Cooperatives as the Path Through Economic Contraction

Copied from a piece by Ludovic Viger with his permission.

Canada’s economy is at a turning point. For decades, we’ve relied on the promise of perpetual growth to fuel prosperity, but the foundations of that growth are crumbling. According to Dr. Tim Morgan’s Surplus Energy Economics, the global economy, including Canada’s, is inflecting from growth to contraction, driven by the rising Energy Cost of Energy (ECoE). This shift challenges our assumptions about progress and demands new approaches to secure a resilient future.

In this post, I’ll outline three likely outcomes of Canada’s economic contraction and argue why cooperative businesses—democratic, community-driven enterprises—are uniquely suited to address this predicament. Drawing on data from Surplus Energy Economics and Canada’s own economic context, we’ll explore how cooperatives can transform challenges into opportunities for a sustainable, equitable future.

The End of Growth: Understanding Canada’s Economic Contraction

Dr. Tim Morgan’s Surplus Energy Economics provides a critical lens for understanding why economic growth is faltering. Morgan argues that the economy is an energy system, not a financial one. All goods and services depend on energy, and the surplus energy available after the cost of accessing it (ECoE) determines prosperity.

Historically, low ECoEs from fossil fuels drove exponential growth, enabling Canada’s resource-rich economy to thrive. However, as Morgan notes, global ECoEs have risen from around 2% in 1980 to now well over 10%, eroding the surplus energy that fuels economic output. For Canada, a nation with high energy consumption and reliance on exports like oil and gas, this trend is particularly acute.

Morgan’s SEEDS (Surplus Energy Economics Data System) model projects that global material prosperity could decline by 1% annually through 2050, reducing aggregate prosperity by around 22%. For Canada, this translates to shrinking real GDP, strained public finances, and reduced household purchasing power. Evidence from Statistics Canada increasingly points to this reality: real household disposable income growth has stagnated since the 2008 financial crisis, and inflation-adjusted costs for essentials like housing and food have risen sharply, consuming a greater share of our budgets.

The era of “solutions of quantity”—building more, extracting more, borrowing more—is ending. Instead, we must embrace “solutions of quality,” prioritize cooperation over individualism, and adapt to shrinking discretionary funds. Cooperatives, with their focus on community ownership and resilience, are the ideal vehicle for this transition.

1. From Quantity to Quality: Reprioritizing for Resilience

As economic contraction takes hold, governments and businesses can no longer rely on growth-based strategies. Morgan highlights that rising ECoEs reduce the surplus energy available for non-essential activities, forcing a shift toward efficiency and value. For Canada, this means rethinking how public services and businesses operate. Governments, facing declining tax revenues, will need to optimize spending on essential services like healthcare, education, and infrastructure. Businesses, meanwhile, must focus on delivering high-quality, sustainable goods and services rather than chasing volume.

Cooperatives are uniquely positioned to lead this shift. Unlike corporations driven by shareholder profit, cooperatives prioritize member needs and community well-being.

• Take Coast Capital Savings, a federally regulated credit union based in British Columbia with over 600,000 members. By reinvesting profits locally and offering affordable financial services, it strengthens communities while maintaining stability in tough economic times.
• Similarly, agricultural producer cooperatives, like those forming the backbone of Canada’s dairy and grain industries, enable farmers to achieve economies of scale and market their produce efficiently, ensuring quality and fair returns without the exploitative pressures of purely profit-driven intermediaries.

In a contracting economy, cooperatives can deliver “solutions of quality” by focusing on durability, local needs, and equitable distribution. For example, housing cooperatives across Canada, such as those within the Co-operative Housing Federation of Canada, provide affordable, stable homes without the speculative price spikes of private markets. By pooling resources and prioritizing long-term value over short-term profit, cooperatives align with Morgan’s call to adapt to a less energy-intensive, more resilient economy.

Governments could amplify this by redirecting subsidies from corporations to democratic businesses, as envisioned in my upcoming book, The Great Canadian Reset (September 2025), which advocates for a Democratic Business Development Agency to support cooperative growth.

2. From Individualism to Cooperation: Building Community Resilience

Economic contraction often exposes the fragility of hyper-individualistic systems. Morgan warns that as prosperity declines, competition for dwindling resources intensifies, potentially fueling social and geopolitical tensions. In Canada, we’ve seen this in rising inequality and housing unaffordability, with the top 1% owning a disproportionate share of wealth while many struggle to afford basics. In such times, individualism—chasing personal gain at the expense of others—becomes unsustainable. Cooperation, however, offers a path forward.

