Finding The Middle Path

The Political Economy Of Cooperation In Rural India

B. S. Baviskar

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429723629
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

Soviet-style socialism has failed; but in Russia, China, and India the transition to capitalism has proven hazardous. Elsewhere, capitalism itself appears to be in crisis, often failing to meet the fundamental needs of workers, small farmers, and even the middle classes. Clearly, the world needs enterprises that are both economically efficient and

Part One
Framework for Comparative Analysis

1
Viewpoints

D.W. Attwood and B.S. Baviskar

Many rural development projects have failed because they were imposed bureaucratically from above. Concern with this problem has led to renewed hopes for the success of cooperative organizations based on grassroots participation. Instead of providing ready-made answers, however, a cooperative approach requires a fresh look at old questions.

How do co-ops become efficient and viable as economic enterprises? And who benefits if they do? To what extent are they managed democratically by their members? Are they more efficient when management is more democratic? These are urgent questions today, as the world economy rapidly takes on a new shape. Seemingly permanent economic systems, such as Soviet-style socialism, have collapsed. Other economic systems are challenged by the globalization of the world economy. The world needs economic institutions which are both efficient and responsive to the needs of ordinary people.

The capitalist economies have “triumphed,” yet they reveal symptoms of malaise, even crisis. At any rate, conditions in many developing countries require solutions which are not merely imitative of advanced capitalist regimes. On the other hand, authoritarian socialist regimes no longer serve as plausible models for the developing world, having proven not only unjust and inhumane but also wasteful, inefficient, and destructive to the environment.

If one considers how to combine the efficiency and productivity of capitalism with a concern for the welfare and productivity of ordinary people, one begins to think about the process of economic democratization. In this process, people would gain greater control over the enterprises in which they work and over the systems of finance and exchange in which these enterprises operate. Economic democratization would promote efficiency as well as justice, since dynamic enterprises require the mobilization of human skills and creativity. The world economy is changing rapidly, and giant bureaucracies (whether capitalist corporations or state agencies) do not respond flexibly and innovatively to change. There is an urgent need for intermediate enterprises, based on the mobilization of local expertise and responsive to local interests.

Cooperatives should serve this purpose. However, there are obstacles to their potential. One problem, seen in the case studies to follow, is that many so-called “cooperatives” are not really cooperatives at all. A true cooperative is managed by its members; but in India, as in many parts of the developing world, cooperatives are often managed by state bureaucracies. As a result, they suffer from the same inefficiencies and the same absence of democratic participation as most state agencies. They are cooperatives in name only.

Moreover, long-established and successful cooperatives have helped some people while neglecting others. The poorest of the poor, including landless laborers and women in the informal sector, often have been unable to use older-style cooperatives as self-help organizations. Cooperatives and similarvoluntary organizations could help repair the broken economies of eastern Europe and build more dynamic economies in the developing world. For this to happen, researchers, policy makers and local organizers must understand what kinds of cooperatives have already been successful, what they have accomplished, and why. Such an understanding will not provide easy formulas for success, but it will help to avoid repetition of costly mistakes.

India is a natural laboratory for investigating how cooperatives succeed or fail. In some regions, cooperatives flourish, making substantial contributions to economic growth while providing benefits to their members and local communities. In other regions, cooperatives stagnate, offering little or no benefit to ordinary people. How do we explain these striking disparities? And what can be done to improve cooperatives where they are doing poorly?

Capitalism vs. Socialism?

Debates on development have tended to assume that policies must follow either a “capitalist” or a “socialist” path, that resources must either be controlled by private owners or the state. Our purpose in this book is to argue that this is a false dichotomy, that it overlooks what we take to be a viable and effective middle path to development, in which the emphasis is on local control of resources through cooperatives, community associations, and other types of voluntary, self-help organizations.

The collapse of Soviet-style socialism has precipitated a crisis in development theory, a crisis which is not resolved by assuming that the prescriptions of the International Monetary Fund will overcome poverty and stagnation in the poorest countries. What is missing in standard debates on theory and policy is a vision of small- and medium-scale organizations providing resources, opportunities and protection to the poor. This is not a utopian ideal, but a statement of what has already been achieved in some parts of the developing world. (See the Human Development Report 1993 [UNDP 1993] for a general discussion and various examples of experiments in “participatory development.’’)

