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close this bookCo-operatives and the Poor (ICA, 1978, 96 p.)
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* Text approved at the Consultation for distribution as an Interim Report summarising the findings and conclusions of the assembled experts.

1. The pace of economic and social progress in most developing countries remains discouragingly slow. The moderate expectations of UN Development Decades fail to materialise. Most of the strategies evolved to achieve a rapid and steady improvement in the living conditions of the under-privileged are therefore increasingly challenged.

2. The co-operative approach - so widely and almost universally endorsed some years ago - is among the targets of critics. Unqualified praise and excessive confidence have given way to disparagement and condemnation.

3. Two major factors have contributed to the new attention being paid to the poor: first, the realisation that growth did not benefit those who are most in need of improved living conditions; and secondly the fact that some systems were actually evolved that specifically aimed at the eradication of poverty. Furthermore, planning also required a new definition of the objectives and functions of all economic agents, including co-operatives.

4. Following intense debate in the UN and other world forums the UN Secretary General, in his most recent report on cooperatives in development, proposed that an expert group meeting be held to - "assess the problems connected with the participation of the poor in the Cooperative Movement... (and)... to recommend appropriate strategies and programmes."

5. The Loughborough Consultation was convened in the light of that challenge. It addressed itself to the three following questions formulated by the convenors -

(a) Are the social and economic objectives of co-operatives, their mode of operation and structure, appropriate and responsive to the problems of poverty and social reforms in developing countries?

(b) Under what conditions can cooperatives be effective agents of structural reform?

(c) To what extent and in what manner do governments facilitate or impede the efforts of co-operatives to combat poverty and introduce social and/or structural reforms?


6. To answer these and related questions it was necessary to agree a working definition of "co-operative". Some are inclined to exclude from consideration any organisation which, though calling itself a cooperative, is in fact controlled by government officials. According to this view, many of the co-operatives which had failed belonged to this category of pseudo-co-operatives. Others pointed out that with this approach little or no guidance was given to those who had to take decisions involving co-operatives or similar associations.

7. The prevailing view is that it would be vain to seek a universally agreed definition and that what is essential is not the name but the functionality of the association in relation to its declared objectives. There were instances in which co-operatives conforming to the usual principles were not serving the poor, or only serving them incidentally, while others clearly imposed by government were taking practical measures to reduce inequalities. Co-operatives, like other institutions, are constantly evolving and should not be seen in too short a time perspective.

8. The experts agreed that in defining co-operatives it would be useful to consider these institutions as falling along a continuum where the "ideal type" may be at one end and the state-directed at the other. Most experts, while accepting the helpful concept of a continuum and the criterion of usefulness especially with respect to services to the poor, stress two indispensable precautions. The first is the necessity to draw the line somewhere below which an institution cannot be known under the name of co-operative. The second is that a clear orientation and objective of any 'co-operative' undertaking should be to move along the continuum in the direction of social equity, democratic control, self-reliance and independent leadership within the area defined by the law of the country. State enterprises and co-operative enterprises should, in all phases of the process, be identified as such.

The Poor

9. Although a clear cut definition of the concept of poverty is an ever elusive objective, it is obviously impossible to deal with these problems without some understanding of the meaning of the words 'the poor'.

10. A first yardstick is that of basic needs - for example, food and shelter for survival. But it is clear that the poverty line differs according to the level of economic and social development achieved in each country. Similarly the poverty line in the same country shifts over time as its development progresses. The concept of relative poverty, both nationally and internationally, is also clearly relevant.

11. When thinking of 'the poor' one must rather refer to their under-privileged position and to their helplessness which preclude their active and fruitful participation in community life. The poor are those who are not benefitting from economic and social interchange. Subjected to disabilities caused by the system, they are precluded from contributing to it or securing through their labours an acceptable standard of life.

12. What emerges from a careful examination of the predominance of poverty is the great diversity of its forms and of its causes. With reference to the developing countries it is thus essential to distinguish between societies with great income disparities and the large communities of poor people (of which subsistence farmers are instances). Different strategies are required to cope with their respective problems.

13. It is also important to probe the causes of poverty. Some communities suffer from a fundamental lack of natural resources, others have been impoverished by the inroads of a capitalistic economy or by the encroachment of single-crop export farming.

Co-operatives' Potential

14. Two highly qualified consultants of international repute presented papers on the problem.

15. One speaking 'from within the Cooperative Movement' recorded the fundamental idea of human beings wishing to concert in pursuit of common aims, including education and training, and performing without undue government intervention. This remained the best approach to global development.

