Proutist Economic Development

Cooperatives

By Dharmadeva

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 Cooperative industries
• All people have the right to be
guaranteed minimum requirements
such as food (including water),
clothing, housing, education and
medical care.

• These basic requirements should be

cooperatively produced because
they are essential collective
requirements.

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Cooperatives as a form of
economic enterprise
• Co-ops help people work together and
move forward in a collective way.

• They are capable of seeking a

balanced adjustment between
collective spirit and individual rights.

• Getting things done with collective

effort.

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 Benefits
• Combines the wealth and resources of
many individuals and harnesses them
in a united way.

• Structured so that individual interest

does not dominate collective interests.

• Individual dominance can adversely

effect the welfare of different social
groups. 

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 Essence of cooperatives
• Involves getting things done between free
human beings with:
(i) equal rights;
(ii) equal human prestige (and mutual
respect for each other);
(iii) equal locus standi (eg, legal standing);
so that everyone's welfare is considered. 

This is called "coordinated cooperation".

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 Coordinated Cooperation
• Needed for equilibrium and equipoise in
social life.
• A socio-economic system should be based
on coordinated cooperation not
subordinated cooperation. 

• "Subordinated cooperation" involves people

doing something individually or collectively,
but keeping themselves under other
peoples' supervision or control.
• This can degenerate the moral fabric of 
an enterprise and should be avoided when
structuring cooperative business
enterprises.
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 Workforce composition
• All groups in the cooperative workforce will benefit
from the cooperative's profits.

• They will be entitled to draw dividends and salaries

including bonuses on the basis of their membership
in, and services they render to, the cooperative.

• Labourers or workers also include those who are

engaged in cooperative management.

• The members of a cooperative can be composed of:

(i) shareholders - who receive salaries for their
work plus a return on their shares;
(ii) non-shareholders or labourers - who enjoy
stable employment and favourable wages or
incomes.

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 Cooperatives ownership
• Without a sense of personal ownership
people do not work hard or care for property.

• Suppression of personal ownership

sentiments results in sluggish production
and psychic oppression.

• In cooperatives, there is personal ownership,

subject to:
– social limitations on concentration of
wealth; and
– a mechanism to ensure progressive
increase in everyone's living standards.
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Membership requirements
• Worker's or shareholder's longer term
commitment to the cooperative.

• Cooperative members have to be local

people who, by virtue of their established
residence, can make a commitment to the
cooperative and the region it services.

• Local is a relative concept and expands over

time.

• Anyone who wishes to be part of the socio-

economic life of a region can settle there and
become a member of a local cooperatives.
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 Shareholder composition

• Members who purchase shares in a

cooperative should have no power or right
to transfer their shares without the
permission of the cooperative.

• Such a pre-emptive right allows existing

shareholders to determine the basis of
membership, and prevents capitalist
entrepreneurs from purchasing large
numbers of shares in a cooperative and
speculating in the market.

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 Share transfer
• Shares can however be inherited.
• Generally, the shares of cooperative members
without descendants simply pass on to their legally
authorised successors, who become members of the
cooperative if they are not already members.

• Different countries have different systems of

inheritance, so the right of inheritance should be
decided according to the system in vogue.
• In Western common law countries if someone
inherits shares in a business enterprise and does not
want to become a member of that enterprise,
existing shareholders simply buy that person out.
• The same reasoning can be applied to cooperatives -
following this arrangement will help cooperative
members avoid litigation. 

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 New shareholders
• Because cooperative members
will be from the same vicinity
they will all know each other, so
there should be no difficulty in
deciding who should be able to
buy shares due to ignorance
about potential shareholders.

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 Dividend distribution 
• In a cooperative system there is no need for
preference shares.

• Today preference shares are used by some

financial institutions as a substitute 
for debt investments (ie loans to businesses).

• Preference shares really mean that a lender in

the guise of a shareholder has first grab at co-
op dividends and therefore co-op profits.

• Such investors should become ordinary

shareholders like other co-op members and
share proportionately in the success (or perhaps
otherwise) of the co-op.
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 Non-shareholder workers
• Non-shareholding workers are possible and
can be categorized into those who are:

(i) permanent labourers - who get bonuses

and premiums (‘dividends’) as incentives
besides their wages; and 

(ii) casual or contract labourers - who only

get wages for their labour. 

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 Bonus distributions
• Workers (or worker/shareholders) who
give the greatest service to the
cooperative should get the greatest
bonuses.

• Bonuses should be paid in proportion

to wage rates and should reflect both
the skill and productivity of the
worker.

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 Incentive system
• Cooperatives are to develop a proper incentive
system so that individual initiative by talented
people is encouraged.

• An incentive system should ensure that

intelligent people are not forced to do work
which is unsuitable for them, or be paid the
same wages as ordinary workers.

• If skilled workers get paid more than unskilled

workers there will be an incentive for all to
become skilled and work harder.

