Internal governance and the role of cooperatives in Central American rural society

Internal governance and the role of cooperatives in Central American rural society

René Mendoza V., E. Fernández, K. Kuhnekath, J. Bastiaensen, and A.J. García[1]

Thanks to Picketty (2014) the topic of inequality became an issue again in our days. Nevertheless, markets, technology, skills and social relations are formed and decided in institutions and organizations that are “social machines” of inequality. This article is about a part of these “machines”, the cooperatives and the chain of organizations connected to them.

There are 800 million cooperative members in the world (International Cooperative Alliance); in Latin America there are between 30,000 and 50,000 cooperatives with between 17-23 million members (Coque, 2002, based on Buendía, 2001); in Central America there are 8,282 cooperatives, of which 3,410 (41%) are legally registered in Nicaragua with 188,000 members (Mendoza, 2012). In Latin America the food production and the mitigation of climate change depend to a large extent on the small producers; in both cases, the cooperatives are fundamental. Nevertheless, market forces and their influence on States, instead of strengthening the cooperative movement, are affecting it in a negative way.

Committed to the importance of the cooperative movement, we ask ourselves how the member families are managing their cooperatives. Historically and within the current context of neoliberalism, the members have managed their cooperatives from within, be they as part of economic or political chains, or part of their extended families and networks of their communities. The cooperatives are struggling in so far as they are glocal spaces – each organization and their economies are local spaces and at the same time express global forces, expressed in networks, policies and ideas (Hart, 2006). In this work we analyze how the cooperatives are trapped in the “iron law of oligarchy” proposed by Michels, and how they get around and beat this “law”, and under what circumstances they do one or the other. Supported by Polanyi, we ask ourselves how the cooperatives are expressing tolerance for the “movement” (neoliberalism and its different variations), what sensitivities do the “counter-movement” processes have, and thinking about how to carry out “transformative research”, we also reflect on a normative question, how should the member families be managing their cooperatives.

It is a text based on a bibliographical review and practical experience in which the authors are involved, believing that the theory and practice are connected and that social science contributes to social transformation.

1. About the research question

How are the member families managing their cooperatives? The question assumes that the members manage their cooperatives, how do we know that they are managing them? Most of the current studies refer to cooperative enterprises for taking advantage of market advantages, the advantages that they have “for achieving greater economies of scale, adopting new technologies, obtaining information on the market, or expanding the scope of operations in another way, not achievable by a company on its own” (Henehan, et al, 2011[2]).) Along these lines, Hueth and Reynolds (2011) think that, instead of the traditional “representation processes from the bottom up”, the key for cooperatives is an Administrative Council with business knowledge and the capacity for communicating with its members about the positive impact of the cooperatives in the market in favor of the people[3]; and along with the Council, a “well qualified team of organizational, legal and accounting advisors can be beneficial for the success of the cooperative development ” (Henehan, et al, 2011). The question for researchers and also for members of the cooperatives is: How do you manage your organization? The leaders and managers of Cooperatives from different countries agree that cooperatives are managed by their laws, voting and by the assemblies[4], but in the end they think that their cooperatives are governed by their board of directors (“…governs all the positions of the cooperative”, see footnote, page 4). This has the cooperatives based on a formal procedure, through which the Administrative Council leads a cooperative, in particular having an understanding of business.

If the cooperatives as economic organizations are part of value chains, where the governance is agreed upon among the connected (trans)national enterprises, based on their procedures, “coordination through governance mechanisms” and “configuration and/or application of parameters throughout the chain” (Humphrey and Schmitz, 2002:9), the cooperatives move within organizations promoted by the market, like any business. In this framework, the role of “governance” of the member families involves doing out what corresponds to them: delivering to their cooperatives more or less products that respond to what is required, and paying, or paying less, for the services that the cooperatives in the chains provide them. From here, the market, through the chain of companies, drives norms, products, services and social relationships, and gives shape to the way in which the cooperatives organize themselves internally, and in relationship to others (for example, it pressures the members to specialize in one crop, discourages a cooperative from connecting with another in their communities).

Our research question allows us to place it within a political context. If they choose their presidents, they are part of a “chain of managers”, at the same time the members still have “governance function”, for example they can turn in (sell) less coffee, and sell the rest fo other buyers. When we look at the roots of the cooperative movement, elections are a political action which is not the only governance role of the members; when cooperatives respond to their adapted Rochdale principles (voluntary and open entry, democratic management, economic participation, autonomy and independence, education, cooperation among cooperatives, commitment to the community), they are governed by all the members. Nevertheless, when these principles are expressed in laws and supervised by States, at least in Central America, the States tend to control the cooperatives along the lines of their political interests; therefore, the members apparently have less – while the states have more – “governance role” in the cooperatives. As an hypothesis, we would say, when the cooperatives respond less to their adapted Rochdale principles, and are more dependent on the market and the state, they are more trapped in the “iron law of oligarchy”.

