Chapter 2

History of Cooperatives

The Beginning of the Modern Cooperative Movement

In 1844 the Rochdale Pioneers founded the modern Cooperative Movement in Lancashire, England, to
provide an affordable alternative to poor-quality and adulterated food and provisions, using any surplus
to benefit the community. Since then, the co-operative movement has flourished, extending across the
globe and encompassing all sectors of economy.

The earliest record of a cooperative comes from Fenwick, Scotland where, in March 14, 1761, in a barely
furnished cottage local weavers manhandled a sack of oatmeal into John Walker's whitewashed front
room and began selling the contents at a discount, forming the Fenwick Weavers' Society.

There are a plethora of records of cooperatives started out as small grassroots organisations in Western
Europe, North America and Japan in the middle of the nineteenth century, however, it is the Rochdale
Pioneers that are generally regarded as the prototype of the modern cooperative society and the
founders of the Co-operative Movement in 1844.

The Rochdale Pioneers are regarded as the prototype of the modern co-operative society and the
founders of the Cooperative Movement.

The Rochdale Pioneers

In 1844 a group of 28 artisans working in the cotton mills in the town of Rochdale, in the north of
England established the first modern cooperative business, the Rochdale Equitable Pioneers Society. The
weavers faced miserable working conditions and low wages, and they could not afford the high prices of
food and household goods. They decided that by pooling their scarce resources and working together
they could access basic goods at a lower price. Initially, there were only four items for sale: flour,
oatmeal, sugar, and butter.

The Pioneers decided it was time shoppers were treated with honesty, openness, and respect,
that they should be able to share in the profits that their custom contributed to and that they should
have a democratic right to have a say in the business. Every customer of the shop became a member
and so had a true stake in the business. At first, the cooperative was open for only two nights a week,
but within three months, the business had grown so much that it was open five days a week.

An independently formulated cooperative model developed in Germany by Friedrich Wilhelm Raiffeisen

and Franz Hermann Schultz-Delitsch. Raiffeisen and Schultz-Delitsch originally formed credit unions in
1862. Since then the model has grown into other sectors and inspired the growth of financial
cooperatives across the world.

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The International Cooperative Alliance

The global rise of cooperatives is partially due to the work of the International Co-operative Alliance
(ICA). The ICA was formed in 1895 during the 1st Cooperative Congress. In attendance were delegates
from cooperatives from Argentina, Australia, Belgium, England, Denmark, France, Germany, Holland,
India, Italy, Switzerland, Serbia, and the USA. It was founded by E. V. Neale of Rochdale and Edward
Owen Greening, a supporter of worker cooperation, in order to “end the present deplorable warfare
between capital and labour and to organize industrial peace, based on co-partnership of the worker …
[and to] promote the formation of central institutions for helping people to establish and maintain self-
governing workshops,” writes Johnston Birchall in The International Co-operative Movement.

Neale and Greening recognized that coops had the power to combat the emergent market trends by
empowering workers to own a share of the business and to govern themselves. They also realized that a
worldwide organization that could support the mission of employee-owned business would help
promote solidarity and their continued existence. Neale and Greening founded the ICA on the principles
under which the Rochdale coops had been successfully operating for 50 years prior to the ICA’s
inception.

Over the last century, the ICA has flourished, particularly in Europe, Canada, and in some parts of Africa.
In the United States, several of the major centers for cooperative business and study (which are
primarily focused on agriculture) also adhere to the ICA’s values. Whether or not cooperatives have an
official connection with the ICA, they ascribe to essentially the same core set of principles. The ICA thus
is recognized as a leader for cooperatives all over the world in terms of promoting the values of
cooperative organization.

Representatives established the International Cooperative Alliance's aims to provide information, define
and defend the Cooperative Principles and develop international trade. It was one of the only
international organizations to survive both World War I and World War II.

Overcoming all the political differences between its members was difficult, but the ICA survived by
staying committed to peace, democracy, and by remaining politically neutral.

Author: Jennifer Wilhoit, founder and director of Teal Arbor, Education and Research for Crafts
Communities and the Environment.

History of Cooperative in the Philippines

Filipinos who have traveled Europe in the later part of the 19th century must have been impressed with
the success of a new economic movement, bringing about a gradual transformation in the economic and
social life of the people. At the turn of the century, Filipinos, in increasing number, traveled and studied
abroad and brought home with them new ideas. Two names worthy of note were Dr. Jose P. Rizal and
Teodoro Sandiko.

