Co-operatives in the developing world have followed very different development trajectories regarding adherence to co-operative principles. Some have been very successful at achieving their intended development goals. According to World Bank [2008], producer organizations engage in a broad array of activities. They participate in trade negotiations and domestic agriculture policy making, improve access to output and input markets, support the generation and adoption of technological innovations, support diversification into new activities and undertake natural resources management.
Producer organizations, like co-operatives, are fundamental building blocks of the agriculture- for-development agenda. Their active engagement in participatory governance is particularly important in relation to decentralization and community-driven development approaches.
Among the better-known producer organizations in the world are the Indian Dairy Coop- eratives Network and the National Federation of Coffee Growers of Colombia. In 2005, the Indian Dairy Cooperatives (IDC) had 12.3 million members, accounting for 22 percent of the milk produced in India. Sixty percent of the IDC membership are either landless, very small holders, or women (World Bank [2008]). A report released by Boston Consulting Group (BCG) indicated the IDC collects 6.5 million litres of milk a day, and boasts one of the longest-running and best-loved advertising campaigns in India. It has already shown “immense resilience” in the face of multinational competition. Its ice-cream business survived the arrival of Unilever; its chocolate milk has thrived despite the entry of Nestle (The Economist [2008]).
Created in 1927, the National Federation of Coffee Growers of Colombia (NFCGC) now has 310,000 members, most of them small holders (less than two hectares). The NFCGC provides production and marketing services to 500,000 coffee growers. NFCGC revenues are contributed to the National Coffee Fund which finances research and extension activities and invests in services, like education and health care, as well as basic infrastructure for coffee-growing com- munities such as rural roads and electrification (World Bank [2008]).
Despite the success of many co-operatives, in a number of developing countries the co- operative model has not been effective at achieving its desired economic and development goals,
due to the unique economic, political and social settings of these countries. Some examples will illustrate what happened.
Experts from the United Nations Research Institute of Social Development (UNRISD) ex- amined rural co-operatives from countries in Asia, Africa and Latin America from 1970 to 1976. The countries examined included Pakistan, Iran, India, Congo, Cameroon, Tanzania, Uganda, and Colombia. In their 1975 Research Report, the UNRISD claimed that co-operatives fell short of the generally accepted principles and practices, and that they had little impact on their communities as institutions for socio-economic development.
The report indicated that rural elites had taken control of the co-operatives to become their primary beneficiaries, passing on little benefit to the poor masses. The existing structures of the community permeated the co-operatives and in turn the co-operatives reinforced pre-existing socio-economic inequalities. The genuine self-help co-operatives of poor farmers dedicated to member interests were small and lacked the power to survive against opposing interests. In short, the structures in place in rural communities were highly unsuitable for the introduction of co-operatives as agents of change and development (Enriquez [1986]).
In India and Tanzania, a co-operative-development strategy was introduced as part and parcel of an overall national development strategy. Governmental organizations promoted co-operatives by contributing capital to them, participating in their management and direction, and influencing the development of individual co-operatives (Develtere [1992] and Hyden [1993]).
In reality, most co-operatives in developing countries failed to live up to their expectations. Rural poverty and inequality were not reduced and agricultural production did not increase to finance industrialization. “In many cases they became hotbeds of political conflict, administrative inefficiency and corruption of all kinds” (Attwood and Baviskar [1993], p. 8). The blueprint approach – which assumes that a tested model exists which can be applied and replicated in an effort at planned development – prohibited potentially creative trends and undermined confidence in public institutions (Hyden [1993]).
In China, farmers’ organizations became vehicles for economic exploitation and political control during the period extending from the 1950s to the 1970s. All means of farmers’ production were confiscated by the Commune. The Commune, functioning as a level of government, was
Chapter 3. Collective Action responsible for education, public works, militia organization, and health care. The purpose of collectivization was to break the traditional Chinese social structure and extract surplus to finance urban-based industrialization. As a result, farmers were deprived of their autonomy and freedom. The path of co-operative development in China stands in stark contrast to that in western countries which attempted to link democratic control with economic ownership. In the West, development was controlled by the people it affected (Fairbairn [1994]).
In all of the cases discussed above, the co-operative model was imported without any sense of whether it was compatible with the existing institutions and the existing power structure in the countries in question. Without reshaping the distribution of power that underlies the institutional arrangements in these countries, farmers co-operatives were endogenized into the existing system, and the opportunity for co-operatives to affect the course of rural development was lost.
As North [1990] indicates, institutional frameworks have a fundamental influence on the organizations that come into existence and how they evolve. No amount of tinkering with set institutional frameworks by co-operatives is likely to alter these basic conditions (Attwood and Baviskar [1993], Scott [1976, 1985]). And without a change in the basic conditions, the co- operative model is unlikely to be successful. In short, the institutional monocropping of the co-operative model has proven futile. There is no universally applicable institutional “magic for- mula” for economic growth (Dunning and Pop-Eleches [2004]). Thus, the spontaneous collective action, described and suggested in some co-operative theories, usually does not happen.
In many developing countries the traditional community is authoritarian. There is a lack of formal co-operation and genuine social interaction due to uneven power relations, and the informal co-operation that does take place in the village is usually quite selective, seasonal, short, exploitive and regressive (Bandyopadhyay and Eschen [1993]).
