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Market power to the people

By Harry Throssell - posted Wednesday, 26 August 2009


The world-wide co-operative movement is to be reviewed in September [2009] by the General Assembly of the United Nations, with a request the UN Secretary-General holds an International Year of Cooperatives.

In preparation Amine Lamrabat of the United Nations Global Alliance for Information and Communication Technology and Development has produced a Background Paper on co-operatives.

The International Cooperative Alliance (ICA) defines a co-operative as “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”.

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The essence is control of production and rewards by the whole body of owner-workers, although there are local differences in achieving this goal. These organisations “aggregate the market power of people” who on their own might achieve little or nothing, inter alia providing ways of escaping poverty and powerlessness.

World-wide the number of co-ops is increasing, although Australia has gone against the trend. A Cooperative Society was founded in New South Wales in 1859 based on the 1840 British “Rochdale model”, but met its demise in 1986. Credit unions, however, remain alive and well. The British Cooperative Wholesale Society was established in 1863 and to this day is the country’s largest co-operative body, with more than 500 food stores, supermarkets and hypermarkets employing 35,000 workers, extensive funeral and farming interests, the second largest mutual assurance society with 35 million members, and a rapidly growing bank with two million customer accounts.

In contrast to Australia, New Zealand is a leading co-op nation. One in three of its population is in membership, as in Canada, Honduras, and Norway, compared with one in two in Finland and Singapore, and one in four in the USA, Malaysia and Germany. In terms of percentage of a country's Gross Domestic Product attributable to co-operatives, the proportion is highest in Kenya at 45 per cent, in New Zealand 22 per cent. Worldwide the sector has some 800 million members in more than 100 countries.

The ICA sets out seven co-operative principles: voluntary and open membership; democratic member control; member economic participation; autonomy and independence; education, training and information; co-operation among co-operatives; concern for community.

Lamrabat: “As the world today faces unstable financial systems, increased insecurity of food supply, growing inequality, rapid climate change and increased environmental degradation, it is increasingly compelling to consider the model co-operatives offer.”

Food

The World Bank estimates food demand will double by 2030 as the world's population increases. There is thus “an urgent need for developing countries to increase the output of food, yet, as the World Bank's 2008 World Development Report on Agriculture for Development has shown, the rural economy has been badly neglected”. Lamrabat encourages farmers to mobilise into co-operatives to gain better market access.

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The number of such farmer bodies is increasing in most developing countries, with India's 100,000 dairy co-operatives making a significant contribution to food supply, although they “have yet to reach their full potential”. Co-ops account for 80 to 99 per cent of milk production in Norway, New Zealand and USA, 71 per cent of fishery production in Korea, 40 per cent of agriculture in Brazil.

Primary producers - farmers, fishermen and forestry workers - include some of the world's biggest co-operatives: one in the UK operating 400 markets on behalf of 65 market societies, through which 12,000 producers sell direct to consumers.

Lamrabat points out these organisations sometimes struggle in developing countries. A recent study of 450 in Tanzania and Sri Lanka found workers lacked access to loan finance to help them gain from new technology, training, and markets beyond their locality. Another challenge was the low level of participation by women in some agricultural co-ops, but Lamrabat suggests addressing this problem by creating women-only organisations.

There were success stories in the fields of sugar and cotton in India, dairy in India and Bangladesh, coffee in Tanzania and Kenya and in several countries a more independent credit sector. “Nevertheless, with market liberalisation in the 1990s and the withdrawal of government support, many state-sponsored co-operatives could not compete with the private sector and had to shut down.” However, some have re-formed independent of government.

Seven per cent of Africans are co-op members, with 554 companies in Uganda in 1995 growing to 7,500 now, and farmer groups meeting a growing supermarket demand for fresh fruit and vegetables.

In East Timor, with help from the National Cooperative Business Association of the USA, a network of 20,000 farmers has been formed, processing one third of the coffee for export.

But, writes Lamrabat, food is not the whole story. Co-operatives also account for 25 per cent of savings in Bolivia, 24 per cent of the health sector in Colombia, 55 per cent of the retail market in Singapore, 36 per cent in Denmark and 14 per cent in Hungary; and for more than 100 million jobs around the world, with dairy organisations in India now including members of different castes.

Informal sector workers have formed co-ops to assist self-employment while in rural areas savings and credit unions provide access to banking services and opportunities for raising incomes. This has an impact on achieving the UN Millennium Development Goals of primary education, gender equality and reduction in child mortality.

In developed countries these organisations have grown over the past two centuries largely without government interference. Often first was a “friendly” or mutual health society that insured people against sickness and provided basic health care. In countries with a mixed system of state and private funding, such as France, Germany or the Netherlands, becoming a member of one of the health mutuals is still the main way for people to gain access to medical care. In the Pacific Northwest of USA one co-operative provides health services for 570,000 members, another in the Mid-West has 630,000 members. In Japan, 120 consumer co-operatives provide health care for three million members who also meet in small groups to discuss prevention.

Consumer bodies are the market leaders in Italy, Switzerland, Singapore, Japan, and are very active in the Scandinavian countries and Atlantic Canada. In the UK, which has seen fierce competition among consumer chains, co-operatives are fifth in market share and pre-eminent in the small supermarket sector. These have a strong record of creating decent working conditions, fair trade with developing countries, setting standards for honest labelling, and promoting healthy diet.

