Authors: Jeremy Rifkin
U.S. cooperatives operate in virtually every economic sector, including agriculture and food production, retail, health care, insurance, credit unions, energy, electricity generation and transmission, and telecommunications. The next time you drop into an Ace Hardware store, you are doing business in a cooperative. “Americans hold over 350 million cooperative memberships.”
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Hundreds of millions of people around the world buy their food from cooperatives, live in cooperative housing, and do their banking with cooperative financial institutions. Most Americans are unaware that “about 30 percent of farmers’ products and supplies in the U.S. are marketed through 3,000 farmer-owned cooperatives.”
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Land O’Lakes butter and Welch’s grape juice are just a few of the recognizable brand names of food products on grocery store shelves that are marketed by agricultural cooperatives.
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Ten million dwellings, or 12 percent of all the households in the European Union, are cooperative housing.
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In Egypt, nearly one-third of the population belongs to a housing cooperative.
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Even in the United States, which boasts the largest percentage of private homeowners, more than 1.2 million dwellings are cooperatives.
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In Pakistan, 12 percent of the housing is cooperative.
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Banking cooperatives are also major players in the financial community. In six European countries—Germany, France, Italy, the Netherlands, Austria, and Finland—cooperatives account for about 32 percent of all deposits and nearly 28 percent of all domestic loans.
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In Asia, 45.3 million people are members of credit unions, which are member-owned financial cooperatives.
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In France, 60 percent of the retail banking is done through cooperatives.
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In the United States, credit unions, which claim over 90 million members—the most of any country in the world—have enjoyed a renaissance since the collapse of the financial market in 2008.
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Deposits in credit unions have risen by 43 percent, compared to 31 percent at the nation’s biggest banks.
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U.S. credit unions now have assets of nearly $1 trillion.
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Despite the cooperative’s venerable track record, it remained a secondary player to profit-making enterprises throughout the First and Second Industrial Revolutions. The substantial capital requirements brought on by centralized communication and energy matrices tipped the game in favor of private companies that could amass sufficient sums in the stock and bond markets. The vertical integration and scaling of manufacturing and services ensured that private enterprises, operating in capitalist markets, would dominate the previous two industrial eras.
Cooperatives were a way for small- and medium-sized businesses to survive by pooling their financial resources in order to purchase raw materials and goods from suppliers upstream at significant discounts while cutting their costs downstream by sharing marketing, logistics, and distribution channels. By operating as nonprofit enterprises in a shared Commons, outside the market, they could move goods and services to their members at low marginal cost because they were operating through a nonprofit business model.
Now the tables have suddenly turned. As mentioned in previous chapters, the Internet of Things gives the advantage to hundreds of thousands of small enterprises, but only if they are able to join together in producer cooperatives and take advantage of the lateral power made possible by the new distributed and collaborative communications and energy configuration.
The prospect of a new economic infrastructure and paradigm that can reduce marginal costs to near zero makes the private firm, whose very existence depends on sufficient margins to make a profit, less viable. Cooperatives are the only business model that will work in a near zero marginal cost society.
Thousands of green energy and electricity cooperatives are springing up in communities around the world, establishing a bottom-up Commons foundation for peer-to-peer sharing of electricity across regional and continental transmission grids.
In the European Union, where more people invest in cooperatives than in the stock market—a striking fact—cooperative banks are taking the lead in financing green electricity cooperatives. Dirk Vansintjan, founding director of the Belgian cooperative Ecopower, says that, for the most part, cooperative banks are the first to jump in and finance wind and solar projects. In the spirit of one of the seven governing principles of cooperatives—that they cooperate with each other when possible—cooperative banks are increasingly financing green electricity cooperatives like Ecopower with members’ funds. Ecopower, which started with 30 members in 1990, had 43,000 members in 2013, and already provides 1.2 percent of Flemish households with green electricity generated by its renewable wind and hydropower energy installations.
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In Germany, green energy cooperatives are sprouting all over the country. In 2011 alone, 167 new green energy cooperatives were created.
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The Horb Ecumenical Energy Cooperative in Stuttgart, Germany, is a typical example of the clout cooperatives can bring to bear in transforming energy generation and use patterns in local communities. The cooperative has already installed several solar power plants in the region, with more scheduled. As already mentioned, Germany is currently producing more than 23 percent of its electricity with renewable energy, much of it generated by local cooperatives.
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Bernhard Bok, a prime mover of the Stuttgart renewable-energy cooperative, says it is not so surprising given that “we are in a country of cooperatives.”
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Denmark is also at the forefront of transforming its society by installing an IoT infrastructure, and has relied heavily on the bottom-up cooperative model to establish a sustainable economic paradigm. When I fly into Copenhagen, I always look down on the harbor during the approach, admiring the 20 or so wind turbines, half of which are owned by cooperatives.
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The Danes have found that the key to effective implementation of the new infrastructure is buy-in by local communities, and that cooperatives provide the best vehicle for building public trust and gaining local support for the new energy infrastructure. They are particularly proud of their lighthouse project on the tiny island of Samsø—a community of around 4,000 inhabitants—where the local households and businesses were able to transform their region from nearly 100 percent reliance on imported electricity, mainly from coal power plants, to 100 percent renewable energy in just ten years.
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At a time when installation of wind farms by major corporate developers has faced opposition from local communities, Samsø countered the backlash by vesting ownership of the new energy among its own citizens. The island followed the lead of the rest of the country, where 80 percent
of the installed wind energy capacity is owned either by cooperatives or individuals.
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Local residents explain to the island’s visitors, who are anxious to understand how they were able to achieve such a success, that it all boils down to democratic participation and community ownership. The green-energy cooperatives provided a Commons that any resident could join, with an equal voice in the decisions governing development and management of the wind turbines on the island and just offshore. Residents became part owners as well, allowing them to benefit from the cheaper prices of the new green electricity.
