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by Bob Williams
Having played a role in the evolution of Western Canada’s largest
financial services cooperative, Vancouver City Savings Credit Union,
over the past twenty years, I have long been intrigued by the impact
that democratically based economic institutions can have on community.
In our continuing quest at VanCity to expand our role in improving
community for our 300,000 members and the people of our region, we
had determined we should play a greater role in generating employment.
I was entrusted to Chair a small task force and business planning
team to determine the best approach.
Our mentors in this work were the Shorebank Group from Chicago’s
South Side, highly regarded development bankers. The Chicagoans and
others advised us that if we wanted to find a region that had advanced
its economic base and might well be the great economic democracy in
the West, we would find it in Emilia Romagna, Italy.
We kept all this in mind, while completing our plans for what ended
up as the VanCity Capital Corporation, a subsidiary of the Credit
Union. Our new company is a business lender in the new economy that
lends against cash flow on a subordinated debt basis. We also decided
as part of our business plan we should lend in the social and cooperative
sector on the same basis. Once we hired our new Chief Executive Officer
for the company, Dave Mowat, a former Vice President with the Business
Development Bank of Canada, I recalled the earlier advice from Chicago.
I travelled to Emilia Romagna and its capital City of Bologna.
What I found in this Po Valley region of Northern Italy was so impressive
that I have returned every year.
This magnificent region centered on the Po River Valley is one of
20 administration regions in the Republic of Italy. Its name comes
from the ancient Roman road that marks the line between the northern
plain and the mountains to the South. The population of this region
nears four million people, while the most populous city is Bologna,
which houses the oldest university in Europe.
The region is a region of small firms; "artigianati" or
self-employed artisans account for over 40% of the companies in the
region, and over 90% of these enterprises employ fewer than 50 people.
There are 90,000 manufacturing enterprises in the region, surely one
of the highest densities per capita in the world! Small, medium, enterprises
(SME’s) predominate. One person in twelve is self-employed or
owns a small business. In recent years the region has produced the
highest GDP per capita in the country, and it now ranks with the ten
best in Europe.
The main feature of the region is its diverse entrepreneurial structure
and its system for supporting cooperative relations among its small
firms in order to create value-added products, linking many producers,
creating local production systems, that secure global markets. More
frequently than not, this involves linking many quality producers
together. The beauty of all this is that the history of artisanship
and quality is maintained, as is the pluralistic ownership. Cooperative
and other links allow for a more complex value-added product in the
end. As a result everyone wins, and the results are achieved without
creating a single enormous corporation; pluralism is maintained, as
is diverse ownership.
What they have created in Emilia Romagna is a diversified "cluster"
model unlike the Spanish Mondragon model, which is highly centralized.
Small firms operating in cooperative networks are the key to the Emilian
commercial economy.
In a short paper entitled "Cooperation in the New Economy, A
Civil Economy Perspective", Professor Zamagni of the University
of Bologna outlined his views on the limitations of seeing the worlds’
various activities in a narrow market perspective, asserting the importance
of reciprocity as a principle and the value of cooperatives which
quite naturally adhere to a longer term reciprocal view.
Zamagni argues we must create a new consensus and that "the new
challenges cannot be met without a robust and viable cooperative sector
leading the civil economy".
This means to him that the principles of reciprocity must be applied,
which means not only as a medium of mutual self-interest, but with
"gratitude, consideration, empathy, liking, fairness and a sense
of community, which are intrinsically valuable and valued by all."
For, as Zamagni says, "the good society is made of good acts".
Don’t we all inherently know this from our own experience?
The co-op, Zamagni would argue, is the natural institutional vehicle
to practice reciprocal arrangements. Because of the high level of
trust that exists within co-ops, Professor Zamagni would argue that
transaction costs (lawyers, contracts, and the like) are insignificant,
unlike the case with the North American Corporation where they are
a large part of the cost of doing business. More than that Zamagni
sees the co-op as the natural vehicle for delivering "relational
goods, those goods such as care-giving that are services to persons
and that are characterized by the exchange of human relations. (In
relational goods, the quality, of the personal interaction lies at
the core of what is exchanged between the provider and the recipient
and can be optimally produced only by the provider and the recipient
together)."