16. The second consultant, drawing from a thorough scrutiny of various experiences in developing countries, observed that within co-operative movements decentralisation (the self-government of local societies) and equity are frequently difficult to reconcile owing to the existing power structure. Similarly given the resource intensity for reaching the poor, the objective of distribution is not always consistent with that of efficient resource use and growth. A conscious decision is therefore needed on the part of the governments to direct the necessary resources if the poor are to be reached. Even with such an allocation of resources to them, however, it is not clear if cooperatives are, by themselves, likely to be motivated to direct the resources to the poor. And in any case government investment is necessary in technology, infrastructure development, market information, training and management skills if co-operatives are to be effective in improving the productivity of the poor. Frequently institutional reform may also be critical to change the socio-political structure that so frequently gets in the way of reaching the poor.

17. Many instances exist however of cooperatives in developing countries that helped significantly their poorer members. Co-operative philosophy and theory are imbued with respect and concern for the poor. Indeed the original proponents and promoters of co-operatives were themselves poor people seeking a self-help solution for their problems.

18. On the other hand, co-operation - economic democracy in action - is not an aid-giving agency. Efficiency requires rigour in management. That hard-headed rule may become unfair however, where an elite, already favoured with physical and cultural assets, exerts its leadership and control in co-operative societies.

19. Substantive structural and political reforms are overdue wherever such tendencies prevail. Co-operatives are unlikely to achieve their full potential for service to the poor in a feudal environment. Many experts believe that, within such a power structure, many other institutions are also unlikely to succeed.

20. When a genuine co-operative spirit prevails - which excludes undue advantage being taken of positions of leadership-co-operatives can and do prove instrumental for the improvement of the poor people's conditions. Among functions which they can usefully perform for the poor are:

- developing economies of scale;
- generating bargaining power;
- distributing risks;
- giving access to technology and to managerial skills;
- favouring exploitation of local resources and talents including handicrafts;
- breaking the isolation of the poor.

21. Few institutions offer such a range of opportunities, together with the full status of a co-equal member. These historical advantages are not materialising everywhere. The co-operative formula has its potential risks (complacency, lack of self-reliance, crystallisation of village hierarchies...). Above all few co-operatives correspond to the ideal model.

22. But the social benefits of a cooperative at work - albeit imperfect-spread beyond the confines of the societies and their membership. Fair and openly posted prices and access to credit do change the economic environment of the poor, they pave the way for a healthy transition to a commercial economy. The emergence of an authentic, local cooperative leadership may also help to shift centres of power and decision from urban to rural areas.

23. Many conditions are required to start or develop co-operatives, many factors condition their growth. In assessing the chances, local history, economic conditions, governmental attitudes, community traditions must be taken into account Serving manifest needs, in particular creating new employment opportunities, is one of the fundamental bases of co-operative initiatives.

24. Two main sets of problems emerge from an examination of the potential role of co-operation in fighting poverty: are the poor better served by co-operatives of their own and, where the answer is negative, how can mixed membership cooperatives reach the poor and serve their particular needs?

25. On the first point the experts' consensus is that, generally, the need to achieve through extended membership, the desired economies of scale and the risks of perpetuating segregation militate against the setting up of co-operatives for the poor, even though they may thus be deprived of opportunities to generate leadership. But that rule has many exceptions, in particular where the poor people concerned democratically want to set up their own societies; where the cooperative initiative is linked to specific development projects (land, forestry); where structural differentiation is great; where clear-cut categories are concerned; where services especially for homemakers are provided. Furthermore in a great many rural communities the question does not arise because there are only 'poor' people.

26. The second and much broader set of problems is that of maximising the reach and services of co-operatives to the poorer sections of the population. It is clear that serving a large number of poor members whose individual transactions with the co-operative are small entails relatively high costs. Also many services required by the poor impose a burden on the whole membership. There is thus a risk that management will be biased against the poorer members. A clear formulation of policy and guidelines is essential to establish safeguards against such abuses.

27. Redistribution from richer members to poorer members within a society has its limits: if the comparatively richer members do not remain prosperous then that resource will disappear, and if that burden is 'unbearable' they will opt out. If redistribution of benefits within individual co-operative organisations has thus to be rather limited, the governments will have to play a leading role in securing resources to bear these costs. The extent to which that will be possible will depend on the nature of the political system and the degree of national will in individual countries.

Structural Reform

28. To be effective agents of structural reform co-operatives must first of all be able to operate efficiently. Conditions exist where it is unrealistic to expect success. On the other hand co-operatives can be instruments of liberation given a culture receptive to group action, awareness of opportunities, a reasonable network of communication and a degree of homogeneity in the needs of members.

