The executive director’s blog

Cooperatives as religion?

Posted by Ramsey Margolis on 13 August 2008 | 1 Comments

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At the evening meal after one of the recent cooperative education workshops, Orb Communications director Chris Haunton made an interesting comment: he talked about how the tone of some of that day’s seminar reminded him of Sunday School.

What brought this to mind, he said, were the points that were being raised about the ethics and values that make a successful cooperative business, successful. This, Chris felt, was not the usual language of business.

These comments set me thinking. From time to time, I come across a cooperative “believer”, an upholder of a faith in cooperatives that mostly they don’t express well and often are unable to rationalise. They just “know in their hearts” that co-ops are the appropriate form for whatever business they’re doing. Some have a dogmatic belief that cooperatives are inherently infallible, forgetting that they’re run by humans.

Funnily enough, there is a religious group which includes cooperatives among its three main tenets – Proutist Universalists – the other parts of their trinity being spirituality and self-restraint.

Getting back to Chris Haunton’s comments, what is it about cooperative business that makes ethics and values important, I wondered?

The answer I came up with – and tell me if you disagree – has to do with the way that a co-op operates in the market in relation to its members. It’s about profit: how it’s obtained, and who gets it.

Investor-owned businesses are profit-maximising entities, buying cheaply and selling dear. Part of this margin provides investors with their dividends, so it’s in their interests for the company to buy as low as possible and sell as high as possible.

A cooperative, however, either buys cheaply and sells cheaply, or buys dear and sells dear. It needs to make a profit to stay in business, so it is a profit-making entity, but it’s clearly not profit-maximising. These profits are then distributed to members according to their participation in the cooperative, effectively reducing even further the margin between buying and selling.

It’s from this relationship to profit that the need arises for cooperatives to behave ethically and have a set of values which members know to be appropriate for their relationship with the co-op they own. As an aside, whether the type of business the co-op does is “ethical” in the modern sense of “ethical business” is another story.

However, given that the members of most New Zealand cooperatives are businesses themselves, this means that profit-maximising entities are members of a profit-making entity. Confused? I was for a while. Actually, the relationship is quite straightforward.

This perhaps explains why those with a desire to demutualise a co-op sometimes find it not so difficult – they simply appeal to the member businesses’ profit-maximising instincts, without pointing out that the fundamental basis of their cooperative is quite different.

Association chairperson Peter Macdougall tells of a farmer acquaintance who chides him and other co-op members as being “communists”. Could the way that successful co-ops have a focus on values and ethics not only explain Chris Haunton’s perception of the seminar but also explain this farmer’s sad misunderstanding?