Co-operative Effectiveness & Efficiency for the Future (Part 2) (1992)

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This document has been made available in electronic format
by the International Co-operative Alliance (ICA)
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October, 1992
(Source: Co-operative Values in a Changing World (1992) 


            VI.  CO-OPERATIVE EFFECTIVENESS AND 
                       EFFICIENCY FOR THE FUTURE

(PART 2)

3.3.2.  Risk of `ineffective hybrids'
------------------------------------------ 
The transformation to stock companies, etc. gives raise
to another kind of risk in these contexts; the tendency
to create an ineffective hybrid between the co-operative
and capital associative forms of association. The risk is
that we are destroying the advantages of the co-operative
form and borrowing some characteristics from the stock
company form, and thus are creating an ineffective and
inefficient mixture. It has neither the absolute advantages 
of the co-operative society, nor the absolute advantages 
of the joint-stock company. 
  
At this stage of the process of transformation these
delicate issues can only be pointed out. There is an urgent 
need to examine those more closely for the future.

3.4.    Federative or unitary approaches?
--------- --------------------------------------
Closely linked to the above is the issue of the federative 
form of organization as an effective form for the future. 
Many co-operative organizations, in fact most, are still 
established according to the federative idea. And some 
types of co-operative organization, especially the worker 
co-operatives, are still just beginning to build up some 
kind of federative network. We are also facing the need 
for more collaborative structures internationally. So, 
experiences are of crucial importance.
  
We can then observe that the federative structures have
become increasingly problematic during recent decades.
Many organizations, especially consumer and agricultural
co-operatives, will certainly need to reform their
federations during the coming decade; among other things
by reducing the number of societies and by establishing a
more clear-cut distribution of responsibilities between
the primary and secondary levels. History has demonstrated 
that these stages need to be passed through when activities 
expand and the advantages of large scaling, and distribution 
and specialization of work inside the federation become 
more important. All the established co-operative organizations 
in industrialized economies have gone through this process 
especially during the 1950s and the 1960s, and it is certainly a
normal process of adaptation for all federations, sooner
or later.
  
During the late 70s and the 80s in particular we have 
experienced a new tendency in this process of federative
change: several organizations have introduced more national 
and integrated bodies within their federative systems, and 
many have built up regional societies as an intermediate level 
between the primary and the union level. Some co-operative 
organizations have totally abandoned their federative models 
and transformed these into national integrated organizations, 
national societies or even national companies. The motivation 
for this is improved economic efficiency and the changes are,
without doubt, signs of the fact that the traditional federative 
structures have become more difficult to manage efficiently 
in the changing environment. 
  
3.4.1. Too complicated a model?
---------------------------------------  
This gives rise to some crucial issues for the future,
especially for those organizations which are still
established according to the traditional federative idea
with many primary societies: do such experiences
demonstrate that federative structures are too complicated 
in the modern environment? And consequently, do these 
changes demonstrate the rational way for the future?
  
It is too early to draw conclusions, since we are in the
middle of these transformations and the long-term effects
cannot yet be seen. But, it seems as if the experiences
have more clearly demonstrated the weaknesses of the
mature federative structures. The drastic example is the
French consumer co-operative movement, which collapsed
mainly because of problems in the relationship between
the society and the union level. But we need not go to
such extremes; more generally, there seem to be increasing 
difficulties encountered in making efficient overall 
decisions and in implementing them, and the difficulties 
seem to have become worse in these periods of economic 
instability. It seems as if smoothly functioning federations, 
at least in the mature stages, with many joint bodies at the 
union level, are much dependent on a stable economy and 
opportunities for future expansion. When such conditions 
are missing, and when the environment calls for radical 
restrictions and renewals as more societies land up in 
economic difficulties, the problems increase, as do the 
demands for more integrated approaches. 
  
This is a long story with many nuances. The odds,
however, have been against the federative model during
recent decades, at least in highly industrialized environments 
and for the more established federative structures. This is 
even more true when the ties between the societies and the 
union tend to become weaker, among other things because 
of increasing tensions between strong and weak societies, 
stronger demands for local market adaptations in the more 
market-oriented climate and of tendencies to place more 
emphasis on the economic aspects of the relationship. 
  
The strength of the federative model has traditionally
been in its combination of local autonomy with the
advantages offered by specialization and large-scaling at
the union level. What about the emerging alternatives,
the more integrated and unitary-oriented models, in this
respect? Are these pointing out the solutions? Yes, they
definitely seem to maintain and develop the latter aspects 
of the federative model, which of course also belong to 
the motives for the transformation. On the other hand, 
they seem to have a detrimental effect on the conditions 
for an effective democracy. In principle, it  should be 
possible to reproduce such conditions within integrated 
structures by introducing local districts and by 
decentralizing those decisions which are vital from
the member's point of view. Such methods still seem more
like challenges for the future than practical experiences.
  
It is obvious that these integrative changes of the federative 
structures reflect increased priorities for economic efficiency, 
partly as a way of assisting member societies in trouble, 
partly as an long-term adaptation to the international economy. 
Those co-operative organizations within the European 
Common Market are particularly likely to face harder 
economic competition in the years to come, and surely 
need to be prepared. The democratic aspects, however, 
are still lagging behind and are waiting for solutions. 
Perhaps that will be the next step. Anyway, we will 
surely need to return to these issues during the 90s, 
since they are crucial for the future. We also need to 
carefully systematize the experiences for the benefit 
of many organizations which, for the time being, are 
in earlier stages of the process.
  
It can be noted, perhaps for the time being mostly as a
peculiarity in the history of co-operative development,
that the Swedish government has been preparing
legislation to classify parts of the collaborotion within
federative structures as undue restrictions of competition. 
This has not yet been confirmed by Parliament, but the 
proposal (especially in an old co-operative country like 
Sweden) is a bad sign of how far a combination of poor 
co-operative knowledge and an increased trend toward 
a "market philosophy" can lead.
  
3.5.    Co-operative internationalization
-----------------------------------------------  
It seems as if the world co-operative sector has lost
ground in the internationalization of its economic
structures in comparison with the capital-associative
way. There have long been good examples, but the overall
impression is that there are relatively
  
-  few co-operative multinationals.
  
-  few international economic relations between various
   types of co-operative.
  
-  few international financial co-operative relations.
  
This is all the more challenging since the world, at
least the industrialized part of it, is rapidly moving
into a stage of development which is more characterized
by the "international economy". Why is the co-operative
way leaving it mainly to private business to "bring the
international markets inside their walls", to express it
in terms of the popular transaction cost theory? Are
there some obstacles in the very constitution of
co-operative organizations which prevent the application
of such methods? Or, is it simply an expression of some
embedded and implicit policy that co-operative
organization should keep to the local and the domestic? 
  
It will be interesting to follow development within the
European Common Market, which has obviously given rise to
new initiatives for co-operative economic collaboration
as well as to new conditions. Never before in
co-operative history have the institutional conditions
for collaboration across national borders been so good,
at least as it seems from the prospects discussed: in
principle, no restrictions on markets for goods, capital
and labour and no legislative restrictions. It is no less
than a basic challenge to the co-operative will for
international economic collaboration; in fact, not only
for the will, but also for the need to survive and to
develop. It will be a hard time, and not the glorious
time for the co-operative future about which I hear
statements now and then.
  
Nevertheless, what is happening in the Common Market 
will surely make it more important to consciously approach
these issues in broader perspectives. And we must not
forget that the international co-operative perspective is
global, and that the European Common Market is just a
part of this.
  
3.5.1.  Basic problems
----------------------------  
To return to the crucial issue: Why are we, as it
definitely seems, lagging behind? Discussion and
experience have suggested some possible explanations:
  
-  The orientation of co-operative activities is basically 
    local and domestic in character. This is where the 
    members and their needs are to be found. This is usually 
    referred to as the significant spatial dimension of the 
    co-operative organization, belonging to its basic 
    `stationary' characteristics. The co-operative idea is 
    about internationalism in the minds of committed 
    co-operators, but the economic practices are by 
    nature mainly local and domestic.
  
