Wasting Time At Government’s Take-Out Window

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The question posed in the previous post (Co-op Apex Tries Second Hail Mary Pass) was how Co-operatives and Mutuals Canada (CMC) has come to believe that Ottawa would or should provide $50 million, or any millions, to help build co-op businesses? At the most charitable, it’s a simple and direct request, but some would say unsophisticated. Naïve. Could this be because CMC put its in-house lobbyist out to contract in early 2014 and didn’t bring a new one on board until this month (February 2016)? Not really. That’s more a symptom than a cause.
The benefits co-ops will provide for such munificence are not self-evident and the public, including its government, is largely unaware of what they might be. Some would say, I would for instance, that this is a high hurdle to surmount. Surely awareness has to precede assistance. The Hon. Mauril Bélanger, who has been a champion for co-ops on Parliament Hill and was founder of the Parliamentary co-op caucus, has said more than once, “They would do well to market themselves better and develop more effective messaging,” MPs at one caucus meeting told co-ops to be conscious of the fact that they are just one sector of many approaching government for financial assistance.
There are 9,000 co-operative enterprises in Canada. Co-operatives provide nearly 900,000 full-time equivalent and spinoff jobs. Their operations contribute more than $22 billion directly to Canada’s GNP. Through spinoffs the overall impact is more than doubled to $55 billion. The numbers are from 2010, the latest available.
Most co-op enterprises are small and medium sized (SMEs) just like other corporations. In Ottawa, where I am, I know of a chocolate maker, specializing in fair trade cocoa and sugar, an engineering consultancy building apps for mobile devices and an alternative energy company that has raised $5 million from members to install solar panels on school and housing rooftops. But some grow to substantial size. In the province of Quebec, there are just three mega financial institutions that underpin and overarch the entire provincial economy. One of the three is a co-operative, which is also ranked by Bloomberg as the strongest bank in the west but that’s another story. The biggest business in Saskatchewan is not potash. It’s an agricultural and energy co-operative.
?????The largest sporting goods retailer in Canada is a co-operative. More than a quarter million Canadians live in housing co-ops in every province and territory. In Manitoba, co-ops are of such moment that the provincial government got involved in the battle of the hyphen that rages between the U.S. and Britain (cooperative vs co-operative) and opted to go hyphenless in defiance of the national adoption of Britain’s co-op dash. A third of Canadians belong to at least one credit union, a co-op by another name. More than half of all Calgarians carry a Calgary Co-op card for groceries and fuel supplies.
How is it that so little of this, if any of it, has seeped into public consciousness? Co-op is a word often enough heard but devoid of any meaning or significance in public discourse about how things should be done. Co-ops are seldom if ever on the agenda when the powers-that-be convene to decide. Why is it that a form of enterprise that throws up provincial champions and commercial heavyweights doesn’t get a seat at the table?
The blame has to lie squarely at CMC’s door. Eschewing the more familiar ‘association’ label, CMC is styled the ‘apex’ of the co-op sector, with a mandate to promote the sector and lobby government on its behalf, among a host of other services it must provide for its members. Like any conventional association, it is dependent on member dues for its operations. And while it claims to represent 9,000 enterprises (with 18 million members, a ludicrous estimate based on much double counting, more likely fewer than six million individual members), in fact there are only about half a hundred members of CMC. (The 9,000 are rolled up into regional and sectoral groupings that are then allowed into CMC — hundreds of credit unions are represented by a credit union association; a quarter million residents of housing co-ops speak at CMC through the Co-operative Housing Federation of Canada.) Among CMC members, only a couple of handfuls actually count. If the 1% is a bugaboo for the population as a whole, the co-op sector takes it down an order of magnitude. About 0.1% of co-op enterprises in Canada, a few from agriculture, a few from retailing, a few from financial services, pay most of the freight and call most of the shots at CMC.
And this directorate keeps a very tight rein. For the past dozen years the budget of CMC has scarcely moved from $2 million annually. There was a slight uptick this year but it’s uncertain that it will stick, since one of the biggest players and payers has taken umbrage at its upwardly revised fee. Basically, once the relentless impact of inflation is calculated, CMC has been able to do less and less every year with the budget allowed.
A tightwad approach is pretty well intrinsic to the co-op world. Their focus is almost entirely inward. In some ways, despite their success, they are more like self-help groups than businesses. This is partly a matter of history and tradition. The origin of co-ops in England in the mid-19th century and in Canada not long after, was among people whose interests were not being served by capitalists or protected by governments. So they banded together to help one another, volunteering their time, talents and sweat in place of capital. And where it was tried, it often worked. Not always. But then there isn’t anything that always works. By one measure, co-ops work better than the rest. That measure is longevity. Ten years after startup, only two of ten conventional corporations are survivors. More than twice as many co-ops survive that long. How is it that nobody knows this? Because CMC has no resources to get the word out and nobody else in the sector has the platform.
There was much applause back in 2012, which not entirely coincidentally was the U.N.-declared Year of Cooperatives worldwide, when CMC announced the $20 million Canadian Co-operative Investment Fund (CCIF). Three co-ops leapt aboard as founders, pledging a total of just over $10 million. And then . . . then . . . then not much. Seldom was heard an encouraging word. By 2013, when the fund was supposed to be operating, three more co-ops were in and pledges had crept up to almost $14 million. By the end of 2014 the total in the fund was still shy by a whisker of the original goal, at $19.35 million. This was still the total in the business case published in April 2015, which reported that the number of founding partners then stood at eight. One of these, The Co-operators insurance company, has since doubled its commitment to $10 million, bringing the total to just shy of $25 million, of which The Co-operators has pledged more than 40%.
CCIF still has not put out Investment #1 and, as the previous post notes, some potential supporters are still waiting to see what the government does. And of course there is many a slip between a sponsor’s pledge and a sponsor’s cheque. After four years it’s still a wait and see proposition.
Canada’s own Ian MacPherson, solon of the sector for many years and responsible for the 1995 update of co-op principles, wrote that “outsiders will not readily learn about a movement that does not broadly project into the public square what it is and why it is important.” Until CMC marshalls resources enough to do this projecting and get its investment program running, it’s just wasting time hanging around the government’s take-out window.