Business Page   Burnham's legacy: The Co-operative movement

Sunday, August 7th, 2005

 

                                      

                                                Forbes Burnham

             

Introduction:

Had it not required a referendum, Guyanese it seems would have long since got rid of the word 'Co-operative' from the official name of their country. It is another of the initiatives with which the late and first President of Guyana is indelibly associated largely because the co-operative movement is seen to have failed in Guyana. Few co-ops, as the entities are called, have survived but the Fishermen's Co-operative Societies of Georgetown, Berbice and Essequibo, the Police Consumer Co-operative Society and a number of credit unions still survive with varying degrees of success. In fact so tainted is the movement that we hardly recognise that our leading housing entity, the New Building Society, operates under the principles of the co-operative movement even though it does not fall within that statutory framework.

The co-operative movement plays a major role in poverty alleviation not only in poor countries of Asia and Africa mainly, but in the UK as well where the co-operative movement was born in the eighteenth century with the formation of the Rochdale Friendly Co-operative Society formed by a number of workers rendered jobless as a consequence of the effect of the Industrial Revolution on the woollen and cotton industries in England.

It has had more than one hundred years of success in India, and in South Africa the movement is so important that it is the subject of a direct ministerial portfolio. In India the co-operative is recognised as having played a pivotal role in that country's dairy production, it is big in housing and in the credit movement and even in the market-driven USA, a number of financial institutions are co-operatives.

Poverty reduction:

Yet, even as we discuss our strategies for poverty reduction we ignore the potential of the co-operative movement to its alleviation. I have argued that what we need is not a strategy for poverty alleviation but an agenda for economic growth. Yet I concede that for the moment the rate of economic growth is too slow to lift the living standard of the very poor in the country, particularly in the rural areas. The experiences and examples where genuine poverty reduction has taken place make a compelling case for the co-operative movement as a critical vehicle.

The co-operative principle is quite simple and is based on a few fundamental realities:

1) The poor and powerless are poor and powerless because they lack access to resources. By association with others, however, they can pool and or access those resources and therefore attain the material rewards available to the more fortunate in the society.

2) Poor farmers will generally be poor producers and a poor fisherman's catch will be no more than can feed his family. The opportunities for capital accumulation or formation are severely restricted. Yet the capital requirement of the poor is not vast sums of money but modest sums which are available in their very communities.

3) By its very nature, the movement is co-operative and therefore enjoys a different form of organisation. It is one person, one vote, no major shareholder and is very much more democratic in its administration than the typical private sector, profit-oriented organisation. It is an exercise in empowerment, a prerequisite for poverty reduction.

4) The poor, no matter that they may constitute a major segment of a society, live on the margins of that society which structurally and otherwise discriminates against the poor in the allocation and distribution of resources.

5) The co-operative movement reflects the values of self-help, self-administration, self-responsibility; open and voluntary membership, democratic management and control; one member-one vote election of office-bearers for a limited term of office; consensus forms of decision-making; limited return on capital and political neutrality.

Origins:

Our own co-operative legislation is very typical of the British style of legislation with the characteristics of a 'development law,' i.e. a law designed to promote development in a planned direction by education of co-operators and encouragement of co-operatives. And we support this type of legislation with tax benefits by exempting from taxation the income of co-operatives. The poor need to stop complaining about who pays the taxes and who gets the tax benefits and take advantage of the incentives that are available to them.

The post-slavery society was largely a co-operative society with the purchase of estates facilitated and financed by pooling the meagre resources of the former slaves. With the formalisation of the co-operatives, the Registrar of Co-operative Societies'(RCS) original function was more like a mentor, advisor and promoter of development entrepreneur, but as co-operatives failed and more regulation and supervision became necessary the registrar was increasingly seen as a supervisor and policeman.

His function was to register new societies, to audit existing societies, to carry out enquiries in case of irregularities discovered during the course of audit, to dissolve and liquidate societies either on the demand of co-operators or ex-officio and to settle disputes within and among co-operatives, touching the business of a co-operative society (excluding access to court). In addition, the RCS had the overall responsibility for sound development of co-operatives. For this purpose he developed non-statutory powers supplementing his statutory powers, implied and deemed to be covered by the law. The most important non-statutory powers were to carry out inspections outside audit (surprise inspections, routine inspections), to attend meetings of co-operatives and to influence the agenda, to make potentially dangerous decisions of co-operative office-bearers subject to his prior approval and to remove unfit officers.

Burnham's experience:

Despite the obvious benefits, as we have seen under President Burnham, co-operatives promoted for purposes other than the pursuit of the interest of all their members, eg to mobilise for political purposes, to target resources or to control and distort production as in the case of some producer and marketing organisations, are unlikely to last. The best guarantee of success is if the co-operative enables its members to gain access to knowledge, markets and credit, pool resources and to build up countervailing power against traders and financial service providers, and initiate processes of mutual learning, knowledge sharing with promoters and innovation at peoples' own speed.

Apart from the low political morale of that era, the failure of co-operatives during the Burnham administration was also more systemic and due in no small measure to lack of experience and the overnight manner in which we attempted to institute a formal co-operative arm to the economy. The functions of the development entrepreneur and mentor did not fit into the career structure of the public service operating in a closed department, but required specialised training and skills which could only develop with years of experience. Instead of having this at its disposal, the co-operative department was hardly seen as a career of choice but a place for low-paid officers who were required to work long hours, travel and stay away from their base, all the while expected to remain enthusiastic co-operative promoters. It just could not happen.

The bad experiences, a commitment to a market economy and the mistaken belief which many policy-makers have that trickle-down economics work, make a come-back for the co-operative movement very doubtful. But the value of the co-operative movement is too important to ignore. The fact that it failed under one political dispensation is hardly grounds for ignoring a tried and tested vehicle of poverty reduction. It has to be approached differently.

Conclusion:

The structure and work of the Co-operatives Department need to be reviewed and more resources made available to it to promote the concept of the co-operative. It will need persons with entrepreneurial talent and a career structure that keeps the trained officers. It must be headed by an experienced administrator with specialist knowledge in promoting development and must not be required to become directly involved in matters of indoor management of co-operative societies even where the registrar has to take control because of breaches by the management. The parallel in the private sector is the appointment of a receiver and any such work should be farmed out to independent administrators. Where the registrar becomes involved in the organisation and management of societies under their supervision, they lose their neutrality as advisers, auditors and arbitrators, and the advice becomes an order.

In a paper marking the one hundred years of the Co-operative Society Act in India, Professor Hans H Muncker of the University of Marburg noted that co-operative officers doing field work have to be well trained, convinced of the importance of their task, highly motivated and with room for their own initiatives. He pointed out that without reasonable pay and career prospects the best officers would leave and the remaining staff will be a negative selection of persons accepting the bad service conditions because they have no alternatives.

Let us give the co-ops a try even if we change the name of the country.