As a part of his search for an appropriate socio-economic-political system, man has discussed and experimented with the co-operative form of organization in many countries. In India also, the co-operatives have occupied a significant space in the discourse and experimentation on socio-economic reforms or social reconstruction in this century. After 1991, the changing role of co-operatives and the reorientation needed in them in the light of economic reforms has become an important topic of discussion.

There has been great optimism about co-operatives in the minds of co-operative leadership. There is a semantic strength in the world “co-operation” because of which co-operatives evoke a favourable response among the people. While generally people have argued for co-operatives as a solution at the micro and meso levels, some thinkers have presented a vision of the Co-operative Commonwealth (CCW) as a superior alternative to the existing major socio-economic systems.

Despite the efforts of governments and co-operators, the benign impact of co-operatives on the life of society has remained limited in all countries. A great deal of empirical literature on all types of co-operatives in all countries has highlighted that the co-operatives have had only a limited success in terms of even the conventional economic criteria, and that even a beginning has not been made anywhere in the world towards the creation of a Co-operative Social Order, although co-operatives have been in existence for the more than hundred any fifty years by now.

It is in this context that the present Paper seeks to review the principles and role of co-operatives in India. Towards this purpose, the paper seeks to discuss questions such as the following: what are the origins and historical antecedents of co-operatives? What exactly is the meaning, content and purpose of co-operation in co-operatives? What are the major principles and objectives of co-operatives? What is their philosophical and motivational foundation? What is the concept of the Co-operative Commonwealth? What are the conceptual and performance problems of co-operatives abroad and in India.

The paper is divided in three sections. In Section I, we briefly discuss the meaning, evolution, principles of, and the case for co-operatives. Section II discusses certain important conceptual and other problems of co-operatives. The summary and conclusions are stated in Section III.

After having discussed the nature of and the case for co-operatives, we highlight hereafter certain important problems or points of weaknesses and limitations of co-operatives which have been discussed by various authors.

1. Many of the principles of co-operatives enunciated by the ICA make them only marginally different from the partnership firms and joint-stock companies in respect of organization, objectives, and attitudes. They relate primarily to organization and management and they are open to diverse interpretations and reservations. For example, the principle of open membership tends to make the size of co-operatives unwieldy, and if this principle is discarded, they become closed-ended organizations or the preserves of vested interests. The basis of sharing the gains among the members of co-operatives does not come up to the ideals such as “to everyone according to need, and from everybody according to capacity”, and trusteeship. The principle of mutuality is compromised because the governments and international development and financial agencies often finance co-operatives and prescribe certain rules and regulations. Similarly, the co-operatives now cover a number of establishments, which are non-mutualities.

   The principle of voluntariness is also underminded because quite often the co-operatives are sponsored or promoted by the state, and incentives, inducements, concessions and privileges are offered to increase their membership. Generally, the most disadvantaged and the poorest have not been able to take to co-operatives spontaneously and successfully. The co-operative movement has often suffered from the lack of real popular or mass base; it is neither fully understood nor widely supported at the village level. The story of co-operatives has often been a “top-down” and not “bottom-up” story. The co-operatives in a number of cases have not succeeded in enlisting the enthusiasm and active participation of their members. They have rarely emerged in response to the felt needs of the members, and through their initiative (Baviskar, 1980, p. 3). The main body of principles and practices of co-operatives have been developed as per the situations, conditions and requirements of Western countries. In India, consumer cooperatives appear to have been imported from England, producer co-operatives from France, and credit co-operatives from Germany.

2. The admirable and desirable value such as co-operation tends to lose its potential when it is formalized into an institution or organization. The co-operative organization may not do good in the way people s latent co-operative capacity or propensity can because of the bureaucratic formalism which characterizes the former. Regulations, managerial hierarchies, committee rule, paper work, and so on make it difficult for all the people to participate, and participate equally, in the affairs of co-operative institutions. The co-operatives generally tend to be either “member-controlled” or “techno-bureaucratic-controlled” organizations which many times suffer from the “institutionalization of suspicion”.

