Worker Cooperatives: Brief Details on Worker Cooperatives in India

Read this article to learn about the introduction, definitions, social uplift, its principle, collectivist organisation and conditions for survival of worker cooperatives!

Worker cooperatives are industrial or commercial organisations which are owned and controlled by employees of these organisations.

Such cooperatives are fairly recent in India as compared to their long history in the more developed countries, especially Britain and other countries in Europe.

There are a few instances of worker cooperatives in plantations, mines and industrial units.

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The workers of Sonali Tea Estate, a tea plantation employing around 500 workers in the Jalpaiguri district in West Bengal, established the first worker cooperative in plantations in 1974. In Tripura, five tea plantations are being run successfully by their workers since the early 1980s.

In Dalli Rajhara, near Bhilai Steel Plant in Madhya Pradesh, there are around half a dozen worker cooperatives operating in the open cast iron ore mines. In Calcutta, now Kolkata, there are at least twenty industrial units that are managed by worker co-operatives since the early 1980s. The fact that these cooperatives have survived for more than two decades is itself a measure of their success.

Worker Cooperatives and Empowerment:

Before discussing the role of worker cooperatives in empowerment, it is necessary to define these institutions and delimit their scope. Derek Jones, an American economist who studied worker cooperatives, noted five distinguishing attributes that could serve as a definition. These are:


i) They are autonomous organisations and not subsidiaries of another firm;

ii) Workers are able to become members of the enterprise, usually by nominal holdings of share capital;

iii) Formal provision exists for direct and indirect participation in decision-making by worker members at all levels;

iv) Worker-members by virtue of their functional role as workers, share in the income remaining after payment of all other costs of production; and


v) The cooperative principles of ‘one member-one vote’ and ‘limited return on capital’ apply.

There are aspects of the above-mentioned definition that need to be stressed in the assessment of worker cooperatives. In these cooperatives, the workers are not only co-owners but they are also actively involved in the management of the organisation.

Hence, while assessing the success of a cooperative these aspects must be kept in mind. One has to draw a distinction between ownership and control. The workers in a worker cooperative may be co-owners in the sense that they jointly hold the shares of the enterprise. However, the more important question that arises is: are they also in control of their organisation? Ownership does not necessarily imply control.

It is possible that though ownership is with the workers, the actual decision-making powers may lie elsewhere. For example, in several government-sponsored cooperatives we find that the officials of the Cooperative Department exert greater control over decision-making than the members.

Hence, though the members are joint owners they may not have effective control as major decisions are taken elsewhere. These cooperatives thus function not as independent decision-making bodies but as appendages of the government. The same may be said of cooperatives that are controlled by other agencies external to their membership. Such cooperatives may be controlled by political parties or trade unions.

There are instances of cooperatives meant for the underprivileged sections being usurped by unscrupulous industrialists. In 1996, a massive cooperative scam came to light. It was found that a few large leather companies had floated primary cooperatives of leather workers in order to corner the funds provided to these institutions as their members belonged to the scheduled castes.

However, despite these aberrations, when cooperatives, which are directed towards the uplift of the weaker sections of society, are autonomous and run on democratic lines they can play a positive role in the empowerment of these sections.

Cooperatives and Social Uplift:

Cooperation as a form of human organisation has been in existence since the beginning of civilisation. In a broad sense, the different types of exchange and reciprocal relations which existed in pre-industrial societies and which were crucial for survival of its members could be regarded as cooperative action.

For example, the jajmani relations in Indian villages were forms of economic cooperation. Every caste in the village entered into a relationship based on reciprocity with other caste groups where the goods produced or services rendered by each caste were exchanged with members of the other castes.

The village economy was able to function in this manner. These relations were not aimed at altering the existing economic relations in the society they operated in. On the contrary, they played a functional role and contributed towards perpetuating the system. Hence these types of cooperation are different from what we understand as the cooperative movement.

The origins of cooperation as a movement for changing and improving the economic and social conditions of the less-developed sections of society can be traced to the first half of the nineteenth century in the philosophy of Robert Owen. The first cooperative was started in England in 1844: a cooperative store set up by a handful of unemployed weavers at Toad Lane in Rochdale, Lancashire.