Rizal, after his side trip to Sandakan, Borneo in 1892, requested Governor Despudol’s permission

to move to that place and found a colony under the cooperative plan of Robert Owen. Instead, he was
arrested for treason and banished to Dapitan, Zamboanga del Norte. In Dapitan, Rizal had his ideas in

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cooperation partially fulfilled. He put up a school for the poor community and a store with the help of
his pupils on a purely cooperative basis. One noteworthy group organized by Rizal was the La
Sociedadde los Abacaleros (Society of Abaca Producers). This functioned for only one year. Rizal
returned the members’ share capital without any loss.

TeodoroSandiko, in his travels to Europe, must have had a close contact with the cooperative movement
in Germany where he came across with the Raiffeisen movement. He was very much impressed by this
type of cooperative that he looked forward for an opportunity to introduce it in the Philippines. Finally,
Sandiko had his chance when he was appointed one of the early governors when Civil Government,
under the Americans, was established.

The Rural Credit Law

As soon as Civil Government was established, Filipino participation in government was encouraged.
TeodoroSandiko, then governor of Bulacan, prepared a bill patterned after the Raiffeisen type of credit
union and had Rep. Albert Barreto of Zambales sponsored the bill in the lower House of Congress. The
principal aim of this bill was to protect and develop the agricultural interest of the country. When the
Barreto sponsored bill was presented it readily obtained unanimous approval on January 20, 1908. The
Philippine Commission however, turned it down.

Undaunted by this defeat, the sponsors of the bill again put it through in the Second Philippine
Legislature. This time it was sponsored in the Lower House by Rep. Rafael Corpuz who succeeded Rep.
Barreto. The bill was ably presented in both Houses and it was finally passed into law on February 11,
1914 and became Act 2508. When this Act was finally made into law, Gov. Sandiko earned the title,
Father of Cooperation in this country.

The administration of the Rural Credit Law was entrusted to the Bureau of Agriculture. The first rural
credit association that was organized under this Law was the Agricultural Credit Cooperative Association
of Cabanatuan, Nueva Ecija. It was formed on October 18, 1916. With this initial organization farmers in
different provinces were organized. At the end of 1926 there were 544 rural credit cooperatives
organized in 42 provinces and by 1930 there were 571 associations formed all over the country. In 1935,
however, about 90% of these cooperatives were inactive with no funds left in their treasury. The
experiment on rural financing, through cooperatives was a failure.

Marketing Cooperatives

As soon as the organization of rural credit cooperatives was in full swing, The Cooperative Marketing
Law (Act 2425) was enacted and approved on December 9, 1927. The rural credit associations were
designed to help finance the efforts of the farmers for more production. Wherever rural credit
associations were, cooperative marketing societies were also designed to be present. The apparent
weakness of the rural credit cooperatives, however, failed the enthusiasm of farmers to organize
themselves into cooperative marketing associations. By 1939 only 164 societies were actually organized
with a total membership of around 5,000 farmers. With this number only 35 reported their sale of

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products to the Bureau of Commerce. The number of associations reporting indicated that only 20% of
the organized associations were active.

The ACCFA Financing Program

In recognition of the strategic position occupied by our farmers in the social structure and economic
development of the country, the Philippine Congress enacted Republic Act 821 in 1952. This law
established a system of liberal credit which is specially designed to meet the needs of the small farmers.
It also created an administrative agency known as the Agricultural Credit and Cooperative Financing
Administration (ACCFA). To implement the great task of rural financing, four general and interrelated
objectives of the law were set forth as follows:

To assist small farmers in securing liberal credit.

To promote the effective groupings of farmers into cooperative associations.

To establish an orderly and systematic marketing machinery for, and controlled by, the small farmers.

To place agriculture on a basis of economic equality with other industries.

Source: Retrieved from http://www.creditunion.coop/history/index.html

[11/5/19]

Additional Notes:

Cooperative societies were created long before the advent of the fair trade movement to help workers
improve their livelihoods and protect their interests.

Cooperatives are organizations of people who have the same needs. Most scholars recognize the
business of the Rochdale pioneers of England as the first coop. In 1844, this group of 28 men (weavers
and skilled workers in other trades) formed a cooperative society. They created business principles to
guide their work and established a shop in which to sell their goods. Increased pressure from the
changing market system was a driving force in their decision to move toward cooperation.

