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With the end to rivalries between the Western capitalistic system and the Soviet collective one, the way now seems open for unfettered private enterprise, trade liberalisation, and a hands-off rôle for governments. The IMF and GATT the WTO proudly point to statistics which allegedly demonstrate the economic success of such policies.

As many critics rightfully point out, this “success” generally conceals growing social and human misery and declining concern for the environment. Besides, many governments are loath to conform to the new rules. The USA is not keen on liberalisation of its financial service sector, the European Union resists reform of its support system for agriculture, Japan maintains barriers to imports, and in much of the South and the East the command and control system remains basically unchanged. Transnational companies with sales larger than many countries GDPs circumvent the market by internal sales representing substantial shares of the product's value. The “market” may be freer, but it is by no means “free”.

Nor can liberalisation be accepted to imply a “free-for-all”. The weakest members of society - be it society-at-large or a cooperative society - have a perfect right to claim some form of protection in law from the stronger. Deregulation cannot excuse governments from their responsibility to ensure a minimum of equity, or to cushim their sometime brutal withdrawal of support cooperatives which suddenly deprives cooperatives of support and members of the services which, willy-nilly, the societies provided.

Preparing to Face Competition

On the face of it, agricultural cooperatives seem well-placed to occupy an important place in the new economic situation. According to ICA, virtually all Sweden's dairy production is marketed by farmer-owned cooperatives; in Norway, 75 per cent of forest products are processed and marketed by cooperatives; in Italy, 60 per cent of wine is cooperatively produced. Fourteen farmer-owned cooperatives in the USA are among the 500 largest corporations and no fewer than 8 of the 10 largest Canadian firms are cooperatives7. But are they still cooperatives?.

Mahasahana: a Cooperative in All But Name*
The Mahasahana network of small farmer groups in Matale and Kurunegala districts of Sri Lanka groups 2000 farmers from 100 hamlets and organizes extension and other services for its members. Born from the failure of a “training and visit” project which directed extension workers to large farmers, the network has empowered poor farmers, ensuring that extension workers interact with them where previously their advice was all one-way.
At the base, the network consists of groups of eight to fifteen farmers, tenant cultivators and craftspeople. Most groups, aided by group promoters from the Ministry of Agricultural Development and Research (MADR), begin with production activities which can be achieved without outside help, in particular labour-pooling. Internal democracy is ensured through rotation of leadership positions each month: in this way each member gains experience of public speaking, record-keeping and consensus decision-making.
Organized on a three-tier system including base groups, village boards and inter-village boards, the network links rural groups to government and NGO development services, in particular sources of agricultural information and technology. It also handles health, credit, marketing, and small-scale rural industries through specialized committees. Mutual assistance often leads to ideas for more ambitious projects such as cash cropping, seed-oil extraction and animal husbandry, which require credit, training or new technologies.
Group representatives now receive attention from government extension officers, discussing their needs with them and often providing them with advice. “The extension officers have theoretical knowledge but we have been farming all our lives”, they say.
The agriculture committees now initiate trial plots, arrange for input distribution and organize training outside the village where necessary, on the basis of farmers' own estimates of their needs.
Begun as an FAO/MADR project in 1985, the network survived after the end of the project. The network functions like a genuine cooperative, with democratic principles and mutual assistance at its base: this doubtless explains its success.

* Based on an article by Graeme Thomas, “Mahasahana: The ‘Great Benefit’ Network”, CERES, FAO, Rome, Jan.–Feb. 1994.

The reality behind this rosy picture is less impressive. In advanced countries, cooperatives may have gained an advantage over other businesses thanks to their success in obtaining fiscal privileges. Elsewhere, cooperatives' dominant position has been built up through artificial means, such as monopolies granted by government. In some countries they have benefitted from huge capital injections from foreign donors and thus now own substantial assets. But are they able to maintain and manage these assets without continued outside support? In China, the pervasive rural cooperative system seems to be collapsing under economic liberalisation: according to an unofficial estimate, 40 per cent of agricultural supply and marketing cooperatives are virtually bankrupt.

Increasing competition is a major threat to cooperatives used to thriving on government-conferred privileges. Birgegaard and Genberg have pointed out that, “Unless the cooperatives can meet this competition, they will end up in down-turn spirals of decreasing volumes of business, deteriorating profitability of their operations, reduced capacity to pay remunerative and competitive prices and provide useful services to their members, continued flight of members, still further decline in volumes of business…”8.

