By Michael Axe
The shared economy is becoming an increasingly popular concept. Companies that offer ride sharing and home vacation rentals have made shared economy services mainstream. While the term “shared economy” may be new, the concept of sharing personal resources has been around for more than 200 years. Before there was the shared economy, there were (and still are) cooperatives. In fact, you could even say cooperatives were the original shared economy.
So, what exactly is a cooperative? Cooperatives are organizations that have two key defining characteristics:
- Multiple individuals working together toward a common goal
- Owned and run by its members, who share the profits or benefits.
Let’s explore these a bit more.
Working toward a common goal
Cooperatives are formed by likeminded people who wish to help themselves and others succeed. They create products and services to help members of the co-op reach their goals.
The Associated Press, for example, was founded in 1846 as a cooperative with the purpose of ensuring news was accessible to everyone. They created a service where news stories could be shared between multiple news outlets across the country, which pushed the latest headlines out to the public much faster. This is why you may see the same story being run on competing news outlets.
Run jointly by members
To ensure that the co-op is successful, the organization is administered by their members. This enables the members to oversee day-to-day transactions, making sure that the cooperative is adhering to the organization’s mission and values, as well as success.
One of the oldest cooperatives is the Rochdale Equitable Pioneers Society, founded in 1844. The members of this organization opened a store that sold food and clothing at reasonable prices. Members of the co-op not only worked in the store, they also provided the food and clothing that was sold there.
Share the profits or benefits
When a cooperative does well, the members of that co-op reap the benefits. Unlike corporations where any profits earned are given to shareholders, cooperatives usually give the profits back to their members in the form of share dividends (i.e., money) or new products and services.
One type of cooperative that reinvests in its members on a regular basis is a financial service cooperative, also known as a credit union. Since 1852, when the first credit union was established, credit unions have been helping to fulfill their members’ financial needs. At the end of the year, if a credit union performs well and there is excess capital, the credit union’s Board of Directors, who are also members, decide how these earnings will be distributed. They can do this by expanding services, adjusting interest rates or even depositing a share into members’ accounts. (Think PLUs!)
While the current options available through the shared economy have many benefits, nothing beats the original options for investing locally. There are many cooperatives to choose from, including farms or farmers markets, community gardens, electric or water supplies, even housing! Check your local community to see what cooperatives are available to join; there might be one perfect for you.