The ILO - Cooperative Service since 75 Years

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   This document has been made available in electronic format
      by the International Co-operative Alliance ICA
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       THE INTERNATIONAL LABOUR ORGANIZATION -
         COOPERATIVE SERVICE SINCE 75 YEARS

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         by Joe Fazzio and Gabriele Ullrich 1/

The present interest in the United Nations (UN) takes place in
different, often contradictory forms.  The interest may be
positive and negative, however, it is often linked with weak
knowledge of structures, instruments and activities of the
various UN agencies.  What is known about the activities refers
mostly to politics, peacekeeping efforts and macroeconomic
issues.  It is less known how the UN system responds through
various structures and instruments to the concern of people in
their daily struggle for economic and social survival in their
environment.  This mostly takes place through the people's own
organizations, among them particularly cooperatives and similar
organizations.

The promotion of cooperatives is an area of concern for the UN
which has recently attracted new attention in the global UN
system and is being taken up by UN structures with various
instruments.  Based on the report of the UN Secretary General on
the global situation of cooperatives 2/, the General Assembly of
the UN adopted a resolution 3/ which provided a new challenge for
specialized agencies of the UN such as the FAO, ILO, UNESCO and
UNIDO in promoting cooperatives.  In 1994 the Secretary General
issued a new report on cooperatives 4/ which led to Resolution
A/49/605.  The first of July 1995 was declared for the first time
the International Cooperative Day for the UN system.  The UN
issued a special press release 5/ which featured cooperatives as
business enterprises within the market system, being both
economic and social with a declared ethic of social responsibil-
ity while being private enterprises. As "schools for democracy"
they fostered social partnership for sustainable development. 

Within the UN system the largest programme for the promotion of
cooperatives exists with the International Labour Organization.
The ILO, with its headquarters in Geneva, is the oldest special
agency of the UN system.  It was founded in the times of the
League of Nations in 1919.  Its constitution was established as
annex to the Treaty of Versailles at the end of the first World
War.  Despite this historical weight the ILO is unknown to the
public of many countries.  Among specialists the ILO is either
known as the UN Organization which develops international
conventions and recommendations (standards) for the improvement
of working and living conditions of the populations or as an UN
organization for the execution of development projects in the
framework of technical cooperation through its Secretariat, the
International Labour Office.  It is rather seldom known how these
two types of activities interact and by this offer a unique
potential for sustainability.

The example for promoting cooperatives shall illustrate how the
ILO can contribute effectively through the above mentioned
instruments to developing and sustaining democracy and at the
same time to alleviating poverty.

The foundation of the ILO in 1919 was meant to promote social
justice and improve living conditions all over the world.  One
of the most important conditions for this end was the freedom of
association which included also the establishment of cooperatives
and similar self-help organizations.  Democracy could best be
practised in self-managed and self-controlled organizations.  The
social movements of the 19th century influenced hence the
founders of the ILO and those of the cooperative movements.

The constitution of the ILO provided therefore for official
consultations with the international recognized organizations of
employers, workers, agriculturists and cooperators. 
Consequently, the International Co-operative Alliance (ICA) was
given from the beginning a special observer status the right to
speak at any ILO body or meeting.  Moveover, the Office
established in 1920 a special Cooperative Service.  The
consultations with the cooperators never reached the status of
those with the employers' and workers' organizations who have
together with the governments voting rights in all ILO bodies. 
However, in the past 75 years frequent and worldwide meetings of
experts took place on questions on cooperative development.  They
led to the establishment of a standing panel of experts on
cooperatives and in 1966 to the adoption of the ILO
Recommendation No. 127 Concerning the Role of Cooperatives in the
Social and Economic Development of Developing Countries.

This Recommendation was adopted in the times of intensifying
technical cooperation with developing countries and was hence
addressed to the governments of these countries.  In the 60s and
70s they were considered to play and important role in promoting
cooperatives and similar self-help organizations which were
regarded as instruments for achieving global development goals. 
This approach started changing in the 80s nevertheless Recommen-
dation No. 127 as the only international standard on cooperatives
was recognized for having contributed significantly to develop
a more precise idea of cooperative policy and legislation.  The
text gave a clear definition, that a cooperative is "...an
association of persons who have voluntarily joined together to
achieve a common end through the formation of democratically
controlled organization, making equitable contributions to the
capital required and accepting a fair share of the risks and
benefits of the undertaking in which the members actively
participate" (12, 1(a)).

This formulation is up-to-date recognized and allows to include
also similar self-help organizations in other legal forms or
without legal personality to be included in the deliberations. 
The ICA Statement on Cooperative Identity which was declared at
its Centennial Congress in Manchester 1995, follows in its
definition the major lines of the definition in the ILO Recommen-
dation No. 127.

