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Submitted
by Lisa Novacek
PED-122M
March 22, 2002
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BACK TO
BREAD AND BUTTER BASICS
Agriculture and Cooperative Aid
in Developing Countries
Applying Lessons Learned to the 21st Century
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From Prairie Populism
to Global Policy
Cooperative
- n. An enterprise owned jointly by those who use its facilities or
services.
-
Webster's Dictionary
One hundred years
ago, across the United States, a self-help movement by farmers was under
way. Farmers, long grown weary of living in poverty; unfair, below-parity
commodity prices; gouging my middle men; and exploitation by big business,
banded together to form cooperatives - organizations by which they could
take back control of various stages of purchasing, financing, producing,
processing, distributing and marketing their goods.
In North Dakota, the movement literally took off like a prairie fire,
wherein farmers' resolve to create economic prosperity and stability;
re-gain control over market drivers and out-of-state price setting; and
achieve long-term sustainability manifested in unsurpassed National Farmers
Organization (NFO) and Union (NFU) membership growth as well as the establishment
of unprecedented state-owned enterprises. Two such institutions include
the Bank of North Dakota, created to foster local financing and savings,
and the State Mill and Elevator, to provide a market for grain and a source
for feed and seed. An offshoot of NFU would follow these extraordinary
moves with the creation of Cenex, a central exchange for purchasing and
distributing inputs and fuel, and marketing and transporting commodities.
These "Made in America" cooperatives are alive and well today
in spite of the declining number of farms and the eroding level of average
family-farm income in the rural Midwest. The cooperative spirit lives
on and continues to serve many functions in addition to promoting farmers'
livelihood.
U.S. Senator Hubert H. Humphrey (D-MN), who was raised in the Dakotas,
understood the empowerment of working collaboratively and set out to make
cooperatives an international experience, an economic leg-up for people
in developing countries. In step with the prairie populist philosophy
that flourished in the early 20th century Midwest, Senator Humphrey led
the charge for growing and globalizing cooperative opportunities. In 1961,
he succeeded in amending the mission statement of the Foreign Assistance
Act to read "to encourage the development and use of cooperatives,
credit unions, and savings and loan associations." (Ruttan, pp. 53)
At the heart of Humphrey's effort is the philosophical belief that cooperative
development would create the most sustainable environment for addressing
the woes of Third World countries - alleviating poverty, abating hunger
and strengthening self-sufficiency that withstands natural and human-produced
disaster. By focusing efforts at the grassroots level, the result would
be built from the bottom-up, giving local farmers and other coop participants
a sense of pride and ownership.
If cooperatives worked in developing states, why not in developing nations?
Cooperatively Attacking Poverty
The root incentive of the cooperative movement among American farmers
was to make an honest living. They felt exploited by big business - companies
that transported, stored, processed and marketed the bulk grains grown
by the producers. They wanted a system they could trust and, as much as
possible, control.
Senator Humphrey knew that applying this notion globally could, literally,
change the world.
As in the Humphrey era, poverty remains a pervasive problem in the world.
According to World Bank's World Development Report 2000-01: Attacking
Poverty, "Of the world's 6 billion people, 2.8 billion live on less
than $2 a day, and 1.2 billion on less than $1 a day." The Report
goes on to recommend several ways to fight poverty in struggling countries
through the promotion of economic opportunity "… by stimulating
overall growth and by building up their assets … and increasing the
returns on these assets through a combination of market and nonmarket
actions." (World Bank, pp. vi)
With the added dimension of "collaboration," this entry could
have been penned by Senator Humphrey, promoting his quest for cooperative
development opportunities. To him and other advocates of cooperatives,
poverty is not fought alone. It is best tackled through collaborative
effort, through margins that can achieve results. Assets are most effective
when saved and reinvested locally. Market and nonmarket forces are optimally
faced en masse.
In carrying forth the Humphrey banner into the new century, the federal
government and other foreign assistance providers need to get back to
the basics - to the people at the grassroots level who alone can sustain
any economic growth mechanism. According to Ted Weihe of the U.S. Overseas
Cooperative Development Council (March 2002), farmers account for 70 percent
of the world's poor, which means that focusing on this population is a
safe bet. In fact, farmers may well be the key to poverty alleviation
and macroeconomic growth in developing areas with desirable side effects.
