Cooperative Ways to a Stronger Economy

Co-ops — just like people — can get more done together than anyone can do alone. They come in many forms, and are more common than you might imagine.  

Guest article

by Sarah van Gelder

Our little group of a dozen families was running out of time. After meeting every weekend for three years to plan our hoped-for cohousing community, and after investing much of our savings to acquire a few acres of land, it looked as though our dream would fail. We couldn’t find a bank that would finance a cooperative.  

It was our local credit union that saved us. “You’re owned by your members? What’s

so odd about that? We’re owned by our members,” the president of the Kitsap Credit Union mused.

With that financing, we were able to build 30 affordable homes and a common house, and to make space available for gardens, an orchard, a playfield, and a tiny urban forest. In 1992, we moved into Winslow Cohousing, the first member-developed cohousing community in the United States.

Co-ops—just like people—can get more done together than anyone can do alone. The good news is that co-ops come in many forms and are more common than you might imagine. They are owned by workers, residents, consumers, farmers, craftspeople, the community, or any combination. What they have in common is that they circulate the benefits back to their member-owners, and these benefits ripple out to the broader community. As Marjorie Kelly explains, cooperative forms of ownership allow the well-being of people, the planet, and future generations to take priority over profits for shareholders and executives.

This is an exciting moment for cooperatives. A growing disillusionment with big banks and corporations is sparking interest in economic alternatives, and new opportunities are opening up:

• The United Steelworkers and other unions are exploring worker-ownership as a means to assure stable, living-wage jobs that can’t be outsourced to low-wage regions.

• Communities seeking alternatives to profit-driven corporate health insurance are forming health care co-ops.

• Hundreds of thousands of people who “moved their money” from Wall Street banks to local banks and credit unions now have a say in how their money is used.

• Consumers are turning to co-ops like Equal Exchange for ethically produced goods, and Equal Exchange, in turn, supports co-ops made up of farmers and producers in some of the world’s poorest regions.  

These cooperatives can be powerful forces for change. Vancity, Canada’s largest credit union, targets its investments to local enter- prises that have positive impacts. It divested its holdings in Enbridge due to concerns about the proposed Northern Gateway pipeline. And it adopted a living wage policy that applies to its own employees and to service providers.

Cooperative structures can strengthen an economy. For example, Italy’s Emilia Romagna region, where about a third of the economy is cooperative and has far less inequality. Most people there can find living wage jobs, and quality of life is high.

Last year, Winslow Cohousing celebrated its 20th year, and the grown sons and daughters of the early members returned to share what it meant to them to grow up in a community, surrounded by love and support.

My hope? That many more children have the opportunity to grow up in cooperative spaces; that more adults get the respect and empowerment that comes from working in cooperatives and buying from co-ops; and that over time, diverse forms of democratic ownership displace predatory capitalism as the foundation for our economy.

This article first appeared here

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Sarah van Gelder wrote this article for How Cooperatives Are Driving the New Economy, the Spring 2013 issue of YES! Magazine. Sarah is executive editor of YES!

Political Democracy can and will be fortuitous when Economic Democracy is established.   Explore this and other articles covering alternative economics, ethical leadership, economic democracy, and a society without the weal and woe of social and economic vicissitudes HERE   How does PROUT compare or contrast with capitalism or communism?  Explore the answers HERE What are essential ingredients assuring progressive sustainability bereft of the vicissitudes of economic or political predation, privation or disparity?  Learn more HERE   http://gplus.to/ProgressiveSustainability

The Economy: Under New Ownership

Cooperatives

What if we all owned and oversaw the banks, by vote, and had a say in decisions made by retailers where we shop?  What if we ran our workplaces without corporate CEOs?  

How cooperatives are leading the way to empowered workers and healthy communities.  

by Marjorie Kelly

Pushing my grocery cart down the aisle, I spot on the fruit counter a dozen plastic bags of bananas labeled “Organic, Equal Exchange.” My heart leaps a little.  I’d been thrilled, months earlier, when I found my local grocer carrying bananas—a new product from Equal Exchange—because this employee-owned cooperativeme outside Boston is one of my favorite companies.   Its main business remains the fair trade coffee and chocolate the company started with in 1986.  Since then, the company has flourished, and its mission remains supporting small farmer co-ops in developing countries and giving power to employees through ownership.  It’s as close to an ideal company as I’ve found.  And I’m delighted to see their banana business thriving, since I know it was rocky for a time.  (Hence the leaping of my heart.)  