Recommendation No. 127 puts furthermore emphasis on the import-
ance of cooperative legislation and related laws in promoting
cooperatives, on the importance of education and training, of
financial and administrative aid as well as on the importance of
supervision and international cooperation.

After the adoption of Recommendation No. 127 by the International
Labour Conference 6/ in 1966 another meeting of experts took
place in 1968 in order to analyze the impact of the Recommenda-
tion.  The experts came to the conclusion that it was too early
to assess the consequences of such a far reaching recommendation. 
However, the framework for the cooperative development policy of
the ILO itself was established.

As an UN Organization which has to respect the autonomy of
national policies and therefore cannot influence the implementa-
tion of a recommendation directly, the ILO's activities were
limited to making the Recommendation known and to promoting its
ideas through technical cooperation projects with cooperative
movements and authorities in the countries concerned.

In the following period which lasted 25 years, no further
meetings of experts were organized by the ILO on this subject. 
The Cooperative Service of the ILO concentrated its efforts on
the implementation of technical cooperation projects for
cooperative development.  Meanwhile, the research and information
activities lost their importance.  Financed through multi-
bilateral programmes of the Scandinavian countries, the Nether-
lands, Switzerland and later also Germany, France and Italy as
well as through the UNDP such projects assisted the creation of
cooperative authorities, training and development centres.  This
resulted in an increased foundation of cooperatives and the
improved education and training of the members and staff of
cooperatives.7/

In order to promote the economic autonomy of cooperatives
projects fostered the trade among cooperatives, the development
of training materials on cooperative management (the best known
is certainly MATCOM 8/), the adjustment of cooperative structures
to the requirements of economic undertakings e.g. in the areas
of accounting, audit and credit.  At the same time the ILO
provided advisory services on cooperative legislation which was
one of the issues Recommendation No. 127 focused on.

In the course of the 80s, however, it became more and more
evident that the cooperative authorities of the countries
concerned did not so much forward their know-how to the cooper-
ative movements, but rather use it for directing and controlling
cooperative affairs.  As the human capital of most of the
developing countries was concentrated in governmental structures,
the efforts of training and sensitization started in these
structures.  At the end of the 80s many political declarations,
however admitted that the state has to withdraw from interven-
tions in cooperatives (e.g. at the ILO 7th Regional Conference
for Africa in Harare 1988).   In order to promote the development
of democratic forces other approaches had to be developed for
also in promoting self-help organizations: education and training
at grassroots level, assistance for the creation and management
of autonomous cooperatives and self-help groups, development of
participatory approaches in promotional activities and the
setting of a political and legal environment conducive to
cooperative development.

The Cooperative Branch of the ILO developed various programmes
which aim at facilitating acquisition of know how, skills and
attitudes directly at grassroots level 9/, at the economic
survival of cooperative organizations 10/, the adjustment of
structures and policies to the changing environment 11/, and at
facilitating networks among cooperative institutions at national,
regional and interregional levels for the development of their
human resources.12/   In these programmes poverty alleviation
through increasing income and (self-) employment and developing
democratic behaviour go hand in hand.

In 1993 the ILO convened after 25 years another worldwide meeting
of experts on cooperatives.  It was meant to assess developments
in this area which are of relevance to the ILO mandate.  In
particular the above mentioned Recommendation No. 127 was to be
analyzed, as well as the role of human resource development in
the economic viability, efficient management and democratic
control of cooperatives and the role of cooperatives in the
promotion of employment and income.  With these agenda items the
experts assessed the role of such organizations in the improve-
ment of the economic situation and of social justice of lower
income groups in the sense of the UN Resolution of 1992.

The role of such expert meetings is to advise the Director
General of the Office in the preparation of subjects relevant to
the International Labour Conference.  At the meeting in 1993 15
experts from cooperative institutions from all over the world as
well as two each from employers' and workers' organizations. 
Twelve observers from institutions working in this area,
including the ICA having a standing observer status in ILO
meetings.

The experts were of the opinion that Recommendation No. 127 had
contributed significantly to cooperative development in the
countries concerned.  The text of the Recommendation, however,
should be revised in the light of changes in the democratization,
structural adjustment and employment.  In particular should the
Recommendation be addressed to all countries, as the observed
global developments and changes also apply to the new democracies
in Central and Eastern Europe and to industrialized countries in
the West.  All countries should create an environment which is
conducive to the development of cooperatives able to survive as
private enterprises: without state intervention and with abusing
them as instruments to implement macro-economic goals.  The
experts underlined that such developments are only possible if
the human resources or the human capital of all groups concerned
is well prepared to participate in and contribute to these
developments.