By generating and sustaining income, we fight hunger. By alleviating poverty
and hunger, coops help move victims up the Maslowian ladder of needs.
Until these citizens have an opportunity to sustain food and income, they
won't have incentive to nourish the government and other needs of the
country.
Humphrey could not have predicted the events of September 11 and the unease
many countries subsequently feel regarding potential future terrorist
strikes. But he would appreciate the value-add of cooperatives in stabilizing
the economies - and thus the tendencies toward unrest - of the world's
poorest, most neglected regions. Cooperative proponents understand the
implicit stabilizing influences of these enterprises and their influence
in "leveling the economic playing field" among individuals,
regions and countries. A milestone in bridging the gaps between the have's
and the have not's is generating more income to all participants of cooperative
structures. Cooperatives have the proven capacity to address issues of
inordinate economic disparity by creating quality of life for the world's
most neglected - one way of peacefully and constructively "attacking"
the root causes of unrest, aggressive behavior and escalating acts of
terrorism.
Improving Effectiveness
and Sustainability of Coops
As described above, promoting the development of cooperatives can play
a significant role in the long-term advancement and stability of developing
countries. Hand in hand with other market tools, such as tariff relaxation,
major inroads can be made in their economic turnaround. There are many
steps that can be taken to create a more favorable environment for cooperatives,
their efficiency and longevity, and their accompanying tools.
Outlined below are four areas in which federal foreign assistance agencies
can focus their capacity to improve the effectiveness and sustainability
of cooperatives, thus strengthening the income-generating, poverty-alleviation
capacity of developing countries. The areas include directing more resources
toward placing coop experts in the field; ushering in a new funding philosophy
and funding levels; educating governments in developing countries about
the rudiments of coops; and harmonizing coop growth and tangential issues
(e.g., trade policy, technology advances, environmental sustainability
and community building).
1. Direct More
Resources Toward Placing Experts in the Field
In order for cooperatives in developing countries to grow and prosper,
mechanisms need to be instilled to replicate the organizational principles
and practices that made American coops thrive, such as open and voluntary
membership and democratic control. (www.coop.org, pp. 1) The best way
for a coop to begin is through the guidance of an expert dedicated to
teaching what he/she knows to a targeted population. With so many American
farmers retiring, along with academics and practitioners that may be willing
to travel, there is a ready supply of experts waiting for duty.
While some organizations, NGOs, businesses, institutions and universities
already sponsor this kind of on-the-ground program, needs remain unmet
if one considers mass establishment of coops a priority. Federal agencies
could generate great effect by allocating resources toward co-sponsoring
more experts to more locations and increasing their length of stay. To
optimize the dispatching of experts, USAID's Office of Private and Voluntary
Cooperation and other agencies can use existing partners such as the Peace
Corps, Agribusiness Volunteer Program at the Citizens Network for Foreign
Affairs, or the National Cooperative Business Association.
To properly establish the foundation of a cooperative, many key principles
must be followed, none of which are a quick fix or brief proposition.
- Build from bottom-up
A cooperative is set up for inefficiency or failure if built from the
top-down. (www.coop.org, pp. 5) This approach promotes undue dependency
on outside supports. The farmers who stand to benefit from the creating
of a coop need to be the drivers of the project from the beginning to
produce an entity that can reach self-sufficiency and induce core member
loyalty. They simply need the tools and know-how to do the building
and maintain member control, which is where the expert(s) comes in.
- Create cooperative
as a true economic tool
To fully capitalize on the strengths of a coop, its members need to
understand its existence as an economic tool, as an income generator,
and as a business management enterprise. There is a science to managing
an efficient coop that produces economic gain for its members. If the
foundation and management practices are intact, there is greater likelihood
of sustainability. The expert can work to inculcate best management
practices and a viable systems framework with clearly defined roles
for members, board and management.
Another means of looking at cooperatives through an economic lens is
by linking their effectiveness to a country's economic self-sufficiency.
In part, this capability is achieved by sustaining reliable levels of
food production to limit dependency on food imports. Well-managed cooperatives
can grow and stabilize crop production, reducing a country's risk in
the new world of scarcity. With populations projected to grow significantly
over the next few decades - nearly doubling to 1.37 billion from 1995
to 2020 in sub-Saharan Africa (Brown, pp. 55) - the stability engendered
by agricultural cooperatives is more vital than ever.