Employees at Equal Exchange, the oldest and largest fair-trade coffee company in the nation.  It is also a worker-owned cooperative.  Photo by Paul Dunn.

I happen to know a bit more than the average shopper about Equal Exchange, because I count myself lucky to be one of its few investors who are not worker-owners.  Over more than 20 years, it has paid investors a steady and impressive average of 5 percent annually (these days, a coveted return).

Maneuvering my cart toward the dairy case, I search out butter made by Cabot Creamery, and pick up some Cabot cheddar cheese.  I choose Cabot because, like Equal Exchange, it’s a cooperative, owned by dairy farmers since 1919.

At the checkout, I hand over my Visa card from Summit Credit Union, a depositor-owned bank in Madison, Wis., where I lived years ago.  Credit unions are another type of cooperative, meaning that members like me are partial owners, so Summit doesn’t charge us the usurious penalty rate of 25 percent or more levied by other banks at the merest breath of a late payment.  They’re loyal to me, and I’m loyal to them.  

On my way home, I pull up to the drive-through at Beverly Cooperative Bank to make a withdrawal.  This bank is yet another kind of cooperative—owned by customers and designed to serve them.  Though it’s small—with only $700 million in assets, and just four branches (all of which I could reach on my bike)—its ATM card is recognized everywhere.  I’ve used it even in Copenhagen and London.

With this series of transactions on one afternoon, I am weaving my way through a profoundly different and virtually invisible world:  the cooperative economy.  It’s an economy that aims to serve customers, rather than extract maximum profits from them.  It operates through various models, which share the goal of treating suppliers, employees, and investors fairly.  The cooperative economy has dwelled alongside the corporate economy for close to two centuries.  But it may be an economy whose time has come.  

Something is dying in our time.  As the nation struggles to recover from unsustainable personal and national debt, stagnant wages, the damages wrought by climate change, and more, a whole way of life is drawing to a close.  It began with railroads and steam engines at the dawn of the Industrial Age, and over two centuries has swelled into a corporation-dominated system marked today by vast wealth inequity and bloated carbon emissions.  That economy is today proving fundamentally unsustainable.  We’re hitting twin limits, ecological and financial.  We’re experiencing both ecological and financial overshoot.  

If ecological limits are something many of us understand, we’re just beginning to find language to talk about financial limits—that point of diminishing return where the hunt for financial gain actually depletes the tax-and-wage base that sustains us all.  

Here’s the problem:  The very aim of maximum financial extraction is built into the foundational social architecture of our capitalist economy—that is, the concept of ownership.  If the root of government is sovereignty (the question of who controls the state), the root construct of every economy is property (the question of who controls the infrastructure of wealth creation).  

Many of the great social struggles in history have come down to the issue of who will control land, water, and the essentials of life.  Ownership has been at the center of the most profound changes in civilization—from ending slavery to patenting the genome of life.  

Author Marjorie Kelly:  It’s no accident that the deep redesign of our economy isn’t beginning in Washington, D.C.  It is rooted in relationships:  to the living earth and to one another.  Photo by Cameron Karsten.

Throughout the Industrial Age, the global economy has increasingly come to be dominated by a single form of ownership:  the publicly traded corporation, where shares are bought and sold in stock markets.  The systemic crises we face today are deeply entwined with this design, which forms the foundation of what we might call the extractive economy, intent on maximum physical and financial extraction.  

The concept of extractive ownership traces its lineage to Anglo-Saxon legal tradition.  The 18th century British legal theorist William Blackstone described ownership as the right to “sole and despotic dominion.” This view—the right to control one’s world in order to extract maximum benefit for oneself—is a core legitimating concept for a civilization in which white, property-owning males have claimed dominion over women, other races, laborers, and the earth itself.  

In the 20th century, we were schooled to believe there were essentially two economic systems:  capitalism (private ownership) and socialism/communism (public ownership).  Yet both tended, in practice, to support the concentration of economic power in the hands of the few.

Emerging in our time—in largely disconnected experiments across the globe—are the seeds of a different kind of economy.  It, too, is built on a foundation of ownership, but of a unique type.  The cooperative economy is a large piece of it.  But this economy doesn’t rely on a monoculture of design, the way capitalism does.  It’s as rich in diversity as a rainforest is in its plethora of species—with commons ownership, municipal ownership, employee ownership, and others.  You could even include open-source models like Wikipedia, owned by no one and managed collectively.  

