argentina or in Italy, but I do think that it is an interesting first group of cooperatives that we have here, and it is one that is growing. We just recently went to the U.S. Cooperative Conference in Boston a couple of weeks ago, and it had over 400 people there from across the country and Canada, and it had a sense of optimism to it; it had the feel of something that is trending upward. And the International Year of the Cooperative declared by the UN is something which also supports that upward trend.

I was going to mention that not only is it the International Year of Cooperatives, but in Canada itself the movement has been around for some time and a lot more of this is going on in here than I thought.

Yeah that’s a common thing to happen, even with me, too. Since the beginning of 2011, and before that while I was out of the country for few years. And it’s one of those things that is pretty easy to miss… There are different types of institutions and supporting organizations built with cooperatives in mind that can really give the Cooperative Movement a little bit more of that… outward looking – looking beyond the individual cooperative and seeing what we can do to bring them together and to have the option of the worker cooperative be more on the table for groups of unemployed people, for people trying to foster job growth, and more deeply rooted in that community instead of just trying to attract outside investors… and I think these organizations have a positive effect [towards that].

Do you think the cooperative model could be eventually adopted nationally? As a possible alternative to capitalism, do you think cooperatives are viable?

It depends what you mean by viable models. I do think that cooperatives have proven over times in a number of different contexts their competitiveness with different business. In  a lot of ways, the introduction of a cooperative into a traditional business ecosystem makes that system healthier; they push the traditional employers to be more responsible and democratic with their workers since this alternative has appeared in workers’ consciousness about what work can mean to someone’s life, and that can be empowering. I think there’s certainly nothing [about cooperatives] that is incompatible with the U.S. economy; I think the cooperative can continue to grow and be a healthy part of that economy. But we do have a strong culture of individualism and the mythology of the individual entrepreneur is very strong. I don’t think that in 100 years all businesses will be cooperatives, nor do I necessarily think that it should be that way – I try hard not to generalize to that degree. I think of it more as a one-step-at-a-time-process in the sense of supporting those cooperatives out there that are doing great work as an option that is on the table and make sure that it will always be on the table for folks looking for new work opportunities.

I guess I ask because with the Union Movement, for instance, when it started and to this day, you had reactionary governments and policies towards – and even constant battles with – Unions, despite their massive power and influence, and they were often dubbed Socialists or Communists. I guess what I’m trying to ask is how much has the cooperative movement been associated with the Socialist ideology and has that helped or been negative?

In the U.S. I don’t think there are many [serious] socialist political parties or institutions. Socialism isn’t a boogie man any more. One of the very interesting and important things is the degree in which they are really post-partisan, if you think about them the right way. On a very basic level, co-ops give people an opportunity to be the protagonist in their own jobs, in their own life-stories; it is giving people the opportunity to go out there and work, make a good living for themselves, and that’s something that appeals very broadly to a large spectrum of folks in the U.S. It even has echoes of George Bush’s ownership societies… There are lot of interesting arguments that you can make for cooperatives from a variety of different political perspectives. While there certainly are some coops that are more political and fairly radical in addition to having strong business, there are others that aren’t so political and that are more about having community-based businesses where everyone has a chance to act as owners and have certain amount of democratic input, and there isn’t necessarily a whole lot more political stuff that is injected into that. So I think in certain situations outside of the United States we’ve seen coops being embraced by the left wing parties, with reason and understanding, and in a way that I hope continues to happen, but I don’t think that’s very deterministic – not the only valve that cooperatives can go. And I think, frankly, in the U.S. they won’t go that route because there don’t really exist [serious left wing channels].

 

 

ARB Team
Arbitrage Magazine
Business News with BITE.

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