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close this bookCo-operatives Today - Selected Essays from Various Fields of Co-operatives Activities - A Tribute to Prof. V. Laakkonen (ICA; 1986; 542 pages)
View the documentPreface by Robert L. Beasley
View the documentPreface by Juhani Laurinkari
View the documentLaakkonen, Vesa Esko
View the documentPublications of Vesa Laakkonen
View the documentThe impact of democratic control on co-operative decision-making
View the documentState policies and legislation vis-a-vis co-operatives
View the documentCo-operatives, associations and co-operative associations - differences and common features
View the documentHousing and non-profit housing - common features and contradictions
View the documentIn search of an international co-operative research programme
View the documentBusiness success and democratic process
View the documentA new model for producer co-operatives in Israel
View the documentA system approach to co-operatives
View the documentThe position of co-operative science within the overall system of sciences
View the documentConcentration in the co-operative system - the abolition of co-operative principles?1
View the documentTrends towards a new co-operative movement
View the documentCo-operative members and their movement
View the documentRaiffeisen - the man and the co-operator
View the documentSystems approach in co-operative research
View the documentThe co-operative system and managerial systems in socialist economy
View the documentThe consumer co-operative movement in Sweden - Theory and practice before the second world war
View the documentBasic co-operative values
View the documentCo-operative law as a tool of development policy
View the documentEcho, techno, polito and dialectics and system-theoretical reduction
View the documentTrends in co-operative theory
View the documentCo-operative principles and their importance for co-operative progress
View the documentCo-operation - An organization strategy
View the documentStrategic planning and strategic control of enterprises as tasks of co-operative management
View the documentGeneral managers in consumer co-operatives - What do they really do?
View the documentUse of computer for co-operative development. Assessment of the prospects for success of co-operatives in developing countries1
View the documentCo-operative principles from the point of view of evolution theory
View the documentAustrian “social partnership” and co-operatives
View the documentHomo oeconomicus and homo co-operativus in co-operative research
View the documentThe officialization of the co-operative system in developing countries - Problems and counterstrategies
View the documentManagement philosophy and business strategies of credit co-operatives

Co-operative principles and their importance for co-operative progress


Anton Rauter*

*Prof. Dr. Anton E. Rauter, Konsum Österreich, Vienna, Austria.

The co-operative history was initiated by a general, abstract cooperative idea, an idea not linked with any specific period, region or group. The co-operative theorist TOTOMIANZ (see Totomianz, Vahan (1923): Theorie, Geschichte und Praxis der Konsumentenorganisation, 2nd edition, Berlin) for example, interpreted this idea as the "cause of people" but also as the 'cause of all humanity' in the end. Where different points of view are confronting each other - may be denominational, sociopolitical or class-related ones - it happens rather frequently that a so-called principle of neutrality emerges; this also applies to our subject.

The founders of co-operatives stood up for a uniform co-operative idea and took all endeavours to implement a full co-operative, that is, a cooperative exercising many economic functions - from the production of commodities aimed at further and final consumption (production cooperatives) up to trade, the distribution of commodities through purchase and sales, including all auxiliary functions linked with it.

However, these pioneers were not only active in almost all fields of the co-operative system but they also developed a uniform 'co-operative system' more or less clearly by making the attempt of combining various types of co-operatives. The idea of 'self-help' was immanent in all these endeavours.

In a co-operative sense, this means active work to overcome misery in contrast to passive behaviour expecting help from the state or other social institutions.

Self-help means that the individual voluntarily decides on performing social action and then joint action based on the finding that more can be achieved by working according to the slogan "one for all, all for each' than the slogan "every-body for his own".

It is like a mosaic where the full effect of the work is achieved only by the effects of all stones of which it is composed.

This idea of self-help is applied to economic work by transferring one or several functions, assumed by individual economies in the past, to a joint enterprise - the co-operative. The merger of the economic potentials of the individuals results in an increased performance of each member within the alliance.