The Central American cooperatives are “political arenas”: “places of concrete confrontation between social actors that are interacting on common issues” (Bierschenk and Olivier de Sardan, 1998: 240), where the interests, policies and ideas of different trans-local actors are expressed (see Figure 1). These conflicts means that there are different paths, and that the members are also actors. It seems that this has been the historic case of the agrarian cooperatives; their appearance is due to the state, donors and the Catholic Church, and in general as an expression of the resistance of the families to the dispossession led by intermediaries and userers.[5]. For the members, that struggle has meant the diversification of products, markets and network strategies, as well as the way they assess their cooperatives depending on specific circumstances.

For the purposes of this article, we understand governance in the cooperatives within a broad and multiple perspective. The cooperatives as organizations are global “political arenas” in which the forces of society, the market and the state participate in various chains of actors, and where there is conflict and coincidence of interests, ideas and norms, as well as competitiveness and cooperation. There are two central lines that cross one another in this: resources that come in from the top down, expressed as procedures, prices, costs or donations; and knowledge that comes from bottom up. The small producers are struggling within this framework with votes, product delivery, cost reduction, payment for services, negotiation, learning…

articulo CEC-3 eng Figure 1

This article is a basis for us to study 25 cooperatives as organizations between 2014 and 2016, in their internal aspects, and as part of the transnational chain of actors, looking for how, within the context of neoliberalism,  they express tolerance toward the “movement” (market and state imposition), and sensitivity to the processes of the “counter-movement.” The specific research questions are: What have been the structural mechanisms for controling the cooperatives and making them instruments of the elites or for becoming autonomous and responsible organizations? Under what circumstances have they emerged, evolved, and how can they be transformed?

2. Cooperatives as organizations

A dozen people come together and form a cooperative, and so the “collective” and the “social” appear. A cooperative is a legal organization, under which there are agreements with goals, procedures and members. Later the importance of control mechanisms appears, because there are resources to administer, as well as claims for their redistribution. And that organization is part of a chain of organizations, be that with other cooperatives that form a second and third tier organization, be that with market organizations (e.g. fair trade, Ritter cacao company, Eskimo and Parmalat in milk), or with state institutions and organizations at the community level (see Figure 1).

Generally the cooperatives are taken for granted. In Latin America the Social Economy approach (see Guerra, 2012), that emerged from the decade of the 1980s, reflects the appearance of organizations (ethical banks, fair trade organizations, small farmer networks, self governed workshops, religious base communities, and poor communities in the urban peripheries) in reaction to the institutional crisis created by the neoliberal policies. In the decade of the 1990s solidarity economies emerged, new cooperatives and associations with popular and solidarity groups, and informal collectives (bartering clubs, revolving funds, communal banks, family cooperative and collective networks), all of them were added to the traditional cooperatives, mutual benefit societies and associations, forming the solidarity economy movement. Reflecting this, the social economy approach reconceptualizes the companies and the economy as “forms of economic organizations – production, commercialization, finance and consumption – that have as it basis associated work, self governance, the collective ownership of the means of production, cooperation and solidarity[6].” In this framework, the cooperatives are seen as part of a larger family of organizations, and to a certain extent, the reconceptualization of the company and the economy is close to the Rochdale principles. Nevertheless, based on our understanding of the cooperatives in Central America, this type of cooperative is like an ideal; it is assumed in the social economy that the cooperatives have internally harmonious social relations, that conflict only happens with the private and public sector, and consequently the internal situations of the organizations are not studied.

We want to study the cooperatives as they are and observe the process by which the cooperatives change or can change. In what follows we summarize Michels (1962; first publication in 1911) in terms of his theory of the “iron law of oligarchy.” Then we present Lipzet et al (1956), who, without denying Michel´s theory show that there is another route to “the law”[7]. In both cases we are going to look at the internal part of the organization, and then we will contextualize it within a broader organizational framework.

2.1 The path of the oligarchy and the way to avoid it

When an individual person cannot solve a problem, he or she can resolve it through an organization. Cooperatives have emerged to resolve commerce and the concentration of credit, to learn about agricultural technology and to grow as leaders, to defend their land and their perspective on environmental issues. Organization is a means for carrying out collective action. In theory, the organization is what emancipates people and helps small farmers be viable in economic, social and environmental terms. Nevertheless, cooperatives, according to our preliminary observations, have become more politically centralized and economically concentrated in fewer hands, which could be affecting small farmers and maybe slowly dispossessing them of their organizations; even though the small producers as actors are certainly resisting in different ways.

