University of Wisconsin Center for Cooperatives

What is Cooperation?

The Philosophy of Cooperation and It's Relationship to
Cooperative Structure and Operations


BY FRANK GROVES*
UWCC Occasional Paper No. 6
October 1985 

The author is former Professor of Agricultural Economics and Chairman, University Center for Cooperatives, University of Wisconsin.

This paper was presented at the Graduate Institute of Cooperative Leadership, Columbia, Missouri, July 16, 1979.

For further information or permission to reprint, please contact:
UNIVERSITY OF WISCONSIN CENTER FOR COOPERATIVES
427 Lorch St.
Madison, Wisconsin 53706 U.S.A.
Telephone 608/262-3981


    Cooperation - it is one of the most "in" words today. We hear about cooperation between governments, businesses, universities, governmental units and other groups that believe they can accomplish more by working with others, than they can alone.

    Cooperation is not new. No doubt early man cooperated in killing large animals and in mutual protection. Records indicate cooperative efforts existed hundreds of years before Christ. The ancient Egyptians had craft cooperatives, and the Babylonians practiced cooperative farming. People tried many different forms of cooperation in the Middle East, Europe and Asia, with the first successful consumer cooperative generally accepted as started by the 28 Rochdale pioneers in 1844.

    There are many examples of early cooperation in this country; land clearing, threshing rings, husking bees, and Ben Franklin's fire insurance company. Most general farm organizations endorsed the idea of cooperation and the formation of cooperative businesses.
 
What is Cooperation?

    To be sure we are all operating on the same wavelength, the following is a current definition from Webster's unabridged dictionary. Cooperation is defined as: "the association of a number of persons for their common benefit, collective action in the pursuit of common well being, especially in some industrial or business process." This definition includes most of the things that we think of when we hear about cooperatives: doing things together that we can't accomplish very well alone.

    Cooperation has also been described as the most powerful word in the English language." This implies that nothing is really impossible if we put our minds to it and pool our efforts and resources. A next step is to use cooperation in different situations, including economic. In this case, the application is known as a cooperative business.
 
Types of Human Behavior

    Before we attempt to define a cooperative business, let's briefly consider how people get along in the world.

    A well-known sociologist, Carl C. Taylor, has described three different types of human behavior: Cooperation, conflict, and competition. Taylor explains, "There is a common denominator to all three of these types of behavior, namely, the fact that the actions of others stimulate a person to a higher level of activity and enthusiasm. In conflict, the motives or actions of contestants are opposed; in competition, they may be opposed or parallel; in cooperation they are parallel and mutual."1

    He goes on to state that some people believe progress is made only through conflict. Others feel that competition is the main stimulus to individual and social action. He cites several studies that show that persons "perform at higher levels of attainment in group situations than when working either alone or in competition with others."

    Cooperation has been described as a higher calling of man. If this is true, and if more can be accomplished by working together than by working separately or at cross purposes, then perhaps cooperation is the most powerful word in the English language.
 
Cooperation Applied

    Before, we noted that the application of cooperation to an economic situation was a cooperative business. Cooperative businesses have been called many things. They have been praised and dammed about equally. Those who feel that cooperatives are great call them Christian economics, or economic democracy, or saviors of the world, or some other glowing terms. And those who damn cooperatives consider them communistic, socialistic, or something worse.

    Again, it is well to define our terms; Just what is a cooperative? Most cooperative authors have developed their own definitions, ranging in length from one sentence to several paragraphs. They are all similar in that they all contain certain basic essentials and cover many of the accepted cooperative principles. We will look at just two. The first, by Professor Marvin A. Schaars: "A cooperative is a business, voluntarily owned and controlled by its member-patrons, and operated for them and by them on a non-profit or cost basis."2

    This is one of the shortest definitions of a cooperative, but it does include many of the cooperative principles. A cooperative is a business that is voluntary, that is owned and controlled by those who use it (member-patrons), and it is operated for them and by them on a non-profit or cost basis.

    The second definition is one that was developed many years ago by the French economist Charles Gide. Gide looked at cooperatives from a different angle and defines a cooperative as follows: "Cooperation (a cooperative) is a group (group, collection) of persons pursuing common (community) economic, social, and educational aims by means of a business." It is not as specific as Professor Schaars' definition in terms of the business operation, but it does include a broad approach to the whole idea of a cooperative. Gide's definition states that a cooperative is more than a special form of business. He emphasizes the triple thrust of cooperatives; economic, educational, and social. Both Schaars and Gide recognize that a cooperative must have a solid business foundation before social and educational purposes can be met. However, Schaars' definition puts business first and other purposes secondary. Gide reverses the order and starts with common needs and interests of the people forming a cooperative first; they meet these common needs and interests through a cooperative business.
 
