Original Models Date to 18th Century

Cooperative business structures have been around for hundreds of years, dating back to the 18th and 19th centuries in Europe.  One of the earliest in the United States was begun in Philadelphia by Benjamin Franklin who organized the Philadelphia Contributorship for the Insurance of Homes from Loss by Fire in the city of Philadelphia in the year 1752.  This early cooperative venture formed by business owners and city residents continues to operate as a cooperative provider of risk management services.

Cooperative Purchasing Groups and the Industrial Revolution

The Industrial Revolution caused a migration of people away from the family farm and into the larger cities.  Those who made this move gave up the ability to directly provide consumable goods for themselves, and were often forced to rely on a general store owned by the company they worked for.  Many of these company-owned stores turned into monopolies, offering poor quality goods at inflated prices.  Cooperatives were formed to regain some of the control that was lost by those who no longer produced the products that they consumed.  This new form of business structure gave the consumer a voice again.

The most frequently referenced example of a successful, early cooperative is the Rochdale Equitable Pioneers Society.  It was formed in 1843 by textile workers in England who had grown tired of being subjected to the unfair practices of their local general store, owned by the mill they worked for.  Twenty-eight people decided to band together and form their own store, purchasing goods in large quantities and distributing them evenly among their members.  In order to ensure that the mistakes made by cooperatives before them did not affect them were not also their downfall, the members of the Rochdale Equitable Pioneers Society drafted a series of rules and regulations for the governing of this cooperative.  Many of these principles are still applied to modern cooperative business structures today.

American Cooperatives

The longest, continually-running American cooperative was the Philadelphia Philadelphia Contributorship that Benjamin Franklin formed with other Philadelphians in the nation’s colonial era.  While it is not as well-known as the Rochdale Equitable Pioneers Society, it still exists in Philadelphia to this day.  Most other early American cooperatives were formed for the benefit of farmers.  Some were § purchasing cooperatives designed to distribute the high costs of items such as equipment and tools§ processing cooperatives§ storage facility cooperative§ distribution cooperativesThe costs for these were shared among members, thus making the financial burden far lighter for everyone involved.  Also prevalent were marketing cooperatives to aid in securing a place in the market and a fair price for the members’ products.

Modern Cooperatives

Modern cooperatives began to emerge in the early 1900s.  The earliest of these were mostly purchasing cooperatives formed with the support of wholesalers to combat the monopolies of private and company-owned stores.  These purchasing cooperatives gradually developed into larger scale retail outlets.  The popularity of self-help cooperatives and consumers unions picked up in the 1930s during The Great Depression in both urban and rural areas of the country.   They were further supported by Franklin Roosevelt's New Deal, which granted technical support to urban cooperatives.  In the 1960s and 1970s there was another rush to form cooperatives; this time with a focus on natural foods.  Their members experimented with different forms of management and organization, and were more focused on staying true to the idealistic beliefs they were founded on than on turning a financial success.  These cooperatives all came and went due to the common problems they shared: insufficient capital, weak management and a lack of support from members and wholesalers.

New Generation Cooperatives

These new cooperatives had their genesis in the 1990s and are in some respects, reflective of opportunities made available through Limited Liability Corporations.  They are true to many of the features of the more traditional cooperatives, such as democratic member control, financial participation from members, autonomy and independence and a concern for the community, but there are several differences as well.  Delivery rights in a New Generation Cooperative are a set, two-way contract.  There is a higher initial investment required of members in this new form of cooperative, but also a higher return. 

In New Generation Cooperatives, members are obligated to produce a pre-determined amount of product and the cooperative is obligated to accept that per-determined amount, ensuring a constant market for the member and a constant supply for the cooperative.  Closed membership allows this form of cooperative to ensure that it does not take on more members than it is equipped to handle.  Finally, in a New Generation Cooperative, it is possible for members to transfer a portion of, or in some situations all of, their delivery rights shares to another member or even a non-member, once approved by the board of directors.  These shares do not have a set value, but instead their worth fluctuates according to the profitability of the cooperative.