KEYNOTE SPEAKER’S ADDRESS NATIONAL ASSOCATION OF HOUSING COOPERATIVES ANNUAL CONFERENCE PHOENIX, AZ — SEPTEMBER 12, 2002 DELIVERED BY MR. HERBERT H. FISHER
We, as members of a world community, have been caught up with remembering the tragic events of 9/11; and here I am one day after the anniversary of that deadly event, undertaking to define the significance of cooperative principles in a world of insatiable greed. You will have to judge the success of my endeavor.
Let us start with a common understanding of the condition of today’s world and the world of 1848, when the unemployed Rochdale Weavers, who created the first modern cooperative, worked out the cooperative principles, which basically still define the cooperative movement today.
In 1848, England was in the midst of an Industrial revolution which was changing the English economic and social atmosphere. It was changing from a rural, agricultural, semi-feudal and mercantile country to one of steel foundries and woolen mills. It changed the country poor into the city poor and unemployed. Because their cottage craft had been replaced by Industrial looms, a group of unemployed weavers from Rochdale concluded that they could survive if they cooperatively joined together to do business. They chose the following principles and concepts to guide their enterprise:
1. Open and voluntary participation or membership
2. Democratic control
3. Limited interest or return on invested capital
4. Patronage return, dividends or refund
5. Cooperative education
6. Cooperation amongst cooperatives
(Text footnote: I have taken liberty with the actual principles for the sake of time, e.g. leaving out the doing business on a cash basis only.)
For them, it was all about their economic salvation. The first modern cooperative effort was successful and sparked the flames of a cooperative movement where people working together could survive and have financial benefits from their joint efforts.
Our history books, on the other hand, write of the Vanderbilts, the Carnegies, and Rockefellers whose great wealth was created by industrialization. But little is written about the low wage workers who helped produce that wealth. Little was written about the new class of city poor and unemployed, whose lot was, and is today, so much worse that the country poor.
While alcoholism was the plague of the 19th century, city poor and unemployed of those who were then hopeless with respect to the securing the benefits of their economy, drugs are the plague of the 21st century city poor and unemployed of those who today are hopeless with respect to the securing the benefits of our economy.
If you conclude that I am a critic of free enterprise, please reconsider. I am a proponent of a free enterprise system which can work, and is unfettered by government interference and biased with assistance. Can we say we are a country which harbors free enterprise when we can still remember our Government sending in troops to break up the Pullman strike in Chicago? Does free enterprise mean bailing out that large dominant airline manufacturer or a major auto manufacturer so their management and shareholders could enjoy larger profits? This was justified in the name of maintaining employment and encouraging American competitiveness in the world market. But in doing so, did we not deny the rest of humanity the proclaimed benefits of a free enterprise system?
Promoting cooperative enterprise and cooperative economy is truly in the spirit and context of free enterprise. Cooperatives are base don the idea that worker owned, producer owned, consumer owned and user owned businesses will deliver a better product at a competitive cost as compared to Investor owned businesses. The difference is in the cooperative devoting its business resources for the benefit of all of the owner-participants and not to enhance the profits of the non-productive investors or the holders of stock derived from board-management determined stock bonus plans. The industrial revolution in the last half of the century produced profound changes in the economic and social fabric of England, the United States, Germany and the rest of the industrialization world. So too, today we are experiencing a technological revolution wherein computer controls and computer communications accelerate the change of our national economies turning into world economies.
In the last quarter of the 19th century, a Catholic pope warned about the impact of a cannibalistic capitalism upon the human condition. This technological revolution and creation of a world economy has created a new cannibalistic capitalism. It has permitted, if not required, the downsizing of companies. These companies focus more on the global, not national, labor market, with resulting unemployment and lower wage scales in the industrialized world to maximize profits and enhance the balance sheets which support stock prices.
The industrial revolution produced tangible products which could be touched and counted. These distinct products has measurable value in the market place. The technological revolution produces non tangible services and a value of services not physically measurable. This is what has permitted the gamesmanship of uncontrolled valuation, the buying and selling of intangibly inflated balance sheets and stock prices. This is what produces the truly cannibalistic results which flowed from the collapse of Enron, World Corn, and others. The cannibalistic devouring of the economic lives of so many by so few.
Now, what has all of this to do with cooperation, with your cooperative? Can we imagine what our lives would be today if the dreams of the philosophers of cooperation back in the 19th and early 20th century had matured into a business world controlled by the people who produced the wealth through their cooperatives and the control over the distribution of that wealth by consumers through their cooperatives?
By cooperation, we are not talking about the United Airlines where employees own stock along with the outside investors and where the employees are brainwashed into believing that their interests are identical to those of the investors. What we are talking about is all of the corporations in which there are no outside investors or the interests of the investors are limited. Where the profits of these enterprises are not traded on the stock exchanges of the world but are returned to the employees or patrons for their benefit. Dividends are based upon formula designed to reflect the value their labor or their patronage which contributed to the profits.
