Expansion of Productive Employment (Note 2)

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   This document has been made available in electronic format
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                                  Background Information Note 2

         THE INTERNATIONAL CO-OPERATIVE MOVEMENT AND 
            THE WORLD SUMMIT FOR SOCIAL DEVELOPMENT  


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            THE EXPANSION OF PRODUCTIVE EMPLOYMENT
               AND THE REDUCTION OF UNEMPLOYMENT
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     RECOGNITION BY THE UNITED NATIONS OF THE RELEVANCE OF
    CO-OPERATIVE ENTERPRISES AND THE CO-OPERATIVE MOVEMENT

The UN system has reasserted the contribution of co-operatives
to the expansion of productive employment and reduction of
unemployment.  An ILO meeting of Experts on Co-operatives
convened in 1993 concluded that co-operatives were an important
means to promote and preserve employment and income.  The UN
Secretary-General also noted in his report to the General
Assembly of the United Nations on co-operatives (A/49/213 of 1
July 1994) that "co-operative enterprises provide the
organizational means whereby a significant proportion of humanity
is able to take into its own hand the tasks of creating
productive employment, overcoming poverty and achieving social
integration".

Most recently, the Summit Declaration commits itself to utilize
and develop fully the potential and contribution of co-operatives
for the generation of full and productive employment.  As a means
to enhance opportunities for the creation and growth of private
sector enterprises which would generate additional employment,
chapter III of the Programme of Action proposes "promoting and
supporting and establishing legal framework to foster the
development of co-operative enterprises and encouraging them to
mobilize capital, develop innovative lending programmes and
promote entrepreneurship".

      HOW DO CO-OPERATIVES EXPAND PRODUCTIVE EMPLOYMENT ?

The international co-operative movement directly provides
productive self-employment for several hundred million
worker-owners of production and service provision co-operatives
and non-member employees of these and other co-operative
enterprises.  Co-operative enterprises are also employers in
their own right.  In addition, the co-operative movement
indirectly maintaining the employment provided in hundreds of
thousands of private enterprises whose viability is partly
secured by their being user-owners of supply and marketing
co-operatives.  It creates considerable additional employment
through multiplier effects and influence on national policies. 
These capabilities particularly relevant for disadvantaged
section of society, are derived from its special organizational
characteristics.

         CO-OPERATIVES FACILITATE THE CREATION OF 
               FORMAL PRIVATE ENTERPRISES

The co-operative model of business enterprise is a conceptually
simple but universally applicable organizational solution to a
common problem:  that faced by an individual wishing to establish
an enterprise but unable to do so alone due to a lack of
resources, notably capital, or access to markets.  The solution
is to combine with others in a jointly-owned enterprise.  This
organizational model, constituted by the co-operative enterprise,
has been tested thoroughly, revealing an unrivalled capacity for
creating and protecting productive employment.

A co-operative enterprise is a means whereby any group of persons
may seek to realize their ambitions. For disadvantaged persons
it is especially appropriate, and often the only available
effective means for increasing their economic and social
well-being. It provides better control of the economic
environment; combines resources, however limited, so that these
become operationally effective; manages common resources
efficiently; ensures that return accrue only to member-owners,
remain under their joint control and are used primarily for
reinvestment; establishes formal legal status, thereby protecting
common assets and facilitating operation in the formal market;
and provides access to formal auditing, thereby encouraging
confidence among members and customers.

Moreover, members of most new co-operatives do not have to rely
entirely on their own efforts.  A large co-operative movement
exists to support them, offering advise and information;
membership in financial, supply and marketing co-operative
systems; specialized co-operative development institutions; broad
international co-operative technical assistance programmes and
support from trade unions, governments and intergovernmental
organizations.

