International Day of Cooperatives

International Day of Cooperatives

Cooperatives offer a better model for global recovery says PETER MACDOUGALL

Saturday, 4 July is International Day of Cooperatives. The United Nations has declared the theme to be ‘Driving global recovery through cooperatives.’

New Zealand Cooperatives Association Chairperson Peter Macdougall said, “Cooperatives often have a low profile, but they contribute significantly to economies throughout the world.” He pointed out that:

• Here in New Zealand, Fonterra, the country’s largest commercial business is a cooperative, while the country’s second largest business is a group of three cooperatives, grocery wholesalers Foodstuffs.

• In terms of contributions to GDP, the proportion is highest in Kenya at 45 percent. In New Zealand it is estimated at 15 percent.

• The cooperative sector worldwide has about 800 million members in over 100 different countries.

• The proportion of cooperative and mutual membership to population varies but can be as high as one in two people as in Finland and Singapore, one in three in Canada, New Zealand, Honduras, and Norway, one in four in the USA, Malaysia and Germany.

• Retail cooperatives have 55 percent of the market in Singapore, 36 percent in Demark and 14 percent in Hungary.

• The second largest retail group in Switzerland is a cooperative, with over 1,400 outlets, employing more than 48,000 staff and a turnover equivalent to NZ$24 billion. Over 2.5 million families are members.

Mr Macdougall went on to say, “In a world experiencing the greatest economic turmoil since the great depression of the 1930s, cooperatives offer a better business model for both developed and emerging economies.”

“Cooperative principles and values are built around mutuality, democracy and social responsibility. In contrast to investor-owned companies which seek to maximise profits, often by forcing down labour costs through outsourcing, cooperatives limit the return on capital, generate skilled jobs and retain profits locally.”

“In the present financial crisis,” he said, “cooperative and mutual banks have shown more stability and resilience than their investor-owned counterparts. Cooperatives have not been involved in the creation of speculative, toxic investments which have brought other financial institutions around the world to their knees. No cooperative bank has so far applied for government aid.”

“The 1990s saw a number of demutualisations of well established and successful cooperative and mutual businesses, such as Colonial Mutual Life, AMP, Tower. The arguments were that cooperatives were outmoded, that they could not attract the best managers and that they were unable to raise enough capital to compete in the modern environment. Those arguments were put forward by consultants who stood to gain by advising on the demutualisation process. They were often echoed by managers whose self-interest was the shares they would receive following demutualisation.”

“While many of the demutualised companies have become bankrupt – Bradford & Bingley and Northern Rock in the UK – virtually all the rest have been taken over or have failed miserably to deliver the promised benefits for members.”

A recent study for the International Labour Organisation by Johnston Birchall and Lou Hammond Ketilson has found that cooperatives have three significant benefits over investor-owned companies which will be important in overcoming the global economic crisis:

• Cooperatives in all sectors survive better than their competitors. A Canadian study found that more than 6 out of 10 cooperatives survive more than five years compared to almost 4 out of 10 in the private sector. More than 4 out of 10 cooperatives survive more than 10 years compared to only 2 out of 10 investor-owned firms.

• Cooperatives provide services to more risk-averse consumers. These citizens have good savings records. It is widely acknowledge that society needs to encourage savings and reverse the past habit of borrowing to finance our lifestyle.

Savings and credit cooperatives have retained an asset which other financial institutions gave lost – trust. As a result, membership levels are rising to record levels. Johnston Birchall & Lou Hammond Ketilson report that in 2008 the membership of Raiffeisen Switzerland Cooperative rose by 150,000 to over 1.5 million members, a 7.3% increase. It was the greatest increase in the co-op’s 108-year history and was accompanied by 12 billion Swiss francs of new money, “taking total client monies above 100 billion Swiss francs.”

In Europe, Rabobank has seen its market share in loans increase to 42% and in mortgage lending to 29% in 2008 while Groupe Desjardins in Canada remains the dominant player in Quebec.

Peter Macdougall commented that “New Zealand institutions such as PSIS, SBS Bank, TSB and the credit unions will undoubtedly find their memberships and deposits growing as Kiwis move to trusted local cooperative and mutual financial organisations.”

“The global economic crisis was caused by greed, rule-bending and loophole seeking, a breakdown in ethics and an emphasis on self over community. The investor-owned organisations which promoted such practices have suffered.”

“The organisations which have been least affected by the crisis are cooperatives. Their values of self-help, self-responsibility, democracy, equality, equity and solidarity are not outmoded or irrelevant. They are the values which will drive the global recovery,” concluded Mr Macdougall.

ENDS

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