Embed Doc
Copy Link
Readcast
Collections

CommentGo Back

Download

Why cooperatives

The New Zealand context

By Bruce Dyer

Considering how water, wind, and landforms affect rainfall, how rain nurtures plantlife and how trees affect climatic conditions - to just hint at how cooperation is anintegral part of nature - it’s clear that cooperation underpins our very existence.From this perspective, it’s no surprise that the world’s largest non-governmentalorganisation is the International Cooperative Alliance (ICA) representing 237 nationaland international organisations and more than 700 million members.Cooperatives formalise cooperation by enabling cooperative members to jointly ownand profit from a venture. Not surprisingly, worker co-ops first developed as a resultof the exploitation of workers during the industrial revolution. In England they beganwith the Rochdale Pioneers in Toad Lane, Rochdale, and on the Continent date back200 years to the French revolution.Today the Mondragon group of cooperatives in the Basque area of Spain provides abenchmark for producer/worker cooperatives by representing what is generallyacknowledged as the world’s most well-developed and successful model. The subjectof a BBC Horizons documentary in 1980, Mondragon’s cooperatives began in the1940s and by the late 1980s employed two thirds of the region’s workforce.The international cooperative movement has many other success stories to its credit.According to the National Cooperative Business Association, there are 47,000cooperatives in the U.S.A. serving as many as 100 million people or 40 percent of thepopulation. Co-ops control 99 percent of Sweden’s dairy production, 95 percent of Japan’s rice harvest, 75 percent of western Canada’s grain and oil seed output and60 percent of Italy’s wine production. Some of the major commercial banks in Europeare cooperatively owned or organised, including such giants as Germany’s DG Bank,Holland’s Rabobank, France’s Credit Agricole. Almost 100 percent of Japan’sfishermen are organised in cooperatives.

New Zealand today

New Zealand’s ideological climate is largely unsupportive of cooperativedevelopment, in spite of the fact that high unemployment conditions are generallyregarded as being conducive to the establishment of worker-owned cooperatives.Few for example will know that starting this year, the first Saturday of July is to beobserved as the international day of cooperatives - the result of a U.N. GeneralAssembly resolution. It will probably come as no surprise to learn that Mr. McKinnonas Minister of Foreign Affairs defends New Zealand’s lack of action on the groundsthat the resolution and a subsequent resolution in December ‘94 urging more specificsupport for cooperatives was adopted without a vote and so was not binding.Despite the lack of support, cooperatives are a familiar feature of New Zealand’sagricultural sector, with almost all of the country’s 70,000 farmers belonging to at

least one cooperative. The New Zealand Agricultural Cooperative Association has 49member cooperatives including the 16 companies of the wholly cooperative dairyindustry. Collectively, turnover of cooperative association members exceeds $10billion, shareholders exceed 277,000 and member organisations employ manythousands of New Zealanders.Non-agricultural members of the Cooperative Association include Foodstuffs -servicing 54 percent of New Zealand’s grocery trade, the PSIS with 150,000members and Motor Trade Finances Ltd., which specialises in vehicle finance. Othermajor cooperatively-run enterprises include electricity supply trusts and creditunions.Cooperatives in New Zealand have developed despite the absence of anyGovernment agency fostering cooperative enterprise. Other difficulties encounteredby cooperatives in New Zealand include the recent withdrawal of tax advantages anda struggle for the retention of cooperative company legislation. This contrasts withthe experience of many other countries. French law for example favours cooperativesand various government taxes and levies are channeled into co-op training, while inSpain, worker co-ops pay a much lower income tax rate.

Why cooperatives?

Cooperatives are based on the principle of maximising income and welfare for allmembers. They also help unify society by facilitating an awareness of interdependence.Traditionally, cooperatives have been born out of oppressive economic conditions.Currently our economy has both positive and negative features.Positive features include:• a market and price system• the opportunity for citizens to engage in free enterprise• incentives to productive effort• competition to provide the best productA key negative feature is its propensity to divide society. By commanding a highreturn, scarce capital leads to extreme inequalities of income and wealth whichworsen over time. Sarkar’s Progressive Utilisation Theory (Prout) directly confrontthis inequality. It argues that because physical resources are limited, an economicsystem allowing unlimited accumulation means that some roll in luxury while othersstarve and that a society so divided is ultimately unsustainable. It also recognisesthat choosing between a system that divides or one that unites is essentially a moralissue.The Prout model proposes that rather than allowing economic control to beprogressively centralised with wealth concentrated in fewer and fewer hands, theeconomy needs decentralising. It suggests that decentralisation be introduced by asystem of economic democracy. Thus one of Prout’s basic principles is that societyneeds to set limits on the extent to which individuals can accumulate physicalwealth.

Cooperatives or democratic firms offer a means of establishing such a system at themicroeconomic level. Rather than perpetuating a situation where, according toSemler, "even in the largest companies, it’s rare for more that half a dozen people todecide corporate strategy and determine the destinies of workers", in democraticfirms, labour hires capital rather than vice versa.Vanek observes that the concentration of economic power supports the concentrationof political power, the logical result of which is totalitarianism. Conversely, practicingdemocracy at the economic level strengthens political democracy.He further suggests that the sine qua non of our economic system is profitmaximisation, and suggests that the system’s defining equation can be written asProfit = income - labour and other expenseswhere human beings (labour) enter the equation as a minus sign. He describes sucheconomies as suffering from MSS or minus sign syndrome. Cooperatives wouldeffectively turn this around with workers controlling capital and enabling people tocome before profit.In democratic firms, technological advances and productivity gains are retainedwithin an enterprise and passed on to worker-owners. In capitalist firms, on theother hand, they are paid out by way of dividend and profit to shareholders whoinvariably live in some other region or country.Without such a change in the exercise of power, workers will remain subordinated tothe interests of capital and exploited by the owners of capital to increase their powerand control.

Capitalism compared to worker cooperatives

Cooperatives can be broadly distinguished between those organised around thecollective use of capital on the one hand or labour on the other. Most of NewZealand’s cooperatives involve the former, with shareholders investing funds tocreate a service to produce a shared financial return. The following focuses on thelatter, generally known as worker cooperatives.Studies have demonstrated that worker cooperatives enable greater participation andprofit-sharing by workers, leading to better human working environments andenhanced productivity. It should be noted that productivity can be measured not onlyin dollars and output but also job security and happiness. In fact, worker-controlledfirms out-perform conventional private firms if they have access to the necessaryinputs of production.The higher productivity of worker-controlled firms could attract outside investment(banks, government, the community at large and outside investors). While investorswould benefit from higher productivity rates, voting rights would still be based onlabour with one person-one vote and not contribution of capital as the criterion.

How can cooperatives be financed?