History of World Cooperative Movement

History of World Cooperative MovementTThe cooperative movement began in Europe in the nineteenth century, primarily in England and France. The industrial revolution and the increasing mechanization of the economy transformed society and threatened the livelihoods of many workers.

The start of the 19th century in the UK was an age of child labor, exploitation and poverty. Those who failed to find work in the new factories were forced to rely on meager parish relief for the poor or to starve. By the early 1800′s, food prices were high and wages were being reduced. Much of the population suffered extreme poverty and deprivation.

The prevailing economic philosophy of the time was the capitalist free-market philosophy of Adam Smith, who claimed that through the impersonal mechanism of the free market, self-interest would automatically lead to the public good. Adam Smith took for granted in his book “The Wealth of Nations” that this market economy was one in which human relations were reduced to the buying and selling of labor and that workers could never improve their lot through industrial or political action. Labor, and the poverty and starvation that go with unemployment, was simply a market commodity subject to the free market rules of supply and demand.

Added to this were the population theories of the Reverend Thomas Malthus, which suggested that any attempt to help the poor would simply increase the population and make matters worse. These individualist theories removed any incentive from those with wealth and power to seek to improve the conditions of the majority who were poor.

There were however, a small number of enlightened individuals appalled by the poverty and ill health of the poor who had an alternative vision. Two of these enlightened individuals are now seen as the founders of the co-operative philosophy that eventually underpinned the development of the international co-operative movement. These two enlightened individuals were a wealthy industrialist, Robert Owen, and a Brighton medical practitioner, Dr William King.

During the early part of the 1800′s, Robert Owen (1771-1858), a Welshman who made his fortune in cotton but who had known poverty in his early life, tried to establish co-operative communities in New Lanark, in Scotland and New Harmony in the United States. While these early experiments in creating complete mini-communities eventually foundered, Robert Owen identified some of the profound underlying values of co-operation as a means of organizing economic activity: kindliness, toleration, co-operation, respect for youth and the belief that the right to full humanity was to be available to all. Robert Owen was the intellectual founder of co-operative ideals.

In May 1, 1828, Dr William King (1786-1865) founded a monthly periodical, The Co-operator, which he published for 3 years. Through it he expanded Owen’s ideas. Unlike Owen, who favored the foundation of new utopian co-operative communities, Dr William King saw the benefits of applying Owen’s co-operative ideals to local economic activity. He urged the formation of small local co-operative shops to tackle the poverty and distress he saw as the result of unfettered capitalism. He concentrated on the importance of food trading because almost all food and drink was heavily adulterated with cheap additives to bulk it out. It was both a direct threat to the health of the poor and an indirect one, because the purchase of adulterated foods made the poor poorer. Dr King’s views, as well as originating from Robert Owen, also were formed as a result of meeting working class leaders who were setting up the Brighton Co-operative Society in the 1820′s. He concluded that the working class poor had to use whatever capital they could muster to trade their way out of poverty.

According to Dr. King: “The key to economic prosperity is to store up enough capital to get control over our own labor, and then, possessing both labor and capital, we will be able to do without the capitalist altogether. But individual workers cannot do this on their own; there is too much risk, the process of accumulating enough capital takes too long, and if we become ill or grow old there is nothing to fall back on. But together, if we learn to co-operate, we can do it.”

King advised people not to cut themselves off from society but rather to form a society within a society, and to start with a shop (store) because, “We must go to a shop every day to buy food and necessaries-why then should we not go to our own shop?”

In 1848, Karl Marx, through his Communist Manifesto, was to see the capitalist system as about to be transformed into the higher stage of society, which he called communism. The means by which this would happen would be a bloody revolution.

Dr William King also saw capitalism as about to give way to a higher stage, Co-operation, but the means was much more peaceful and constructive; the workers once they got hold of capital, would simply buy out the capitalists gradually until a Co-operative economy would result. There would still be competition in such a society, but it would be the friendly competition to see who could run the best most efficient co-operative.

What happened to these early attempts to set up co-operatives that Dr William King promoted? For a number of reasons they failed. Some reasons were external, the working poor placing faith in achieving political change rather than investing their energies in practical economic co-operation. There was also no legal status for a co-operative. Co-operatives could not rent or own property in their own right but had to do so through individuals and the capital that was accumulated belonged, legally, to no-one. Some reasons for failure were internal. Some co-operatives failed because of fraud or because they traded by giving members credit and rapidly encountered cash-flow difficulties. Others, still hoping to set up an ideal Owen-type community, limited members and locked-up the benefits of the co-operative within the business itself. Some hoped eventually to employ all their members or sell the goods they produced. As a result, there was pressure from members to fold the business to release the capital it had created.

During the same period, strikes by the weavers in Rochdale had failed to have any lasting effect on their wages and living conditions. The weavers, wondering if there was a better way of improving their situation, turned to the ideas of Owen and King. It was the Rochdale Pioneers who solved the structural problems with early co-operative trading in a crucial way. They saw the need to distribute some of the fruits of co-operative trading to the members so members saw an immediate benefit from co-operation. The Rochdale Pioneers admitted unlimited numbers of members and distributed part of the co-operative’s profits as a dividend on purchases. With 28 members they started not the first, but the first successful co-operative enterprise, the Rochdale Equitable Pioneer Society at their shop in Toad Lane Rochdale, now the Rochdale Pioneers Museum. They began trading on 21 December 1844, the date now recognized as the birth-date of the International Co-operative Movement.