Social and Economic Issues

    Most businesses recognize a social responsibility as well as an economic one. However, it is in a cooperative business that the argument of how to balance the two frequently produces more heat than light.

    Those on one side of the argument, including many developing countries, feel that a cooperative's major purpose is social and in some cases, socialistic. Others have described cooperatives as applied Christian economics and one writer considered them an application of the second great commandment; i.e. you shall love your neighbor as yourself.

    The cooperative method of doing business is accepted within many different economic systems. Lenin and many other communist leaders extoll the virtues of cooperatives as a way for people to help themselves. Most of the developing countries of the world today use cooperatives as an economic tool to enhance the lives of their people. Cooperative businesses have been accepted in Western countries for many, many years, although not always with great enthusiasm.

    This is a very difficult balance to maintain. Cooperatives that forget their social responsibility are doomed to failure. The late Canadian economist Alex Laidlaw commented on this balance between efficiency and democracy as follows:

"We do not need to spend a great deal of time defining or debating the meaning of the two parts of our subject, and it will be sufficient to say that efficiency has to do with the business operation of the cooperative and democracy with the organization of people as it's owners and users. These two can never be separated and treated as if each were independent of the other, for they are as two faces of the one coin. Or, they may be compared to the right hand and the left attached to the same body; and making them work in conjunction is very close to the heart of every co-operative organization. If one arm tries to do all the work or attempts to carry on as if the other did not exist, the result could be, and indeed often is, disastrous. No boxer would like to enter the ring with one arm tied behind his back, but many co-operatives in actual practice are trying to do that very thing.

Some people assume, wrongly I believe, that these two, economic efficiency and democratic control, are essentially in conflict and cannot be tied together in the one organization. I prefer to think of them as supporting and complementing each other, for surely members want the business serving them to be efficient, and, on the other side, the very existence of a participating membership gives the business an assured group of customers that makes it easier to be efficient.

Our whole problem, and sometimes a dilemma, in the cooperative way of doing business is to keep the two, efficiency and democracy, in balance. In other words, those who are charged with the operation of a cooperative, chiefly the board and manager, must serve two masters: the imperatives of good business practice and the social purpose of a community of people. However, if I was pushed to answer the question 'can you have one without the other?' I would reply: yes, you can have a cooperative that seems to get along with efficient management but without democratic involvement for quite a whiile, and sometimes for quite a long while, but in the long run it cannot survive.

There are two main reasons. First, a new, more efficient business or a way of serving people, will come along, and the members will leave the co-op in droves, simply because someone else can do the job better. Or second, in time a new generation will grow up that may know nothing of the conditions which gave rise to the cooperative and the days gone by so that when trouble comes along they won't care -- and the cooperative will go down the drain. A system of cooperatives, or any single cooperative, that tries to exist on a foundation of business efficiency alone is not only denying or neglecting a base principle of its operation, but it is also writing it's own death warrant." 3

    Two recent experiences illustrate what can happen when cooperative leaders overemphasize the social goals of the cooperative and neglect the business side. The first concerns the Finnish cooperatives in the upper Midwest of Wisconsin, Upper Michigan and Minnesota. During the early part of this century, thousands of Finns immigrated to this country to work in the mines and forests. Since they were continually exploited by the mine owners and the local storekeepers, they turned to cooperatives and socialism, and later communism.

    At one time these cooperatives were a very important economic and political force in the upper Midwest. Today they are almost all gone. Their decline was due to many factors, one of which was their inability to separate their political motivations from their economic motivations. The fact that at one time they were closely allied with the communist party, and that their food label had a red star and a hammer and sickle, did not help their general acceptance in the upper Midwest. Even though they eventually broke with the communist party, they falled to adapt fast enough to changing economic conditions following World War II.

    A second example concerns consumer cooperatives in California. If you follow the history of the Berkeley Cooperative you can easily see the struggles between the political activists and the business realizes within the organization. The result has been that the organization is not as strong either politically or economically as it otherwise might be. Their most recent move has been to close several stores in an attempt to stem large losses.

