Category Archives: Organizational Development

“Open Books” innovation in business

“Open Books” innovation in business

René Mendoza, Steve Sheppard y Mark Lester*

Information should not be a tool of power, it should be a means of education

Jack Stack

Jack Stack,[i] and hundreds of employees turned into the owners of the Springfield Remanufacturing Corporation, innovated in 1980 the “the Game of Business”, known as “open books management.” This novelty was disseminated to thousands of economic organizations of different types and sizes, in and outside of the United States, particularly to many corporations in that country whose workers became the owners of their corporations. What does this innovation entail? Can it be adapted to enterprises in Latin America?

Every game has rules for scoring and winning, and the team that knows and practices how to score better than others wins. So it is in soccer or in cricket, the team that plays better, scores goals or runs. So it is also in businesses, whose staff are the players, the more they know the rules and play as a team, the more scoring they do, the more money they make, and the more cash they generate. The motivation for this comes from the desire to harness all of the resources possible for success, as well as understanding what a business means for their family and community, from looking beyond the specific job and its pay, and from feeling proud of being part of an enterprise whose numbers – both overall, as well as for each area of the business – they understand: sales, profit and losses, daily production, balance statement…If the company is a coffee exporter, their areas include coffee buying-harvest collection, dry milling, credit, commercialization, administration…Knowing the moves, they know who is on offense, on defense, or in midfield in the business, and they know that they should make an effort based on their “critical numbers” (standards or goals) like sales, cost of raw materials, productivity or cash flow.

This novelty clashes with the myths of traditional businesses (“only the accountants understand the numbers”, “the manager has all the answers”, “the staff should only be concerned about their job”), and proposes a different perspective: no one individual is more intelligent that all the people together; instead of one person who centralizes the information, let the personnel function as a team, generate information and be educated in this game. This allows for collective trust to be built, as well as credibility in the information. From here, if the staff of an area understand that their work is generating profits and losses, then that impacts the balance statement, and that that is connected to the financial rewards that everyone has set when certain goals are met as a company. Then he or she will understand that they are not “a tooth in the grinding wheel”, but an important contributor for the company, their family and society. The more the staff of your organization know, the better they perform, and consequently the company produces with lower costs and has the capacity to offer more unique products or services.

This innovation has been adapted by companies of all sizes and types, and especially by companies where the employees are also shareholders, and they have been successful. In the financial crisis in 2008 many of these companies continued growing, while more traditional firms were shrinking. It does not work in companies with a pyramid-shaped organizational structure, where the leader is on top and the staff down below, and that moves under the spirit of Taylor, separating brains and hands. It requires companies to move toward circular organizational structures (see Mendoza, 2014)[ii] among owners, board members and management, revolving around itself where everyone from the cleaning staff to the manager understand the rules of the game, objectives, goals, and rewards (incentives for all the staff, and not individual incentives, e.g. incentives of x percentage after achieving a 5% increase in earnings as a company), and regular meetings organizing the information of each area and evaluating it in light of their objectives and goals. In this context, when a certain area does not meet their goals, they identify the problems and the remedies, pressure and collaboration is expressed to solve them, because the success of their company and their rewards are in play. This is a model that comes in part from indigenous peoples in the US, the elders and leaders that would meet in circles, where each one expressed their data and perspectives to stay or move to another place, with the role of the chief being to seek consensus, and when there was none, based on what he had heard and his judgement, to make the decision.

This is a game that overcomes Hardin´s[iii] dilemma of collective action, of opportunism (free riding), and that of generating wealth by walking on top of others. It changes the mentality of “employees” to that of “owners.” It recovers the original idea in the US that corporations emerged for the good of the entire society. And it is a game with which businesses are achieving their puprose of making money and generating cash, of producing wealth and having an impact on its distribution.