Endeavours to achieve liberty made around 1848 when Socialdemocracy, that is, the idea of a new social order based on economic democracy, played a leading role - although for a short time only -, contributed to consolidating the co-operative idea essentially. Due to investigations and threats of punishment by the authorities in connection with the idea of upheaval promoted by the democrats, these persons living in Central Europe had to emigrate, to England in particular, where they became acquainted with the idea of consumer co-operatives as published by the so-called Rochdale pioneers through the well-known journalist G. J. Holyoake (see Holyoake, G. J. (1928) "Geschichte der Rochdaler Pioniere"; revised edition in German R. Schloesser, Cologne).

After the first years of foundation, an increasing differentiation of various types of co-operatives based on different points of view became apparent. According to social or economic-social objectives, a difference was made between co-operatives of craftsmen, tradesmen, farmers and workers.

The classification by political, ideological and denominational points of view showed that the co-operative system was orientated both toward workers' parties and trade unions on the one hand and parties of the upper middle class on the other.

Four different co-operative systems emerged in the course of time:


- Consumer co-operative system (Rochdale principles)
- System of manufacturing co-operatives (Schultze-Delitzsch)
- System of agricultural co-operatives (Raiffeisen) and
- System of housing co-operatives.

Even today, these co-operative systems are existing in the above mentioned form in Austria.


Despite considerable differences between the various co-operative types, co-operative movements had found a decisive common expression and an essential linkage in the uniform legal co-operative form originally; the degree of closeness to the co-operative ideal was dependent on the conceptional contents and socio-economic objectives of the respective type of co-operative.

Consumer co-operatives based on the principles of the Rochdale pioneer co-operatives of 1844 are essentially closer to the co-operative example, its conceptional contents and socio-economic objectives - than certain forms of credit co-operatives in the manufacturing sector, that had to adapt to procedures used in banking for the sake of survival.

As to the co-operative system, the foundation of the Rochdale Society of Equitable Pioneers as already mentioned above showed the way. This co-operative founded on 28 October, 1844 by 28 flannel weavers became the example for the consumer co-operative movement existing all over the world today.


Essentially, the Rochdale principles being of paramount importance for consumer co-operatives are based on the ideas of the English social reformer Robert OWEN (1771-1858), and their history is marked by ups and downs.

For a long time, it was not clear how to formulate and interpret these principles. More or less clear ideas about the fundamental importance of certain rules and modes of behaviour of the Rochdale pioneers existed but it was not possible to reach an overall agreement.

It was said the only important point for integrating a principle into the basic rules was the personal judgement of those making this list. The judgement changed with the person making it. What was important for this pioneer could be unimportant for another one. There was no uniform co-operative 'declaration of principles' in Rochdale.

At the International Co-operative Congress in Paris in 1937, the following seven principles were designated as true " Rochdale principles" and were codified internationally:


1) Open membership,

2) Democratic administration (one vote per member)

3) Repay of the surplus to the members according to their participation in the business of the cooperative,

4) Limited interest payment,

5) Political and religious neutrality,

6) Cash payment,

7) Promotion of the education system.

These seven principles of co-operative action are not only purposeful statements of economic experience but also the result of economic thinking.

They reflect the co-operative idea in clear-cut formulas. Irrespective of the will and views of the people, their consequent application ensures such a socio-ethical implementation of economic life, that differs from the results of the capitalist economic life distinctly. In this sense, co-operatives are counterpoles to an economy being in contrast with honest principles so often. They implement a part of socio-ethical economic life and prove that it is possible to bring ethical principles and economic reality into harmony.


After 1945, the economic, social and political conditions for the existence and development of co-operatives had been set in motion. The process of adaptation to technological and organisational changes in the economic and social structures compelled the co-operatives to reexamine the co-operative principles.

After long and hard negotiations, the following version of the Rochdale principles could be adopted at the Congress of the International Cooperative Alliance in Vienna in 1966:

1) The determination of 'open membership' is the basis of expanding the co-operative idea to all strata of the population because everybody being ready to accept the principles of the consumer co-operatives was entitled to become a member. However, membership to a co-operative should be voluntary and open to all people who want to use the service of the co-operative and are ready to assume the duties linked with membership.

2) Co-operatives are democratic organisations. They should be administered by persons who were elected or nominated according to a procedure decided upon by the members, and who are accountable to the members. Members of primary co-operatives should have the same right to vote (one member - one vote) and the same right to take part in taking decisions on the affairs of their co-operatives. Primary co-operatives based on one uniform managerial structure are also designated as individual cooperatives. Their special feature is their close connection with the members, and they are often seen as part of the co-operative basis.

