Benefits of Cooperatives to the Contemporary Economy - Essay Example

Benefits of Cooperatives to the Contemporary Economy Many cooperatives have emerged to help grow the economy in many of the developing nations whereeconomic strive is highest and the number of poor people is increasing on a daily basis. Evidently, the work of cooperatives is to strengthen the economic growth of a group of people who seek to come together and invest in meeting their mutual needs through pooling of resources. They understand that the only way of meeting their goals is to come together and make use of what they have to develop themselves and the economy as well. Cooperatives have been in existence for over 160 years, with so many people benefit from the growing need for such centres (UN no date). The important thing is to understand that the unique goal of achieving economic growth rests on the ability to increase competitive attributes within the global platform. Many who understand that the economy grows from the work of the citizens make good use of what they have and this allows them to powerfully utilise their services and assure the society of an increased support for any of their endeavours. To understand the role of cooperatives in the economies across the world, this report will look at a variety of topics to help dissect the topic. The first will look at the definitions of cooperatives and the source of this name. The next section will look at their importance within the economy and the successes witnessed over the years. The third section will explain the different types and their role as part of the economy. This section will see the utility of examples to check on the impact this has had on the economy as a whole. This section will also be important in discussing the role of cooperatives based on available literature. Cooperatives There is no single means of defining what the term cooperatives mean with a single term or sentence. Different people have different definitions of what is and what it should be. In most cases, the term is used to define the action of the people that voluntarily come together and use reciprocally their forces and resources under an agreeable mutual management for the sake of profitability or loss (Baron 2007: 297). Others see an organisation as a self-help group that becomes more useful by maximising on organisation (Pollinger, Outhwaite & Cordero-Guzmán 2007: 23). The main idea is to have a group that unites to come to a common agreement as a way of establishing new platforms for the sake of dealing with the available means of communication. Other researchers opine that the identity of a cooperative is known by examining five main attributes: have a governance structure in place, tax-filing status is examined, application of a statement of principles, incorporation status and self-identification (Pollinger, Outhwaite & Cordero-Guzmán 2007: 25). These five allow an individual to ensure that the growing society will be based entirely on the ability to maximise on available options without losing any profitability by placing different resources together. The goal is to ensure that the cooperative business is boosting the financial status of the members and is contributing greatly in reaching towards the main ideals of the organisation (Baron 2007: 299). The principles alluded to above are those that show that the cooperative is a user-controlled, user-owned entity that distributes benefits to the users based on the use. It acts as an autonomous interplay within the society and has greater implications when it comes to its contribution to the society. These cooperatives can further be divided into credit cooperatives, consumer cooperatives, producer cooperatives, marketing cooperatives, service cooperatives and multi-purpose cooperatives provided they serve the intended need of the initial owners (Zeepedia.com 2015). The main goal is to establish the continued provision of benefits to the users as a way of creating an entity. Merits of Cooperatives to the Economy Cooperatives are very essential in shifting the buck from the government. They are unique in the way they tackle the issues within the economy, dealing with the same aspects that affect the growing needs of those in the society (UN no date). They are a good plan for farmers who want to gain anything from fertilisers, farming loans, selling their produce, getting a market to sell their services, having a rationalised mode of payment as well as maximising on the distribution of resources to even the most remote areas in a country (Zeepedia.com 2015). The farmers are the most beneficiaries across the world with so many cooperative societies targeting farmers across the world (Deller, Hoyt, Hueth & Sundaram-Stukel 2009: 5). They are able to deal with the farmers in a way the government cannot. They fight for their rights and that keeps the farmers motivated. They are easy to form and that makes it easy to have them in any area where people come together for this purpose. They ensure that equal distribution of wealth is necessary to all, making it easier for the producer and the seller to gain benefits from selling products. The intermediaries are now replaced by the cooperatives, and the benefits trickle down to the last person in the cooperative (Deller, Hoyt, Hueth & Sundaram-Stukel 2009: 5-7). Cooperatives provide so many benefits to the small-scale