-  The co-operative representatives and leaders have
    not traditionally been able to speak languages other
    than their own. This is changing, but it takes time.
    The organizational culture is traditionally local and 
    the incentives to actively identify the international 
    economic applications are weak. Perhaps co-operative 
    leaders also lack competence and interest in it to some 
    extent, because they are recruited on other merits. 
    This might be interpreted in terms of local conservatism
    in these new situations: healthy in many ways, but 
    problematic for innovative international perspectives. 
  
-  There is a traditional policy among co-operative
    organizations that co-operative activities in one
    country should not compete with those in other
    countries. At least not within the same territory. So, 
    an internationalization of co-operative activities has 
    to be prepared by agreement between the parties 
    concerned; it is not just a question of expanding the
    market by export and by internationalized production 
    and marketing. 
  
-   It is more complicated to build up co-operative
    multinational organizations, because there must be a
    democratic agreement by all the co-operative
    organizations involved. It is easier for private business; 
    their international activities are mainly built up through 
    the market and by capital-oriented means, by which the 
    economically strongest `dictate' the conditions. 
    Co-operative organizations search for the basis of 
    economic internationalization by democratic negotiations. 
    The economically stronger parties have no special rights 
    in those contexts. This is stable in the long-run, but it 
    is also slow.
  
These are quite heavy restrictions on economic
internationalization, especially in established structures, 
since there are always conflicts involved between local, 
regional and global interests and aspects of effectiveness. 
These conflicts will, so to speak, be  "run over" by the 
capital-associative process, but will be subject to lively 
debate within the co-operative democratic way. There 
are no easy solutions. Co-operative organizations must 
certainly continue to be locally strong, and based on the 
needs of the members and where they live. And the 
co-operative way cannot use the power of the economically 
strong in prescribing the conditions for international 
economic relations. 
  
This poses a challenging dilemma, both principally and
institutionally, in the co-operative way for the future:
we cannot shut our eyes to that. The world is becoming
more international in economic terms, and this calls for
more conscious distribution of work within the world
co-operative sector. And it definitely seems as though
local, and even national, viability will become more
dependent on the viability of international economic
collaboration. In other words, the delicate balance of
earlier periods between the local and national levels for
overall effectiveness has increasingly become
supplemented by another level: the international.
  
3.5.2.  International perspectives
---------------------------------------  
Co-operative organizations are faced with the urgent
necessity to include international levels in their
considerations about the priorities for the overall
effectiveness. There will be an increasing need to use
resources to identify and build up international networks, 
etc. in order to take advantage of the possibilities of 
distribution of co-operative work, reduced transaction 
costs and supporting structures for international finance, 
education and training. The tasks of the ICA should be 
considered in the light of this and the resources allocated 
for these tasks. 
  
There is a need for new forms of application and new
forms of co-operative association. This is especially
important in the contexts of updating old structures and
attracting new investments. Probably, there is a need to
temporarily diverge from the traditional co-operative
approach and to accept that the stronger co-operative
organizations can be permitted to take more of the
initiatives during a period of transition, and gradually
transform the applications into a more co-operative form
as the development progresses. We need "co-operative
statesmen" who can express the international co-operative
message in the same way as was done during the difficult
restructuring processes of the national federative
organizations. The future demands that we think in
federative international perspectives.

In the long-run, however, this crucial task can never be
successfully dealt with by senior management and
co-operative businessmen. Nor can such matters be seen
solely from economic perspectives. We mre back to the
values of democracy, participation and mobilization. The
members must be a part of this development, locally and
nationally: the international perspective must become a
living part of the day-to-day co-operative work and of
the basic identity. Otherwise international practice will
just strengthen the tendencies to alienate the members
from their co-operative organizations. And the process
will end up in totally management-dominated organizations, 
similar to other organizations. This is the basic challenge 
in these international perspectives: similar in character 
to that faced by national economies. Perhaps we are 
approaching a future in which the "national state" will 
become an increasingly old-fashioned background 
concept? The tendencies are there, but for the time being 
such forecasts are mostly speculative. 
  
This opens up a range of methods necessary for
encouragement and reproduction, as mentioned in 
chapter IV. It also raises the question of the ways in 
which members from various parts of the world are 
given the opportunity to meet: a concrete task for the 
co-operative travel agencies, for instance. Contacts 
between co-operative organizations throughout the 
world cannot be an exclusive matter for top management, 
elected or employed. Contact between ordinary members 
is what we understand by Co-operation as an international 
movement  among people. This is also the base of  success-
ful long-term co-operative economic internationalization.
  
  
3.6.    Social responsibility and effectiveness
-----------------------------------------------------  
Few co-operative concepts are as confused as that of
social responsibility, frequently because it is too often
referred to within the restricted short-term framework of
economic efficiency in a competitive market economy. 
"It  is not possible for co-operative organizations to take
(much) more social responsibility than their competitors", 
is a saying that can be heard now and then. It is true 
within that framework, but still, and looked upon in a 
broader context, it is much too modest a statement. 
Co-operative organizations are, in fact, taking on social 
responsibilities all the time, certainly far more than the 
capital associations.
  
  
("When a co-operative institution arrives at a complex 
level of organization because it has been successful as 
a business, there comes a time when it is no longer 
viewed solely in respect of the specific needs of its 
members but in relation to the nature of the role it
has come to play within the urban or rural community 
by its scale and scope, its impact on economic life at 
local, regional, national or international level. It is 
challenged in its daily activities by problems beyond 
the strict limits of co-operative principles as adapted 
to the small local co-operative."
  
-Yvon Daneau, ICA Congress in Hamburg, 1984)
  
  
Let us make the concept clear. Social responsibility is
basically built into the co-operative way. That is why
co-operative organizations were and are started: groups
of people wanted to participate in the shaping of their
living conditions and to influence the social and
economic conditions for society at large. This is social
responsibility. It is also the way in which co-operative
organizations are established as people-based, democratic
organizations formed to promote the needs of their
members, with a fair distribution of benefits and with an
open membership (as far as possible). Social
responsibility is a basic constituent in co-operative
contexts; in the motives, purposes, relationships between
members and their societies, and in the relations between
the societies and the community at large. Co-operatives
are not charity organizations, but are, indeed,
organizations consciously designed to give the people a
voice in the shaping of their living conditions. 
  
We must never forget these basics when we approach the
issue of social responsibility. To express the situation
as some kind of inherent conflict between economy and
social responsibility in the co-operative system belongs
to the same false view as that which sees a conflict
between economy and democracy (above). 
  
3.6.1. Policies
------------------  
These basic aspects of the co-operative constitution are
usually also reflected in co-operative policies in many
ways:
  
  
-  Good quality, low cost services to the members, but
    also giving consideration to environmental protection, 
    health, security, etc. Services are also made available 
    (especially in various types of consumer, insurance 
    and credit co-operatives) to non-members and to 
    potential members by the "open membership" approach. 
    This might also be carried out to influence the whole 
    market performance, in other words to use member-
    oriented activities to serve the community at large. 
  
-  Parts of the annual surplus and current income are
   often used to support educational, social and
   cultural activities within the community. This is a
   usual practice for many co-operative organizations,
   for instance among successful workers co-operatives,
   in order to avoid the temptation of too much "group
   egoism".
  
-  Orientation of co-operative activities to the needs
   of the lower and middle classes of the population:
   as consumers, farmers, fishermen, workers and
   savers. Co-operation also uses resources to promote
   co-operative development for relatively weak and
   disabled groups of the population (e.g. various
   types of "social co-operative") and many 
   co-operative organizations in the richer parts of
   the world are carrying out bilateral (organization
   to organization) and multilateral (through the ICA,
   for instance) support to co-operatives in developing
   countries. Such measures are increasingly carried
   out in collaboration with state agencies for
   developmental assistance.
  
These are common examples of co-operative policies for
social responsibility and do more than just promote the
needs of existing members. Of course this is, as are all
issues of policy, basically a decision by the members on
how to use the resources; so, the extent and frequency of
such methods will consequently vary from time to time and
from context to context. It is not an automatic consequence 
of the co-operative way. On the other hand, public opinion 
has become used to such policies. It is generally expected 
that co-operatives should show more social responsibility 
than other organizations. This is part of their identity and 
it gives the co-operative way a good reputation. 
Consequently, it will not be popular if the co-operatives 
deviate from that identity. The co-operatives are expected 
to express social responsibility in their relations with the 
community at large.
  