Can companies and cooperatives of Latin America play this “game” of business? Obviously they can! Nevertheless for companies to achieve it they will have to also overcome other strongly institutionalized myths: “whoever provides information will be crucified,” “the rich are self sufficient,” “God made the poor and the rich, and he made me poor”, “the boss is always right”, “those who mix with business men are disrespectful”. There are businesspeople who would wait until hell freezes over before their staff would buy shares in their companies (“the two don´t mix”), and there are companies whose staff have shares, but continue functioning under a pyramid-shaped organizational structure, with centralized information, and therefore with a mentality of employees and bosses. The teaching that “open books management” left for companies of all sizes and types, is that if you play “the game of business” as a team, with all the players, they will learn more and will generate more wealth; and in the long term the staff that cultivates a mentality of “owners” will organize (incubate) other similar or more democratic companies than the mother-companies, and society will benefit more. Because our lives are brief, and needs and opportunities are infinite, will sign up to play this game?

* René ( has a PhD in development studies, is a collaborator of the Winds of Peace Foundation (WPF) (, associate researcher of IOB-University of Antwerp (Belgium) and the Nitlapan-UCA Research and Development Institute. Steve, the current director of WPF, was manager of the Foldcraft corporation bought by its 350 employees. Mark is director of WPF in Nicaragua and of the Central for Global Education and Experience at Augsburg College.


[i] Stack, J., 1992, The Great Game of Business. USA: Doubleday

[ii] Mendoza, R., 2014, “Liderazgos colectivos y compartidos. Antídoto para una sociedad dependiente de patrones y jefes” en: ENCUENTRO, 99

See English version at

[iii] Hardin, R., 1982, Collective Action. Johns Hopkins University Press. Baltimore.

The Other

We’ve all experienced it.  It might have been a classroom where none of the other students were known to you.  Maybe it was a conference where every other attendee, except you,  seemed to have an old friend with whom to sit.    Perhaps the first day on a new job left you feeling as though you had taken on the loneliest assignment in the world.  As adaptable as we human beings are, those moments of being “the other” can be among the most excruciating experiences we encounter.  Such occasions are the very definition  of being alone. Whether due to being new to a group, or of different race, gender, age, language or any other distinguishing characteristic of ourselves, it’s a role likely each of us would rather not have to play.

Over the past several weeks, I’ve found myself in just such circumstances a number of times.  Among several college classroom presentations, a conference in Nicaragua and a seminar at a New England retreat, I occupied the role of the other, unknown to those around me, unfamiliar with people who generally seemed to be quite familiar with one another, and in one case, not even able to converse in the same language as my peers.  To be sure, each of the venues was voluntary on my part and my expectations of unfamiliarity were identical to the reality in each situation; there were no surprises.  But anticipating that reality did not make for an easier adjustment to it.

What is the element deep inside that moves a group toward exclusivity and separation?  Comfort?  What is it inside of our own cognizance that tends to inhibit an immediate acceptance of each other?  Fear?  What is the addiction we have to being part of the group, even at the expense of one who is not?  Suspicion?  Psychologists have the answer to these and related questions, I’m sure.  As for me, I’m just left with the uncomfortable feelings.

But I experienced something else, an unexpected phenomenon. Within these moments of feeling apart from the group, one venue left me feeling welcomed.  And interestingly, the place where I was in fact the most “other-wise” than my fellow participants, is where I became most comfortably assimilated.

Seminar Breakout
Seminar Breakout

My week in Nicaragua was spent attending a workshop for rural cooperative members, a “certificate program” which presented the holistic elements of successful organizations and individuals, including elements of cooperative history, organizational innovation, gender issues, environmental impact, spirituality in work and organizational/individual health.  (We even shared a hike to the top of Peñas Blancas mountain, together!)

Everyone to the top!
Everyone to the top!

I arrived at the conference site on Sunday evening.  By Monday morning there were no cliques or sub-groups, only a room filled with expectant participants, fifty Nicaraguans and two gringos.  

Did I mention that, to my great embarrassment, I still do not speak Spanish?  That every word addressed to me and every response I offered had to be filtered through an interpreter?  Integrating with a new group is hard enough.  Inserting oneself into an assembly in another country is more so.  And acceptance in the face of differing languages is a gulf many of us might deem too wide to conquer.  In truth, I had met some of the attendees in previous settings.  But the gathering at the base of Peñas Blancas  embraced me as a full partner in our mutual journey of education, and in ways I do not always experience in such gatherings of such disparate folks.

A smile, a nod, a handshake and even a wave each have the capacity to draw one into the heart of a crowd; I received gifts of each.  Few words were exchanged among us, given my previously-referenced language deficit, but that insufficiency mattered not.  I felt “at home.”

