Finance

The impact and significance of co-operatives

November 27, 2014
Beeld: © Nationale Beeldbank

The co-operative organizational model is back on the world stage. To date, many new ‘social’ co-operatives in the areas of energy, health, care giving, education, employment and housing are established. This is due to the fact that many governments have to cut costs drastically, whereas the demand for social services will grow explosively in the coming years, also because of demographic developments (an ageing population). And the private market sector is not very eager to fill this gap.

Inefficiency is not an option

Many people also have built up an aversion towards large institutions and professionals. It is becoming increasingly clear to ‘outsiders’ that co-operatives are in fact modern and commercial organizations. Co-operatives simply cannot manage their operations inefficiently, because they have to compete with other two dominant organizational forms, the ‘capitalist’ and ‘public’ organizations. They must also be innovative and financially sound, and offer quality services and products at fair prices. Otherwise, very few people will be inclined to become a customer first and subsequently take the step to become – or remain – a member.

Socially embedded

Co-operatives are actually ‘dual-bottom line’ institutions. They also fulfill other equally important objectives than mere shareholder value creation. This suggests that financial performance and economic efficiency are neither the only nor the ultimate standard of assessment for co-operatives. This feature sometimes led to the false conviction that co-operatives are some exotic form of ‘philantrophic’ organizations that mainly exists to achieve social objectives, which simply could not be viable. Co-operatives are in effect perfect manifestations of TIAS’ values and proposition: co-operatives are economic businesses and firmly embedded and justified by society, i.e. their members are customers and owners! 

One in six

Recently, some academic institutions have undertaken a heroic attempt to collect data and build up a database on co-operatives. The figures reveal that over one billion people are members and clients of co-operatives. One in every six people on average in the world has membership or is a client of a co-operative. Regarding size, 1,465 co-operative firms across 42 countries with a turnover of more than US$ 100 million are identified. This refutes the myth that co-operatives are small businesses and operate at the margins of the economy. On the contrary, they constitute important economic forces with market power.

Based on evenly weighted average of the membership to population ratio, the share of co-operative employment in total national employment and the co-operatives’ gross revenues as a percentage of GDP, it appears that New Zealand is the most co-operative country in the world. And the Netherlands? A few people would have guessed that the Netherlands occupies the sixth position on this global ranking!

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