Cooperative
From Encyclopædia
A cooperative is a voluntary form of business organization owned by its patrons and run for the benefit of those who use its services. Cooperatives are found in most countries of the
world today. They operate on a break-even basis, distributing
profits to the members in proportion to the volume of business each member has done with the cooperative.Principles of CooperativesMost cooperatives follow principles that originated with the Rochdale Society of Equitable
Pioneers in Rochdale, England. In 1844, a group of 28 flannel
weavers and other workers opened a cooperative store that purchased groceries, sold them for cash at the prevailing price, and distributed
profits to the members on the basis of their
patronage.Today's basic cooperative principles, known as the Rochdale principles, include the following: (1) Open membership--anyone may become a member by purchasing one or more shares of stock and doing business with the cooperative. (2) One member, one vote--each member has only one vote in the cooperative regardless of the
number of shares of stock the member owns. This principle is sometimes modified to allow voting in proportion to
patronage. (3) No price cutting--cooperatives normally sell goods at the prevailing market price. (4) Service at cost--all
profits are allocated to the members on the basis of percentage. (5) Limited dividends--cooperative dividends in the
United States are generally limited by federal law to 8 percent. This ensures that the benefits are returned to patrons in the form of
patronage refunds. (6) Quality products--because cooperatives are owned by their patrons, they generally provide the quality of products and services most generally needed and desired. (7)
education--new patrons are indoctrinated both in the need for cooperatives and in their principles of operation.TypesThe five major types of cooperatives are supply,
marketing, consumer, credit, and those providing services.Supply cooperatives are operated primarily by farmers. Local supply cooperatives owned by farmers provide feed, seed,
fertilizer, oil, chemicals, and other materials needed on the farm. These local cooperatives generally own regional and national cooperatives that produce the goods sold by the local cooperatives. There are approximately 2,000 U.S. farm supply cooperatives; they supply U.S. agriculture with about 26 percent of its requirements.
marketing cooperatives engage in the collection, processing, sale, and distribution of farm products. The right of U.S. farmers to form
marketing cooperatives was guaranteed by Congress in the Capper-Volstead Act of 1922.
marketing cooperatives handle about 28 percent of total U.S. agricultural production. They process and market well-known brands such as Land O' Lakes butter, Sunkist oranges, Sun-Maid raisins, Ocean Spray cranberries, and Diamond walnuts.Consumer cooperatives have been much less successful in the
United States than supply and
marketing cooperatives.
interest expanded rapidly in the early 1970s, however, when many small food-purchasing cooperatives were formed in large cities. These cooperatives seek to lower food costs through direct-to-consumer purchases of a relatively small
number of grocery items. Consumers have also organized cooperatives as a means of
marketing handicraft items such as
dolls, furniture, clocks, and quilts. In urban areas, apartment houses are often owned cooperatively by the tenants.Credit unions and the various components of the cooperative farm credit system are numerous in the
United States. In a CREDIT UNION, members pool their savings. These savings in turn become a source of funds for those who want to borrow. Farm credit cooperatives, including the federal land banks, production credit associations, and banks for cooperatives, are the largest single source of credit for American farmers and ranchers.Cooperatives providing services have played a
Central role in the development of rural areas in the
United States. When private companies found the extension of electrical and telephone services to rural areas unprofitable, customer-owned cooperative electric and telephone companies were formed with the assistance of low-
interest government loans. Service cooperative activity has since expanded into the formulation of mutual insurance companies and health-care cooperatives.Cooperatives Throughout the WorldFrom their beginnings in Rochdale, cooperatives expanded throughout the
world. Cooperative activities in Canada developed along the same general lines as in the
United States. In
Europe they range from the strong consumer and producer cooperatives of Scandinavia to employee cooperatives in France that own industrial
plants. The strength of cooperatives in
Europe and Japan has been fostered by government policies and by strong support from major farm organizations.In
Africa,
Asia, and South
America, cooperatives are increasingly used as tools of economic development. In areas where landholdings have been fragmented into small units, cooperatives provide a means of access to credit and supplies and a channel through which products can be marketed.So-called cooperatives were prominent in the Communist countries of [[Eastern
Europe|Eastern Europe]],
Cuba, and
Asia before the introduction of free-market systems in some of those countries. Agriculture was organized in large
collective farmS and cooperatives of artisans were also common in the production of industrial goods, particularly consumer products. Those agricultural and industrial cooperatives were essentially different, however, from the voluntary member-controlled cooperatives found in the rest of the
world. Membership was usually compulsory and the government determined production goals and prices.Ronald D. KnutsonBibliography: Bakken,
henry H., Basic Concepts, Principles and Practices of Cooperation (1963); Knapp,
Joseph G., The Advance of the Cooperative Enterprise: 1920-45 (1973); Mellor,
Mary, et al., Worker Cooperatives in Theory and Practice (1988); Nash, June, et al., eds., Popular Participation in Social Change: Cooperatives, Collectives and Nationalized Industry (1976); Roy, Ewell P., Cooperatives: Development, Principles and Management, 4th ed. (1981); Stephen, Frank H., The Economic Analysis of Producers' Cooperatives (1984); Watkins, W. P., Co-Operative Principles (1986).
