Socialism: study the precedents and test whether the help matters

Add precedents.md: Mondragon's Caja Laboral, the US National Consumer Cooperative Bank, Italy's Coopfond and Marcora Law, each with what went wrong. Add a support lottery to the pilot (intensive help for a random half, advisers walled off from lending, all help counted against the bank), count distressed mergers as closures, and replace unsourced precedent claims on the bank and argument pages. Co-Authored-By: Claude Opus 5.5 <[email protected]> Claude-Session: https://claude.ai/code/session_01QWPs69B8nQZjtPEUXMKzZx
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@@ -14,7 +14,7 @@ summary: A working model for building an economy where the people who do the wor
 This model doesn't buy, seize or convert anyone's company. Instead it builds new worker-owned companies alongside existing ones, then lets customers and workers choose between them.

 - **Workers own their company.** Every member gets one vote. A share of the profits grows with tenure until long-time members split them equally. Salaries still exist, and hard jobs still pay more. Part of each year's profit builds up in a personal account that's paid out when you leave, and part goes into a permanent reserve that keeps the business investing. [Worker Ownership](worker-ownership.md), [Member Capital Accounts](capital-accounts.md) and [Investing for the Long Run](the-long-run.md)
- **A small public bank lends to worker co-ops.** It charges market rates, so it only succeeds if co-ops can really compete. Its whole job is to be willing to lend to a kind of company other banks won't. [The Bank](the-bank.md)
+- **A small public bank lends to worker co-ops.** It charges market rates, so it only succeeds if co-ops can really compete. Its whole job is to be willing to lend to a kind of company other banks won't. Spain, Italy and the US have all tried versions of this, and the pilot is built around what went right and wrong. [The Bank](the-bank.md) and [Has This Been Tried?](precedents.md)
 - **Co-ops funded this way stay co-ops forever.** They can't be sold to conventional owners, and members can't vote to cash out what earlier members built. [The Lock](the-lock.md)
 - **It runs as an honest experiment.** A one-time $350 million pilot aims to fund about 400 new co-ops. The success measures are published before the first loan. If, after twelve years, co-ops stay open about as well as similar conventional firms while paying their members fairly, and the bank earned at least what Treasury bonds would have, Congress votes on growing it. If not, it shuts down automatically. [The Test](the-test.md) and [The Pilot, in Numbers](pilot-spec.md)
 - **Co-ops back each other up.** They pool part of their profits into a shared fund. If one fails, its workers are moved into others instead of being left with nothing. [The Federation](federation.md)
@@ -15,7 +15,7 @@ An honest list of what the model hasn't solved yet, most dangerous first.

 3. **Members' savings sit inside their employer.** [Member capital accounts](capital-accounts.md) are capped at a year's pay and protected by a solvency test, but they rank behind the co-op's creditors. Fagor's 2013 bankruptcy shows what that can mean. Federation-backed insurance is an option, not yet a design.

-4. **Is the lock too rigid?** A co-op that should be sold (a better operator exists, the members want out) can only go to another co-op. If the co-op sector is small, that buyer pool is tiny, and viable firms may be liquidated instead of rescued. The federation as buyer of last resort is a partial answer. Critics on the right add a sharper version: a lock that outlasts a repaid loan by generations is a permanent restriction on selling property, bought with one loan, and it binds members who never agreed to it.
+4. **Is the lock too rigid?** A co-op that should be sold (a better operator exists, the members want out) can only go to another co-op. If the co-op sector is small, that buyer pool is tiny, and viable firms may be liquidated instead of rescued. The federation as buyer of last resort is a partial answer. Critics on the right add a sharper version: a lock that outlasts a repaid loan by generations is a permanent restriction on selling property, bought with one loan, and it binds members who never agreed to it. Italy offers a softer model: a co-op there can convert into an ordinary company, but its accumulated reserves go to the co-op development fund, not to the members ([Has This Been Tried?](precedents.md#italys-co-op-funds-coopfond-and-the-marcora-law)). That would keep the part of the lock that stops members cashing out what earlier generations built, and drop the part that stops a firm from ever changing hands.

 5. **Scale.** Even a total success at pilot scale leaves most workers in conventional firms. The labor-market effect needs a sector large enough to move wages, and nobody knows how long growth to that size takes, if it happens at all. That's the price of not forcing it.

@@ -27,7 +27,7 @@ An honest list of what the model hasn't solved yet, most dangerous first.