One week later, I attended another seminar, with attendees of similar outlooks on topics such as the environment, energy and the economy.  We traveled from different sections of the country, sought the same kinds of insights and shared similar expectations.  We even spoke the same language.  Yet here, among fellow countrymen and women, I experienced a curious solitariness.  Small groups had assembled for a social hour and busily chatted away, I imagine sharing their stories of travel to the site, renewing perhaps previous acquaintances, discovering those elements of likeness which cultivate the feeling of belonging to one another and the group at large.  Several times I sidled up to a cluster in hopes of inserting myself, and each occasion was met with barely an acknowledgement.  Of course, each moment made the next even more awkward.

Over the course of the weekend, my role as the other dissipated and I connected with any number of friendly and enthusiastic people.  Small group interactions which necessitate collective participation and expose your thoughts, experiences and uniqueness usually open the doors to collegiality and even friendships.  But I can’t help but wonder what there is in our national culture or customs that seems to require this sort of justification before acceptance is extended to strangers.  Are they less worthy in one moment than the next?

Naturally, we are all inclined to make judgments about others based upon what we hear and the behaviors we observe.  But in the wake of the unqualified reception I received in one setting and the awkward time of trial in the other, I now more clearly recognize the duty that I have to others.  New acquaintances deserve my immediate and best efforts at inclusiveness.  It may just be that my Nicaraguan associates have experienced sufficient hardship and trials in life to understand that there is no time for artificial barriers when it comes to embracing the other….

The "Others"
The “Others”

Very Cooperative

Winds of Peace Foundation has committed a great deal of time and resources to the study and development of cooperatives in Nicaragua.  Over the past five years alone, WPF has supported more than thirty coops; underwritten the cost of a half-dozen cooperative workshops for rural participants; commissioned studies about their history, makeup, the effects of climate upon them, and the context of coffee; and now partially sponsored an entire cooperative certificate program to continue teaching and to provide a tangible marker of achievement.  We’ve even pitched the idea for the creation of a “Synergy Center,” whereby WPF might partner with  a North American university to share its wealth of experiences and findings and provide a destination for students and delegations wanting to know more about the realities of Central American neighbors.

We’ve had some amazing successes.  We’ve also experienced some unexpected and disappointing defaults.  We’ve come to know a lot about Nicaraguan coops and what makes them work.  Yet, at the same time, we’ve had one organization- not even a cooperative in structure- that models the cooperative methodologies and successes as well or better than almost any other partner.  Yes, I’ve had another visit with ANIDES.

ANIDES has been guiding women of the rural communities of Matagalpa in the creation of small community banks in recent years, creating financial literacy, sustainability, independence and savings accounts for its participants.  The impact upon the lives of its members is palpable, not only in terms of financial strengthening, but also in quality of life and family.  WPF has admired the motivations and results of this group for years.  And now, ANIDES is proud to be reporting that these small community banks are becoming formally-registered cooperatives, with ten of the current thirteen banks in the registration process.  The objective is to eventually form a union of cooperatives once all registrations are complete.

These coops offer strengthened opportunities for their members to establish outlets for their small enterprises: crafts, bread-baking, small services and other commercial ventures.  These entrepreneurial efforts have created the financial wherewithal to “feed” the community banking enterprise.  The resources generated by these small enterprises often are used to fund significant events, such as the addition of indoor plumbing to a home, a water softener for cleaner drinking and washing water, or education opportunities for members’ children,  a dream that might otherwise seem very out-of-reach for these same families.

The legal cooperative status confers some technical advantages for the  women members: they will have access to joint banking accounts, easier accessibility to those accounts, greater security for deposits, cooperative education to further their understanding of collaborative advantages, opportunities to learn from one another.  The plan is to conduct monthly meetings among the cooperative delegates to consistently share experiences, problems, concerns, financial lessons and to celebrate what has been and promises to be a continuing success story in the rural countryside of Matagalpa.

