The Strength of Co-operatives

An article by Frank    No Comments

When discussing Fair Trade and the use of co-operatives as a healthy business model in developing areas, I often get asked what a co-operative (co-op) is. Allow me to give an explanation here for people who may not have grasped an understanding of this business model before, and allow to me to share why I think it is a strong model for developing areas.

The Statement on the Co-operative Identity issued by the International Co-operative Alliance gives the following definition of a co-op:

A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.

More often than not, it is a value driven enterprise. The quoted statement defines the following values as a the driving force for good co-ops:

Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

The following are the defining principles for co-ops, given in the statement:

The co-operative principles are guidelines by which co-operatives put their values into practice.

1st Principle: Voluntary and Open Membership

Co-operatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

2nd Principle: Democratic Member Control

Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organised in a democratic manner.

3rd Principle: Member Economic Participation

Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.

4th Principle: Autonomy and Independence

Co-operatives are autonomous, self-help organisations controlled by their members. If they enter to agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.

5th Principle: Education, Training and Information

Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.

6th Principle: Co-operation among Co-operatives

Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.

7th Principle: Concern for Community

Co-operatives work for the sustainable development of their communities through policies approved by their members.

It must be stated, in order to avoid any confusion, that what I am supporting and endorsing here is the voluntary co-operation of individuals around a democratic business model, not the involuntary, communist form of worker ownership that forces the distribution of communal resources even where the will of the people is against such distribution. The latter, in my mind, places power in the hands of an elite few and does not actually follow through on the egalitarianism it purports to uphold. True egalitarianism can only be achieved through voluntary democracy, not through state control.

Voluntary co-operatives have proven time and time again that they are a strong model of business for the development of struggling communities as they draw individuals into the process of business and provide all with the benefits of whatever the business achieves. One of the major advantages of this model is the ability it has to draw entire villages and communities into developing a business around whatever area that village is strong in, providing each member of the community the chance to input and develop said business and reap the rewards.

The co-operative model, where whole communities are involved, has seen the development of health and educational institutions in once struggling communities as profits are put straight back into those communities at the request of the members who in turn benefit from the resulting developments.

More often than not, it is the co-op model that member businesses of organizations such as the Fairtrade Association are choosing to deal with as by doing so they can often access a number of growers of product who are supplying individual co-ops and they can create deals through the one organization that benefits all the associated growers as those growers are almost always part owners of the co-ops… does that make sense?

Now, to pre-empt the critics, as with anything it wouldn’t be too hard to find instances where even this system has been abused and people have been marginalized for the gain of a few, but by and large it seems to be one of the most, if not THE most successful model in developing areas.

Addition post publishing: It will be interesting to watch and see if co-operatives grow in their popularity as a business model of choice in developed nations where a system crash seems to be occuring, thus crippling the financial and business models that have become the norm. Will developed nations turn to more democratic models of business that flatten out the authority structure and therefore the liability?