The cooperatives also afforded the inhabitants of the island the opportunity to become part of something bigger than themselves. Active participation in the decision making and management of the green energy cooperatives built social capital, trust, and good will.
In the United States, rural electric cooperatives have been at the forefront of the movement to green electricity. The National Rural Electric Cooperatives Association has set a goal of producing 25 percent of members’ electricity from renewable resources by 2025.
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In 2009 a North Dakota rural electric cooperative, Basin Electric, put online a $240 million 115-megawatt wind farm, the nation’s largest.
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The project was completed in a record time of four months, rivaling the largest renewable-energy projects in the world. The cooperative, which serves 2.8 million rural consumers in nine Western states, has begun the process of transforming its energy generation from fossil fuels to renewables. In 2005, 94 percent of the company’s electricity was derived from coal and less than 1 percent from wind. Today more than 20 percent of its electricity is green and generated from wind farms.
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Rural electric cooperatives have also outperformed private and municipally owned utilities in the build-out of the new Energy Internet. Over 40 percent of all electric cooperatives have installed advanced meters at industrial, commercial, and residential locations.
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Green electricity cooperatives are also taking hold in urban and suburban neighborhoods, as well as in rural areas, in many regions of the world. A study done in Germany on the future role of urban electricity cooperatives found, contrary to earlier assumptions, that green electricity cooperatives are not more likely to develop in rural areas. It appears that urban green cooperatives are developing as fast if not faster than their rural counterparts. In the German study, 80 percent of the members of one of the nation’s biggest green energy cooperative live in towns or large cities. When asked about their rationale for becoming members of a green electricity Commons, most respondents mentioned “political motivation,” by which they meant their desire to be actively involved in planning their own and their community’s energy future.
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The generation that grew up on the Internet and that takes for granted its right to create value in distributed, collaborative, peer-to-peer networks
has little hesitation about generating their own green electricity and sharing it on an Energy Internet. They find themselves living through a deepening global economic crisis and an even more terrifying shift in Earth’s climate, caused by an economic system reliant on fossil fuel energy and managed by centralized, top-down command and control systems. If they fault the giant telecommunications, media, and entertainment companies for blocking their right to collaborate freely with their peers in an open Information Commons, they are no less critical of the world’s giant energy, power, and utility companies, which they blame, in part, for the high price of energy, a declining economy, and looming environmental crisis.
For a growing number of young people, the conventional energy and utility companies represent the very archetype of centralized power and all the ills that it has forced on the world. The prospect that those ills can be cured by joining together in open, collaborative, and democratically managed cooperatives to produce and share clean, green energy is empowering. It is inspiring a generation to rally under the banner of sustainability. The call for free access to communication is now being joined by the demands for free, green energy.
The Logistics Commons
There is one remaining sphere that needs to be brought into the matrix to create a Commons infrastructure. Internet communication, which is beginning to manage laterally scaled green electricity, is now being used to create a Logistics Internet to transform local and global transport. The coming together of the Communications Internet, the Energy Internet, and the Logistics Internet in an integrated Internet of Things operating on a Commons paves the way to the Collaborative Age.
While roads are by and large treated as public goods all over the world, the modes of transport we use to travel on them and to ship materials and goods are a mix of public and private enterprises. Hundreds of millions of human beings each day use public transportation to commute to and from work and for social mobility.
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Commuter trains, light rail, and buses provide services at just above cost, subsidized by taxes. Hundreds of millions of other people depend on private cars for their economic and social mobility. Others use a combination of public transport, private cars, bicycling, and walking.
Most shipments of commercial goods across roads are done by private carriers. Large vertically integrated Second Industrial Revolution companies rely on their own internal car and truck fleets or outsource to other private carriers to store and move materials, components, and other supplies as well as finished goods across the value chain. Going it alone, however, has its drawbacks. Although maintaining an internal, top-down, centralized command over logistics and transport gives private firms a strong measure of control over their production, storage, and distribution
channels, that control comes with a high cost of lost efficiencies and productivity and increased carbon dioxide emissions.
A recent global study revealed several different ways that privately managed logistics contribute to lost efficiencies and productivity and increased carbon dioxide emissions. First, in the United States alone, trailer trucks are on average only 60 percent full when on the road. Global transport does even less well and is estimated to be lower than 10 percent efficient.
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While trucks often leave their docks loaded, they become less and less full after each drop and often return empty. In the United States in 2002, trucks were, on average, empty of cargo for 20 percent of the miles driven and spent many more miles with their trailers nearly empty.
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Second, manufacturers, wholesalers, distributors, and retailers are storing products in warehouses for long periods of time, often far away from where they will ultimately be shipped, at a high cost. As of March 2013, U.S. business inventories were estimated at $1.6 trillion.
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These inventories represent goods sitting idle and taking up huge overhead costs. Warehouses are underutilized during certain periods of the year and overextended at others because of the seasonal nature of the product lines. Third, many time-sensitive products like food and clothes go unsold because distributors aren’t able to deliver them in a timely manner due to logistical inefficiencies. These time-sensitive losses are only compounded in developing countries where the transport and logistics infrastructure is weak, unreliable, and subject to breakdown. Fourth, products are often shipped in circuitous routes rather than the fastest routes, in large part because of reliance on giant centralized warehouses and distribution centers that serve large terrains. Fifth, in a global logistics system dominated by hundreds of thousands of private carriers, there is a lack of common standards and protocols that would allow firms to collaborate with each other, using the newest IT and Internet technology apps, and share logistical resources in a way that would increase efficiencies and productivity and reduce operating costs.
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