• In this way the cooperative will encourage the

educational and skill upgrading of its members. 
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 Who else benefits?
• Disadvantaged persons can also benefit from the
cooperative system.

• A widow, orphaned minor or disabled worker can

own shares and derive an income based on the
number of shares they own.

• Therefore even if as cooperative members they are

unable to work or are retired, they will can still be
entitled to an income from special funds
deriving cooperative profits, eg pension funds.

• Establishing such a structure on a large

scale should be able to do away with the welfare
state mentality prevalent in capitalist societies.
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 Cooperative behaviour
• Encourage individual initiative by
talented people.

• Organisational behaviour and outlook

to be cultivated is one that is non-
materialistic.

• Leadership is subtle and sophisticated.

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 Cooperative management
• Cooperative members should
elect a board of directors from
amongst the cooperative
members.

• The position of director should

not be honorary or hereditary.

• Directors must be moralists.

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 Board of Directors
• The board decides the amount of profit to be
divided amongst members, ie the dividends or
bonuses to be paid to each shareholder and/or
worker.

• However, not all profit should be distributed in the

form of dividends. Some should be kept or used for:
(i) reinvestment, purchasing capital items or repair
and maintenance; 
(ii) increasing the authorised capital of existing
shareholders;
(iii) deposit into a reserve fund to be used to
increase the value or rate of dividends in years
when production is low.

• This also ensures that shareholder capital is not

adversely affected.

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 Farmer cooperatives
• The importance of food means there has to be
maximum and safe utilisation of agricultural land.

• The best way to achieve proper organisation of

agriculture is on a cooperative basis.

• Land is very important in the psychology of farmers

so a proper cooperative system has to be built up to
give farmers a sense of ownership of their land and
permanent usufructuary rights to the land 
while it is managed cooperatively.
• This will also give a better outturn. 

• The cooperative system has to be psychological and

subtle so that farmers do not feel adversely affected
or insecure. 

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 Pooling of land
• Farming cooperatives can be achieved by
farmers pooling their land in cooperatives
and keeping records of their shares based
on the size of their individual land holdings.

• In this way many small plots can be

merged and boundaries for adjoining lands
broken down, removing needless division
of land into small individual holdings.

• This allows for an increase in the area

of land available for cultivation, benefiting
farmers collectively.
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Research and development
• In the cooperative system there is also
great scope for agricultural research and
development into new ways to better
utilize and prolong the vitality of land.

• The ill effects of chemical fertilizers, which

are common in individual farming and
relatively unavoidable because of lack 
of individual capital, could be minimized or
eliminated. 

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 Producer cooperatives
• Cooperatives which are agricultural should sell their
produce to producer cooperatives, which in turn can
manufacture a wide variety of consumer goods.

• Raw materials which are of non-farming origin, such

as limestone for the production of cement, can also be
processed by producer cooperatives. 

• Producer cooperatives need to be formed for agro

industries, agrico industries and non-agricultural
industries.

• The total profit of such cooperatives should be

distributed amongst the workers and members of the
cooperative according to their individual capital
investment (shares) in the cooperative and the service
(labour) they render to the production and
management of the cooperative.
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 Farmer-producer
cooperatives
• Farmers in agricultural cooperatives may also
create producer cooperatives to produce items for
various industries.

• Some cooperatives may function as both farmer

and producer cooperatives. 

• Farmer cooperatives which also function as

producer cooperatives have the opportunity of
increasing their profitability in various ways.
• For example, producer cooperatives functioning
with agricultural cooperatives could produce rice
as well as oil from the husks. 

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 Consumer cooperatives
• Consumer cooperatives will distribute consumer
goods to members of the public at reasonable
rates.

• These cooperatives should be formed by persons

having an interest in selling goods to the public (ie
not hoarding), and will share profits according to
the standard criteria of individual labour and capital
investment (shares). 

• Consumer cooperatives will be supplied by both

agricultural and producer cooperatives.
• For example, agricultural or producer cooperatives
which produce cotton or silk thread will sell the
thread to weaver cooperatives, which can produce
cloth using the appropriate or latest technology.
• Weaver cooperatives will in turn supply consumer
cooperatives that sell the cloth to the public. 
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 Service cooperatives

• These are special cooperatives which

should be formed by people involved in
service-type industries, such as
doctors.

• Professional cooperatives for dentists,

accountants, etc can also be formed.

• Small business may remain privately

owned.

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 Satellite cooperatives
• An economy can advocate the formation of many
small satellite cooperatives to supply various items to
large producer cooperatives.
• Eg, different parts of a motor car can be locally
manufactured in small cooperatives (and even carried
out as cottage industries).

• The main function of the producer cooperative will

then be assembly.

• This has two benefits: 

(i) large cooperatives will not require many labourers,
minimizing labour unrest; and 
(ii) labour costs can be reduced, keeping the cost of
commodities low.

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 COOPERATIVE GAMES
- are a technique of experiential education that
raises consciousness and teaches solidarity.

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 Cooperative games
- promote kindness, honesty, trust and
teamwork.
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