("Continuing the ideals and beliefs of co-operative pioneers, 
credit unions seek to bring about human and social 
development. Their vision of social justice extends both 
to the individual members and to the community in 
which they work and reside. The credit union ideal is 
to extend service to all who need and can use it. Every 
person is either a member or a potential member and 
appropriately part of the credit union sphere of interest 
and concern. Decisions should be taken with full regard 
for the interest of the broader community within which 
the credit union and its members reside."
  
-From Philosophy and Uniqueness, 1988)
  
This might create some problems for co-operative economic
efficiency in times when there is a need to economize with 
co-operative resources, as in the 80s. Probably sayings such 
as the one above reflect the fact that co-operative managers 
want to explain that there are obvious limits to co-operative 
policies for social responsibility.
  
3.6.2.  The basis for successful policies
------------------------------------------------  
Policies for social responsibility are, as said, a matter
for the co-operative society itself to decide about. It
cannot be accepted that, for instance, governments
interfere in internal affairs and prescribe such policies. 
This would sooner or later weaken the more basic aspects 
of co-operative social responsibility, the democratic and 
mutual self-help character, so damaging the capacity for 
long-term contributions in this respect. 
  
There are plenty of examples, from the history and
present times, of successful collaboration with governments, 
locally and centrally, for various social and cultural tasks. 
The success of such contributions, however, is due to the 
fact that the governments have respected the co-operative 
need for autonomy. Policies for social responsibility can 
only be carried out by co-operatives which have long-term 
economic viability, based on the principles of members' 
mutual self-help.    
  
3.6.3. The poorest of the poor
------------------------------------  
This brings us finally to the crucial issue about
co-operative responsibility for the poorest parts of the
population. As we all know, there are differing views on
this, both inside and outside the co-operative organizations. 
But, as committed co-operators, we can hardly escape from 
the fact that the co-operative way is expected to contribute, 
and it would be a very bad for the co-operative future if 
such contributions were looked upon as impossible to carry 
out. On the other hand, there is a need to carefully state the 
realistic preconditions, otherwise there will always be 
grounds for disappointment in and discrediting opinions 
of the co-operative way.
  
This is a delicate issue, much discussed in co-operative
contexts and by development agencies. I hesitate to make
any judgements because such issues are complex and it is
necessary to have long practical experience in order to
get the relevant insights. After much reading about the
experiences and discussions, however, I dare to express
some opinions to at least provoke discussions. I do think
that the main co-operative contributions must be applied
in a step-by-step way in approaching the very poor. The
first co-operative steps must be taken within contexts
where the preconditions are fairly good. And then, when
these co-operatives have reached a viable stage, they
should open up to and orient their activities for the
poorest part of the population and promote the proper
co-operative applications. 
  
Yes, this view has been commonly held since the beginning
of the co-operative way. So, this is an easy standpoint
to adopt. However, what are the experiences to date? Has
this strategy had the effects anticipated? As I understand it, 
there has been a mixture of good and bad experiences. So, 
we need more direct approaches, and as I understand it 
there are viable examples of this in rural and urban parts 
of developing countries, as well in slum areas in big cities 
within rich countries. The experiences seem to demonstrate 
that such applications need to be carried out carefully by 
intensive methods to support, to encourage and to mobilize 
the mutual self-help character and to demonstrate the benefits 
and progress (see IV section 4). My practical knowledge,
however, restricts me from examining these crucial issues
in more detail.
  
3.6.4. Basics and policies
-------------------------------  
To sum up, social responsibility is basically connected
to the constitution of the co-operative organization and
should be reflected by an effective reproduction of
democracy, participation and mobilization. Such
reproduction encourages the basic values of social
responsibility and is also the basis for policies of social 
responsibility in connection with normal activities to 
promote the needs of the members and with the use of 
the surpluses and the incomes. So, when we search for 
integration between "economy, ideology and democracy", 
this also implies social responsibility. And the co-operative 
ability and will to carry out such policies is `proved' by 
numerous experiences. Finally, it follows by logic and 
by example that effective co-operative contributions for 
these values presuppose viable co-operative organizations, 
democratically and economically.   
  
So, when we are discussing conflicting values, as is
quite usual, we must carefully consider the special
nature of such conflicts and not see them as conflicts of
principle within the co-operative way.
  
3.7.    Visions and effectiveness
--------------------------------------  
Living visions of the future orientation are crucial for
co-operative organizations, since these are based on
ideas and wills: not on capital and rate of capital returns. 
It also belongs to the characteristics of the successful 
movements of people: those which manage to reproduce 
the relevant visions in contemporary society are those 
which are able to maintain their basic vigour. By the way, 
most of the management literature from the 80's clearly 
states that conscious visions belong to the success criteria 
of enterprise.
  
Co-operative organizations are in a better position in
this context, since there is a rich history of ideas,
theories and utopias to draw inspiration from. Utopia
belongs to the co-operative reality. Yes, the optimistic
spirit to strive for the ideal community is as important
as ever, and will be in the future. The tendencies during
the 80's in parts of the world co-oterative sector to tune 
down the visionary aspects of the co-operative project 
are therefore alarming, though well understood in this 
period of serious economic difficulties and acute short-
term problems. Such a climate has encouraged heavy
footwork rather than visions. On the other hand, think of
the climate in which the pioneers had to work! Nevertheless, 
the future orientation demands visions both for the identity 
of the co-operative movement and for an effective democracy, 
participation and economy.
  
  
("Let us suppose that we were asked for one all-purpose 
bit of advice for management, one truth that we were able 
to distill from the excellent companies' research. We might 
be tempted to reply, 'Figure out your value system. Decide 
what your company stands for. What does your enterprise 
do that gives everyone the most pride? Put yourself out ten
or twenty years in the future: what would you look back on 
with greatest satisfaction?' We are struck by the explicit 
attention they (the excellent companies) pay to values, end 
by the way in which their leaders have created exciting 
environments through personal attention, persistence, 
and direct intervention  - far down the line."
  
-T. Peters and R. Waterman in Search of Excellence, p. 279)
  
  
But cannot visions be dangerous for co-operative
effectiveness? I have encountered fears about that during
my preparatory work, expressed in statements such as
co-operative organizations cannot just make nebulous
promises about the future; we are not political parties
or general promotional organizations. We are expected to
take the responsibility for putting our visions into practice! 
Otherwise, there will be resultant disappointments, increasing 
lack of confidence and a bad press for the co-operative way. 
We must live as we learn. The visions cannot be allowed to 
be too far from reality; they must be concrete and in touch 
with the practical possibilities! 
  
3.7.1.  Individual and collective visions
-----------------------------------------------  
These are serious considerations and might serve as a
good opportunity to open up a long discussion about the
proper place of ideas, values, visions, programmes and
plans in co-operative organizations. To make the story
short, however, I will simply state that a co-operative
view should be characterized by an ambition:
  
1) to provide the broadest possible base for individual
    members (and potential members) to define the co-operative 
    way in bold visions for the future, and   

2) to transform these into accepted programmes and plans 
    for co-operative activities.
  
We must not confuse the view on the place of visions in
co-operative organizations by failing to distinguish
clearly between the needs of `individual' visions and the
need to transform these into more `collective' visions.
The existence of individual visions, almost as personal
`ideals of life', is a sign of the strength of the co-operative 
organization and of the ideas behind. These can never be 
dangerous for the co-operative way. On the contrary: the 
alarming situation occurs if these visions tend to be few, 
or even to disappear. Then, we can speak about basic 
ideological problems, or even crises. 
  
The aforementioned fears are mostly connected to
collective visions for the co-operative organizations and
to the consequences of prospects which are too bold and
utopian in such contexts. Certainly, these collective
visions must be closer to reality and oriented more
towards programmes and plans so that they can be put into
practice in a responsible way.
  
3.7.2.  Participatory transformation
------------------------------------------  
The crucial issues are about how to encourage individual
visions, and how to transform these into overall visions
for the co-operative organization. This brings us back to
the previous discussions about democracy, particmpation
and mobilization, because, in a viable co-operative, the
members must participate in developing the collective
visions. Individual visionary views must be discussed and
balanced within a whole, and the members must know that
they are part of that whole. In other words, the process
of the transformation from (1) to (2) is crucial. In the
participatory process the members get insight into the
conditions for the overall visions and about the restrictions 
imposed by reality and by the resources available. There 
are many good examples of such participatory 
transformation processes from earlier periods, as well as 
in recent times. I have seen it, among other things, when 
organizations have prepared their views on the basic values. 
Probably, as far as I can judge, organizations with such 
practices also belong to the successful organizations.
  
