In 2012, the International Year of Co-operatives, the United Nations symbolically recognized cooperative’s presence as a vehicle ‘to pursue both economic viability and social responsibility’. The International Cooperative Alliance, the apex organization that represents cooperatives worldwide, refers to cooperative 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’ (ICA 2012a). In other words, cooperatives are independent of the government and generally share a common set of institutional principles that distinguishes them clearly from other forms of (shareholding) business organizations.
The first modern co-operatives emerged in Western Europe in the mid-nineteenth century, during the Industrial Revolution. However, proto-types of consumer co-operatives formed already in Britain since 1760 in opposition to the high prices of flour and bread resulting from local monopoly of millers and bakers (Cole 1944, Birchall 1994). In the same year, the enclosure of common land in most parts of England took place and as a result people no longer had the customary rights to let their cattle graze, hunt game, or build their house on the common (Birchall 1994). At the same time, the Industrial Revolution resulted into rapidly growing industrial cities (Williamson 1990). Those developments had repercussions for the form of co-operation. In cities’ wage labour economy more and more products from human labour were turned into commodities to be bought at a given market price. The shift from land to towns also impeded citizens to live on their land and thus to grow their own food. As a result people depended increasingly on the market with modest control over commodity prices and quality. At the beginnings of the Industrial Revolution, Britain witnessed a dramatic decline in living standards as market prices for food and housing increased (Feinstein 1998, Lindert and Williamson 1983), which only spilled over into increases of real wages after 1850 (Allen et al. 2011). During those times of crisis, the first modern co-operative, the Rochdale Society of Equitable Pioneers was set up in 1844 in response to high prices and low quality of flour. Collectively, artisans working in the cotton mills established a shop selling flour, oatmeal, sugar and butter and built a number of houses for their members. The co-operative enabled them to tap the benefits of economies of scale and thus achieved food and commodity prices and quality not available to them as individuals. The pioneers expressed their institution’s “rules of the game” in seven fundamental “Rochdale Principles”. The table underneath reaffirms that those principles represent the backbone of co-operatives until today (Birchall 1994, ICA 2012b).
|Rochdale Principles (1844)||International Co-operative Alliance (1995)|
|Open membership||Voluntary and open membership|
|Democratic control||Democratic member control|
|Distribution of surplus in proportion to trade||Member economic participation|
|Payment of limited interest on capital||Payment of limited interest on capital|
|Political and religious neutrality||Autonomy and independence|
|Promotion of education||Education, training and information|
|Co-operation among co-operatives|
|Concern for community|
The following milestone in the development regarding co-operatives was laid in 1864 by the German Hermann Schulze-Delitzsch in the 1840s and Friedrich Raiffaisen in the 1850s. Both founded cooperative banks which provided credit and savings services based on the idea of self-help, self-responsibility, and self-administration (Guinnane 2011). Although other co-operatives in 1760 Britain preceded these two early co-operatives, they became the prototypes for societies in Europe.
Co-operatives operate in diverse sectors. Types of cooperatives include consumer-owned, producer-owned, worker-owned, purchasing, and hybrid co-operatives. However, cooperatives can be labeled more than one way. This has contributed to some terminological confusion over the terms used to describe different types of co-operatives. For example a group of coffee farmers forming a co-operative to jointly sell its coffee is referred to as producer-co-operative. In the case those farmers then purchase agricultural equipment and inputs together make them a consumer cooperative. Both labels are correct. One refers to the co-operative’s initial ownership structure (producers) and the other describes the dual gains that can result from its organizational structure which compliments both coffee production and the needs and roles of members as consumers.
|Producer co-operative||Agricultural cooperative||Producers of farm commodities or crafts||Joint storage, processing and marketing of pooled agricultural and livestock products||Agriculture: dairy, (cash)crops and livestock|
|Consumer co-operative||Credit unions, child care cooperatives, electric and telecommunications cooperatives, food co-ops, health care co-ops, housing cooperatives||Individuals who buy goods and services of the co-operative||Bulk aggregate purchase to benefit from economies of scale||Retail, food, capital markets, health and child care, real estate, telecommunications|
|Worker co-operative||Employees “worker-owners”||Need for start-up capital||Childcare, commercial and residential cleaning, food service, healthcare, technology, consumer retail and services, manufacturing, wholesaling|
|Purchasing and shared services co-operative||Small, independent businesses, municipalities or other like organizations that band together to enhance their purchasing power||Composed of businesses that join to improve their performance and competitiveness|
|Hybrid||Multi-stakeholders||Seeks to balance conflicting needs, between different stakeholders||Members have dual roles and needs as producers and consumers|
- Allen, R. C., Bassino, J. P., Ma, D., Moll-Murata, C., and van Zanden, J. L., 2011. Wages, prices, and living standards in China, 1738-1925: in comparison with Europe, Japan, and India. Economic History Review 64(Supplement 1), pp. 8-38.
- Birchall, J., 1994. Co-op: the people’s business (Manchester: Manchester University Press)
- Cole, G. D., 1944. A century of Co-operation (London: George Allen and Unwin).
- Feinstein, C. H., 1998. Pessimism perpetuated: real wages and the standard of living in Britain during and after the industrial revolution. Journal of Economic History 58, pp. 625-58.
- Guinnane, T. W., 2011. The Early German Credit Cooperatives and Microfinance Organizations Today: Similarities and Differences. In: B. Armendáriz and M. Labie (eds), The Handbook of Microfinance (Singapore: World Scientific), pp. 77-100.
- International Co-operative Alliance, 2012(a). What is a co-op? Website International Co-operative Alliance.
- International Cooperative Alliance, 2012(b). Co-operative identity, values & principles. Website International Co-operative Alliance.
- Lindert, P. H. and Williamson, J. G., 1983. English workers’ living standards during the industrial revolution: a new look. Economic History Review 36, pp. 1-25.
- Williamson, J. G., 1990. Coping with City Growth during the British Industrial Revolution (Cambridge: Cambridge University Press).