(Photo by iStock/Eoneren)
You can feel it when you walk into a mutualist space for the first time—whether it’s a worker cooperative in North Carolina, a community garden, a labor-housing cooperative, a cohousing group in New York City, a nonprofit building in Portland, Oregon, or a social cooperative in the Italian Alps.
In these places, you just feel human in a way that you don’t when you’re one-click ordering on Amazon or strolling through Target.
One trait common to all these mutualist cities, spaces, regions, and projects is that people got started and built locally from the ground up. They formed social movements, worked together to solve shared problems, created economically sustainable organizations, and planned for the long term. They connected into networks with leadership that can organize multiple groups around common purposes, such as local economic development. When enough mutualist networks and organizations are active, you may even wind up with an ecosystem—an abundance of shared resources, experience, social capital, and financing, both centralized and grassroots, all sustaining projects serving a wide variety of community needs.
Yet the future of mutualist organizations—which today includes cooperatives, faith groups, credit unions, nonprofits, unions—is under threat. The capital markets that can invest in social enterprise are chaotic and low-impact. Mayors, citizens, funders, and practitioners end up doing their mutualist work in silos, without access to shared resources, knowledge, and coordinated financing.
The problem is that both the political left and right in the last 35 years have enacted policies that prevent the next generation from building mutualist enterprises. The left has often undercut a notion of a mutualist future by insisting that every problem needs a large centralized government solution. The right only promotes competitive market solutions to solve for human needs.
To ensure mutualism thrives in the next generation, communities need laws, regulations, practices, and capital markets that encourage solidarity and investment outside of any given silo. To build a mutualist ecosystem, you need investors who can see the whole ecosystem, beyond any single cooperative, faith group, or labor organization.
Three Principles of Mutualism
Molly Hemstreet, who helped launch a worker-owned textile cooperative and an industrial commons in her hometown of Morganton, North Carolina, exemplifies this mutualist spirit.
In only seven years, starting in 2008, Morganton quickly evolved from a deindustrialized textile city to a new kind of regional economic hub. As part of this economic shift, Hemstreet founded an employee-owned textile company, Opportunity Threads, with one sewing machine and two employees.
Hemstreet went on to work with local cooperatives, civic groups, manufacturers, nonprofits, and the local Rotary Club—the other mutualists in her area—to launch Morganton’s Industrial Commons, a nonprofit economic-development project that created the Carolina Textile District and four additional community-owned organizations. This network-weaving has now created an ecosystem which has generated $64 million for the regional economy. It has catalyzed the sale of local established businesses to their workers, creating a regional concentration of worker-owned cooperatives. Morganton, North Carolina, is now a next-generation city that illustrates how mutualism builds an economically viable community where the locals are in control and do the work.
Hemstreet’s current generation of mutualists follow a pattern found throughout history. In what is now the United States, Benjamin Franklin created the first mutual bank and mutual insurance company in 1752, after a devastating fire destroyed much of Philadelphia. Cooperative, mutualist enterprise also thrived in utopian groups such as the Shakers. The 1800s saw the emergence of the Underground Railroad as well as the formation of historically black colleges and universities (HBCUs). Over the centuries, workers formed guilds, craft, and industrial unions. Today, even the Green Bay Packers football team is a mutualist co-op that’s owned by its fans. You can also count every quilting, crocheting, and knitting circle ever created anywhere as mutualist. In every case, people with a shared need team up, identify a solution, and just get started.
This pattern of “just getting started” is also found in the origin stories of the largest cooperative movements globally. Today, Northern Italy’s co-op sector has gross revenues of about $6.1 billion; the Mondragon co-op ecosystem in the Basque region of Spain has gross revenues of about $14.5 billion; and co-ops and mutuals around Quebec, Canada, contribute $50 billion to Canada’s gross domestic product. Each was started by just a few people.
Mutualism has three core principles:
- A solidaristic community
- An economic mechanism that supports the community’s mission
- A long-term time horizon where the economic value is recycled back to the community
By looking in turn at how each of these principles work, we can understand how mutualists create something greater than the sum of its parts.
The First Principle: Solidaristic Community
Mutualists work together, in solidarity. Just as Hemstreet’s community built Opportunity Threads, Reverend Dr. Pastor Heber Brown organized within his community of Black parishioners in Baltimore to help form the Black Church Food Security Network. His church organized vegetable gardens on the church property. Like Hemstreet, Pastor Brown just got started, and worked to build community.
