That it's not so common is an interesting question: does it get outcompeted by your standard corporation? Would people rather generally work as employees than take on risk as owners? Something else? I think in a co-op like this, employees would still be eligible for food stamps, and there's nothing preventing them from "decimating" a local economy, either.
I think this is "socialist", and it seems to be working, and everyone is happy, so more power to them. But my understanding is since there's nothing preventing people from setting this up, the "Red Scare" was not a bunch of people going, "hey, change the laws so me and my buddies can set up a co-op". Like, what's the actual policy change desired? "Let folks who want to run corporations and work for them do so, and let folks who want to operate in a co-op do so?" No, because that's our current situation.