The real value of these fledgling cooperatives, however, may not be in the technical or legal characteristics that registration will confer.  The bigger impact just may be on the lives and attitudes of those who have been willing to risk moving out of their comfort zones and into positions of learning and financial responsibility. For most, it’s an act of faith.  (By comparison, imagine yourself voluntarily signing up for a quantum physics class as a forty-something year-old, when you barely understand arithmetic.)  But such is their determination for improving their families’ circumstances, to work in some form of solidarity.  It also underscores a deepening sense of self-respect: in discussing a request for possible funding,  they have specified for the first time in our work together that the funding be in the form of a loan, to be fully repaid.  (I truly wish I could convey the sense of pride on the faces of the women as they specified a loan.)

They are taught and they understand the basic finances of their banks.  They assume positions of leadership, likely for the first time in their lives.  They make decisions among themselves.  They establish and attend meetings of their banks, sometimes walking for miles to be present.  They create celebrations of their work and themselves.  In short, these women do the things that successful cooperatives-  successful organizations of any sort- must do in order to endure.

As WPF imagines new ways of bringing together organizations to model best practices and to learn from one another, ANIDES might very well need to be part of the mix, even though they aren’t growing coffee, beans, rice or raising cattle.  What they are raising is their quality of life, their knowledge and their self-esteem, and being very cooperative about it….



Iguanas on the Wall

Surprised to see iguanas at school?

With the emphasis on education during my recent visit to Nicaragua, we had the pleasure of re-visiting the Association of Women Builders of Condega (AMCC).  AMCC is a non – profit organization whose main purpose is to promote economic, political and ideological empowerment processes to young and adult women from Northern Nicaragua, to enhance the basic conditions for the exercise of their full citizenship.  It’s quite an undertaking when one considers the context of the education, the circumstances of most of the students, the nature of a very patriarchal Nicaraguan society and cryptic attitudes about women, their roles and their capacities.

“Young women are better off staying at home.”

Ready to Learn and Work
Stay at Home? Why?




And, oh yes, at the same time the school is providing a very hands-on technical education for their students, teaching practical construction and building skills and demonstrating the latest technologies in use of earth materials.  And their results are stunning in both attractiveness and quality.  A visit to their site and walk through the grounds where the students work hands-on provides a clear picture of what these very young students can achieve.

“Women don’t do well in trades work like carpentry or electricity.”

Well Enough?


Carpentry and Electricity Included



In addition to receiving practical vocational training, these students are also immersed in the science of environmentalism. They are taught concepts in the making and use of earth building materials, installation and use of solar energy, efficient land use and building projects that are adapted into the AMCC campus after their completion.  My own preconceptions about the use of adobe as a construction material have changed rather dramatically since my visits here!

“Earth materials like adobe aren’t durable enough or attractive enough for serious construction.”

Attractive Enough?
Durable Enough?




But as is nearly always the case in Nicaragua, the greatest values are to be found in the people engaged in the process.  In some cases, it’s the presence of students in a curriculum that they likely never dreamed about for themselves.  Sometimes it’s the story of a student who excels in a field of study to the extent that she remains at AMCC as an instructor to other young participants who can identify with her easily, and from whom young women are at ease in following her lead.  And there is always the guiding presence of the founding generation, those whose vision and persistence and passion have blended together in a force of determination on behalf of young people’s lives throughout the area of Esteli and city of Condega.

“Young Nicaraguans  today have little ambition or drive to succeed.”

Collaborative Work
Stay Out of Their Way!




AMCC is helping their young students to recognize who they are, what they can become, that they are a part of their environment, and that they are stewards of those surroundings.  Regardless of what may be said by “others.”

Working within the education arena of Nicaragua, we find that there is much to worry about with regard to student development in the country.  Student access, student retention, availability of materials and adequate teacher training are just some of the challenges facing the country, which has slipped during recent years in comparison with the other Central American nations.  But there are also islands of hopefulness in this great sea of needs, and walking the grounds at the AMCC campus offers a rare glimpse of what could be….






