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Cooperative organizations in the United States appeared very early, reflecting both the European heritage of early settlers and the basic need for cooperative solutions to rural conditions.
Cooperatives in the U.S.
Cooperative associations have been organized throughout history to carry
out many different activities, often in response to economic and social
stress. Cooperative organizations in the United
States appeared very early, reflecting both the European heritage of early
settlers and the basic need for cooperative solutions to rural conditions.
The development of U.S. cooperative organizations are
rooted in the upheavals that characterized the Industrial Revolution in England during
1750-1850. During this period many small, home-based enterprises
disappeared, forcing workers to move to cities where they faced harsh
working conditions and low wages. In rural areas, the enclosure movement
and changes in land tenure patterns drove many small farmers off their lands
into towns and cities looking for work.
Building on trade and social guild traditions, mutual aid and "friendly
society" organizations sprang up to address the conditions of the times, and
contributed to the development of the cooperative business ideas.
Arguments that provided a broader rationale for cooperative organizations
were articulated by Robert Owen (1771-1858) and Charles Fourier
(1772-1837), who were inspired by conditions of the period to search for
paths to a more harmonious, utopian society.
The more pragmatic
William King (1786-1865) advocated the development of consumer cooperatives
to address working class issues, and his self-published magazine, "The
Cooperator", provided information on cooperative practice as well as theory.
King emphasized starting small cooperatives with capital that could be
supplied by its members. He stressed the use of democratic principles of governance, and
the education of the public about cooperatives.
The wave of consumer cooperatives that followed included the Rochdale
Cooperative, which is often cited as the prototype for the modern
cooperative association. A group of struggling weavers pooled their funds so
that they could purchase quality goods and supply themselves at cost. These
efforts were part of a broader vision in which other social needs could be
met through cooperative action. Building on the successes and failures of
organizations that preceded it, the Rochdale pioneers codified the
principles of a successful cooperative business operation. These were widely
publicized and distributed, and are the basis of the
seven cooperative principles that continue to influence cooperative practice.
The 1840s was a period of extreme famine and hardship in Europe,
and cooperative responses emerged in other European countries as well. In Germany, F.W.
Raiffeisen and Herman Schulze organized cooperative loan and credit
organizations. These were models for the cooperative banks that spread across
Europe, and were the forerunners of credit unions and the cooperative farm
credit system in North America.
Cooperative farm marketing and farm supply organizations took hold and
flourished in Denmark in the 1870s without government assistance or
subsidies. The success of these cooperatives has been attributed in part to
the Folk High School system. The schools were established to provide a
non-formal, liberal arts education to adults, giving them the tools to be
the active and engaged citizens who are key to a well-functioning democratic society.
Cooperative development in specific economic sectors sometimes followed
divergent paths, influenced by the social and market conditions of a given
time and place. Periods of significant cross-pollination between sectors
also occurred, especially when broader socio-economic forces were at work. It is in the agricultural sector, however, that cooperatives have
made the most significant economic impact in the U.S.
The first recognized cooperative business in the U.S. was a mutual fire
insurance company, founded in 1752 by Benjamin Franklin, which continues to
The first recorded dairy and cheese cooperatives were organized in 1810, and
cooperatives for other agricultural commodities followed. These early cooperative efforts
on the part of agricultural producers were local, independent of any larger organization, and relatively
Several small, localized cooperatives during this time were
organized to purchase products in bulk for members and sell them at cost.
Many of these consumer cooperative ventures developed independently
throughout the 19th century; by 1866 they could be found in most important
industrial towns nationwide. (Parker, p.25)
The westward expansion in the first half of the 19th
century created a surplus in agricultural production as those lands were
settled and cultivated. Adverse economic conditions for farmers
included low prices, wide marketing margins, high freight charges, and high
interest rates. Marketing cooperatives were organized by farmers to counter
these conditions. (Bakken and Scharrs, p. 47)
A more organized effort to develop consumer cooperatives
occurred in 1845. The First Workingmen's Protective Union, which
focused on a broad range of social issues that affected its members,
organized a bulk purchasing program for its members in Boston. The
organization grew, and the cooperatives began to be operated according to
the Rochdale principles. However, poor business practices and widening
disparities in member priorities contributed to the Protective Union's
A sponsor of "cooperation in all things", the Order of the Patrons
of Husbandry, known as the Grange, was formed
after the Civil War to improve farming conditions. As the first organization
that actively promoted cooperative development, the Grange sought to eliminate the costs
associated with the middleman by bringing farmers and manufacturers,
and producers and consumers, into direct relations.
