Digital Co-Ops and the Democratic Economy
Digital Co-Ops and the Democratic Economy
Executive Summary
With thanks to Kayleigh Walsh (Outlandish), Ludovica Rogers (Co-operatives UK), John Evans (CoTech), Mansib Rahman (Radish), Trebor Scholz (The New School), and Leo Sammallahti (Coop Exchange) for their insights and contributions to this research.
During the past year, we have seen the rise of platform tech giants throughout the global pandemic, as well as a major effort by the UK Parliament, US Congress, and the European Union to regulate those platforms. Yet far from just a dramatic confrontation between Big Tech and its opponents, any substantial transformation of the tech industry must also involve the fostering of alternatives in the face of economic concentration and deeply undemocratic platform giants. These alternatives can act as long-lasting drivers of change, inscribing new values into the tech industry alongside regulation.
The pandemic has been a time of extraordinary social innovation, solidarity, and experimentation in the digital and platform cooperative sector. Diverse models of ownership like cooperatives and worker-owned platforms can offer a foil to the intense concentration of wealth and power that is embedded in the dominant ownership model in tech, with the potential to put pressure on companies with unfair work practices, presenting ethical alternatives, and reformulating the economic makeup of the sector.
However, it remains unclear at present how digital cooperatives might be able to live up to that potential. Scaling up these relatively small efforts in order to actively compete with the platform giants is not an easy task – indeed, it is one that we at Common Wealth believe will necessitate policy intervention on multiple levels. While lawmakers at the national and international level have increasingly turned to the regulation of Big Tech in the hopes of more competitiveness, it is essential that we begin a public conversation on how regulatory mechanisms can be matched by incentives and investment for the digital cooperative sector as an alternative to the platform giants.
To become the agents of system change, we need to ask crucial questions about the digital cooperative sector. How can we better incubate and scale these democratic alternatives – institutions which serve social and environmental needs, and are governed by their members? How can we foster experimentation in economic forms? What are the barriers and obstacles facing digital co-operatives – and the wider co-op movement – and how can public policy, from local government, devolved administrations, and Westminster, address them? What are the mechanisms and institutions that policymakers have at their disposal to reach these goals?
Digital cooperatives have the capacity to bring about a more democratic economy for us all, transforming the technologies that we use on a day-to-day basis. The value of coops come from their ability to share wealth built in common, rather than extracting it and drawing it away from those who generated that wealth. As both democratic and redistributive institutions, cooperatives can help contribute to Community Wealth Building and other forms of sustainable economic growth. That makes them of vital importance for policymakers as the UK seeks to rebuild from the pandemic.
Following a series of interviews and a public-facing panel event held in late February, “The Future of Digital Co-ops: How policy can help scale the sector”, Common Wealth has been exploring these questions. The following briefing note pulls from those conversations to offer a list of demands that speak to co-operatives, their advocates, the Community Wealth Building movement, local government, and beyond.
Four Policy Priority Areas for Digital Co-Operatives
[.num-list][.num-list-num]1[.num-list-num][.num-list-text]Increase funding and investment opportunities[.num-list-text][.num-list]
Silicon Valley has been propelled by the availability of venture capital (VC) funding. Tech start-ups – both those that are innovative and those that are less innovative – have been able to scale quickly thanks to early seed investment that offers venture portfolios an opportunity to take risks on many companies in the hopes of oversized rewards from just a few. Due to restrictions around equity pay-outs, and the expectations of slower revenue generation, digital co-ops are often not seen as an attractive venue for investors.
The Westminster government has made serious attempt to draw VC capital to its tech sector – it should direct these efforts so that they support the investment in the digital co-op sector. Digital co-ops can help conserve investment in communities by giving back to the members who live in those communities. The sector has a potential to play a role in the government’s ‘levelling up’ agenda, bringing the benefits of a strong tech industry to communities outside of the capital, rebalancing investment to nations and regions. Separating co-op governance rights from share issuance is one way to deal with that gap in venture capital investment – preserving the decision-making rights of a co-op so that they remain vested with the members, while also allowing venture capital to come into the business.
But not all digital cooperatives choose to focus on high-growth, venture-led revenue models. Policymakers should work to establish a public venture capital fund that can support long-term growth in the sector through ‘patient capital’ with a less aggressive rate of return; this could be at a UK level, devolved administrations, or through the office of directly elected Mayors. Public pension funds could also be activated to invest in digital co-ops.
Local authorities have a part to play as well. Councils and devolved nations can help support digital co-ops through match funding, community share raising and business grants. In the face of Big Tech dominance, local governments have a role to play in developing a tech sector that can respond to local problems and local needs.
[.num-list][.num-list-num]2[.num-list-num][.num-list-text]Support local co-operative business development[.num-list-text][.num-list]
There are two urgent policy actions local authorities can take to help support digital co-ops. Firstly, there is a need for local government schemes to reduce rents and overhead costs, part of which can be accomplished by letting out publicly owned space to digital co-ops at a subsidised rate. As in the case of Space4 in Islington, partnerships between local authorities and digital co-ops can help foster entrepreneurship and bolster local tech sectors, while keeping knowledge, expertise, assets and wealth in the community. With High Streets struggling, one route to revive them would be through nesting thriving digital co-ops and other forms of social enterprise at the heart of communities, in social rent-based arrangements in local authority property. With a surplus of office space available post-pandemic, there is the potential to imagine new possibilities for co-operative working spaces harnessed for social good.