These varieties of alternative ownership have yet to be recognized as a single family, in part because they’ve yet to unite under a common name.  We might call them generative, for their aim is to generate conditions where our common life can flourish.  Generative design isn’t about dominion.  It’s about belonging—a sense of belonging to a common whole.  

We see this sensibility in a variety of alternatives gaining ground today.  New state laws chartering benefit corporations have passed recently in 12 states, and are in the works in 14 more.  Benefit corporations—like Patagonia and Seventh Generation—build into their governing documents a commitment to serve not only stockholders but other stakeholders, including employees, the community, and the environment.  

Also spreading are social enterprises, which serve a social mission while still functioning as businesses (many of them owned by nonprofits).  Employee-owned firms are gaining ground in Spain, Poland, France, Denmark, and Sweden.  Still another model is the mission-controlled corporation, exemplified by foundation-owned companies such as Novo Nordisk and Ikea in northern Europe.  While publicly traded, these companies safeguard their social purpose by keeping board control in mission-oriented hands.  

If there are more kinds of generative ownership than most of us realize, the scale of activity is also larger than we might suppose—particularly in the cooperative economy.  In the United States, more than 130 million people are members of a co-op or credit union.  More Americans hold membership in a co-op than hold shares in the stock market.  Worldwide, cooperatives have close to a billion members.  Among the 300 largest cooperative and mutually owned companies worldwide, total revenues approach $2 trillion.  If these enterprises were a single nation, its economy would be the 9th largest on earth.  

Often, these entities are profit making, but they’re not profit maximizing.  Alongside more traditional nonprofit and government models, they add a category of private ownership for the common good.  Their growth across the globe represents a largely unheralded revolution.  

What unites generative designs are the living purposes at their core, and the beneficial outcomes they tend to generate.  More research remains to be done, but there is evidence that these models create broad benefits and remain resilient in crisis.  We’ve seen this, for example, in the success of the state-owned Bank of North Dakota, which remained strong in the 2008 crisis, even as other banks foundered; this led more than a dozen states to pursue similar models.  We’ve seen it in the behavior of credit unions, which tended not to create toxic mortgages, and required few bailouts.  

We’ve seen it in the fact that workers at firms with employee stock ownership plans enjoy more than double the defined-benefit retirement assets of comparable employees at other firms.  And we’ve seen it in the fact that the Basque region of Spain—home to the massive Mondragon cooperative—has seen substantially lower unemployment than the country as a whole.  

Together, these various models might one day form the foundation for a generative economy, where the intent is to meet human needs and create conditions in which life can thrive.  Generative ownership aims to do what the butcher, the baker, and the candlestick maker have always done:  make a living by serving the community.  The profit-maximizing corporation is the real detour in the evolution of ownership, and it’s a relatively recent detour at that.   

The resilience of generative design is a key reason that people have often turned to these models in times of crisis.  When the Industrial Revolution was forcing many skilled workers into poverty in the 1840s, weavers and artisans banded together to form the Rochdale Society of Equitable Pioneers, the first modern, consumer-owned cooperative, selling food to members who couldn’t otherwise afford it.  

During the Great Depression in the United States, the Federal Credit Union Act—ensuring that credit would be available to people of meager means—was intended to help stabilize an imbalanced financial system.  Today, credit union assets total more than $700 billion.  In the recent financial crisis, their loan delinquency rates were half those of traditional banks.  Since the crisis, credit unions have added more than 1.5 million members.  In Argentina in 2001, when a financial meltdown created thousands of bankruptcies and saw many business owners flee, workers—with government support—took over more than 200 firms and ran these empresas recuperadas themselves, and they’re still running them.  

Last year, with financial and ecological crises mounting worldwide, the U.N. named 2012 the Year of the Cooperative, and cooperative activity, is advancing around the globe.  Cooperatives were largely sidelined during the rise of the industrial age.  But current trends indicate that conditions may be ripe for a surge in cooperative enterprises.  As people lose faith in the stock market, feel mounting anger at banks, and distrust high-earning CEOs, there’s growing distaste for the business-as-usual Wall Street model.  Meanwhile, the Internet has enabled the expansion of informal cooperation on an unprecedented scale—with the Creative Commons, for example, now encompassing more than 450,000 works.  As the speculative, mass-production economy hits limits, cooperatives may be uniquely suited to a post-growth world, for they are active in sectors related to fundamental needs (agriculture, insurance, food, finance, and electricity comprise the top five co-op sectors).  

