Consumers' co-operative

A consumers' co-operative is an enterprise owned by consumers and managed democratically and that aims at fulfilling the needs and aspirations of its members.[1] Such co-operatives operate within the market system, independently of the state, as a form of mutual aid, oriented toward service rather than pecuniary profit.[2] Many co-operatives, however, do have a degree of profit orientation. Just like other corporations, some co-operatives issue dividends to owners based on a share of total net profit or earnings (all owners typically receive the same amount); or based on a percentage of the total amount of purchases made by the owner. Regardless of whether they issue a dividend or not, most consumers' co-operatives will offer owners discounts and preferential access to goods and services.

Consumers' co-operatives often take the form of retail outlets owned and operated by their consumers, such as food co-ops.[3] However, there are many types of consumers' co-operatives, operating in areas such as health care, insurance, housing, utilities and personal finance (including credit unions).

In some countries, consumers' co-operatives are known as co-operative retail societies or retail co-ops, though they should not be confused with retailers' co-operatives, whose members are retailers rather than consumers.

Consumers' co-operatives may, in turn, form co-operative federations. These may come in the form of co-operative wholesale societies, through which consumers' co-operatives collectively purchase goods at wholesale prices and, in some cases, own factories. Alternatively, they may be members of co-operative unions.[4]

Consumer co-operation has been a focus of study in the field of co-operative economics.

History

Consumers' co-operatives rose to prominence during the Industrial Revolution as part of the labour movement. As employment moved to industrial areas and job sectors declined, workers began organizing and controlling businesses for themselves. Worker co-operatives were originally sparked by "critical reaction to industrial capitalism and the excesses of the industrial revolution." The formation of some workers co-operatives was meant to "cope with the evils of unbridled capitalism and the insecurities of wage labor."[5]

The first documented consumers' co-operative was founded in 1769,[6] in a barely-furnished cottage in Fenwick, East Ayrshire, when local weavers manhandled a sack of oatmeal into John Walker's whitewashed front room and began selling the contents at a discount, forming the Fenwick Weavers' Society.

In the decades that followed, several co-operatives or co-operative societies formed including Lennoxtown Friendly Victualling Society, founded in 1812.[7]

The philosophy that underpinned the co-operative movement stemmed from such socialist writers as Robert Owen

Governance and operation

Consumers' co-operatives utilize the co-operative principle of democratic member control, or one member/one vote. Most consumers' co-operatives have a board of directors elected by and from the membership. The board is usually responsible for hiring management and ensuring that the co-operative meets its goals, both financial and otherwise. Democratic functions, such as petitioning or recall of board members, may be codified in the bylaws or organizing document of the co-operative. Most consumers' co-operatives hold regular membership meetings (often once a year). As mutually owned businesses, each member of a society has a shareholding equal to the sum they paid in when they joined.

Large consumers' co-ops are run much like any other business and require workers, managers, clerks, products, and customers to keep the doors open and the business running. In smaller businesses the consumer/owners are often workers as well. Consumers' co-operatives can differ greatly in start up and also in how the co-op is run but to be true to the consumers' co-operative form of business the enterprise should follow the Rochdale Principles.

Finance and approach to capital accumulation

The customers or consumers of the goods and services provided by a co-operative are often also the individuals who supply the capital necessary to establish or acquire the enterprise.

The primary distinction between consumers' co-operatives and other forms of business is that a consumers' co-operative aims to offer quality goods and services at the lowest possible cost to its consumer‑owners, rather than maximizing profits by charging the highest price the market will bear.[10] In practice, consumers' co-operatives typically set prices at competitive market rates.[11]

Unlike for-profit enterprises, which treat the margin between cost and selling price as profit for shareholders, consumers' co-operatives may use this surplus to build collectively owned capital, support member-defined social objectives, or return the excess to consumer‑owners as a patronage refund or dividend.[12] Accumulated capital may be retained as reserves, reinvested in the co-operative’s growth, or used to acquire assets such as facilities or equipment.

While some claim that surplus payment returns to consumer/owner patrons should be taxed the same as dividends paid to corporate stock holders,[13]

Problems

Since consumers' co-operatives are run democratically, they are subject to the same problems typical of democratic government. Such difficulties can be mitigated by frequently providing member/owners with reliable educational materials regarding current business conditions.[15] In addition, because a consumers' co-operative is owned by the users of a good or service as opposed to the producers of that good or service, the same sorts of labor issues may arise between the workers and the co-operative as would appear in any other company. This is one critique of consumers' co-operatives in favor of worker co-operatives.

Pursuit of social goals

Many advocates of the formation of consumers' co-operatives—from a variety of political perspectives—have seen them as integral to the achievement of wider social goals.

For example, the founding document of the Rochdale Pioneers, who established one of the earliest consumers' co-operatives in England in 1844, expressed a vision that went far beyond the simple shop with which they began:

"That as soon as practicable, this society shall proceed to arrange the powers of production, distribution, education, and government, or in other words to establish a selfsupporting home-colony of united interests, or assist other societies in establishing such colonies.[16]"

Co-operative Federalists, a term coined in the writings of Beatrice Webb, advocated forming federations of consumers' co-operatives as a means to achieve social reform. They believed such a development would bring benefits such as economic democracy and justice, transparency, greater product purity, and financial benefits for consumers.[17]

Examples

See also

• Food co-operative, a supermarket owned and operated by its consumers.
• Copyleft
• GNU General Public License
• Health food store
• Healthcare Co-operatives movement in India
• National Cooperative Business Association
• Open source
• Open-source hardware
• US Federation of Worker Cooperatives

Further reading

• Co-operation 1921-1947, published monthly by The Co-operative League of America. fully searchable original link
• The History of Co-operation, by George Jacob Holyoake, 1908. fully searchable original link
• Why Co-ops? What Are They? How Do They Work? A pamphlet from the G.I. Roundtable series by Joseph G. Knapp, 1944
• Law of Cooperatives, by Legal Firm Stoel Rives, Seattle

External links

• Cooperatives Europe – The common platform of ICA Europe and the Coordinating Committee of European Cooperative Associations (CCACE)
• International Co-operative Alliance
• Consumer Cooperatives Worldwide (sector of ICA)
• Co-operatives UK, the central organisation for all UK co-operative enterprises
• The online database of UK Co-operatives
• ICOS, the Irish Co-operative Organisation Society
• German technical consulting for optimization