The Multinational Monitor

OCTOBER 31, 1985 - VOLUME 6 - NUMBER 15

C O O P S   A   D E V E L O P I N G   A L T E R N A T I V E

Coops: A Developing Alternative

by Russell Mokhiber

Ever since the 1830s when Robert Owen inspired the first cooperative enterprise in the heart of industrial northern England, worker and consumer owned and operated cooperatives have sprung up around the world to forge a middle path between the dominant capitalistic and communistic economic structures of east and west.

The visionary leaders of the western cooperative movement, including Owen, Beatrice and Sidney Webb, and James Peter Warbasse foresaw that co-ops, offering workers and consumers direct control over the production and consumption processes, would eventually grow and reach out across national boundaries as a means of confronting the economic cartel and oligopolistic power of multinational corporations.

But while the cooperative economic form thrives today in several European nations and has a presence in the Third World and in North America, efforts by cooperatives to join hands across national boundaries to challenge the multinational corporate power have been few and far between. The obstacles to expanding internationally at times seem overwhelming. "We don't have the financial capacity to do it," said Ann Hoyt, of the University Center for Cooperatives at the University of Wisconsin. "In many cooperatives we're not even operating on the national level, to think internationally is a step beyond our capacity."

Many cooperatives developed as a result of members banding together to get a service or product that corporations or government refused to provide. Such cooperatives even to day often serve local or regional needs, and little would be gained and much lost by spreading to the national or international level, said Hoyt. The benefits offered by cooperative housing and day care, two rapidly expanding types of cooperatives, occur because the cooperatives are local entities, she said.

Member control, the foundation of the cooperative movement, is also an obstacle to cooperative internationalism. Members who have committed their time, energy and money into creating a viable cooperative often are hesitant to see the cooperative expand for fear they will be forced to relinquish their individual control.

"International cooperative organizations, which try to strengthen the cooperative movement, sometimes tend to ignore the primary member and strike out on their own," said R.B. Rajagura, New Delhi regional director of the International Cooperative Alliance in Southwest Asia.

These international affiliations, though controversial, are perhaps one of the cooperative movement's best chances for bridging international barriers to cooperation.

One of the largest international cooperative associations is the International Cooperative Alliance (ICA). Founded in 1895, the ICA is an alliance of 164 national member organizations representing a half billion members from 72 countries around the world. The alliance has two primary goals: first, to foster the establishment and growth of independent democratic, and viable cooperatives within each nation, and second, to cross national boundaries and, in the words of a recent ICA policy document, "strengthen collaboration between cooperative organizations of various types and in different countries, thereby promoting the growth of international solidarity, which is the foundation of constructive peace."

Co-Operatives in the Year 2000, a paper prepared for the 27th Congress of the ICA held in Moscow in October 1980, reported what was already known by many coop members, that "the world cooperative movement is not strong at the international level." The report's author hypothesized that "because co-operative action is so tied to social background, cultural traditions, language, and legal arrangements" it "tends to stop at the boundary line" and that "private business rather than cooperatives" spread "across borders and value most highly the international connection."

While many within the co-op movement would agree with the report's conclusion that the international co-op movement is not strong at the international level, efforts are underway to strengthen the movement by linking cooperatives across national boundaries. In recent years ICA member co-ops have taken a more active role in facilitating international cooperation. ICA has spun off a number of international organizations and committees that facilitate joining efforts between cooperatives worldwide in the fields of agriculture, fishing, banking, housing and insurance among others.

Of these organizations, INTERCOOP (International Organization For Consumer Co-Operative Distributive Trades) is pointed to as proof that international cooperation can work in the modern economy. Founded in 1970, the Copenhagen, Denmark based INTERCOOP is a federation of co-ops from 20 countries that pools its buying power to negotiate cheaper prices and better products from producers. INTERCOOP also arranges for sales of goods from one member co-op to another. When an ICA official was asked recently why INTERCOOP was created, he responded a bit incredulously, "If you were sitting down with a seller who would you rather be representing: one million consumers or two million consumers?" In 1983, INTERCOOP recorded sales totaling $360 million.

The Cooperative Business International (CBI), an arm of the National Cooperative Business Association in Washington, D.C., also helps to bring international cooperatives together. "Cooperatives have been weak on the marketing side," said Peggy Sheehan, vice president of CBI, "so we're trying to fill that gap." The group unites foreign and domestic cooperatives with both cooperatives and profit making companies who want to do business.

