PROUTIST ECONOMIC DEVELOPMENT

COOPERATIVES

B :-Y DALJEET AND AJAY

C :- -LASS XI C

Cooperative Industries

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.

COOPERATIVES AS A FORM OF ECONOMIC ENTERPRISE

• Co-ops help people work together and move forward in a collective way.

• They are capable of seeking a balanced adjustment between collective spirit and individual rights.

• Getting things done with collective effort.

Combines the wealth and resources of many individuals and harnesses them in a united way.

Structured so that individual interestdoes not dominate collective interests.

Individual dominance can adversely effect the welfare of different social groups. 

BENEFITS

Involves 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".

Coordinated Coordinated CooperationCooperation

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 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.

All groups in the cooperative workforce will benefit from the cooperative's profits.

They will be entitled to draw dividends and salaries including bonuses on the basis of their membership in, and services they render to, the cooperative.

Labourers or workers also include those who are engaged in cooperative management.

The members of a cooperative can 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 or incomes.

COOPERATIVES OWNERSHIP

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, there is personal ownership, subject to:social limitations on concentration of

wealth; anda mechanism to ensure progressive

increase in everyone's living standards.

M embershiprequirement Worker's or shareholder's longer term

commitment to the cooperative.

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.

Local is a relative concept and expands over time.

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

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.

Share transfer Shares can however be inherited. Generally, 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.

The same reasoning can be applied to cooperatives - following this arrangement will help cooperative members avoid litigation. 

New shareholders

•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 shares due to ignorance about potential shareholders.

Dividend distribution  In a cooperative system there is no need for 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.

Non-s

hare

hold

er

Non-s

hare

hold

er

work

ers

work

ers

Non-shareholding workers

Non-shareholding workers

are possible and can be

are possible and can be

categorized into those

categorized into those

who are:who are:

(i)(i) permanent labourers -

permanent labourers -

who get bonuses and

who get bonuses and

premiums (‘dividends’) as

premiums (‘dividends’) as

incentives besides their

incentives besides their

wages; and 

wages; and (ii)(ii) casual or contract

casual or contract

labourers - who only get

labourers - who only get

wages for their labour. 

wages for their labour. 

Bonus distributionsWorkers (or worker/shareholders)

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.

Cooperatives are 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. 

Who e

lse

Who e

lse

benefits

?b

enefits

?• Disadvantaged persons can also benefit from

the cooperative system.

• A widow, orphaned minor or disabled worker can own shares and derive an income based on the number of shares they own.

• Therefore even if as cooperative members they are unable to work or are retired, they will can still be entitled to an income from special funds deriving cooperative profits, eg pension funds.

• Establishing such a structure on a large scale should be able to do away with the welfare state mentality prevalent in capitalist societies.

Encourage individual initiative by talented people.

Organisational behaviour and outlook to be cultivated is one that is non-materialistic.

Leadership is subtle and sophisticated.

Cooperative management

Cooperative members

should elect a board of

directors from

amongst

the cooperative

members.

The position of director

should not be honorary

or hereditary.

Directors must be

moralists.

Board of DirectorsThe board decides the amount of profit to be divided

amongst members, ie the dividends or bonuses to be paid to each shareholder and/or worker.

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

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.

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. 

Farming cooperatives 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.

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. 

Research and development

• Cooperatives which are agricultural 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, can also be processed by producer cooperatives. 

• 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.

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 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.

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

Professional cooperatives for dentists, accountants, etc can also be formed.

Small business may remain privately owned.

An economy can advocate the formation of many small satellite cooperatives to supply various items to large producer cooperatives.

Eg, different parts of a motor car can be locally manufactured in small cooperatives (and even carried out as cottage industries).

The main function of the producer cooperative will then be assembly.

This has two benefits: (i) large cooperatives will not require many labourers, minimizing labour unrest; and (ii) labour costs can be reduced, keeping the cost of commodities low.

COOPERATIVE GAMES- are a technique of experiential education that raises consciousness and teaches solidarity.