We are facing events with “unexpected consequences” (Merton). The values system of the cooperatives (the adapted Rochdale principles) illustrate that the practical results of this political and economic process are not necessarily identical with the Rochdale principles. The social relationships themselves that make possible the production of the values system of the Rochdale principles give birth to and observe “their own laws” that can change the “intentional meaning” of the values system behind the individual participants in a new “sense.” In other words, the conditions that give rise to a collective value system are not in every case identical to the conditions for their implementation. For the implementation of the cooperativist ideas on the level of their social relationships, it is not enough that those ideas of values enter into the identity of the cooperative as a social group; suitable structural conditions would have to exist, whose “laws” would not hamper, but rather facilitate the transformation from one state to the preferred state. The role of the structural conditions on the implementation of collective values has been discussed within the context of the democracy problem, and now in the conext of the values system of the cooperatives. Democratic norms require that the decisions about collective goals and actions not be done through imposed applications, but through consensus under the possibility that all the participants can have an impact.

It is difficult and problematic to carry out this democratic postulate if the magnitud of the group or the problems that they have to solve requires a delegation of tasks and an organization of decision making through a division of labor. In this case the possibility of democracy depends on the fact that the different policy functions (horizontal differentiation) not become the starting point for a vertical differentiation with a division of different and unequal powers. The German-Italian sociologist R. Michels (1876-1936) belongs to that group that believes that democracy is an illusory program that assaults and rejects fundamental social laws. In the beginning of his professional life Michels belonged to an anarchical trade union movement, and later got close to the fascism of Mussolini. He discovered, within the context of his research on the structure of the organization of the German  worker movement, a structural mechanism that he himself called the “iron law of the oligarchy”. This principle means that every attempt to achieve collective goals and interests leads to an unequal distribution of power among the participants. According to Michels it has to do with a structural mechanism whose effect is completely independent of the values system ideas of the affected social group.

Michels (1962:365) said that “it is the organization that gives rise to the dominion of the elected over the voters, of the leaders over the constituents…the one who says organization, says oligarchy.” This result is due to the modernization of organizations that requires competent leadership, centralized authority, and a division of tasks within a bureaucracy. Within this framework, the leaders increase their power in proportion to the growth of the organization; more organization less democracy; more extended and branches to the organization, less control of the members; the more developed an organization is, the more complex is the administration, the more specialized are its obligations, and the greater the differentiation of functions. He stated that representative democracy in place of an elite government was not possible, that it was only a facade to legitimize oligarchical rule. A quote that summarizes his theory is:

… society cannot exist without a “dominant” or “political” class, and that the dominant class, while its members are subject to frequent partial renovation, constitute, nevertheless, the only sufficiently lasting factor of effectiveness in the history of human development. From this point of view, the government…, the state, cannot be anything else than the organization of a minority. It is the objective of this minority to impose on the rest of society a “legal system”… The majority is, then, permanently incapable of self governing. Even when the discontent of the masses culminates in a successful attempt to deprive the bourgeiose from power…always and necessarily a new organized minority sprouts from the masses, that is elevated to the rank of a governing class. So, the majority of human beings, in a condition of eternal guardianship, are predestined by tragic necessity to submit themselves to the dominion of a small minority… (Michels, 1962: 353-354).

So the oligarchy is constituted following what the organization requires, the docility of its members, the conversion of the leaders into men abandoning their ideals, and into the bureaucratic apparatus of the organizations that become more and more hierarchical.

It is not surprising that Michel´s thesis, that in a simple and grandiose way declares that democracy is impossible, continues provoking debate today. The book of Lipset, Coleman and Trow (1956) is an important reference for our study on cooperatives. They differ from other contributions on the problem formulated by Michels. Lipset et al do not discuss the “iron law of the oligarchy” of Michels on the level of general theoretical speculation, but with the support of empirical analysis try to reduce and limit the claim of validity of Michels´”iron law” to specific structural conditions to define ex negativo the social premises of democracy. Lipset et al, through observation and case study, proved that the political process was getting off the course proposed by Michels. How was it possible to escape from the authority and validity of the “iron law”, characterized by differentiation of status, power formation and change of interests? How can the formation of a cartel of officials with monopoly control over political and organizational capacities be prevented in an organization? The authors found that the key factor is the central axis of a system of organization of values which prevents the formation of a cartel of officials, that it is the competition for leadership anchored in the statutes of the union and in the daily work of the organization.