 9. **The 1/N problem.** *(Mostly answered.)* Peer monitoring works at 30 people; at 10,000 your extra effort raises the pool by a rounding error. The answer is culture and structure: co-ops really do push out free riders, and the federation model keeps units small enough for monitoring to bite while pooling risk above them.

-10. **The pilot's own weak points.** [The pilot](pilot-spec.md) puts the burden of proof on the co-ops, which means roughly a 1-in-10 chance of shutting down a pilot that was actually working. It tests individual co-ops, not the [federation](federation.md) support network Mondragon relied on. Its comparison group (small businesses with government-backed loans) is biased in directions that partly cancel out, by amounts nobody knows. And market-rate lending based on collateral may mostly reach founders who already have some wealth. Approval rates by race, gender and wealth are published so that shows up, but publishing a gap doesn't close it.
+10. **The pilot's own weak points.** [The pilot](pilot-spec.md) puts the burden of proof on the co-ops, which means roughly a 1-in-10 chance of shutting down a pilot that was actually working. It tests individual co-ops, not the [federation](federation.md) support network Mondragon relied on. Its [support lottery](pilot-spec.md#the-support-lottery) tests hands-on help after the loan, but not help *before* a co-op exists, which is where Mondragon started and which might matter most for getting enough good co-ops founded. And unlike Mondragon and Italy's Marcora Law, it doesn't require members to put in money of their own. That's a real trade-off: a stake from members screens out people who only want the loan, but it also shuts out workers with no savings. Its comparison group (small businesses with government-backed loans) is biased in directions that partly cancel out, by amounts nobody knows. And market-rate lending based on collateral may mostly reach founders who already have some wealth. Approval rates by race, gender and wealth are published so that shows up, but publishing a gap doesn't close it.

 11. **Federal or state?** A federal bank is the cleanest single experiment. But a few state-chartered lenders running one shared, pre-registered plan would fail smaller, fit the fact that co-op law is state law, and might be harder to repeal all at once. That trade-off hasn't been worked through.

@@ -69,6 +69,7 @@ This page lists the ways someone could cheat [the pilot](pilot-spec.md), or sabo
 - **"Open" means actually operating:** at least three members and sales above a minimum level. An empty shell counts as closed.
 - **Loans are valued honestly.** At review, outstanding loans are valued at what a buyer would pay. A loan whose terms were eased to avoid default is marked down. Unpaid interest added to the balance doesn't count as income.
 - **Mergers are treated the same on both sides.** A co-op absorbed by another co-op, and a conventional firm bought by another firm, are both counted as neither success nor failure. A second analysis counts them both ways.
+- **A merger that hides a failure counts as a failure.** If a co-op was behind on its loan payments, or below the minimum sales level, at any point in the year before it merged, the merger counts as a closure. Nobody working for the bank, including [the advisers](pilot-spec.md#the-support-lottery), may arrange or suggest a merger.

 ## Sabotage

@@ -52,7 +52,7 @@ Private co-op lenders exist and do good work, but they're small. Shared Capital
 It breaks down like this:

 - **About $300 million for loans.** Around 400 co-ops with a typical first loan of about $500,000 is roughly $200 million. The rest is for follow-on loans to co-ops that grow. For comparison, Shared Capital's average loan is about $230,000. The pilot's loans are larger because it's meant to fund real businesses with real payrolls, not only very small ones.
- **$20 million, capped, for business help:** bookkeeping, governance training, legal setup. Venezuela's census blamed many of its failures on the lack of exactly this. This money is a public cost, stated openly and capped, and it's counted in the pilot's total cost to taxpayers. It isn't allowed to hide inside loan pricing.
+- **$20 million, capped, for business help:** bookkeeping, governance training, legal setup, and more intensive help for half the co-ops, chosen by lottery (see [the support lottery](#the-support-lottery)). Venezuela's census blamed many of its failures on the lack of exactly this. This money is a public cost, stated openly and capped, and it's counted in the pilot's total cost to taxpayers. It isn't allowed to hide inside loan pricing.
 - **The remainder** is a cash cushion and running costs.

 ## Why about 400 co-ops
@@ -110,7 +110,7 @@ All of this is written down and filed in a public study registry before the firs
   - it stops being a real co-op: fewer than three-quarters of its work hours are done by members, or its workers are kept on probation past the limit.