  
("Question: What is most important for the management
                   of (consumer) co-operatives?
  
Answer:      Economic efficiency should be demonstrated
                   in terms of member benefits.
  
                  Members should be encouraged to participate 
                  and to become involved. The recruitment of 
                  members must be consciously considered.

                 A clear-cut distribution of responsibility and 
                 work should be carried out between local and 
                 central levels of the co-operative organization, 
                 and confidence established between the parts of 
                 the organization. It is crucial to achieve a quick
                 implementation of decisions and a uniform
                 performance in the marketplace when competing
                 against large enterprises.

                 The issue of finance requires the most serious
                 attention, and    members should be encouraged 
                 to participate.

                 Crucial attention should always be paid to the
                 possibilities for diversification and international
                 collaboration."
     
-Reimer Volkers, General Manager of Co-op Dortmund
  (from an interview, 1991)
  
  
The dangers and the problems start to appear if the
members play no part in the process of creating relevant
collective visions and programmes, for instance when
these are mostly worked out by ideological departments or
by management. Then, the members feel that they have no
parts in those `collective' visions, and do not feel
themselves responsible for their creation or implementation. 
  
Conclusion: the way for the future cannot be to tone down
co-operative visions in order to suit them to the
restrictions of reality. The challenge should instead be
to combine (1) and (2): to reproduce a culture of
co-operative organizations, within which it is considered
a positive value to encourage and to discuss individual
visions and to search for the proper participatory means
to transform these into collective plans and programmes
for the co-operative whole. This is the only way to
maintain co-operative vitality and member-responsibility.
  
4. Criteria for a viable co-operative way
------------------------------------------------  
The proceeding part of this chapter has, perhaps, raised
more questions than it answers. This belongs to the
nature of the actual situation; we are in a period of
transition, and there are no set answers. But, to
distinguish the issues in themselves is an important
exercise for the future. As success criteria in
implementing the essential aspects of the basic values 
I would propose the following: 
  
1) There should be a balance in the allocation of
     resources to develop a combination of methods for
     economic, democratic and promotional efficiency. 
     The criteria for estimating efficiency should be
     appropriate to each of these, as should the
     conditions for implementing them.
  
2) Economy, ideology and democracy should be 
     integrated as far as possible in the organization of
     co-operative activities. To some extent there should
     be independent organizational solutions to develop
     and encourage innovative aspects in the application
     of the values behind economy, ideology and 
     democracy and their integration.
  
3) The co-operative society form of organization should
     be used in those parts of the organization which are
     vital from the members(r) point of view. If the
     joint-stock company form needs to be used in such
     areas there must be by-laws designed to maintain the
     co-operative character.
  
4) The recruitment of co-operative leaders and top
     managers should be carried out with the utmost care.
     Professional competence should necessarily be
     combined with a commitment to co-operative ideas and
     values. This is especially crucial in parts of the
     co-operative organizations considered vital from a
     members' point of view and calls for proper
     co-operative training programmes for management. 
  
5) The international aspects of co-operative activities
     should be present in all planning and strategies for
     the future. The distribution of work between local
     and national levels should increasingly be
     considered in the international context, especially
     in connection with renewals and new investment.
  
6) The value of social responsibility should be
     recognized as belonging to the basic constitution 
     of co-operative organizations. It should be natural 
     to carry out policies which demonstrate these basics 
     in connection with the ordinary activities of the
     co-operative organizations, as well as in the use 
     of surpluses and/or incomes.
  
7) We should take the appropriate steps to continuously
     reproduce and encourage visions about the co-operative 
     future among members and to transform these 
     individual visions into overall plans and programmes 
     for the co-operative whole. 
  
8)  Resources should be used to spread the co-operative
     message to society at large. This will influence the
     conditions in which legislation affecting
     co-operatives is formed. We should also prepare for
     the long-term recruitment of co-operative members,
     employees and management by promoting education in
     co-operative economy and theory at all levels of the
     educational system.
  
These are not new, peculiar or sensational criteria for 
viable co-operative applications in order to carry out
the essentials of basic ideas and values. We have long
known about these from experiences and practice.
Nevertheless, they have to be stated again for the
future.
  
4.1.    Basis for evaluation
--------------------------------  
Such applications, in order to become efficient, call for 
periodic evaluations in terms of the goals and, as far as
possible, the values and ideas behind these. Members
should be given the possibility to evaluate progress in
order to become involved in the process of development
and to control their organizations. This implies that the
esonomic accounts usually issued should be supplemented
by indicators about, among other things:
  
-  Member participation in decision-making, financing,
   education and information activities.
  
-  Member participation in the use of the economic
   services of the organization.
  
-  Benefits available to members.
  
-  Social responsibility taken by co-operative
    organizations.
  
-  Progress in international collaboration.
  
-  Views and opinions of co-operative organizations
   about society at large.
  
-  Penetration of co-operative activities within
   society as a whole, for instance membership 
   in relation to relevant part of the population 
   and market shares.
  
-  Plans and prospects for the future.
  
Such accounts might be connected to programmes and 
plans for co-operative organizations. I have not studied 
the actual practice very closely, but a glance at annual
reports tells me that this kind of accounting seems to be
surprisingly unusual. One of the best I have seen is from
the Swiss Migros.
  
At the more global levels, especially at the ICA level
and in global long-term perspectives, the description of
results should concentrate on the effectiveness of the
co-operative project to transfer its values to society at
large. This might be carried out  by using indicators for
the penetration of the co-operative project in the
following aspects in particular.
  
-  Membership in relation to relevant parts of the
   population (demographic penetration)
  
-  Coverage of economic needs of the population
   (economic penetration)
  
-  Impact on the social and culture climate (social
   penetration).
  
The first two are relatively easy to estimate. ICA
statistics show a satisfactory, if still not good,
picture of demographic penetration. Economic penetration
should be quite easy to demonstrate in  quantitative
figures, but the statistics needed to get a satisfactory
picture are not easily available. Social penetration is
more difficult to quantify, but it  should be possible to
at least get some broad indicators about it. By
continuously describing the results of the co-operative
world project in such a way, we could more clearly
identify the various types of unknown areas on the
co-operative map, related to geographical parts of the
world and to economic areas of people's needs.
  
Of course, we know quite a lot about it, but such a
`penetration' account, say every 4 years, would surely be
a good basis for setting global goals, for analyses of
the co-operative impact in various contexts, and as a
point of departure for systematic considerations of the
reasons why co-operative projects seem to experience
greater or fewer difficulties in various parts of the
world. I have seen some approaches in this direction;
there is a need to develop these and to improve ICA
statistics so as to `evaluate' the overall level of
co-operative effectiveness. 
  
Recommendation
---------------------  
Transformations to joint-stock companies and changing
federative structures should be more closely examined.
Such transformations are quite new, but are increasing
and will probably belong to the crucial issues of the
90's and the beginning of the next century. The
experiences should be systematized to draw conclusions
about the advantages and the risks. 
  
Notes
*****  
1) The concepts of effectiveness and efficiency may be
     confusing. I will not enter into a discussion about
     them in this context. I simply understand by
     efficiency the capacity to achieve an objective with
     a minimum of resources, or as much as possible of an
     objective using a given amount of resources. By
     effectiveness, I understand how much an objective
     has been achieved, and how much the objectives of
     the relevant priority have been achieved. See Simon 
     chapter IX (1965) and Blumle (1985). 
  
2) This is much based on previous chapters, especially
     III and IV. The basis for the industrialized
     countries and for consumer and agricultural
     co-operatives is fairly well documented by research.
  
3) The essence of this can be found in many contexts. 
     I have constructed it myself in this context. 
  
4) Pestoff chapter 3 (1991); Ilmonen (1986);
    Schediwy/Brazda (1989).
  
5) I have used the transaction cost theory as a general
    approach. See e.g. Nilsson 1991).
  
6) Ilmonen, (1986).
  
7) E.g. Jonnergord (1991), Nilsson (1991) and Briscoe
    chapter 2 (1982).
  
