The Cooperatives and Entrepreneurship
in Theory and Practice
By
ALI HOSSEIN SHAHRIVAR
Shahrivar44@yahoo.com
Table of Contents
Introduction
The ideas behind cooperative entrepreneurship and company form
The present role of cooperation in the organisation of economic activities in world
Conclusion
References
Introduction
For more than 150 years the co-operatives have operated across the world. Based on their vast experience, they continue to develop in most sectors, such as consumer, banking, agriculture and service provision, not to mention sport and culture. They remain an economic and social reality wherever they operate. Far from having passed their “sell-by” date, they are responding to market needs and demands. Moreover, they are also meeting; the new and unsatisfied needs of the people. And this is their strong point.
It is often said that cooperation is strong in practice but weak in theory. Although not quite true, it is a fact that cooperation has been little researched, has weak links with mainstream economics and, partly for these reasons, the theory and practice remains surprisingly unfamiliar. [1] The intention of this article is to correct the situation by reviewing
a) The ideas behind cooperative entrepreneurship and company form, and
b) The present role of cooperation in the organisation of economic activities.
The main points of departure in a cooperative organisation are that membership is voluntary and open to all and that it produces services in the interests of its members. The cooperative form of company and entrepreneurship is in extensive use throughout the world. Today, cooperation has an important social role to play in the organisation of economic relations. Whereas originally cooperatives ensured the balanced development of the market economy, in our new globalising world these National, democratically controlled organisations ensure that the economy continues to serve the everyday needs of the ordinary people.
The ideas behind cooperative entrepreneurship and company form (International Cooperative Principles
In law, company forms are part of the institutional framework modern society has created to provide the appropriate operating conditions for Entrepreneurship and the necessary regulation of economic activities. There is, however, no simple theory or practice that determines what Forms of company should exist, their characteristics or the details of their regulation. This can be clearly seen in the major variations in the essentials of companies and their appearance between different countries as indeed in the general organisation of economic activities.[2] The cooperative firm differs from other types of companies largely because of its ownership model and basic aims. Thus a cooperative enterprise also differs in its structure and operating objectives from other companies in the private sector. From the point of view of the operations of the cooperative model, it is essential that all the elements also function in practice, that their importance is recognised and informed to their main interest groups, and that a certain balance exists between them.[3] In order that the aim of cooperating on a basis other than capital investment should succeed in practice, internationally applicable principles have been developed over the years– largely through trial and error – for the cooperative form of entrepreneurship derived from the Rochdale pioneers. In practice these consist of certain generally accepted guidelines for cooperation in producing member services –rather like the rules of fair play. The International Cooperative Alliance (ICA) has brought this tradition up to date. At its centenary congress in 1995, the ICA defined the cooperative firm as follows:[4] ”A cooperative 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.”
There are seven internationally recognized principles of cooperatives:
1. Voluntary and open membership: Cooperatives 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.
2. Democratic control by members: Cooperatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives have equal voting rights, based on one member one vote.
3. Member economic participation: Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is the common property of the cooperative. 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 the cooperative, benefiting the members in proportion to their transactions with the cooperative, and supporting other activities approved by the members.
4. Autonomy and independence: Although cooperatives may deal 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 cooperative autonomy.
5. Education, training and information: Cooperatives provide education and training for their members, elected representatives, managers and employees, so that they can contribute effectively to the development of their cooperatives. They also inform the general public about the nature and benefits of cooperation.
6. Cooperation among cooperatives: Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, regional, national and international structures.
7. Concern for the community: While focusing on member’s needs cooperatives also work for the development of their communities through policies acceptable to their members.
Former United Nations Secretary-General Boutros Boutros-Ghali, in his 1994 Report to the General Assembly, said: “Cooperative enterprises provide the organisational means whereby a significant proportion of humanity is able to take into its own hands the tasks of creating productive employment, overcoming poverty and achieving social integration.”[5]
The cooperative principles are guidelines by which cooperatives put their values into practice. In practice, these principles provide a general starting point and motive to cooperative-based business activities. However, on this common basis a wide variety of different national and sectoral cooperative model solutions have sprung up that can also vary considerably in how they emphasise principles[6]; in modern mainstream economic literature, the cooperative is defined as a company owned and controlled by its users and operated in their interests. A more general reference is to member and customer-owned companies.[7]
The present role of cooperation in the organisation of economic activities in world
A) The cooperative sector: The cooperative sector would be the largest sector in cooperative economy. The cooperative sector would be divided into three main subsectors:[8]
a) Cooperatively-run businesses,
b) A range of community-based organisations,
c) Households.
a) Cooperative businesses include farmers’ cooperatives, farmers’-cum-producers’ cooperatives, producers’ cooperatives, workers’ cooperatives, industrial cooperatives, cooperative banks, financial cooperatives, and cooperatives that provide a range of other services, such as health care and legal services. Such cooperatives would be designed to be successful business enterprises and to make a profit. Most small, medium and large businesses that we see in the world today would be transformed into cooperative enterprises in a cooperative economy.
b) The second branch of the cooperative sector includes a range of community-based organisations. It includes community groups, sporting clubs, charities, cultural and religious organisations, environmental groups, non-profit organisations, nongovernment organisations (NGOs), mutual societies, and other similar types of organisations. This branch of the cooperative sector is important because it reflects the ideals and values of a community, and is a rich source of social capital. It includes the organisations and networks that make up civil society, and which perform many beneficial works not done by businesses or governments.
c) The third branch includes household economies. Household economies are good examples of cooperative principles at work, and they can give us some useful insights into how a cooperative economy might function. For example, the members of a household generally share resources, cooperate together for their mutual benefit, and enjoy a shared sense of belonging. Household production, household work, childrearing, and the role of mothers and carers, which are generally not included in the formal economy today, all, would be recognized in a cooperative economy.