   The pay rule matters. Co-ops can survive a bad stretch by cutting their own pay instead of cutting jobs, and the best existing study couldn't rule that out. A co-op that survives by paying its people far less than the business down the street hasn't passed.
-2. **The bank's money.** At the end, after every loss, write-off and running cost, has the loan book earned at least what the same money would have earned in Treasury bonds over the same years? Anything less means taxpayers lost money compared with just holding bonds. Loans still outstanding are valued at what a buyer would pay for them. Loans that were restructured to avoid default are marked down, so going easy on struggling borrowers can't hide losses.
+2. **The bank's money.** At the end, after every loss, write-off and running cost, and every dollar spent on business help, has the loan book earned at least what the same money would have earned in Treasury bonds over the same years? Anything less means taxpayers lost money compared with just holding bonds. Loans still outstanding are valued at what a buyer would pay for them. Loans that were restructured to avoid default are marked down, so going easy on struggling borrowers can't hide losses.

 A useful yardstick: among the SBA's mature loan groups from 1992 to 2004, loans making up about 6% to 10% of the money lent eventually defaulted, and about 37% of the defaulted amount was later recovered ([GAO-20-618](https://www.gao.gov/products/gao-20-618)). A lender charging market rates with losses in that range covers them from interest.

@@ -139,6 +139,38 @@ This is the hardest part of any test like this. Co-ops that got a loan aren't li

 **What existing evidence predicts.** The strongest study so far followed every firm in Uruguay from 1997 to 2009: about 29,000 firms, 223 of them worker-run. After leaving out very small businesses and adjusting for tax differences, worker-run firms were about 29% *less* likely to close in any given period than conventional ones ([Burdín, *ILR Review*, 2014](https://journals.sagepub.com/doi/10.1177/001979391406700108)). The advantage was clearest in services. In manufacturing and transport there was no clear difference. That's encouraging, but it's one country, and it's why pay is built into the survival measure above.

+## The support lottery
+
+Mondragon's bank gave its co-ops far more than loans. It gave them a salaried manager while they planned, specialist departments for marketing and production, a staff member who sat in on board meetings for the first year, and monthly check-ins on the numbers ([Has This Been Tried?](precedents.md#mondragons-bank-caja-laboral)). Nobody knows whether the loans or the help did the work. The pilot can test part of that cheaply, so it does.
+
+**How it works:**
+
+- **Every co-op gets standard help:** setting up the books, legal setup, and training in how to run a co-op meeting and a co-op budget. That's about $15,000 per co-op, around $6 million in all.
+- **Half also get intensive help for two years, chosen by lottery.** That means an experienced adviser who attends board meetings without a vote, a monthly review of the numbers, and access to specialists in marketing, operations and pricing. It costs about $70,000 more per co-op, around $14 million in all.
+- **The draw is made by the reviewers, not the bank**, after each co-op's first loan payment, using a random method filed in advance. It's balanced by industry and by the founders' wealth. Every co-op is analyzed in the group it was drawn into, whether or not it uses the help, so a co-op can't improve the numbers by opting in or out.
+- **Each co-op's help budget is set aside when it's drawn.** If money runs short, the intensive group gets smaller, but no co-op's help gets thinner.
+- **Co-ops agree to the lottery when they apply**, and the design is approved by an independent research ethics board. Co-ops in the standard group can ask for intensive help after year four, once the main comparison has been measured.
+
+**Advisers are walled off from the bank's interests.**
+
+- **They're hired through outside nonprofit providers on fixed fees.** They aren't bank staff, and nothing they're paid depends on whether their co-ops survive.
+- **They advise; they don't run anything.** All advice is written and non-binding. They can't vote, sign anything, or take part in hiring or firing, and the members can replace their adviser at any time.
+- **They can't arrange rescues.** Advisers can't arrange or suggest mergers, loan changes or sales of the business. A co-op's merger counts as a closure if it was behind on payments or below the minimum sales level in the year before (see [Keeping zombies alive](pilot-safeguards.md#keeping-zombies-alive)). Merger and restructuring counts are published for each group.
+- **They're treated as insiders.** An adviser and their firm can't sell paid services to a co-op they advised for three years afterward. Someone who referred a co-op for a loan can't be its adviser.
+- **Their one reporting duty is fraud.** They report suspected fraud to the reviewers, and nothing about business performance goes to the lending side.
+
+**The help is a subsidy, and it's counted as one.** Intensive help is worth something like a sixth of a typical first loan. So:
+
+- **Every dollar of business help counts against the bank** in the [money test](#the-decision-rule), just like a bad loan.
+- **The survival result for the standard-help group alone is published next to the main result.** If co-ops only hold their own with intensive help, readers will see that.
+- **Comparison firms' use of free government business counseling**, such as the SBA's Small Business Development Centers, is recorded where the data allows.
+
+**What it can and can't show.** Assume about 200 co-ops in each group and closures in line with new businesses generally. Then the pilot can reliably detect only a large effect, something like 30 to 40% fewer closures in the intensive group. So its main outcome is survival and fair pay at year four, when the help's effect should be clearest, with year twelve reported as well. The result is reported as a range, with a cost per closure avoided, and it counts as exploratory. **A result that isn't statistically significant doesn't prove the help is useless.** It means only that a large effect has been ruled out.
+
+**What it doesn't test.** Mondragon's help started *before* a co-op existed: studying the idea, paying the manager, covering early losses. This lottery starts after the loan, so it can't say whether help before launch creates more good co-ops. That's logged as an open question.
+
+**If intensive help works,** that's an argument for building it into [the federation](federation.md), paid for by the co-ops out of their shared fund the way Italy's Coopfond is, not for a permanent federal advisory office.
+
 ## The timeline