Lipset et al explained the exceptionality for building democracy was due to the coherence between individual conduct, the quality of the local environment, the leaders and the identification with the industry; through these factors, an underlying idea is the social basis as central for political life. First of all, the union was founded by a local group that valued its autonomy, located in a place with a strong history of local organizations, that was reinforced by the printing industry that operated in the local and regional markets. Secondly, the economic situation of the members was pretty homogeneous, all of them belonged generally to the middle class, with relative equality in terms of income, status and communications skills, all of which motivated them to have democratic decision making processes. Thirdly, they kept the competition between two different groups in the elections, which kept the leaders from falling into corruption, and the existence of this competition allowed them to play a counterweight to the leaders in order to avoid oligarchical practices. And fourthly, the identification of the members with the industry, which related to the local economy strengthened by the industry that operated in the local and regional market, without much competition.

2.2 Broadening and specifying the study on cooperatives

Lipset et al include the (local) context that is missing in Michels´study. Both studies are based on empirical research, Michels writes based on his participation in organizations, while Lipset finds in the Union a divergent path from Michels´theory, first as part of his university work, and then applying a survey to the Union itself. Michels and Lipset et al were based on urban organizations and industrial workers, while our concern is with farming families. They focused on the internal world of organizations, which is also our interest, particularly the first tier cooperatives, but contextualized within a broader panorama. Then, these cooperatives, in most of the cases, belong to a second tier of cooperatives, an interrelation that has to do with our study. Then, most of the second tier cooperatives are part of third tier cooperatives.  A common pattern between the three tiers of cooperatives is that each “higher” tier tries to concentrate the principal functions and resources from the “lower” tier of the cooperatives, while at the same time adding new functions; the principal investments are concentrated in the second tier cooperatives (e.g. processing industry), as well as resources and services (commerce, credit, technical assistance).

Now our unit of analysis are the first tier cooperatives. We see them as global arenas, in which different organizations (cooperatives, fair trade companies, state and organizations) and local networks have an impact. By way of hypothesis, if the first tier cooperatives change (improve), all the cooperative movement can be improved, and the relationships with the different actors, including markets, can change. Inspired in Michels and Lipset et al, we think that the cooperatives tend to fall into the “law of oligarchy” and at the same time their members develop cooperatives as their means for their own viability. It is a process where the key resources (prices, product quality, credit, knowledge, meaning) are fought over, mediated by multiple and different rules, with the intervention of multiple actors committed to their interests, strategies and ideas. All this above all in the last 30 years. (See Figure 2).

articulo CEC-3 eng Figure 2

2.3 The context that affects the cooperative organization

What does (glocal) context mean? Marx refers us to the circumstances in which people make their history. We think that part of those circumstances in Central America refer to the rural zones where there is no longer space for extensive agriculture (increasing production with more area), based on the old knowledge of slash and burn. Covey (2012:xiii) states that “we are in the midst of one of the most profound changes in the history of humanity, where the principal work of humanity is moving from the industrial era of “control” to that of the knowledge worker. From this angle, the rural zones of Central America are moving from extensive agriculture to a more diversified economy, where knowledge is what is most important.

Let us illustrate this moment with the words of a producer, words that are shared also in other parts of Central America:

“In the last 10 years agriculture has been getting complicated. We used to plant, weed, and harvest, when things went bad, we would use new areas; but now the plants are weak, there are more insects and diseases, more sellers of inputs, the rainfall varies more, there are no more areas …” (Member of the José Alfredo Zeledón Cooperative, Nicaragua; March 2013).

This small farmer was refering to the agrarian situation, to maintaining the production level of previous decades; the change is even more profound when prices are added in, as well as costs of inputs, terms of exchange, productivity, product quality…Our hypothesis is that, even though the rural context is changing, the structures of organizations that collaborate to benefit small farmers remain the same, while the large organizations that affect small farmers are progressing rapidly, like the business circuit of companies (market, finance, research and development approaches like “payment for environmental services” and “payment for results”), the reorganization of value chains and the use of stagnant local organizations.

This means that the old patron-client relationship prevails in the region, which affects the way in which the cooperatives are organized; and from the side of the cooperatives and the organizations that work with cooperatives, the “leader-follower” approach persists. Marquet (2012) maintains that the leader-follower approach assumes that the world is divided between a minority of leaders and the large mass of followers. This approach has developed over a long period when progress depended on physical work, where the skill of the leaders was needed to mobilze the masses with physical work. This also has been the situation for centuries in Central America: a deep connection between the patron-client relations, the leader-follower approach, and extensive agriculture (and extractive economy).

The current context, nevertheless, depends more on cognitive work. In Nicaragua the end of the agricultural frontier and extensive agriculture, that requires more physical labor, is just around the corner, because the agricultural frontier has reached the ocean, challenges are increasing because of climate change and the instability of agricultural markets. There is an urgent need for an agriculture that makes intensive use of the land, provides more added value to products and natural resources, and an improvement in the lives of the people. All this means that we are living in a more complex world where the actors need more knowledge. So the agrarian context is changing, while the organizational structure of the small farmers and organizations that work with them apparently remains fixed. Consequently, there is an urgent need for their transformation.

