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).