Cooperatives, Little Recognized, But Engrained in U.S. History
WASHINGTON -- Although most credit union members and even many CU staff fail to recognize it, they are part of a global industry that has roots in the U.S. going back to revolutionary times.
Most people aren't aware, for instance, that Benjamin Franklin organized the very first cooperative in the United States in 1752. The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire is a cooperative insurance company that Franklin organized as a means for Philadelphia business and homeowners could limit their risk from fire and still exists today.
Paul Hazen, CEO of the National Cooperative Business Association, uses the Franklin example to illustrate the role that cooperatives have played--and continue to play, in the country's economy, and to illustrate the broader industry credit unions share.
"The fact is that cooperatives are everywhere and have been everywhere," Hazen said. "In the past there may have been a reluctance to trade or market themselves as cooperatives, almost as a kind of embarrassment, but now cooperatives are starting to recognize that their cooperative nature provides them a real market advantage."
According to the NCBA, cooperatives operate in every industry--including agriculture, childcare, energy, financial services, food retailing and distribution, health care, insurance, housing, purchasing and shared services, and telecommunications.
The association, which has been representing cooperatives since 1916, said that co-ops define themselves less by their exact lines of business and more by the way they conduct business.
NCBA pointed out that co-ops are owned and democratically controlled by their members--the people who use their services or buy their goods--not by investors. They return surplus revenues to members proportionate to their use of the cooperative, not proportionate to their ownership share. Co-ops are motivated not by profit, but by the desire to meet their members' needs for goods or services. They generally pay taxes on income kept within the co-op for investment and reserves, while surplus revenues from the co-op are returned to individual members, who pay taxes on that income.
The association also lists seven guiding principals for cooperatives, including voluntary and open membership, democratic member control, member economic participation, autonomy and independence, education, training and information, cooperation among cooperatives, and concern for community.
Hazen argued that it's important for credit unions to understand themselves and their structures as cooperatives because it can provide them with a deeper context for what they do and an answer to the occasional question, "aren't you just another kind of bank?"
Credit unions share the consumer cooperative designation with organizations like Recreational Equipment Inc, the largest consumer cooperative in terms of membership in the United States that sells outdoor sporting goods and Group Health Cooperative of Puget Sound, a health care cooperative that has been nationally recognized for its quality health care services and reasonable prices.
Other types of cooperatives include producer cooperatives, which include Land O' Lakes, Blue Diamond, Sunkist and Sun-Maid, among other very popular food brands. Worker cooperatives include firms like the Burley Design Cooperative, the organization that designs and manufactures the popular bike trailers widely used for carrying kids and cargo.
Purchasing cooperatives are also a sort of cooperatives and these include ACE Hardware and TruServ. These are national cooperatives of independent hardware store owners that pool purchasing power. Carpet One is a national cooperative of independent floor covering retailers that now is the largest seller of floor covering in the world and the independent pharmacy cooperative that is owned by independent, main street pharmacies that allows members to reduce the costs of pharmaceuticals and retail items to better compete with national chains.
The common thread to all these organizations is the commitment of their members to join together in a non profit way and to pool their resources in an effort to obtain or provide less expensive products and services, Hazen pointed out. Rather than remaining isolated when facing opposition from bankers and other for-profit firms, credit unions are part of a widespread industry dedicated to helping members from a wide variety of firms find a market alternative to finding the products and services they need.