Finally, cooperatives have the capacity to harness and build local savings,
a vital component of a country's economic growth and poverty reduction.
As described by Lancaster in Aid to Africa, "In poor countries,
the size and rate of domestic savings are often low. [Yet] savings rates
… are critical … in influencing a country's rate of growth."
(pp. 16) The creation of credit unions and a safe means by which citizens
can deposit their income is an effective way to generate and sustain
local investment capital.
- Enlist strongest
farmers/leaders first
Scalability is integral to a cooperative's success. (Weihe, 2002) To
create momentum for membership growth, the expert-in-residence can work
with information-gathering units (e.g., local governments, NGOs, Peace
Corps volunteers) to assess which farmers to choose as the leaders in
initiating the coop. The bottom line is that start-ups are inherently
political operations, requiring buy-in from stakeholders. Starting a
coop is no different. Choosing respected leaders of the community will
create momentum for enlisting other grassroots organizers and members.
The momentum of membership growth is significant. Without scalability,
a cooperative will not be able to secure asset formation, move into
mainstream production or marketing, or become self-sustaining. (Weihe,
2002) Margins are key to success.
- Create customized
coops, not one size fits all
The expert can help identify priority needs in a region. Some farmers
may be best served by "single-purpose" coops while others
would benefit from a "multi-purpose" entity. (Weihe, 2002)
As an example of the latter, some farmers may need A to Z support, from
garnering economies of scale in purchasing inputs to post-harvest processing,
storage, transportation and marketing.
- Develop corruption-fighting
infrastructure
Unfortunately, as with any large enterprise, growing cooperatives run
the risk of insiders stealing money, engaging in nepotistic practices
and other undesirable activities. (Faust, 2002) One way that an expert
can offset the likelihood of corruptive practices is to foster trust
bonds, building a sense of extended family. By then directing responsibility
- particularly for financial matters - to those considered family members,
or those with built-in trust positions (e.g., clergy or police in some
regions), the potential for corruption is reduced. (Weihe, 2002)
- Share American
"best practices"
When the American cooperative movement was taking hold, many would-be
members and activists learned about the merits of these systems by reading
populist publications. Reading fueled the prairie fire that generated
widespread interest in the movement. There are several ways to replicate
the effects of reading in addition to producing materials for literate
populations to devour. Having an expert on the ground to help the community
band together to create a bottom-up approach is the preferred way to
transfer cooperative best practices to the Third World. Learning by
example and personally witnessing neighbors' success stories, and then
spreading the news by word of mouth will perpetuate these practices
and provide incentive for new members to join or create their own cooperative.
Finally, if possible, key members could travel to the U.S. to see firsthand
the operations of coops. One way or another, promising activists and
leaders in developing countries need a 360 degree education about the
reasons behind a successful cooperative venture.
2. Usher in New
Funding Philosophy and Levels
There are fundamental
ways in which the federal government appropriations agents and implementing
agencies, such USAID, can enhance the underpinnings of aid decisions as
well as the performance measures of the aid packages. With the events
of September 11 ever-present in our minds, there is more compelling interest
than ever to straightforwardly address underlying economic misery, income
gaps, pervasive hunger, and ethnic and sectarian differences. As inherent
bridges between individuals, communities and nations, cooperatives have
the potential to serve as agents of stability, democracy and economic
development growth.
To begin with, policy writers and promulgators of aid programs can articulate
goals that reflect a commitment to "the broadening and deepening
of support for cooperative development" and a decision-making environment
that values the expansion and reach of cooperatives. (Report to Congress,
pp. 6)
USAID can embrace its role as an intellectual leader and reformer, not
simply that of a resource provider. (Report to Congress, pp. 1) The agency
can strengthen networks of cooperatives to help carry out its mission,
to be the agents of change on the ground.
Federal agencies can more ardently recognize the value of investing where
viable cooperative enterprise already exists or can effectively exist.
According to OECD's A Vision of Progress (pp. 8), aid works best when
it is "a catalyst or reinforcement of other factors." By supporting
the viability of cooperatives at the grassroots level, by allocating more
dollars toward the creation and sustainability of coops, USAID and other
agencies will have such an infrastructure from which economic growth can
be fostered.