We can see the same pattern in other mutualist organizations, schools, and networks. Jacob Imam cofounded the College of Saint Joseph the Worker in Steubenville, Ohio, where students graduate with a college degree and mastery of a building trade skill. Bren Smith started Greenwave as a network of fishermen farmers. The Mondragon cooperative’s founder, Father José María Arizmendiarrietta, started by first founding a vocational school.
Mutualism begins where you identify your group—your solidaristic community. There is something that the group needs to do that can only be accomplished together. Individuals can see that this can only happen if the group does well. It isn’t charity, it isn’t selfishness. Seeing that you have a shared fate is the mutualist impulse.
This group activity requires people to learn skills for resolving differences. You may not like someone, but you have an incentive to work things out. That’s why mutualist organizations teach people important civic skills needed for a democracy. Unions, civil rights groups, faith groups—they all teach agenda setting, leadership development, and life skills needed for human interconnection.
The Second Principal: An Economic Mechanism
Unlike conservative antipathy to centralized government, mutualists see that government has a role in building the next era’s mutualist sector. Unlike liberal skepticism of markets, mutualists’ core economic mechanisms are market actors that charge fees, collect dues, barter, create lending circles, provide services, and tithe. The bottom line is something of economic value must be exchanged between peers, and this economic value must be recycled back to the community to support their mission and goals.
Mutualists view their economic mechanism as a lifeline to support their mission. The economic mechanism is located within the activity of their community, and all members have a stake in the future of their organizations—for example, union members who pay dues for union representation, strike funds, and union-owned properties. But the examples of mutualist economic mechanisms are wide and varied.
In the late 1980s in Kenya, groups of local women began to set up self-governing financial systems to pool resources and to get access to credit. Their economic mechanism is called chamas or VSLAs (village savings and loans groups). Shaila Agha of the Regen Foundation has documented how this community-centric financing addresses gaps in the formal banking system—along with its growth to over 300,000 participants.
Another interesting example comes from First Book, a nonprofit that provides kids with books through a network of more than 600,000 educators serving 6.5 million children. Co-founder Kyle Zimmer and team launched the First Book Marketplace, which is only available to educators and professionals who are members of First Book’s network, as a way to offer deeply discounted learning materials while also generating 30 percent of its $80 million annual revenue. When factoring in in-kind donations of books and educational resources by network members distributed through the marketplace, the 30 percent portion rises to 89 percent of annual revenue. The economic mechanism here serves the mission of First Book and provides additional educational materials the members need.
Meanwhile, the Mondragon cooperatives in Spain’s Basque region, the Italian cooperative movements, and those in Quebec all pay around three percent of their profits to a central fund of “indivisible reserves” to invest in future cooperatives. This dedicated financial infrastructure is the exact reason these countries continue to have huge growth in the sector.
My current organization, The Mutualist Society, has built “version one” of an economic mechanism by asking active mutualists to lead small peer-to-peer learning groups we call pods. Next, we’ve invited new mutualist enthusiasts to pay a fee for this educational activity. By getting started with the contribution of time, groups can begin to form revenue-generating strategies that build an economic mechanism.
The Third Principle: A Long-Term Time Horizon
It is essential for mutualists to build community continuity. A solidaristic group has reasons for coming together which could persist for a few months—or into the next generation. The parishioners who organized their first vegetable garden with Pastor Brown were focused on the next projects that their garden would yield. They connected with Black farmers to create a weekly farmers market at the church on Sundays, then built a network of faith organizations repeating the model to create a connected network across the United States.
Even as Hemstreet got started with one sewing machine and two employees, as Pastor Brown began with one church vegetable garden, and Father Arizmendiarrietta built from one training program; they all had a throughline, intuition, and a deep commitment to their community that guided their future direction.
As Georgia O’Keeffe said, “To see takes time." The essential part of mutualism is allowing groups time to emerge.
Growing the Mutualist Sector
For a mutualist sector to emerge and flourish, mutualists need an organized, vertical pipeline that can support them through three levels—startup, next-level funding, and growth.
Level 1: Just Get Started
Mutualist social entrepreneurs roll up their sleeves and start with their local community and a group of builders. But they benefit from support. Government, philanthropy, and larger mutualist enterprises all need to help create large cohorts of new mutualist social entrepreneurs and bridge them to appropriate capital.
