Background

Cooperation between people goes way back to early humanity…

…but it was not until during the 1800s that cooperative business models as we know them today were first developed.

While cooperatives have a long history, the industrial revolution is generally considered the era that heralded in the modern form of cooperatives.

The first recorded purchasing cooperative in this period whose records have survived called itself the Penny Capitalists, was established in 1769 by a group of weavers in Fenwick, Scotland, who came together to share weaving supplies.

In the 1830s Friedrich Wilhelm Raiffeisen, mayor of Flammersfeld, a small German town, recognised that farmers’ financial needs were not being met by the larger, urban financial insititutions of that time. He devised a systen in which farmers’ savings were collected to provide a sound financial basis for credit, establishing the first cooperative bank.

At the time, this was a new approach to banking, combining idealistic principles within a business framework.

 

Rochdale’s Cooperative Museum

 

Meanwhile, during the 1840s at a town called Rochdale, near Manchester, a group of people were establishing a trading business in basic commodities of flour, sugar, milk etc on the basis of giving fair and accurate measure for the purchase.

Such fairness in trading had been lacking, with unscrupulous traders giving short measure and poor quality goods, with chalk in the flour, brick dust in the bread and water in the milk.

From the development of the Rochdale business came a set of business principles which were adopted and extended into various forms of business.

Today in Toad Lane, Rochdale, the Rochdale Pioneers Memorial Museum is open to the public. It celebrates the establishment of the cooperative trading business in the very building used by the famous Rochdale Equitable Pioneers Society when it commenced business on 21 December 1844.

Rochdale may not have been the first such cooperative but from its decisions, methods and practices, what we now know as the Rochdale Principles evolved to provide the pattern for consumer cooperation.

Other examples of early cooperative ventures include the Sheerness Economical Cooperative Society (formed 1816), the Stockport Great Moor Society (formed 1831) and Ripponden Cooperative Society (formed 1832). There are probably others whose records have not survived.

 

The original Rochdale principles

 

In 1895 a body was established to develop and protect the interests of cooperatives internationally: the International Cooperative Alliance (ICA). Based in Geneva, Switzerland, it how has 237 members in 89 countries. The New Zealand Cooperatives Association is a member of the ICA.

Cooperatives were quick to catch on in many countries and a considerable period of growth ensued. In Australia, for instance, the first general cooperative was formed in New South Wales in 1859, and since then cooperatives have developed throughout the country.

One of the most successful cooperative endeavours, perhaps the most famous, is the Mondragon Group in Spain’s Basque country. This began in 1956 in the town of Mondragon and enormous businesses have been developed through the widespread adoption of the cooperative business model.

Mondragon is collectively owned by those who work for the cooperative and to this day is a model of how cooperative business can operate for the success of those who take part in it. There are strong cooperatives in most European countries, in fact.

Closer to home, with the changes taking place in the Chinese economy, there are moves for state-owned businesses to shift to ownership by the people who participate in them, and thereby become cooperatives.

A little know fact is that in the USA, there are more than 72,000 cooperative establishments providing over 2 million jobs with the top 100 co-ops generating more than $150bn in revenue.

Americans hold more than 350 million memberships in cooperatives, which generate nearly $79 billion in total impact from patronage dividends and refunds.

These US statistics were gathered in March 2005, and can be found in the document Research on the Economic Impact of Cooperatives, which is available here.

According to ICA figures, some 750,000 cooperatives worldwide serve more than 800 million members and provide over 100 million jobs.