Cooperatives and similar self-help organizations were considered
by the experts to be an efficient possibility of self-employment
and thereby for the absorption of the workforce which can be
neither employed by big and small private enterprises or by the
public service or enterprises.  According to the World Labour
Report of the ILO in 1992 in most developing countries less than
50 per cent of the workforce in the non-rural sector and less
than 75 per cent in the rural sector are absorbed by wage
employment.  This fact makes the search for alternative employ-
ment opportunities to one of the most urgent challenges at the
end of this century.  Cooperative organizations offer for micro,
small and medium entrepreneurs survival in the formal and
informal sector but also an improvement of the living standard
of households in these sectors.  Through joining together in such
organizational forms, small economic units can obtain services,
finance and information at favourable conditions.  Thus cooper-
atives have an impact on the employment and income situation and
can contribute to poverty alleviation in developing countries. 
At the ILO meeting in 1993 the experts of cooperative institu-
tions, employers' and workers' organizations confirmed these
effects of cooperative organizations.  Nevertheless they warned
to draw from there the conclusion to abuse such self-help
organizations as instruments of governments, donors and NGOs for
the achievements of macro-economic goals. 13/

In May 1995 the ILO convened another worldwide meeting of experts
in the area, this time with a focus on cooperative law.  The
Governing Body of the ILO decided that the agenda of the meeting
was to treat the impact of labour law, industrial relations
systems and international labour standards on cooperatives and
cooperative law as well as cooperative law and the regulatory
role of the State.

The Meeting noted that recent economic trends throughout the
world, including structural adjustment and particularly
privatization, have highlighted the role of cooperatives in
promoting self-employment and wage employment.  Cooperatives are
being formed with a strong emphasis on their original values,
including collective self-help, equality, democracy and strong
member participation.  The growth of the cooperative movement
worldwide required an examination of labour law and labour
relations in relation to cooperatives as business enterprises,
which are employers.  In recent years, due to increased competi-
tion in the market economies, many cooperatives have grown from
small member-owned and operated enterprises into larger business
with a formal organizational structure, a detailed division of
work and with salaried employees and managers.  This was the case
for both service and production or worker cooperatives. 
Therefore, cooperatives have become increasingly subject to the
application of labour law and labour relations systems as any
other form of business enterprise in the private sector.

The Meeting considered nevertheless that the issue was more
complex in the case of worker cooperatives, where the members
were simultaneously both the owners and the workers.  The members
as self-employed individuals are subject to an association
agreement to establish a cooperative business enterprise as
owners, and yet at the same time they work in the enterprise. 
The Meeting noted that a major question arises in the case of
worker cooperatives as to whether the member-workers have the
legal status of employees and thus are subject to labour law, or
whether they are independent self-employed workers subject only
to the agreement of association establishing the cooperative. 
Legal practice in many countries does not provide a clear answer
to this question.  Thus the application of legislation governing
hours of work, holidays, minimum wages and collective bargaining
is often difficult to enforce in these circumstances.  The
Meeting, however, noted that safety and health as well as social
security aspects should receive particular attention.  The
Meeting was of the opinion that the relationship between the
cooperatives and the labour market should be further investi-
gated.

The issue of labour relations was also examined by the Meeting. 
The experts observed that the traditional employer/employee
relationship would apply to paid managers and workers in
cooperatives who are not members.  The critical issue, however,
is the relationship between the management of a cooperative
enterprise as an employer and the members in their quality as
both owners and workers.  This management-member relationship in
cooperatives is very important, especially when compared to other
forms of business enterprises, as the members are not only owners
of the enterprise but are simultaneously involved in business
operations as suppliers or clients or as workers.  This relation-
ship has inevitably given rise to legal problems, but the general
trend is to apply to at least worker-members all the benefits of
labour law and social security, as in the case of worker non-
members.

The Meeting gave careful consideration to the importance of
international labour standards to cooperatives, their members and
non-member employees.  The experts noted that the standards
concerning employment, training, social policy, freedom of
association, labour administration, occupational safety and
health, social security and working conditions were all relevant
to worker members and non-member employees alike.  Furthermore,
the Recommendation concerning the role of cooperatives in the
economic and social development of developing countries, 1966
(No. 127) was reviewed and judged to have had a beneficial impact
on the promotion of true democratic and independent cooperatives. 
The experts therefore endorsed the conclusion of the earlier
Meeting of Experts on Cooperatives in 1993 that the Recommenda-
tion should be revised to update and extend its policy guidelines
to all countries and that ILO member States should take appropri-
ate action.