If many of us fail to recognize an emerging ownership shift as a sign of progress, it may be because it arises from an unexpected place—not from government action, or protests in the streets, but from within the structure of our economy itself.  Not from the leadership of a charismatic individual, but from the longing in many hearts, the genius of many minds, the effort of many hands to build what we know, instinctively, that we need.  

This goes much deeper than legal or financial engineering.  It’s about a shift in the cultural values that underpin social institutions.  History has seen such shifts before—in the values that underlay the monarchy, racism, and sexism.  What’s weakening today is a different kind of systemic bias.  It’s capital bias:  capital-ism—the belief system that maximizing capital matters more than anything else.   

The cooperative economy—and the broader family of generative ownership models—is helping to reawaken an ancient wisdom about living together in community, something largely lost in the spread of capitalism.  Economic historian Karl Polanyi describes this in his 1944 work, The Great Transformation, tracing the crises of capitalism to the fact that it “disembedded” economic activity from community.  Throughout history, he noted, economic activity had been part of a larger social order that included religion, government, families, and the natural world.  The Industrial Revolution upended this.  It turned labor and land into commodities to be “bought and sold, used and destroyed, as if they were simply merchandise,” Polanyi wrote.  But these were fictitious commodities.  They were none other than human beings and the earth itself.  

Generative design decommodifies land and labor, putting them again under the control of the community.  

It’s no accident that the deep redesign of our economy isn’t beginning in Washington, D.C.  It is rooted in relationships:  to the living earth and to one another.  The generative economy finds fertile soil for its growth within the human heart.  The ownership revolution is part of the “metaphysical reconstruction” that E.F. Schumacher said would be needed to transform our economy.  When economic relations are designed in a generative way, they’re no longer about sole and despotic dominion.  Economic activity is no longer about squeezing every penny from something we imagine that we own.  It’s about being interwoven with the world around us.  It’s about a shift from dominion to community.   

Political Democracy can and will be fortuitous when Economic Democracy is established.   Explore this and other articles covering alternative economics, ethical leadership, economic democracy, and a society without the weal and woe of social and economic vicissitudes HERE   How does PROUT compare or contrast with capitalism or communism?  Explore the answers HERE What are essential ingredients assuring progressive sustainability bereft of the vicissitudes of economic or political predation, privation or disparity?  Learn more HERE

Cooperatives: Alternative Economic Structures and Business Enterprises

Cooperatives

Alternative Economic Structures and Business Enterprises

By Dieter Dambiec

The basic reason for having cooperatives as a form of economic enterprise in an economy is to help people work together and move forward in a collective way.  Cooperatives are considered to be the best form of economic enterprise because they are capable of seeking a balanced adjustment between collective spirit and individual rights.  Dieter Dambiec summarizes Prout's views on cooperatives.

Cooperation means getting things done with collective effort.  The benefit  of cooperatives is that they combine the wealth and resources of many  individuals and harness them in a united way.  To help achieve this,  however, cooperatives should be structured so that individual interest  does not dominate collective interests.  Individual dominance can  adversely effect the welfare of different social groups and the  environment.  

Essence of cooperatives

Cooperatives as a form of economic enterprise involve getting things done between free human beings with: 

(i) equal rights; 

(ii) equal human prestige (and mutual respect for each other); 

(iii) equal locus standi (eg, legal standing) so that everyone's welfare  is considered.  

This is called "coordinated cooperation" and is needed for equilibrium  and equipoise in social life.  A socio-economic system should be based on  coordinated cooperation not subordinated cooperation.  

"Subordinated cooperation" involves people doing something individually  or collectively, but at the same time keeping themselves under other  peoples' supervision or control.  This can degenerate the moral fabric of  an enterprise and should be avoided when structuring cooperative business enterprises.

More evolved than communes

A collective economic enterprise that lacks coordinated cooperation as  its primary mode of functioning is a commune or communist system.  It ends up being based on subordinated cooperation and the predominant  relationship is that of supervisor and supervised or master and servant.   According to Prout founder P.R.  Sarkar, these relationships are ultra  vires to the psychological needs of the human mind and retard progressive movement.  