With the emergence of mass production during this time, entrepreneurs who had previously been
capable of the sustainable production of high quality goods found themselves competing with large
industries that sold less-expensive, poorly made products. In the tea industry, for example, large-scale
producers added grass clippings to bulk up tea, sacrificing quality for quantity. Production was changing
in order to accommodate consumers’ desire for cheaper, plentiful goods. Those who rapidly produced
high volumes could meet the demands of the shifting market.

Another significant change in the market system was that the new large industries relied on unfair labor
practices in order to meet production quotas. Employees lost control over working conditions; low pay,
long hours, unsanitary workplaces, and no mechanisms for claiming worker rights added to the growing

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frustration among laborers. In Co-operatives and Community Development: Economics in Social
Perspective, Brett Fairbairn and his coauthors describe the situation:

The monotony and cruelty are hardest on the children; they work fourteen-, even sixteen-hour days,
standing, fetching, holding, with hardly a break. It is a long time. The speed of the machinery is
calculated and they [the masters] know how much work it will do; and unless [the children] are driven
and flogged up, they cannot get the quantity of work from them. The average life expectancy of an
urban labourer is seventeen years.

Small companies that did not want to adjust their business practices in such a manner began to lose out
in the new market. The local producers had typically used the finest materials and relied on traditional
techniques for production. These smaller producers were not willing to resort to labor practices that did
not respect the rights of individual workers. Thus, they did not meet the demands for quantity and
speed that the changing market dictated.

The situation demanded new forms of organization that retained old modes of production while
providing economic security for individual producers. Since the time of the Rochdale pioneers, the
formation of cooperatives has continued and the notion of cooperative organization has reached many
regions of the world.

Principal Concepts

The seven ICA principles of coops are variously interpreted but generally followed in some manner in
most cooperative organizations. The attempt to solve common problems by combined action is at the
root of cooperatives, but empowerment, shared ownership, and democratic control are also key
concepts of cooperative ideology. Members become bound to each other through values and principles
as well as through their shared experiences in the cooperative.

Cooperatives attempt to balance individuals’ needs with those of the community as a whole by
encouraging individual empowerment within the structure of membership and responsibility to the
group. In a 1997 article in the ICA Review, J. Langmore says that cooperatives promote “the material
conditions and well-being of members through their acting in concert; members [have] a greater say
over their lives through their voluntary association in organizations controlled freely and democratically
by their members.”

Each member of the cooperative typically has a voice and a role in the daily operations of the
cooperative. Cooperative principles place a strong emphasis on democratic processes such as majority
voting systems, participation by all members in decision-making, and sharing work and benefits equally.

Cooperatives do not operate in isolation from their community, but are integrated into society. Some
offer various types of educational opportunities to non-members; others support local projects
benefiting their communities. As individuals, members are involved with groups outside the
cooperatives and, according to anthropologist Christine Eber, are viewed as “people of action in their
communities and beyond.” Cooperative values and principles are intended to support the structure of
the cooperative, which in turn supports the structure of society.

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Participants from 94 countries met in the first global conference focusing on cooperatives’ contribution
to the SDGsFrom 14 to 17 October, 2019 in Kigali, Rwanda.

Retrieved from https://www.culturalsurvival.org/publications/cultural-survival-quarterly/cooperatives-

short-history

Birchall, J. (1997). The international co-operative movement. Manchester, U.K.: Manchester University
Press.

Centre for the Study of Co-operatives at the University of Saskatchewan (2000). coop-studies.usask.ca.

Eber, C. (2000). That they be in the middle, lord: Women, weaving, and cultural survival in highland
Chiapas, Mexico. In Artisans and cooperatives: Developing alternative trade for the global economy,
Grimes, K. & Milgram, B.L., Eds.. Tucson, Arizona: The University of Arizona Press. Pp 45-64.

Fairbairn, B., Bold, J., Fulton, M., Ketilson, L., &Ish, D. (1995). Co-operatives and community
development: Economics in social perspective. Saskatchewan, Canada: Centre for the Study of Co-
operatives.

Langmore, J. (1997). The global dimension of co-ops. ICA Review, Vol. 90, No. 4, pp 73-76.

Milgram, B.L. (2000). Reorganizing textile production for the global market: Women’s craft cooperatives
in Ifugao, upland Philippines. In Artisans and Cooperatives: Developing Alternative Trade for the Global
Economy, Grimes, K. & Milgram, B.L., Eds. Tucson, Arizona: The University of Arizona Press. Pp 107-28.

The University of Wisconsin Center for Cooperatives (2003). http://www.wisc.edu/uwcc/.

https://www.ica.coop/en/cooperatives/history-cooperative-movement