B) Successful Cooperative Models:
Examples of successful cooperative models include the following:
1. Farmers’ cooperatives: Cooperatives manage 99% of Sweden’s dairy production, 95% of Japan’s rice harvest, 75% of western Canada’s grain and oilseed output, and60% of Italy’s wine production. 99% of Japan’s fish production is also run cooperatively.
2. Banking cooperatives: Some of Europe’s major commercial banks are cooperatively owned or organised, including Germany’s DG Bank, Holland’s Rabobank, and France’s Credit Agricole.[9]
3. Housing cooperatives: In Europe, there are 10,614,000 housing coops. 15% of Norway’s and 2% of the United Kingdom’s housing stock is cooperative. The Czech Republic has 10,000 housing cooperatives. 25% of housing development in Turkey in the last 25 years has been through the cooperative system.
4. The National Cooperative Business Association: In the USA, the National Cooperative Business Association includes 47,000 cooperatives serving as many as100 million people, or 37% of the population.[10]
5. Maleny: Australia’s best-known example of a cooperative community is Maleny, on the Sunshine Coast Hinterland. Maleny is a small rural town of 4,000 people, which supports 17 cooperatives, including a cooperative bank, a food cooperative, a cooperative club, a workers’ cooperative, a cashless trading cooperative, four environmental cooperatives, and several community settlement cooperatives. The Maleny Credit Union was started in 1984, and today has more than 6,000 members and more than $15 million in assets.[11]
6. The International Cooperative Alliance: Finally, today more than 760 million people throughout the world are members of cooperatives. They are members of the world’s largest non-government organisation, the International Cooperative Alliance, which represents more than 250 national and international organisations.[12]
Conclusion
Co-operatives are enterprises. And as such, they are an important part of the economy and economic performance, particularly in terms of growth. They are important in maintaining and increasing competition in the markets. And efficient competition is fundamental if the competitiveness of European industry is to be improved. Co-operatives employ 2 million workers in Europe. Thus, they play a significant role in sustainable development and in the creation, saving and stabilisation of jobs. They often respond better than traditional enterprises to new living and working requirements, such as, for example, the introduction of reduced and flexible working hours and new services to the individual.[13]Co-operatives and the co-operative movement are important to the World, because:
· they are based on peoples’ needs
· they are fostering entrepreneurship
· they improve market competition
· they create jobs
· they can facilitate the integration of new Member States
Even if cooperation today is a worldwide popular movement, its starting point is always local people and their needs. Thus it offers hundreds of millions of people a channel to work and develop locally, regionally, nationally, as well as internationally. For a long time now cooperation has been successfully realised in accordance with the popular adage: Think globally but act locally. And in the more or less uncontrolled Globalising world of tomorrow, this will probably remain one of the most durable and important competitive advantages of cooperation. [14]
References
[1] SAMULI SKURNIK ,The Role of Cooperative Entrepreneurship and Firms in Organising Economic Activities – Past, Present and Future, The Finnish Journal of Business Economics 1/2002, p. 103.
[2] SAMULI SKURNIK ,The Role of Cooperative Entrepreneurship and Firms in Organising Economic Activities – Past, Present and Future, The Finnish Journal of Business Economics 1/2002, p. 109.
[3] FULTON, MURRAY: Cooperatives and Member Commitment. The Finnish Journal of Business Economics 4/1999, pp. 418–437.
[4] Macpherson, IAN: Co-operative Principles for the 21st Century. International Cooperative Alliance (ICA), 1996. (Available also on the internet http://www.coop.org/ica/info/enprinciples.html)
[5] Boutros Boutros-Ghali, UN Secretary-General, “1994 Report to the General Assembly”.
[6] PARNELL, EDGAR: Reinventing the Co-operative Enterprise for the 21st Century. Plunkett Foundation .Oxford, United Kingdom 1995.Pellervon vuosikirja 2001, Osuustoiminta-lehti5/2001.
[7] NILSSON, JERKER: Co-operative Organisational Models as Reflections of the Business Environments. The Finnish Journal of Business Economics4/1999, pp. 449–470.
[8] Jake Carlyle, A COOPERATIVE ECONOMY – What Might It Look Like? Paper given at the Hobart conference: Community, Economy and the Environment: Exploring Tasmania’s Future, 15 October 2005.
[9] Dyer, Bruce, “Why Cooperatives: The New Zealand Context”, Proutist Universal,
Nelson, 2000, available at www.prout.org.
[10] National Cooperative Business Association, www.ncba.org.
[11] Karlyle, Jake, “Creating Prosperous Communities – Small-Scale Cooperative
Enterprise in Maleny”, 2002, available at www.proutworld/features/maleny.htm
[12] International Cooperative Alliance, www.ica.org
[13] Message of Mr Papoutsis (Video),Opening plenary session” ENTREPRENEURSHIP AND
COOPERATIVES IN EUROPE 2000", Bologna, Italy.30.11.98.
[14]SAMULI SKURNIK ,The Role of Cooperative Entrepreneurship and Firms in Organising Economic Activities – Past, Present and Future, The Finnish Journal of Business Economics 1/2002, p. 122.