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When is a Co-op not a Co-op?

According to the official ICA definition, “A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through jointly-owned and democratically-controlled enterprise”.

But the question: “When is a co-op not a co-op?” is a valid one and can probably no longer be considered a conundrum. There are several answers such as: “When it is a company.,” or “When it is government-controlled”, or “When its assets have been sold off.” Unfortunately, the global cooperative community appears loath to face up to the fact that the word cooperative has come to mean all things to all men. In its submission prepared for the Third PrepCom of the UN World Conference on Women2, the International Cooperative Alliance (ICA) includes a “Note on what cooperative enterprises are not”. That Note, written in the past tense, could well have been written in the present, since it aptly describes the situation of a large share of “cooperatives” today. The elements of the Cooperative Identity Statement remain essentially an ideal in many parts of the world.

Conferring the term “cooperative” on any institution claiming to be one, and grouping all such institutions together under a single umbrella category makes it possible to reach fantastic (3.6 billion cooperators) figures which themselves depend on unreliable and frequently inflated national statistics. To give but one example, a 1993 World Bank report: Review of Cooperatives and Other Rural Organisations in Ghana considers that “only 4 per cent of the registered agricultural cooperatives were in actual operation”. But surely this does a disservice to genuine cooperatives?.

Behind the impression of power, unity, mission and a monolithic cooperative movement is a confusing amalgam of widely differing institutions where the term means different things to different observers.

Farmer Organizations Survive Difficult Times in Ethiopia
The drought of the mid-1980s decimated the very productive base of Ethiopia's agriculture. Strengthening farmers' organizations, in particular to handle input supply, was an important factor in rehabilitating the sector. Yet promoting genuine cooperative development in a country where the “cooperative” had become little more than an extension of the ruling party's control in the countryside was a challenging task.
FAO's Freedom from Hunger Campaign (FFHC) launched a project providing inputs on credit. By 1993 it had reached 13 service cooperatives serving no less than 175 000 rural people. The success of the project in mobilizing farmers around the new cooperatives was such that the international NGO community contributed US$7 million, a considerable sum for one NGO project.
Among the types of activity which have progressed apace are: farmer-centred agronomic research, with trials based on traditional varieties; seed multiplication by local farmers; women's savings and credit groups; veterinary services by para-vets trained by the project and paid by the farmers; tree nurseries, including income-generating trees such as coffee; and improved cooperative management using local people trained by the project.
The new government's policy on non-intervention, participation and genuine cooperatives is exemplary, but project staff believe it now needs further operationalizing in order for the farmers' organizations and cooperatives to be able to develop their full potential.

In many less developed and newly industrializing countries now emerging from the grip of authoritarian or centrally-planned regimes, the term “cooperative” has become symbolic of values which are frequently quite the opposite of those it is supposed to incorporate. For instance, in much of rural Tunisia, where a quarter of a century after the failure of the forced cooperativisation programme, the term is still remembered with misgiving; in Tanzania, where the failed Ujamaa village experience turned rural people off collective action; or again in Albania, where any term (“Private Farmers' Associations”) will do to avoid the “eleven-letter word”. Even those genuine cooperatives which have managed to survive independently in such countries have become tarred with the same brush. Tristram Eastwood, writing for COPAC considers that “the pseudo-cooperative is a particularly repugnant institution because it is a travesty of what it is supposed to be.”3

Indeed, the juxtaposition of State-driven “pseudo-cooperatives” with genuine ones which are based on the principle of mutual self-help, creates confusion both within and outside the movement. Studies of “cooperatives” which use the parody to condemn the genuine product are deeply unfair.

Ashish Shah sees cooperatives today as being faced with three choices: adopting the company model, the third sector model (basically that adopted in many countries of the South where cooperatives run programmes for the government) or the cooperative value-based model.4 Only the latter corresponds to the generally accepted definition, and it is seen as a model for cooperatives “looking for new areas of activity and trying to offer solutions where the State and market fail to address certain pressing problems, such as unemployment and caring for senior citizens or ecological degradation”. On the face of it, this implies cooperatives are no longer capable of operating as economic businesses while complying with the cooperative rule book. Is this not another form of parody?.

The cooperative image and identity crisis has different origins and meaning in the industrialized, developing and former Soviet bloc countries. A diluted sense of membership is generally the common thread in the crisis. But it also has to do with the “special nature” of cooperatives as forms of socially-responsible, patron-owned private business which distinguishes them from capitalistic firms. Cooperative or Company?