   The institution, power, and money are mostly inseparable. In institutionalized co-operation, money, authority, power, usually become more important guiding forces, and pragmatism becomes as overriding consideration. The institutions have their own economics, politics, and power dynamics; they may create appetite for power and wealth, and scope for misuse or abuse of power. Therefore, the wise have advised, as far as possible, the freedom from money (Kanchanmukti) and freedom from institutions (Sansthamukti) as being necessary for social development.

   The real co-operative relationship among people can be achieved mostly in informal arrangements when co-operation involves altruism, compassion, service and sacrifice; when there is “working for others” than “working with others” to fight or deal with the “enemy” or “others”. The formal co-operatives, which are specific in character, purpose, and activity operate in the framework of individualism, market, and State. The growth and spread of formal co-operatives in practice has generally given rise to co-operativism or co-operative capitalism. The cooperatives have generally evolved into powerful and dominant economic-political institutions in which the masses have a place or participation essentially as instruments. It has been rightly pointed out that the formal co-operatives have grown alongside a decline in the sense of social and religious kinship and communitarian ethos (Namjoshi, 1977, p. 21.).

   The very move to institutionalize any principle generally stems from such motives as would vitiate that principle. The consumers, borrowers, farmers, and others mostly form cooperatives to maximize their group self-interest, which means a shift from the “ethos of co-operation among all” to “a cooperative of some”. The institutionalized co-operation may conflict with other important values such as “small is beautiful” and “self-consumptive production” also. The dangers of institutionalization of co-operation can be seen in the many cases of continuous, often violent, feuds among the members of various types of co-operatives, the frequent member-requested intervention by the government “administrators” in the running of co-operative societies, the phenomenal growth of co-operative courts and the cases in them, and the greed, corruption, and the pursuit of power in many co-operatives.

3. Co-operatives implicitly accept the philosophy that there is an inevitable conflict, antagonism, struggle, war between the interests of different groups, sections, communities, classes, and other similar social divisions. They try to provide an institutional mechanism to organize people of given interests to protect, safeguard, promote, and fortify their self-interests. They hardly promote the interests and strivings of the society as a whole. The vision of co-operation between all interest groups based on the motivation of altruism, service is generally absent in institutional co-operation. A recent study of the co-operative movements around the world has highlighted the absence of inter-co-operative co-operation and collaboration. Despite the obvious advantages, the co-operation among co-operatives is uncommon on either the national or international scene. The “consumer-production dichotomy” underlines the working of cooperatives (Plunkett Foundation, 1995, pp. 1–2).

4. The co-operatives can play only a limited role in a radical social transformation because they are essentially business and commercial enterprises. As Mark and Walras have pointed out, they came into being to enable certain specific interests to accumulate capital, to become entrepreneurs, to secure an extension of State activities and so on (see Namjoshi, 1977, pp. 28–29). Their guiding value system comprises efficiency, productivity, surplus, dividends, and similar other values. They do not come into being to address broader or wider social, economic and political issues. Liek the corporates, they also suffer from the problems of agency costs, moral hazard, adverse selection, and x-inefficiency. Even if they are associations, they are “common interest-group associations” and not “social entity associations”. Consequently, they tend to safeguard the interest of their members even at the cost of wider social interest, and their mutuality often does not contribute to community interests.

   As business enterprises, the motivational foundation of cooperatives is the maximization of economic or pecuniary selfinterest. The motivation of co-operatives namely, “mutual aid for individual gain” is distinctly different from the ideas of socialization and communitarian living. The widely accepted definitions of co-operatives reflect this quite well. It is said that “co-operative is self-help made effective by organization”, or “co-operative is a form of organization wherein persons voluntarily associate together…. for the promotion of economic interests of themselves”, or “in its broadest sense, a co-operative is a voluntary association in a joint undertaking for mutual benefit-admittedly a lower ideal than a joint effort directed at the common good” (See Hough, 1966, p.41).

