Focus

Cooperatives – the magic bullet of poverty reduction? With the values and principles that they are based on, appear to be virtually predestined for combating poverty. Even so, in development cooperation, they have been consigned to the shadows for many years. This article gives an account of how the notion of cooperatives evolved and examines the issue of how important – and realistic – the principle of “pure self-help” really is.

Cooperatives have tended to be tions. While advocating what were taken advantage of to reflect on the viewed critically in international devel- basically self-help princi- concept as a whole (see page 33). opment cooperation since the 1980s. ples such as free and equitable partici- For one thing, this may have been due pation, democratic self-management to the notion of cooperatives simply and solidarity as being helpful and n How the notion of cooperatives being overloaded with expectations even applying them, they went to great emerged in Europe of providing solutions to all sorts of lengths to avoid associating these prin- problems, from overcoming the sub- ciples with the concept of cooperatives The development of modern - sistence economy through supporting to prevent any negative reminiscences eratives is in fact inseparably linked to independent entrepreneurs to democ- from surfacing. the advent of the “social question” ratisation, so that the almost inevitably during the Industrial Revolution in the resulting disappointment led to a coun- It was only in the 1990s that a care- ter-reaction. Also, what severely dam- ful reassessment set in when attempts aged the reputation of cooperatives were made via de-officialisation pro- was their frequently being accused of grammes to release existing coop- a “touch of ”, which often eratives from the grip of the state and associated or even equated them with its harnessing them for its purposes. state dirigisme, public mismanage- Lately, above all the great success of ment, corruption and nepotism (also micro-finance institutions has played a see pages 10–12). particular role in again focusing more attention on the micro-level in the Indeed, the Cold War era that com- context of the world-wide halving of menced roughly in the 1960s was extreme poverty aimed for in the Mil- not restricted to Central and Eastern lennium Development Goals, and thus Europe, but also in Asia, and particu- on the possible significance of coopera- larly in Africa, it was a period of forced tives in combating poverty. This has collectivisation following Lenin’s con- been all the more the case given that cepts and inspired by notions of social- the latter have already provided suf- ism, with all its negative consequences. ficient proof historically of their suit- This was the reason for a certain degree ability for this target, at least in west- of “cooperative blindness” (Birchall) ern Europe. The International Year of among international donor organisa- Cooperatives could (and should) be

Hans Jürgen Rösner Microfinance institutions’ great Professor of Cooperative Economics success has brought cooperatives University of Cologne, Germany and their potential for reducing [email protected] poverty back into the limelight.

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first half of the nineteenth century, and just become unemployed was soon hence to the pauperisation of wide sec- to result in an excess of supply and tions of the population. The notion of corresponding falling wages. Prole- cooperatives emerged as a humanis- tarian mass misery due to exploitative tic response to the individualism that working conditions, poor provision of economic liberalism had unleashed, low-quality food and miserable accom- although it simultaneously kept its dis- modation were among the factors tance from the collectivism advocated prompting English industrial work-