29. The need for a legislative background allowing for flexibility with adjustments over time and for an easy transition from governmental to members' control as soon as appropriate is universally agreed. Adjustments in legislation from time to time are equally desirable. There is also a consensus on the involvement of co-operatives in evolving and reflecting national and community development planning which should put in the forefront the participation and economic and social uplift of the poor. Government goodwill, assistance and support being essential if co-operatives are to reach and serve the poor more adequately, attention must be paid to the ways and means of pursuing these policies.

30. But to better serve the poor, cooperatives must above all review their internal policies and, whenever necessary, adjust them to the requirements of an enlarged spectrum of members. While the limitations within which they operate restrict their ability to redistribute resources among members, there is always room for improvement in the procedures of allocating loans, fixing interest rates and terms of repayment, differentially pricing purchases and sales - all of which can usually be used to benefit the poor.

31. Among the institutions which are, to varying degrees, likely to impede successful co-operative action for the benefit of the poor, experts identify the following main ones:

- patterns of land tenure precluding access to viable holdings and to credit-worthiness;

- monopoly in the private sector (moneylenders, traders) leading to unsustainable competition for cooperatives;

- encroachment of state companies depriving peasants of their livelihood.

32. Conversely a number of institutions can and do assist co-operatives in their endeavour to reach and serve the poor:

- co-operative ministries or departments;
- rural development agencies and banks;
- producers' marketing boards;
- university research and advisory services.


33. A most decisive factor in assisting co-operative efforts in the direction of the poor remains the attitude, the political will, of the government. Only the government can through its fiscal, budgetary or other policies achieve transfers of resources of the required order of magnitude from the rich to the poor. Only the government and the local authorities can provide the environment in infrastructure, services, sources of supply, etc., without which co-operatives cannot be expected to 'take off'. Only they can enforce rules safeguarding the rights of the poor in the allocation of scarce resources and support the development of new technologies applicable by marginal farmers.

34. Directions can be identified where government intervention is potentially an impediment rather than a help: throwing irrelevant or over-burdening tasks on cooperatives, pressing hard for too rapid expansion, distracting co-operatives from their tasks. Conversely government influence and resources are best used to create a favourable milieu, ensure adequate representation of and services for the poor, giving incentives to government officials to promote a sound evolution of co-operatives in the direction of self-reliance and self-government, etc.


35. Education is perhaps the most essential ingredient in co-operative development. Regarding the task of reaching the poor and meeting their needs, the role of co-operative education and training is paramount. The first and foremost necessity is to make sure that managerial cadres are kept constantly aware of their responsibilities in that respect and to prepare them for new forms of action. Expanding membership and activities to poorer sections of the community must be considered as both a challenge and an opportunity - as a new form of growth.

36. Managerial and leadership skills at all levels need to be raised especially by formal and practical education. The higher class of management must evolve methods which facilitate the tasks of their subordinates. The pursuit of objectives broader than business achievement, extending to the improvement of the poorer members' living conditions and way of life, must become part of their brief.

37. Adult education is a key component in co-operative education programmes and is particularly relevant in the case of poor people. There is also need to greatly improve and widen the ability of societies' secretaries, particularly at village level, to grasp the real meaning of their work (for example, in the field of farm requisites supply).

38. The availability of teaching aids and materials is often a bottleneck. Much is being done at national and international level to improve the situation but little which is of direct relevance to the specific problems of the poor. ICA's Co-operative Education Materials Advisory Service (CEMAS) is a useful instrument which could be used to this end.

39. Beyond members and staff, cooperative education must reach many categories of the public (educators, mass media, politicians, trade unions, youth, women, businessmen). Ignorance and widespread misconceptions and misunderstandings regarding the role of co-operatives in eradicating or alleviating poverty must be dispelled. Furthermore member, staff and broader education should more often use local languages.

40. Such efforts can only be successful if they are backed up by an adjustment of co-operative theory to changing circumstances and trends (incorporating for instance the concept of social profitability); by the integration of co-operation in the curricula of higher studies; by the inclusion of co-operative policies in the social sciences. To that end the establishment of chairs of co-operation at leading universities and close working relationships between their Economy, Sociology and Business departments and the cooperative leadership, particularly in the field of research, is overdue.

International Assistance

41. There is considerable room for improvement in the quantity and effectiveness of international assistance for cooperative development, particularly as regards its relevance to the situation of the poorest. With a few notable exceptions the assistance given by the co-operative movements in the richer countries has not been particularly generous, while that given by governments to other governments, though necessary, is not ideally suited to the promotion of participatory peoples' organisations. International trade policies remain adverse to developing countries and impair the ability of co-operatives to promote the interests of their members, including the poor.