In areas where economics of scale and technological progress requiring
large amounts of capital are necessary then Zamagni would argue that
profit maximizing firms would hold a comparative advantage. But Zamagni
argues that the opposite is true in areas where personal relations
are critical, and says that "research shows that cooperative
firms hold a comparative advantage because capital is generic and
labour is asset specific. The cooperative structure that employs the
reciprocity principle in carrying out its functions will always perform
better than a capitalist firm. Indeed, the history of cooperative
firms offers an empirical confirmation of this principle."
"Cooperatives provide just what post-industrial societies need:
the ability to operate in the market at high levels of efficiency
without destroying - and in fact regenerating - ethical values, without
which the market economy cannot exist."
Furthermore Zamagni claims:
"Due to their organizational peculiarities, co-ops are a suitable
solution to the crisis in social security systems, a crisis due in
large part to the inability of the public sector to respond to changing
needs. Without the bureaucratic rigidity of the public sector, co-ops
are flexible enough to meet those needs, thanks in part to their ability
to manage the values of the market with the values of solidarity."
This is an intriguing argument, one that most Italians agree with.
It should be noted that Zamagni’s work in the civil sector follows
a long grand tradition in the country. As Zamagni himself notes, the
term "civil economy" was coined by one of Italy’s
first great economists, Antonio Genovesi in 1753.
The Po River Valley with its rich agricultural lands was amongst the
first in Europe to escape from serfdom and feudal times. The river
itself, which often flooded, required cooperative work to control
its banks, and the delta areas required dyking on a joint basis as
well. At a later stage there had to be cooperative sharing of the
water resource by the many mills that were river-based. Emilia Romagna
has been blessed with good regional government with a long history
of productive capacity, able to facilitate linkages between individuals
and small corporations and provide both business and physical infrastructure
in an atmosphere of trust and respect.
What comes through clearly is that this region with its lengthy rich
cultural background is a marvelous mix of both competition and cooperation.
The civil economy and cooperative sector is as vibrant as anywhere
in the world, while the private entrepreneurial sector is active,
pluralistic and highly productive. It is so because it is not fragmented
and works closely with many other entrepreneurs to create greater
value using cooperative structures to enhance their productivity.
Furthermore, the role of the state in the region is more that of a
facilitator, creating conditions for the civil and private sectors
to play a more complex role in a highly networked cooperative milieu.
Think of it.
A region of four million people with 90,000 manufacturing enterprises
(compare that with New York with only 26,000 manufacturers). A region
of four million people and some 325,000 enterprises one business for
every twelve citizens!
A region that is so highly entrepreneurial and yet is also referred
to as Italy’s "Red Belt" because it has voted for
the left consistently for over fifty years.
A region that has an alphabet soup of entities that are state, and
private, or cooperative or joint, which help guide the many pluralistic
individual entrepreneurs in business.
A region that houses the oldest university in Europe, the University
of Bologna, teaching some 80,000 students a year. A university that
now has the country’s first postgraduate program on the civil
economy and cooperatives.
A region with a center of government that has three towers in its
complex, one for the regional government, one for the Lega or cooperatives,
and one for small business.
A region that has created more cooperatives than any other region
in the country.
A region where local cooperatives predominate in the delivery of social
services, where two thirds of the citizens in Bologna belong to co-ops.
A region where 85% of the social services in their major city are
delivered by coops.
A region where only a few firms have over 500 employees.
A region where 45% of the GDP is produced by coops.
A region where all credit decisions are made within the region.
A region that has now reached the top of Italy’s economic ladder,
and produces the highest GDP per capita in all of Italy.
This region is the Bologna-centered region of Emilia Romagna.
If we are seeking a model of economic democracy there can be little
question that one of the great models for the world is this magnificent
valley that stretches from Tuscany to the Adriatic and from the foothills
of the Alps to the hill towns of Umbria. Bob Williams is chair
of VanCity Capital Corporation, a subsidiary of Vancouver City Savings
Credit Union, former chair of the Insurance Corporation of British
Columbia, former Deputy Minister, Crown Corporations in BC.
Professor Stefano Zamagni of the University of Bologna, Italy, and
Professor John McKnight, of Northwestern University, Chicago, will
be sharing more insights into cooperatives at "Mobilizing the
Hidden Assets of Our Communities" at the Morris Wosk Centre
for Dialogue on Tuesday, June 24, 7.30pm. Admission is free.
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