Models include the Ashoka fellowship program (which counts Molly Hemstreet, Bren Smith, and Pastor Brown as alumni), the NYC Urban Fellowship Program, and the Bloomberg Philanthropy Global Mayors Challenge. On the for-profit side, the tech incubator Y Combinator and the ecosystem it supports is a model for mutualist investors to follow in that they get startups from early-stage to their next level of funding. They curate cohorts of founders for training and networking, and then weave them into a larger ecosystem of Y Combinator alumni, investors, and others in the venture capital world.
Level 2: Next-Level Funding
Getting next-level funding is where for-profit founders start a pathway toward wealth and where nonprofit founders often land in penury. So how can we incentivize the creation and growth of mutualist social enterprise? Key economic strategies for doing so include repurposing and updating existing tax credits, loan strategies, and market proposals:
- Community Development Financial Institutions (CDFIs) are now used for supporting local community business activity and cooperatives. CDFIs should be expanded to include a wider range of mutualists like unions, cooperatives, mutual banks, and mutual insurance companies.
- The Community Reinvestment Act (CRA) requires banks to comply with credit requirements of the communities they serve. Banks should be required to include mutualist entities as part of their CRA obligation.
- America needs its own version of indivisible reserves to enable sectors to reserve capital from one generation to the next. Expand existing accounting, tax, and financial practices that give mutualists ways to build a wider indivisible reserving system.
Level 3: A New, Mutualist Capital Market
Hemstreet may have started with one sewing machine and two employees, but in recent years, the regional development organization she co-leads has received major funding from both the state and federal governments, injecting tens of millions of dollars into the local mutualist ecosystem in recent years.
This sort of opportunity needs to greatly increase for mutualist organizing. A couple other strategies for building a large-scale mutualist capital market include:
- Foundations should greatly increase program related investments (PRIs)—technically extremely low-cost loans that foundations make as part of their charitable distributions.
Foundation PRIs are ideally suited to mutualist organizations that need to grow because they provide below-market loans. Through PRIs, foundations could create a pathway toward financial sustainability for emergent mutual aid groups or local community rebuilding efforts after natural disasters. However, very few foundations have significantly invested in PRI financing.
- Focus government procurement on mutualist organizations for disaster recovery, renewable energy, and regenerative farming practices.
Federal, state and local governments can specifically call for mutualist procurement projects. Government procurement can create a stable source of revenue upon which to build an enterprise’s track record. A demonstrated track record helps any business, including mutualist organizations, to leverage loans, grants, and investments. For instance, a small city mayor could award procurement contracts for local farmers in a cooperative to provide needed training to urban farmers and to supply fresh food. Over time they could compete for larger procurement projects so they could expand. Other cities could look for existing larger mutualists like unions to rekindle their efforts to build limited equity housing cooperatives, which anchor communities and stabilize housing prices for cooperators.
Today, mutualists who successfully launch in the social sector face a disorganized and chaotic capital market of foundations and philanthropists. Too many funders either do not have a mutualist category or are implementing their management consultant’s high-level “impact” strategies, not building from the ground up.
The Next Mutualist Ecosystem Today
A next-generation mutualist ecosystem will emerge when two things happen simultaneously.
First, the next mutualist groups will get started and spring up to solve for their collective needs. Different groups of mutualists may start in their own siloes, but the power of their models will be realized when they adopt an ecosystem perspective on their work. This ecosystem perspective provides a mutualist map to working with and mutually reinforcing the other faith groups, unions, cooperatives, social entrepreneurs, mutual aid groups, and community nonprofits around them.
Second, the next investors and funders need to be ready to deploy mutualist capital to meet that moment. Investors need a new perspective that leads them to see the whole ecosystem and to understand the entire life cycle. Then they can determine which part of the process they want to help build.
When these two things happen, future possibilities could include unions rekindling their housing cooperative strategies from the 1920s and 1930s, supported by tax credits and mutualist capital. Local mayors and community associations could develop renewable energy strategies that are hyperlocal and community-run. New advocacy groups could organize to fix the federal and state funding pipeline that would eventually allow new mutualists to receive start-up grants. Faith groups could use their land to reimagine community gardens, cultivating both fresh vegetables and conviviality.
By just getting started with a few investors and funders who are catalytic, the new mutualists will play a critical role of learning from the robust past models created by mutualist bankers, community builders, cooperative housing developers, insurance executives, union organizers, gardeners, and utopians. From that learning, they will iterate and experiment and ultimately build the mutualist ecosystems of tomorrow that we need today.
Read more stories by Sara Horowitz.