On a smaller scale, the International Cooperative Petroleum Alliance (ICPA) was founded in 1947 to provide lubricating oils and services to cooperatives around the world. ICPA's oil refining plant in Dordrecht, Holland supplies lubricating oil to its 40 member cooperatives from twenty countries. Based in Jersey City, New Jersey, ICPA represents a first tentative step toward challenging the multinational oil industry's power in the world marketplace.

But such steps toward internationalism have been unable to challenge the multinational corporation. Despite the fact that the ICA has half a billion members, it remains a loosely controlled member organization.

"This is a mental problem," said Lars Marcus, president of the International Cooperative Alliance. Cooperators are unwilling to think regionally, let alone globally, said Marcus. Even the ICA has problems developing a strong international presence because it is broken down into many small local and state cooperatives, he said.

"Sometimes consumer cooperators can be very narrowminded, they want to protect their own interest and they don't care about future generations," he said. "A good cooperator must think ahead to build up the movement and the capital to pass on from generation to generation to serve their kids and their kids' kids."

Throughout this century, cooperative leaders have experimented with international cooperation, but most efforts have been timid at best, and few have been able to overcome the economic hurdles posed by multinational corporatism. One place where the cooperative movement has the potential to make significant gains is in the underdeveloped world where cooperatives, if in a less pure version, are often a more acceptable form of economic enterprise than multinational ventures.

Even so, western cooperatives have been much less successful in forging ties with the Third World than multinationals. Where multinationals have been able to flourish with imported capital and technology, cooperatives have had to struggle for survival in many parts of the developing world, often without the benefit of past cooperative experience.

Here too, cooperators blame the lack of success on finances. In cooperatives, where under-capitalization of enterprises is common, investing in overseas development projects that guarantee no immediate return and in fact promise little material benefit for co-op members is not popular.

Although western cooperatives are often chastised for not adequately spreading the co-op gospel or concerning themselves with international ties, there are some success stories of cooperatives crossing national borders to encourage Third World development.

In Jamaica, Land O' Lakes, a U.S. agriculture cooperative, helps local dairy farmers increase their productive capabilities and builds local markets for farmers products by sending both technical experts and excess dairy products to the country.

On the island of San Andres, a Colombian protectorate off the coast of Nicaragua, a small in-shore fishing co-op and a large Canadian fishing cooperative have joined hands to improve the catches and the profits of the San Andres fishermen. The Prince Ruperts Fishermens Cooperative of Canada, with the Co-operative Union of Canada, is not only helping the San Andres fishermen buy a ship for deep-sea fishing, but it also helped the islanders buy a truck and storing facilities and advised on accounting and management procedures.

In India, the National Cooperative Business Association, formerly the Cooperative League of the USA, together with the Agency for International Development (AID), is working to expand the production, processing and marketing of peanuts, soybeans and cottonseed in local cooperatives. The cooperatives, organized in 1984, have already shown important gains for their more than 140,000 members. In the state of Gujarat farmers participating in the cooperative received on the average of $61 more per ton for their oilseeds than farmers not belonging to the cooperative.

In Rwanda, the NCBA and AID are working together to build grain silos to lessen the amount of grain lost through improper storage. The cooperatively held silos will keep the grain of 114,000 Rwandan families that on the average have yearly cash incomes of only $100 per family.

The National Rural Electric Cooperative Association has been perhaps the most focused and aggressive in its commitment to Third World development. In the 23-year history of its international program, NRECA has spread to 15 countries. Today NRECA has helped set up cooperatives that supply electricity to more than 24.5 million people overseas, up from 169,065 in 1969.

With a kind of missionary zeal, rural electric cooperators have headed to the Third World with the financial backing of the Agency for International Development. NRECA has helped set up rural electric distribution systems from Bangladesh and the Philippines to the Yemen Arab Republic and throughout much of Latin America.

"We literally transfer technology and skills," said Ed Gaither, NRECA's regional administrator for Asia and the Pacific.

NRECA has a talent bank of some 500 to 600 co-op members in the United States who travel to developing countries and set up rural electrification projects-building distribution systems, small hydropower projects, or other electricity generating schemes using indigenous resources.

"Our goal," said Gaither, "is that by the time the program is 50 percent complete we will have trained sufficient people and transferred sufficient technology and skill so that they can complete the program by themselves with a minimum of help."