Lethargical movements are ill-prepared for this and it is hard to see where pressures to become more efficient will come from: not from management, which has had little exposure to decision-taking since they operated under official diktats; not from the government, basically unwilling to see cooperatives develop into strong independent organisations which escape its control and could even pose a political threat; not from the membership, which is often largely indifferent, especially where satisfactory alternatives are available to them.

However, as cooperatives lose their privileges and slim down, “hard work and devotion” will be only way to keep afloat. And as they slim, they will become far less attractive for the sharks and hangers-on who abused of them previously. Less money means less corruption: perhaps this will allow the spirit of mutual assistance to rise again.

There is no intrinsic reason why a cooperative enterprise should not be efficient and business-like, provided it has dynamic and imaginative management. But there seems to be a consensus that the movement must be rebuilt starting from the grass-roots, primary societies that comprise its base. Primary societies should be small enough for members to be able to relate to them yet large enough for efficient operation. This clearly poses a dilemma: at what point do member cohesiveness and efficiency of operation diverge? Some believe even the village, a typical unit for a primary cooperative, cannot generate enough business. Imaginative solutions must be sought to overcome this problem. Whatever their territorial base, primary societies are easier to manage and control than the unwieldy top-heavy structures built-up by government decree, or born of the need for business efficiency. Renovated primary societies can then recreate secondary-level unions, and up, once they feel the need.

Where secondary unions, be they district, provincial or regional, are working efficiently they will continue to do so. Where they have patently failed in their mission, they should not be maintained artificially, but should be allowed “to go under” without packing down their members with them.

8 Birgegaard and Genberg, "Cooperative Adjustment in a Changing Environment in Sub-Saharian Africa, ICA, Geneva, September, 1994.

Are Cooperatives Inevitable?

While large government-dominated cooperative structures have been slow to adapt to the new situation, many other rural institutions have shown more dynamism. The various types of voluntary rural associations, formal or not, and the self-help cooperation networks they create among themselves, constitute the essential framework of social capital in the countryside that supports the emergence of truly democratic and participatory institutions that are in stark contrast to the slow-moving, unresponsive organs of official political democracy. The more such organisations there are, the greater people's choice, and the more chances there will be for wider democracy to work in the new decentralised set-up.

Small informal groups appear to be the most successful and resilient of rural institutions. Their major weakness lies in their isolation and frequent lack of structured horizontal or vertical links to similar groups. Under the former cooperative régimes, being a “pre-cooperative” was often the only way small rural groups could gain access to certain inputs and services, and indeed obtain a degree of acceptance and protection from the authorities, even though their members may have had neither the intention nor the desire to be eventually incorporated into the officially-sanctioned cooperative system.

Convinced cooperators tend to apply a reductionist theory to third world rural institutions: once a few people form a self-help group, they have engaged on a path which will inevitably lead them to become a full cooperative.

It is legitimate to question this hypothesis?. Why should efficiently-functioning rural people's institutions be caught up in the web of cooperative legislation, bureaucracy and formalism? Cooperatives are one form of rural institution, but they are not the only form. That other forms of rural organization have a rightful place should be recognised by government… and by cooperatives.

Where the Government Comes In

Just as governments have played a crucial role in cooperatives' submission, so they hold the key to their liberation, inter alia by creating a favourable legal and policy environment in which genuine cooperatives can develop. But they can do more for instance by focusing technical assistance and available financial support on strengthening local cooperative management capacities and enabling cooperative self-reliance to become a reality. Such a role is played, for instance, by the National Cooperative Development Council in India. This would reverse past errors whereby bureaucratization and paternalistic centralisation had the effect of disempowering cooperative society managers by leaving then precious little to manage or decide upon.

Government control usually entails, or stems from, various forms of support. But it also served as an excuse for interference and this, in turn, is an excuse for the non-accountability of management and discounting of members' views. Interference disempowers the members. Cooperative legislation has reflected this approach.

In former British colonies, the registrar has extensive control over cooperative operations and decisions (right of veto, political nominees to the Board…). K.K. Taimni, in his study of the Role of the Cooperative Registrar in South Asian Countries, humorously points out that Indian critics of the institution often compare it “…with the mythological Indian god-trinity Visnu (the ‘creator’), Mahesh (the ‘preserver’) and Shiva (the ‘destroyer’) of cooperatives”. The managers consider themselves accountable to government, which they view as their paymasters, rather than to the membership.9

As government capacity for intervention declines, legislation governing cooperatives should be redirected. Legislation has a major impact on the operation of cooperatives and this can be negative or positive. In many countries, as in Tunisia, cooperative legislation is dispersed among many texts and needs codifying. Elsewhere, as in France, legislation goes into much detail for different types of cooperative, leaving few areas for bye-laws to handle. Again, in French-speaking Africa, “too much stress is laid on legal formalism”, according to one observer

In Uganda, a 1991 Statute had a positive effect: it stipulates that if audits are not carried out, elected officials are deemed to have relinquished their office; to avoid this outcome, officials ensured book-keeping was more accurate and management more efficient and this in turn left less leeway for minority domination.