farmers. This means that the members have an equal vote and have their say in the management of the business (Baron 2007: 300). This means that the managerial levels that could hinder the full acquisition of the growing tributes within the society will not have the opportunity to diminish the value of any shareholder because they are all part of the system (Pollinger, Outhwaite & Cordero-Guzmán 2007: 27). This will eventually increase and improve the standard of living amongst the shareholders, enhancing their access to services and maximising on their purchasing power. This also borders on the ability to get assistance financially to do personal businesses that will increase the chances of strengthening the employees across the divide (Baron 2007: 300). The important thing is to increase the level of employment, something that boosts government services and efforts by a huge margin. They show the society that anything can be done if people come together and strengthen each other (Zeepedia.com 2015). In a society where monopoly is known to kill business or ransom the economy, it is important to have an organisation that provides people with the open-play business opportunities that will assist them meet their demands eventually (Urutyan 2012: 85). The economy is dependent on the ability to sustain growing competition and establish a host of business that will support the economy from various sectors. Some of the cooperatives join up and build houses, which they rent out and distribute the profits to shareholders based on shares held (Pollinger, Outhwaite & Cordero-Guzmán 2007: 29). This means that everyone has a choice of using the money to whatever business and in different sectors, which expands the economy. This allows the government to concentrate on offering the right atmosphere, lay down good policies that will make sure everything works out as expected. The role of the society is to ensure that the mutual interest of all members is protected always (Urutyan & Avetisyan 2011: 49-50). Cooperatives have been commended for their participation in the poverty reduction aspect (Brown 2006: 78). Cooperatives contribute a lot to the growth of the individuals within a society by giving them an opportunity to do something worthwhile with their resources (Brown 2006: 79). This allows them to play a huge role in the eradication of poverty through ensuring that every member benefits and works towards meeting personal goals. The role of this is to make sure that the social fabric stops churning poverty and transferring it to the next generation. As Bello notes, cooperatives are community-based and have their roots in democracy. This means they are flexible, participatory and everyone shares in the successes of the cooperative (2005: 7). This makes it easy to use it as a tool for the benefit of the shareholders, making it easier to identify the growing need for the reduction of poverty across the country (Bishop 2012: 155). Many countries have benefited from these cooperatives such as Armenia, Nigeria, Tanzania and even parts of America that have embraced the growing urge to be in a cooperative society (Monzon & Chaves 2008: 558). This opens up the society and makes it easier even for the poorest person to improve living standards. People can now have their businesses and get connections to the services offered by the mutual agreement involved in these cooperatives (Monzon & Chaves 2008: 558). Sizya (2001: 9) states that these cooperatives have played a very huge role in providing a voice to the poorer when it comes to policies. Most of the farmers could not get access to credit facilities because they did not have any guarantors to secure the loans. Credit cooperatives came up with their own sources and the poorest could get assistance at a very cheap rate. The cooperatives have a say because they have the backing of the main stakeholders in the industry sectors they service (Dana 2010: 48). This provides them with a chance to meet their demands and allocate the investing farmers a chance to maximise their resources. Cooperatives generate employment. In Tanzania, Sizya notes that these cooperatives open up marketing services for different crops, which leads to the utility of these avenues to grow their customer base. They secure the markets and get people to provide the products (Pollinger, Outhwaite & Cordero-Guzmán 2007: 235). This way, unemployment rates reduce and the youth that could be engaging in crime and drug abuse get a place to gain daily bread. Though the wages may not be as high, the ripple effects are felt across the divide and the levelling of the playground makes it easier to conduct business at anytime. Bello (2005: 7) also echoes the same sentiments saying that the cooperatives try to balance the need for profitability and the general welfare amongst the members. Therefore, the growing need for a secure society is to have a better understanding of the society, given the growing importance of the management of risks amongst the small-scale members (Dowla & Barua 2006: 129). By giving a voice to the poor, these cooperatives make good use of the remedies, which make it easy to provide these aspects from the very beginning. The aim is to provide the society with an aspect that binds them as a group (Monzon & Chaves 2008: 562). Cooperatives contribute greatly to the social integration of the members while meeting the