The group was known as the Equitable Pioneers of Rochdale and its objective was to provide consumer goods to workers at fair prices. The Rochdale Pioneers saw cooperatives as a step towards a larger goal, namely, a socialist society characterised by economic democracy. Rochdale served as a model for many other cooperatives in England, the United States and the rest of Europe.

The basic principles governing the functioning of this cooperative were adopted by the cooperative movement all over ‘the world. These were: one vote for each member (and not for each share as in the case of joint stock companies), sale at market prices, division of profits among the shareholders on the basis of the shares each held, and limited interest on share capital.

The cooperative movement thus grew out of a need to change the existing society through an ideology based on egalitarianism, and it could not be equated with the traditional forms of cooperation. The early co-operators such as the Rochdale Pioneers and Robert Owen in England and Franz Schulze and F. W. Raiffeissen in Germany propagated the cooperative movement as an alternative to the exploitative nature of capitalist society in nineteenth-century Europe.

Cooperation for them was a vehicle through which capitalist exploitation could be replaced by an egalitarian and just society. They envisioned cooperatives not as bodies that were functional to their respective societies but as instruments for transforming their societies. In this way, the objectives of cooperatives differ not only from those of private enterprise but also from traditional forms of exchange and reciprocal relations.

Cooperatives are not expected to function merely as mutual benefit societies. They have in addition certain social obligations which are spelt out in the principles of co-operation. While elaborating on this aspect, the Commission on Cooperative Principles, appointed by the International Cooperative Alliance, noted in 1966: ‘Cooperation at its best aims at something beyond promotion of interests of individual members… Its object is rather to promote the progress and welfare of humanity.

It is this aim that makes a co-operative society something different from an ordinary economic enterprise and justifies its being tested not simply from the standpoint of its moral and social values which elevate human life above the merely material.’

Principles of Cooperation:

Based on these objectives, the International Co-operative Alliance, the official representative body of countries having cooperatives (its membership comprising countries and not cooperatives), with headquarters in London, formulated six basic principles of cooperation that have been accepted by the cooperative movement all over the world.

These are: voluntary membership, democratic administration, limited interest on share capital, equitable division of surplus, cooperative education and mutual co-operation among co-operatives . We shall restrict ourselves to those principles concerning participation and social change.

The principle of voluntary membership stipulates that any person who fulfils the basic requirements of the cooperative and who is willing to abide by its objectives should be allowed membership. A cooperative cannot discriminate among its membership as it is expected to include all those who are eligible.

Similarly, a cooperative cannot force people to become its members. It is expected that the members of a cooperative are those who have understood and accepted its objectives. In cases of cooperatives of the underprivileged and marginalised sections of society, it is necessary for the members to understand the objectives and the functioning of the institutions.

If they do not understand these, they will not be able to participate effectively. Hence this principle also presumes that cooperative education is essential for ensuring greater participation. This principle is frequently violated, especially in the government-sponsored cooperatives meant for the poorer sections.

Over-enthusiastic government officers may force people to become members in order to increase the membership. The efficiency of an official of the cooperative department of the government is judged by the number of cooperatives he can initiate and the number of members he has inducted.

This drives many of them to embark on mass membership without making these members aware of what the cooperative stands for and how it functions. In such cases, the general members remain passive and detached from the functioning of the cooperative. Either a coterie of interested members takes over the cooperative’s functions or the government officials more often than not usurp these.

The principle of democratic administration tries to ensure that all members have an effective say in the functioning of the cooperative. This is the most significant principle of cooperation as it distinguishes these organisations from other enterprises. The objectives of the cooperative movement do not limit themselves only to securing economic benefits for its members.

The movement is also expected to inculcate a sense of participation by building democratic institutions of equal partners. It can be distinguished from joint stock companies by its principle of ‘one vote for each member’ and not each share. Therefore, even if a member has a large number of shares he has only one vote.

The attempt here is to ensure that control of the organisation does not lie in the hands of a few people who manage to corner a large number of shares. Thus in principle the status of all members is equal and all have equal opportunities for participating in the decision­ making process.

The Commission on Cooperative Principles observed that democratisation is important because a cooperative ‘exists in order to place the common people in effective control of the mechanism of modern economic life it must give the individual (only too often reduced to the role of a cog in that machine) a chance to express himself, a voice in the affairs and destinies of his co-operative and scope to exercise his own judgement (NCUI 1969).’

