Are Cooperatives Crisis Proof?

By Edith Drouin-Rousseau Reprint | | Print |

UNITED NATIONS, Jul 8 2013 (IPS) - “Cooperative enterprises remain strong in time of crisis.” This was the mantra heard echoing around the world on Jul. 6, the International Day of Cooperatives.

The division for social policy and development at the U.N.’s Department of Economic and Social Affairs (UN DESA), in collaboration with the Permanent Mission of Mongolia, organised a special event on Jul. 8 to discuss this year’s theme and look back at 2012, the International Year of Cooperatives.

The assessment was unanimous: last year was extremely successful for cooperatives all over the world. According to the latest Vital Signs Online publication of the Worldwatch Institute, no less than one billion people are currently members of cooperatives.

The United Nations estimates that cooperatives secure the livelihood of about three billion people, nearly half of the current world population.

More importantly, community-based enterprises performed surprisingly well in the face of the 2008 financial crisis, suggesting that cooperatives offer a successful alternative model to the system of free market capitalism.

The key to their success? Resilience.

In a statement released Saturday,  U.N. Secretary-General Ban Ki-moon stated, “Over the course of the ongoing global financial and economic crises, financial cooperatives have proven their strength and resilience, benefiting members, employees and customers.  They have maintained high credit ratings, increased assets and turnover, and expanded their membership and customer base.”

Resilience is built into the very DNA of a cooperative, which, according to Javier Molina Cruz, a liaison officer for the Food and Agriculture Organisation (FAO), “is concerned with community, rather than… profits.”

A recent report issued by the International Labor Organisation (ILO), authored by Professor Johnston Birchall, points in the same direction, concluding that financial cooperatives were less at risk during the crisis than traditional financial institutions.

The surpluses of the former went to the reserves of the cooperatives or were reinvested in the community, rather than being absorbed by shareholders, which was the case with the latter.

Empowering the poor, excluded and marginalised lies at the heart of community-based business models. Youth stand out as a particularly excluded population, facing widespread unemployment across the world.

Daniela Bas, the director of the division of social policy and development within the UN DESA, told IPS cooperatives can help remedy the issue by acting as new tools for young people to find or create their job.

Cooperatives are also a way out the crisis for the population as a whole. As unemployment rate reaches 27 per cent in Spain, the community-based enterprises increased their percentage of workers by 7.2 in the third quarter of 2012.

Food security is also an outcome of farmers’ cooperatives, producing no less than half of the global agricultural output. The supportive framework of this type of enterprises allows farmers to be more effective, to anticipate better and to recover faster from difficult time.

But even though successful cooperatives tend not to sink in turbulent waters, they sometimes have trouble simply building the boat, as securing the initial funds or start-up loans remains a huge challenge.