Are We Ready to Respond to Pope Francis’ Call for Co-operatives?

Small Farmers, Big Change
July 13, 2015

By Ted Weihe, Consultant to Equal Exchange
Yesterday in Paraguay and earlier in Bolivia, Pope Francis praised co-operatives and other localized organizations that he said provide productive economies for the poor (See NYT, July 11, 2015).
“How different this is than the situation that results when those left behind by the formal market are exploited like slaves!” he said. In his Encyclical Letter, Laudato SI (available on line), he said “Liberation from the dominant technocratic paradigm does in fact happen sometimes, for example, when cooperatives of small producers adopt less polluting means of production, and opt for a non-consumerist model of life, recreation and community.”
He has reframed inequality and poverty around a new economic theory and defining it in moral terms. “Working for a just distribution of the fruits of the earth and human labor is not mere philanthropy,” he said on Wednesday. “It is a moral obligation. For Christians, the responsibility is even greater: It is a commandment.”
Francis acknowledged that he had no new “recipe” to quickly change the world. Instead, he spoke about a “process of change” undertaken at the grass-roots level by priests, NGOs and community organizers.
“What can be done by those students, those young people, those activists, those missionaries who come to my neighborhood with the hearts full of hopes and dreams but without any real solution for my problems?” he asked. “A lot! They can do a lot.”
“You, the lowly, the exploited, the poor and underprivileged, can do, and are doing, a lot. I would even say that the future of humanity is in great measure in your own hands.”
But, if there are “real solutions” in promoting co-ops, the Catholic Church, community leaders, NGOs and Fairtrade advocates have a lot to learn, too.
Most credit unions in Latin America were formed by priests and nuns. Yet, it took decades to restructure them as sound financial institutions for the poor with appropriate interest rates for savers, and market-based loans to members.
Similar U.S. efforts in the 60s and 70s to create worker co-ops also failed because they were seen as utopian democratic experiments instead of successful group businesses where worker-owners needed to provide equity. In the case of Equal Exchange, they allowed for non-voting investors to raise capital – all with a profit focus while true to their democratic workplace and mission to buy from and support small farmer co-ops.
We know that cooperatives in Western countries probably did more to reduce poverty among the poor than any other interventions. For example, in the U.S. during the 1920s recession in agriculture after World War I, most of today’s producer co-ops were formed; in the 1930s rural credit unions took off during the Great Depression; and in the 1940s electric coops transformed rural America. This same U.S. experience parallels successful earlier co-ops in Europe, in Japan with General MacArthur reforms after World War II and in India where in the 1960s, they created the most successful and largest small farmer dairy co-ops in the world. Many of the most successful co-ops in the world such as Sunkist were formed before 1900 – so there is a rich and long history to draw on.
Yet, we in the development field have not learned the most important lesson about co-ops in that they must be properly structured financially so that the poor contribute through their usage and delivery of products, and they generate member equity so that the co-op can prosper and grow. Do-gooders, Fairtrade advocates and industries such as chocolate companies that are dependent on small farmers to provide their raw products, cocoa beans, do not understand co-ops. Donors certainly do not when they shower money on co-ops “to help the poor” instead of creating sustainable co-ops that can be self-supporting and uplifting through the farmers own efforts.
With Equal Exchange’s on-going project with cocoa co-ops in Dominican Republic, Peru and Ecuador, they have proven that getting poor farmers to contribute to their co-ops through the delivery of products is not only possible, but supported by managers, boards of directors and delegates to the General Assembly. Members now have a financial stake in their co-ops which generates lower bank loans, more purchasing of cocoa beans from fellow members and greater loyalty to the co-op. They are breaking away from the current donor-driven paradigm.
So we do have successful models to respond to the Pope’s call, but how can we spread the message, design and advocate true co-ops? At least, I have tried to lay out these premises in my book: Saving Fine Chocolate: Equity, Productivity and Quality in Cocoa Co-ops. But, I feel like a lonely voice. I hope that others can join me.