    All of this illustrates several things:

1. In many cooperatives, it is a constant struggle to balance the social purpose with the economic one. This is not as true in agricuitural cooperatives in the U.S. as it is in consumer cooperatives and in cooperatives in other countries. Canadian cooperators appear to be much more conscious of their social responsibility than cooperators in the U.S. The U.S. attitude is best exemplified by the late E.G. Nourse, "Cooperatives are long on practice and short on theory".

2. Cooperatives are a remarkably adaptable type of business. In fact, they are the only type of business that is accepted by so many different types of governments. It is a self-help tool that offers a rallying point for different economic and social groups.

3. A cooperative is a tool and, like any tool, it has no ethics of it's own. The ethics of a cooperative business are no better than the people who make up the business.

    The arguments between those who favor social objectless, and those who favor business objectives, go on. In a recent speech, C.T. Fredrickson has been widely quoted as saying:
"My premise of cooperatives is that they are economic instruments existing and operating to increase the profitibility of their owners -- nothing more and nothing less. They are not in existence to create or perpetuate any particular industry structure. Neither do they have any particular role to play in promoting or defending social values, movements or structures, however desirable they may be. Cooperatives exist to make money for their owners and any objectives which dilute emphasis on that reason for being are dangerous, by definition. "4
    Rod Nitsestuen, Executive Secretary of the Wisconsin Federation of Cooperatives answered Fredrickson in the March, 1985 Challenge:
"This is a rather startling expression from a farmer cooperative executive at a time when many of the nation's farmers are fighting for survival. Fifty years ago, if co-ops hadn't been seen as an answer to the family farmers' needs, they never would have been created. Certainly, the co-op founders who started the REC's, credit unions, supply, dairy and marketing co-ops, PCA's, FLBA's, etc., had more in mind. President Eisenhower said, "Cooperation is the means by which free men solve problems or tackle jobs too big for the individual."

"This is the paradox. It is also the challenge. Clearly, to have value to the member, the co-op must succeed as a business. Yet, if we are honest, the business interest of the co-op is not always the self-interest of the member."

He continues along the lines of Laidlaw:

"Yet, I would contend that there need be no substantial dissonance between good cooperative business practices and cooperative service. The answer really lies in our vision of cooperatives. If cooperatives are viewed only as gas stations, fertilizer supply outlets and milk handlers, than you can be sure that today's farmers aren't going to turn to cooperatives as a solution to their problems.

In the alternative, if cooperatives are seen as a means by which farmers can gain greater control of market channels and thus gain greater economies of scale, greater market power and a better chance to be profitable, then co-ops will be viewed as a part of the solution.

This isn't just philosophy or rhetoric. How co-ops answer these questions will largely determine their future, their role, and perhaps their existence. "

Cooperative Principles

    All businesses operate under some rules and principles. They may be well defined and written, or only in the mind of the manager. Cooperative businesses also have principles, but they are a little different from those of for-profit corporations.

    Cooperative principles evolved over many years. The first attempt to develop a set of principles is credited to the Rochdale pioneers. In 1844 they developed ten Principles and Practices for the operation of a cooperative business. Since 1844 many authors have dissected and reworked the original principles.

    In 1966 the International Cooperative Alliance developed a list of six principles, including five of the original principles and adding a new one, cooperation between cooperatives. Schaars felt that there were three "hard core" principles:

    The latest revision of cooperative principles was by Ingalsbe, Jacoby, and Simpson in 1984. 5
They felt there were four principles and three practices.
The authors first defined the difference between a principle and a practice:
"A cooperative principle is an underlying doctrine or tenet that defines or identifies a distinctive characteristic.

A cooperative practice is an action that supports. complements, or carries out a principle.

The cutting-edge difference between principle and practice is this:

If an organization doesn't follow the key cooperative principles, it isn't a true cooperative.

An important practice is neither distinctive to a cooperative nor does it's absence change its basic characteristics. The practice has a special importance, however, because it could determine the cooperative's long-run success or failure."

The four principles they identified :
"Service at Cost - The purpose of a cooperative is to provide a service to its user-owners at the lowest possible cost, rather than generate a profit for investors. However, the cooperative must generate income sufficient to cover costs and meet continuing operating capital needs.

Ownership Benefits in Proportion to Use - This phrase is closest to being self-explanatory in stating a principle. In short, the more you use a cooperative the more you benefit. Or, benefits are tied to use rather than to amount invested.