by socialism and communism. But in ers in Brighton in 1826 to sell jointly Photo: DRV addition to idealistic social reformers procured better food at cheap prices, Hermann Schulze-Delitzsch (left) and and philanthropists, the pioneers of thus resulting in the first consumer Friedrich Wilhelm Raiffeisen cooperatives also included pure prag- cooperatives. While this venture was to matists who, without any ideological founder after a few years, the Rochdale new modes of production, either, were reservations, simply regarded coopera- Society of Equitable Pioneers, based on negatively affected by the intensifica- tives as an effective means of overcom- the ideas and methodical principles tion of competition. This also applied ing the desperate situation prevailing of Welsh industrialist to agriculture and here, in particular, among all those who belonged to the (1771–1858) and founded by 28 weav- the small peasants, whose problem lay losers of structural change triggered by ers from Rochdale in December 1844, in the exodus of labour that they were the industrialisation processes. represented a cooperative model rep- unable to make up for with higher licated throughout Britain and beyond. productivity. The use of improved Great Britain: the first consumer seed, fertiliser and agricultural machin- cooperatives. Initially, the workers were Germany: the origins of the credit ery to this end would have required able to benefit from rising employ- cooperatives. Traditional artisans, capital that they simply did not have. ment opportunities thanks to indus- whose workshops could no longer This applied all the more since, often trialisation. But together with the rise compete with industrial mass produc- enough, they were unable to pro- in population, the permanent influx tion, but who, for lack of equity capi- vide sufficient security for personal or of rural labour and artisans who had tal, could not make the transition to mortgage loans from regular banks. If they wished to keep their farm, they therefore had to rely at least partly on private money-lenders, whose exorbi- tant interest rates could subject them to interest slavery, i.e. the returns from the next harvest were already impounded, but were only enough to pay interest, and not to settle the debts. Incidentally, this is a phenom- enon that still exists in a comparable mode in many developing countries. Thus the shortage of capital and a lack of access to credits were central prob- lems throughout Europe that both artisans and other trades people and peasants shared. It was for these prob- lems that solutions were developed in the shape of so-called loan socie- ties and credit associations by Ger- man cooperative pioneers Hermann Schulze-Delitzsch (1808–1883), from 1850 on, and, starting in 1864, Fried­ rich Wilhelm Raiffeisen (1818–1888). These institutions were the forerun- ners of the credit cooperatives, which today are known as “Volks- und Raiff­

Photo: J. Boethling eisenbanken” (cooperative banks).

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In the Andes countries, forms of cooperation date back to pre-colonial times. Priority was always given to the community’s needs and concerns.

in medieval Europe, there were also guilds, brotherhoods and other forms of cooperation supported by self-help that were oriented on e.g. common soil management, mutual financial sup- port and assistance in emergencies. By contrast, in pre-colonial African socie- ties, it was not so much religious affili- ations but the individual’s integration in a patriarchally oriented kinship and tribal order that played a crucial role regarding the predominant forms of Photo: K. Desmanowitz cooperation. The obligation to work for the community in areas ranging from n Two different schools among the trades people, and he cor- farming and fishing to implementing of thought respondingly stressed the principles of jurisdiction was focused on the goal self-help and self-responsibility, while of meeting subsistence-oriented com- The basic principle applied here was strictly rejecting any state intervention. munity needs with collective self-help. relatively simple. By committing them- Up to this day, this dispute between dif- In pre-colonial Latin American socie- selves to joint and several liability, farm- ferent schools of thought has prevailed ties, there is also evidence of similarly ers or trades people were able to pool and also affects the possible role that hierarchically structured obligations their savings for mutual lending and cooperatives can play in combating to perform community work that are obtain securities for prefinancing via poverty. Before this issue is addressed, frequently linked to indigenous oligar- credits from a regular bank. Although a look will be taken at cooperatives in chies (e.g. the Mita of the Incas), but purchasing developing countries in the following. indigenous forms of cooperation (e.g. associations and marketing coopera- the Minka in the Andean countries) tives were created in addition, the as well, which go back even further credit cooperatives initiated by Raiff­ n Cooperative traditions in in history. Unlike in Africa and Asia, eisen for farmers and by Schulze-De­ developing countries and Spanish and Portuguese colonial rule litzsch for the commercial sector have emerging economies in Latin America did not replace them remained the true characteristic and with modern models of cooperatives. internationally effective legacy of the Early forms of associations resem- Rather, the colonial masters attempted German cooperative movement. How- bling cooperatives go back a very long to transfer existing forms of rule to ever, in spite of sharing much common time in history and were based on tra- themselves, for instance by applying ground, the two pioneers did hold dif- dition, customs and religion, but also the Spanish Encomienda system to ferent opinions on some issues. Raif- on types of rule. These indigenous indigenous community structures, the feisen’s image of humanity was shaped concepts can be found in all continents Comunidades. by ethical and religious concepts. and in almost all developing societies. Against this background, and as mayor, Even so, there are considerable differ- Focusing on the individual. But all he sought to address the needs of the ences between Asia, Africa and Latin in all, by the twentieth century at the local population with charitable “wel- America regarding the form they have latest, most of the pre- or early coop- fare associations” based on Christian assumed relating to cultural specifics. erative forms had either been replaced compassion. Therefore, he was willing In Asian cultures, even today, com- with modern western models of coop- to accept support by private donors munity life is above all shaped by reli- eratives, or at least they had been cov- and the state. But Schulze-Delitzsch, gious affiliations (Buddhism, Hinduism, ered over by them. In India, for exam- who was liberal member of a Land- Islam) and by ties with certain castes, ple, the first law on cooperatives out- tag (a German regional government families or clans and tribal member- side Europe was adopted in 1904. The institution), aimed, at least partly, at ship assigning the individual his or her crucial difference was that there, it was maintaining independent enterprise place in the collective. But rather like no longer the community that stood at

