Why We Need Cooperatives for the Digital Economy

Platforms like Airbnb claim to be building online “communities” — even as their business undermines the real communities in cities. But the history of cooperatives shows that it really is possible to democratize the services we use — so long as it’s connected to a wider redistribution of power in society.

The Airbnb app logo is displayed on an iPhone on August 3, 2016 in London, England. Carl Court/ Getty

“We want to be good partners to everyone,” claims Airbnb, the digital behemoth now valued at $31 billion. It likes to depict itself as a small grassroots community organization, just doing its bit for the collaborative economy. But despite platitudes of “partnering with cities” and working with local communities, Airbnb has spent millions lobbying the European Union, suing local councils, and fighting attempts by cities to protect affordable housing.

The news headlines of Airbnb’s tax avoidance, exploitative labor practices, and monopolisitic tendencies are bad enough. But they’re all by-products of a more fundamental issue: platforms like this were never intended to provide a public good — they were designed to maximize profit.

Some insist the answer lies in more competition within the tech sector, through antitrust laws. Yet such calls for a government-regulated market don’t get to the heart of the matter. Better regulated tech giants would still exercise disproportionate influence over policy making and put their own financial gain ahead of the interests of local communities.

Rather, the takeover of our cities by firms like Airbnb shows the need for a more profound solution — one that changes the balance of power, through truly community-owned and -run platforms. By replacing extractive platforms with a democratic alternative, we can cut out the exploitative middleman, allowing service providers and users to benefit from the full fruits of their labor — and data.

But how would such an alternative be organized? One useful set of indications comes from the writings of the so-called “guild socialists.” In early twentieth-century Britain, this movement called for workers’ control over industry and the creation of a participatory socialist society. Adapted to our own conditions, their insights show the possibility of democratic workplaces and services — not just planned by the state but rather collectively managed by those with a direct interest in how they operate.

Considering the different possible ownership and governance structures can help us reimagine socialism in a digital age — one that innovates beyond the rigid strategies of twentieth-century state socialism and its top-down nationalizations. Marrying new technologies with the promise of democracy, they can give us a clearer picture of a digital future worth fighting for.

FairBnb.coop: A “Social” Platform Cooperative

Founded in 2016, Fairbnb.coop presents itself as an alternative to the extractive model of existing holiday rental platforms. Incorporated as a cooperative in October 2018, it promotes sustainable travel by enforcing a “one host/one house” rule to prevent the displacement of local residents and by investing half of its 15 percent commission in social projects chosen by hosts and travelers. It commits to complying with local laws, paying its taxes, and sharing its data with municipal authorities.

Currently the membership and governance of Fairbnb.coop is organized according to a worker cooperative. The cooperative consists of the original five member/investors along with ten additional workers. But as Damiano Avellino, one of the founders of Fairbnb.coop explains, “we are a worker cooperative but we want to become a multi-stakeholder cooperative” — allowing other stakeholders to have more ownership and control over the company.

Governance could be expanded to include hosts, guests, or the local communities served by Fairbnb’s social projects. Avellino believes that it is primarily the latter that would be most desirable. “It makes sense to give more ownership to the social projects we fund,” he states, “the local communities are the ones who are affected by rising housing prices and gentrification so they should have a say in how Fairbnb.coop is run.”

The organization is run by a core team of workers with local nodes in each city and working groups dedicated to specific projects. Building a multi-stakeholder platform would mean devolving more power to local “nodes” to autonomously organize how each individual city would negotiate relationships with their social projects and plans for promoting sustainable travel. Digital platforms allow worker cooperatives to consider a variety of different governance and ownership structures due to the dispersed nature of their stakeholders.

To maintain the convenience of existing platforms, most platform co-ops will require an option where individuals can download the app and set up a free account as a user. But users and service providers could be able to make a small investment in the organization in exchange for a share in the capital and voting rights. With Fairbnb.coop it is currently possible to register as a host or traveler on the system without investing any capital in the platform.