Covey (2012) argued that the present context has to do with the “knowledge worker”. For the purpose of responding to this context, Marquet (2012) introduced the leader-leaders approach, where all can be leaders and use their leadership skills in every aspect of life; that according to him three elements make this possible: that you have authority (decision making and interaction for solving problems in each area of the organization without passing through vertical procedures); competencies (specific knowledge, deliberated thought before acting, and learning instead of being trained); and clarity (know the purpose of the organization and the criteria for decision making[8]). This perspective could be coherent with the Rochdale cooperative principles in the sense that it includes formation (education), cooperation (transformation of the organization), participatory decision making, transparency…

The glocal context in which the cooperatives move is changing, from a world based on physical work to a world in which the principal challenge is learning, and the organization of agriculture for producing more in the same zone, with better quality, and environmentally, economically and socially sustainable. This challenge pressures organizations to be transformed, to overcome the patron-client relations and the leader-follower approach. Therefore, we propose two hypotheses: 1) the longer the transformation of the organizations takes, the more dispossession will happen; 2) the 1st tier cooperatives are key because the knowledge of their territories has become the fundamental crossing point between the flow of resources (“services”) that come from the top-down and the flow of knowledge that goes from the bottom-up for the control and orientation of the resources (“services”). Figure 3 summarizes our renovated framework. 

articulo CEC-3 eng Figure 3

3. Market forces

We began asking our research question, about how the members manage their cooperatives. We reviewed the studies of Michels, and Lipset et al in order to read the cooperatives as organizations on the oligarchy route (sometimes called “patron-client” or “leader-follower” relations), and as a space where the members transform their organizations. In focusing our unit of analysis on the 1st tier cooperatives, we place them in their larger context, including other groups of cooperatives, fair trade organizations and the state (even though without more discussion). Lastly we mentioned the challenge of learning and organizing agriculture in the current agrarian situation of Central America, which requires the transformation of the cooperatives and the organizations connected to them. But we have not discussed the more important factor of our time, the markets, that have a huge affect on the cooperatives. This section will now deal with that.

3.1 The Neo-liberal market “movement”

The agrarian cooperatives have risen as a reaction to the despotic and oligarchical organization of the elites who dispossessed the population of their land, capital, labor and /or product markets. Nevertheless, we see that the cooperatives over time tend to become something contrary to their purposes, into something oligarchical and anti-democratic, reduced to the economic aspect. What is the magnetic force that draws them away from their purposes and their cooperative principles? Stiglitz (2001:vii), in the prologue to Polanyi´s book said:

… Polanyi, who described the great transformation of European Civilization from the pre-industrial world to the era of industrialization, and the changes in ideas, ideologies and social and economic policies that accompanied it. Due to the fact that the transformation of European civilization is analagous to the transformation that the developing countries throughout the world are facing today, frequently it seems like Polanyi was talking directly about the current situation.

What did Stiglitz mean? Polanyi (2001, published originally in 1944), described the situation of Europe before the Second World War. He understood society to be in transition to the market economy. In the non-capitalist economy or the “society of markets”, people organized their economies under the logic of reciprocity and redistribution, the markets had limited functions with trade mediated over large distances. In the capitalist society or the “market society”, people tended to sell in an extended way and maximize their profits, and consequently the social order eroded. The factors of production, like land, labor and capital were no longer defined more by criteria of tradition, reciprocity or redistribution, but by the markets as “ficticious merchandise”. Society subordinated to the market, and as a self regulated market separating society into economic and political spheres. This image of Europe before the Second World War is what Stiglitz says is what the current situation of developing countries is like.

Polanyi suggests that the liberal radicalization through the “market society” led toward fascism as an authoritarian –corporativist way of re-establishing the control of society over the market, the eroder of social relations. The lessons were learned, and Europe, after the Second World War, created its welfare states with a fundamental role for the states, in general terms on the basis of the ideas of Keynes. They experienced what was called “embedded liberalism”: a relationship between the economy and the social system where the economy is embedded into society (Ruggie, 1997, 1982). Nevertheless, this system was contested, with the increase of greater predominance of liberal thought from the time of the 1973 oil crisis and the debt crisis of the Latin American governments in the decade of the 1970s, and consequently, the prevalence of neoliberal policies since 1980.