   The incentive system in co-operatives, as under private capitalism, is one of “positive economic gains” and “negative sanctions”. The co-operatives also foster acquisitive, accumulating and achieving mind-set. The internal and external performance appraisal of co-operatives (by management, State, committees, academics) is done in terms of narrow economic indicators such as volume of output and sales, efficiency, productivity, diversification, successful competition, foreign exchange, wages, prices, surplus or dividend, and size. Generally, the co-operatives neither came into being, nor are they being run, nor are they being assessed in terms of vital broader issues such as the structure of production, distribution of goods, health of people, social welfare, ethics and morals, environmental and ecological impact, and so on. It has been put rather harshly that co-operatives are a capitalist wolf clad in an egalitarian rhetoric (Robertson, 1984). Robert Owen had termed Rochdale Pioneer s Consumer Society as an experiment in jointstockkeeping rather than as a co-operative (see Victor, 1979, pp. 70–74).

5. Co-operatives have frequently failed in offering right solutions to the problems of what to produce?, how to produce?, and for whom to produce? In many cases, they have not been producing, on priority basis, those goods and services which meet the basic or primary needs of the poor masses. They have, often enthusiastically and without any qualms, entered into the production of luxury and harmful goods. The have been often instrumental in promoting the structural retrogression in various economies. They have contributed to the creation of mass consumption societies, particularly in respect of products of display, entertainment, and ostentation.

   Similarly, the co-operatives have generally failed to promote appropriate technology, indigenous technology, and indigenous knowledge systems. They appear to vie with corporates in using large-scale, high, sophisticated, capital-intensive, energyintensive, labour-saving technology. Further, the principles of social justice or distributional justice are not the core principles of co-operatives. They have been found to be a rather weak means for countering poverty, exploitation, and inequality. It appears that within the co-operatives also, perhaps only the voting power is equal, while other things such as distribution of surplus, control, participation are unequal.

6. Sri Aurobindo once said that many problems faced by man inter alia are due to his creation of organizations, structures, institutions which are so large-sized and complex that his limited intellect cannot manage them well. Like certain State and private corporate sector enterprises, many co-operative enterprises also have become huge, multi-purpose, centralized, and bureaucratized organizations, which operate beyond a village in the national and international arena. In their quest for tapping the economies of scale, co-operatives have exhibited a tendency towards bigness and centralization. They have often been instrumental in reducing the number of individual proprietorship form of business organizations.

   In certain fields they have tended to become either oligopolies or monopolies. In India, for example, they have entered into monopoly procurement, trading, and marketing of commodities such as cotton, milk, onions, and jowar. The organizations such as Maharashtra State Co-operative Marketing Society, Maharashta State Co-operative Marketing Federation, National Federation of Co-operative Sugar Factories, and Federation of State Co-operative Banks are huge organizations with Statewide and Nation-wide reach. They are characterized by the horizontal and vertical integration in which the responsibility, decision-making power, and overall management and control are centralized at the apex level.

   The federal structure of co-operatives or federalism in the co-operative sector has not helped to solve the problems of centralization. The co-operative federations have tended to reduce the democratic content and mutuality in the co-operative movement. The upper tiers or federations do not deal with the individual members of the co-operative societies. The existence of the district-level, State-level, and National level co-operatives and their federations has made co-operatives huge, complex, and impersonal superstructures in which there is little personal knowledge, acquaintance, and relationship among the members. It has been found that in USA and Denmark, the main bulk of co-operative work and the responsibility to take decisions have been transferred from the small local units to the larger federal organizations (Victor, 1979, pp. 74–77). In UK, the functioning of co-operatives as private microcosms of ancillaries to the national democracy has become much muted and weakened. The participation of members in meetings has declined, and their apathy has increased in large co-operative societies. In India also, the democratic control is nominal, it lacks vigour and vitality, and there is little real internal autonomy in the functioning of large-sized co-operatives and co-operative federations (Krishnaswami, 1976, pp. 4–6 and p. 235).