8) In Nordic countries there is a growing amount of
    research about federative organizations. I have
    based much of my reasoning on Svensson 1990/91.
  
9) See Pestoff, chapter 10 (1991).


3.3.2.  Risk of `ineffective hybrids'
------------------------------------------ 
The transformation to stock companies, etc. gives raise
to another kind of risk in these contexts; the tendency
to create an ineffective hybrid between the co-operative
and capital associative forms of association. The risk is
that we are destroying the advantages of the co-operative
form and borrowing some characteristics from the stock
company form, and thus are creating an ineffective and
inefficient mixture. It has neither the absolute advantages 
of the co-operative society, nor the absolute advantages 
of the joint-stock company. 
  
At this stage of the process of transformation these
delicate issues can only be pointed out. There is an urgent 
need to examine those more closely for the future.

3.4.    Federative or unitary approaches?
--------- --------------------------------------
Closely linked to the above is the issue of the federative 
form of organization as an effective form for the future. 
Many co-operative organizations, in fact most, are still 
established according to the federative idea. And some 
types of co-operative organization, especially the worker 
co-operatives, are still just beginning to build up some 
kind of federative network. We are also facing the need 
for more collaborative structures internationally. So, 
experiences are of crucial importance.
  
We can then observe that the federative structures have
become increasingly problematic during recent decades.
Many organizations, especially consumer and agricultural
co-operatives, will certainly need to reform their
federations during the coming decade; among other things
by reducing the number of societies and by establishing a
more clear-cut distribution of responsibilities between
the primary and secondary levels. History has demonstrated 
that these stages need to be passed through when activities 
expand and the advantages of large scaling, and distribution 
and specialization of work inside the federation become 
more important. All the established co-operative organizations 
in industrialized economies have gone through this process 
especially during the 1950s and the 1960s, and it is certainly a
normal process of adaptation for all federations, sooner
or later.
  
During the late 70s and the 80s in particular we have 
experienced a new tendency in this process of federative
change: several organizations have introduced more national 
and integrated bodies within their federative systems, and 
many have built up regional societies as an intermediate level 
between the primary and the union level. Some co-operative 
organizations have totally abandoned their federative models 
and transformed these into national integrated organizations, 
national societies or even national companies. The motivation 
for this is improved economic efficiency and the changes are,
without doubt, signs of the fact that the traditional federative 
structures have become more difficult to manage efficiently 
in the changing environment. 
  
3.4.1. Too complicated a model?
---------------------------------------  
This gives rise to some crucial issues for the future,
especially for those organizations which are still
established according to the traditional federative idea
with many primary societies: do such experiences
demonstrate that federative structures are too complicated 
in the modern environment? And consequently, do these 
changes demonstrate the rational way for the future?
  
It is too early to draw conclusions, since we are in the
middle of these transformations and the long-term effects
cannot yet be seen. But, it seems as if the experiences
have more clearly demonstrated the weaknesses of the
mature federative structures. The drastic example is the
French consumer co-operative movement, which collapsed
mainly because of problems in the relationship between
the society and the union level. But we need not go to
such extremes; more generally, there seem to be increasing 
difficulties encountered in making efficient overall 
decisions and in implementing them, and the difficulties 
seem to have become worse in these periods of economic 
instability. It seems as if smoothly functioning federations, 
at least in the mature stages, with many joint bodies at the 
union level, are much dependent on a stable economy and 
opportunities for future expansion. When such conditions 
are missing, and when the environment calls for radical 
restrictions and renewals as more societies land up in 
economic difficulties, the problems increase, as do the 
demands for more integrated approaches. 
  
This is a long story with many nuances. The odds,
however, have been against the federative model during
recent decades, at least in highly industrialized environments 
and for the more established federative structures. This is 
even more true when the ties between the societies and the 
union tend to become weaker, among other things because 
of increasing tensions between strong and weak societies, 
stronger demands for local market adaptations in the more 
market-oriented climate and of tendencies to place more 
emphasis on the economic aspects of the relationship. 
  
The strength of the federative model has traditionally
been in its combination of local autonomy with the
advantages offered by specialization and large-scaling at
the union level. What about the emerging alternatives,
the more integrated and unitary-oriented models, in this
respect? Are these pointing out the solutions? Yes, they
definitely seem to maintain and develop the latter aspects 
of the federative model, which of course also belong to 
the motives for the transformation. On the other hand, 
they seem to have a detrimental effect on the conditions 
for an effective democracy. In principle, it  should be 
possible to reproduce such conditions within integrated 
structures by introducing local districts and by 
decentralizing those decisions which are vital from
the member's point of view. Such methods still seem more
like challenges for the future than practical experiences.
  
It is obvious that these integrative changes of the federative 
structures reflect increased priorities for economic efficiency, 
partly as a way of assisting member societies in trouble, 
partly as an long-term adaptation to the international economy. 
Those co-operative organizations within the European 
Common Market are particularly likely to face harder 
economic competition in the years to come, and surely 
need to be prepared. The democratic aspects, however, 
are still lagging behind and are waiting for solutions. 
Perhaps that will be the next step. Anyway, we will 
surely need to return to these issues during the 90s, 
since they are crucial for the future. We also need to 
carefully systematize the experiences for the benefit 
of many organizations which, for the time being, are 
in earlier stages of the process.
  
It can be noted, perhaps for the time being mostly as a
peculiarity in the history of co-operative development,
that the Swedish government has been preparing
legislation to classify parts of the collaborotion within
federative structures as undue restrictions of competition. 
This has not yet been confirmed by Parliament, but the 
proposal (especially in an old co-operative country like 
Sweden) is a bad sign of how far a combination of poor 
co-operative knowledge and an increased trend toward 
a "market philosophy" can lead.
  
3.5.    Co-operative internationalization
-----------------------------------------------  
It seems as if the world co-operative sector has lost
ground in the internationalization of its economic
structures in comparison with the capital-associative
way. There have long been good examples, but the overall
impression is that there are relatively
  
-  few co-operative multinationals.
  
-  few international economic relations between various
   types of co-operative.
  
-  few international financial co-operative relations.
  
This is all the more challenging since the world, at
least the industrialized part of it, is rapidly moving
into a stage of development which is more characterized
by the "international economy". Why is the co-operative
way leaving it mainly to private business to "bring the
international markets inside their walls", to express it
in terms of the popular transaction cost theory? Are
there some obstacles in the very constitution of
co-operative organizations which prevent the application
of such methods? Or, is it simply an expression of some
embedded and implicit policy that co-operative
organization should keep to the local and the domestic? 
  
It will be interesting to follow development within the
European Common Market, which has obviously given rise to
new initiatives for co-operative economic collaboration
as well as to new conditions. Never before in
co-operative history have the institutional conditions
for collaboration across national borders been so good,
at least as it seems from the prospects discussed: in
principle, no restrictions on markets for goods, capital
and labour and no legislative restrictions. It is no less
than a basic challenge to the co-operative will for
international economic collaboration; in fact, not only
for the will, but also for the need to survive and to
develop. It will be a hard time, and not the glorious
time for the co-operative future about which I hear
statements now and then.
  
Nevertheless, what is happening in the Common Market 
will surely make it more important to consciously approach
these issues in broader perspectives. And we must not
forget that the international co-operative perspective is
global, and that the European Common Market is just a
part of this.
  
3.5.1.  Basic problems
----------------------------  
To return to the crucial issue: Why are we, as it
definitely seems, lagging behind? Discussion and
experience have suggested some possible explanations:
  
-  The orientation of co-operative activities is basically 
    local and domestic in character. This is where the 
    members and their needs are to be found. This is usually 
    referred to as the significant spatial dimension of the 
    co-operative organization, belonging to its basic 
    `stationary' characteristics. The co-operative idea is 
    about internationalism in the minds of committed 
    co-operators, but the economic practices are by 
    nature mainly local and domestic.
  
-  The co-operative representatives and leaders have
    not traditionally been able to speak languages other
    than their own. This is changing, but it takes time.
    The organizational culture is traditionally local and 
    the incentives to actively identify the international 
    economic applications are weak. Perhaps co-operative 
    leaders also lack competence and interest in it to some 
    extent, because they are recruited on other merits. 
    This might be interpreted in terms of local conservatism
    in these new situations: healthy in many ways, but 
    problematic for innovative international perspectives. 
  