As they often work in or for a specific location, they are designated as local co-operatives frequently.

KONSUM OESTERREICH is a primary co-operative for the whole territory of the Federal Republic.

Non-primary co-operatives should be administered democratically in a form appropriate for them.

3) There should be only a limited interest payment, if any, of the share capital.

4) Eventual surplus or savings from the business of a co-operative belong to the members and should be distributed in such a manner that no member is favoured at the cost of other members. Based on decisions taken by the members, the surplus could be used in the following manner, for example:


a) for the development of the co-operative enterprise,

b) for creating common services,

c) for, its distribution among the members according to their business relations with the co-operative.

5) All co-operatives should take care of the training and information of their members, managerial employees and other staff members. The public should be informed about the objectives and purposes of the co-operative. This educational work has to cover the economic-democratic principles and methods of the co-operative movement.

6) All co-operative organisations are to actively and practically cooperate with other co-operatives at local, national and international levels in order to serve the interests of their members and communities in an improved manner.

Due to social developments, it was not necessary for the Congress of Vienna to maintain the principle of cash payment because most of the cooperatives provide credits for the sales of consumer goods or specific services.

The Rochdale pioneers wanted to elaborate the basis of co-operative action being relevant for future generations. This will is being documented through recognizing and stipulating the principles adopted by the International Co-operative Alliance, principles that involve the promotion order of co-operatives.


When the ICA Congress took place in Moscow in 1980, however, doubts were voiced with regard to the official formulation of the six Rochdale principles. Instead of stating the principles apodictically, the Moscow statements show the attempt of adapting the level of the principles to recent changes in market life. The statements also say the Rochdale principles are mainly based on the ideas of consumer co-operatives and not applicable to other kinds of cooperatives like agricultural co-operatives, workers' co-operatives or housing co-operatives. Therefore, the proposal to find a new formulation of the principles was accepted, aimed at making five general principles applicable to all types of co-operatives.

Ideological principles must be defended but they must be examined critically from time to time, that is, when this seems to be necessary and improvements are imperative. For example, the principles of 'cash payment' or "selling at actual market prices" have been embodied in cooperative democracy for a too long time although these principles continue to represent a practicable guideline in specific situations, especially when it is necessary to change traditional methods of economic action to make them more profitable.

Co-operative movements all over the world have to elaborate principles, showing the way for all types of co-operatives, principles that, like a star, show the way to the future.

However, this does not mean at all that the Rochdale principles were outdated in their essence.


When applying these co-operative principles, some unintentional, not foreseeable consequences may occur, especially in co-operatives in developing countries; this is documented in a critical working paper (see Craig, Dr. J. G., and Saxena. Dr. S. K. (1984): "A Critical Assessment of the Co-operative Principles" in Working Papers Vol. 3, No. 2).

Co-operative principles are stipulations aimed at transforming cooperation into practice. They are limited by space, time and the understanding for co-operation in a respective culture.

When taking stipulations as a purpose per se and not as what they really are, that is, stipulations aimed at ensuring the application of the fundaments of co-operation in a certain situation, difficulties arise. A verbal interpretation may distort the fundaments of co-operation.

When applying co-operative principles, some unintentional consequences came into being. However, these are not the inevitable result of the rules of contractual co-operation but of the use of stipulations when social, economic and cultural ties are changing. There occur the following contradictions in particular:


- In some types of co-operatives, women are excluded from participation generally.

- Some groups of shareholders were taken into consideration in the democratic system while other shareholders were deprived of the benefits of basic democratic rules.

- Due to this procedure, the democratic character and contents disappeared for the members gradually.

- In many cases, there is a lack of working capital and of the possibility to finance local self-help projects.

The principles were stipulated in the first half of the 20th century in order to provide co-operatives with successful positions on the market at that time. However, they do not contain the fundamental struggle of the movement.

The weakness of co-operatives is not manifested in the co-operative philosophy but in the fact how co-operative principles are stipulated and applied in practice.