The Rochdale Pioneers began in a very modest way. They sold the basic necessities of life to their members, butter, candles, soap, flour and blankets. Their aim was to supply good quality goods, cheaply and to return any profit to members of the co-operative. Where the Rochdale Equitable Pioneers succeeded was that, from their own harsh experience of poverty and the theories of Owen and King they worked out that to succeed, their co-operative enterprise must work on a number of key principles which are now recognized internationally as the Seven Co-operative Principles.

The success of the Rochdale Pioneers was remarkable. By the 1870′s the co-operative movement had its own wholesale and insurance societies and accumulated capital of over £300,000. Today, despite intense competition in food retailing, UK retail co-operatives still have a total turnover of over £7.7 billion and there is a renaissance of interest in all forms of co-operative.

The co-operative movement spread rapidly, by the end of the last century it was already an international movement. The International Co-operative Alliance was founded and held its first congress in Manchester in 1896. To date, the National Confederation of Cooperatives (NATCCO Network) is the lone representative of the Philippine cooperatives in the alliance.

Today the Co-operative Principles are successfully applied throughout the world to a vast array of co-operative enterprises, farming co-operatives, fishing co-operatives, credit unions, retail co-operatives, manufacturing co-operatives, even co-operatives providing internet access services.

History of Cooperative Unions

From their origins, credit unions were unique depository institutions created not for profit, but to serve members as credit cooperative. The earliest financial cooperative date back to the beginning of 19th century in England. In the mid-1800′s, Germany was the first home of credit unions as we know them today.

These early German credit unions were organized by Herman Schulze-Delitzsch and Friedrich Raiffeisen.

As a member of the German Parliament of 1848, Franz Hermann Schulze-Delitzsch (1808-1883), joined the Left Center and, acting as president of the commission of inquiry into the condition of the laborers and artisans, became impressed with the necessity of co-operation to enable the smaller trades-people to hold their own against the capitalists.

He devoted himself to the organization and development of co-operation in Germany. The crop failure and famine of 1846 caused Schulze-Delitzsch to organize a cooperatively-owned mill and bakery which sold bread to its members at substantial savings. He took this cooperative notion to address the needs of credit. In 1850, he organized the first cooperative credit society, known as the “people’s bank.”

Friedrich Wilhelm Raiffeisen (1818-1888) conceived of the idea of cooperative self-help during his tenure as the young mayor of Flammersfeld. He was inspired by observing the suffering of the farmers who were often in the grip of loansharks. He founded the Heddesorf cooperative lending bank, in effect the first rural credit union in 1864 to help German farmers purchase livestock, equipment, seeds and other farming needs.

In 1900, the credit union concept crossed the Atlantic to Levis, Quebec, where Alphonse Desjardins organized La Caisse Populaire de Levis. A court reporter, Desjardins became aware of the outrageous interest being charged by loan sharks and organized the credit union to provide relief to the working class.

In 1909, Desjardins helped a group of Franco-American Catholics in Manchester, New Hampshire, organize St. Mary’s Cooperative Credit Association, the first credit union in the United States.

The credit union idea expanded to North America early in the 20th century. Credit Union National Association (CUNA), the national association for credit unions in the United States, was founded in 1934. Twenty years later, Roy Bergengren, CUNA president & CEO, asked representatives to approve an overseas credit union assistance program that would expand the organization’s existing outreach to countries outside of North America.

The vote passed, and CUNA’s World Extension Department came to life. Its purpose was to attack usury, one of the greatest abuses in developing countries, on a global scale. The department’s vision was to provide a simple, effective, yet potent weapon to improve people’s economic situations.

In the 1950s, international credit union development programs emphasized community development. Programs had broad social, as well as economic objectives. Bergengren believed the department could work with several private and government funding agencies to foster credit unions as part of a wider program to create modern economies in less developed countries. The work of this office, in conjunction with the efforts of cooperative systems in Canada and Europe, led to the organization of credit unions in nearly all parts of the world over the next two decades.

Since the 1960s, the U.S. government has encouraged cooperative and credit union development through its foreign assistance legislation. The Foreign Assistance Act in 1961 was amended to encourage the development and use of cooperatives and credit unions in economically developing countries. The move was particularly important because of the formation of a new agency, the United States Agency for International Development (USAID) within the State Department. USAID funded the majority of the department’s early credit union development activities. Between 1962 and 1970, credit union movements in the United States, Canada and Australia had generally started the systematic expansion of the international credit union movement. By the late 1960s, organizations from all over the world had joined to form the international credit union system that exists today.

World Council of Credit Unions was incorporated on January 1, 1971, the result of a vote of confidence among national credit union associations throughout the world. It was a benchmark in history for the international movement and the culmination of a dream that had stirred enthusiasm in two generations of leaders.

Today, World Council acts as the leading voice for advocacy and governance on behalf of the international credit union community. World Council continues to promote economic freedom and the sustainable growth of financial cooperatives across the globe through education, collaboration and community-based development projects.