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the forefront but the individual with his ring to third-party support may not be guidance in setting up the cooperative or her inalienable personal rights. The appropriate, one should at least speak and possible pump-priming support, principle of self-help, which implies of “initiated self-help”. Industrial work- external interference would indeed be self-responsibility and self-adminis- ers, poor peasants, artisans and trades harmful. The potential membership of tration, already places the individual people and, above all, women who this model could comprise smallhold- at the centre of cooperation, while were discriminated against would not ers, artisans and small traders belong- supplementary procedural principles have succeeded in setting up a cooper- ing to the near poor whose abilities to such as voluntary and open member- ative self-help organisation of their own perform productive self-help could be ship, equal and democratically exer- accord owing to a lack of administra- sustainably strengthened by coopera- cised rights (“one member, one vote”) tive knowhow and economic potential. tive activities. and also the maintenance of internal Rather, this required both guidance and external autonomy support these and material support. It may well be the By contrast, in the other concept, individual rights: the individual coop- case that many cooperatives have sub- which would then be the Raiffeisen erates to the extent to which he or she sequently failed owing to state inter- model, the emphasis is on combating wishes and without any external force ference and excessive development poverty. A cooperative “for the poor” or interference. promotion measures, but does this need not necessarily be economically already imply the converse conclusion successful if it contributes to poverty that they would have been successful alleviation by initially guiding people n Facts and myths or emerged without such interven- who would otherwise have no pros- tions? If this really were the case, there pects of gainful employment owing However, this somewhat idealis- would be no need to discuss the pos- to their sex, their ethnic affiliation ing view is restricted by one having to sible “role” of cooperatives in poverty and their lack of education towards concede that hardly any of the coop- reduction. One would simply have to the capability of productive self-help. eratives were created in this manner wait for the right founding fathers. Thus, while in the first model, the basi- and that most of the principles referred cally existent self-help potential would to have only been realised to a lim- merely be brought to come into full ited degree. In this context, taking n A pragmatic compromise effect via advice and (limited) support, another look at the time of founding in the second model, this potential cooperatives in nineteenth-century A solution to the fundamental would first of all have to be created. Europe, it becomes apparent that vir- debate on the “virgin self-help princi- Obviously, this requires a longer period tually none of the cooperative pioneers ple” that would, basically, allow for a of more intensive support. Neverthe- was a member of the people actually consensus could be that of distinguish- less, cooperative principles can be affected by need and poverty: Robert ing between two forms of cooperative helpful here through combining and Owen was an entrepreneur, Raiffeisen association one of which is oriented on focusing scarce resources and shar- a mayor, Schulze-Delitzsch a jurist and setting up a commercial enterprise suit- ing risks. But for poor people, the true politician, and later on, the founder of able for a market economy. This could value of cooperatives may already lie the successful producer cooperative also be referred to as the “Schulze- in their giving them an opportunity to Mondragon in the Basque Country was Delitzsch” model, and here, except for experience their own potential. Father Arizmendiarrieta. It is no differ- ent in Asia: the two most successful organisations inspired by the notion of cooperatives were founded by Indian jurist and member of parliament Ela Ramesh Bhatt (1972: Self Employed Women’s Association (SEWA) and by Muhammad Yunus, a university profes- sor in Chittagong (Bangladesh), who started the Grameen Bank in 1983. For honesty’s sake, however, while refer-

Cooperatives can make poor people

aware of their own potential. Photo: J. Boethling

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