What is needed to promote participation and democracy, is less regulatory legislation (no more fixed profit margins or obligations to be buyers of last resort), legislation which is easier for members to understand, less intrusive, and which aims at facilitating cooperatives' operation rather than controlling them. But most important, it should curb vested interests and defend the weaker members. Once efficient and democratically functioning structures have been established, cooperatives should be allowed to be self-regulatory, just as other private businesses are, within the framework of the law.

Cooperative legislation and practice in countries of the North, while not directly transferrable, could provide useful guidance for adapting current legislation and regulations with a view to conferring greater self-regulatory powers on cooperatives at all levels.

Unfortunately, reforms aimed at achieving the above objectives are not always undertaken enthusiastically. Governments jealously cling on to their power and when new laws are adopted, they are resisted in their application by those who have enjoyed sway over cooperative activities. So long as legislation remains vague and inconsistent, reforms will continue to be half-hearted and therefore unconvincing for rural people. Yet, there are some refreshing signs of change: cooperative laws are being reformed, such as in Tanzania (1991) and interesting new efforts like the Cooperative Initiatives Project in India.

In 1992/93, India's Cooperative Development Foundation (formerly Samakhya) and the National Dairy Development Board established the Cooperative Initiative Project. The project's main aim is to influence in economic policy and cooperative legislation which will ensure cooperatives can benefit from liberalisation on an equal footing with capitalistic companies. In May 1995, the cooperative legislation in Andhra Pradesh was completely overhauled and this has encouraged the promoters of the project to press for India-wide reforms.

Governments also have a legitimate role in supporting rural cooperatives for purposes of social equity, despite the constraints of structural adjustment in cases where market forces and the private sector are not appropriate to handle services due by society to the weaker, poorer and underprivileged sectors of the population and which they are patently unable to pay for. Special features which justify continued support include the often high level of poverty and illiteracy of their members and their geographical isolation (from markets, supplies, political decision-makers, technical innovations…).

Governments and foreign donor assistance should leave the board and management, possibly after appropriate training and under direction from the members, free to manage the resources provided without paternalistic interference.

Clearly, there will continue to be strong resistance to conceding greater freedom to rural organisations. The local elites, cooperative bureaucrats, local power networks, governments… all have their own reasons to maintain the status quo. A recent study10 on sub-Saharan Africa has pointed out that rural society continues to be dominated by an interventionist policy giving government authorities a high degree of control over rural institutions. A similar study on Asia's cooperatives sees government intervention in cooperative business being maintained throughout the region, including Japan and Australia.

Suren Saxena, a former Director of ICA, has suggested developing an Autonomy Index for Cooperatives. The principle parameters of the index would be: management efficiency, adequate financial resources raised preferably from members, credibility in the surrounding countryside, and member participation. Perhaps such an index could provide a first step towards sorting out true cooperatives from those on probation and non-cooperatives.

New Cooperative Act in Tanzania Injects Dynamism into Cooperative Movement
In Tanzania, when the Cooperative Act was changed in 1991, government intervention was reduced, membership in cooperatives was no longer compulsory, purchase of at least one share became obligatory, and primary societies were allowed to create their own unions and apex organizations.
Positive effects of these changes are being felt, for instance in the Mara region of the country. Membership of the Mara Cooperative Union had been compulsory for primary societies. Now several of them have effectively withdrawn from the Union and are selling to private traders while considering setting up their own union. Moreover, primary cooperatives have been forced to slim down and become more efficient. Other primaries are staying with the MCU which could in turn be forced to smarten up its operation and make better use of its considerable assets such as cotton ginneries and coffee processing plants.
In parallel, released from the bond of compulsory cooperative membership, formal and informal self-help organizations are expanding their activities. Groups involved in village trading reportedly grew from 350 in 1982 to 1300 in 1992, creating many off-farm jobs.

9 Taimni, K.K., "Cooperatives in the New Environments: Role of the Registrar of Cooperative Societies in South Asia, Food and Agriculture Organization, Rome, (forthcoming).

10 Birgegaard and Genberg, op. cit.

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