-  There is a traditional policy among co-operative
    organizations that co-operative activities in one
    country should not compete with those in other
    countries. At least not within the same territory. So, 
    an internationalization of co-operative activities has 
    to be prepared by agreement between the parties 
    concerned; it is not just a question of expanding the
    market by export and by internationalized production 
    and marketing. 
  
-   It is more complicated to build up co-operative
    multinational organizations, because there must be a
    democratic agreement by all the co-operative
    organizations involved. It is easier for private business; 
    their international activities are mainly built up through 
    the market and by capital-oriented means, by which the 
    economically strongest `dictate' the conditions. 
    Co-operative organizations search for the basis of 
    economic internationalization by democratic negotiations. 
    The economically stronger parties have no special rights 
    in those contexts. This is stable in the long-run, but it 
    is also slow.
  
These are quite heavy restrictions on economic
internationalization, especially in established structures, 
since there are always conflicts involved between local, 
regional and global interests and aspects of effectiveness. 
These conflicts will, so to speak, be  "run over" by the 
capital-associative process, but will be subject to lively 
debate within the co-operative democratic way. There 
are no easy solutions. Co-operative organizations must 
certainly continue to be locally strong, and based on the 
needs of the members and where they live. And the 
co-operative way cannot use the power of the economically 
strong in prescribing the conditions for international 
economic relations. 
  
This poses a challenging dilemma, both principally and
institutionally, in the co-operative way for the future:
we cannot shut our eyes to that. The world is becoming
more international in economic terms, and this calls for
more conscious distribution of work within the world
co-operative sector. And it definitely seems as though
local, and even national, viability will become more
dependent on the viability of international economic
collaboration. In other words, the delicate balance of
earlier periods between the local and national levels for
overall effectiveness has increasingly become
supplemented by another level: the international.
  
3.5.2.  International perspectives
---------------------------------------  
Co-operative organizations are faced with the urgent
necessity to include international levels in their
considerations about the priorities for the overall
effectiveness. There will be an increasing need to use
resources to identify and build up international networks, 
etc. in order to take advantage of the possibilities of 
distribution of co-operative work, reduced transaction 
costs and supporting structures for international finance, 
education and training. The tasks of the ICA should be 
considered in the light of this and the resources allocated 
for these tasks. 
  
There is a need for new forms of application and new
forms of co-operative association. This is especially
important in the contexts of updating old structures and
attracting new investments. Probably, there is a need to
temporarily diverge from the traditional co-operative
approach and to accept that the stronger co-operative
organizations can be permitted to take more of the
initiatives during a period of transition, and gradually
transform the applications into a more co-operative form
as the development progresses. We need "co-operative
statesmen" who can express the international co-operative
message in the same way as was done during the difficult
restructuring processes of the national federative
organizations. The future demands that we think in
federative international perspectives.

In the long-run, however, this crucial task can never be
successfully dealt with by senior management and
co-operative businessmen. Nor can such matters be seen
solely from economic perspectives. We mre back to the
values of democracy, participation and mobilization. The
members must be a part of this development, locally and
nationally: the international perspective must become a
living part of the day-to-day co-operative work and of
the basic identity. Otherwise international practice will
just strengthen the tendencies to alienate the members
from their co-operative organizations. And the process
will end up in totally management-dominated organizations, 
similar to other organizations. This is the basic challenge 
in these international perspectives: similar in character 
to that faced by national economies. Perhaps we are 
approaching a future in which the "national state" will 
become an increasingly old-fashioned background 
concept? The tendencies are there, but for the time being 
such forecasts are mostly speculative. 
  
This opens up a range of methods necessary for
encouragement and reproduction, as mentioned in 
chapter IV. It also raises the question of the ways in 
which members from various parts of the world are 
given the opportunity to meet: a concrete task for the 
co-operative travel agencies, for instance. Contacts 
between co-operative organizations throughout the 
world cannot be an exclusive matter for top management, 
elected or employed. Contact between ordinary members 
is what we understand by Co-operation as an international 
movement  among people. This is also the base of  success-
ful long-term co-operative economic internationalization.
  
  
3.6.    Social responsibility and effectiveness
-----------------------------------------------------  
Few co-operative concepts are as confused as that of
social responsibility, frequently because it is too often
referred to within the restricted short-term framework of
economic efficiency in a competitive market economy. 
"It  is not possible for co-operative organizations to take
(much) more social responsibility than their competitors", 
is a saying that can be heard now and then. It is true 
within that framework, but still, and looked upon in a 
broader context, it is much too modest a statement. 
Co-operative organizations are, in fact, taking on social 
responsibilities all the time, certainly far more than the 
capital associations.
  
  
("When a co-operative institution arrives at a complex 
level of organization because it has been successful as 
a business, there comes a time when it is no longer 
viewed solely in respect of the specific needs of its 
members but in relation to the nature of the role it
has come to play within the urban or rural community 
by its scale and scope, its impact on economic life at 
local, regional, national or international level. It is 
challenged in its daily activities by problems beyond 
the strict limits of co-operative principles as adapted 
to the small local co-operative."
  
-Yvon Daneau, ICA Congress in Hamburg, 1984)
  
  
Let us make the concept clear. Social responsibility is
basically built into the co-operative way. That is why
co-operative organizations were and are started: groups
of people wanted to participate in the shaping of their
living conditions and to influence the social and
economic conditions for society at large. This is social
responsibility. It is also the way in which co-operative
organizations are established as people-based, democratic
organizations formed to promote the needs of their
members, with a fair distribution of benefits and with an
open membership (as far as possible). Social
responsibility is a basic constituent in co-operative
contexts; in the motives, purposes, relationships between
members and their societies, and in the relations between
the societies and the community at large. Co-operatives
are not charity organizations, but are, indeed,
organizations consciously designed to give the people a
voice in the shaping of their living conditions. 
  
We must never forget these basics when we approach the
issue of social responsibility. To express the situation
as some kind of inherent conflict between economy and
social responsibility in the co-operative system belongs
to the same false view as that which sees a conflict
between economy and democracy (above). 
  
3.6.1. Policies
------------------  
These basic aspects of the co-operative constitution are
usually also reflected in co-operative policies in many
ways:
  
  
-  Good quality, low cost services to the members, but
    also giving consideration to environmental protection, 
    health, security, etc. Services are also made available 
    (especially in various types of consumer, insurance 
    and credit co-operatives) to non-members and to 
    potential members by the "open membership" approach. 
    This might also be carried out to influence the whole 
    market performance, in other words to use member-
    oriented activities to serve the community at large. 
  
-  Parts of the annual surplus and current income are
   often used to support educational, social and
   cultural activities within the community. This is a
   usual practice for many co-operative organizations,
   for instance among successful workers co-operatives,
   in order to avoid the temptation of too much "group
   egoism".
  
-  Orientation of co-operative activities to the needs
   of the lower and middle classes of the population:
   as consumers, farmers, fishermen, workers and
   savers. Co-operation also uses resources to promote
   co-operative development for relatively weak and
   disabled groups of the population (e.g. various
   types of "social co-operative") and many 
   co-operative organizations in the richer parts of
   the world are carrying out bilateral (organization
   to organization) and multilateral (through the ICA,
   for instance) support to co-operatives in developing
   countries. Such measures are increasingly carried
   out in collaboration with state agencies for
   developmental assistance.
  
These are common examples of co-operative policies for
social responsibility and do more than just promote the
needs of existing members. Of course this is, as are all
issues of policy, basically a decision by the members on
how to use the resources; so, the extent and frequency of
such methods will consequently vary from time to time and
from context to context. It is not an automatic consequence 
of the co-operative way. On the other hand, public opinion 
has become used to such policies. It is generally expected 
that co-operatives should show more social responsibility 
than other organizations. This is part of their identity and 
it gives the co-operative way a good reputation. 
Consequently, it will not be popular if the co-operatives 
deviate from that identity. The co-operatives are expected 
to express social responsibility in their relations with the 
community at large.
  
("Continuing the ideals and beliefs of co-operative pioneers, 
credit unions seek to bring about human and social 
development. Their vision of social justice extends both 
to the individual members and to the community in 
which they work and reside. The credit union ideal is 
to extend service to all who need and can use it. Every 
person is either a member or a potential member and 
appropriately part of the credit union sphere of interest 
and concern. Decisions should be taken with full regard 
for the interest of the broader community within which 
the credit union and its members reside."
  