Of course, members of a cooperative are bound to have different levels of involvement and influence. Not every member is going to want to attend meetings or keep up with the day-to-day business of the cooperative, but they might want an option to have a say over important decisions or to voice their disapproval over one particular practice of the organization.

Fairbnb.coop also demonstrates the importance of locating new sources of funding. It received €400,000 euros from a cooperative bank which has assisted in the initial phases of start-up and promotion. While in theory, the cooperative keeps half of its 15 percent commission to run the platform, in the early days of a new venture these takings can be lean.

The problem for emerging platform cooperatives is they lack access to the capital investment needed to scale their operations. Venture capital and even so-called “impact” investors generally steer clear of co-ops because of the low return on their investment and the lack of control over the organization.

Nesta, a UK innovation foundation, have proposed solving the “capital conundrum” through an alternative model of capital investment based on “community shares” — withdrawable, non-transferable capital in the organization that provides a degree of control through a “one-member-one-vote” system rather than “one-share-one-vote.”

This would encourage a form of crowdfunding in which individuals could invest in the capital of the organization but retain a right to withdraw their share at close to purchase price at the discretion of the cooperative’s board. Shares would provide democratic control to members and limit the extent to which any individual could exercise undue influence over the cooperative. So far, over £150 million has been raised through this method across the United Kingdom.

Fairbnb.coop faces a tough road ahead in the fiercely competitive short-stay rental market. But could it ever out-compete its Big Tech rivals? A common criticism of traditional worker co-ops is they try to compete against capitalist firms in a capitalist marketplace and it simply doesn’t work. Capitalist firms will always have more resources to invest in research and development and can pursue aggressive business strategies to undercut their competitors. They are also more willing to externalize costs, lower wages, and adopt less environmentally friendly practices.

Social Experiment

These problems aren’t entirely new. Indeed, a similar debate began with the first emergence of cooperatives in the early nineteenth century, together with the Industrial Revolution. Many early cooperatives were influenced by the writings of early socialists like Robert Owen and Charles Fourier, who set out visions of a future harmonious society.

More contradictory was the stance taken by Karl Marx. He had many positive things to say about worker cooperatives, terming them “great social experiments” whose value “cannot be overrated.” He understood that they could serve as a transitional arrangement, able to increase the power and autonomy of the working class. But he also recognized that it was not enough to create islands of socialism, absent a wider uprooting of wage labor.

Indeed, even benefits of cooperatives, like workers’ greater control and lesser alienation from their jobs, risk being undermined by the challenges of competing in a capitalist economy. This even includes the pressure toward “self-exploitation” due to competitive market incentives. Rosa Luxemburg concluded that cooperatives “are obliged to take toward themselves the role of capitalist entrepreneur — a contradiction that accounts for the failure of production cooperatives, which either become pure capitalist enterprises or, if the workers’ interests continue to predominate, end by dissolving.”

This critique is, in part, borne out — cooperatives have not historically played an important role in social transformation, and they tend to isolate themselves from other forms class struggle. Yet to recognize that they are not a panacea to all our problems — or a replacement for other forms of political organizing — ought not be grounds to dismiss cooperatives entirely. In fact, they are most promising when considered alongside other strategies of social transformation — from trade unionism to challenging state power.

Municipal Socialism

Today, these difficulties help make the case for what Janelle Orsi has called “Munibnb’ — a municipally owned platform that could be developed between several large cities to manage short-term accommodation services offered by local residents. This could be a new way of structuring a broader city-managed commons — one that could effectively tax and regulate the use of property to ensure money stays within the city and benefits its residents equally.

The great advantage of control by a municipal authority is that (depending on the jurisdiction) they will sometimes have the regulatory power to ban capitalist competitors and insist on maintaining high standards and a fair service for users.

