The Case for Cooperative Business Ownership – A MAHB Dialogue with Professor Anu Puusa, University of Eastern Finland

Geoff Holland: Since the beginnings of the era of agriculture, the course of history has been driven by men making the rules, women being subjugated, and nature being plundered relentlessly. How has this influenced the way the world engages in commerce?

Anu Puusa: This is a challenging question, which can be approached from many angles, and to which there is no one correct answer. This question is difficult to answer as we can only scratch the surface from some angles. Of course, historically there is little about the fact that in many things men have laid out the rules, and it is noteworthy to clarify that we are talking about white men in particular. With this, I am trying to say that in addition to gender, there are also many other important points of view in the development of current structures which this question does not take into account.

Culturally, men have undoubtedly, at least formally, been in control of agricultural societies. Agriculture has been practiced for at least 10,000 years on Earth. It was the next step after hunting and gathering. Agriculture and the surplus it produced enabled the division of labor between people, specialization, urbanization, and wider commerce. It also became possible to maintain larger military forces. Social structures started to become separated, to evolve, and to become hierarchical. Historically, this also includes journeys of discoveries, colonial times, competition between rich countries over the colonial rule, etc. 

So, is the issue of gender the most relevant when discussing this issue? Rather, we should discuss the historical formation of the separation of social classes, and of social differences, because as societies developed, a clear difference between the ruling classes and the ruled classes was created. Things are also relative: in a hierarchical society, upper-class women were probably in a fairly good position relative to their sisters in the lower classes. From what we can deduce, they had influence in their own communities. 

I just think that the economic system is not explained by the issue of gender, but by the hierarchy of the European society and the goals of the power-wielding upper class to satisfy their own needs. 

Democracy is a new 20th-century phenomenon. In previous times, large parts of society were not able to influence social priorities. Legislation could not be developed for the protection of the people, not men, women, nor children. Luckily the situation is now different in many places.

But it is also fair to say, that any power elite’s guidance, respect, and behavior inevitably controls what kind of commerce is done and how, which things are valued, what is given preference to, and in reverse, what is ignored. 

This is also seen in decision making which thus turns the conversation to leadership. This path of history is seen, for example, in the fact that the preference for characteristics viewed as masculine is still clearly visible in organizational structures, in what kind of people are being hired, who is successful (career development and pay negotiations, etc.), and overall in who is seen as qualified to take leadership positions.  

This is further evident in that we often value characteristics seen as masculine (risk-taking, competitiveness, assertiveness, efficiency, etc.) while characteristics seen as feminine, such as broad discussion, nurturing, security, and so on can easily be ignored as unnecessary things that gnaw at streamlined efficiency. 

In my opinion, studies show that those masculine characteristics are not in any way innate male characteristics. Instead, they are learned and taught. This in turn tells us about power discourses which men, due to their position, have been building and upholding to societies far longer than women. It also tells us of the way they guide us when various cultural institutions and practices are being formed. In other words, in organizational structures, for example, as well as with dominant and often very guiding stereotypical attitudes, there are still many features that have been developed and formed into their current state by men, and they are also visible not only in individual organizations but in society as a whole.

For example, there are considerably fewer companies owned or founded by women in the world. Studies show that fewer women intend to start businesses, and women’s businesses are generally smaller than men’s. Of course, there are exceptions: in some African countries, for example, women start businesses at the same pace as men. There should be enough diversity to be able to estimate the potential of a business idea or product.

I also want to mention that nowadays, when the number of female executives has increased, leadership has been seen as gender-specific, or at least there have been studies on whether gender has a meaning in how leadership is practiced. It is good to bear in mind that in this discussion women’s leadership is often compared with men’s leadership, and men’s leadership is seen as the norm.

When it comes to the exploitation of nature, of animals as well as people, if you want to use that word, it surely has always occurred. Its destructive meaning has emerged during the past centuries when it was proven that man can make even irrevocable changes in the Earth’s ecosystem. 

It is difficult to estimate how much this has to do with the issue of gender because, in my opinion, it has long been a question of common ignorance. But, of course, as the amount of knowledge grows we are facing questions on economic goals and the inevitability of taking nature/environment into account. 

