The Co-op Food Stores

added 05/01/08

by Don Kreis, Board President

Two longtime members sent us a long handwritten letter recently, in which they respectfully sought to admonish the Board that “the mission of a co-op is to radicalize, not rationalize, consumer behavior.” These members dismissed as “cavalier” my suggestion in the newsletter, several months earlier, that “cooperatives do not renounce wealth—they just deploy it locally and virtuously.”

“We believe co-ops need to model a type of social responsibility recognizing distribution and use of wealth as one element of justice,” wrote the concerned members in rebuttal. “Until the Co-op community recognizes . . . the need for all of us to make sacrifices of choice and convenience, it is just another bourgeois marketplace in sheep’s clothing.”

Among other things, these admonitions made me realize that my use of the word “wealth” had been misleading and glib. The coin of the realm isn’t really wealth at all—it’s welfare, in the sense economists use the term to connote anything that adds quality to life on the planet, whether or not it can be monetized. Unfortunately, the word “welfare” has come to have pejorative connotations thanks to those who abhor resource redistribution of any kind.

Serving on the Board of the Co-op makes me think we should take the word back, in quest of the radicalization of consumer behavior the letter writers seek. It’s pretty radical, after all, to operate a commercial enterprise that is neither a nonprofit (because we pay our taxes, and aren’t limited to endeavors the IRS views as charitable) nor a business that seeks profits and then pays them to the owners. Patronage refunds are just that—refunds that simply reflect our having charged ourselves a bit more than necessary for our groceries. That’s why they’re not taxable as income, when paid to consumers in connection with household goods.

My day job finds me working alongside economists, who look to markets for evidence of the value of things—even stuff like the inchoate “welfare” that our cooperative pursues. Enough economics has rubbed off to make me dangerous, as I will now prove.

It seems plausible to equate the value members assign to their Co-op with the cost of that membership. To join requires a $50 investment, but that’s obviously not the cost because you get the money back when you leave. A better measure is opportunity cost—what we forego by not investing those fifty bucks elsewhere. According to a financially savvy fellow—my former Board colleague Phillip McCaull of Wachovia Securities—the classic opportunity-cost benchmark is the risk-free, ten-year Treasury Bond yield, 3.6 percent as of this writing. That works out to $1.80 per year.

This is a staggering revelation, in my judgment. Think of all the intangible good the Co-op produces—the welfare, in all its varieties—and ask yourself whether it’s worth less than two dollars a year to you. And that doesn’t even include the patronage refund which is, for the reasons explained above, not properly counted as return on investment.

Because the Co-op has lately been issuing part of its patronage refunds in stock, many of us have more than $50 invested in the cooperative. Should we encourage, or even require, everyone to invest more than $50? Do we feel called, as a community, to devote more of our resources toward making our local economy self-sustaining and even regenerative? In the parlance of our letter writers, as a cooperative we have the power to radicalize consumer behavior (however we collectively decide to define such an objective), but we must decide to use it.

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