The urgent need to re-invent the “fair trade movement”

The urgent need to re-invent the “fair trade movement”

René Mendoza Vidaurre

The Fair Trade movement (FT) started in 1964 within the framework of the United Nations Conference on Trade and Development (UNCTAD). Since then a number of European countries promoted the UNCTAD stores, selling products from developing countries. Then the “solidarity store” chain got started. In 1973 FT coffee began with coffee from Guatemalan cooperatives under the brand “Indio Solidarity Coffee.” In the decade of the 1980s the volume of products increased, as well as their quality and design; the solidarity stores sold blended coffee, tea, honey, sugar, cocoa, nuts, bananas, flowers…In 1988 “Fair Trade Labelling” began in Holland, and in 1997 the International Fair Trade Organization was formed – FLO for its acronym in English. Since 2012 decisions in FLO are made with 50% of the votes of organizations from three continents (Latin American Coordinator of Fair Trade from Small Producers, Fair Trade Africa and the Network of Asian Producers) that represent 800 organizations and 1 million small producers from 60 countries in Africa, Asia and Latin America, and the remaining 50% of the votes from 21 national brands.

What has happened with this large FT movement? Here, focused on coffee for didactic reasons, we present its innovative character, its later deterioration, and a path to reinvent itself.

The novelty of fair trade

Figure 1 articulo de comercio justoThe biggest obstacle for getting out of poverty is the intermediation network that combines usury, low prices and deception in the weighing and quality control of the product, and the lack of organization of the producers. FT responds to this challenge with three elements (see Figure 1). First, the member families receive credit through their first and second tier cooperatives, capital that comes from the social banking sector (9% interest rate), and from FT organizations. A good part of them pre-finance 50% of the value of the product at 0% interest, so that the producers can avoid usury and ensure product. Secondly, FT sets a minimum price of US$1.40/lb when the international prices are less than $1.40/lb, provides an additional bonus of US$0.20/lb above the market price, and for organic coffee a premium of US$0.30/lb. Thirdly, compliance with the agreements and policies for organic coffee is assured by the certifiers: FLO does it for the bonus and good operations within the cooperatives, in both cases in situ, erecting long term relationships.

This combination of commerce, financing and multinational organization of counterparts leads to the families improving their production, their lives in the family and in the community, with the FT network being a space for learning and social, economic and environmental transformation.

The deterioration of fair trade

After a half century of FT, what has happened? First, the prices to the producer in terms of the final value of coffee in the decade of the 1930s was 33% (Wickizer, 1943, The world coffee economy), 27%  in the decade of the 1970s (Clairmonte and Cavanagh, 1988, Merchants of Drink), 15-20% in the decade of the 1990s (Pelupessy, 1999, Coffee in Cote d’Dvoire and Costa Rica), 10% in 2001 (Mendoza y Bastiaensen, 2002, Fair trade and the coffee crisis in the Nicaraguan Segovias) and 12% in 2009 (Mendoza, 2012, Gatekeeping and the struggle over development in the Nicaraguan Segovias); in other words, it went from 33 to 12% over 8 decades. When we compare both chains, the prices to the producer in relative terms (%) is smaller in the FT chain than in the traditional chain, even though in absolute terms it is a little bigger; in other words, the FT coffee price to the consumer is higher, while its distribution through the chain is similar to the traditional chain. Secondly, credit gets to the member families in an unequal manner, some get nothing, no one gets it at an interest rate of 0%, others get some amount at interest rates between 12-18%. Third, the FT bonus gets to the families in an unequal manner, some get nothing, others get US$0.5/lb and others get a little more. Fourth, the complaint is that the yield (humidity and quality of the coffee) is worse than in the traditional buyers. Fifth, it is estimated that 30% of the total coffee that the members produce is sold through FT, while the export cooperatives are increasingly buying coffee from “third parties” (not members of the cooperative) who come in through the traditional commercialization network. From here, the challenge of ending usury, accessing markets and doing it through a multinational alliance is being rolled back.

The first two elements of FT were weakened, and the third is controlled by elites in the FT chain, attracted in turn by the logic of the market. FLO audits, and analysis of the social banking sector and verifications of the organic certifiers are reduced to formal elements (review of financial data, minute books and written records); in some cases without understanding that the social structures absorbed the FT chain, in other cases understanding these structures, but blocked from reporting and taking measures out of fear of financial losses, and in general keeping quiet when facts like the pre-financing that comes from the stores of Europe or the loans from the social banking sector do not get to the producers, yet they are the ones who have to pay them.