Cooperatives embody cooperation by design. Owned and governed by their members, they distribute benefits equitably and foster collective problem-solving.

• Historical movements like the Antigonish Movement in Nova Scotia during the Great Depression demonstrated how community-driven cooperatives could provide essential services and build economic self-reliance when traditional markets failed.
• In Canada today, consumer cooperatives like the Saskatoon Co-op, part of the larger Federated Co-operatives Limited (FCL) system, demonstrate this resilience by providing affordable food and services and reinvesting profits into local jobs and community initiatives.
• During the 2008 recession, Canadian credit unions, with over $400 billion in assets today, weathered the storm better than many banks due to their conservative, member-focused models.

In an energy-constrained future, cooperatives can mitigate resource competition by localizing economies. For instance, SolarShare, a Toronto-based renewable energy cooperative, allows members to invest in solar projects, reducing reliance on high-ECoE fossil fuels while keeping energy dollars local. This cooperative model counters the divisive effects of scarcity, fostering trust and mutual support.

As you’ve discussed on various forums, Canada’s values of fairness and belonging align perfectly with cooperatives, making them a natural fit for navigating economic decline. By scaling up cooperative networks, Canada can build resilient communities that share resources rather than compete for them.

3. Shrinking Discretionary Funds: Cooperatives as a Buffer

As ECoEs rise, the cost of essentials—housing, food, energy—consumes a larger share of household budgets, leaving less for discretionary spending. Morgan’s SEEDS data shows that discretionary sectors, like luxury goods and entertainment, could contract by 30% or more as prosperity declines. In Canada, this is already evident: a 2023 Statistics Canada report noted that 40% of households cut back on non-essential spending due to rising costs. This squeeze threatens economic stability, as discretionary sectors employ millions and drive tax revenue.

Cooperatives offer a buffer against this trend. By pooling resources, they reduce costs for members while maintaining access to essential goods and services.

• For example, Organic Meadow Co-operative, a Canadian dairy cooperative, provides affordable, sustainable food by cutting out corporate middlemen and ensuring fair prices for both producers and consumers.
• Similarly, education cooperatives can offer low-cost, community-driven schooling tailored to local needs, providing vital services without the high overheads of private institutions. These models ensure that essentials remain accessible even as discretionary funds dwindle.

Moreover, cooperatives can stabilize local economies by keeping money circulating within communities. The T’Sou-ke Nation Solar Co-op on Vancouver Island generates clean energy and local jobs, reducing dependence on expensive, high-ECoE fossil fuels. By contrast, corporate models often extract wealth to distant shareholders, exacerbating economic leakage in tough times.

Cooperatives’ focus on reinvestment and affordability aligns with Morgan’s warning that we must “own our mistakes and misfortunes” without the “elixir” of growth to bail us out. Through collective ownership, Canadians can stretch limited resources further, ensuring stability in a contracting economy.

Why Cooperatives Are the Answer

Cooperatives are not just a stopgap; they’re a transformative model for Canada’s future. Morgan’s work underscores that economic contraction is inevitable as ECoEs rise and surplus energy shrinks. Traditional growth strategies—borrowing, deregulation, globalization—have failed to address this reality, leaving Canada vulnerable to financialization and systemic risks.

Cooperatives, however, offer a proven alternative. With over 8,000 cooperatives employing 100,000 Canadians and contributing $50 billion to GDP annually (Co-operatives and Mutuals Canada), they’re already a cornerstone of our economy.

Their democratic structure ensures accountability and fairness, countering the exploitative tendencies of neoliberalism. Unlike corporations, which prioritize profit over people, cooperatives reinvest in communities, fostering belonging and resilience. They’re also adaptable to local contexts, whether it’s a fishing cooperative in Atlantic Canada or a solar co-op in Ontario. As my book, The Great Canadian Reset, argues, redirecting support to cooperatives—through loans, training, and policy reform—can democratize our economy and ease the pain of contraction.

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A Call to Action

Canada stands at a crossroads. Economic contraction, driven by rising ECoEs, demands a shift from growth to resilience, from individualism to cooperation, and from excess to sufficiency. Cooperatives are not a utopian dream but a practical, proven solution. They’ve thrived in crises before, from the Great Depression to the 2008 recession, and they can do so again.

Join the conversation and learn more:

• Share my Substack: thegreatcanadianreset.substack.com
• For international readers: Consider adapting these ideas to your own country—my book welcomes such inquiries.

Together, we can build a resilient, equitable economy that faces the challenges of contraction head-on.