Such systems force production down, not increase it.  This is because  workers do not feel oneness with their job, nor do they have freedom to  express all their potentialities.  Communes or collectives in communist  countries were not cooperatives.  They were simply production distribution mechanisms under a regimented system of control.  

The major distinctions between communes and cooperatives are: 

(i) Communes lack personal ownership; this is one reason for their  failure.  Without a sense of personal ownership people do not work hard or care for property.  Suppression of personal ownership sentiments results in sluggish production and psychic oppression.  In cooperatives, to  compare, there is personal ownership, subject to social limitations on  concentration of wealth but also part of a mechanism to ensure  progressive increase in everyone's living standards. 

(ii) Communes lack a proper incentive system, which discourages  individual initiative by talented people.  The result is that people do  not work hard.   

(iii) Organisational behaviour and outlook in communes tends to be  materialistic and the imposed leadership crude and unsophisticated.

More responsible than capitalism

Cooperative economic enterprises must also avoid becoming capitalist in  nature.  A key feature of capitalism is the import of raw materials from  other countries or regions in order to manufacture finished products.   Cooperatives must not encourage this form of economic imbalance.  An  economy based on cooperatives must develop its own raw materials through research so that cooperatives are not dependent on foreign raw materials.

For example, apple orchards (raw materials), sericulture, apple  processing, packaging, transportation and marketing should all be  regarded as part of the farming industry of a region and function as  cooperatives.  

However, in capitalism raw material producers like farmers, timber  growers, fishing fleets, etc.  have to sell their produce immediately  through large commodity exchanges or multinational companies in order to pay off loans for irrigation, seeds, labour, equipment, etc.  Because  capitalist enterprises control markets for these raw materials, producers  often sell at lower prices than they could get under other arrangements.   A good example of the squeeze on primary producers' income by capitalist enterprises can be seen in the steep decline in wool prices in Australia over recent years.  Commodity exchanges and multinational corporations act as or dominate raw materials markets to the detriment of their suppliers.

In a cooperative system, raw materials producers like farmers would not  be faced with the same financial pressures, and so not be forced to sell  produce immediately after harvesting at sub-market prices.  By advancing  money to individual farmers, cooperatives will allow farmers to better  control the conditions of sale and thus enjoy more financial security.

A properly conceived and structured cooperative should be capable of: 

(i) determining how much to sell;  

(ii) determining the most favourable time to sell in order to get the  best price; 

(iii) fixing the price of its own produce within certain price limits.   In this way cooperatives will get the profit which is presently taken by  middlemen and profiteers in the capitalist system.  

In a cooperative farmers sell their produce to the cooperative at a rate  fixed by the cooperative.  When the market price is reasonable the  cooperative sells the aggregate.  The farmers then receive their  percentage of the profit, which will be proportional to the amount of  their land shareholding in the cooperative.  At least this can be an  initial arrangement.  

Membership requirements

Cooperative members have to be local people who, by virtue of their  established residence, can make a commitment to the cooperative and the region it services.  Therefore the problems of a floating population and immigrant labour which may disturb the economy by increasing the  availability of labor will not occur in a cooperative system.  The  requirement of a worker's or shareholder's longer term commitment to the  cooperative means there is no scope for floating labourers to be  cooperative members.  Elimination of immigrant labour will also protect  the social life of the cooperative from possible adverse social  influences created by mobile populations.  

Anyone who wishes to be part of the socio-economic life of a region,  however, can settle there and become a member of local cooperatives.  

Unemployment

Sarkar further states that in the cooperative system unemployment will be solved.  This is because as production increases the need for more human resources and for the construction and operation of more facilities will also increase.  Educated people can be properly employed as skilled  workers.  There will also be a need for tractor drivers, labourers,  cultivators, etc.  who as cooperative members will naturally do this work.   In times of economic downturn everyone's labour will be proportionately  reduced so that no one suffers the stigma of being unemployed.  In this  way economic downturns will always be short and temporary.  

Sarkar is confident that cooperatives will solve the unemployment problem and states that in the cooperative system there should be no compulsory date for superannuation.  People should be free to work as long as they like providing their health permits.  This is in contrast to some government policies which encourage older people to retire in order to make room for younger people.  Following is a look at other aspects of  Sarkar's cooperative concept.  

Workforce composition

All groups in the cooperative workforce will benefit from the  cooperative's profits.  The members of a cooperative will be composed of: 

(i) shareholders - who receive salaries for their work plus a return on  their shares; 

(ii) non-shareholders or labourers - who enjoy stable employment and  favourable wages.

