The concept of cooperatives has been around for centuries even if the modern cooperative model reached its peak in the 1970s and 1980s. A simplified definition of a coop is ‘an autonomous association of people who voluntarily cooperate for their mutual social, economic, and cultural benefit’. Coops come in different shapes and forms and include non-profit community organisations as well as businesses owned and managed by people who use their services or by the people who work there.

The announcement made by Small Enterprise Minister Chris Cardona that “the government this year intends to relaunch the concept of cooperative societies within the public service” stirred interest among economic analysts, especially those who believe that the public service in this country needs to improve its efficiency and reduce its size if it is to fulfil its mission to serve the public in the most effective way.

Coops have some distinct advantages over other business models. They are easy to form, are open to all types of economic activity, in most cases they offer limited liability to their members, are often supported more intensely by the government and other institutions, have a democratic management system and generally have more stability and continuity than one-person businesses.

Like any other business model they are not a risk-free way of doing business. One distinct disadvantage of coops is that they often lack resources and expertise and are not suitable for large scale businesses that require huge capital.

When coops are run by their members, they often lack professional management skills that are so important to make a business viable. Bad management often leads to disputes between members of a coop and many have been wound down because of lack of cohesion between members who often have different social, economic and academic backgrounds.

Unfortunately, the information provided by Dr Cardona in Parliament was too generic even if the general message was positive. What the minister meant by “public sector employees would be enticed to form cooperatives and the government would contribute towards their success” is not clear enough to elicit a welcome response from people who use public services or from economists who fret about the size and effectiveness of the public sector in our economy.

If the government intends to reduce the size of the public service by encouraging certain groups of employees to branch off to the private sector by forming their own coops and would be guaranteed a certain amount of turnover through government contracts, this would be a welcome move.

For instance, the maintenance and upkeep of government schools can easily be undertaken more efficiently if the public service employees who provide this sort of service today would be encouraged to become entrepreneurs by setting up a coop that could guarantee them a better take-home pay.

However, the minister’s comment that “the plan will address students, traders, professionals and the public in general even through close cooperation with local councils” is somewhat obscure and needs to be explained better if the people are to put their mind at rest that public services will not actually deteriorate when coops take over.

Malta has varied experiences of coops. Some, like the Milk Producers Cooperative, have been very successful and have operated profitably for decades. Others wound down as a result of the weaknesses of the coop model.

The government would do well to issue a White Paper with details of its plan to relaunch the coop model.