It is something to think about, is it not?
I cannot help but wonder if we had adherence to the principles of cooperation in the world; could we have minimized the impact of 9/11?
9/11 has caused so many more of us to look inward, to become more people conscious, to want to join together with others in search of solutions.
Those of us in the cooperative movement do that as a matter of business routine. We work together for the common good of all of the members as a group.
As a result of the principles of cooperation, your housing cooperatives are, or can easily become, places of solace, of safety in a troubled world, and you have made so many into being just that for a long time.
Having said all of that, let us revisit the original principles of cooperation:
1. Open and Voluntary
In 1848, this meant avoiding the religious conflicts of that time and having an alternative to being forced to shop at the company store. Today it means welcoming any individual (and I emphasize any individual) who is reliable and will share in the responsibility of a successful cooperative. How many cooperative boards and membership committees keep that in mind today?
2. Democratic Control
Regardless of a cooperative’s method of voting, cooperatives still operate in strict compliance with the Rochdalean principle that voting can be exercised only by the member, the consumer, the producer who uses the cooperative’s assets for their own economic benefit. This is in direct contrast to the issuance of an endless stream of shares of stock.
3. Limited Interest or Return on Invested Capital
The adoption of this concept together with the concept of patronage dividends immediately eradicates all of the motivations which created the Enron and World Corn debacles.
4. Patronage Return
The return of profits to the members or shareholders or used for their benefit based upon contribution to or participation in the creation of the profit eradicates any potential for cannibalism as an inherent by-product of the economic enterprise.
5. Cooperative Education
The principle of continuous, ongoing and never-ending cooperative education for member, shareholders, boards, officers, employees and the general public is essential to the ongoing success and existence of cooperatives. The failure of some of the farm cooperatives in our country has been attributed to the fact that the second generation of cooperators did not share the cooperative knowledge and spirit of their parents Some cooperatives are facing being bought out by profit driven investor owned corporations because the cooperator-shareholders have had no and too little education as to what their cooperative share ownership means to them and the social setting in which they live and the economy in which they have to survive. There are housing cooperators, even in affordable housing cooperatives, being seduced by developers who see a big return for themselves if they can convince the requisite number of members to approve the sale of their cooperative property in exchange for a pittance of its value. With education and understanding, the members would comprehend how much more they benefit from the ongoing ownership and use of that value-how much more they can benefit for themselves, their families and their children. And do not overlook the potential that as your cooperative is able to pay off mortgages which end responsibilities under regulatory or land use restriction agreements, liming the use of cooperative income to providing housing only, member shareholders can decide on the use of their combined financial strength and resources to improve educational opportunities, to avoid the use of drugs, provide job training and retraining, bridge the technology gap amongst the cooperative families contribution by to those combined resources. Education can provide for your ability to leave the legacy and value of your cooperative for your children.
6. Cooperation Amongst Cooperatives
If our cooperatives don’t practice cooperation, how can we expect our members to be cooperatively inclined? This contributes to the strength of the individual cooperative and the strength of the cooperative movement. It has been cooperation amongst cooperatives which has resulted in our cooperatives being able to continue to deduct the depreciation of our property on the cooperative tax returns; it is our unity which has prevented the IRS from taxing income for prudently made savings and investments; it was our inter-cooperative industry cooperation which prevented the banking industry from keeping cooperative credit unions from being able to expand their membership bases.
7. At the last International Cooperative Alliance meetings which debated the cooperative principles, a new principle was created — Concern for Community. As 19th century advocates of cooperation were motivated by the impact of the new economic realities of their day on the lives of people, so to must we be concerned about the impact of the new economic realities of our day upon people not only our member/ shareholders but upon the people of the communities in which our cooperatives exist. One of those concerns must be a concern over the lack of adequate affordable housing for those who do not have it. We, as housing cooperators and persons working with housing cooperatives must understand housing cooperatives cannot become fortresses providing safe, decent sanitary housing for those privileged to be cooperators, to be members, while the less fortunate go without decent, safe or sanitary housing or any housing at all. These kids of conditions breed resentment and physical violence. We must use our resources and our abilities and our unity and our strength to avoid such consequences.
May you all go forward from this room this morning to the workshops and shared experiences being offered by the National Association of Housing Cooperatives to become better cooperators and cooperative leaders so that you may contribute to the continued success of your cooperative, and by doing so to there being more enduring cooperatives.
Take a moment to look forward to future generations ahead, generations of your grandchildren and mine, when the principles of cooperation, and not greed, impact the world economies which will govern our lives.
Reprinted with permission from Mr. Herbert H. Fisher
Volume 1, Issue 1