A critical matter with which both developed and less developed countries have to deal is the increasing promotion of self-help establishments and the economic improvement at a local level.

The idea of co-operative self-help was never as actual as today but co- operatives in developing countries have increasing difficulties in doing their work and coping with critical situations confronting the communities.

Co-operatives in developing countries are at the beginning of their cooperative history. They are often not in a position to apply the characteristics contained in the principles because problems linked with the survival of co-operatives like, for example, financing, democratization, beneficial co-operation, are not yet solved in many cases.

This is a broad field of action for the International Co-operative Alliance - the Alliance and its national members will have to participate in developing projects of the Third World even more actively.


The key to co-operative ideas and co-operative philosophy has always been the ability not only to adapt to changed times and demands but also to initiate new developments. More than a hundred years ago, the economic situation of millions of co-operative members in Europe could be improved through the use of the Rochdale principles in practice; today, it is our task to promote and support developing countries. Therefore, cooperatives provide the people in the Third World with the capacity of cooperative self-help increasingly. Much has been achieved - much has still to be done.

In addition to co-operative development, co-operation within the framework of social economy is of paramount importance. Many tasks can be solved jointly and most efficiently by activating and using all reserves.


In this context, I want to deal with definite objectives of social economy undertakings for an actual reason - reprivatisation supported and managed by conservative circles.

In the present-day pluralistic society of Western industrialized countries, it is not only the capital structure and the proprietor that decide but also the technostructure and the manager in conformity with staff representatives.

Therefore, the antagonism between social economy and private economy does not exist any more in all sectors. Assumptions saying that the social economy is predominantly producing losses although it makes supplies to oligopolaric markets, are based on polemics, above all. Generally, the statement is correct saying that social economy is to the general welfare while the private economy is concentrated on efforts by individual enterprises to make profit: however, this assumption certainly does not hold true any more for all economic fields.

As long as the term 'social economy' is only used for co-operatives, municipal service and transport undertakings as well as regional bodies and federal bodies essentially, the term 'social economy' covers reality to a large extent although not all types of co-operatives fit into the model of social economy.

Even today, social economy is determined by extra-economic targets. Social economy covers all economic activities, all households and undertakings whose extra-economic prime targets are linked with the general welfare, the welfare of a country's or town's population or the welfare of large groups of the population representing the entity; these social economy targets may not only be social ones but also targets in terms of cultural policy or social policy.

Primarily, co-operatives have to serve the interests of their members and other group interests only secondarily. Their predominant task is to promote economically weaker groups and their second task is to serve the general welfare.

Certainly, co-operatives and public undertakings are justified in claiming to consider themselves as elements and pioneers of a new economic and social order.

Enterprises of social economy - like enterprises of private economy - have to prove their value on the market today. They must produce economically, that is, at a cost as small as possible, and must provide the markets with goods and services that are cheap and accepted - thus bought - by the consumers owing to their quality. This requires managerial initiatives, courage to make technological and economic innovations, the ability to adaptation and permanent efforts aimed at achieving maximum productivity.

To meet the dynamics of our technological age with its complicated economic and social structures, the unstoppable increase in collective demands and the simultaneous unlimited esteem of the freedom of individual consumption and professional choice, it may be the best to implement coexistence and co-operation of various economic types, mutual completion, penetration and promotion of types and principles in terms of private economy and social economy.

Structural changes caused by new technologies may also bring about multinational giants in industrial manufacturing. However, this leads to giving a subordinate role to free market economy in the post-industrial society and distribution, compared with the state and social tasks. In this development, social economy has to be given responsibility for new fields.

The integration of co-operative and social economy principles is to be based on an increased readiness to solve problems of environmental protection and to accept that in case of problems of ecology, the tasks can be solved only on the basis of common responsibility, injunctions, planning by authorities and the economy, guaranteed employment and a careful approach to taking risks.


If there is any priority in Western Europe where economic systems based on mixed economies are prevailing, this is environmental protection and guaranteed employment.

Most of the social demands of the past have been satisfied to a large extent, our society is characterized by facing new problems. As already mentioned, certain conservative circles believe that present-day problems could be solved by using the slogan 'privatisation' or 'individualization'. Developments show, however, that the sense of community must be developed and that individuals must not be allowed to extend their privileges at the cost of the community.