7. It has been pointed out by some that co-operatives the world over have entered into the politics of distribution, fixing prices, and location of factories (Curtis, 1991, p. 62). A study of marketing co-operatives in Tamil Nadu in India has revealed that the influence of the Central and State government in these institutions has increased over the years. These co-operatives have been unable to eradicate unnecessary middlemen, and yet, they have been perpetuated and expanded with government subsidies year after year (Hariss, 1984, p. 220).

   There is evidence to show that co-operative farming does not result in the development of agriculture in general and small farmers in particular. Where the decision to joint farm cooperatives or not lies with the peasants, they shy away for such co-operatives. If the co-operative farms do come into existence, they disintegrate soon enough. If they do continue to function, their productive performance hardly ever matches that of wellmanaged private farms. The causes for these are embedded in the structural features of agricultural co-operatives (Deshpande, 1977, pp.1–5). A study of forest co-operatives in Gujarat has shown that (a) they have undertaken ruthless destruction of the forests; (b) they do not involve the poorest sections of society in any significant way; (c) they frequently pay their labourers below the legal minimum wage, and (d) they have not done any better than commercial organizations such as Forest Corporations, and contractors or middlemen in respect of social welfare (Dogra, 1986, p. 1884).

   The evidence on co-operative sugar factories is equally revealing. In Maharashtra, they account for hardly three percent of the total cultivable area, but they use more than seventy five percent of water. They have strongly opposed the Government policy for equitable distribution of water even during drought conditions. They indulge in cutthroat competition and maintain private “armies” which they use to compel farmers to deliver cane to themselves. They compulsorily deduct a part of the final price of cane paid to the grower-shareholders and credit this money as contributions to the public and private trusts which are controlled by their leaders. The “Sugar barons” or “Sugar Samrats” occupy top positions in co-operatives year after year (for, say 25 years), and even pass on their positions to their children and relatives. They have set up distilleries in a big way, and they are making huge profits by selling many varieties of liquor. The co-operative sugar factories have brought about a change in the structure and style of politics in their areas of operation, and a symbiotic relationship between co-operatives and politics has grown in which the two sustain each other. They have taken politics to the villages in the worst forms, and have condemned the rural society to permanent factional feuds, rivalries, and political competition. The enourmous political power wielded by co-operative “leaders” coupled with the interlocking positions occupied by them in the other authority-structures has increased inequalities in the distribution of power. The elections in these co-operatives are fought viciously by using any and every means. The sugar cooperatives lack internal democracy; they are nowhere near the idea of the co-operative commonwealth (Baviskar, 1980, p. 1 and pp. 70–186).

8. Co-operatives, like public and private sector enterprises, are dominated by leaders, bureaucrats, and experts. They are managed by salaried staff, which is not accountable to members who, in fact, become subordinate and subservient to this staff. The bureaucrats in co-operatives also have great power, high status, sense of superiority, attitude of superciliousness, and contempt for the masses. They are appointed by an outside authority and they cannot be removed by the members.

   The “management” of co-operatives has become more important than member initiative and mutual help and trust. The co-operatives are not free from the culture of secretaries, technicians, managers, consultants, advisers, and so on. They have come to depend on non-local leadership, the formal training of which has become a huge activity. Co-operatives have contributed to the deskilling of indigenous societies; they set out to organize small, poor, local people but have ended up by destroying the local people s roots, skills, and value system.

9. Co-operatives have not been in a position to mitigate the problems of the “market system”. As said earlier also, in their efforts to protect certain economic interests and to act as the “countervailing power” against the private sector monopolies and oligopolies, often they themselves have become oligopolies and monopolies. There is really little to choose between the private, State, and co-operative imperfect markets. The price levels arrived at by co-operatives tend to be quite similar to those arrived at under the private competitive capitalism. Cooperatives do not reject, either in principle or in practice, the philosophy and psychology of competition, incentives under competition, and competitive pricing. They can hardly ever develop into “an alternative” to the Market System.

