History of Co-Ops Broaden Understanding of Their Usefulness

Jason Bonner writes…

The overview of cooperative development in the United States is a reminder of our country’s European heritage as well as a universal collective response to harsh living conditions in rural areas. Looking back on American history, cooperatives played a major role in the early development of this young country. They made it possible for small groups to venture out across the country and survive and thrive. The successes and failures can be studied closely to learn what had worked and in what situation. This knowledge can be used to help developing nations and the Bottom of the Pyramid (BOTP) rise from poverty-stricken living conditions to a much more welcomed, successful way of life.

When early settlers arrived in this country, forming cooperatives was done out of need for survival. Communities of people needed to rely on one another’s strengths for society as a whole to prosper; this was basic common instinct. They earliest documented cooperative, established in 1752 by Benjamin Franklin 24 years before the birth of the United States, is still in operation to this day, the Philadelphia Contributorship for the Insurance of Homes from Loss by Fire. It predates the historical Rochdale group in England, known for the Rochdale Principles, a set of principles of co-operation formed in 1844 that provide the foundation for the principles on which co-ops around the world operate to this day. The earliest, continuing successful cooperatives in the US were formed by farmers in order to support one another by sharing machinery, crop information, bulk purchases of supplies etc. leading to increased farming efficiency, cost savings, and profits. Agriculture cooperatives helped to spread the wealth when available as well as lesson the damages from disasters that may occur by having others with a collective interest help out. Consumer cooperatives became the most popular in the early 1900s enabling the working class opportunities to purchase needed goods of better quality and at a cheaper cost than typical retail outlets by buying in bulk from major wholesalers. This business plan is very similar to stores such as Costco and BJs, with their plan of selling in bulk to members while passing along savings, for a small membership fee of course.

Most early American co-ops failed due to insufficient capital, poor management, and/or a lack of understanding of the cooperative principles by their members. In studying the success and failure of cooperatives, a very common element becomes apparent. When income is less important than survival, the cooperatives succeed; but as soon as they grow too large, problems arise. Problems stem from wholesalers unable to supply the large bulk purchases to arguments between members on cooperative direction or use of profits. Usually, as history has taught us, the cooperatives than close, continuing a historic cycle of the popularity of the cooperative business plan. During economic downturns in a developed society, cooperatives become popular once again to help those, who are usually the working poor, survive the tough times. But as soon as economies start to improve, the fight for a more capitalistic society becomes increasingly apparent and the cooperatives fall apart again. A balance needs to be discovered to cash in on the benefits of a cooperative while keeping the destructive forces at bay. This notwithstanding, many undeveloped societies, as well as those at the BOTP, can utilize the cooperative model to help break the stranglehold of poverty and create wealth and sustainability in places it was never dreamed possible.

References

 Margolis, R. (Dec 20, 2008) How Cooperatives Fail. New Zealand Cooperatives Association. Retrieved from http://www.nz.coop.

Zeuli, K.A. & Cropp, R. (2004) Cooperatives: Principals and Practices in the 21st Century. University of Wisconsin. Retrieved from http://learningstore.uwex.edu/assets/pdfs/A1457.PDF.

Zimbelman, K. Employee Orientation Handbook on Co-op History. Cooperative Development Institute. Retrieved from http://www.cdi.coop/historyofcoops.html.

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One thought on “History of Co-Ops Broaden Understanding of Their Usefulness

  1. tlhill2012 December 17, 2012 at 9:31 AM Reply

    Really helpful history lesson with some clear guidelines…

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