THE PURPOSE OF THE STUDY

Background

Privately-owned businesses, which have been the main engines of economic growth nearly everywhere, are established and managed by individuals, or groups of individuals, mainly for their own profit. Experience suggests that such enterprises can also bring benefits to their employees, their suppliers and their customers, and thus the economy as a whole. There are of course all too many examples of exploitation, where private enterprise actively damages the interests of others. A form of organisation which is intended directly, rather than as a by-product, to benefit its owners, its suppliers and its customers, or any two of the three, clearly deserves to be taken seriously.

Informal group-owned enterprise must be as old as economic activity itself, and the exploitative behaviour of the early industrialists, and the associated impoverishment of rural areas, led to the formation of the first formal co-operatives in Germany and the United Kingdom in the first half of the last century. It was clear that co-operation could also benefit people in the colonies, and co-operatives in India were first formally recognised and promoted, over a hundred years ago.

In more recent years, since the end of the colonial area, co-operation has been seen as a way of enabling indigenous people to take over the control of their own lives from alien business. It seemed to have the potential to release the poor from the domination of capitalism and of foreigners at the same, and co-operative enterprises were eagerly promoted by the governments of newly-independent countries everywhere. Foreign donors, both government and non-government, assisted enthusiastically; not all of them could point to a universally successful co-operative movement in their own countries, and none could claim that co-operation had been their major source of economic growth, but this did not necessarily mean that they had nothing to offer.

There have been some successes, and many failures. The recent history of the former Soviet Union and Eastern Europe, where government-sponsored co-operatives have been discredited along with state enterprises, has contributed to a general climate of scepticism about any form of group or co-operative enterprise. It is important to learn from the failures, but also to recognise the successes, and this study aims to make a modest contribution by identifying some factors which appear to be associated with successful group enterprise. It is hoped that the findings will be of some value to anyone who is involved in the possible establishment of a new group enterprise, or in advising, assisting or managing an existing one.

The original study for this book was undertaken in 1991 and 1992, mainly in the state of Orissa in India. A number of articles, drawing on our findings, appeared in various journals and other collections but the study as a whole was not published or widely distributed at that time. For a number of reasons it was decided in 1998 that in spite of the somewhat dated nature of much of the original case study material the work should be updated and made more widely available.

Liberalisation and structural adjustment, in India and elsewhere, have led to many improvements in efficiency and levels of service, but it is now even clearer than ever that there is often a need for a 'middle' way, between state ownership and the private sector.

Co-operatives have been widely discredited, and often with good reason, but their many failures have frequently been the result not of intrinsic faults with the concept of group ownership, nor of members' own mistakes, but of overzealous or misdirected efforts by governments or other agencies which have tried to promote them. As governments, at every level, are withdrawing from many fields, co-operatives and those who wish to promote them are faced with new freedom and challenges. They can make more of their own decisions, and they need to learn as much as possible from the experience of the past, good and bad.

There is a great need for effective new co-operative enterprises, and a perhaps even greater need to restore older ones to profitable operation. It was therefore felt to be appropriate to publish this study in order to help those who promote and assist co-operative development to be more selective in choosing situations where this type of enterprise has a better than average chance of working, and to give them some guidelines as to factors which appear to contribute to success. There are of course no simple right and wrong ways to promote group enterprises, but this study assembles and analyses the accumulated experience of a large number of experienced co-operative development practitioners, and of many informal and formal groups and societies. If it helps even one society to develop more successfully, or if it warns even one development agent to stay away from one particular situation, it will have served its purpose.

It is tempting, and all too easy, to say that any genuine group enterprise must be initiated and managed by the members who wish to benefit from it, and even to suggest that any form of assistance from outside the group will inevitably limit their autonomy and reduce their chances of success. There are of course many groups which have dramatically succeeded without any external intervention at all, but there are far larger numbers of people who could possibly benefit from a group enterprise, but who for one reason or another have not been able to start one on their own.

Shah (1996, pp. 232–238) contrasts the "blueprint" with the "greenhouse" approach to institutional development. He stresses that it is not necessary for every community to "reinvent the wheel", and points out that institutions of all sorts, everywhere, are of a few basic types. Blueprints, and, by extension, guidelines from others' experience, are useful for those working to promote new societies, or to revive old ones. He uses the analogy of plant breeding to show that success will depend not only on the quality of the original variety, but also on the condition of the environment or domain where it is being planted, and the quality of the cultivation process. Farmers, and co-operative developers, cannot claim that "replication" is impossible and thus blame it for all their failures, but they must still be held responsible for choosing the right models for each environment and for nurturing them correctly.

Shah (ibid., pp. 20–21) also deals effectively with the view that co-operatives can only be successful when they are evolved totally 'naturally', without any external assistance or inspiration. He shows that most societies come into being because the members are coerced, or bribed, or lead, Only a...