   At the same time, they can hardly contribute to the minimization (withering away) of the role and power of the State. As it has been pointed out, it is only when the widespread State machinery has reconstructed the village and villager that the voluntary co-operative efforts by the people themselves can make further headway with adequate grants and subventions from the government (Hough, 1966, p. 317). The co-operatives have become State-sponsored and State-dependent institutions everywhere. The high level of State intervention and State interference is regarded as essential to remedy various problems of co-operatives.

   The State generally does not regard co-operatives as an independent alternative system of self-help and grass-root democracy. Although co-operatives sound non-contentious, fair, democratic, and participative with rules prescribed by the authorities, burdened with government funds, and supervised by government personnel, they are at best some kind of a branch of national administration (Curtis, 1991., p. 52). There has been a two-way relationship between the State and co-operatives. While the co-operatives are often a creation of official action, they have, in turn, generally acted as the instruments or agents for implementing the official policies. Experience shows that the co-operatives do not stand apart from the State; they work closely with the State.

   The evidence from the countries such as France, Mexico, Italy, Turkey, Japan, and India shows that co-operatives abet and consolidate the State. As Gadgil has highlighted, “co-operation in these countries was … a formal apparatus … for giving effect to State policy. Ordinarily, the initiation of the cooperative effort was undertaken as a part of an official programme” (GIPE, 1975, p. 23). In China, both before and after 1950, the partnership between the government and the co-operatives has been such that co-operative societies are so only in name. The Agricultural Producers Co-operatives are really agricultural communes whose annual plans are approved, whose priorities are determined, and who are financed by the State and Communist Party (Victor, 1979, pp. 83–85).

   In India, the All-India Rural Credit Survey Committee had categorically recommended that if co-operatives are to succeed, the State should help them as a partner. The Third Five-Year plan also had stated that in a planned economy, co-operatives should progressively become the basis of organization in certain branches of economic life (Hough, 1966, pp. 386–388). The cooperatives in India are said to have been mostly set up by the Registrars and the resolutions and laws of the State; they have been administered, almost wholly, by the huge posse of Registrars, Assistant Registrars, and Auditors who inspect, supervise, monitor, control, and direct all types of co-operatives. The co-operative movement in India has come to be known as “Co-operative Registrars movement”. What has existed in India all the time is not so much “the movement through community co-operation” but “the State co-operative policy”. The cooperatives in India are said to be “public sector co-operatives” (Hough, 1966, p. xii).

10. Although the vision of CCW is very attractive, so far it remains quite vague. As it has been pointed out, the consensual conception of CCW has not been spelt out by anyone so far (Namjoshi, 1977, pp 41–44). The CCW is expected to operate as a part of the planned economy. In CCW the State would provide not only legalistic structures and regulatory systems but it would also perform many more functions. Given the role assigned to modern democracy, federalism, welfare functions, planning, and public utilities, CCW cannot be said to be much different from the Mixed Economy or Welfare State.

The co-operatives have been in existence in the World for more than 150 years now. The empirical evidence from all the countries including India on all types of co-operatives shows that they have succeeded in achieving most of their objectives only to a limited extent, and they have not been able to develop into an alternative social order such as the cooperative commonwealth. In the 1950s, it was said that the “co-operation has failed but it must succeed”. However, the limitations of the basic principles, motivations, and goals of institutionalized co-operation imply that even if the co-operatives succeed, it would be so in achieving rather limited and sectional objectives. In future also, the co-operatives can hardly develop into an Alternative Social Paadigm, which can effectively solve today s urgent problems such as poverty, inequality, environmental degradation, and conflicts of a diverse nature. Some of the problems of typical co-operatives today are: the multi-purpose vertical federal structure, concentration and centralization, State-sponsorship and Statedependence, top-to-bottom approach, outside leadership, lack of spontaneity, failure to serve the neediest social strata, commercialization, agent-status, consumerism, power politics, and corruption. The institutionalization of the principle of co-operation has perhaps tended to result in the emergence of an ideology of co-operativism.

References