The sense of community favours an evolutionary development and - in partial fields at least - shows the way how to make economically weaker groups full members of the society. This development is taking place and is characterized by the speed of social progress. In countries with open social systems, where the same starting conditions exist for competition, principles of the mixed economy have brought about great stability. In countries with totalitarian regimes in all hemispheres, the opposite development has to be stated to the disadvantage of large parts of the population impeded in their development. A process of mitigation is to be expected in these countries, too.


In the last few decades, co-operatives - in Western Europe in particular - were subject to a process of extraordinary changes because they have been and are being placed at the intersection of growing demands by their members and speedily changing market demands.

Through permanent economization and respective modernization in all fields, KONSUM OESTERREICH succeeded in fully satisfying these demands of our time thus proving its economic and social proficiency with taking co-operative principles into account.

The long-term objective of KONSUM OESTERREICH is to promote all member households in those fields of life that are considered to be of vital importance and worth promotion; this is to be done by providing goods and services and the general engagement in terms of consumer policy.

However, many things remain open with such a formulation. But this is its purpose because a 'long-term objective' must not set limits as this would diminish its significance. 'Long-term' in this context means one decade, and every year, the foundation stone should be laid for an additional decade.

That means, exact planning in the consumer co-operative movement is a continuous process. As it is common practice, our objective is a state aimed at, conditions that are realistic but should motivate the consumers strongly.

It is impossible to adjust the business of KONSUM OESTERREICH to the varied individual interests although many problems are inherent in this overall promotion. In this context, the organisation based on democratic principles permanently has to stand new tests as to establishing generally accepted detailed targets and balancing all objectives.


Undoubtedly, the promotion order as embodied in the idea of self-help occupies the most important position among the principles of the cooperative idea; this holds true even if there exist most varied views as to its concretization.

It comprises three sectors of performance - commodities, services and the metaeconomic social field.

First it seems to be rather difficult to find an answer to the question what is to be understood by promotion in essential fields of life.

Because this answer is again in the field of competence of the individual members. This subjective evaluation, however, would be far too varied in case of more than 800,000 members and therefore, it is only of an illusionary character for decisions in terms of business policy.

An insight into what the majority of members hold to be essential, however, results from meetings and formal events (general assembly, regional assembly, general meetings), from practical experience made in talks with the members, from proposals and other things. These wishes and suggestions from the members and customers of KONSUM OESTERREICH are reflected in practical management. In addition to promoting its members, all kinds of direct promotion of all consumers are increasingly important for KONSUM OESTERREICH in the future.

In addition to this kind of promotion order, there is another one in the metaeconomic field, that is, services free of charge, especially in the fields of education, training and information; this only applies to the members of KONSUM OESTERREICH.


According to the principle of identity being part of the promotion order of co-operatives (See Weber, Wilhelm (1976), in: "Verbraucherpolitik und Wirtschaftsentwicklung" Anton E. Rauter (ed.), Vienna), members are part of their co-operatives twofold in economic and functional terms - they use the co-operative to get things for their households and for promotion on the one hand, and on the other, they are co-proprietors, shareholders of the law-based company formation 'co-operative' and thus participants in decision-taking within the organisation, that is, the legal entity called 'co-operative'.

When seeing the term more comprehensively, the principle of identity may also be considered theoretically as the expression of the individual's self-identification with an economic and living community accepted by the individual.

Such an identification with the co-operative is a prerequisite for the ability and readiness of members to exercise democracy. This clearly shows the close interdependence of co-operative principles.

As an expression of self-identification of the members, the principle of identity remains significant at a new level even if it has been subject to certain modifications as a traditional principle both in legal and economic terms.

However, solidarity among the members and their permanent democratic co-operation will only be possible where an especially close relationship to the co-operative exists and identification is possible for the individual.


In a society where competition dominated the economic life, where the worker was subjugated to the employer for a long time, co-operatives meant far more than only an improvement of the living standard. The cooperative - for many people this was a symbol or the beginning of a more humane and free social order.

What was said here shows that co-operative action does not have revolutionary traits. But through eliminating socially detrimental effects of the capitalist economic system, it essentially contributed to organic evolution. And it is going on contributing in a modified manner.