 - **Year 0.** Charter the bank. File the full analysis plan, code, benchmarks and thresholds. Name the reviewers.
@@ -155,7 +187,7 @@ At year 12, both measures must pass:
 1. **Fair survival.** We can be 95% confident that co-ops' chance of failing in a given year, as defined above, is no more than 25% higher than the comparison group's. If co-ops are exactly as durable or more, this should pass. If they're clearly worse, it fails.

   Why allow up to 25% rather than demanding exact equality? No test can prove two things are *exactly* equal. You can only rule out differences bigger than some margin, and a tighter margin takes more co-ops. Ruling out a 10% gap would take somewhere around 1,500 to 2,000 co-ops, more than twice the entire US co-op sector. The 25% margin is also a value judgment, stated openly: a society might reasonably accept firms that are a little less durable in exchange for workplaces people govern themselves. Readers who think that price is too high should say so. Burdín's result suggests the margin won't matter, because co-ops may well come out ahead.
-2. **The bank's money** earned at least the Treasury rate.
+2. **The bank's money** earned at least the Treasury rate, counting every loss, every running cost, and every dollar of business help.

 **If both pass:** the charter triggers a fast-track, up-or-down vote in Congress on a second capitalization, with no amendments and no committee bottleneck. It can't be automatic, because no Congress can bind a later one's spending. A fast-track vote is the most that can honestly be promised. If the bank is later allowed to borrow, its debts carry **no federal guarantee**, written into the charter. Fannie Mae and Freddie Mac needed a taxpayer rescue in 2008 partly because markets had always assumed the government stood behind them. This bank shouldn't be able to create that assumption.

@@ -173,5 +205,5 @@ At year 12, both measures must pass:

 - **Whether the labor market changes.** 400 co-ops won't move anyone's wages. See [The Test](the-test.md).
 - **Whether the best founders come.** The test measures the co-ops that *did* apply. If strong founders stay away ([The Founder Problem](founder-problem.md)), a pass means "the co-ops that exist can compete," not "co-ops would win with everyone's best people."
- **Whether co-ops do better with a full support network.** The pilot funds individual co-ops. It doesn't build [the federation](federation.md) that Mondragon relied on, so co-ops that join a federation are reported separately.
+- **Whether co-ops do better with a full support network.** The pilot funds individual co-ops. It doesn't build [the federation](federation.md) that Mondragon relied on, so co-ops that join a federation are reported separately. The [support lottery](#the-support-lottery) tests one piece of that network, hands-on help, but not the rest: shared funds, moving workers between co-ops, joint buying and selling.
 - **Whether it survives politics.** Congress can refuse the second capitalization, or repeal the whole thing. See [The Constitution](constitution.md).
@@ -0,0 +1,88 @@
+---
+title: Has This Been Tried?
+section: Growing the Sector
+order: 55
+summary: Three real institutions that financed co-ops (Mondragon's bank, America's co-op bank, and Italy's co-op funds), what they got right, how they went wrong, and what the pilot takes from each.
+---
+
+# Has This Been Tried?
+
+A bank that lends to co-ops isn't a new idea. At least three serious versions exist, and each teaches something different. One built a whole economy of worker co-ops, and then quietly became an ordinary bank. One was created by Congress, and ended up lending to expensive New York apartment buildings. One is funded by co-ops themselves and still holds most of what it has collected over thirty years.
+
+This page goes through what each one actually did, with the failures left in, and what [the bank](the-bank.md) and [the pilot](pilot-spec.md) take from them.
+
+## Mondragon's bank: Caja Laboral
+
+**What it was.** In 1959 the young Mondragon co-ops in Spain's Basque Country founded their own savings bank, the Caja Laboral Popular ("the Working People's Bank"). Local people deposited their savings there, and every member co-op was required to bank there too. Until the 1980s it lent almost only to co-ops. Apart from some government job-creation money, it was their only source of capital from outside their own members, and its loans made up about half of the co-ops' capital ([Morris, *The Mondragón System*, 1992](https://www.ilsr.org/wp-content/uploads/2013/03/mondragon-3.pdf)).
+
+**What made it unusual wasn't the money. It was the help.** In 1969 the bank set up a separate Entrepreneurial Division, which worked more like a business incubator than a loan desk (Morris, 1992):
+
+- When a group of workers came with an idea, the bank picked one of them to be manager, **paid them a salary**, and put them on a team that studied whether the business could work. That often meant visiting factories elsewhere in Europe to learn how the best ones did it.
+- The bank had departments for marketing, exports, production planning, factory design, legal setup and accounting, and the new co-op could use all of them.
+- The bank put up 60% of the start-up money. The government's job-creation program put up 20%, and the founders themselves 20%. The bank also covered the new co-op's operating losses for its first two years, as a loan to be repaid later.
+- One bank staff member was assigned to each new co-op as its "godfather" and sat in on its board meetings for the first year.
+- Every co-op sent the bank monthly financial reports and got a full audit every four years.
+
+**The famous number, and why it needs care.** Of the 103 co-ops created between 1956 and 1986, only three were shut down ([Whyte and Whyte, *Making Mondragon*, 1988, as summarized by Participedia](https://participedia.net/case/82)). That counts co-ops the bank rescued, restructured or merged as survivors, and five things sit behind it:
+
+- **The money was cheap.** One new co-op, a maker of seed drills, borrowed at 8% when the going market rate was 15%. The bank could do this partly because every co-op had to do its banking there, which kept its cost of money low, and partly because its managers were paid co-op wages (Morris, 1992).
+- **The help was subsidized.** The economist David Ellerman estimated in the early 1980s that what new co-ops repaid for their start-up support covered less than half of what it actually cost the bank (Morris, 1992).
+- **Survival often meant rescue.** In Spain's recession of the late 1970s and early 1980s, the bank's business division switched from starting co-ops to saving them. In 1983 alone, 34 of about 100 co-ops needed its intervention department. The bank replaced managers, changed product lines, merged co-ops, and moved workers between them, and it wrote off about $160 million in loans (Morris, 1992). Many of the co-ops that "survived" did so because the bank restructured them. That's a real achievement, but it isn't the same as surviving on their own.
+- **The market was protected.** Mondragon's biggest industry was household appliances. In 1980 Spain protected them from imports with a 35% tariff, and that protection only fell away (to 5% in 1991) as Spain joined the European market (Morris, 1992).
