Eradication of Poverty

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   This document has been made available in electronic format
           by the International Co-operative Alliance.
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                                  Background Information Note 3

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


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                  ERADICATION OF POVERTY
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    RECOGNITION BY THE UNITED NATIONS OF THE RELEVANCE OF
    CO-OPERATIVE ENTERPRISES AND THE CO-OPERATIVE MOVEMENT

In his latest report to the General Assembly of the United
Nations  on co-operatives (document A/49/213 of 1 July 1994), the
Secretary-General concluded that "co-operative enterprises
provide  the organizational means whereby a significant
proportion of humanity is able to take into its own hands the
tasks of creating productive employment, overcoming poverty and
achieving social integration". He reported that co-operatives
"continued to be an important means, often the only one
available, whereby the poor, as well as those better off but at
perpetual risk of becoming poor, have been able to achieve
economic security and an acceptable standard of living and
quality of life".  

In its Declaration, the Summit commits itself to utilize and 
develop fully the potential and contribution of co-operatives for
the eradication of poverty. Chapter II of its Programme of Action
proposes that opportunities for income generation,
diversification of activities and increase of productivity in
low-income and poor communities should be enhanced by a number
of actions.  These were identified as strengthening co-operation
among various types of institutions, including co-operatives,
with the aim of mobilizing local savings, promoting the creation
of local financial networks, and increasing the availability of
credit and market information to small entrepreneurs, small
farmers and other low-income self-employed workers, with
particular efforts to ensure availability of such services to
women. A second area of action is that of strengthening
organizations, including community-based and workers'
co-operatives, especially those run by women, in order to 
increase productivity, marketing and participation in the
planning and implementation of rural development. Urban poverty
should also be addressed by actions which include the promotion
of co-operatives.  

  RELEVANCE OF CO-OPERATIVE ENTERPRISE TO POVERTY ERADICATION

Co-operative enterprises contribute both directly and indirectly 
to the eradication of poverty among members and employees, and 
more widely throughout the communities in which they operate.
They  help those who are poor to escape from poverty by means of
joint self-help efforts, and protect those who are at significant
risk of becoming poor. They often constitute the only type of
formal organization offering such opportunities by means of joint
self-help.  

INCOME DERIVED FROM EMPLOYMENT   

Background Information Note 2 identifies the various forms of 
employment, including self-employment, arising from different 
types of co-operative enterprise. Each is the basis for earning 
income either in the form of shares of surplus, wages and
salaries or profits depending on the type of co-operative.   

PROVISION TO HOUSEHOLDS OF AFFORDABLE GOODS AND SERVICES   

Basic living costs can consume such a high proportion of income 
that little or nothing remains for entrepreneurial development, 
education, training, and improving health. Co-operatives are able
to reduce such costs while simultaneously assuring the adequate 
provision of appropriate and high quality goods and services.
Bulk purchasing, limited expenditures on advertising and
concentration  on a limited number of product lines assure
adequate supplies of basic necessities to those with limited
incomes.  

CONSUMER PROTECTION   

Co-operative enterprises are particularly effective in protecting
consumer interests because their member-owners establish their
own goals and practices. For this reason they have been in the 
forefront in the introduction of consumer-responsive practices 
such as unit-pricing and truthful advertising. Some national 
consumer co-operatives have established their own advertising 
agencies, whose practices must conform to an ethical code.
Because of their economic weight, they are able to take direct
and effective economic action, including insistence on quality
from suppliers, often doubly secured by purchasing only from
producer-co-operatives.   

EFFECTIVE MANAGEMENT OF HOUSEHOLD AND ENTERPRISE FINANCE

Financial co-operatives are of special value for the poor, 
especially for women.  They can operate in areas not served by 
commercial banks, and where public sector credit programmes are 
insufficient. Savings and credit co-operatives ("credit unions") 
and co-operative banks often provide the only secure institution 
for the deposit of savings - however small these may be. They 
provide an affordable means for concentrating and recirculating 
local capital by providing credit for entrepreneurial use and for
improvements in the household. Moreover, because these co-
operatives are owned by their members, costs are kept to the 
minimum and services and procedures adapted to their particular 
needs and circumstances. Such co-operatives allow the poor to 
escape from the control exerted by private money lenders. In both
developed and developing market economies, governments support 
financial co-operative development in poor communities, 
acknowledging their unique capacity for capital mobilization and 
appropriate investment.  