Non-shareholding labourers can be further categorized into those who are: 

(i) permanent labourers - who get bonuses and premiums (dividends) as  incentives besides their wages; and  

(ii) casual or contract labourers - who only get wages for their labour.  

Labourers or workers also include those who are engaged in cooperative  management.  They will be entitled to draw dividends and salaries on the  basis of their membership in and services they render to the cooperative.  

This structure allows cooperatives to develop a proper incentive system  so that individual initiative by talented people is encouraged.  An  incentive system should ensure that intelligent people are not forced to  do work which is unsuitable for them, or be paid the same wages as  ordinary workers.  If skilled workers get paid more than unskilled workers  there will be an incentive for all to become skilled and work harder.  In  this way the cooperative will encourage the educational and skill  upgrading of its members.  

In addition, workers who give the greatest service to the cooperative  should get the greatest bonuses.  Bonuses should be paid in proportion to  wage rates and should reflect both the skill and productivity of the  worker.

Shareholder composition

Members who purchase shares in a cooperative should have no power or  right to transfer their shares without the permission of the cooperative.   Such a pre-emptive right allows existing shareholders to determine the  basis of membership, and prevents capitalist entrepreneurs from  purchasing large numbers of shares in a cooperative and speculating in  the market.  Speculative activity can easily lead to a depression and this  will of course effect the cooperative.

Shares can however be inherited.  The shares of cooperative members  without descendants simply pass on to their legally authorised  successors, who become members of the cooperative if they are not already members.  Different countries have different systems of inheritance, so the right of inheritance should be decided according to the system in vogue.  In western common law countries if someone inherits shares in a business enterprise and does not want to become a member of that enterprise, existing shareholders simply buy that person out.  Presumably the same reasoning can be applied to cooperatives.  Following this arrangement will help cooperative members avoid litigation.  

Because cooperative members will be from the same vicinity they will all  know each other, so there should be no difficulty in deciding who should  be able to buy such shares due to ignorance about potential shareholders.

Disadvantaged persons can also benefit from the cooperative system.  A  widow, disabled worker or minor can all own shares and derive an income  based on the number of shares they own.  Therefore even if as cooperative members are unable to work, they will still be entitled to an income from cooperative profits.  Establishing such a structure on a large scale should be able to do away with the welfare state mentality prevalent in capitalist societies.

Dividend distribution
In a cooperative system there will be no preference shares.  Today  preference shares are used by some financial institutions as a substitute  for debt investments (ie., loans to businesses).  Preference shares really  mean that a lender in the guise of a shareholder has first grab at co-op  dividends and therefore co-op profits.  Such investors should become  ordinary shareholders like other co-op members and share proportionately  in the success (or perhaps otherwise) of the co-op.

Cooperative management

Cooperative members should elect a board of directors from amongst the  cooperative members.  The position of director should not be honorary.   Directors must be moralists.

The board decides the amount of profit to be divided amongst members,  ie., the dividend to be paid to each shareholder.  However, not all profit  should be distributed in the form of dividends.  Some should be kept or  used for: 

(i) reinvestment, purchasing capital items or repair and maintenance;  

(ii) increasing the authorised capital of existing shareholders; 

(iii) deposit into a reserve fund to be used to increase the value or  rate of dividends in years when production is low.  This also ensures that  shareholder capital is not adversely affected.

Farmer cooperatives

All people have the right to be guaranteed minimum requirements such as  food (including water), clothing, housing, education and medical care.   These basic requirements should be cooperatively produced because they are essential collective requirements.

The importance of food means there has to be maximum and safe utilisation of agricultural land.  The best way to achieve proper organisation of agriculture is on a cooperative basis, as will be seen.

Land is very important in the psychology of farmers so a proper  cooperative system has to be built up to give farmers a sense of  ownership of their land and permanent usufructuary rights to the land  while it is managed cooperatively.  This will also give a better outturn.   The cooperative system has to be psychological and subtle so that farmers do not feel adversely affected or insecure.  

This can be achieved by farmers pooling their land in cooperatives and  keeping records of their shares based on the size of their individual  land holdings.  In this way many small plots can be merged and boundaries for adjoining lands broken down, removing needless division of land into small individual holdings.  This allows for an increase in the area of land available for cultivation, benefiting farmers collectively.

