In 1844 in the UK, R. Owen saw workers' cooperatives as a way to put production in the hands of the workers. Formation of cooperatives would be voluntary; administration and control was democratic; equal rights regardless of number of shares (one member, one vote); goods of high quality sold at average market prices; allocation of a share of profits to social and cultural improvement; distribution of profits among cooperative members according to the actual amounts acquired. A Cooperative Union was formed in 1885 in Paris. Cooperatives can flourish in the capitalist free enterprise system.
Cooperatives may be formed for a variety of purposes: consumer, credit, producer; supply and marketing, housing etc. They may be of a wide range, from labourers to owners to a combination of the two. A group of farmers and farm workers may form a cooperative to own equipment jointly, market crops and livestock etc. A group of tenants may form a cooperative to buy the building they live in and thus reduce costs and turn profits to themselves. A variety of cooperatives may form an alliance to support certain causes and effect social changes. Cooperatives are very extensively used around the world in nearly every country in some form or another. Generally they require training systems when introduced to a new area to familiarize members with the function of the co-op and the responsibility of membership.
In 1984 there were around 700 million members of co-ops worldwide, 100 million in the USA alone. A survey of USA food co-ops found that sales grew 13% between 1992 and 1993.
ILO promotes appropriate policies and operational measures for the development of democratic and efficiently managed cooperatives. It assists cooperative movements and government supporting services to promote cooperatives capable of supporting the economic activities of their members and of making a substantial contribution to national economic and social development. ILO also helps to promote conditions which facilitate cooperative growth.
As participatory institutions cooperatives contribute to poverty alleviation, employment and income generation; human resources development and the improvement of social conditions. Cooperatives are of particular importance in the structural adjustment process in developing countries because of the emphasis laid on replacing public decision-making and resource allocation by the efforts of individuals and their own organizations and groups. The cooperatives then play a greater role in accumulating funds for investment, creating opportunities for self-employment and organizing the provision of goods and services in market-oriented economies.
In recent years the cooperative movement has been tainted by accusations of being communistic.
At the same time cooperatives in socialist countries have not had the high level of productivity anticipated when competition is removed.
Cooperatives have a tremendous failure rate in most parts of the world especially in the third world; most of the failures are due to mismanagement. Even the original cooperative society in the UK has not proved successful.
With rare exceptions, the cooperative movement, which was intended to spearhead a process of rural transformation, has been unsuccessful, and has not been associated with desired increases in rural incomes. (In the United Republic of Tanzania, where there is a strong government commitment to the cooperative system of production, the past years have witnessed continuing declines in output and hence incomes). An ILO study on cooperatives also concluded that they were not often successful in motivating and mobilizing their membership.
Some of the problems that seem to be widely prevalent in cooperatives and affect their efficiency in general, and for the poor in particular, are: (a) a hasty launching of cooperatives, usually before the members understand them; (b) an inexperienced management; (c) units that cannot support themselves financially; (d) a lack of supporting infrastructure, including training and financial facilities, extension services, legislation, etc; (e) top-down Politico-bureaucratic channels; and (f) lack of incentives.