Democratic Control - The 28 Rochdale pioneers formed their cooperative as individuals and exercised control through one-member, one-vote. Subsequently, we've labeled that concept democratic control. The concept remains today, affirmed by State and Federal statutes and research. The question that arises is whether democratic control means equal or equitable control rights. It probably meant both in 1844. Our political democratic process allows also for representation or proportional voting. Certainly, proportional voting based on use would be a control mechanism distinctive to cooperatives, but represents a departure from the historical majority rule concept.

Limited Return on Equity Capita1 - The overriding value of the cooperative to its owners is in the services provided. Limiting the return on equity capital is a mechanism to support distribution of benefits according to use. It helps to keep management decisions focused on providing services attuned to members' needs."

The three practices they identified:
"Continuing Member Education - Keeping members educated on what is going on is an important practice for any business. It is particularly vital to a cooperative for at least three reasons:

- The democratic control principle, exercised through majority rule, requires that the entire ownership be equally informed to assure enlightened decision making;

- The cooperative can be responsive to member's needs only if they express those needs and recognize they must bear the financial burden to fulfill those needs; and

- The rarity of the cooperative form of business in this country means our education system doesn't give much cooperative instruction in business and economic courses and, therefore, the cooperative must be the educational institution for itself.

Cooperation Among Cooperatives - Farmers who allow their cooperatives to compete are engaging in a one-player checker game. No matter how they go about it, they're simply playing against themselves. Cooperatives are not a large enough force in the marketplace to waste resources competing with each other. If the idea is to keep business skills razor sharp, competition from other business is sufficient to go around. Cooperation among cooperatives often takes on the characteristics of fights between brothers and between sisters."

Operations on a Sound Financial Basis - Certainly this is an important practice for any business."

Application of Principles

    In looking at the application of principles over the last 100 years, cooperatives have faced a variety of changing and challenging economic conditions: the Boom and Bust of the late 1800's, the trust-busting era of the early 1900's, two World Wars, a Cold War, and an agricultural depression that ran for many years during the 1920's and 30's. Now it appears that we may be headed for another long period of depressed agricuitural prices and income.

    It is always easier for businesses to grow in a period of economic expansion; yet, cooperatives have experienced their most rapid growth in times of economic difficulty. It is during hard times that people have looked toward cooperation as one way of easing some of their economic problems and maximizing their limited income. People are frequently at their best when economic conditions are at their worst.

    The application of principles faces another hurdle when the torch of leadersh1p is passed from one generation to another. The first generation is gone in many cooperatives, and is going in many others.

    Your presence here at this Institute indicates that the leaders of your organization feel that it is important for you to gain an appreciation of what cooperatives and cooperation are all about.

    The best summary that I have seen describing the problems that any voluntary organization, including a voluntarily-organized society such as our country, faces when leadership passes from on generation to another was written by John Gardner. In his book Excellence, he describes the problem as follows:

"...When a group forces its way to the top...their most precious asset is their drive, their sense of purpose, their indomitibility. And that is the asset they cannot easily pass on. They can pass on wealth, their knowledge and their influence, but they cannot pass on their memory of hardships, the will to win, the fierce determination borne of struggle."
    These lessons must be constantly retaught to each new generation of members. Without constant education, the secoond and succeeding generation have no appreciation of how things were before cooperatives were started.

    We have noted that cooperatives are often considered economic democracy. For some people, one of the best ways to understand cooperatives is to consider them a microcosm of democracy. This means that any cooperative business has all the strengths and weaknesses that we have in our own democratic society. They also have the same types of checks and balances; i.e., the members (voters) have the ultimate authority, but delegate much of this through representative democracy to the board of directors (legislature), who in turn delegate to a hired manager (executive) and his/her staff.

    Cooperatives are different from other types of business; they are different in structure, in the way decisions are made, in the purpose of the organization, in the distribution of surplus, and so forth. The following table illustrates some of these points:

UNIQUE FEATURES OF COOPERATIVE MANAGEMENT
(Cooperatives and Non-Cooperatives Compared)
 

FEATURE
COOPERATIVE
NON-COOPERATIVE
IMPLICATIONS FOR
COOPERATIVES
PURPOSE Maximize member income Maximize returns to stockholders Profit maximizing decisions, not always the best for the member
DECISION MAKING PROCESS Democratic one member one vote One vote/share of common stock Members need education for decision making*
DIRECTOR SELECTION From members Inside/outside or both Directors often need training*
STRUCTURE Those who own, use, control, are the same people Those who own, use, control may be different people Members need education for decision making*
POLICY MAKING PROCEDURE Quasi public Often private Members need education for decision making*
CONTRIBUTION TO OWNERS EQUITY AND DISTRIBUTION OF NET MARGINS Proportional to use by current member-owners Money available to invest and proportional return on investment Members need to be educated to understand their responsibilities*
 
*In any democratically controlled organization, educational programs are needed at all levels. Members, directors, managers and employees all need continuous cooperative education to make sound decisions.

