The Cooperatives Need to Re-invent Themselves

By René Mendoza and Edgar Fernández

“ We are supporting a family that is a member of a milk cooperative; the cooperative has enormous capital earnings but it has members in extreme poverty”, said an aid worker. This type of paradoxes also occur in coffee, transportation, savings and loan cooperatives. Reviewing the experiences of cooperatives in the world, we find that the first consumer cooperatives of England (working consumers who put their salaries together for better food consumption), that evolved to importing products and having plantations in the colonies and food factories, failed because they produced a managerial elite, and the economic success became an end in itself. Digging into cooperatives in Nicaragua, some have disappeared, trapped by corruption, others remain in the above mentioned paradox, and others persist as interesting cooperatives.


In general the cooperatives were injected with neoliberalism, a logic that reduced the focus on the economic aspect and on individualism, and with the “aid industry”, a dependency on external resources and a technocracy that took the place of the leadership structure itself. The meaning of organization itself got distorted: “If you do not have an office and management, then you do not have organization,” say some international organizations, to leave implicit: “I reach agreements with management and in an office.” In other words, one thing is the cooperative model under the principles of Rochedale (equality, voluntary, one vote per person and participation in decisions, autonomy, education, cooperation among cooperatives, and community commitment), and another thing is its implementation. Rather than reflect on the causes that distort the cooperative movement, I note three elements needed for the cooperative movement to turn itself into learning organizations and redirect its purpose in coherence with its principles.


First element: rethink the organizational structure. It is common for us to find that the cooperatives only have one or two assemblies a year; that the oversight boards focus on the finances and even have difficulties doing so; that the administrative council is almost only the president, and they are immovable (“the same leader but in different positions”); and that many times the managers are the real power. In addition to the formalities established in the statutes and in the law of cooperatives, what can make them work?


  • The assembly should meet every month and be the body that selects the auditing firm on the basis of a slate presented by the Oversight Board. This would break with the custom of seeking auditors that reach conclusions that the management and/or president want them to reach.
  • The Oversight Board watches over the finances, compliance with agreements of the Assembly, and the rotation of leaders to prevent “the same leader” appearing in each election. In the cooperatives that have the fair trade seal, the oversight boards and the fair trade organizations should coordinate so that the financial and social audits (rotation of leaders and respect for the rules)  are transparent and prevent covering up irregularities.
  • The Administrative Council has a strategic role, while the management has an operational role. When the first tier cooperative are the ones that develop different services, the administrative council of the first and second tier play a strategic role; when the second tier cooperatives concentrate the different services, the manager takes on the strategic role and the leaders a decorative role; the territorial logic allows the cooperative movement to recover the strategic role for their leaders.
  • The management posts should be rotated every two years: cooperative development management, commercialization, processing, administration  and finance.


Second element: relations of counter-balancing power, both from below and from above. An administrative council needs a counterbalancing power from below: that the commissions and the oversight board function, e.g. the credit committee is the only body that approves or rejects credit requests, and that the assembly play a  more active role.  The counterbalancing power from above when the role of the State, aid agencies and the fair trade organizations contribute to the first element mentioned above, complying with the financial and social audits, and making sure that the assembly considers the results. The first tier cooperatives  exercise the role of counterbalancing power from below for the second tier cooperatives, and these in turn act as counterbalancing power from above.


Third element: turning attention to the innovation processes. Instead of being intermediating organizations, administering services, the cooperatives need to be incubators of social and technological innovation processes, with policies that would increasingly include women and youth – women for their virtues and multifunctional role, and youth for their increasingly better educational background – and being an “open book” (information on finance, credit, commercialization costs, project beneficiaries gets posted on the walls of the office). This dynamic would make the leaders and technical-administrative staff focus on the member families and on their communities.


The first and second element make the cooperative become learning organizations; the third gives them back their sense or perspective and innovation. The three are mediated by power relations; none one wants to be controlled, leaders and managers tend to perpetuate themselves, second tier organizations want to be the magnet for resources, aid agencies look for the managers, governments are looking for controlable leaders. Only a strong cooperative can turn the cooptation into an institutionality that would contribute to the lives of the members families and their communities.