EFFECTIVE PROTECTION AGAINST FINANCIAL AND OTHER RISKS

Co-operative insurance enterprises provide affordable, non-
exploitive and appropriate policies to their individual and 
household members.  These policies are adjusted to the special 
needs of women and other sections of society at special risk.
They also protect co-operative and other small-and medium-sized 
enterprises, which often grow and occupy a predominant market 
position which allows them to influence the general standards and
practices of their sector. Costs are kept at a reasonable level, 
not only by efficient operation and avoidance of surplus, but
also  by the high priority given to prevention.  

PROVISION OF ACCEPTABLE LIVING CONDITIONS NEEDED FOR HUMAN
RESOURCE DEVELOPMENT  

User-owned co-operative enterprises contribute significantly to 
overcoming conditions which contribute to chronic poverty - i.e. 
inadequate housing, fuel, energy, water, sanitation, 
infrastructure and essential services, especially in rural areas 
and inner cities where high percentages of the poor live.  
Examples of these types of co-operatives include housing 
construction and maintenance co-operatives (which often set aside
accommodation for lower-income households); electricity, heating,
telephone, water and sanitation co-operatives; community 
development co-operatives; and health-care and social service 
provision co-operatives (see Background Information Notes 6 and 
7).  

The impact of their activities is to free the time and energies
of the disadvantaged, so that they are able to engage in
education and training, seek and keep jobs, engage in
entrepreneurial activity, and undertake community development
work.    

PROVISION OF EDUCATION AND TRAINING FOR HUMAN RESOURCE
DEVELOPMENT  

Provision of education and training for members, leaders and 
employees is a basic principle of co-operative organization.
Where members are poor, this is usually extended to provision of
basic education, literacy, numeracy, business methods and
technical and vocational training in the areas of activity of the
co-operative.   

COMPREHENSIVE COMMUNITY AND REGIONAL DEVELOPMENT FOR POVERTY
ERADICATION   

As an extension of their significant contribution to local 
subsidiarity and sustainability, co-operative groups and
movements in many countries promote and support community and
sub-regional development programmes, particularly in the
economically depressed rural, "old industrial" and inner city
communities in which poverty is widespread.  In Quebec, for
example, the savings and credit co-operative group, 'Mouvement
des caisses Desjardins', the largest financial institution in the
province and the fifth largest in Canada, joined with employers'
associations and local governments to stimulate local
entrepreneurs in the economically  disadvantaged communities of
the Province, partly through 12 regional investment corporations.
In the United States, three quarters of rural electricity
co-operatives (which supply 25 million persons over 90 per cent
of national territory) promote rural community development
programmes which have a substantial impact in the poorer areas.
Community development co-operatives in the inner cities and
depressed rural areas of many developed market economies and
throughout developing market economies, provide a means to
mobilize local resources and channel external help.  In former
industrial regions of northern Sweden, local governments and
co-operative development institutions have supported the creation
of an incipient co-operative economy.  

INTERNATIONAL SOLIDARITY   

A principle of co-operative organization, applied throughout the 
world in many millions of co-operative enterprises, is that in 
order to best serve the interests of their members and of their 
communities, co-operatives actively co-operate in every practical
way with other co-operatives at all levels. This implies not only
that poor persons attempting to establish a co-operative can call
upon the support and practical help of existing co-operatives in 
the neighbourhood including co-operative financing institutions, 
but also that they are able, through their membership in broad 
federations of co-operatives, to exert an influence in national 
policy making that otherwise they would have little opportunity
of  doing.  For example, the European Community of Consumer Co-
operatives (EUROCOOP) was given formal responsibility for
drafting the directives of the Union on foodstuffs, and by
lobbying succeeded in having a consumer protection section
included within the Treaty of the European Union.  


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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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