Secondly, new local procurement policies aimed at supporting digital co-ops can help be part of broader Community Wealth Building strategies. As the operation of local government was increasingly brought online during the course of the pandemic, now is a crucial time to ensure that co-ops are considered as part of the development of public digital infrastructure. Incentive schemes and progressive procurement policies can be part of place-based industrial strategies to support thriving, local, 21st century digital economies. Common Wealth has made a number of proposals, including the rollout of Co-operative Development Agencies and a Capital Development Fund, to achieve those goals.
While education and accessible guidance for those looking to start co-operatives has long been a priority for the co-operative movement, from registering as a co-op business to questions of how to run regular meetings as a co-op, local authorities should do more to offer resources and guidance for co-op businesses in the tech sector as part of Community Wealth Building schemes. Support for co-operatives should match business support that is offered for limited companies. There remains a major knowledge gap for individuals and groups looking to start co-operative businesses.
Both the co-operative movement and local authorities should do more to support pathways for tech companies that were not established as a co-op but seek to transition to a co-op model. In particular, there is still a strong need for a ‘right to own’ that can support worker buyouts and the co-operatisation of existing tech companies, as was proposed in the New Economy Foundation’s landmark “Co-Ops Unleashed” report.
Finally, there must be a renewed emphasis on co-op federations to allow co-op to compete with Big Tech. Indeed, making the case for co-operative ownership to companies working across software development, design, e-commerce, IT, and platform delivery services should be a priority for the international co-op movement. Sharing resources among co-operatives from different tech industries can help make the value proposition for co-ops, rather than just making the case based on political commitments. Federations like CoTech offer a chance for co-ops to pool resources and expertise and to scale up. Governments across the UK should foster and support these initiatives as a way to grow thriving local tech sectors.
[.num-list][.num-list-num]3[.num-list-num][.num-list-text]Worker power and the tech labour market[.num-list-text][.num-list]
The availability of venture capital and the reliance of fast growth has contributed to a labour market that offers high salaries and equity shares for tech workers. Often, these salaries are made possible through exploitative conditions for precarious workers such as delivery drivers, call centre staff, or workers tasked with digitising files by hand. For those working in well-paid start-up roles, joining a digital co-op means a potential pay cut, as well as a forfeiture of potential stock pay-outs. Likewise, digital co-ops face retention issues because of higher paid positions in private start-ups. While a steady decrease in salaries and stock pay-outs for private tech companies may change these realities in the coming years, more needs to be done to attract and retain staff at digital co-ops. That might include, for example, action to provide tax breaks for those working in co-ops. Additionally, a levelling of the playing field is needed, particularly through stronger worker rights and a move to classify platform workers as employees, as per the UK’s Supreme Court decision on Uber drivers taken earlier this year, to address the creative interpretation of labour laws that has benefited large tech firms.
Local co-op technologists hubs, as well as co-op run training programmes, offer a way to change the structure of the tech labour market. The co-op movement also needs to do more to reach out to graduates and young IT professionals who can join up with co-ops, while local authorities have a crucial opportunity to support the training of tech workers.
Additionally, unions and co-ops both have a role to play in re-establishing a role between organised labour and the co-op movement, a historic allyship based on common goals to support employment rights, worker power, and a more democratic economy. As efforts such as the United Tech & Allied Workers (Communications Workers Union) and Game Workers Unite UK (Independent Workers of Great Britain) ramp up, both co-ops and unions have a clear stake in building a better tech industry.
[.num-list][.num-list-num]4[.num-list-num][.num-list-text]Data and the regulation of Big Tech[.num-list-text][.num-list]
The ownership and control of user data has emerged as a crucial issue in the regulation of the tech industry in recent years. It is a useful starting point for discussions of digital co-ops, as there are already solid efforts underway to explore collective ownership of user data. Co-operative initiatives such as Eva Co-op in Montreal, Salus Coop in Barcelona, and Polypoly in Berlin offer workable models for how data (such as medical files, browsing habits, and transport data) can be controlled more democratically in the face of Big Tech’s extractive data practices. Westminster and local authorities should investigate ways to develop data co-ops or data trusts as part of its efforts to regulate data practices and privacy. The Open Data Institute has, for example, recently put forward a data trust pilot programme for the Greater London Authority and the Royal Borough of Greenwich.
When it comes to competition law, the UK’s Digital Markets Unit must ensure that digital co-ops have a seat at the table when making decisions about the future of the UK tech industry. Efforts to curb unfair monopoly practices can easily have the adverse effect of restricting digital co-ops. It is vital that digital co-ops and other alternative forms of ownership.
Finally, it is critical that the UK ensures that digital infrastructure – broadband connectivity, cloud storage, web platforms and the like – are democratically owned and operated. Digital co-operatives have a role to play in running and maintain long-term digital infrastructure.
The Future of Digital Co-ops: How policy can help scale the sector
Conclusion
While there are barriers to scaling up digital co-ops, alternative forms of ownership provide the best way that socialist institutions can challenge an extractive and undemocratic tech economy. There is strength in collaboration and partnership as a way of reimagining a different tech future: platform taxi co-ops can work alongside co-operatively owned app development companies and data-co-ops; web design co-ops can work in collaboration with co-operatives providing video services.
As activist-scholar Trebor Scholz has noted, the largest co-operative sector in the United States were established through the regulation of private monopolies in the early 20th century. With the regulation of Big Tech in the US, the UK, and the European Union, there is a new opening for digital co-ops. As the UK embarks on a mission to ‘level up’ and support local economies outside of London, digital co-ops can be part of Community Wealth Building strategies to help lead an economic recovery after the pandemic. Digital co-ops should also be front and centre as part of tech workers action to challenge exploitative working practices for platform workers as well as the concentration of power and wealth in tech more broadly. Digital co-ops offer an opportunity to democratise the tech industry, creating a fairer and more sustainable economy.