A municipal authority in charge of the platform would also assist with the coordination of other housing services offered by many cities and help with issues of housing affordability and gentrification. They could also encourage users away from renting out entire houses on the short-term property market through increased taxes on such a service, which would alleviate housing shortages.

Cash-strapped city councils might feel reluctant to take on such a service, which would require a significant investment of resources and could become a black hole in their budgets. There is also a challenge of how this could be coordinated across cities and whether one platform could accommodate the needs of different authorities while maintaining a user-friendly interface and keeping operating costs down.

Equally, we may doubt whether public control over the operator could be strong enough to ensure real democratic accountability. If mayoral elections are the primary means of holding platform operators to account, then this issue becomes bundled into larger questions of good governance and partisan preferences — leaving many with no realistic option of influencing policy or important questions of service delivery.

Put another way, the risk of such a system of municipal socialism is that capitalist bosses are replaced by unaccountable bureaucrats. This fear echoes problems associated with twentieth century top-down nationalization programs that failed to incorporate forms of grassroots democracy and meaningful control by service users.

Guild Socialism for the Digital Economy

One source of inspiration in this sense can be found in the writings of early twentieth-century socialist, G. D. H. Cole. Having joined the Fabian Society during his university years, Cole would become a critic of its top-down nationalization strategies and lack of support for workplace democracy. A libertarian socialist, he developed guild-socialist ideas in the 1910s and 1920s alongside other contributors such as S. G. Hobson and A. J. Penty.

In Guild Socialism Restated, Cole proposed that every important association should have its own democratic structures of governance to expand the capacity of individuals to exercise decision-making over the institutions that shaped the material conditions of their lives. For Cole:

“Society will be in health only if it is in the full sense democratic and self-governing, which implies not only that all the citizens should have a “right” to influence its policy if they so desire, but that the greatest possible opportunity should be afforded for every citizen actually to exercise this right.”

Cole’s central insight was that representatives in the political sphere could never adequately represent their electorate “as a whole” because it contained too many different complex social systems which required their own democratic structures. Representation for Cole should be “specific and functional” rather than “general and inclusive.”

Guild socialists envisioned a participatory socialist democracy in which multiple and overlapping producer, consumer, and municipal associations coordinated social life. The underlying idea was to extend democratic principles of citizen control and autonomy from a narrow political sphere of the state to broader social relations. Cole argued that the power and authority of the state should be drastically reduced to one small element in a larger social system of internally democratic associations led by active citizens.

These plans were viewed as an alternative to the limitations of syndicalism in which only worker/producers were given ownership and control over firms, and state nationalization in which control passed to unelected bureaucrats. Guild socialists argued for a system in which the community would have ownership over productive assets, but different functional systems would be democratically managed by those most affected by the organization.

In the case of housing, one can imagine that short-term rentals would be managed as part of a broader housing organization which balanced the needs of different members of the community. The priority would be to ensure that everyone had access to secure and affordable long-term housing, while allowing for flexibility in renting out rooms for vacation rentals.

The organization itself would be internally democratic and enable different stakeholders to have input into the design and management of the service. These principles do not provide a complete blueprint for a new platform, but they do help to show how new democratic models of ownership and governance represent a step forward and a victory of democracy over private power.

We don’t just need new apps — we must also develop the culture and infrastructure of a cooperative society, meaning democratic controls over investment and finance, new legal structures and environmentally sustainable practices. Cooperatives are one part of the solution, not an alternative to participation in other struggles. Developing a cooperative economy is best conceived as one aspect of a broader shift of wealth and power towards workers, which can only be achieved through class struggle. Worker cooperatives and municipal socialist arrangements are practical examples of an alternative ownership model that can offer inspiration for further struggle and political organizing.

The fantasy of the sharing economy has been shattered. But we need to champion fairer alternatives that can replace the extractive models of Big Tech. We don’t just want better pay and conditions for workers in the gig economy. We must push for a fundamental restructure of the ownership and governance of these firms, creating new democratically controlled alternatives.