Small plots are also detrimental because farmers have to lease their land  to someone who can cultivate it as an aggregate, as in the share cropping system.  This results in lower (if any) return to the farmer.

In the cooperative system there is also great scope for agricultural  research and development into new ways to better utilize and prolong the vitality of land.  The ill effects of chemical fertilizers, which are  common in individual farming and relatively unavoidable because of lack  of individual capital, could be minimized or eliminated.  

Phase-wise socialisation

Sarkar's theory also advocates the gradual socialisation of all  agricultural land according to a phase-wise plan.  Socialisation does not  mean nationalisation or loss of an ownership interest as in the commune  system.  

A main objective of socialisation is to ensure that everyone's economic  needs can be met (particularly by having enough purchasing power to get access to the basic necessities of life).  It also ensures that there is  maximum utilisation and rational distribution.  Another objective of  socialisation and the phase-wise process is to allow for individual  psychic expansion, with a consequent change in collective psychology, so as to create a more congenial social environment in which people learn to think for the collective welfare rather than for their own self-interest.  

Four Phases

In the first phase all uneconomic land holdings should be taken over by  cooperative management for the benefit of those who own the land.  

In the second phase all landowners should be requested to join the  cooperative system.  

In the third phase there should be rational distribution of land and  redetermination of ownership.  It appears that in this phase questions  such as the excessive concentration of wealth are to be fully addressed  after having instilled in people's minds the purpose and practice of  cooperatives.

In the fourth phase conflict over land ownership should disappear.   Therefore after land has been vested in the cooperative and ownership of shares determined (as well as a proper policy of distributions of  dividends to shareholders and wages to workers determined), conflicts  amongst landowners and landless rural workers will no longer exist.

Initial stages
In the initial stages (phases 1 and 2) agricultural cooperatives can be  formed by farmers consolidating their lands into a cooperative and having  shares in the consolidated holding in proportion to the amount of land  they put into the cooperative.  For example:  

Farmer	Hectares	Shareholding %
A	5	10
B	10	20
C	15	30
D	20	40
Total	50	100

Adjustments to this simple structure will be required where the number of  shares has to be allocated to take into account the productivity of the  land.  For example, if a farmer has 20 hectares of land of which 10  hectares are highly productive and 10 hectares are of low productivity,  the share allocation to that farmer should take into account the  differences in productivity accordingly.  

Profits from crop sales by the cooperative should be shared in proportion to: 

(i) the number of shares each shareholder has in the cooperative; and 

(ii) the labour rendered for crop production.   In this way farmers receive profits according to the number of their  shares in the cooperative and their labour.  

The system is flexible so that landowners who do not want to work in the  cooperative will still have their land included in the cooperative and be  considered cooperative members.  They will get shares based on the size  and productivity of their land but if they do not want to work they will  not be entitled to wages.

Producer cooperatives

Cooperatives which are strictly agricultural, in Sarkar's system, should  sell their produce to producer cooperatives, which in turn can  manufacture a wide variety of consumer goods.  

Raw materials which are of non-farming origin, such as limestone for the  production of cement, should also be processed by producer cooperatives.  

Thus, producer cooperatives need to be formed for agro industries, agrico industries and non-agricultural industries.  

The total profit of such cooperatives should be distributed amongst the  workers and members of the cooperative according to their individual  capital investment (shares) in the cooperative and the service (labour)  they render to the production and management of the cooperative.

Farmer-producer cooperatives

Farmers in agricultural cooperatives may also create producer  cooperatives to produce items for various industries.  Thus, some  cooperatives may function as both farmer and producer cooperatives.  

Farmer cooperatives which also function as producer cooperatives have the opportunity of increasing their profitability in various ways.  For  example, producer cooperatives functioning with agricultural cooperatives  could produce rice as well as oil from the husks.  

Consumer cooperatives

Consumer cooperatives will distribute consumer goods to members of the  public at reasonable rates.  These cooperatives should be formed by  persons having an interest in selling goods to the public (ie., not  hoarding), and will share profits according to the standard criteria of  individual labour and capital investment (shares).  

Consumer cooperatives will be supplied by both agricultural and producer  cooperatives.  For example, agricultural or producer cooperatives which  produce cotton or silk thread will sell the thread to weaver cooperatives, which can produce cloth using the appropriate or latest technology.  Weaver cooperatives will in turn supply consumer cooperatives that sell the cloth to the public.  

