The other day, I dropped by the offices of a venture capitalist friend to have a serious conversation about the economy.
In a nutshell, he’s worried.
When I met up with a friend in the labor movement that afternoon, I was struck by the fact that they shared the same views on our economic situation.
They both talked about how our institutions are fraying, and they’re worried that there doesn’t seem to be a plan for what’s next.
At their core, cooperatives are networks of people with a common interest, working together to bring costs down for everyone.My VC friend talked about the breakdown in the way people work—companies have been laying people off and reducing staffers to part-timers. He railed against the current mentality that focuses on short-term gains rather than long-term success.
He’s troubled by the accelerating income disparity because it’s killing consumer spending. It should be troubling to anyone, not just a VC guy: In order to grow, businesses need customers who have money in their pockets that they’re willing to spend. It feels like the appetite for consumption that made America famous has left the building.
My labor union friend is trying to think about the next strategy for the labor movement. He also talked about how work has broken down. The union model will need to evolve, as it did from craft guilds to industrial unions, into new forms of unionism. Workers still need support networks as they lose benefits and job security. Of course, he’s also troubled by the growing income disparity. “Imagine,” he said, “if the guy who pumps gasoline into the airplane could actually afford to take a flight.”
For me, the parallels couldn’t be clearer: They’re both looking out at the same rubble of our social safety net. Sure, the VC guy cares about returns and the labor guy is looking for new union models—but they’re looking at the same problem, and neither sees a satisfactory solution in the works. And last time I checked, workers are consumers, too.
In the early part of this century, Henry Ford came up with a solution. He doubled wages to $5 per day and reduced the workday to eight hours from nine hours, and it ushered in a new middle class. That was in 1914. Not only could his plants run more efficiently with three eight-hour shifts, but workers could actually afford to buy Ford cars.
Then two decades later, during the Great Depression, FDR came along with the New Deal. This time it was the government creating robust institutions for social services that pulled the economy out of the rubble.
Back then we had big business, big labor, and big government. We don’t have those anymore. They create economies of scale and—this is key—ensure success for future generations.
But what if there was already a solution out there? Or at least a path towards a solution?
I’ve been a fan of the cooperative model for a while—you’ll hear me talk about this more—but the social institutions of the future will have to be driven by people coming together for a common goal.
At their core, cooperatives are networks of people with a common interest, working together to bring costs down for everyone. They create economies of scale and—this is key—ensure success for future generations.
We can look at some of the successful agricultural cooperatives like Sunkist, made up of independent citrus growers in California and Arizona. Its 6,000 members pool resources for marketing, lobbying, harvesting, and shipping. Minnesota-based Land O’Lakes, a member-owned dairy cooperative with about 3,200 producers, is one of the largest suppliers of milk and butter in the U.S. There’s also Ace Hardware, a cooperative with more than 4,000 member stores that benefits from centralized purchasing power.
Here are real-life examples of networks in action. These are the types of institutions that will usher in the next wave of our economy.
If the VC and the labor leader are looking for answers, they should probably turn to the farmer.