Retail groups provide small storekeepers with grocery, hardware and pharmacy supplies and compete directly against the large multiple chains. Worker co-operatives, particularly in the Emilia-Romagna region of Italy and the Basque region of Spain provide shared services such as banking, technical education and product development. Also emerging are services for older people and those with disabilities.

Electricity companies work in rural areas ignored by the private sector, small dairy co-operatives are growing rapidly in Eastern Europe, Latin America, and Africa to provide raw milk, and there has been a major resurgence of marketing co-ops in Ethiopia, Zambia and Honduras. In Ethiopia 400 co-operatives with a total family membership of 2.5 million are developing educational materials.

In Brazil the biggest medical system in the world has 98,000 doctors serving 12 million patients, medical networks in India are used for health education and also in Africa facing the special threat of HIV-AIDS. In Calcutta 7,000 sex workers, members of the Usha Multipurpose Cooperative Society, have started a micro-credit scheme marketing handicrafts and creating a peer education program.

Civil wars and ethnic conflicts can destroy social capital but “there is evidence that even during conflict co-operatives can survive. In Sri Lanka and Nepal they have been the only independent organisations allowed by both sides in the civil war zone”, Lamrabat reports.

In Rwanda, a credit union system was rebuilt by the World Council of Credit Unions without regard to ethnicity, and now there are 149 CUs with nearly 400,000 members. Electricity co-operatives in Bangladesh have a common membership among 28 million users.

Homes

Much of the housing built in Norway and Sweden in the second half of the 20th century was by combined effort. In the USA housing co-ops are popular among higher income groups and retired people, in New York 27,000 homes abandoned by private landlords were taken over and renovated for low income people. In Britain, management co-ops have taken over unpopular council estates, and tenant-owned organisations are challenging conventional landlords to be more involved in governance.

In an affordable housing project in Canada consisting of apartments, town houses and freestanding homes, every occupant has a say on management and elects a board of directors each year from among themselves. On taking up residence members make a small down-payment but since the members own the property there is no need for a profit. Government and other interest-free loans are available, for which the government requires a quarter of residents be eligible for rental subsidies. In one case residents' annual incomes ranged from under $10,000 to more than $100,000, the age-range from the 20s to the over-60s, with two-parent and single-parent families, and a mix of ethnic backgrounds.

South America

“In Venezuela”, writes Naomi Klein, “[President Hugo] Chavez has made the co-ops a top political priority, giving them first refusal on government contracts and offering them economic incentives to trade with one another. By 2006, there were roughly 100,000 co-operatives in the country, employing more than 700,000 workers. Many are pieces of state infrastructure - toll booths, highway maintenance, health clinics - handed over to the communities to run. It's a reverse of the logic of government outsourcing - rather than auctioning off pieces of the state to large corporations and losing democratic control, the people who use the resources are given the power to manage them, creating, at least in theory, both jobs and more responsive public services”.

Co-op News reported in June 2009 “As Argentines prepared for mid-term legislative elections in June co-operatives made a surprise appearance as part of the debate. President Cristina Fernández gave a speech at an event organized by one of the associations of recovered factories in which she promised to promote a change in the bankruptcy law so that workers are the first to be given the opportunity to buy the assets of a company before it's auctioned off among other creditors. The Argentine government has carried out an unusual type of rescue in the case of a large bankrupt paper factory, Papelería Massuh by which the company has continued operations through a trust fund financed by the government and co-managed by government and worker delegates. Once the fund expires in 2011, the workers will be able to continue operations as a worker cooperative”.

Co-op News also reported “it is clear that the cooperative model is increasingly becoming an attractive alternative in the midst of the recession … brought on by the global crisis”. Argentina’s The Working World/La Base co-operative made a major shipment of 1,650 pounds of clothing products to the United States.

In Peru, when the government nationalised tin mines then pulled out, leaving whole communities with no alternative work, 10,000 miners created four co-operatives to keep the mines going. A recent figure showed the country with 15,000 personnel in 200 manufacturing and other organisations operating as co-operatives.

Money

Financial services are a common form of co-operative, with 49,000 credit unions serving 177 million members in 96 countries under the umbrella of the World Council of Credit Unions.

Alphonse Desjardins started credit co-operatives in Quebec, Canada, in response to the poverty and unemployment he observed at the turn of the 20th century. Working people couldn't borrow money at interest rates they could afford so Desjardins started a credit union (“caisse”) in which members pooled their savings and took turns for affordable loans. The Mouvement des Caisses Desjardins is now a countrywide organisation with both community and industrial credit unions.

Lamrabat concluded “Cooperatives may not be the solution to the world's problems, but they are certainly part of the solution. An International Year of Cooperatives can firm up the international will to strengthen cooperatives, in so doing help achieve the MDGs and alleviate world crises.”

In his 2009 BBC Reith Lectures Harvard Professor of Government Michael Sandel emphasised the need in developed countries like USA to return to a greater “sense of community” and advocated a “politics of the common good” which would rebuild the infrastructure of civic life rather than focus on access to private consumption. This would include “public schools to which rich and poor alike would want to send their children; public transportation systems reliable enough to attract commuters from all walks of life; public health clinics, playgrounds, parks, recreation centres, libraries and museums that would, ideally at least, draw people out of their gated communities and into the common spaces of a shared democratic citizenship”.

The virtues of democratic life - solidarity, trust, civic friendship are, he said, “like muscles that develop and grow stronger with exercise”.

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About the Author

Harry Throssell originally trained in social work in UK, taught at the University of Queensland for a decade in the 1960s and 70s, and since then has worked as a journalist. His blog Journospeak, can be found here.

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