42. Basically, international co-operative assistance should be such as to encourage small farmers and other underprivileged groups to analyse their own problems and to enable them to realise the potential for joint action. Among measures which might be taken to render international assistance more productive, experts note the following:

- concentration of aid in the poorest countries;

- inclusion in aid agreements of clauses to ensure that co-operative projects benefit the poorest sectors of the population;

- greater collaboration in technical assistance among the developing countries;

- wider use of versatile generalists rather than high-level specialists;

- greater reliance on local universities and institutes in the developing countries for research and project implementation;

- recruitment of practical farmers and fishermen for technical assistance assignments with co-operatives;

- introduction of simplified bookkeeping systems;

- fuller use of inconvertible currencies.

43. Both multilateral and bilateral external aid can be effective in co-operative assistance programmes, especially under conditions where the external assistance can be directed to the co-operative institution being assisted without local government interference. Donor country government and LDC* government involvement, however, may be necessary in both multilateral and bilateral external aid programmes. International governmental agencies, such ILO, FAO and UNESCO are usually required to channel external aid through the LDC governments.

* LDC-Less developed countries.

44. The work of these international governmental organisations makes a valuable contribution to the promotion of sound co-operatives. Increasing use should be made of the facilities offered by the Joint Committee for the Promotion of Aid to Co-operatives (COPAC) as a neutral forum where international governmental organisations and international voluntary organisations meet regularly to exchange information on their respective policies and programmes in the area of co-operatives and to coordinate their action wherever possible.

45. The work of bilateral governmental organisations makes a valuable contribution to the promotion of sound cooperatives especially when they collaborate with their respective national cooperative organisations in planning and implementing co-operative development programmes. Such arrangements provide better opportunity for 'co-operative to co-operative' assistance.

46. Increasing use should be made of combined bilateral programmes and such consortium and other bilateral efforts should make use of the ICA facilities for identification of co-operative development opportunities and dissemination of information through the research and educational programmes of the ICA Regional Offices.

Summary and Conclusions

Poverty is as diverse as it is widespread in the developing world. Identifying its root causes in each geographical area is a pre-requisite for policy making (paras. 12, 13). Circumstances exist which are inimical to co-operative success (para. 31).

Co-operative institutions of developing countries often fail to conform strictly to rigid conceptual norms. While it is imperative to refrain from classing state enterprises as co-operative societies, it is also advisable to look upon many current undertakings as imperfect forerunners of genuine co-operatives and to help them to achieve self-motivation and self-government (paras. 7, 8). A legislative background allowing for flexibility in such a transition is required (para. 29).

Co-operatives can and do prove instrumental in many ways for the improvement of poor people's conditions (para. 20). Few institutions offer such a range of opportunities to the poor together with the full status of an equal member. The social benefits of co-operatives at work, albeit imperfect, spread far beyond the confines of the societies and their membership (para. 22).

Co-operatives, however, should not be expected to solve single-handed the huge problem of poverty. Redistribution of wealth and income among their members is at best limited by imperatives of economic efficiency and competitiveness (para. 27); fundamental socio-structural reforms are far beyond their purview (para. 31) and the net input of resources necessary to initiate and sustain economic and social development must in the last analysis be provided by the community at large (para. 33).

Co-operatives whose membership consists exclusively of poor people can be desirable and instrumental in certain circumstances. But many considerations militate for mixed membership (para. 25) which, in turn, calls for precautions and safeguards - in the co-operative law and in the individual societies' bylaws - to curb the tendency of elites to administer people and things in their own interests. Specific provisions must, on the contrary, be made to ensure favoured treatment for the under-privileged (paras. 29, 30).

A most decisive factor in assisting co-operative efforts in the direction of the poor is the attitude and political will of government. The government can help or impede sound co-operative development in many ways. The risk of the latter should not be minimised (paras. 33, 34).

Education is fundamental to the process of developing co-operatives especially with respect to services to be rendered to the poor. Managerial cadres must be imbued with new motivations; new skills and a broader educational background must be imparted to society secretaries; better teaching aids must be evolved and disseminated (paras. 35-38). Co-operation must become a specific subject of higher research and learning (para. 40).

International assistance to co-operative development needs to be redirected and strengthened, a greater role being assigned to experienced co-operators, especially at grass roots level. Co-ordination, especially through COPAC, is imperative if the cooperative movement is to achieve its potential for the improvement of the living conditions of the poor throughout the world.