-From Philosophy and Uniqueness, 1988)
  
This might create some problems for co-operative economic
efficiency in times when there is a need to economize with 
co-operative resources, as in the 80s. Probably sayings such 
as the one above reflect the fact that co-operative managers 
want to explain that there are obvious limits to co-operative 
policies for social responsibility.
  
3.6.2.  The basis for successful policies
------------------------------------------------  
Policies for social responsibility are, as said, a matter
for the co-operative society itself to decide about. It
cannot be accepted that, for instance, governments
interfere in internal affairs and prescribe such policies. 
This would sooner or later weaken the more basic aspects 
of co-operative social responsibility, the democratic and 
mutual self-help character, so damaging the capacity for 
long-term contributions in this respect. 
  
There are plenty of examples, from the history and
present times, of successful collaboration with governments, 
locally and centrally, for various social and cultural tasks. 
The success of such contributions, however, is due to the 
fact that the governments have respected the co-operative 
need for autonomy. Policies for social responsibility can 
only be carried out by co-operatives which have long-term 
economic viability, based on the principles of members' 
mutual self-help.    
  
3.6.3. The poorest of the poor
------------------------------------  
This brings us finally to the crucial issue about
co-operative responsibility for the poorest parts of the
population. As we all know, there are differing views on
this, both inside and outside the co-operative organizations. 
But, as committed co-operators, we can hardly escape from 
the fact that the co-operative way is expected to contribute, 
and it would be a very bad for the co-operative future if 
such contributions were looked upon as impossible to carry 
out. On the other hand, there is a need to carefully state the 
realistic preconditions, otherwise there will always be 
grounds for disappointment in and discrediting opinions 
of the co-operative way.
  
This is a delicate issue, much discussed in co-operative
contexts and by development agencies. I hesitate to make
any judgements because such issues are complex and it is
necessary to have long practical experience in order to
get the relevant insights. After much reading about the
experiences and discussions, however, I dare to express
some opinions to at least provoke discussions. I do think
that the main co-operative contributions must be applied
in a step-by-step way in approaching the very poor. The
first co-operative steps must be taken within contexts
where the preconditions are fairly good. And then, when
these co-operatives have reached a viable stage, they
should open up to and orient their activities for the
poorest part of the population and promote the proper
co-operative applications. 
  
Yes, this view has been commonly held since the beginning
of the co-operative way. So, this is an easy standpoint
to adopt. However, what are the experiences to date? Has
this strategy had the effects anticipated? As I understand it, 
there has been a mixture of good and bad experiences. So, 
we need more direct approaches, and as I understand it 
there are viable examples of this in rural and urban parts 
of developing countries, as well in slum areas in big cities 
within rich countries. The experiences seem to demonstrate 
that such applications need to be carried out carefully by 
intensive methods to support, to encourage and to mobilize 
the mutual self-help character and to demonstrate the benefits 
and progress (see IV section 4). My practical knowledge,
however, restricts me from examining these crucial issues
in more detail.
  
3.6.4. Basics and policies
-------------------------------  
To sum up, social responsibility is basically connected
to the constitution of the co-operative organization and
should be reflected by an effective reproduction of
democracy, participation and mobilization. Such
reproduction encourages the basic values of social
responsibility and is also the basis for policies of social 
responsibility in connection with normal activities to 
promote the needs of the members and with the use of 
the surpluses and the incomes. So, when we search for 
integration between "economy, ideology and democracy", 
this also implies social responsibility. And the co-operative 
ability and will to carry out such policies is `proved' by 
numerous experiences. Finally, it follows by logic and 
by example that effective co-operative contributions for 
these values presuppose viable co-operative organizations, 
democratically and economically.   
  
So, when we are discussing conflicting values, as is
quite usual, we must carefully consider the special
nature of such conflicts and not see them as conflicts of
principle within the co-operative way.
  
3.7.    Visions and effectiveness
--------------------------------------  
Living visions of the future orientation are crucial for
co-operative organizations, since these are based on
ideas and wills: not on capital and rate of capital returns. 
It also belongs to the characteristics of the successful 
movements of people: those which manage to reproduce 
the relevant visions in contemporary society are those 
which are able to maintain their basic vigour. By the way, 
most of the management literature from the 80's clearly 
states that conscious visions belong to the success criteria 
of enterprise.
  
Co-operative organizations are in a better position in
this context, since there is a rich history of ideas,
theories and utopias to draw inspiration from. Utopia
belongs to the co-operative reality. Yes, the optimistic
spirit to strive for the ideal community is as important
as ever, and will be in the future. The tendencies during
the 80's in parts of the world co-oterative sector to tune 
down the visionary aspects of the co-operative project 
are therefore alarming, though well understood in this 
period of serious economic difficulties and acute short-
term problems. Such a climate has encouraged heavy
footwork rather than visions. On the other hand, think of
the climate in which the pioneers had to work! Nevertheless, 
the future orientation demands visions both for the identity 
of the co-operative movement and for an effective democracy, 
participation and economy.
  
  
("Let us suppose that we were asked for one all-purpose 
bit of advice for management, one truth that we were able 
to distill from the excellent companies' research. We might 
be tempted to reply, 'Figure out your value system. Decide 
what your company stands for. What does your enterprise 
do that gives everyone the most pride? Put yourself out ten
or twenty years in the future: what would you look back on 
with greatest satisfaction?' We are struck by the explicit 
attention they (the excellent companies) pay to values, end 
by the way in which their leaders have created exciting 
environments through personal attention, persistence, 
and direct intervention  - far down the line."
  
-T. Peters and R. Waterman in Search of Excellence, p. 279)
  
  
But cannot visions be dangerous for co-operative
effectiveness? I have encountered fears about that during
my preparatory work, expressed in statements such as
co-operative organizations cannot just make nebulous
promises about the future; we are not political parties
or general promotional organizations. We are expected to
take the responsibility for putting our visions into practice! 
Otherwise, there will be resultant disappointments, increasing 
lack of confidence and a bad press for the co-operative way. 
We must live as we learn. The visions cannot be allowed to 
be too far from reality; they must be concrete and in touch 
with the practical possibilities! 
  
3.7.1.  Individual and collective visions
-----------------------------------------------  
These are serious considerations and might serve as a
good opportunity to open up a long discussion about the
proper place of ideas, values, visions, programmes and
plans in co-operative organizations. To make the story
short, however, I will simply state that a co-operative
view should be characterized by an ambition:
  
1) to provide the broadest possible base for individual
    members (and potential members) to define the co-operative 
    way in bold visions for the future, and   

2) to transform these into accepted programmes and plans 
    for co-operative activities.
  
We must not confuse the view on the place of visions in
co-operative organizations by failing to distinguish
clearly between the needs of `individual' visions and the
need to transform these into more `collective' visions.
The existence of individual visions, almost as personal
`ideals of life', is a sign of the strength of the co-operative 
organization and of the ideas behind. These can never be 
dangerous for the co-operative way. On the contrary: the 
alarming situation occurs if these visions tend to be few, 
or even to disappear. Then, we can speak about basic 
ideological problems, or even crises. 
  
The aforementioned fears are mostly connected to
collective visions for the co-operative organizations and
to the consequences of prospects which are too bold and
utopian in such contexts. Certainly, these collective
visions must be closer to reality and oriented more
towards programmes and plans so that they can be put into
practice in a responsible way.
  
3.7.2.  Participatory transformation
------------------------------------------  
The crucial issues are about how to encourage individual
visions, and how to transform these into overall visions
for the co-operative organization. This brings us back to
the previous discussions about democracy, particmpation
and mobilization, because, in a viable co-operative, the
members must participate in developing the collective
visions. Individual visionary views must be discussed and
balanced within a whole, and the members must know that
they are part of that whole. In other words, the process
of the transformation from (1) to (2) is crucial. In the
participatory process the members get insight into the
conditions for the overall visions and about the restrictions 
imposed by reality and by the resources available. There 
are many good examples of such participatory 
transformation processes from earlier periods, as well as 
in recent times. I have seen it, among other things, when 
organizations have prepared their views on the basic values. 
Probably, as far as I can judge, organizations with such 
practices also belong to the successful organizations.
  