Lengthening the aid program cycle is imperative to achieving sustained
achievement in the cooperative movement. (Weihe, 2002) Currently, Community
Development Organizations (CDOs) enter into short-term agreements with
USAID; however, two- and three-year projects are not long enough to build
a self-sustaining entity. Agencies need, at minimum, to test new and longer
agreement terms and solutions to help cooperatives reach a viable stage
of development, scale and impact.
Finally, appropriations leaders need to heed the advice of those calling
for a doubling of foreign aid dollars. (Clinton, 2002) In his recent column,
James Wolfensohn (Washington Post, 2002), states that a doubling of foreign
aid would amount to "one-fifth of one percent of income" in
rich countries. In light of the current terrorist-threat climate, the
minimal cost observed and the far-reaching potential impact incurred,
it seems that the question quickly moves from "Can developed countries
afford to double foreign aid?" to "Can these countries afford
to not double foreign aid?"
President Bush recently proposed a $5 billion increase in aid to poor
countries that "support human rights, adhere to strong systems of
law and have open markets." (The New York Times, 15 March 02) While
aiming in the right direction, the proposal falls short, representing
a mere 15 percent increase over today's spending. (The New York Times,
15 March 02) Federal aid agencies could do more to present the case for
increased funding to American political leaders and to work with their
counterparts in other countries to increase overall assistance levels.
3. Educate Governments
Direct government interference is one of the most serious obstacles to
successful cooperative development today. (www.coop.org, pp. 4) Many governments
may be stuck in a passé Cold War mentality, viewing modern coops
as Marxist bureaucracies best managed top-down by the overarching government.
Moving mindsets to private-enterprise mode is one of the ways to address
old regime thinking, and incorporating this learning environment into
an overall civic education strategy would be a natural umbrella approach.
Transitional governments need to understand the link between a cooperative's
autonomy and its success, how self-sufficient coops translate into income
generation for its members, and how cooperatives serve as a paradigm of
democracy. (www.coop.org, pp. 4) Indeed, coops do represent democracy.
The underlying principle of coops is "one person, one vote."
These living lessons of democracy enrich members and instill a collaborative
spirit that transcends boundaries in an individual's life. Learning about
collaboration of agricultural purchases, production, processing and transport,
coop members can appreciate the value of transferring the essence of coops
to meet other needs, such as finance, housing and education.
In Aiding Democracy Abroad, Carothers suggests that one of the lackluster
outcomes of democracy aid to date is that "programs to aid civil
society help many individuals and small organizations strengthen their
civic participation but rarely have society-wide reverberations."
(pp. 341) Carothers' interpretation suggests a learning gap between those
experiencing local and regional cooperative and other democratic involvement,
and the transfer of this knowledge nation-wide. By enveloping the principles
of cooperatives, living mini-democracies, into a government's institution-building
and civic education process, Carothers' goal of society-wide results can
be realized. USAID and other democracy-building programs would do well
to add to their curricula the value and functionality of autonomous, self-sustaining
cooperatives.
4. Harmonize Coop
Growth and Tangential Issues
Cooperatives will produce the most effective results for farmers, income
and production levels when coupled with complementary policies and practices.
Areas in which federal foreign assistance agencies could be more involved
include the establishment of a trade-friendly environment, application
of technological advances, capitalization of dual benefits to the natural
environment, and "community building" to generate more support
for cooperatives.
a. Trade policy
changes
According to the February 11, 2002 edition of Agweek (pp. 36), "developing
countries stand to earn at least three times more in exports than the
international aid they currently receive if developed countries drop
domestic agricultural subsidies." Many experts suggest that allowing
developing countries to export agricultural goods to Western countries
would be the quickest way to increase employment and reduce poverty
in the Third World.