Probably the most inspiring source of neoliberalism, at least for our topic, is F. A. Hayek from the Austrian School of Economics, who delved into the old liberal ideas of the market economy, smaller role of the state for maintaining the rule of law (Hayek 1944); and proposed the free price system for sharing and synchronizing personal and local knowledge, which would allow the members of society to promote different and complicated purposes through the principle of “spontaneous self organization”. Hayek (1944) argued that you have to let the market do everything, that the function of the State is to protect the market, that the free price system was like language, the result of human action but not designed by humans. “Self organization” seems equivalent to “spontaneous order”, understood as free networks and not created nor controlled by anyone, while the organizations are supposedly hierarchical networks, created and controlled by humans.

Whether the State is democratic or not is not the principal concern of Hayek, because even though in the long term he was against dictatorships, as a transitional phase he prefered “liberal dictatorships to non liberal democratic governments” (Farrant, McPhail and Berger, 2012: 513) in reference to the Pinochet dictatorship in Chile. The fear exists that people could get involved through the state (for example, through elections), due to the risk of the interruption of the common good which is the market (Boudon, 1981). It is not whether the majority should prevail, but the efficiency and automatic optimization of the interests of all through the market. Hayek (1979, 1982) maintains that power should be in the hands of an elite that protects the market from any type of intervention, which is why the degree of democratization should be limited. More economy means less democracy – something contradictory in Hayek, because that coincides in large measure with Michels´law, which in theory was rejected by Hayek.

In this way, under the influence of Hayek and others, neoliberalism as a political project for the expansion of spaces for the free market through a reduced, but many times strong, state has been the agenda since 1980. The developing countries had to accept the Washington Consensus (privatization, governments out of the economy, liberalization policies), the European welfare states began to be affected, the markets directing society (Ruggie, 1997), precisely what Polanyi observed in Europe before the Second World War.

Let us note that the market appears to be supposedly free, but it responds to the hidden interests of large economic clusters. Polanyi refered to it in his time with the expression of “always embedded”, because the free market does not exist, it is a market deliberately constructed to promote certain interests, it is not the theoretical free market of Hayek without political control that is in play, it is not a conflict between “market” and “society”, but between a specific political project of “individual markets” and societies that should adapt to them, and another political project where the mutual adaptation market-society is different. It is the case of post Second World War Europe, the control of society over the market did not keep it from being a capitalist market (mitigated, but capitalist).

In this process, going back to Hayek, we highlight the growing centralization of the modern State, which has become more distant from society and from the political and economic systems. It is said, for example, in the case of Europe, the European Commission is more and more powerful, that the European Parlament is less strong, as well as the growing subordination of the states to the European Central Bank. Likewise, in the “socialist countries”, China since Xiaoping with the “socialist market economy” and politically centralized; or Cuba in the last 5 years. It would seem that the fear of the masses is something that has become “globalized”, like the belief in more economy and less democracy.

What does all this have to do with cooperatives? We began this section describing how the cooperatives have evolved toward non-democratic and economicist organizations. In addition to what was seen in previous sections, now we run into another part of the magnetic forces, the markets. Correspondingly, the developing countries are seen in a transition to the “market society”, self-organization guided by the market, “fictitious goods”, centralization (state controlled by a minority), market protection, exclusion of the masses. It can be understood from this angle why the donors and states are trying to turn the cooperatives into enterprises, private organizations with “fictitious goods” seeing the cooperatives as “gatherers of products” and their members only as “producers”; the centralization of decisions and information, absence of spaces for democratic processes; concentration of wealth in the second tier cooperatives controlled by a minority; prevalence of managers of cooperatives in the decisions about cooperatives and in leadership posts in international cooperative organizations…Literally, under this angle, the cooperatives are useful for contributing to the transition processes toward “market societies”.

3.2 “Counter-movement” processes

The perspective of the previous section is pessimistic. Are the cooperatives mere instruments (“movement”) of the neoliberal market? If we make the connection between this situation and the state of extensive agriculture, the situation is seen to be even more difficult. Nevertheless, we also observe resistance on the part of the cooperative members. There are cooperatives that have built their autonomy since their founding on the increase of their capital based on the economic resources of their members, in order to administer their own credit; cooperatives that challenge their perpetual leaders and managers; cooperatives that combine the perspective of their farms and that of environmental sustainability; cooperatives that export directly, and not through second tier cooperatives; women organized into cooperatives. There are also some lessons that combine market and organizational transformation; for example, basic grain or ranching cooperatives are no longer seen, the cooperatives are into differentiated products, in other words, the greater the differentiation of products the more necessary the cooperatives seem to be; consequently, there are organic coffee cooperative, milk product cooperatives, sesame seed, cacao cooperatives… Secondly, the greater majority of the members turn over part of their produce to the cooperatives, but never turn over 100%, it does not matter how great the fair trade premium and the projects may seem, an action that from the angle of the “market society” is seen as a deviation (“disloyalty”); the small farmers, regardless of the pressure to specialize, continue diversifying their products, networks and markets. Thirdly, some (even though very few) international organizations also understand these processes and are working accordingly.