    CO-OPERATIVES PROMOTE HIGH LEVELS OF MOTIVATION AND POSSESS
            AND INHERENT CAPABILITY FOR PRODUCTIVITY

Control over business policies and practices by member-owners is
a basic principle of the co-operative enterprise.  It is assured
by special structures and procedures applied in the context of
the widely acknowledged co-operative values of mutual
responsibility, equity, honesty and openness.  Members, managers
and employees are all involved in making decisions and setting
policies.  Most importantly, member-owners, and often managers
and other employees, are motivated as beneficiaries to ensure
high levels of productivity.  Co-operative movements maintain
motivation and productivity by constant attention to reciprocal
education for members, leaders and employees so they can teach
- and learn - from each other in carrying our their respective
roles. To this end, larger co-operatives and national movements
maintain their own specialist research and training institutions
supported by international co-operative technical assistance
programmes and by governments and intergovernmental
organizations.

    CO-OPERATIVES FACILITATE THE CONTINUOUS MOBILIZATION,
         CONCENTRATION AND REINVESTMENT OF CAPITAL

A characteristic of all co-operative enterprises is that members
must commit their own resources as a share of enterprise capital.

Founding members are willing to do so because of their commitment
to the venture; members joining later do so for this reason, but
also because of their confidence in an already viable enterprise
which they control.  Surplus earned by the co-operative is
retained and largely reinvested. By these means much local
capital, often under-used, can be mobilized to support
entrepreneurial development and thereby productive employment.

Savings and credit co-operatives and co-operative banks
specialize in local capital concentration and investment for
entrepreneurial promotion, of by other co-operatives.  They set
up national federations, thereby securing access to capital
accumulated within the entire co-operative system.  They develop
special services which enhance their capacity for promoting
entrepreneurial development.  They are supported by a network of
financial co-operative institutions at the international and
regional level providing managerial and technical assistance.

Insurance co-operative enterprises also cover financial risks
faced by co-operative enterprises and individual members.
International insurance and reinsurance co-operative groups also
provide technical and operational assistance.

        CO-OPERATIVES PROVIDE ACCESS TO AFFORDABLE AND
           APPROPRIATE INPUTS AND MARKETING SYSTEMS

Supply and marketing co-operatives can provide appropriate inputs
of commodities and services at affordable prices. Through the
introduction of technical and organizational innovations, these
co-operatives continuously upgrade their capability of supporting
member productivity. Co-operatives of this type successfully cut
out middlemen and assure market influence to small producers. 
They are a major organizational means to secure the existence and
employment maintaining capability of their many millions of
member enterprises. 

          OTHER SIGNIFICANT CONTRIBUTIONS OF CO-OPERATIVE
                ENTERPRISES TO PRODUCTIVE EMPLOYMENT

*  The area of the greatest impact of the co-operative enterprise
is in the creation and protection of productive employment in
non-co-operative enterprises whose viability is partly derived
from membership in supply and marketing co-operative.

*  Co-operatives provide security of employment for non-member
employees. Co-operatives do not readily close or relocate because
they are controlled by members residing in the communities which
would be affected.  They thus protect the livelihoods of many
communities especially rural areas and "old-industrial" regions
of developed market economies.

*  Co-operatives provide opportunities to transform
underemployment into productive self-employment through the
formation of informal and household micro-enterprises. 
Particularly relevant to women, this has a very high potential
in all sectors in developing market economies and the service
sector. 

*  The formation of worker co-operatives is one way of providing
for the protection of formal employment at risk due to public
sector retrenchment or private sector restructuring as well as
for isolated and unprotected professionals such as those in the
medical sector.

*  Employee ownership and co-operative management by means of
employee stock ownership and similar programmes are options for
the conversion of enterprises which protect and maintain jobs.

*  The creations of worker-owned service co-operatives as
entrepreneurial structures for the placement of the unemployed
by publically financed programmes can also contribute to the
reduction of unemployment.

Co-operative enterprises have been successful in creating and
protecting employment and therefore tackling one of the most
pressing problems facing societies worldwide - unemployment.


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This Note has been prepared for the information of participants
at the World Summit jointly by the International Co-operative 
Alliance and the United Nations Department for Policy Co-
ordination and Sustainable Development. For further information
contact the  Alliance at 15, Route des Morillons, 1218 Grand
Saconnex, Geneva, Switzerland. Tel: +41 22 929 8888, Fax: 798
4122, E-mail: icageneva@gn.apc.org. 
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                                                 March, 1995