In 1875 the Grange endorsed the Rochdale Principles, and its
cooperative development efforts led to the formation of hundreds of
agricultural marketing and purchasing cooperatives, as well as cooperative
stores for consumer goods. Its diversification into many
business activities, however, contributed to its decline in the 1880s, as
poor business practices and a lack of member participation took their toll.
Other organizations emerged to support the development
of agricultural cooperatives. The Farmers' Alliance and the Society of
Equity were both more political than the Grange and were aligned with the
progressive agendas of the day.
The Alliance was also active in the southern states, where the use of
crop liens created chronic debt for many small tenant farmers and
sharecroppers. However, racial discrimination practices made it
difficult for black farmers to participate in the Alliance, and a segregated
branch of the movement, the Colored Farmers' National Alliance and
Cooperative Union, was established in 1886. The
Alliance introduced cooperative practices to some Southern black
farmers, but discrimination and the passage of Jim Crow laws in
the 1890s significantly affected cooperative development. (Reynolds, pg.6).
During this time labor organizations such as the Knights of Labor and the
Sovereigns of Industry also experimented with developing cooperative stores
for their members. The Rochdale Principles were successfully used to
operate many of these stores. (Parker, pg.20)
Numerous retail cooperatives also developed independently to meet
the needs of their members. Often independents were not
geographically concentrated enough to successfully federate for wholesaling
purposes, and failures could often be attributed to insufficient capital,
poor management, or lack of patronage (Parker, pg. 31).
Interest in cooperatives intensified around the turn of the century, as
many reacted to monopolistic practices and what were seen as the excesses of
capitalism. Cooperation was identified as one avenue to a more socially
responsive economy. The Cooperative League of the United States of America
(CLUSA) was organized in 1916 to promote a broad cooperative agenda.
CLUSA drew support from consumer cooperation movements in other parts of
the country, most notably from the social democratic Finnish cooperatives in
the Upper Midwest and the agricultural cooperative purchasing associations.
The first credit union statute was passed in Massachusetts in 1909.
The number of credit unions significantly expanded during the 1920s
under the strong national leadership of Edward Filene and Roy F. Bergengren,
who promoted the adoption of credit union legislation at the state and
Emerging in the early 1900s, the American Farm Bureau and the National Farmers Union
became significant forces in farmer cooperative development by providing technical assistance
to new cooperatives, and by lobbying for the enactment of state and federal legislation
favorable to cooperatives. Several of the largest modern agricultural
cooperatives grew out of the development efforts of these organizations.
The Sherman Antitrust Act, which made the constraint of
trade through contract or conspiracy illegal, had been passed in 1890 to
counter the negative effects of monopolies on the economy. However, since agricultural
cooperatives were a vehicle for farmers to set a common price for
their products, there were subsequent attempts to declare agricultural
cooperatives in violation of the antitrust law.
The controversy eventually led to the
1922 passage of the Capper-Volstead Act, which authorized the right of farmers to
market or process their agricultural products cooperatively if certain criteria were met.
Aaron Sapiro (1884-1959) and Edwin G. Nourse (1883-1974) were two
influential American cooperative thinkers active in the agricultural sector
during this time. Rather than emphasizing cooperatives as part of
broader social and political philosophies, both focused on building efficient
cooperative business models that would meet farmer needs.
A lawyer from California, Sapiro promoted large-scale, centralized
co-ops organized by commodity that would function monopolistically, and
allow producers to capture greater market share and achieve better prices
for the farmer. He created a uniform cooperative marketing law in 1919
which was adopted at least in part by 26 states, and which influenced the language of the
Nourse, in contrast, promoted locally organized
and controlled cooperatives and the use a federated structure to capture
only enough market share to promote competition.