And then we must also face the deep assumptions rooted in our culture, where the value system of today, with its certain masculinity and speech, may question the necessity of an action model that requires a new attitude and ways of action. This needs the long term attention that rises from a knowledge and value base but which is relatively new in human history.

Fortunately, many people are beginning to be more aware of the seriousness of the ever-larger problem. For example, their consumer behavior is forcing businesses to take environmental aspects more into account in their operations. 

In general, it is important to remember when thinking about possible answers to this question that on one hand, economic and political structures and ways of doing things do control commerce in the world, and they are and have always been gender-based. But on the other hand, it is important to bear in mind that this concept is only a modern invention. This is not without its problems, and in some cases, it is not right to evaluate the doings of people in the past by current values or standards. It is one of the fundamental truths of social history.

GH: Finland and three of the other four social democracies of Northern Europe are now led by women. Are women leaders the not-so-secret way to achieve a future for humanity that is life-affirming and sustainable?

AP: It may come as a surprise, but my unequivocal answer is No. 

A woman is not inherently a worse leader than a man, but not better either. For example, in Finland, the fact that the government is led by women is not intentional. But it has been thought that the most suitable and qualified people from the group from which the selection was originally made, should be chosen for the job. 

These people happened to be women. The attention paid to this fact also reveals that we have a lot of work to do regarding equality on many different fronts. We should reach a situation where we would not even have to discuss gender issues in these kinds of contexts. 

At the same time, I am naturally proud that Finland, like other Nordic countries, is a front-runner in promoting and highlighting equality issues even though there are still many things that need fixing. 

It is great that women and their competence have been brought more and more to the front (alongside men) and they are thus breaking the myths and stereotypes connected to their gender. 

Instead, I want to stress that humanity, open-mindedness, and the support and promotion of sustainability are not related to gender.

GH: Traditional business structures are shaped to put profit and the welfare of stockholders above everything else. What’s wrong with that picture?

AP: For a researcher, concepts are important tools, and that is why I was left wondering about the terminology used. 

There is nothing wrong with the production of profit and maximizing the welfare of owners, even financial welfare, as a phenomenon itself. 

Producing profit can sometimes be seen as a synonym for profitability and the entrepreneur’s reasonable reward. Sometimes it is seen as oversized and as unreasonable wins that have been gained at the expense of others (or by not caring about the losses of others).  

It may be illuminating to view things from extreme ends, but that seldom creates a total image of the phenomenon. 

Things are also often seen from different viewpoints. I like the starting point that the question specifically relates to the maximizing of profit as the primary mission of a business, following the logic popularized by Milton Freedman (1970). He said that “the social responsibility of business is to increase its profits”. 

One might say that at one extreme, the whole model is problematic, while at the other extreme, this ultimate purpose of entrepreneurship is the very essence of capitalism that functions and creates welfare. 

For example, from the point of economic theory (of which I do not claim to be an expert), the model of maximizing profits is “problem-free” in perfect competition, because due to competition, profits are moderate and both the consumer and the business benefit “maximally” from this functioning of the market. 

Of course, in reality, perfect competition is very rare and various real market formats come with many so-called problems of imperfect competition. These markets often do not benefit the consumer and businesses equally, but rather businesses have a monopoly on power and less welfare is created than in competitive markets.

In the end, it is a question of from whose perspective the matter is viewed and what kind of issues are emphasized and considered by various parties. The discussion is often controlled by those whose voice gets heard while other voices may be silenced.

Along with the development started by the industrial revolution, the power of capital as a means of production became disproportionately large at the expense of labor and raw materials. 

A small part of humanity lived in unforeseen wealth and another under the unforeseen burden of work. Natural resources and nature’s bounty were taken without regret and with no regard for the future. 

A force will always create a counterforce. Voices began to emerge, calling for a more responsible way of building the economy and society. This was a time when the cooperative movement was also born. It was a completely new way of looking at a business and, in a larger sense, the economy and the whole social philosophy: everything has a limit, moderation is good, and business profits are required, but people come first. That is to say, money became the means instead of the driver.

I sincerely believe that everyone should adopt the co-operation values based on the 19th-century social philosophy regardless of ownership form or business model. They are universal values where humanity is the basis of everything. With these values, it is possible to create a healthy and competitive business.