Although these development programs won't do much to help the bottom line of the cooperatives involved, such programs strengthen the cooperative movement and set an important foundation for cooperative internationalism which may later lead to important markets for the cooperatives.

INTERCOOP, CBI, ICPA, the Third World development schemes of dozens of cooperatives and the continued vitality of the ICA have kept alive the hope for international cooperation. The potential for cooperatives to increase bargaining power with suppliers, to reduce costs, to eliminate middlemen, and to curb multinational abuses of worldwide cartels and oligopolistic market power remains alive, if unfulfilled.

Russell Mokhiber, an attorney with Corporate Accountability Research Group, is completing a book on corporate crime.

Cracking the Cartel

The vision of international cooperation grew out of economic necessity. Cooperative societies often directly confronted the economic power of worldwide cartels and oligopolies. Representative of the confrontation was the struggle by Scandinavian cooperatives to break the electric light bulb cartel.

In 1928, Anders Hedberg, one of the leading theorists of the Swedish Cooperative Union, was invited to Geneva, Switzerland by managers of the Phoebus Company, a multinational incorporated in Switzerland for the purpose of policing the international electric light bulb monopoly. Phoebus executives were concerned about the Cooperative Union's plan to build and operate a lamp (light bulb) factory in Stockholm that would threaten the cartel's Swedish market.

For years, Hedberg, a former army officer turned cooperative businessman, had researched the international light bulb cartel and shown how a handful of multinational corporations, led by General Electric (GE) in the United States, carved up the world's light bulb market through price fixing, production quotas, and interlocking patent agreements. Consequently, consumers worldwide were overcharged billions of dollars.

The Swedish Cooperative Union, acting on Hedberg's research and recommendations, sought opportunities to challenge the multinational light bulb cartel, but was hindered by the technical difficulties involved in starting up a lamp factory, at the time an especially complex form of mass production. An overreaching General Electric affiliate in Germany, however, gave Hedberg and the Cooperative Union the opening they were looking for. The German GE affiliate, Osram Lamp Company, obtained complete control over a privately owned electric lamp factory in Stockholm in 1928. The Osram executives ordered the manager of the Stockholm plant to Berlin. But the Swedish manager balked at this abrupt transfer order and decided instead to quit the company and stay in Stockholm. The cooperative Union got wind of the rift, approached the experienced manager, and hired him to build and operate a new lamp factory. Word of this deal quickly reached Phoebus executives in Geneva, and a wary Hedberg'; was invited to Geneva to discuss the matter.

According to a Hedberg report to his associates, one Phoebus managing ; director threatened to put the

Cooperative Union's planned factory out of business by setting prices below the market price. A defiant Hedberg was not intimidated. "There is a difference," Hedberg told the executive, "between the consumers' cooperative factory and your other competitors. We don't mind you dumping lamps into Sweden. That is in the interests of consumers, our clients. If you wish to sell the Swedish people lamps below cost or even if you give them away free, we shall applaud and thank you and congratulate ourselves on having built a factory that elicited such generosity."

Despite such tough talk, Hedberg realized that a Swedish co-op could not alone bust an international cartel. The cartel could follow up on Phoebus' threat and price the cooperative venture out of the Swedish market, then increase the prices afterward. But if the Swedish co-op produced and marketed bulbs internationally, through a coalition of cooperative societies around the world, the cartel would be broken.

Light bulb prices in Sweden, in anticipation of the opening of the plant, dropped from 37 to 27 cents. As a first step toward realization of his dream of international cooperation with the construction of the plant underway, Hedberg reached out to cooperative societies in neighboring Denmark, Finland and Norway and on May 28, 1931 together they formed the North European Luma Cooperative to build and operate the Stockholm lamp factory. In its first year of operation, the Luma co-op manufactured and marketed 3,000,000 light bulbs. By 1934, the Luma co-op had one-third of the Swedish light bulb market.

While the early founders of the cooperative movements had always dreamed of worker and consumer owned economic institutions sweeping the world, Hedberg was one of the first to take the practical steps necessary to implement this vision. With the Luma experience as a guide, Hedberg urged cooperative leaders to break down the barriers of nationalism and join with cooperative societies worldwide. "Such international cooperation is urgently needed in these days in several fields," he wrote. "The private manufacturers are steadily being welded more and more into vast international combines, too often with monopolistic aspirations. Against these the cooperative movement is powerless if it cannot overcome its nationalism."

- R.M.

Table of Contents