What is a cooperative?

There are records of cooperatives going back to 1770. Cooperatives were workers’ method of responding to the new pressures of industrialization. In Britain, a group of shop workers came together in 1844 to create a business entity based on the principles of cooperative organization.

How are cooperatives different from corporations?
Cooperatives are democratically owned and organized by the people that the cooperatives represent. While corporations are owned by shareholders and run by managers, cooperatives are owned by the people that are the cooperative’s members. Cooperatives are not motivated by the profit motive, as corporations are. The cooperative’s main reason for being is to further the well-being of its members. A cooperative can also be a group of small businesses that band together to do things that they cannot do by themselves.

Cooperatives do many things

• Extend short-term credit to members who need it
• Form a collective voice that can petition the government to redress grievances.
• Provide services that are often unavailable to the poor and that the state often cannot provide.
• Health care
• Education
• Provide for utilities in rural areas in which it may not be profitable for companies to install phone lines, electrical transmission lines, etc.
• Agricultural extension services

Cooperatives can help with capital accumulation

Many people who live in rural areas in developing and developed countries alike struggle to make ends meet. They live from week to week and often are not able to save any money after their expenses are paid off. As a result, they are never able to buy new equipment to make their farms or business function more smoothly and efficiently. Suppose a wheat miller needs to buy a new mill. It would take him a long time to save up enough money to buy such a mill. However, a cooperative of many millers can pool their money and buy the equipment sooner. Or the miller can buy the equipment through access to credit from the cooperative.

Cooperatives in the United States

There are many cooperatives in the United States. Some examples include:

• Rural electric cooperatives
• Rural phone Service cooperatives
• Agricultural cooperatives

Agricultural cooperatives overseas

Much of the food that we eat and drink is imported from other countries. Frequently farmers in developing countries grow the fruits and coffee that are used to make our juices, chocolate, and coffee. Farms operate independently of one another. However, when a company that makes juices buys fruit or coffee from overseas, they prefer to buy in bulk. Companies don’t usually approach hundreds of independent farmers individually with contracts. Large companies that process the foods that we eat produce huge amounts of food, and so they need to do business with growers who can supply them with huge amounts of crops.

• Sometimes a company goes to an exporter. An exporter is a person who buys up a crop, say coffee, and gathers huge quantities of it in a warehouse. The exporter can then sell the large amounts of coffee to a company at a huge markup and profit.
• The problem with this arrangement is that most of the profits go to the exporter, who is, usually, already the wealthiest person in the community. That money does not go to the people who work hard growing and gathering the coffee. Under this arrangement, some farmers get as little as one cent of the approximately 4 dollars that you pay for a cup of coffee.