Facing the challenges of globalisation

The importance of co-operative enterprises in making Europe more competitive and dynamic was recently stressed by Erkki Liikanen, EU Commissioner responsible for Enterprise and the Information Society. He was speaking at an International Co-operative Alliance (ICA) European Assembly for Europe on the theme "The Co-operative Contribution to European Competitiveness".

Liikanen stressed that co-operatives were not to be seen as peripheral to enterprise policy, but were part of a coherent approach by the Commission to achieving the goals set by the "Lisbon agenda" of 2000. That agenda was meant to make the European Union more competitive and dynamic.

It is common knowledge that the idea of creating businesses based on people rather than on capital has its origins in the 19th century, fostered by the ideas of Owen, King, Greenwood, Plunkett, Gide, Raiffeisen, Sergio and Luzzatti.

It was first practised in England by what became to be called the Rochdale Pioneers, although the Danes hold that their very successful agricultural co-operative movement was born simultaneously with, and independently of, the British one as a call by the people to take the manufacturing process in their hands.

Co-operativism has had various levels of success in the various countries in which it has been put into practice. It has done especially well in Scandinavian countries, not that well in Great Britain and the United States. It should have fared better in several European countries, even if in the food supply sector its current proportion of the market is very high, with over 30 per cent in Sweden, more than 50 per cent in Spain and Italy, and 83 per cent in the Netherlands. But problems of availability of capital have always hampered further expansion.

It is actually estimated that over one-third of the world's food supply is managed by co-operative enterprises. These are truly global businesses, yet they are owned and controlled by their members, mainly independent farmers.

African and Asian countries, generally speaking ex-colonies of the British and the French, have had mixed successes, the better ones coming from small, well-knit groups at grass root level.

In an EU context one has to consider that the EU economy is undergoing a rapid transformation into knowledge-based society.

During the second half of the nineties, all employment growth was in skill-intensive employment, with the number of low-skill jobs declining in absolute terms. Human capital was at a premium. And yet it is a precondition for innovation, and a source of innovation. These skills and capacity for innovation "can be more effectively translated into action in those enterprises where the employees can have a real influence over management decisions. The co-operative form, with its participatory ownership and control structures, is an ideal instrument for this," says Liikanen.

Recent years have seen a trend for the services industry to expand more than the manufacturing one, hence creating more jobs than this latter.

Services represent 70 per cent of output and 69 per cent of jobs in the European Union. Because of the intangibility of many services, innovation in services often relates to the way in which the service is delivered, its design or customisation.

This calls for increasingly high quality and tailored services. A co-operative structure, which allows users to influence the business that serves them, is a way to ensure that the business responds directly to their needs.

In the fast growing sectors of health and social care, co-operatives are increasingly proving their ability to perform well.

Another area presenting opportunities for co-operative development is that of small and medium-sized enterprise.

The modern EU economy is dominated by these micro-enterprises employing less than 10 employees. A recent report of the European Observatory for SMEs confirms that SMEs provide two-thirds of private employment in Europe. This compares with one-third in Japan and around one-half in the USA.

SMEs are dynamic and flexible. However, smaller enterprises also lack some of the advantages of size, such as scale economies, access to markets, input purchasing power and marketing power.

Co-operation between enterprises can bring about these advantages, whilst at the same time enabling the individual enterprises to retain their autonomy. However, most non-co-operative enterprises, imbibed with the prevailing investor-led business culture, remain unaware that the co-operative form can be an appropriate vehicle for their common activities.

Europe, and the world, are undergoing changes not less fundamental than those faced by workers in the mid 19th century when economies were going through a period of rapid industrialisation and urbanisation. In actual fact, the more rapid process of globalisation is much more challenging.

Co-operatives therefore play an important role in ensuring that individuals and communities are not excluded from the benefits of globalisation.

In December 2001 the EU Commission published a consultation document entitled "Co-operatives in Enterprise Europe".

The document argued that co-operatives did not need special treatment or favours. This basic message was universally supported in the responses to the consultation. Co-ops do not ask for preferential treatment. They only want a level-playing field in which they can assert themselves.

Commission President Romano Prodi stated last year at a meeting with co-operative organisations, "Co-operatives are autonomous, viable and innovative enterprises that have an important role in the modern mixed market economy".

Liikanen comments that "these words were carefully chosen: they are autonomous because they are owned and managed by their members; they are not dependent on public sector support. They are viable because they operate within a market context and without subsidy. They are innovative because they directly involve their principal stakeholders in their decision-making processes."

The document also recognised that co-operatives have the right to demand a regulatory framework that is adapted to their specific characteristics. To be able to provide such a level-playing field the Commission and national governments must have a proper understanding of these characteristics and of the particular obstacles facing co-operative business.

Commissioner Liikanen noted that "it remains an unfortunate reality that too few people in Europe understand the potential of co-operatives, let alone consider establishing a co-operative enterprise themselves. Those who are aware of co-operatives often regard them as somewhat old-fashioned."

This is a sad reality the co-operative movement has had to face all along its long history. And the Maltese experience is no better.

In the last months the EU Commission has been working on the results of the consultation which drew a satisfactory reply from member and accession member states.