Phenomena should be regarded against their time. Trends are born, they grow, establish their place, evolve more, and, in the end, change their form or die off. 

In our times, the side effects of capitalism can be viewed critically both in a positive and in a negative light. It is also a question of a collective change in the value system. 

Do we believe that extreme individualism, where everyone has to be a self-made person, is inherent and good for us, or do we see that solidarity, co-operation, and a sense of community are good for us? 

How will those images highlight the diversity of people, different skills, motivations, needs, and values? These are the big questions to which there is no one single answer. And that is fine because then we would be silencing diverse voices and drift towards a totalitarian system instead of a liberal democracy. The latter, from my own perspective, is a structure from where we can find a balance and add to the welfare of individuals and communities in a sustainable way.

GH: You are a prominent champion of cooperatively-owned business structures. Can you summarize the things about cooperative ownership that make it so suitable for nature, people, and the planet?

AP: For ages, we have been wrestling with a shortage of resources and their sufficiency concerning the needs of an ever-growing population, not to mention taking a stand on eternal questions like “what is fair” “what is equal” and – in the modern age where the idea of stakeholder capitalism dominates – ”how do we balance profits and purpose”. 

The past decades have also brought to light the glaring problems and challenges we face regarding the use of natural resources and sustainability. The solution already exists and has existed for almost 200 years. The solution is cooperativism: a system of running a business that puts people at the center (maximizing customer benefit), anchors wealth in a community, sets a generational strategy and is competitive in the market.

A co-op is an organization that is owned by its members, who are also its customers and decision-makers. In other words, the basic operating principle of a cooperative is that the people who own and finance the cooperative, use it, control it and benefit from it are based on the use of its services. 

And unlike most businesses where certain owners can buy more power and influence, in a co-op, every member has one vote. In the cooperative movement, everybody can have a say and contribute to their own well-being and the well-being of their community, regardless of their age, social status, or wealth.  

This means that the cooperative movement also promotes inclusion: on the one hand, this brings people together, providing them with a forum for active engagement, while on the other hand, there is also the principle of self-help, which means that everybody is responsible for improving their own living conditions. 

Phenomena such as the readiness to cooperate, joint action, trust, and solidarity are a natural part of all cooperative activities. They all embody the idea that unity is strength and that you achieve more by working together. Cooperation is a great opportunity and the idea of being stronger together is part of the fundamental ideology of the cooperative movement.  

This strength can be aimed at almost any target: people themselves decide, but the reverse side of the coin is that we all need to be active too. In other words, the heart of cooperativism is the idea of participation. If we want the business to do things with us and the good of the environment in mind, we should get involved. 

Cooperativism is not giving away, it’s not getting from, it’s participation, and through that, we can get the kind of companies we want.

GH: What kind of businesses are well-suited to cooperative ownership?

AP: This is an easy question to answer: No boundaries. 

Co-ops can be found on all continents and in almost all countries. Co-ops operate in different fields, they come in different types (for example consumer co-ops, producer co-ops, service co-ops, work co-ops, etc.), and different sizes. 

They may have their own rules, and laws governing co-ops also vary from country to country. However, they all share the framework formed by the International Cooperative Alliance, the international values and principles of the cooperative movement, which suit everyone despite the above-mentioned differences.  

GH: What has been your experience in Finland with cooperative ownership?

AP: I am proud to say that in relative terms, Finland is one of the most cooperative countries in the world when considering the combined turnover, membership, and employment impact of cooperatives relative to the size of the country. In Finland, membership in a co-op is also the most popular form of business ownership. We have 5.5 million people who have over 7 million memberships.

The history of the cooperative movement is longer than the history of Finland as an independent republic. The boldest might even claim that the emergence of the cooperative movement in Finland and the founding of the Pellervo society by the united cooperative members gave a mental push towards Finland’s attempts to gain independence as nationalism gained strength in the last years of the 19th-century. Indeed Gebhard, the father of the Finnish cooperative movement, believed cooperation was a way to fight against the russification that was threatening our Finnish autonomy at the time.

The genius of Gebhard has left an irreplaceable legacy in the DNA of our nation: those values emerging from the co-op activities, above all the belief in equality, democracy, and self-help. 