    In our quest to be a potent force in the market place, we often attempt to emulate our competition and forget some of these unique features. When we do, we risk the consequences noted by Laidlaw.
 
Role of the board
    In our definition of a cooperative, Schaars called cooperatives businesses that were voluntarily organized. No one is forced to join a cooperative, and as a last resort a dissatisfied member can "volunteer out" or quit.

    Because volunteers are so important, and because one half of the management team (the board) is composed of volunteers, and because of the differences in cooperative structure and management philosophy, we should examine more closely the unique position of a cooperative board.

    Most states require that all or almost all of the directors be members of the organization. Because, as members, they are also users, owners, and controllers, and not part of the regular hired management, they don't really fit the definition of either "inside" or "outside" directors. They occupy a very unique position. The best parallel that comes to mind is the one that St. Paul used when describing the relationship of the Christian church to the world. He said that the church was "in the world but not of the world" -- meaning that while the church must physically operate and carry out many of its functions in the world, it has a non-worldly base from which it draws much of its strength. I think we can say that the board of directors of a cooperative is in the cooperative, and yet in many ways not of the cooperative. Because the board is made up of member/owners, they are a definite part of the organization. Since they are not actively involved in management, and indeed, in order to carry out their proper function cannot be part of active management, they are not really of the organization. For a board to really do its job, it must be aloof from mundane, routine management decisions and be in a position to judge the performance of the organization from a lofty and objective position.

    In any corporation, the board is legally responsible for management. Most state laws, and the model corporation law, are very explicit on this point. In a cooperative corporation, because the owners/users also make up the board, their objectives are not the same as the board members of a standard, for-profit organization. Short-run profit-maximizing decisions may not be in the best long-run interest of the members. Also, the board's legal responsibility may not always be in harmony with the wants and needs of the members. For example, the members may want a patronage refund to offset high operating costs, yet if the board were to grant one they would jeopardize the financial structure of the cooperative and thereby violate their legal responsibility.

What About the Future?
    A famous writer said that those who failed to learn the lessons of history are condemned to relive them. It is also true that we are a product of our past, and our past is but a prologue to the future. Many of the "problems" that we face today are a result of inadequate planning and a shortsighted outlook in years gone by.

    Over and over we hear people talk about the fantastic rate of change in which we live. Yet, it was two thousand years ago that a wise Chinese philosopher remarked that the only sure thing in the world is change. We can look about us and certainly see changes occurring at an ever-increasing rate.

    When the history of this country is finally written, it may show that we have lived through the zenith of our civilization. We probably reached our peak in terms of economic, political, and military power right after World War II. We have been struggling to maintain this pos1iton ever since, and unfortunately many of those struggles have not been too successful. One result is that decisions are now made in an entirely different economic and philosophical climate than existed twenty, thirty or forty years ago.

    There is a law of Physics that states that things cannot expand forever. But those who were brought up just before and after World War II were ingrained with an ever-expansionist philosophy. Now we are suddenly finding that this is not to be. As one person puts it, "Everything we thought was nailed down is coming loose."

    In a speech before the 1983 Director's Conference of the National Rural Electric Cooperative Association, Lester Thurow put it this way:

    "The real problem, I think, if you look at the American economy, is that the world for the Americans is never going to be the same again. Those decades of what I would call effortless superiority for America are over.

    If you go back to 1953, America had a per capita gross national product twice that of the next best country in the world, eight times that of the Japanese. We could simply afford to do things, make mistakes, be sloppy, and still have the world's highest standard of living. By the time you get to 1981 that isn't true. In 1981, the Organization for Economic Cooperation and Development felt the United States would have fallen to 10th. They thought we'd been passed in terms of per capita GNP by Switzerland, Sweden, West Germany, Denmark, Norway, Iceland, Belgium, and Luxembourg and were tied with the French for 10th.

    We are now in a world of equal competitors. There are other countries that can afford to do anything that we in America can afford to do. Back there in the mid-1950's, we had an enormous technological lead on the rest of the world." 6

    A key point in Thurow's argument is that "We are now in a world of equal competitors." Evidence of this appears almost daily in attempts to lower wages and shift production from this country to other part of the world. Agriculture is not immune. Sagging grain exports, brought on in part by increasing competition from other countries, are one example.

