Types - Co-operatives

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
Cash trading -
Promotion of education Education, training and information
  Co-operation among co-operatives
  Concern for community

Table: Co-operative principles in the past and present

 

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.

 

 

Type Subtype(s) Ownership Justification Sectors
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

Table: Types of co-operatives and their characteristics