Both “capitalist” and “socialist” regimes have tended to embrace large-scale, bureaucratic systems of organization. Socialist economies are (or were) dominated by state bureaucracies, while capitalist economies are dominated by corporate and state bureaucracies. These bureaucracies tend to ignore the poor, co-opt their resources, and degrade the environment. The alternative is to empower local self-help organizations and cooperative enterprises.

M.J. Esman and N.T. Uphoff have analyzed the performance of 150 local organizations, including cooperatives, from Asia, Africa and Latin America. They argue that certain development tasks are best performed by semi-autonomous local organizations, not by private corporations or state bureaucracies (1984: 19–21). Cooperatives and other local organizations can avoid the inefficiencies of state bureaucracy while protecting small producers against power imbalances caused by the concentrated wealth of giant corporations.

Cooperatives enable small producers to aggregate their skills and resources so that large-scale, external systems (political, administrative, and economic) are less overwhelming. Instead of promoting capitalist corporations or state bureaucracies, development policy could be oriented toward promoting organizations like cooperatives. There are great potential benefits to this middle path, as exemplified by the co-ops of western India.

The idea of a middle path is not new. For example, the eminent Indian economist, D.R. Gadgil, published a small book entitled Towards a Co-operative Commonwealth in 1961. Gadgil compared cooperatives with capitalist and socialist enterprises, concluding that, “The importance of co-operation to a society which is poor and in which weak economic units are overwhelmingly large in number, cannot be over-estimated” (1961: 86).

Gadgil had more than a theoretical interest in these matters. He played an active role in the establishment of the first cooperative sugar factory in western India. As documented in our earlier books (Baviskar 1980; Attwood 1992), this experiment led to the rise of remarkably successful, large-scale enterprises. Thus the outcome of Gadgil’s practical efforts verified his prediction concerning the vital role which cooperatives could play.

Experience shows that co-ops established on sound principles can operate as efficiently as private enterprises. In addition, co-ops can avoid at least some of the problems inherent in private enterprise. In a private corporation, one share of capital gives the owner one vote in management. This enables ownership and control to be concentrated in a few hands; the ownership of several shares gives the owner several votes. Co-ops avoid this by following a different principle: each shareholder gets only one vote, regardless of the number of shares owned, thus limiting the concentration of ownership and power.

In western India, where we have observed many successful cooperatives, the vast majority of co-op members are small farmers. Their interests are protected by the rule of one member/one vote. The will of the majority generally prevails. A well-run cooperative comes closer to economic democracy than a private corporation.

Concentrated ownership of property is a form of power. It is not the same as concentrated control over state institutions, but one form of power is often transmutable into another. And both forms of power are dangerous to ordinary people. Apologists for socialism (or more accurately, statism) are eager to point out the dangers of concentrated ownership but loath to admit the dangers of concentrated state power. Apologists for capitalism are eager to point out the dangers of concentrated state power but loath to admit the dangers of concentrated ownership. Those who understand “development” to mean human development should be wary of both.¹

Cooperatives can provide an alternative to both forms of concentrated power. In some societies, as in India from about 1950 to 1990, co-ops were needed to counterbalance the overwhelming power of the state. In other societies, including India today (with its shift towards more liberal economic policies), they are needed to counterbalance the overwhelming power of private corporations and the state.

While we argue that local organizations can provide viable alternatives to statist development models, it must be recalled that many “cooperatives” have long been tainted by statism. Cooperatives were promoted by governments as instruments for rural development. Ideally, co-ops were expected to mobilize resources for economic growth and also to promote social justice. Few have attained either goal. Our results indicate that the primary cause of failure has been the tendency to promote cooperatives as tools of state bureaucracy.

“Cooperation” sounds attractive to planners and policy makers, since the ideal cooperative enterprise embodies popular participation, equality among members, accountable leadership, and local autonomy. These are the values of democratic socialism, to which lip service is paid throughout the developing world. In practice, however, these ideals are rarely attained, often because governments do not really want semi-autonomous organizations to arise as potential power bases for local leaders. The “cooperative” label is applied to organizations which governments have created to serve their own interests and which embody quite different values: the values of hierarchy, bureaucracy, urban bias, and technocratic elitism.