    It's a new ball game, and the rules are changing all the time. In fact, one of the biggest problems of most management teams today is just to stay even with change.

    Let me give you one example. Two years ago we had a meeting in Chicago to discuss cooperative research problems. One of the participants mentioned that he was working on the problems of allocating losses. At first glance this appears to be a minor problem until one looks at it in a little more detail. We have always been concerned with the allocation of surplus or profit, but rarely with the allocation of losses.

    After returning to Madison, I looked up our state law and found that there was almost a page on how to allocate net margins or profits, but there was only one sentence on how to handle losses and that had nothing to do with allocation. If our business climate is going to chug along at about 80% speed as it has in the past few years, rather than full speed like it was during the heady years following World War II, we have to learn how to handle losses because they are going to occur. No business can operate forever and just show black ink; there is going to be an occasional dip in your long-range growth cycle.

    Now let's look at some specific problems that cooperatives are going to face in the future:

1. Cooperative Principles. Will the principles of cooperation still apply? Despite the fact that some authors do not agree, I think we can answer the question with a resounding "yes". If this is not true, cooperatives will cease to exist, at least as we know them today. The principles of cooperation will continue to be important because they will express the social conscience of the members of the organization. As R.H. Towney said, "It is the principles which men accept as the basis for their social organization, which matter." If these principles are high and maintained at a high level, the organization will also operate at a high level.

    That cooperatives have been used for hundreds of years, and that many different types of governments promote cooperatives, illustrate the resiliency and adaptability of the cooperative organization; no doubt it will survive the current economic situation.

2. Member Control. As organizations grow and diversity, how are we going to insure member control? One saying we have used many times is that a cooperative should "be big and seem small;" i.e., it should be big enough to compete in the market place, but small enough so that the average member can relate to the organizaiton on a personal basis. Galbraith in his book American Capitalism referred to the theory of countervailing power, whereby agricultural organizations would have to be large enough to balance the power of the firms they were competing with in the market place. I think very few economists would argue with this, for to go to the bargaining table without power really is little more than begging. Yet if cooperatives are going to continue to be controlled by their owners, i.e., members, we have to come up with some different control mechanisms. A basic question is does ownership always mean control? The answer is no.

Then we have the problem of the third level or the interregional cooperative: who controls them? Yet. farmers/members are still the owners. For example, the eventual loss from the investment in Energy Cooperative Inc. is going to be borne by the farmer members in the upper mid-west.

    All of these problems will be exaggerated as membership becomes more heterogeneous. Almost all cooperatives in this country started as a homogeneous group with a single purpose. Over the years this has changed as the nature of agriculture has changed, and cooperatives have attempted to diversify as a hedge against economic downturns. One example: the long-term interests of the soybean farmer-members of Land O' Lakes are not always the same as the dairy farmer members of Land O' Lakes. The fact that Land O' Lakes started with a single purpose; i.e., to market butter from member creameries, but today also sells margarine made from soybeans, illustrates this point.

3. Balance Between Economic and Social Purposes. Businesses do exist for both business and social reasons, and we should not let ourselves become blinded with the bottom-line syndrome. That means that we should not let the only test of a cooperative's success be whether or not the bottom-line figure on the operating statement is black.

    American businesses are often criticized for operating in the short run and ignoring the long run; i.e., looking for the short-range maximization of profit to pay shareholders rather than long-run gain for the corporation. A long-range outlook has been rated as a strength for businesses in other countries, and a short-range outlook as a weakness of business in the U.S. Cooperatives must be careful not to fall into the same trap.

4. Emphasize Our Differences. Cooperatives are different business organizations, but too often we have tried to operate the same as our non-cooperative competitors. Nowhere is this more apparent than in the food business. Cooperatives that have attempted to compete head-on with the multinational giants have been less than spectacularly successful. Earlier we noted that Berkeley is closing several of their stores. Recently Greenbelt Cooperative in the Washington, D.C. area announced that they were closing all of their food operations. Cooperatives are different, and we should never forget it.

5. Relations with Nonagricultural Cooperatives. In talking with reresentatives of the so-called emerging cooperatives, it is interesting to listen to their views and compare them to the history of agricultural organizations. They are going through many of the same struggles that agricultural cooperatives experienced thirty to fifty years ago. The struggles are not just economic, but in many cases involve social issues. Many of our agricultural cooperatives have not viewed nonagricultural organizations too kindly. However, with agriculture representing less than 4% of the population, and declining both in numbers and influence in all legislative bodies, agricultural cooperatives are going to need all the friends they can get. It would be much better to work with our nonagricuitural friends and help them avoid some of the mistakes we have made rather than sit by and let them solve their problems and then ask for their help when the going gets tough. Failure to work with our nonagricuitural cooperative friends is a shortsighted political view.