+- **Then the bank moved on.** Once a change in Basque co-op law allowed it, in the early 1980s, the bank started offering mortgages and car loans to the public, and its deposits grew far beyond what the co-ops needed. By the early 1990s only about 15% of its loans went to co-ops. In 1991 the Entrepreneurial Division was spun off into a separate consulting co-op, LKS (Morris, 1992).
+- **And the flagship later failed.** Fagor, the appliance maker at the heart of the group, expanded across Europe and China largely on borrowed money, lost its main market in Spain's housing crash, and went bankrupt in 2013 with €1.1 billion of debt ([Wikipedia](https://en.wikipedia.org/wiki/Fagor)). Full group support didn't save it.
+
+**What the pilot takes from it:**
+
+1. **Maybe the help mattered more than the money.** Mondragon combined cheap loans, a protected home market and intensive hands-on support, and nobody can tell which one did the work. The pilot tests one piece of that directly (see [the support lottery](pilot-spec.md#the-support-lottery)).
+2. **Count rescues honestly.** A bank that can quietly restructure its borrowers can make almost any survival rate look good. That's why the pilot counts a co-op that's been restructured to avoid default as a loss, not a survivor (see [Keeping zombies alive](pilot-safeguards.md#keeping-zombies-alive)).
+3. **A co-op bank drifts toward ordinary lending once co-op demand runs out.** The pilot's bank can lend only to worker co-ops, and the bank can't change its own charter (see [The Bank](the-bank.md)). That doesn't stop a legislature from changing it, which is how Caja Laboral's drift began.
+4. **The pilot doesn't copy the cheap money.** It lends at market rates, for the reasons on [the bank's page](the-bank.md). The help it gives *is* a subsidy, so it's counted against the bank's results and tested separately (see [the support lottery](pilot-spec.md#the-support-lottery)).
+
+## America's co-op bank: the National Consumer Cooperative Bank
+
+**What it was.** In 1978 Congress created the National Consumer Cooperative Bank to lend to co-ops that couldn't get credit from ordinary banks. It came with a separate office to give new co-ops technical help and start-up money. The law authorized up to $300 million of federal capital over five years ([Public Law 95-351](https://www.congress.gov/95/statute/STATUTE-92/STATUTE-92-Pg499.pdf)). According to one of its later board members, the public investment that actually went in was about $100 million, to be repaid over 40 years ([Barnes, board member 1982–86](https://peter-barnes.org/blog/what-ever-happened-to-the-national-cooperative-bank/)).
+
+**Why it never became a worker-co-op lender.** The law was written for co-ops whose members are *consumers*: food co-ops, housing co-ops, co-ops that buy things together for their members. To qualify, a co-op has to serve members "who are ultimate consumers" of what it provides. Co-ops of *producers* can borrow, but loans to them are capped at 10% of the bank's assets ([12 U.S.C. § 3015](https://www.law.cornell.edu/uscode/text/12/3015)). A worker co-op, whose members supply their work rather than buy its products, fits that law awkwardly at best. Worker co-ops were never what it was built for.
+
+**What happened to it.** The Reagan administration tried to shut it down in 1981. Congress resisted, and the compromise was to privatize it. On December 31, 1981 it became a co-op owned by its borrowers, and by 1985 it was fully private and renamed the National Cooperative Bank ([Next City, 2019](https://nextcity.org/urbanist-news/the-weirdest-bank-youve-never-heard-of); [Encyclopedia.com](https://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/national-cooperative-bank)). It survived, and it had about $2.6 billion in assets in 2019. Its technical-help office was later spun off as a separate nonprofit ([12 U.S.C. § 3051](https://www.law.cornell.edu/uscode/text/12/3051)). But in the words of one of its former directors, it became "a big lender to fancy New York City housing coops, large grocery wholesalers" and other "healthy businesses, few of whom need help getting credit" (Barnes).
+
+**What the pilot takes from it:**
+
+1. **The charter decides who gets served.** A bank "for co-ops" will lend to whichever co-ops are safest. The pilot's bank is chartered for worker co-ops only, and only those that accept [the lock](the-lock.md).
+2. **A target nobody enforces is not a target.** The 1978 law told the board to use its "best efforts" to keep at least 35% of its loans going to co-ops of low-income people or facilities they use (Public Law 95-351). Missing that target had no consequence, and the bank drifted toward borrowers that could have borrowed anywhere. The pilot has fixed measures, published in advance, and a date when it has to answer for them (see [The Test](the-test.md)).
+3. **Politics can change what a bank is.** It survived an attempt to close it by becoming something else. A charter can't protect against the legislature that wrote it. The pilot is built so that a failed test shuts it down cleanly, rather than letting it drift into a different mission (see [The Constitution](constitution.md)).
+
+## Italy's co-op funds: Coopfond and the Marcora Law
+
+Italy has two different kinds of co-op fund, and both are useful.
+