  
("Question: What is most important for the management
                   of (consumer) co-operatives?
  
Answer:      Economic efficiency should be demonstrated
                   in terms of member benefits.
  
                  Members should be encouraged to participate 
                  and to become involved. The recruitment of 
                  members must be consciously considered.

                 A clear-cut distribution of responsibility and 
                 work should be carried out between local and 
                 central levels of the co-operative organization, 
                 and confidence established between the parts of 
                 the organization. It is crucial to achieve a quick
                 implementation of decisions and a uniform
                 performance in the marketplace when competing
                 against large enterprises.

                 The issue of finance requires the most serious
                 attention, and    members should be encouraged 
                 to participate.

                 Crucial attention should always be paid to the
                 possibilities for diversification and international
                 collaboration."
     
-Reimer Volkers, General Manager of Co-op Dortmund
  (from an interview, 1991)
  
  
The dangers and the problems start to appear if the
members play no part in the process of creating relevant
collective visions and programmes, for instance when
these are mostly worked out by ideological departments or
by management. Then, the members feel that they have no
parts in those `collective' visions, and do not feel
themselves responsible for their creation or implementation. 
  
Conclusion: the way for the future cannot be to tone down
co-operative visions in order to suit them to the
restrictions of reality. The challenge should instead be
to combine (1) and (2): to reproduce a culture of
co-operative organizations, within which it is considered
a positive value to encourage and to discuss individual
visions and to search for the proper participatory means
to transform these into collective plans and programmes
for the co-operative whole. This is the only way to
maintain co-operative vitality and member-responsibility.
  
4. Criteria for a viable co-operative way
------------------------------------------------  
The proceeding part of this chapter has, perhaps, raised
more questions than it answers. This belongs to the
nature of the actual situation; we are in a period of
transition, and there are no set answers. But, to
distinguish the issues in themselves is an important
exercise for the future. As success criteria in
implementing the essential aspects of the basic values 
I would propose the following: 
  
1) There should be a balance in the allocation of
     resources to develop a combination of methods for
     economic, democratic and promotional efficiency. 
     The criteria for estimating efficiency should be
     appropriate to each of these, as should the
     conditions for implementing them.
  
2) Economy, ideology and democracy should be 
     integrated as far as possible in the organization of
     co-operative activities. To some extent there should
     be independent organizational solutions to develop
     and encourage innovative aspects in the application
     of the values behind economy, ideology and 
     democracy and their integration.
  
3) The co-operative society form of organization should
     be used in those parts of the organization which are
     vital from the members(r) point of view. If the
     joint-stock company form needs to be used in such
     areas there must be by-laws designed to maintain the
     co-operative character.
  
4) The recruitment of co-operative leaders and top
     managers should be carried out with the utmost care.
     Professional competence should necessarily be
     combined with a commitment to co-operative ideas and
     values. This is especially crucial in parts of the
     co-operative organizations considered vital from a
     members' point of view and calls for proper
     co-operative training programmes for management. 
  
5) The international aspects of co-operative activities
     should be present in all planning and strategies for
     the future. The distribution of work between local
     and national levels should increasingly be
     considered in the international context, especially
     in connection with renewals and new investment.
  
6) The value of social responsibility should be
     recognized as belonging to the basic constitution 
     of co-operative organizations. It should be natural 
     to carry out policies which demonstrate these basics 
     in connection with the ordinary activities of the
     co-operative organizations, as well as in the use 
     of surpluses and/or incomes.
  
7) We should take the appropriate steps to continuously
     reproduce and encourage visions about the co-operative 
     future among members and to transform these 
     individual visions into overall plans and programmes 
     for the co-operative whole. 
  
8)  Resources should be used to spread the co-operative
     message to society at large. This will influence the
     conditions in which legislation affecting
     co-operatives is formed. We should also prepare for
     the long-term recruitment of co-operative members,
     employees and management by promoting education in
     co-operative economy and theory at all levels of the
     educational system.
  
These are not new, peculiar or sensational criteria for 
viable co-operative applications in order to carry out
the essentials of basic ideas and values. We have long
known about these from experiences and practice.
Nevertheless, they have to be stated again for the
future.
  
4.1.    Basis for evaluation
--------------------------------  
Such applications, in order to become efficient, call for 
periodic evaluations in terms of the goals and, as far as
possible, the values and ideas behind these. Members
should be given the possibility to evaluate progress in
order to become involved in the process of development
and to control their organizations. This implies that the
esonomic accounts usually issued should be supplemented
by indicators about, among other things:
  
-  Member participation in decision-making, financing,
   education and information activities.
  
-  Member participation in the use of the economic
   services of the organization.
  
-  Benefits available to members.
  
-  Social responsibility taken by co-operative
    organizations.
  
-  Progress in international collaboration.
  
-  Views and opinions of co-operative organizations
   about society at large.
  
-  Penetration of co-operative activities within
   society as a whole, for instance membership 
   in relation to relevant part of the population 
   and market shares.
  
-  Plans and prospects for the future.
  
Such accounts might be connected to programmes and 
plans for co-operative organizations. I have not studied 
the actual practice very closely, but a glance at annual
reports tells me that this kind of accounting seems to be
surprisingly unusual. One of the best I have seen is from
the Swiss Migros.
  
At the more global levels, especially at the ICA level
and in global long-term perspectives, the description of
results should concentrate on the effectiveness of the
co-operative project to transfer its values to society at
large. This might be carried out  by using indicators for
the penetration of the co-operative project in the
following aspects in particular.
  
-  Membership in relation to relevant parts of the
   population (demographic penetration)
  
-  Coverage of economic needs of the population
   (economic penetration)
  
-  Impact on the social and culture climate (social
   penetration).
  
The first two are relatively easy to estimate. ICA
statistics show a satisfactory, if still not good,
picture of demographic penetration. Economic penetration
should be quite easy to demonstrate in  quantitative
figures, but the statistics needed to get a satisfactory
picture are not easily available. Social penetration is
more difficult to quantify, but it  should be possible to
at least get some broad indicators about it. By
continuously describing the results of the co-operative
world project in such a way, we could more clearly
identify the various types of unknown areas on the
co-operative map, related to geographical parts of the
world and to economic areas of people's needs.
  
Of course, we know quite a lot about it, but such a
`penetration' account, say every 4 years, would surely be
a good basis for setting global goals, for analyses of
the co-operative impact in various contexts, and as a
point of departure for systematic considerations of the
reasons why co-operative projects seem to experience
greater or fewer difficulties in various parts of the
world. I have seen some approaches in this direction;
there is a need to develop these and to improve ICA
statistics so as to `evaluate' the overall level of
co-operative effectiveness. 
  
Recommendation
---------------------  
Transformations to joint-stock companies and changing
federative structures should be more closely examined.
Such transformations are quite new, but are increasing
and will probably belong to the crucial issues of the
90's and the beginning of the next century. The
experiences should be systematized to draw conclusions
about the advantages and the risks. 
  
Notes
*****  
1) The concepts of effectiveness and efficiency may be
     confusing. I will not enter into a discussion about
     them in this context. I simply understand by
     efficiency the capacity to achieve an objective with
     a minimum of resources, or as much as possible of an
     objective using a given amount of resources. By
     effectiveness, I understand how much an objective
     has been achieved, and how much the objectives of
     the relevant priority have been achieved. See Simon 
     chapter IX (1965) and Blumle (1985). 
  
2) This is much based on previous chapters, especially
     III and IV. The basis for the industrialized
     countries and for consumer and agricultural
     co-operatives is fairly well documented by research.
  
3) The essence of this can be found in many contexts. 
     I have constructed it myself in this context. 
  
4) Pestoff chapter 3 (1991); Ilmonen (1986);
    Schediwy/Brazda (1989).
  
5) I have used the transaction cost theory as a general
    approach. See e.g. Nilsson 1991).
  
6) Ilmonen, (1986).
  
7) E.g. Jonnergord (1991), Nilsson (1991) and Briscoe
    chapter 2 (1982).
  
8) In Nordic countries there is a growing amount of
    research about federative organizations. I have
    based much of my reasoning on Svensson 1990/91.
  
9) See Pestoff, chapter 10 (1991).