Value of Cooperatives in the Financial Crisis
The 2008 global financial crisis has dealt a heavy blow to the world economy. Till now, the recovery of the economy has still been rather slow. The American economy is lurching forward, the sovereign debt crises in the EU tend to worsen, the emerging markets are fighting against increasing inflation, the IMF keeps downgrading its forecast for economic growth and the global economy is full of uncertainties. This financial crisis prompted the political and business leaders in the world to have a rethink and triggered expert opinions and numerous symposia and academic papers. Apparently, the economic crisis has pushed the world towards a more rational direction.
Same as other types of economic organizations, cooperatives also endured the ordeal of the financial crisis. The book “Capital and the Debt Trap” now being published summarizes the development of cooperatives during economic crises with detailed data and proves to the world the value of cooperatives. The information provided by this report not only boosts the confidence of cooperatives in the world but also dispels a century’s doubts on the value of cooperatives.
The cooperative, as a corporate organization of joint ownership and democratic control, is an economic organization through which the weak safeguard their rights and interests. As a worldwide movement, cooperatives have existed for more than 160 years across the world. They have always contended against selfish and greedy capitalism. Today, cooperatives are playing a positive role in every social and economic sector. In the economy, cooperatives keep improving themselves amidst the competition with large capital and are becoming very important economic organizations. Relying on its fast expansion, capitalism is arrogant to cooperatives. This also prompts cooperatives to study relentlessly. However, the mock at cooperatives has never disappeared and the value of cooperatives has always been put in doubt. From “Capital and the Debt Trap”, we learn that the cooperative movement and enterprises are getting more mature in Europe, America and Asia and are bringing about a force of harmony for the world. Through the organizational form of cooperatives, numerous farmers and the weak form a power counterbalancing capital. They not only safeguard their way of self existence and their interests but also facilitate the solution of many contradictions during economic development in different countries at a lower social cost.
After observing the development practice of cooperatives in many countries, this book found that in the 2008 financial crisis, cooperatives universally outperformed other types of economic organizations. Particularly, in comparison with the avaricious and unrestrained financial capital, cooperative banks have had a better performance and more reliable stability. In this unprecedented systemic crisis, the stable development of cooperatives fully reflects the fact that cooperative organizations sticking to the principle of democratic control can more effectively cope with market uncertainties. We have seen that when the systemic risk of the financial crisis emerged, the capitalist system built on the basis of greed was like a shoddy building which cannot withstand a single blow. For impartiality and efficiency – a time-honored proposition, obviously government officials, scholars and people in business circles in the world have one more case for thinking and one extra brand new perspective. No doubt, efficiency obtained to the detriment of the future is not what the world really wants, while the balance brought about by the development of cooperatives and the contribution of cooperatives to society also prove to the world the overall superiority of the cooperative system.
This book is a very good reference to the governments of the countries which are entering the age of the new economy. To the world economy, which is being globalized, harmony is a perpetual theme of development. However, our world still has many imperfections. The unbalanced development of the world is getting more obvious and the Matthew Effect is ubiquitous both inside a country and throughout the world. This reminds us of the Rochdale Equitable Pioneers during the British Industrial Revolution and the concept of cooperative which they established. Today is different from the situation 160 years ago. What is happening in the world is an information revolution stirred up by the virtual world. Under the push of financial capital, its influence on the world is much more intensive and far-reaching than the influence created by steam engines. The theme of balanced development is meeting a challenge which is grimmer that that encountered 160 years ago. No country can keep its economy away from the challenge. Economic development alone can hardly secure social stability. The government should fulfill its duties. It not only should develop the economy but also needs to strike a balance. Obviously, cooperatives are a force which must be reckoned with.
China as an emerging market economy adopted cooperatives late. In 2007, China enacted the Law of the People’s Republic of China on Specialized Farmers Cooperatives, creating a good legal environment for the development of cooperatives. At present, China has more than 400,000 registered specialized farmers’ cooperatives and this figure is increasing at a speed of 10,000 a month. Supply and marketing cooperatives as traditional cooperative organizations in China are currently trying to establish a rural commodity circulation network and develop specialized farmers’ cooperatives in the light of the Chinese Government’s plan for reforming supply and marketing cooperatives. In the last three years, the business scale of supply and marketing cooperatives has ascended to a higher stage every year. The gross sales amount exceeded one trillion yuan in 2008 for the first time, surpassed 1.2 trillion yuan in 2009 and reached 1.563697 trillion yuan in 2010, 1.7 times as much as that in 2007, up by 18.53% every year on average. The 21,602 grassroots cooperatives in China realized 353.873 billion yuan of gross sales amount and 1.16 billion yuan of profit in the year, up by 77.8% and 152.2% as compared to 2007. 54,817 specialized farmers’ cooperatives of various types were established, doubling the 2007 number. There were 219,700 village-level multi-purpose service centers, 42,300 more than in 2007 and covering above one third of the villages of China. Although China has not avoided the impact of the worldwide financial crisis, and while the impact of the financial crisis made itself continuously and increasingly felt, Chinese supply and marketing cooperatives have been growing by leaps and bounds, showing their value with strong Chinese characteristics. We are proud that the performance of Chinese cooperatives is totally consistent with the assessment made in “Capital and Debt Traps”. In the territory covered by the International Cooperative Alliance, China is becoming an increasingly brilliant region.
This book prompts us to pay tribute to the ideal pursued by the forerunners of cooperatives. In the past 160 years, new elements of the times have continuously been added into the ideal of cooperative, but they have always stuck to humanistic principles that are to the opposite of capitalism. This unprecedented financial crisis has made people see the greater brilliance of humanism. We have good reasons to believe that, after successfully resisting the financial crisis, the international cooperative movement will be in a more favorable condition to play its role in economic development and gain more opportunities to make contributions to mankind.
Director of Training Center, All China Federation of Supply and Marketing Cooperatives
Director of International Cooperative Exchange Center of China, All China Federation of Supply and Marketing Cooperatives