Commodities which do not go directly from agricultural cooperatives to  consumer cooperatives will be produced by producer cooperatives.  These  non-farming commodities should be compulsorily produced by producer  cooperatives.  

This arrangement will prevent artificial shortages or the non-supply or  unavailability of essential goods and commodities.  This can cause  suffering to ordinary people who have little means for circumventing  these problems.

This structure also ensures there is no accumulation of essential  commodities by capitalists for the purpose of maximizing profits, or  price inflation in essential commodities.  If the distribution of  essential commodities is done through consumer cooperatives linked with  producer cooperatives, middlemen and profiteers will be eliminated.  

Service cooperatives
These are special cooperatives which should be formed by people involved  in service-type industries, such as doctors.

Satellite cooperatives

PROUT advocates the formation of many small satellite cooperatives to  supply various items to large producer cooperatives.  For example  different parts of a motor car can be locally manufactured in small  cooperatives (and even carried out at home as cottage industries).  The  main function of the producer cooperative will be assembly.  This has two  benefits:  

(i) large cooperatives will not require many labourers, minimizing labour  unrest; and  

(ii) labour costs will be reduced, keeping the cost of commodities low.

Electronic commerce and digi-cash will make it easier to establish  cottage industries because links can be made electronically between  various satellite coops, avoiding many costs and delays potentially  arising from decentralized production.

The question of transportation of goods or parts still needs to be  addressed.

The state and cooperatives

Taxation

Taxes, levies, excise duties, etc.  should be paid collectively by the  cooperative, not individuals.  This frees individuals from financial  pressure and economic exploitation through personal taxation systems.  

The primary source of taxation revenue in a PROUT system would appear to be at the point of production.  This makes sense in that enterprises which make first use of resources have a social responsibility to ensure proper utilisation and rational distribution; taxation imposes some restraint to ensure this responsibility is carried out.

Trademark regulation
A useful device that can stop black-marketing or the sale of stolen goods  is trademark law.  Laws can be passed which prevent the sale of goods  without the producer co-op's trademark.  Thus, if black marketeers try to  sell any clothing without trademarks, they can be caught easily.   Trademarks specifying cooperative ownership will also help the public  support the cooperative movement.

Essential commodities

Commodities can be divided into three categories: 

(i) essential commodities, like rice, pulse, salt, clothing, etc.  People  are willing to borrow money to buy these; 

(ii) demi-essential commodities, like oil, antiseptic soap, shoes etc.;  and  

(iii) non-essential commodities, like luxury goods.  

The number of items of essential commodities should be continually and  progressively revised and expanded with changes in time, place and  preferences.  These revisions should be made by the government and not by the board of directors of a particular cooperative.  What is considered a demi-essential commodity today may be treated as an essential commodity tomorrow.  Demi-essential commodities which may be affected by artificial shortages, causing suffering to common people, should be produced by producer cooperatives.  The production of luxury goods can be left in the hands of the private sector.  Essential commodities or services of a non-farming nature which require large capital investment, like the railway system, should be government managed.  

During shortages of non-essential commodities ordinary people will thus  not be affected.  

Pressure groups
Farmers in agricultural cooperatives should be able to exert collective  pressure on local, state or federal governments for different benefits  and facilities.  For example, government assistance may be needed to  develop an irrigation infrastructure.

Scientific advancement

As science advances, cooperatives will develop and manufacture a great  variety of commodities from synthetic raw materials.

Socio-economic units lacking sufficient supply of raw materials will have  to manufacture synthetic raw materials.  Suppose a unit or region lacks an  adequate supply of fodder to feed its cattle, sheep, etc.  Will it import  fodder from another unit or region?  No, it should manufacture artificial  fodder instead.  Similarly, it takes a substantial volume of cotton to  produce one "dhoti" (the traditional garment worn by men in northern  India).  To transport large amounts of cotton also requires much energy,  and so if it is not readily available, synthetic fabric can be produced  instead.

Thus through the cooperative system human society will progress with  accelerating speed, ushering in a new revolution in science and causing  the intellectual capacity of human beings to increase.  Every nook and  corner of natural and human potential will be properly used.  In this way  progress and development can be maintained in every field of life.  

To encourage common factors and discourage all fissiparous factors in the  physical realm, human sweetness is required.  The best expression of human sweetness in the socio-economic world is the cooperative system.

Dieter Dambiec practices law in Australia and New Zealand.