In the industrialised countries, as agricultural cooperatives increase in size of both turnover and membership, and their membership gets more heterogeneous, maintaining member cohesion and a business system that respects the original cooperative principles is becoming singularly difficult. Members are feeling increasingly remote from their cooperative as mergers of primary units have transformed many primary agricultural cooperatives into units with several thousand members. The local nature of the primary cooperative which enabled members to relate strongly to it has been sacrificed in the interests of business efficiency.

In New Zealand, dairy cooperatives are now regarded as “companies” in all but name. In Australia, deregulation of the economy has led some of the leading cooperatives to be officially converted into “investor companies.” In parallel - though moving in the other direction - many private capitalistic companies are now introducing cooperative-style employee participation schemes and practising more social responsibility (creches, in-house and out-of-house training, social activities, for example). The frontiers between cooperative forms and capitalistic forms of business are thus becoming increasingly blurred.

As Münkner has pointed out, “In large heterogeneous groups, members' consciousness of their rôle as co-owners and decision-makers of the cooperative enterprise is decreasing, turning them into simple customers…”5. He continues: “Many cooperatives see their only chance to survive growing competition from large multinational conglomerates as growth in volume of business and size of membership by way of mergers and vertical integration for purely economic reasons”. But, there is a growing awareness that there are diseconomies of scale in horizontal and vertical integration of cooperative (or other) businesses.

Is it really possible to keep a balance between necessary management decisions and members' desires? Will member influence become inevitably so diluted and general as to become irrelevant?.

2 International Cooperative Alliance (ICA), “The Contribution of Cooperative Business Enterprise and the International Cooperative Movement to Achievement of the Strategic Objectives of the Draft Platform of Action. ” New York, March, 1995.

3 Committee for Promotion and Advancement of Cooperatives (COPAC), “Special Management Opportunities for Cooperatives” Rome, May 1995.

4 International Labour Organization (ILO), “Structural Changes in Cooperative Movements and Consequences for Cooperative Legislation,” Ashish Shah ed. Geneva 1993. Introductory section, page 14.

5 Structural Changes op. cit.

The Governments' Hijack of Cooperatives

In much of the developing world and former Soviet bloc, the “cooperative” institution has been hijacked by governments, and parodies of cooperatives imposed on hapless “cooperators” herded into cooperatives which control rather than empower them. Most of these institutions simply do not stand up to the test of the basic principles.

In the developing world the hijacking took place when rural marketing and service cooperatives were taken over as instruments for government control of rural areas. As the expansion of the movement was based on government-supplied sources of financing, control became increasingly tight and member interest increasingly loose. Cooperators in this case have little reason to feel loyalty towards the cooperative, or to consider it as an institution financed by them and therefore belonging to them and over which they can exercise any control. In some French-speaking West African countries Government intervenes (in savings and loan groups) in deciding on how to distribute the surplus, to the detriment of the members, and banks exercise control over cooperatives which can often results in difficulties for them to withdraw their own funds. With very few exceptions, it is therefore wrong to speak of an identity “crisis”: in most of these countries, “cooperators” barely identify with cooperatives at all. Indeed, they often do not even know what a genuine cooperative is really all about!.

In the ex-Soviet bloc with the notable exceptions of Poland and Yugoslavia, most existing agricultural cooperatives were gradually transformed into production units providing a whole range of State-subsidized support services, under the guidance of party cadres. Here, the identity crisis is expressed differently again. In many ways, belonging to a communist-style cooperative in some countries was not so bad. While member participation and productivity per member remained low, the services offered were often respectable. Member attitudes today still reflect some of those advantages, since the majority of agricultural cooperatives survived the transition and most of their members chose to remain in re-established or newly-formed cooperatives.

This paradoxical attachment to institutions which had gained such a poor reputation doubtless has many explanations; among these is the sense of security derived from membership in such bodies, the desire to participate in the use of the assets built-up by the cooperatives, or simply to be present when the time comes to share them out. Also, cooperatives still remain virtually the only channel for input supplies or marketing.

Conversely, in Hungary there were 9,900 cooperatives with 4.4 million members at end-1990; following free votes, many of these societies were dismantled and their assets shared-out: after 1992, they had been slashed to 1,510 societies, with only 844,000 members6. In some cases, cooperative assets which rightfully belonged to the members have been sold off. This has happened in Albania with abusive take-overs by management. Farmers are left to deal with the now privately-owned structures since no alternative is available, yet without the formal say they used to have in their cooperative and without the social services the cooperative provided.

6 Munkner, Hans, “Cooperative Legislation to Support Autonomous Cooperative Development in Emerging Free Market Environments”. Marburg, November 1994.

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