The Italian region where co-ops produce a third of its GDP

Emilia-Romagna, the region of northern Italy around Bologna with nearly 4.5 million people, is where co-operators elsewhere look when they want proof that co-operatives can be more than a niche. An article by John Duda in the American magazine YES!, published this month and widely shared since, makes the case at its strongest: about two in three inhabitants belong to a co-op, and co-operatives produce around 30 per cent of the region’s GDP.

The membership figure is plausible, given how large the consumer co-operatives are. The output figure needs more care.

Where the “third of GDP” comes from

The 30 per cent figure has circulated for years in English-language writing about the region, usually without a source that can be checked. Published estimates range from single figures to more than 40 per cent, depending on whether they count value added or turnover, whether they include companies owned by co-operatives, and whether they add knock-on spending by suppliers. Turnover flatters the result most, because big consumer and agricultural co-ops move a great deal of goods and add comparatively little value to each sale. The number is best read as a claim made by advocates, not an official statistic.

Firmer numbers exist for Italy as a whole. The second report on Italian co-operation by Euricse, the research institute in Trento, published in 2013, drew on the 2011 industry census and counted about 1.2 million people working in co-operatives at the end of 2011, 7.1 per cent of those employed in the businesses the census covered. Emilia-Romagna stands out within that total: consortia based in the region produced 53 per cent of the output of all Italian co-operative consortia in 2011. The census does not report co-operatives’ share of regional GDP, which helps explain why a round number has filled the gap.

How the sector grew

The movement is old. Co-operatives were forming across the region in the second half of the nineteenth century, among farm labourers, builders and shoppers, and they were broken up or taken over under Fascism. After the war the Republic’s 1948 constitution, in its Article 45, recognised the social function of co-operation based on mutual benefit and without private speculation, and the law followed.

Duda’s account draws on the economic historian Vera Zamagni of the University of Bologna, and it puts the rules on capital at the centre. Italian co-ops place much of their surplus in reserves that can never be shared out among members, and since a 1977 law those reserves have been largely exempt from corporate tax. Since 1992 every co-operative has had to pay 3 per cent of its annual profit into a fund for developing new co-operatives, run by its federation or, for co-ops outside the federations, by the state. Over decades that builds a stock of capital owned by the movement rather than by any one generation of members.

Two further laws widened what co-ops could do. The Marcora law of 1985 lets workers facing redundancy take their unemployment benefit as a lump sum and put it towards buying their employer as a co-operative, with backing from a dedicated fund. A 2015 study by Marcelo Vieta for Euricse counted 257 firms converted in this way. The social co-operative law of 1991 created two kinds of social co-op: those providing health, education and care services, and those set up to employ disadvantaged people, who must make up at least 30 per cent of the workforce.

Networks rather than one giant

Zamagni’s most useful point, as Duda reports it, concerns structure. English-speaking co-operators tend to hold up Mondragon in the Basque Country, a single large group. Emilia-Romagna works differently. Many medium-sized co-ops are tied together through federations, consortia and shared finance, which gives them some of the benefits of scale without a single head office. The two largest federations, Legacoop and Confcooperative, grew from the left-wing and Catholic traditions respectively, and since 2011 they have worked together, with the smaller AGCI, in the Alliance of Italian Co-operatives.

Consumer co-operation shows how members can supply capital as well as custom. Coop, Italy’s biggest supermarket group, has long borrowed from its own members through member loan schemes, and Zamagni credits that borrowing with paying for much of its expansion in the 1980s and 1990s.

The crisis test

The strongest recent evidence in the co-operatives’ favour is how they behaved after 2008. The same Euricse report cites Censis figures showing co-operative employment 8 per cent higher in 2011 than in 2007, while employment in the economy as a whole fell. Co-operatives’ output and investment were also higher in 2011 than in 2008. Most of the job growth came from newly formed co-operatives rather than older ones. That cuts both ways: it shows people turning to the form in hard times, and it raises the question of how many of the new ones were co-operatives in more than name.

The question is a real one. Italy has a long-running problem with sham co-operatives set up mainly to cut labour costs in sectors such as logistics and cleaning, and in December 2014 a Rome investigation into corruption in public contracts reached a social co-operative that had won city work. Size and political connections bring co-operatives the same temptations they bring any other business.

What travels

Scotland’s co-operative sector is small by comparison, and Italy’s framework cannot be copied wholesale. Two ideas travel more easily than the rest. One is capital locked into reserves that no member can take out, so that each generation inherits more than it started with; the asset lock in community benefit societies and community interest companies already does part of this. The other is a development fund paid for by co-operatives themselves, rather than by grant schemes that change every few years. Neither depends on reaching Emilia-Romagna’s density of membership. Both depend on patience measured in decades.