In rural communities, the mass of rural poor feel powerless to make change. Instead, the more well-off and influential took the initiative and manipulated the so-called co-operatives to perpetuate their dominance. Therefore, community-wide co-operation is depressed. These “co-operatives” are not governed by formal rules and they do not function on the basis of “institutionalized suspicion” – i.e., through checks and balances (e.g., election of officials and
audits) that have been built into the system. Dore [1971] argues that institutionalized suspicion is an exclusive characteristic of modern contractual co-operation, which distinguishes itself from traditional co-operation. A major conclusion of the UNRISD [1975] is that rural co-operatives in developing areas bring little benefits to the masses of poor inhabitants and cannot be generally regarded as agents of change and development for such groups.
Co-operatives thus did not emerge in developing countries as spontaneous movements like they did in developed countries that were affected by great social reforms and pragmatism. In- stead, co-operatives were imposed by colonial governments as an ideological instrument that had no connection to local ideology or practice (Develtere [1992]). After their colonial indepen- dence, governments in these countries played a key role in advocating for institutional change. Some governments adopted a blueprint approach to promote co-operatives as an instrument of agricultural industrialization and modernization.
As Korten (1980) points out, the member-controlled co-operative has long been an idea with almost universal appeal, being widely promoted in much of the developing world as an integral instrument of national development policy. The values and principles associated with the co-operative model were introduced to these countries as well. However, when co-operatives were implanted onto rural society (rather than growing out of them), members did not relate to them in the same way as people did in Europe at the turn of 20th century, when workers (and then farmers) joined hands and formed co-operatives of their own (Hyden [1993]). The co- operative organization was a foreign body, with elites interpreting and enforcing their own values and principles on its structure and principles. In developing countries the farmer co-operative laws that preceded the organization and operation of co-operatives were co-opted to support government goals (Su [1989]).
The distinctive feature of co-operatives in developing countries was government involvement in the promotion, direction, and control of the co-operative sector. Co-operatives were considered to be an integral part of the overall development process (Develtere [1992]). The nature of the transitory states explains a great deal about the traditional involvement of government in co- operative development in developing countries (Holmen [1990]). Inspired by high-modernist theories, there was strong belief in the manageability of accelerated economic growth. The
Chapter 3. Collective Action state’s planned interventions in economic and social policy were endless, and centralization of the administrative apparatus began (Scott [1998] and Develtere [1992]).
With the top-down development approach, government creates organizations to provide a ready-link to the rural community to make the environment more orderly and manipulable (Hyden [1993]). Behind this approach was the government’s desire for farmer co-operatives to be a means of taxing the enormous small farmer population to support national industrialization (Scott [1998]).
According to Develtere [1992], the government in developing countries dominated and con- trolled five characteristics of the co-operative sector. First, government controlled the intensity and extent of co-operative development. Second, co-operatives were held under the wing of government, thus giving power holders full confidence in the movement. Third, governments in many countries shifted their initial policies for co-operatives from inducement to coercion. Fourth, government-sponsored and controlled co-operative structures were used as social control instruments. Fifth, the diversify of the co-operative sector was managed by the state. As a result, co-operative organizations did not adhere to their democratic principles nor to the processes of co-operation (member bargaining, consensus, control, and a focus on serving the membership) which have proven central to the prosperity of co-operative businesses.
One of the greatest problems with the development approach taken by co-operatives in developing countries was the attempt to redefine social behaviour in foreign terms. Rather than allowing co-operatives to grow out of the country’s public and social institutions, the blueprint approach prohibited any potentially creative trends. It also undermined confidence in public institutions by imposing values and principles that could not be upheld by society (Hyden [1993]). While the history of co-operatives in developing countries before the 1990s was disappoint- ing, a series of case studies of co-operatives (Birchall [2004]) and surveys (Develtere et al. [2008]) indicated that after this period co-operatives did emerge as an organizational form that could provide opportunities for the poor, while guaranteeing their security (Birchall [2004]).
Field studies conducted in sixteen African countries indicate that since the 1990s co-operatives have been playing a key role in resolving some of the major challenges the continent is facing. Among other things, co-operatives create employment and income-generating opportunities, re-
inforce the traditional social security system, create social capital by creating a bridge between the poor and the relatively well-off in social and economic development initiatives, and enable the poor to participate the decision-making process by representing their interests (Develtere et al. [2008]).
As an example of the role played by co-operatives, there are 150,000 collective social- economic undertakings in the countries surveyed and most of them are registered as co-operatives; the result is that seven percent of African households belong to a co-operative-type organization (Develtere et al. [2008]). Some of the co-operatives have been very successful. For example, Mwalimu Savings and Credit Co-operatives Society of Kenya has accumulated one hundred million US$ savings, while Mooriben in Niger provides 25,000 households with affordable and nutritious food (Develtere et al. [2008]).
The renaissance of the African co-operative movement is made possible by the conditions created by the institutional changes that have taken place since the early 1990s. Dramatic changes have occurred in governance patterns across the continent since then (Barkan [2009]). The model of one-party state controlling all sectors of the economy was demonstrably bankrupt and has now been replaced (Kpundeh [1992]). In addition to multiparty elections, there is now space for civil society. The press and broadcast media is free and no longer a state or party monopoly in many African countries (Barkan [2009]). Governments also shifted their role in co-operative development from a planned and top-down approach to one that was hands off (Develtere et al. [2008]). New co-operative laws, which adhered to key international principles, were passed and co-operatives were ‘co-operativised’ – i.e., given back to their members and reconstituted as genuine member-owned businesses (Birchall [2004]).