Figure 2 articulo de comercia justoFigure 2 expresses the concentration of power (capital, positions, information and contacts) from where the entire chain is managed, and the privatization of the FT brand. Seen from the region, the second tier cooperatives concentrated investments based on a good part of the bonuses, premiums and earnings, and are the “door” to the certifications, the banks and the markets. The Delegates of the first tier cooperatives to the second tier cooperatives, as well as their board members, are eternal. The administrative personnel run the second tier cooperatives, and many of them are named by national and international organizations as the representatives of their cooperatives in their organizations. The rotation and renovation of the leaders is vetoed,    because it would affect their financial income, the control of the administrative staff of the cooperatives, and the circuit of transnational power; and if that veto conflicts with the statutes of the cooperatives, the statutes are reformed.

As that power got consolidated, most of the first tier cooperatives hollowed out; they are not doing savings nor credit, some are not even collectors of coffee and their board members do not meet monthly, even though their “minutes” exist. Under these conditions these cooperatives cannot have an impact on the second tier cooperatives; if they try to, they face another wall: “FLO and the bank say that you cannot change me, because my signature is on the contracts”; if there is a change in management of someone who was a favorite of FT: “If you change the manager, we are not going to buy your coffee.” If a cooperative dares to save and manage itself: “you do not have the FT certification nor organic coffee certification and I am not going to give it to you, if you insist it will end up being very expensive financially.” If independent researchers seek information in FLO, “we only give information to the cooperative.” And, if in spite of these walls, there are first tier cooperatives that are able to get out of this power circle, their bonuses and premiums more frequently get to their members, and their credit to their members has lower interest rates.

The FT chain expresses the “law of oligarchy” that Michels in 1911 found in democratic organizations, and the logic of the markets (importers, roasters and distributors increase their control over the value of coffee, and the FT staff act out of financial interests – and over wanting to earn more Fair Trade USA and FLO separated), within a framework of mutual complicity and exclusive transnational legitimation. The paradox, a movement that got started to fight traditional commerce was absorbed by that very logic, even though in the name of the poor.

Toward the second generation of fair trade

Figure 3 articulo de comercia justoClark and Doersam (2000, open space community) say that organizations are born, grow, mature, decay and die or they change. Deterioration is the death of FT. To avoid death, we argue that FT should reinvent itself, responding to the producer and consumer families, expanding and strengthening the relationships and democratizing the FT chain. First, Solidarity Stores and first tier cooperatives should construct a space for direct communication (SS-C), including the possibility that one be a member of the other; SS-C be supported from studies coming from an alliance between a development studies institute in the north and another in the south; SS-C become a space for learning about prices, credit, distribution mechanisms for the bonus and the premium, the democratization of the FT chain…; SS-C, to the extent that it learns, influences FLO so it is transparent and shares with the public its audits and reports, transparent to businesses, certifiers, banks and cooperatives, getting beyond the myth  that “the enemy will take advantage of our information”. Secondly, FLO and the certifiers respond to SS-C, their audits and verifications contribute to good practices within the FT organizations: e.g. veto the permanance of board members and delegates as leaders for more than two periods in the cooperatives and international organizations, regardless of the reformed statutes and tricks of the elites; the FT seal and organic coffee certification is only for the coffee of the members. That the FT and organic certification be for first tier cooperatives, and at prices agreed upon with SS-C to prevent the first tier cooperatives from being excluded. Third, that the first tier cooperatives develop savings and loan services, and decide about the use of 100% of the bonus and the premium, while the second tier cooperatives specialize in coffee processing, facilitate the connection of the first tier cooperatives to markets, and support groups of cooperatives to develop services depending on the opportunities around them and their capacities.

Based on these three elements, the model would be “I support you so that you might commercialize your excellent coffee”, instead of “I buy your coffee to sell it”; the producers would recover their faith and turn in 100% of their coffee to FT, and the consumers would appreciate that they are really drinking organic coffee and that the added price that they pay is working well; systematic corruption would be avoided that is impoverishing producer families; the social banking sector would recover their loans at less cost. This route could be a way of getting beyond  Michels Law and building “societies with markets” instead of “market societies”, and with this the FT mechanism would really help people get out of poverty.

René Mendoza has a PhD in development studies, is a collaborator of the Wind of Peace Foundation (, an associate researcher for IOB-University of Antwerp (Belgium) and for the Nitlapan-UCA Research and Development Institute (Nicaragua).


