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Self-support is key to co-op success

Published: 02 Dec. 2012, 20:20

A law to promote the establishment of cooperatives, or entities running on principles of reciprocity, democracy, equality and shared responsibility, took effect on Dec. 1. Under the new law, a group of more than five can form a cooperative, except in the financial sector. In the past, regulations were strict on the establishment of cooperatives. For instance, the Living Cooperative Association that works on the marketing of organic farm produce was licensed after at least 300 members came together. Under the new law, however, anyone can easily link up to cooperate on a number of services such as delivery, chauffeuring and security.

It has not been easy to start businesses alone. Even with partners, a licensed business was possible mostly through stake-holding because various regulations prohibited cooperatives. The government expects the new cooperative law will help to encourage start-ups, increase employment and vitalize the community businesses and local economies. Mom-and-pop stores can group to create a cooperative, and bakeries, butcheries and fruit markets can consolidate to better compete with franchise supermarkets.

So far, the government has mostly employed antitrust regulations to enhance fair trade and market competition by threatening large groups to stay away from mom-and-pop businesses and restricting business hours of franchises. But a cooperative system empowers smaller businesses to compete with larger rivals.

The system also could help improve workers’ welfare and rights. Chauffeur drivers, for example, formed a cooperative and the collective framework could solve such problems as excessive commission payment and poor employment protection. The cooperative deregulation could breathe new air into the sluggish economy and also contribute to easing polarization and social conflict. The United Nations designated this year as the International Year of Cooperatives to raise awareness of the collective supportive enterprising system to foster socioeconomic development.

But the cooperative framework is no panacea. Despite the government’s big expectations for nonprofit social enterprises, many of them lost profitability, and government funding and now exist in name only. The cooperative system should not make the same mistake. The main principle behind the co-op is self-support, autonomy and self-reliance. The government hand could only undermine these values. It should do no more than offer training and infrastructure. Co-op members also should not rely on the government.