Christian, liberal, conservative, and, last but not least, social-democratic motives have influenced the development of co-operatives. The supporting element of the co-operative idea has been and continues to be the idea of self-help as embodied in the promotion order of consumer co-operatives.

We are living in an increasingly dangerous time. The holocaust of a nuclear war, economic chaos and world-wide hunger is threatening all of us. To cope with these threats, we must learn to co-operate.

There are many critical issues in our society of welfare and abundance. One of the most crucial problems - a very complex economic, social and moral one - is the simultaneous existence of increasing abundance in the rich countries and increasing poverty in developing countries. There are only a few among the rich industrialized countries that are aware of their task to render solidarity to the people in developing countries; this underlines the urgency of the task adopted by the International Cooperative Alliance.

The consistent application of co-operative principles has proved to be a good method to achieve co-operative objectives. To do so, one has to know these principles. Only action creates new preconditions and fundaments for a new democratic society. Especially today, it is of paramount importance to the international co-operative movement to apply well proven strategies and to manifest mutual understanding and alliance all over the world.


"Analyse critique des principes co-operatifs" (1983). In: Zeitschrift "Co-operation" - Organe de la Fédération Beige des Co-opératives - FEBECOOP".

Arbeitsgemeinschaft der österreichischen Gemeinwirtschaft (Hrsg.) (1972): "Die Gemeinwirtschaft in Österreich", Vienna, Munich.

Arbeitsgemeinschaft der oesterreichischen Gemeinwirtschaft (ed.) (1979): Gemeinwirtschaft - Aufgaben, Ausmass, Argumente", Vienna, Munich.

Arbeitsgemeinschaft der oesterreichischen Gemeinwirtschaft (ed.) (Sept. 1985): Literaturliste ueber Gemeinwirtschaft, Vienna.

Frotz, Gerhard (1985): Geschaeftsleiter und Funktionaere bei Raifleisenkassen. In: Allgemeine Schriftenreihe, Folge 3, Dr.-Rudolf-Rasser-lnstitut, Vienna.

Hasselmann, Dr. Erwin (1968): "Die Rochdaler Grundsaetze im Wandel der Zeit", Veroeffentlichungen der deutschen Genossenschaftskasse, vol. 4, Francfort-on-Main.

Laidlaw, Dr. A. F. (1980): "Co-operatives in the year 2000".

Laurinkari, Juhani (1985): Empirisches Experiment zur Schaffung einer Typologie. In: Typisierung von Funktionstraegern in Genossenschaften. Zeitschrift fuer das gesamte Genossenschaftswesen, vol. 35/2, Goettingen.

von Loesch, Achim (1977): "Die gemeinwirtschaftliche Unternehmung", Cologne.

Patera, Mario; Brazda, Johann, and Zachert, Ulrich 1984: Zeitgemaesse Interpretation des Foerderungsauftrages. In: Allgemeine Schriftenreihe, No. 1, Dr.-Rudolf-Rasser-Inst., Vienna.

Patera, Mario (1984): Moeglichkeiten und Grenzen demokratischer Mitbestimmung in Genossenschaften. In: Allgemeine Schriftenreihe, No. 2, Dr.-Rudolf-Rasser-Inst., Vienna.

Rauter, Anton E. (1976): Verbraucherpolitik und Wirtschaftsentwicklung, Vienna.

Rittig, Gisbert, and Ortlieb, Heinz-Dietrich (ed.) (1972): "Gemeinwirtschaft im Wandel der Gesellschaft" In: Festschrift fuer Hans Ritschi zu seinem 75. Geburtstag am 19.12.1972, Berlin.

Seibert, Franz (1978): "Die Konsumgenossenschaften in Oesterreich" - Geschichte und Funktion, Materialien zur Arbeiterbewegung No. 11, Vienna.

Walkins, William Pascoe, J. P., B. A. (1969): "Die internationale Genossenschaftsbewegung - Ihr Wachstum, ihre Struktur und ihre zukuenftigen Moeglichkeiten, Veroeffentlichungen der deutschen Genossenschaftskasse, Zentralbank der Genossenschaften, vol. 5, Francfort-on-Main.


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