Polanyi (2001) saw that society reacted to the “movement” (“the market society”), people sought their own protection and they resisted (“double movement”). Our purpose is to study how the cooperatives are doing, how they can be transformed, and how that process is fundamental for the democratization of “societies with markets”. For this reason we quote what Marx said in 1852 in the Eighteenth Brumaire of Louis Bonaparte:

“Men make their own history, but they do not do it on a whim; they do not do it in self-selected circumstances, but in already existing circumstances, given and transmitted from the past. The tradition of all dead generations weighs like a nightmare on the brain of the living. And just as they appear to be busy with themselves and to revolutionize things, the creation of something that did not exist previously, precisely in such times of revolutionary crisis that fervently evoke the spirits of the past to their service, the borrowing of names, battle crys, and clothing for the purpose of presenting this new scenario of world history within the concealment of  long tradition and borrowed language.”

‘Counter-movement’ is a process that is carried out within the situations of the “movement”. The circumstances are not under our control, we do not choose them, but without a doubt the key issue is the relationship between the actors and the circumstances (structures). So, we should study how this “movement” and “counter-movement” is constructed in the cooperatives. On this basis, see Figure 4 and Table 1.

articulo CEC-3 eng Figure 4 Third Framework on coops

5.     Final observations

The cooperatives in Central America are fundamental for the economy and democracy, for the mitigation of climate change and the production of food, and above all so the rural families can improve their lives. Nevertheless, at the same time that there are great opportunities, the cooperatives are also at risk of being politically co-opted and economically subsumed. Thus the importance of understanding the “movement” in order to understand the processes of the “counter-movement”.

This article summarizes the conceptual framework for studying cooperatives in Central America, seeking to combine traditional research and something new. We have begun studying 25 cooperatives, accompanying their experiments on innovation, and systematizing their processes jointly with the cooperatives. This process is about the transformation of the cooperatives, being careful about the limited role that we might have from the social sciences. We are working on this with a network of researchers that includes cooperative leaders, even all their members, also researchers from various universities. An implicit purpose is building bridges between the “university” and the small producer cooperatives, in this way also contributing to the democratization of research.



Bierschenk, T., and Olivier de Sardan, J.P., 1998. Les Pouvoirs au Village: Le Bénin Rural entre Démocratisation et Décentralisation. Paris: Karthala.

Boudon, R., 1981, The Logic of Social Action: An Introduction to Sociological Analysis. Routledge & Kegan Paul.

Buendia, I., 2001, Las Cooperativas en América Latina. Estado de la cuestión. In: Perez, J.M. (ed) Economía Social e Iberoamérica: la construcción de un espacio común. Valencia: CIRIEC-España, pp.  67-86

Coque, J., 2002, Las Cooperativas en América Latina: visión histórica general y comentario de algunos países tipo. In: Revista de Economía Pública, Social y Cooperativa. No. 43. Pp. 145-172. Last consulted: September 8, 2014.

Covey, S., 2012, “Foreword” in: Marquet, L.D., 2012, Turn The Ship Around! How to Create Leadership at Every Level. Texas: Greenleaf Book Group Press

Farrant, A., Mcpahil, E., Berger, S., 2012, Preventing the “Abuses” of Democracy: Hayek, the “Military Usurper” and Transitional Dictatorship in Chile? American Journal of Economics and Sociology, Vol. 71, No. 3 (July, 2012).

Guerra, P., 2012, Las legislaciones sobre economía social y solidaria. Casos latinoamericanos y europeos.  Documento de Trabajo No. 4. Montevideo: Facultad de Derecho de la Universidad de la República.

Hart, G., 2006, Denaturalizing Dispossession: Critical Ethnography in the Age of Resurgent Imperialism, en: Antipode, 38(5): 977-1004

Hayek, F.A., 1944, The Road to Serfdom. England: Routledge Press.

Hayek, F.A., 1979, Social Justice, Socialism and Democracy. Australia: The Centre for Independent Studies, 1979.

Hayek, F.A., 1982, Law, Legislation, and Liberty : A New Statement of the Liberal Principles of Justice and Political Economy. London: Routledge and Kegan Paul.

Henehan, B.M., Hardesty, Sh., Shultz, M. and Wells, J., 2011, “New Cooperative Development Issues” en: Choices, The magazine of Food, Farm and Resource Issues. A publication of AAEA Agricultural & Applied Economics Association. Last consulted: August 27, 2014.

Hueth, B. and Reynolds, A., 2011, “A Life-Cycle Perspective on Governing Cooperative Enterprises in Agriculture”, in: Choices, The magazine of Food, Farm and Resource Issues. A publication of AAEA Agricultural & Applied Economics Association.