The federal government supported cooperative development in the
agricultural sector in a variety of ways. The
Smith-Lever Act of 1914 created the Cooperative Extension System, a
partnership funded by the U.S. Department of Agriculture (USDA) and
This program translated university-based agriculture,
food, and natural resources
research into practice, and many cooperatives were started
through this system's research and extension services. The
Cooperative Marketing Act of 1926 broadened the USDA's support of farmer
The challenges of the Great Depression brought further federal support
for cooperatives. The Farm Credit Act in 1933 established Production Credit
Associations to make production loans to farms, and created a system of
banks for agricultural cooperatives. And in 1934,
the passage of the Federal Credit Union Act permitted credit unions in
states without credit union statutes to be chartered at the federal level.
Until the 1930's, most agricultural operations were still
operating without electric power, as most investor-owned utilities were
unwilling to invest in the infrastructure
required to serve rural areas. The Rural Electrification Act of 1937 established
a lending agency to finance this effort. Farmers, familiar with the cooperative model, quickly established rural
electric cooperatives to take advantage of the program.
The REA provided ongoing organizational support to these cooperatives, which
contributed to the overall success of the program (Parker, pg. 135). Rural
profound changes in rural life and agricultural practices.
During the 1930s, urban interest in cooperatives
increased, resulting in part from the role that cooperatives played in many
of the New Deal government programs. There was also increased
coordination of cooperative activity nationwide. (Parker, p.126, 153).
Farm purchasing cooperatives continued to grow and thrive during this
period, especially in the Midwest. Not only did they provide fertilizer and
feed, they expanded into the production and distribution of petroleum
products, and offered insurance and credit. (Chambers, pg. 68)
The federal government continued to maintain an
interest in cooperatives, but with more minimal support.
The years following World War II were marked by increasing sales volume and
an increased use of cooperatives in the agricultural sector, although
cooperative consolidation led to a smaller number of larger cooperatives.
As the scale of operations increased, agricultural cooperatives entered into a wider
variety of value-added processing ventures.
A more moderate political outlook came to dominate CLUSA as the political and social landscape changed. The rise
of a business managerial leadership that could effectively manage
increasingly complex cooperative enterprises also contributed to a more
The civil rights movement embraced cooperatives as a way to support
independent black farmers in the south. Organizations such the Federation of
Southern Cooperatives recognized the wide range of services needed to promote operating
independence and land retention among black farmers, given the legacy
of segregation and discrimination, and took a broad approach to cooperative
Consumer food cooperatives experienced a resurgence during the mid-1960s
and early 1970s, driven by a lack of access to natural and organic foods,
and interest in alternative food systems. Although many eventually
failed, those that survived have been a major influence on the growth and
development of the organic and natural foods market.
Some agricultural cooperatives are now among the largest corporations in the country and are
part of the global marketplace. Strategies and structures are now dominated by economic
considerations, and agricultural cooperatives play a role in
influencing national agricultural policy (Cobia, pg. 119).
Cooperatives today can be found in all sectors of the U.S. economy.
Henry H. Bakken, Marvin A. Scharrs, The Economics of Cooperative Marketing, (McGraw-Hill Book Company, Inc. 1937).
Orin E. Burley, The Consumers' Cooperative as a Distributive Agency,(McGraw-Hill Book Company, Inc., 1939).
Clarke A. Chambers, "The Cooperative League of the United States of America, 1916-1961: A Study of Social Theory and Social Action",
Agricultural History, Vol. 36, No. 2 (Apr., 1962), pp. 59-81.
David W. Cobia, ed., Cooperatives in Agriculture, (Prentice-Hall, Inc. 1989), pp. 106-120.
Greg Lawless, History of
Cooperatives in Wisconsin, University of Wisconsin Center for
Cooperatives Bulletin, August 2002.
Florence Parker, The First 125 Years, (Superior WI: The Cooperative League, 1956), 3-35.
Research on the Economic
Impact of Cooperatives, University of Wisconsin Center for Cooperatives, June 2009.
Bruce J. Reynolds,
Black Farmers in America, 1865-2000, U.S. Department of Agriculture, RBS Research Report 194, 2002.
Kimberly A. Zeuli and Robert Cropp,
Cooperatives: Principles and Practices in the 21st Century