+**Coopfond: money from the co-ops themselves.** Since 1992, Italian law has required every co-op to pay 3% of its annual profit into a co-op development fund, usually the one run by its federation ([Lomuscio and Tortia, 2023](https://pdfs.semanticscholar.org/a7eb/90b586cb2adb63c321f1ca616afefb27eb70.pdf)). Coopfond is the fund of Legacoop, the largest federation. It also receives whatever is left of a co-op's assets when it's wound up, or when it converts into an ordinary company. It invests in co-ops through loans and temporary, time-limited stakes, and recycles the money as it's repaid. From 1993 to 2023 it collected about €596 million. After three decades of losses and grants, about €499 million, or 91% of what it collected, is still in the fund. Around 2,400 co-ops pay in, about €18–20 million a year ([Coopfond, 2022–23 sustainability report](https://www.coopfond.it/wp-content/uploads/bilancio24_compressed.pdf)).
+
+Two cautions. Those are euros as collected, not adjusted for thirty years of inflation, so the fund's real value has shrunk more than the 91% suggests. And it isn't a one-time endowment: new money arrives every year, and Italian co-ops pay the 3% alongside generous tax breaks on their locked reserves. Still, it's the closest real-world model for the [federation's](federation.md) shared fund: the movement financing its own growth without spending its capital away.
+
+**The Marcora Law: public money matched to workers' own.** Under a 1985 law named after the industry minister who proposed it, Giovanni Marcora, the Italian state helps workers buy out firms that are closing. It invests alongside the workers through CFI, a specialist co-op investor whose members include the industry ministry, Italy's business development agency Invitalia, and about 270 co-ops. Before investing, CFI studies whether the business can work and advises the workers, much like Mondragon's Entrepreneurial Division. Workers put in their own money too, often from their severance and unemployment benefits ([Vieta, Euricse working paper, 2015](https://base.socioeco.org/docs/wp-78_15_vieta.pdf)).
+
+The survival record is good. Of the 82 buyouts started between 2003 and 2014, 71 (87%) were still operating at the end of 2014 (Vieta, 2015). That's a young group, though, and buyouts are chosen with care: workers only try one when they're confident the business can work.
+
+These are rescues of existing businesses, which [the pilot](pilot-spec.md#who-can-borrow) keeps out of its main test because of Uruguay's experience. The difference is in how they're chosen. Marcora buyouts need the workers' own money and a specialist's study of whether the business can work. Uruguay's went mostly to politically connected firms that had already failed.
+
+**The warning in the Marcora story.** The original law let the state put in up to three euros for every euro the workers invested. After Italy's main employers' association intervened, the European Union ruled that this broke its competition rules by giving worker buyouts an unfair advantage, and the program was suspended. A 2001 reform cut the state's share to one euro per worker euro, to be repaid over 7 to 10 years. From 2000 to 2006, while the rules were being rewritten, CFI made no new investments, and only a handful of buyouts happened at all (Vieta, 2015).
+
+**What the pilot takes from it:**
+
+1. **A movement fund can last.** Coopfond shows that a small cut of co-op profits, lent and invested carefully, can keep its value for decades. The federation fund is modeled on it.
+2. **Workers' own money in, alongside the public's.** Both Mondragon (20% from founders) and Marcora (one to one) required workers to put money in. The pilot doesn't require it yet. That's logged as an open question, because a buy-in also shuts out workers with no savings.
+3. **Subsidies get challenged.** Marcora's generous matching was the part that got struck down, and the program lost six years. The US has no European-style rule against state aid, but the political version of the same attack ("unfair competition with taxpayer money") works anywhere. A bank that lends at market rates is much harder to attack that way. That's one more reason the pilot's bank doesn't subsidize its loans, and why the help it does give is costed openly.
+4. **Italy locks the reserves, not the firm.** An Italian co-op *can* turn itself into an ordinary company, but its accumulated reserves go to the co-op development fund, not to the members. That's a softer version of [the lock](the-lock.md), and it's weighed in [Open Problems](open-problems.md).
+
+## The pattern
+
+| | Mondragon's bank | US co-op bank | Coopfond | Marcora / CFI |
+| --- | --- | --- | --- | --- |
+| **Money came from** | Local savers and the co-ops' own deposits | Federal capital | 3% of co-op profits | The state, matched to workers' money |
+| **Hands-on help** | Very intensive | A separate office, later spun off | Some | Feasibility study and advice |
+| **Who it served** | Worker co-ops | Mostly housing and consumer co-ops | Co-ops of all kinds | Worker buyouts |
+| **What went wrong** | Rescues flattered its record; it drifted into ordinary banking; its flagship failed | Drifted to safe borrowers after privatization | Its real value shrank with inflation | Its subsidy was ruled unfair and the program suspended |
+
+Four cases can't prove a rule. But two patterns stand out. The two that actually built worker co-ops, Mondragon and Marcora, both paired money with serious hands-on help before and after launch. And both banks drifted once their mission became optional, one because the law changed and one because nobody enforced its target. The pilot takes both lessons: it tests whether the help matters, and its mission comes with a deadline and a verdict.
@@ -9,7 +9,7 @@ summary: Lead with "nobody is forced," point to the co-op banks that already exi