Gebhard realized that commitment, and the action and co-operation resulting from it, had to come from the people themselves, not from above or from the outside. 

The activity that forms the destiny of a nation must well up from the large masses of the people, who have the will and whose ability to create progress and improvement can be promoted through cooperative activity. The thought may sound natural to us, but at the time before Finland’s independence, Gebhard’s ideas of a self-thinking, equal people, capable of making decisions together, were extremely radical, even revolutionary. 

The idea of cooperation provoked thought and its practices showed their strength. Cooperative activities have evolved hand in hand with the different eras of our nation’s development, shaped them, and have been shaped as a movement.

We have always believed in the power of cooperation; after all, we have endured harsh times and as a poor people we have been forced to be cooperative. 

Yet, in addition to the clarification of the meaning of cooperative ideology, the cooperative movement has also given Finns much more. The cooperative members united by Pellervo set the starting level at equality between women and, more broadly, people in general. 

The democracy of the Cooperative Act and the gender-neutral voting right defined in the act must have had an impact on our current Finnish idea of equality.

From 1901 onwards, cooperative associations have been securing the availability, quality, and reasonable pricing of food products.  

The role of the co-op shop has not been just to be one shop among others. The task of the co-op shops was to increase the knowledge of their owners, to support the management of finances, and overall to improve the owners’ quality of life and standard of living. 

The development of agriculture was funded by founding cooperative banks from 1903 onwards. Since then, cooperative banks have grown into some of Europe’s most stable banks that are still owned by their members. 

Due to the efforts of the cooperative folk, the Hankkija and Valio co-ops were founded in 1905 to support the main industry, agriculture. In addition to its service role, Valio also took on the role of a pioneer. 

The first reward for this role was the Nobel prize for chemistry that was awarded to Artturi Ilmari Virtanen in 1945. The pioneering tradition has continued as today Valio’s product development department produces in proportion to its size more patents than any other company operating in the same field of business. 

Metsäliitto, which has grown into one of the largest cooperatives in Europe, was founded in 1934 to care for the Finnish forest owners’ reserve of the “green gold”. 

All the large and well-known cooperatives that even today are important for your economy and our welfare were founded to serve the needs of our nation from the very start. We should also remember that these cooperatives were operating during the war years, catering for evacuees, surviving urbanization and other changes in the world. The story of each cooperative is an integral part of the history of the Finnish economy and people.

Cooperatives have offered Finland and Finns practically applicable solutions to correct both economic and social wrongs by working together. The history of Finland’s cooperative movement clearly shows that cooperatives are not only a matter of making money. In fact, by their origins, cooperatives can be considered social, economic, and cultural projects. Their aim is to ensure healthy and competitive business operations but also to achieve wider social change.

GH: Many nations, including those mainly in Europe, use public ownership to manage much of the critical infrastructure. This includes delivering energy, water, sewage, roads, mail, and transport, like railroads. Are there parts of a nation’s economy that are best served by public ownership?

AP: The answer to this question is in principle political or ideological, so there is no clear point of view or correct answer to it. 

The relationship between the public and the private is always political, to which each nation will provide its own answer. As I understand it, there are all kinds of research data available and the fact is that there is no ownership or organizational model in itself which guarantees that any activities or end results are good or bad. The question is how things are managed and how sustainable the ideology is from the aspect of social responsibility.

Sometimes public ownership has been applied to the above-mentioned areas of economy and activity. Cooperative ownership has also been used. In the language of economy, we can talk about natural monopolies. For example, it is not reasonable to build overlapping competing service networks, rail networks, or water networks side by side. The other aspect is that it would be hard to imagine markets or market prices for some infrastructure services (such as street lights, public broadcast systems, or national defense).

The critical point is that the social services mentioned in the question should be under democratic control which can be made possible with many organizational models. 

This guarantees that private owners, from a superior position of negotiation, cannot set unreasonable prices for users and at worst cripple, the whole service system in the name of short-term profits and then vanish with the money when all the benefits have been squeezed out with ruins left behind. 

Even Adam Smith stated that some activities, such as railroads, are not suitable to be coordinated by market forces. Even so, there is no simple answer to the question “Does public ownership best serve economic areas such as critical infrastructure”.