Humphrey, J. & Schmitz, H., 2002, Developing Country Firms in the World Economy: Governance and Upgrading in Global Value Chains. Paper Heft 61. UK: IDS-Sussex University

Lewis, D, Bebbington, S, Batterbury, A, Shah, E, Olson, B, Siddiqi, MS & Duvall, S., 2003, “Practice, power, and meaning: frameworks for studying organisational culture in multi-agency rural development projects” in: Journal of International Development, vol 15, no. 5, pp. 541-557

Lipset, M., Trow, M., and Coleman, J., 1956, Union Democracy: The Internal Politics of the International Typographical Union. USA: New York Free Press.

Marquet, L.D., 2012, Turn The Ship Around! How to Create Leadership at Every Level. Texas: Greenleaf Book Group Press

Mendoza, R., 2012, “Nicaragua – 33 ANIVERSARIO DE LA REVOLUCIÓN: Café con aroma de cooperativas” en: Revista ENVIO No. 364. Managua: UCA

Mendoza, R., 2014 (soon to be published), “Collective and Shared Leadership: Antidote for a society dependent on bosses and patrons” in: Encuentro. Managua: UCA

Michels, R., 1962, Political Parties. A Sociological Study of the Oligarchical tendencies of Modern Democracy. New York: The Crowell-Collier Publishing Company. (First published in 1911)

Picketty, Th., 2014, Capital in the Twenty-First Century. USA: Harvard University Press. First published in 2013.

Polanyi, K., 1944, The Great Transformation. The Political and Economic Origins of Our Time. New York: Farrar & Rinehart. 2nd edition, Boston: Beacon Press.

Ruggie, J.G., 1997, Globalization and the Embedded Liberalism Compromise. The End of an Era. MPIfG  Working Paper 1997-1.

Ruggie, J. G., 1982, “International Regimes Transactions and Change. Embedded Liberalism in the Postwar Economic Order”, in: International Organizations 36, 1982, p. 379- 399.

Stiglitz, J., 2001, “Foreword” in: Polanyi, The Great Transformation. The Political and Economic Origins of Our Time, 2nd ed. Boston: Beacon Press

Taylor, C., 1953, The farmers’ movement: 1620-1920. New York: American Book Company

Wade, R., 1997,Greening the Bank: The Struggle over the Environment, 1970–1995.” In The World Bank, Its First Half Century, vol. 2, edited by Devesh Kapur.


[1] This text is based on the work on cooperatives of a team composed of Mendoza, Fernández and García supported by the Winds of Peace Foundation (see: This text benefitted from the support of the Institute for Development Studies (IOB) of the University of Antwerp (Belgium) where Mendoza had six week to review bibliography on the topic. J. Bastiaensen is a professor in the IOB-UA and K. Kuhnekath is an associate researcher of the Central American University (UCA) in Nicaragua. Contact:

[2] These authors, connected to the perspective of “market driven” cooperatives, write on the basis of a “panel of cooperative leaders, USDA specialists and academic experts.”

[3] The power of the market that the farmers face as individuals provides a strong motivation for collective action. Acting together, farmers can improve the results of their participation in the market, and generate the redistribution of the economic surplus of the input supply and the intermediation sectors with the farming sector” (Hueth and Reynolds, 2011).”

[4] ANASCOOP, a savings and loan cooperative in Puerto Rico, states that their members goven their cooperative by their vote…They choose a Board of Directors…That board is responsible for governing all the positions of the cooperative.”). Mondragón, a cooperative in Spain, states that a member “governs through the delegation of the cooperative congress.”

[5] This is also the case of the US farmers evaluated by Taylor (1953), where for the farming sector, the history of three centuries has been about prices and the power of markets and credit.

[6] Quote from the conference given by Dr. Valmor Schiochet, in the international seminar on cooperativism. Habana, November 2, 2012.

[7]One was written a century ago and the other half a century ago. With this we are not assuming that there are no current theorists for studying cooperatives. But, so far we are not familiar with any study on the internal aspects of organizations. Some authors are useful, like the approach focused on actors of Long, Lewis et al (2003) that proposes a three notion framework (practice, power and meaning), identifying subcultures within (and among) organizations; and Wade (1997) studying the enviromental department in the World Bank on the basis of anthropological methods of being immersed in that department for 9 months.

[8] Marquet has developed this approach while experimenting in a nuclear submarine. Some could argue that a submarine has nothing to do with agriculture and cooperatives; I prefer to think that if it was possible to have success with the leader-leader approach in a nuclear submarine with military verticalness and isolated at sea, it would have to be less difficult to do it in cooperatives and organizations that work with them. For more on this approach in the context of Nicaragua, see Mendoza (2014, soon to be published).

Leave a Reply