When We Learn

I caught a segment on the news today that captured my attention. The piece had to do with the issue of memory loss and whether there are practices we can use to slow down the seemingly inevitable loss of memory that afflicts so many of us.  The discussion included several lifestyle factors which can affect memory strength: exercise, sound nutrition, sufficient sleep, stress control and mental stimulation such as encountered in learning something new.  This last category is the one which struck me with special impact.

I’m not sure how many retirement-age people seek out new fields of learning in their later years, but I suspect that it’s a significant number.  It may not be learning in the sense of a new language or taking up a musical instrument- as suggested in the story- but some retirees are inclined to delve into topics that they never had the time to explore when working vocationally.  The availability of extra time is simply too valuable to leave unfilled.

And what gifts such opportunity provides!  In addition to mental and memory sharpening, learning can  launch the acquisition of new skills, discovery of new outlets of expression, permit an unfolding of a new worldview, and further enrich lives that may have previously been thought to be static.  Even new careers are launched from the base of educational re-birth.  As long as the energy and desire to learn are present, transformation can happen, and at any age.

The recognition is a happy one for someone like me, on the upper fringes of middle age (whatever that is).  But following a week in Nicaragua during which our emphasis again was education development, such awareness exposes an uncomfortable inequity, another one of those troubling realities which has seemingly few avenues for redress and yet massive consequences to us all.  For in Nicaragua, like many other developing nations, access to education is limited, at best, and at every age.

 At the time when Nica children are most eager and receptive to the lessons of life from the neighborhood academy, they are all too often denied entry.  Too many are needed by their families to work in order that living necessities can be met, or they are unable to access a school with books and teachers, or they cannot afford the niggling costs of a uniform and materials.  As a result, rural Nicaraguan children have very small chances of remaining in school past the third grade, and the statistics are not improving. Another generation of so many uneducated children is an enormous burden that the country simply cannot absorb successfully, no matter how strong the optimism or how deep the denial.

Hearing from the StudentsLast week, WPF visited  the  Fe y Alegria vocational school in Somotillo, located in the far west corner of the country.  Like so much of the country, it’s a remote, rural sector, featuring high heat and ever-higher winds, few opportunities outside of “street” jobs, and a place where kids have few chances to learn much about their lives and what they could be.  In fact, most of them come from destitute families or no families at all; the street is not only where they work, but where they live.

The Somotillo Technical School is an oasis in this context, where children ranging from pre-school to high school can be exposed to the possibilities in life, away from the streets.  Young people are introduced to trades like welding, furniture-making, sewing, baking, electricity and computers.  (In one class, I inspected this computer made by the students from old parts.  Could you do that?  On my best day I could not.)  Handmade ComputerAs importantly, they are taught life skills, things like respect and healthy relationships, personal hygiene, lifestyle choices.  But most importantly, the kids are given the chance to absorb what they crave: learning and self-actualization.  Melby, perhaps as old as twelve, said it for himself: “I have done baking from my lessons in

Melby Speaks

the class and it has allowed me to sell and generate a little money for my everyday needs.”  With no one else available to do so, this free school- the only free technical school in the entire region- is helping Melby to learn the basics of self-sufficiency.

Our world requires all the collective knowledge, innovation and insight that we can possibly muster and the under-education of our future generations might be one of the most self-defeating postures ever assumed by humankind.  Issues of poverty and justice, climate change and energy, war and peace, demand intellect and vision beyond what we have at our disposal presently.  The answers to the great dilemmas of humanity may well lie in the untapped mental fertility of those for whom education is a great unknown, a process only to be dreamed of, or perhaps even feared, but never to be personalized.  The notion is frightening enough to conjure a particular vision of Hell, where humans there discover that they had all the answers to life itself within their collective grasp, but failed to see them due to their own shortsightedness.

Truth and irony abound in this education tale.  The truth is that the capacity for learning- indeed, the love of learning- never goes away during our lifetimes.  It may become dormant for lack of use or opportunity, but it is as central to our beings as the heartbeat itself.  The irony is that while most in this country have endless access to even the narrowest fields of learning, we tend to take such privilege for granted and are  willing to forego such capacities in favor of less dynamic pursuits.  And meanwhile, many of the young children of Nicaragua are desperately seeking even the smallest chance to advance their understanding of the world around them. It creates an immense imbalance, one that would seem worthy and capable of address, if we were collectively motivated to do so.