6. Relating to Foreign Cooperatives. As the world becomes more interrelated, events in other countries affect all of us. Consequently, there is a growing interest in cooperative-to-cooperative trade between this country, Europe, the Far East, and developing areas. Some of this is already being done.

    How serious farmers are about committing products to agricultural export cooperatives will say a great deal about how important cooperatives will be in the future world trade situation. 7

7. Continual Education. There is a saying in Europe that a cooperative without an education program will last a generation and a half. No doubt we have many organizations in this country that are operating on the half-generation side, and some may even be beyond it. This question takes on greater importance when one considers what a generation is. In a student housing cooperative, it is probably two or three years, while in an agricuitural cooperative it may be twenty-five or thirty years.

    In an article in Farmer Cooperat1ves, Apri1 1983, Randall E. Torgerson, administrator of the Agricultural Cooperative Service, USDA, commented on cooperative education as follows:

"A casual look at a number of cooperatives in recent years indicates that the human side has been getting insufficient attention (as compared to the business side). This educational deficiency shows up in uninformed members, misunderstandings, apathy in use and uitimately in disappointing business results. In some cases, the organization may even drift from its basic cooperative character."
    Thomas Jefferson said that the price of democracy is eternal vigilance. We can paraphrase this to say that the price of cooperation is eternal education. No business can exist without information and good information flow.

    It is the lifeblood or lubrication that keeps the machine going. If this is important in the standard business corporation that may operate more autocratically than a cooperative, it is even more important in a democratic, voluntary organization such as a cooperative.

8. Maintaining a Favorable Public Image. As agriculture becomes a smaller minority in the population, each commodity group becomes a smaller minority within a minority. We can't afford continual bickering and a bad press as we air our dirty linen before the entire nation. We noted that we will need all the friends and allies that we can muster in the years ahead to preserve the enabling legislation that allows us to operate as cooperative businesses now. It is frequently the case that when a group of people has an unfavorable public image, it is their own fault. Cooperatives are no different, and much of the bad press that we receive can be traced right to our own doorstep. Let's look at some examples:

1. Cooperatives are often considered communistic or socialistic, yet we know that they have made their greatest gains in western countries. However, much of the early theoretical thinking about cooperatives was done by socialists. Many cooperative pioneers in England, France, and Germany were avowed socialists. Earlier we mentioned the Finnish cooperatives in the upper Midwest and the fact that they were openly socialistic and later associated with the communist party. Also, all of the eastern European countries today, and many of the developing countries that lean toward socialism, consider cooperatives a very acceptable economic development tool.

    So people who do consider us different and communistic and socialistic perhaps feel that they have a justification for those feelings. And we haven't always been the best spokesmen to dispel such feelings.

2. Cooperative writers and speakers often use the terms "cooperatives" and "private enterprise" in comparing cooperative and non-cooperative businesses. If we are not going to consider ourselves part of the free enterprise system, what are we? Most of us consider cooperatives the most basic type of business, but if we compare ourselves to organizations that are accepted in the free enterprise system, how can we expect to be accepted ourselves? Cooperative uniqueness arises from structure and operations, not from being freaks in a free enterprise or other economic system.

3. From the end of World War II untll the mid-1960's, many cooperatives concentrated on business growth and expansion, and neglected member education and public relations. A natural consequence was an eroding of member and public support as older members and supporters of cooperatives retired and their replacements had no firsthand knowledge of conditions before cooperatives were established.

In the past 15-20 years most cooperatives have recognized increased need for member and public education. Greater education efforts will hopefully lead to better understanding and support of cooperatives.

9. Expanded Role of Spouses. The greatest wasted resource in any cooperative is the human resource. Too often spouses are delegated to a special spouse program and/or shuttled off on busses to go shopping. We find that many women prefer to sit in on the business sessions and find out what cooperatives are doing. This is especially true among the younger couples, who tend to operate as true partners.
SUMMARY

    A question we might logically ask ourselves is what would happen if cooperatives were not there? Many times we hear members, especially the younger members, say, "Why should we trade with the co-op if the price is the same as it is anywhere else?" This is a difficult question to answer, but younger members and employees should be reminded that things were not always the way they are right now, and if cooperatives were suddenly to vanish from the picture they would have to be recreated.

