Collective Action and Cooperatives: Theoretical and Historical Perspective
Cooperatives have impressive historical roots and they manifested collectivism as a way of life in order to attain the members’ desire for better economic and social condition. Literatures converge that cooperatives started in the 19th century in England and France to pursue the members’ needs at that time. They attempted to respond to the impact of the industrial revolution which transformed the society’s economy and affected many workers’ livelihood. However, several hundred of cooperatives that were established in the 1830 have failed in the 1840. However in 1844, the cooperative movement flourished as the Rochdale Society established Rochdale Principles that inspired modern cooperatives until during this time.
The significant contributors of cooperativism were Robert Owen (1771-1858), who was regarded as the father of cooperative movement and Dr. Willian King (1786-1865), who took Owen’s philosophy and practically applied them. Robert Owen spurred the idea that workers can drag themselves out of poverty by forming “villages of cooperative” and govern themselves in order to meet their needs for foods, clothes and essential goods. His concept was later on translated by Dr. William King by setting up a co-operative for the working classes using cooperative principles. Owen and King’s ideas had become more realistic where people started their own shop and they would patronize it and adopt policies such as having weekly audit and electing board of trustees who would ensure that funds are intact rather than being spent for their own personal gains.
Cooperatives were formed to address the needs of the members during the era of industrial capitalism. The Rochdale Pioneers for instance have started in order to mitigate the high cost of food by selling sugar, flour and butter. In doing their business, they formulated collectively agreed principles which became a basis for worldwide cooperative movement. These principles are: 1) open membership, 2) democratic control (one-person, one-vote), 3) distribution of surplus in proportion to patronage, 4) payment of limited interest on capital, 5) political and religious neutrality, 6) cash trading (no credit extended), and 7) promotion of education (ICA, 1995). Since then, there has been a rapid growth of cooperatives and their structures and models have been improving based on the nature and purpose they serve. They engage in various nature such as business, retail, consumer, social, non-monetary and employment (Hammond & Luiz, 2016).
There were also two (2) notable men in the cooperative movement in Germany, Franz Hermann Schulze-Delitzsch (1808-1883), who operated in the urban areas that was founded in 1852, and Friedrich Wilhelm Raifeisen (1818-1888), who focused in the rural areas that was founded in 1864. They both exerted their efforts in aiding different groups who were socially and economically affected by the industrial revolution in the 19th century (Aschhoff, 1982). Both of them devoted their lives in abiding with and setting clear rules and standards for credit cooperatives. The succeeding paragraph introduces their cooperative models.
The Schulze-Delitzsch model. When Franz Herman Schulze-Delitzsch introduced credit cooperative, he emphasized on the principles of self-help and self-responsibility. His principles states “the existence of the individual and thus existence of the society are based on freedom and the responsibility of making use of it.” He was the first proponent of credit cooperation and introduced the concept of mutuality in which the members need to support the cooperative’s working capital through their savings, share capital contribution, reserve capital and loans. Through the members’ contribution, they accumulate initial capital that can be used to operate their business. Schulze’s model presents that capital is necessary in a cooperative entity but he also emphasized on members’ integrity and trustworthiness. Hence, the credit cooperative he introduced may issue a loan without collateral where the members were given full trust and credence. The strength of their cooperative is on the moral virtue of individuals. When an individual exerted less effort in the cooperative, the collective members would intervene in order to attain collective strength. The cooperative respects the individuality of the members, however collective efforts and experience could allow individuals to develop personal abilities and moral vitues (Goglio & Leonardi, 2010).
The Raiffeisen model. Raiffeisen emphasized on the credit needs of farmers and craftsmen in the rural areas. The main problem of farmers and craftsmen at that time was insufficiency of capital which hindered the growth of the agricultural and production industry. With the help of the wealthy class, Raiffeisen managed to create an association that could help farmers to acquire resources without the need for mortgage. The wealthy class are invited to join in his early association and later on offering membership to poorer class so that they can borrow from the association. This association quickly became a credit society where the farmers could borrow at a low rate. As the market also developed, producing goods for personal consumption was not enough hence, it was necessary to introduce innovative ways in order to have products in the market. Credit at a minimal interest rate and without requiring collateral is important for the farmers at that time. This was also an important means to combat usury loans that trapped most small farmers from the vicious credit cycle. The association also served as an important means to purchase and to market rural goods. While the wealthy class provides most of the capital in the association, the poorer class became the largest borrower since they need to have access to capital. In fact, the deposits and capital contributions of the wealthy class served as the financial backbone of the association (Goglio & Leonardi, 2010).
The theoretical and historical roots of the cooperativism have been complemented by the observance of collectivism as way of life. The social and economic challenges faced by the cooperatives during their birth have been resolved when the members manifested collectivist behavior. The Rochdale Pioneers gave us a lesson that economic problems could be addressed when individuals pool funds together and establish their own cooperative and help themselves by observing equality and self-help. Delitzsch and Raifeisen have also taught us that social problems could be addressed when people learn to help themselves and through collective will and effort. In this sense, collectivism serves as the theoretical building block of the cooperative movement. The great founders have realized that survival, prosperity and development could be achieved when societies would collectively work for their aspirations, goals, and interests.
In the contemporary times, cooperatives continue to prosper and they follow democratic control of governance wherein their affairs are decided and resolved through collectivist culture. Cooperatives set realistic depiction of a formal collectivist life where decisions are consensual and representative in order to combat inequalities in the society (Rothschild, 2016).