Leave it to a week in Nicaragua to teach me a new perspective.  I am grateful for the gift of life-long learning, a gift intended for all….

Intensity to Learn




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.



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[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).

Yesterday, Today, Tomorrow

I will be leaving a corporate Board of Director’s seat in a few weeks, ending about 28 years of service with that group.  “That group” is Foldcraft Co., the firm for which I worked as an employee for more than 30 years, as well.  To have remained on the board for so long has been a privilege as well as a point of pride; that any organization would tolerate my presence and outlooks for so long defies realistic expectations.  But I have chosen to leave under my own terms and timing, which seems a fitting conclusion for so long a tenure.  The change that it will create is an essential one. And therein lies a lesson for most organizations, I think, including ones in Nicaragua.

The lesson has everything to do with succession, that final piece in a sometimes long term of service wherein the responsibilities and obligations, the voice and the stewardship for the organization is passed along to whoever follows.  It’s likely the most overlooked responsibility leaders deal with.   That’s not to suggest that leaders don’t think about and plan for succession at all, but that they simply don’t prepare for the eventuality nearly well enough.  That reality is why leadership succession represents one of the most vulnerable times in an organization’s entire life, and why organizational failures often occur within a short time after a succession has taken place.

I have often stated that perhaps the most important accomplishment I ever achieved during my employment at Foldcraft was turning over the leadership of the Company to the “right” successor.  I still believe that to be true.  But it also must be recognized that the effectiveness of that transition was years in the making, wherein senior authority and leadership became increasingly discussed, shared and strategized.  In fact, one could argue that preparation for that particular succession evolved over nearly fifteen years.  Successful succession in that instance was not an event, but rather a process of orientation, teaching, seasoning, making and learning from mistakes.  Organizations rarely have fifteen years to prepare for a shift in leadership, but they owe it to themselves to be constantly preparing for the inevitable change.

And when the planning and preparation have been well provided for, the change in boardroom or management or committee setting can be- in fact, should be- a blast of fresh air.  I hope and believe that my participation in recent Board meetings has not been stale or redundant.  (You’d have to ask the others about whether that’s true or not.)  But I also hope and believe that my successor will bring new chemistry to the process, challenging the way that conversations have evolved over the past 28 years, lending insights that I might never have had, and seeing the future of the organization through a new lens.

If, over the past years, I have brought any positive elements to the organization, I will trust that those characteristics will have impressed themselves on my colleagues and they will blend those singularities with the freshness of the newcomer.  It’s the best of evolution, and our organizations deserve that step up in their continuity.  No one is good forever, and even if they could be, there will come a time when the organization needs something else, something new.

One of the great disservices which befalls an organization is the perpetuation of same leadership.  Leaders are comprised of the sum total of their life experiences and lessons.  It’s the stuff from which they draw conclusions, make judgments and see the world.  But no one possesses perfect vision or all-encompassing experiences, and by definition that means any leader is bound to misinterpret or misread from time to time.  The capture of an alternative outlook sometimes can only be discovered through new insight born of different intelligence.  Hence, the necessity for superb succession.

Some have argued that the risk of succession is primarily because the new leader might not possess the same values and perspectives that allowed the organization to function well in the first place.  And that’s true, if the successor is relatively unknown to those who would make the appointment; any governing body’s primary obligation is to have a pretty intimate knowledge of its incoming leaders.  Where that knowledge exists, the value of new energies will far outweigh the risk of detrimental decisions.  (In any case, no leader should lead without checks and balances and the continuing governance structure should always provide a safety valve against an ill-advised direction.)

I’ll be spending time visiting cooperatives during the coming weeks and one of the essential qualities I hope to see is the provision for what happens when the leadership shift occurs.  First of all, will one occur?  And if so, under what process and preparedness?  It may not feel like a priority to anyone today, but I can guarantee that it will be, and sooner than most are prepared for.

Yesterday, I remember wondering about the future and what it might hold for my organization.  Today,  as I prepare to leave it, I recognize all the promise and challenge once imagined in the past. Tomorrow, I hope neither I nor the rest of the organization will regret any lack of preparedness for what is to come….