These assessments are echoed by the OECD, which reports that open economies
and income levels of developing countries have grown much faster than
closed economies over sustained periods of time. In fact, the organization
reports that income levels in open states are converging towards those
of developed countries. (OECD, pp. 47)
In addition to supporting liberalized import/export policies and opposing
high tariffs and other barriers to boosting developing economies, American
foreign aid agencies could do more to investigate intra-country and
regional distribution channels and to support NGOs undertaking such
challenges. If it is determined that distribution would best be directed
via cooperative efforts, then resources should be allocated in that
direction.
b. Technology advancements
While biotechnology has its detractors, many researchers point to this
science and other high-tech applications as key to limiting starvation
and the social chaos that accompany overpopulation. (Athanasiou, pp.
251)
Ideally, crop yields in developing countries can multiply via the biotechnological
advances that have boosted certain American production yields. Rather
than placing the full financial risk of such endeavors on private companies,
the federal government could offer more partnership and pilot-project
opportunities for interested businesses. In the event that a company
ultimately profits from the investment, the agreement could state that
a portion of the federal government's seed money would then be repaid.
Partnering with various entities, such as universities, corporations,
foundations, host-country governments and NGOs, Monsanto's smallholder
farmer program offers an example of a private company that is willing
to "do good while doing well" in poor regions of the world.
The program also represents the type of partnership opportunity that
American foreign assistance agencies could support in more ways than
simply providing country-specific data.
The Monsanto program works to adapt technologies to a region's crop
varieties, pests, food preferences and agricultural practices for joint
gain - improving the productivity and efficiency of agriculture in these
countries while entering an untapped market. (HBS, pp. 7) In Kenya,
the project translated into promoting a virus-resistant sweet potato.
High-yield hybrid corn seed and tailored herbicides were staples of
the Mexico project. (HBS, pp. 9-10)
Technology-supported advances in crop yields are a wise investment in
that they are usually not just one-time gains. They typically have a
sustained multiplier effect, creating a virtuous cycle of enhancing
knowledge, health and productivity, and raising incomes and building
capacity for future innovation. All of these gains then feed back into
human development. (Human Development Report, pp. 2)
Ushering technological advances into poor countries may face stronger
competition than ever. Since September 11, many agricultural experts
and researchers have placed more attention on strategizing protective
measures against domestic bioterrorism than extending seed and animal
advancements to needy countries. Specifically, since last fall, American
researchers are devoting more time to assessing the threats and risks
of various diseases on domestic crops and animals, anticipating possible
intentional or accidental incursions and scenarios, and developing coordinated
emergency response measures through a centralized database and communication
system. (Agweek, 18 February 02, pp. 40)
c. Environmental sustainability
According to Carley and Spapens in Sharing the World (1998, pp. 94),
"unsustainable production methods are decreasing the amount of
high-quality arable land by about 16 million hectares per year, mainly
due to soil erosion and salinization of irrigated land." They further
state that "the accumulated effect of this soil degradation is
a major threat to global food security."
Increasing reduced and no-till farming practices and other low-input
applications would serve the dual purpose of limiting production expenses
and enhancing soil preservation. Along with sharing seed technology
advances, Monsanto has worked with farmer cooperatives to help incorporate
these environment-nurturing practices into their operations. (HBS, pp.
7) As a result, Monsanto's efforts have provided a positive impact on
local biodiversity, soil and water quality. USAID could help promote
these earth-friendly practices by helping other companies, NGOs and
universities target preferred locations for education and training.
USAID and other entities could also provide start-up funds for pilot-project
scale initiatives. Then, once a small base of farmers understand the
practices, they can pass them along to their neighbors, creating a self-sustaining
training system.
A high-end - and high-orbit - innovation that promotes environmentally
sound practices has been developed by NASA. The agency now provides
American farmers with satellite images of their land to pinpoint soil
types within and among fields, thus paving the way for sound application
of inputs. (Agweek, 25 February 02, pp. 53) By identifying soil types
and needs, farmers can better calculate input rates of various chemicals,
reducing application levels and waste. Extending this NASA innovation
to help farmers and protect soil in poor countries would be a worthy
undertaking by a foreign assistance agency such as USAID.
d. "Community building" to generate more support
Given the inherent environmental-protection potential of cooperative-based
production decisions as outlined above, a natural community from which
to garner support for coop advancement is the environmental sector.
USAID could partner with the EPA, other countries' environmental agencies,
NGOs, and various sustainable growth, enviro-friendly organizations
to promote the environmental track record of coops in developing countries.
By doing so, more organizations and donors may choose to become involved
with the movement.