GH: Food security is increasingly an issue in many parts of the world. An emerging technology that could be deployed worldwide is referred to as urban vertical farming. It’s a hi-tech, highly efficient way of producing fresh vegetables and some fruits. It uses 90% less water, no pesticides, and green OLED lighting systems that optimize photosynthesis. Is urban hi-tech farming suitable for cooperative or public ownership?

AP: In addition to self-sufficiency, food security and the security of distribution are important topics of conversation. 

I am not familiar with this technology, but my answer to this, too, has been made clear from my previous ones: one structure in itself is no guarantee of success or lack of success. 

Generally, one might think that these types of innovations which, on the whole, can be used to do good, should be harnessed also to promote the common good. This often requires a broad-based ownership structure so that neither private nor single interest is raised above the public and common benefits. The cooperative model is excellent for this purpose, too. When owned, made, and financed together, decisions are also made together and these are to be made in a spirit of goodwill.

GH: Is doing good for the planet, and doing business cooperatively a threat to privately-owned, shareholder business models?

Our goal is to pursue a humane planet of humanity. 

There is room for everyone if greed is not allowed to run rampant, and we can build social structures that do not encourage people to do the wrong thing. 

All businesses, regardless of their corporate form, that don’t act socially responsibly in the future are going to be in trouble and will vanish from the economical map. Or an explanation is expected from them. At least this can be hoped for. 

Like other businesses, co-ops will have to consider whether their business responsibility is up to date ecologically, socially, economically, and ethically. The value basis of cooperatives provides a good starting point but it is a question of whether cooperatives follow those values. Everyone has room for improvement. 

All businesses will have to take future demands into account. Conscious young people vote with their feet and by their actions force businesses to take note of sustainable development. If others cannot do this, co-ops will take on an even bigger share of the market. People increasingly want to engage in socially responsible business practices that put humanity and sustainability at the heart of operations.

GH: What can the individual citizen do to encourage a friendly business atmosphere for cooperatives?

People must be awake. We need information about different forms of business and, above all, about their differences. Not everything should be taken at face value. Businesses are very skillful at marketing. But as people, we should adopt a critical attitude and look behind the marketing speeches and evaluate if the walk matches the talk.

Information is also required because many of the most glaring failures in the market, which in the past gave a push to the cooperative model, could have been avoided by legislative developments, for example. 

Businesses have become more alike and for the individual, it may be difficult to spot any differences. 

However, there is a big difference in whether a company is privately or publicly owned. It is also advisable to get acquainted with an organizations’ missions. For cooperatives, mission, and (at least in Finland) the legally defined presumption for action starts from the fact that the business action model has other goals in addition to financial ones. In the case of investor-owned companies, the situation is different.

Besides ownership, what makes cooperatives so unique and distinguishable from other business forms is their dual nature. Let me elaborate: A cooperative is a business enterprise and a social group of members and as such has both business and member community roles. It combines two distinct but not conflicting dimensions: the economic dimension of an enterprise that operates within the market and accepts its logic, and the social dimension of an institution that pursues meta-economic aims and produces positive externalities for other agents and for the entire community. 

In plain English, they are people-centered enterprises run by and for their members. They try to achieve economic, but also social, and cultural goals that benefit those members who are just regular people like you and me.

Despite the impressiveness and global importance of cooperatives, studies show that knowledge of them is at a fairly low level. 

For example, in Finland, there is very little talk about cooperatives at any level of education. Even though they represent a so-called low level of entrepreneurship because people know so little about them, cooperatives are not even included in a list of possibilities when someone plans on starting a new business. 

Studies also show that membership in cooperatives does not always become meaningful. People do not feel they are owners, they do not engage in basic ownership or use their chance to run for the cooperatives’ governing bodies to make decisions on what the business activities are and where they are headed in the future.

We can each make a difference in all of these things. It should also be remembered that, as stated earlier, the activity of cooperatives is not capital- but human-centric. This means member contributions are not based on capital investments but on the use of services. 

So each of us makes daily choices. Businesses, cooperatives included, make a difference in our daily lives, whether as babies or pensioners. We have the opportunity to choose who we want to work with and deepen that relationship.