 **Lead with "nobody is forced."** The model takes nothing from anyone. It charters a bank, asks it to lend at market rates to a kind of firm other banks won't touch, and publishes the results. If co-ops can't compete, the experiment says so and it gets wound down. That is the most market-friendly proposal on the left, and it should be argued that way.

-**The second line: "we already did this."** Congress chartered a cooperative bank in 1978. Mondragon built one in the 1950s. Italy has run a co-op development fund on member profits for decades. This is an old, tested idea aimed at a new target.
+**The second line: "we already did this."** Congress chartered a cooperative bank in 1978. Mondragon built one in the 1950s. Italy has run a co-op development fund on member profits for decades. This is an old, tested idea aimed at a new target. The record, failures included, is in [Has This Been Tried?](precedents.md).

 **Germany is now a supporting point, not the lead.** Co-determination puts workers on up to half the supervisory board of large firms, by law, and Germany is still a capitalist market economy. It shows ownership and governance rules are choices societies make, not laws of nature. But it's no longer needed to defend a mandate, because there isn't one.

@@ -11,11 +11,11 @@ summary: A small public bank that lends only to worker co-ops, at market rates,

 Why a bank and not a mandate: co-ops are rare, and there are two competing explanations. One says they're rare because capital markets won't fund firms whose owners can't sell equity to outsiders. The other says they're rare because they're genuinely harder to run. A bank that removes the financing barrier is the experiment that tells those apart. If co-ops were starved of capital, they'll grow. If they're hard to run, the portfolio will fail, and we'll have learned that honestly and cheaply.

-Mondragon already proved the first half of the premise: it had to build its own bank, Caja Laboral, because ordinary banks wouldn't lend to it.
+Mondragon's history supports the first half of the premise. For decades, apart from some government job-creation money, its own bank, Caja Laboral, was its co-ops' only source of capital from outside their own members. But that bank also gave them cheap loans and intensive hands-on help, in a market protected by tariffs, so nobody can say which one mattered (see [Has This Been Tried?](precedents.md)).

 **Design:**

- **Charter:** lends only to firms that meet the [co-op definition](worker-ownership.md) and accept [the lock](the-lock.md).
+- **Charter:** lends only to firms that meet the [co-op definition](worker-ownership.md) and accept [the lock](the-lock.md). The bank can't widen its own charter. Mondragon's bank drifted into ordinary lending after a change in the law, and America's co-op bank drifted toward the safest co-ops once nothing held it to its target (see [Has This Been Tried?](precedents.md)). A charter can't stop Congress from changing it, but the fixed measures and deadline in [The Test](the-test.md) mean a mission change can't happen quietly.
 - **Priced at market rates.** This is deliberate. The bank's edge must be *willingness* to underwrite a firm structure other lenders refuse, not *cheap money*. If it lends below market, every result is unfalsifiable: success gets dismissed as "free state money," failure gets dismissed as "hobbled by the lock." At market rates, survival and returns mean something.
 - **Professional, insulated underwriting.** Loan officers are bankers, not appointees. Lending decisions are walled off from legislators the way monetary policy is walled off from Congress. A bank that funds whichever co-op has the best-connected sponsor fails the experiment and deserves to.
 - **Self-sustaining by design.** One-time capitalization, then it lives on its loan book. Losses are public and published. A permanent appropriation would turn it into a subsidy line, and subsidy lines get captured.
@@ -23,6 +23,6 @@ Mondragon already proved the first half of the premise: it had to build its own

 The actual numbers (how much money, how many co-ops, loan limits, and how "market rate" is checked) are in [The Pilot, in Numbers](pilot-spec.md). The rules against sham co-ops and political favoritism are in [Guarding the Pilot](pilot-safeguards.md).

-**Precedent:** the United States already has one. Congress created the National Consumer Cooperative Bank in 1978. It was never scaled or aimed at worker co-ops specifically, but "a federally chartered bank for cooperatives" is not a new idea. Italy's Coopfond, financed by a mandated slice of member co-op profits and used to seed new ones, has decades of data on exactly this kind of lending.
+**Precedent:** this has been tried, in pieces. Congress created a National Consumer Cooperative Bank in 1978, but its law was written for consumer co-ops, and after it was privatized in 1981 it became mainly a lender to housing co-ops. Italy's Coopfond, funded by 3% of co-op profits, has lent and invested in co-ops for three decades and still holds about 91% of what it collected. Italy's Marcora Law puts public money alongside workers' own to fund worker buyouts. The details, including how each went wrong, are in [Has This Been Tried?](precedents.md).

 **And a warning:** Uruguay's public fund for worker-run firms, FONDES, lost almost 90% of its loan book within five years, mostly on rescues of already-failed firms with political connections. [The pilot](pilot-spec.md#two-warnings-from-real-life) is designed around that failure.