Understanding Cooperatives

The Cooperative Model

A cooperative is an organization that is owned and democratically governed by the people who use its products, supplies, and/or services. Cooperatives can vary in their particular purpose but share in common the fact that they are formed to meet the specific objectives of members and adapt to member’s changing needs. Self-reliance and self-help are the hallmarks of cooperatives.

Cooperative organizations have been organized throughout history to carry out many different activities, often in response to economic and social stress. Cooperative organizations in the United States appeared very early, reflecting both the European heritage of early settlers and the basic need for cooperative solutions in rural conditions. The first recognized cooperative enterprises was a mutual fire insurance company, founded in 1752 by Benjamin Franklin, that is still in operation today.

Cooperatives promote the interests of the local economy by promoting economic security for workers, consumers, and producers. The early pioneers of cooperative enterprises discovered that they could accomplish much more by combining their resources and working together.

Types of Cooperatives

Cooperatives can be used to address a multitude of shared needs:

  • Producers like farmers, artisans or industrialists utilize the cooperative to market or process their goods jointly.
  • Workers in areas as diverse as bicycle sales, baked goods production, and catalog sales use cooperatives to create employment that offers many of the benefits of ownership.
  • Consumers use cooperatives to gain better prices, gain organic, specialty, or locally sourced food or other goods; acquire financial or insurance services that are focused on member needs rather than profit; bring utility access to remote areas, or meet the social or cultural needs.
  • Private business or public entities gain purchasing power through bulk buying, obtaining products or services that are difficult to obtain individually, or sharing the administrative cost of certain projects.
  • Parents can gain quality childcare, preschool education, charter or private education by working together.
  • Home ownership that is affordable or is developed to meet the needs of seniors, students or people with disabilities is created using the cooperative model.

The cooperative model works well in many situations, but it always starts with a group of people who decide to provide certain goods or services for themselves. Often, this is after concluding that they cannot get the quality, quantity, or price they desire from somewhere else. Cooperatives range in size from small storefronts to among the largest companies in the United States. In the United States, there are roughly 48,000 cooperatives serving over 130 million members. Worldwide, some 750,000 cooperatives serve over 800 million members.

Underlying any cooperative is the shared recognition of a common economic need. Cooperatives can meet that need if their members are willing to participate, patronize/utilize the business, and provide financial support.

Benefits of Cooperatives

The Values of Cooperatives

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity. In the tradition of early cooperative pioneers, modern-day cooperative members believe in the ethical values of honesty, openness, social responsibility, and caring for others.

The International Cooperative Alliance (ICA), composed of cooperative leaders from around the world, established seven fundamental principles that guide cooperatives. These principles are known as the Madison Principles. We proudly subscribe to and affirm these values. They guide our work and provide us with an important framework for the work that we do.

  1. Voluntary and open membership. Cooperatives are voluntary organizations and membership is non-discriminatory by gender, social, racial, political or religious beliefs.
  2. Democratic member control. Cooperatives are controlled by members who actively participate in setting policies and making decisions.
  3. Economic participation. Members contribute equitably to the capital of their cooperative.
  4. Autonomy and independence. Cooperatives are autonomous, self-help organizations controlled by their members.
  5. Education, training, and information. To foster the development of a cooperative, education and training for members, elected representatives, managers, and employees is provided.
  6. Cooperation among cooperatives. To serve their members most effectively and strengthen the cooperative movement, cooperatives work together.
  7. Concern for community. While focusing on members' needs, cooperatives work for the sustainable development of their communities through policies accepted by their members.