The Meeting also gave careful attention to the regulatory role
of the State in cooperative law in the light of changing economic
conditions in the world of today.  Due to recent trends towards
political liberalization and the market economy in developing
countries and economies in transition, long-established govern-
ment supervisory structures have been called into question and
have been weakened.  The role of the State and of cooperative law
has changed, and basic elements of the legal structure such as
collective, cooperative or state property have now become part
of the private sector.  Cooperatives, formerly viewed in some
countries as parastatals, have become true private and autonomous
institutions.  Structural adjustment policies have reinforced
political liberalization and the trend towards democratization,
de-officialization and the deregulation of the cooperative
movements in developing countries and in the former socialist
countries.  The experts noted that experience has shown that
cooperatives cannot develop under strong government control, and
that the trend is towards the reform of cooperative law to limit
the regulatory powers of the State.  In developed countries, the
role of the State under cooperative law has been historically
limited to a promotional role based on the belief that efforts
should be encouraged to improve the business efficiency of
cooperatives and to enhance their capacity to compete with other
enterprises.  At the same time, cooperatives are allowed autonomy
to adopt rules of management and finance similar to other forms
of enterprises in the private sector.  The Meeting endorsed the
view that the required reform of the regulatory role of the State
would be facilitated by a revision and updating of Recommendation
No. 127. 14/

Through the results of these meetings of experts a process was
initiated which has led to discussions at the level of the
Governing Body of the ILO and of the International Labour
Conference which may result in a revision of Recommendation No.
127.  This would, however, depend on the reaction of governments,
employers' and workers' organization represented in these bodies
and also in the need for such a discussion expressed in the
lobbying process for the agenda of these bodies.  The
disadvantage for the cause of cooperatives is here that there is
no formal constituency in the ILO bodies and thus the lobbying
has to take place via the voice of governments', employers' and
workers' representatives.  The dialogue among the over 172 member
States of the ILO, involving governments, employers' and workers'
organizations as well as cooperative federations would yet re-
launch the concerns of cooperatives and similar self-help
organizations at broad and highest levels.  Never before was the
chance greater for them to be recognized as autonomous, economi-
cally self-reliant and democratically controlled enterprises of
the private sector, which should be offered the same opportun-
ities for development as other private enterprises: without
interference from the State, however, in an environment where
they can develop the impact which was described above.  This
concerns the improvement of the employment and income situation
as well as the development of human resources.15/

At the same time the Cooperative Branch of the ILO continues its
assistance to the cooperative institutions and those to create
for them an enabling environment through technical cooperation
projects and advisory services.  They are meant to help improving
the conditions for democratic attitudes and efficient management
as well as the development of employment and income
opportunities.
                           NOTES:
                           -----
 1/  Joe Fazzio is Chief of the Cooperative Branch of the ILO;
     Gabriele Ullrich was until September 1995 Chief of the
     Section on Human Resource Development, Legislation and
     Information in the ILO Cooperative Branch.
 2/  Status and role of cooperatives in the light of economic
     and social trends, Report of the Secretary General of the
     UN (A/47/216/43) of 28 May 1992.  The drafting of this
     report was assisted by the Joint Committee for the
     Promotion and Advancement of Cooperatives (COPAC) to which
     besides UN agencies also international NGOs such as ICA and
     WOCCU belong.
 3/  UN General Resolution 47/90 adopted on 2 November 1992.
 4/  Status and role of cooperatives in the light of new
     economic and social trends, Report of the Secretary General
     of the UN (A/49/213 of 1 July 1994).
 5/  United Nations in Focus: "Cooperatives: Schools for
     Democracy", New York, 1 July 1995
 6/  The International Labour Conference (ILC) is the annual
     general assembly of the International Labour Organization
     which offers the member governments, employers' and
     workers' organizations a global forum for the discussion of
     social and labour issues.  The ILC adopts the international
     labour standards and the Office's budget.
 7/  See also the ILO background paper for the Meeting of
     Experts on Cooperatives in 1993 by H.-H. Munkner "Review of
     the Impact of the Recommendation Concerning the Role of
     Cooperatives in the Economic and Social Development of
     Developing Countries", Geneva 1992.
 8/  ILO Materials and Techniques for Cooperative Management
     Training.
 9/  The ACOPAM (Appui associatif et cooperatif aux initiatives
     de developpement  la base) and INDISCO (Inter-regional
     programme to support self-reliance of indigenous and tribal
     communities through cooperatives and other self-help
     organizations) programmes.
10/  The INTERCOOP (International network of cooperative trade
     partners) programme.
11/  The COOPREFORM (Structural reform through improvement of
     cooperative development policies and legislation)
     programme.
12/  The COOPNET (Human resource development for cooperative
     management and networking) programme.
13/  ILO Final Report on the Meeting of Experts on Cooperatives,
     Geneva, 29 March to 2 April 1993, ILO Working Paper on
     Cooperative Development, 1993.
14/  The report of the meeting was approved by the Governing
     Body of the ILO in its 264th Session (November 1995).
15/  The role of cooperatives as "schools of democracy" in the
     process of economic liberalization and of employment
     creation is specifically emphasized by the ILO Director
     General's report of 1992 on "Democratization and the ILO".

                                                   January, 1996