What Cooperatives Do: Market Access, Countervailing Power and Yardstick Roles Enhance Economic Efficiency

By Ling, Charles | Rural Cooperatives, March-April 2010 | Go to article overview

What Cooperatives Do: Market Access, Countervailing Power and Yardstick Roles Enhance Economic Efficiency


Ling, Charles, Rural Cooperatives


The year 2012 has been declared by the United [Nations General (Assembly as the International Year of Cooperatives in order to highlight the contribution of cooperatives to socioeconomic development worldwide. That same year also will be the 90th anniversary of the publication of "Economic Philosophy of Co-operation," the first academic paper on the theory of cooperation, published in the American Economic Review (Nourse, 1922; Hess). The piece was written by Edwin G. Nourse, who later became the first chairman of the Council of Economic Advisers, Executive Office of the President, 1946-49.

This may be an opportune time to review Nourse's ideas on cooperation and see if they have relevance to the reality of the market performance of cooperatives today and, therefore, if they deserve to be relearned.

Nourse's primary focus, along with the oft-quoted "brief remarks" he made years later (Nourse, 1945), was on the role agricultural cooperatives played in the marketplace. This arose from his observation that the attempt to apply the cooperative form of organization to economic needs and problems in agriculture was critically important.

Purposes of cooperation

The following examples are taken from Nourse's paper to illustrate how farmers organize cooperatives to perform various market functions jointly and efficiently in various market situations--functions that cannot be satisfactorily carried out alone by individual farmers:

1) Cooperation for market access--An example is a small fruit-producing area far from any large market. The product is perishable, hence both risk and marketing expense are high. Volume is not large enough to attract a private distributor. Facing this situation, producers have the option of organizing a cooperative association to market their products. These cooperatives have frequently demonstrated the ability to achieve successful results where private outside entrepreneurship fails to perform.

2) Local to regional coordination--A local cooperative creamery may initially be effective in meeting the competition of other small, private creamery operations. However, when competing creameries have grown to be entities of great size, the competition must be met by a distributing organization of equal scope. This will often be achieved through federation of the cooperative creameries across a region which may embrace an entire state, several states or parts of a state.

3) Region-wide associations--In many instances, growers in horticultural regions have organized and integrated highly efficient businesses that serve producers across an entire production region by assembling, processing and distributing their products. These agencies have eliminated wasteful competition both at the local shipping point and at the central markets. Further-more, they are the instruments of the producer and owner of the goods, and hence are likely to be more aggressive in the effort to reduce expense and wastage in the handling process and to improve quality and enlarge outlets.

(Author's note: Cooperative organizations covering entire production regions have been most prevalent in California because of the characteristics of the state's economic geography. This type of cooperative organization was called "the California plan" and was promoted on a national scale in the 1920s by Aaron Sapiro, with varying degree of successes and failures (Sapiro; Larsen, et al).)

Countervailing power

The above examples show how cooperatives are organized and grow to enable farmers to exercise "countervailing power" in the market-place, although the term was not coined until the 1950s when economist John Kenneth Galbraith cited the type of cooperatives made famous by Sapiro as an example for his explanation.

Nourse certainly recognized the importance of countervailing power if cooperatives are to have a strong market position. As he stated: "Possibly the keynote of the philosophy lies in the idea that a means must be found for giving agriculture a type of organization whose productive and bargaining units respectively will expand in step with the growing needs of the agricultural techniques (and its accompanying capital demands) and of the size requisite to an effective bargaining position in contact with the units of commercial organization with which they must deal. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

What Cooperatives Do: Market Access, Countervailing Power and Yardstick Roles Enhance Economic Efficiency
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.