Farmaid is the American non-profit organization dedicated to raising
funds for small family farms. An admirable venture, its effect by directing
funds to poor farmers and seminal cooperatives in developing countries
could be staggering. Microfinancing funds of $100 have made a world
of difference to recipients selling eggs in Africa or sheep cheese in
Macedonia. (Weihe, 2002) By raising charitable dollars in developed
countries to supplement federal, NGO and private funds allocated to
developing countries, the impact would be dramatically multiplied. Perhaps
USAID could sponsor a workshop of collaborators to brainstorm the creation
of such a non-profit. Coopaid has a nice ring to it.
Another way in which others can become more involved in building cooperatives
is by creating more communication channels to further understanding
of sister countries and respective best practices. For example, American
and Brazilian farmers recently met in Brazil to discuss common values,
challenges and goals, possibilities for farmer-to-farmer opportunities
and various policy issues. (Agweek, 4 March 2002, pp. 13A) This kind
of collaborative dialogue and information sharing may be more readily
engaged if USAID and private companies were to co-sponsor such events.
Looking Ahead
With the grassroots cooperative spirit prospering in the Third World,
more countries will achieve the unthinkable - economic growth and sustainability
with accompanying abatement of hunger and environmental degradation. It
is possible, just as self-sustaining farm operations and cooperatives
were possible to build in developing rural America 100 years ago.
Exponential growth and sustainability of cooperative organizations has
been documented by several independent sources and cooperative-related
organizations over the years.
· In the U.S., farmer-owned cooperatives reported record income
of $2.4 billion in 1996, up 20 percent from 1994. (www.kc.frb.org, pp.
1)
· Twenty years ago, U.S. cooperative development programs were
at $23 million. Today, these organizations carry out $200 million annually
in programs offered in 62 countries. (Report to Congress, pp. 1)
· In 1998, there were 674,967 cooperative societies in the world,
and more than 500,000 of them were in developing countries. (www.coop.org,
pp. 1)
· Building cooperatives has been described as the "largest
socioeconomic movement in the world," with nearly 600 million individual
members. (www.coop.org, pp. 1)
As millions across the globe can attest, grassroots cooperatives are able
to proliferate and self-sustain if given the proper start-up tools and
guidance, autonomy from government intervention, and technical and capital
assistance during an appropriately long gestation period.
Ideally, these core elements are attended by favorable trade policies,
sound biotechnological and environmental practices, and innovative types
of community building.
As important as these layers of policy and support are to an enterprising
cooperative, there is no ingredient more vital to the success of a coop
than the people, the members who make it happen. When one peels away the
layers, it is the members who comprise the root of the enterprise. Just
as pioneering American farmers learned a century ago, today's successful
cooperatives are homegrown, from the bottom-up, founded on bread and butter
basics and the fundamental principle of people working together for the
common good. It is this paradigm of democracy that needs to be nurtured
among our neighbors in developing countries.
As described in this paper, USAID and other leaders, managers and policy
makers of foreign assistance programs have immense opportunity to accomplish
this feat - to unleash the collaborative potential of those living in
developing countries. By prioritizing cooperative development, foreign
assistance providers can help ensure the continued engagement of these
individuals and the growth and sustainability of their grassroots cooperatives.
It is my hope that, within the next three decades, future USAID administrators
will frequently echo the words of former Administrator J. Brian Atwood
who, in 1996, praised the historic accomplishments of Costa Rica in creating
sustainable economic prosperity. (Atwood on Costa Rica, 1996) Their praise
will be directed toward countries that are building viable cooperative
structures and economic mechanisms - today - that will, over time, shore
up each country's most precious resource - its people. In the words of
Atwood, these countries will have found the keys to success by "investing
in people, embracing democracy and stability, making hard choices and
looking to the future."
Fittingly, cooperatives address each of these tenets. And they bring these
principles to life - from nascent rural America to today's budding economies,
from the western plains to West Africa. Democracy is at the heart of cooperatives.
Cooperatives are at the heart of sustainable economic growth. This trilogy
of sorts may well be the winning formula for foreign assistance programs
in the years ahead, creating a global prairie fire of economic prosperity
and sustainability for the 21st Century.
References
Back to Bread and Butter Basics
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