    A recent article in Farmland News contained some comments by Doyle Smith, general manager of Agland, Inc.. He commented on the life and death of a cooperative as follows:

"I can recall about ten years ago, a group of farmers got together and formed a small cooperative in Colorado, the purpose of forming that cooperative was the same purpose that Agland -- or most any other co-op was formed.

They were paying extremely high prices for their fuel and other products needed in their farming operation.

The day this local cooperative opened its doors the price of LP gas dropped 14 cents a gallon.

Well, this group of farmers supported their local cooperative for several years. Then, all of a sudden, they found they could buy propane for a penny less, and in some cases two cents less, than at the co-op.

And because they no longer supported their cooperative, it liquidated a little over a year ago. Within two weeks after liquidation of this association, the price of propane went up 9 cents a gallon.

And if you recall, at that particular time the price of propane was decreasing instead of increasing."

    One of the major schools of cooperative thought in this country considers them a competitive yardstick. Part of what this means is that the cooperative acts as a yardstick against which non-cooperative businesses can be compared. The example cited above was fairly common when cooperatives were first started. It should serve as a reminder that things were not always the way they are now. Anyone who expects cooperatives to always sell for the lowest price or pay the highest price will be disappointed.

    In this world of great change and decreasing permanence, people need something they can feel a part of. A cooperative, through it's unique form of economic democracy, can offer this opportunity. As Jerry Voorhis sa1d, cooperatives are "the little people's chance in a world of bigness."8  In performing this unique function, cooperatives also offer the consumer an added layer of protection. The longer I work in this field, the more convinced I become that the best form of consumer protection, and we are all consumers, is consumer ownership. If you don't like what someone else is doing to you or for you, do it yourself.

    I would encourage you to keep the faith. Cooperation represents a higher calling of mankind, and not all people respond to higher callings. Consequently, cooperatives are not for everyone. I hope that as you progress up the management chain, you never forget who the true owners of the organization are, and who you really work for. It is the members' interest that must come first, and that you always must guard.

    Finally, let's return again to antiquity. The three greatest thinkers in early Greece were considered to be Socrates, Plato, and Aristotle. What we frequently don't realize is that Socrates taught Plato and Plato in turn taught Aristotle.

    The story is told about Aristotle who at the age of 21 was approached by King Phillip of Macedonla and asked to teach his son Alexander, age 11. Alexander, who was destined to become Alexander the Great, was a very bright young man. One day in the middle of a mathematics lesson, as the story goes, he stopped Aristotle and asked: "How many is 1?" Aristotle could have answered that 1 was unity, it was one-half of two, it was two halves, or something else, but instead he asked for twenty-four hours to think about it. When he returned he told his young student, "One can be a very great many." Think about it: as individuals we are a great many people, and we have relatively little power alone. Through a cooperative we act as one, and one can be a very great many.

    Good luck to all of you in cooperative management.


FOOTNOTES
*Professor, Department of Agricultural Economics and Chairman, University Center for Cooperatives, University of Wisconsin - Extension
Presented at the Graduate Institute of Cooperative Leadership, July 23,1985

1. "Objectives of Farmer Cooperatives: by a Sociologist", Carl C. Taylor, Agricultural Cooperation, selective readings, Abrahamson and Scroggs, Editors University of Minnesota Press, 1957.

2. Marvin A. Schaars, Cooperatives. Principles and Practices, University of Wisconsin - Extension, Madison, 1978.

3. The New Harbinger, a Journal of the Cooperative Movement, Volume 5, #1, Spring 1978.

4. Fredrickson, C.T. "Cooperatives--Hard Times and Hard Realities" Land O' Lakes Annual Meeting, February 25. 1985.

5. "Cooperative Principles and Practices Redefined", Gene Ingalsbe, Director, Agricultural Cooperative Service Information and Education Staff, and Waiter Jacoby, Vice President of Programs, and David, Simpson, Education Specialist, both of the American Institute of Cooperation, Farmer Cooperatives, July, 1984.

6. Rural Electrification, May 1983

7. For further discussion of world wide interrelationships and other factors affecting cooperatives see: Naisbitt, John, Megatrends, Warner Books, 1982. Also, U.S. News and World Report, March 19, 1984.

8. Jerry Voorhis, Cooperative Enterprise, Interstate Publications, 1975


 Return to UWCC Homepage