main demands of the society. Ideally, the importance of dealing with these attributes lies on the creation of a society that has mutual interests and works towards the accountability of every activity that is taking place (Sapovadia 2013: 595). Cooperatives also make globalisation quite easy (Yunus 2007: 258). They play a huge role in bring the society closer together and promoting solidarity even with other people. They have links to international players who may be their clients or partners in other ways (Yunus 2007: 259). This opens up relations between different countries, and promotes the growth of open relations with like-minded organisation. It offers them a chance to maximise on the opportunities. The goal is to establish criteria that both parties can use to ensure accountability while still managing the deeper partnerships that could make the cooperative more profitable to its shareholders (Dowla & Barua 2006: 225). Some cooperatives link up with international partners and make services even cheaper for members. This presents people with a host of opportunities to choose from and a chance to deal with their issues without having to look extensively beyond their cooperatives (UN no date). The cooperatives have been so effective in meeting the demands of the society that the Labour Party in the UK has decided to increase its funding for development of cooperative movements across the country (UN no date). Though this was a political promise, it shows that the political elite understood the impact this had on the economy and the people that depended on it (UN no date). Lazenby (2010) looks at the example of Leeds that saw a group of individuals open a flourmill through a cooperative organised by millers in 1847. This led to the flourishing of flour millers in the area, and the dairy farmers saw this as an opportunity to open theirs and benefit too. Conclusion Cooperatives are an integral part of the society. They make life easier and make a better understanding of the economic benefits that can emanate from the popular interlinking of services across the divide. The goal is to establish new methods of dealing with the social attributes while at the same time providing solace to those without the stable means of investing in huge projects. Essentially, the growth of the society will depend on the ability to fund these cooperatives and encourage their increase across the society. This meets the desires of all members by providing new platforms for the sake of the expansion of the society. Despite the level of development, all countries have a chance of identifying their strengths and using them to meet the main demands of the society. The role of this is to entrust the society with an opportunity to discuss and determine its future. References Baron, M-L. (2007) "Defining the Frontiers of the Firm through Property Rights Allocation: The Case of the French Retailer Cooperative Leclerc", Review of Social Economy, vol. 65, no. 3, pp. 293-317 Bello, D.A. (2005) The role of cooperative societies in economic development, MPRA Paper No. 23161, pp. 1-21, viewed March 28, 2015 from . Bishop, J. (2012) ‘Lessons from The Emotivate Project for Increasing Take-up of Big Society and Responsible Capitalism Initiatives’, In: P.M. Pumilia-Gnarini, E., Favaron, E. Pacetti, J. Bishop, L. (Eds.) Didactic Strategies and Technologies for Education Incorporating Advancements, IGI Global: Hershey, PA. Brown, J. (2006) “Designing Equity Finance for Social Enterprises”, Social Enterprise Journal, vol. 2, no.1, pp. 73-81. Dana, L.P. (2010) “Nunavik, Arctic Quebec: Where Co-operatives Supplement Entrepreneurship,” Global Business and Economics Review vol. 12, no. 1/2, pp. 42–71. Deller, S., Hoyt, A., Hueth, B. & Sundaram-Stukel, R. (2009) Research on the economic impact of cooperatives project principal investigators, Madison: University of Wisconsin Center for Cooperatives. Dowla, A. & Barua, D. (2006) The poor always pay back: the Grameen II story. Bloomfield, Connecticut: Kumarian Press Inc. Lazenby, P. (2010) The importance of co-operatives, Guardian.com, viewed March 28, 2015 from . Monzon, J.L. & Chaves, R. (2008) “The European Social Economy: Concept and Dimensions of the Third Sector”, Annals of Public and Cooperative Economics, vol. 79, no. 3/4, pp. 549-577. Pollinger, JJ & Outhwaite, J, & Cordero-Guzmán, H (2007) "The Question of Sustainability for Microfinance Institutions", Journal of Small Business Management, vol. 45, no. 1, pp. 23–41. Sapovadia, M. (May 2013) "Microfinance and womens empowerment: a contemporary issues and challenges", International Journal of Innovative Research & Studies (IJIRS) vol. 2 no. 5, pp. 590–606. Sizya, M.J. (2001)The role co-operatives play in poverty reduction in Tanzania, Paper Presented at the United Nations in observance of the International Day for the Eradication of Poverty on 17 October 2001. UN (no date) Cooperatives in social development, viewed March 28, 2015 from . Urutyan, V. & Avetisyan, S. (2011) Agricultural cooperatives, Yerevan: Asoghik. Urutyan, V. (2012) Necessity of legal reforms aimed at sustainable development of cooperatives in Armenia, Yerevan: ICARE Yunus, M. (2007) Creating a world without poverty: social business and the future of capitalism. New York, New York: PublicAffairs. Zeepedia.com. (2015) Introduction to business: cooperative society, viewed March 28, 2015 from . Read More