However, this book is not a polemic about the rhetorical misuse of cooperative ideals. It is a study of how cooperatives actually operate, and why. For more than a quarter-century, we have been studying cooperatives with sociological and anthropological field methods. Our goal has been to discover which organizations are successful and which are not, why they have succeeded or failed, and whether they have benefitted the poor. We are less concerned with the ideal values of the cooperative movement and more with the realities of production and power. We tend to assume, for example, that cooperatives are more or less successful, not because their leaders are more or less idealistic but because they either find or fail to find pragmatic solutions to local problems.

Cooperatives and other voluntary organizations are more important than most people realise. Field studies in many parts of the world have discovered local organizations performing a variety of essential functions. Some manage resources on a sustainable basis; some increase production and marketing opportunities; some invest in local infrastructure; and some invest in human capital: that is, in local education and health facilities. There are also many organizations which have failed to accomplish these tasks. Clearly, there is much to be learned from comparing the successes and failures. In the process, we may learn what conditions enable people to solve their own problems at the local level.

Cooperative History

The cooperative movement originated in early nineteenth century Europe, a product of the social movements and communitarian experiments which characterized this period. The movement was, in part, a response to the needs of urban workers, addressing their needs as consumers. A famous example was the Rochdale Society, founded in England in 1844. As with early pioneers such as Robert Owen and William King, the Rochdale Society intended ultimately to form cooperative communities, but it set out by establishing a cooperative store (Craig 1993: 24–31). With this and other models for inspiration, cooperatives of various types soon spread to other European countries and other areas of the world. Their animating spirit was often that of the Rochdale pioneers, who instituted the principles of democratic control, open and voluntary membership, and distribution of surplus among the members in proportion to their transactions with the society (Craig 1993: 32, 42).

In theory, cooperatives are expected to function as enterprises which are owned and managed collectively, with democratically elected leaders. The general assembly of members holds the final authority and each member, regardless of how many shares he or she may own, has only one vote. However, not many cooperatives truly embody these principles, as we shall see.

India’s cooperative movement started officially in 1904, with the enactment of the Indian Co-operative Societies Act. The initial focus was on the formation of societies supplying agricultural credit and later on cooperative marketing and processing. The early credit co-ops were partly modelled on “Raiffeisen societies,” originally created in rural Germany.

The Raiffeisen societies were fundamentally self-governing associations of borrowers, who all, or practically all, subscribed a share of the capital of the society, and who made use of the further capital attracted to the society through the combined credit of the members. Their area of operation was limited as a rule to a single village; members, it was claimed, thus knew the faults and good points of every potential borrower; administration was gratuitous, by an elected committee, only the clerical work being paid for. (Catanach 1970: 44)

In the Bombay Presidency and the Punjab, the colonial government encouraged credit societies more or less of this type, though with varying degrees of success and varying degrees of official interference and control (Catanach 1970: 153).

After independence, the central and state governments began promoting a greater number and variety of cooperatives. Today, as shown by the case studies in this book, cooperatives are found almost everywhere, and in some cases they have provided effective solutions to development problems. However, particularly in the case of credit societies, which are most numerous, they often deviate widely from the Raiffeisen model: most of the capital they lend is provided by the state at heavily subsidised rates; and not surprisingly, therefore, these societies are usually managed by state officials, not by their members. As we shall see in Chapters 3–5, this state of affairs is a legacy of both colonial policies and post-colonial statism.

Theoretical Problems and Approaches

Promoters of rural cooperatives often assume that villagers should and therefore will cooperate, since the poor have no other resource than their numbers, and since village traditions are based partly on informal cooperation.² These idealistic assumptions ignore the difficulties people face in attempting to cooperate and build new organizations....

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Dedication
• Contents
• Acknowledgments
• Map of India
• PART ONE: FRAMEWORK FOR COMPARATIVE ANALYSIS
• PART TWO: CASE STUDIES FROM MAHARASHTRA
• PART THREE: CASE STUDIES FROM GUJARAT
• PART FOUR: CASE STUDIES FROM OTHER STATES
• Glossary
• References
• About the Book
• About the Contributors
• Index