The Commission is confident that "the ability of co-operatives to build enterprises that are at the same time both viable and empowering makes them an important bridge between local communities and the global economy," said Commissioner Liikanen.

It is often stated that the "common bond" - a common interest or need - is the very basis of successful co-operation. Today that bond is increasingly becoming global. And co-operative organisational forms are providing a good means to serve global communities, given that the communications revolution has given rise to the possibility of communities that are themselves global.

In a sense co-operatives anywhere in the world have always had strong ties that may be termed global. First of all, they generally adhere to the same principles wherever they are and whoever they serve.

The "principles" adopted by "the pioneers" are still the same. The 'one man one vote' principle, the essence of any democratic organisation, is a sine qua non for an organisation that wants to be legally recognised as a co-operative. So is the distribution of profits according to the amount of business a member has transacted with his co-operative.

These are principles that differentiate co-operatives from other businesses, even from SME's of which they often form part and share ups and downs.

One of the keys to the globalisation of the co-operative movement is the use of the Internet. The International Co-operative Alliance has been instrumental in setting up the new "dot coop" top-level domain name, a initiative that has been welcomed by Erkki Liikanen, EU Commissioner responsible for Enterprise and the Information Society.

"The combined recent developments of expanding business Internet use, a European Co-operative Statute, and a recognised "dot coop" domain name will open up opportunities for co-operatives to grow in the single European market and the global market," he told the ICA European Assembly for Europe on the theme "The Co-operative Contribution to European Competitiveness".

The European Co-operative Statute is a step towards helping co-operatives in the EU achieve greater cohesion through a streamlining process somewhat similar to the harmonisation that has been attained in the field of company legislation. Although, given the particular nature of co-operativism, it will still be optional and intended for those co-operatives that have activities in more than one member state. However, it may well have an indirect harmonising effect as it becomes accepted as a reference text for co-operative regulators.

It is also hoped that the enlargement due to take place in May 2004 will open the way for more regular contacts between the public officials responsible for the regulation and development of co-operatives at national and European levels.

Such contacts will help and exchange good practices in the regulation and promotion of co-operatives. This may also lead to benchmarking exercises as a means of comparing the varied approaches at national level.

Between January and May 2002 the DG Enterprise held a consultation exercise that elicited a good response from all sectors of co-operative activity in Europe. The findings will form the basis of a communication on co-operatives that will orientate the Commission's actions in relation to co-operatives for the coming years. It will also make recommendations to member states, and to accession states, concerning the regulation and promotion of co-operatives.

The Communication will call for appropriate regulation for co-operatives in the wide range of policy areas that have an impact on them. It will also call for improvements in the quality of data available on co-operative enterprises.

It is important to note that the consultation aroused particular interest among the co-operative organisations of the candidate, now acceding, countries. Opinions representing the views of 57 different co-operative federations were received.

"It is therefore clear that we will pay particular attention to the specific concerns and problems of the co-operative movements in these countries," said Liikanen.

The text of the statute was agreed to in June 2002 and is in line with a proposal the Commission originally made in 1991. It is hoped that it will be adopted in the current year after going through the European Parliament.

One of the problems of harmonising co-operative legislation stems for the very diverse history and development of co-operatives in different European countries. This has led to different legal frameworks and regulations governing co-operatives.

It is enough to go through the various definitions of "a co-operative" that one finds in the various countries.

Possibly one the most interesting is the Danish one which says that a co-operative is a business the purpose of which is to promote its members' common interests through participation in the business as purchasers, suppliers or in similar manner, where the profit of the business, apart from normal interest on the paid-up capital, is either distributed between the members in proportion to their share of turnover or remains within the company.

The definition is the probably the most modern one, given that Denmark, where co-operatives (especially the agricultural ones) have always been highly organised, did not have any co-operative legislation before it joined the EU.

Spanish legislation speaks of a society founded by persons who come together on a voluntary basis to realise enterprising activities, to meet common needs and economic and social aspirations, with democratic structure and functioning, according to the principles of the ICA.

The European Co-operative Statute is thought to have struck a good balance between respect for the fundamental co-operative principles and the provision of a flexible and practical instrument which will, for example, give co-operatives access to increased capital.

It will also provide an effective instrument for existing co-operatives in Europe to fulfil their cross-border activities and ambitions.

The positive response of international and European co-operative groupings and federations to the DG Enterprise consultation augurs well for the adoption of a statute that will be a catalyst for the further development of the co-operative movement.

The ICA suggested that it first be adopted as a White Paper and then become part of the acquis communautaire, and called for funds to support the implementation of an Action Plan. The World Council of Credit Unions called on governments in candidate countries to better recognise co-operatives as an important component in efficiently operating free markets and sound financial systems.

The Co-Ordinating Committee of European Co-operative Associ-ations also called for its inclusion in the acquis and for the support of acceding countries.

This was also the view of the European Community of Consum-ers' Co-operatives. The General Committee for Agricultural Co-operation in the EU emphasised the development of co-operatives in rural development and in the vertical integration of the production chain.

The views expressed by these worldwide and European groups are also reflected in those of national federations and organisations.

It is now only a question of time before co-operatives in the EU will have common statutory provisions which will help them develop further their potential in the economic and social fields.