Democratic control of a cooperative is not restricted to exercising one’s franchise during elections. It is a continuous process which is expected to encourage all members of the cooperative to actively participate in its functioning. The social implications of these could be far-reaching.

For developing countries such as India, cooperatives can provide scope for increasing the self-confidence of the socially marginalised sections of society such as agricultural workers and workers in the unorganised sector. These sections have for long been isolated from the decision-making process because of the belief that they are incapable of deciding what is good for themselves.

Cooperatives have the potential of institutionalising the democratic process whereby it becomes a continuous involvement of the people in its management. They can increase the self-confidence of their members by making them realise that they are capable of dealing with complex problems of management.

Collectivist Organisations:

Building cooperatives as participatory organisations is not an easy task. Cooperatives are contrary to mainstream organisations if they are truly democratic in nature. Mainstream organisations follow the bureaucratic model where authority is derived from the top. The incumbents in the various offices in the organisations hierarchy derive their authority from those superior to them. Decisions are taken by those at the top and the orders are carried out by those below.

The authority structure in a cooperative is expected to be substantially different, if not the reverse of, normal bureaucratic structures. Here the ultimate authority rests with the general body of its members. The entire administration of a cooperative is responsible to its general body and not to its highest executive authority.

The Commission on Co-operative Principles observed: ‘Since it is the members who bring a co-operative into existence and whose constant adhesion and support keeps it alive, those who administer its affairs and in particular, conduct its day-to-day business must be chosen directly and indirectly by the members and enjoy their confidence.

It follows further that the administrators and managers, who are accountable to the members for their stewardship, report regularly in a business-like manner on their activities and submit the results to the members’ judgement. If members are not satisfied, they have the authority and power to criticise, to object and in extreme cases, to dismiss and replace their officers and officials (NCUI 1969).’

A democratic organisation is something intrinsic to a cooperative. Authority is vested in the members who elect or appoint their representatives or officials to run the cooperative. These people have the power to exercise authority or take decisions, but this power is delegated to them by the members and not by a higher bureaucratic authority.

While drawing a distinction between collectivist and bureaucratic organisations, Rothschild-Whitt observe: ‘Perhaps more than anything else, it is the basis of authority that distinguishes a collectivist organisation from any variant of bureaucracy. The collectivist-democratic organisation rejects bureaucratic justification for authority.

Here authority rests not with the individual, whether on the basis of incumbency of office or expertise, but resides in the collectivity (1987).’ They admit that this may lead to a chaotic situation where each member may hold opinions which differ from those of the others. The authors explain that organisations ‘cannot be made up of a collection of autonomous wills, each pursuing its own personal ends. Some decisions must be binding on the group. Decisions become authoritarian and binding in collectivist organisations to the extent they arise from a process in which all members have the right to full and equal participation.’

Organising collectivist organisations where power is decentralised is not an easy task. It is easier to organise in an authoritarian manner, as it requires less effort; decisions are taken by a few at the top and these are implemented by those below. A participatory organisation is more complex because before any decision is implemented discussions have to be held at every level and a general approval obtained.

This is why in most cases cooperatives tend to take the easy way out by evolving an authoritarian and bureaucratic pattern of organisation. Decisions are taken by a few at the top (the managing committee or even a government-appointed administrator) and, instead of being a continuous process the democratic process is restricted to the periodic election of managing committee members.

This defeats the basic purpose of cooperation. A cooperative, as noted earlier, is not merely an economic organisation but it is above all a democratic institution in which ordinary members must have a say in the decisions. When this aspect is subordinated, there arises a contradiction in the cooperative movement, besides the violation of its basic principles as espoused by the Commission on Co-operative Principles. In such cases there is a distinction between ownership and control.

The owners, namely, the members, do not exercise effective control. Hence even if such organisations were financially successful they would still not qualify as being real cooperatives. In the case of worker takeovers, the problem is not so much of appropriation of power by the collective of workers as this is done soon after the takeover.

We will find that this is true for most of the cooperatives, which we will discuss later. The main problem is of retaining power within the collective after the takeover. After the cooperative stabilises, there are possibilities of bureaucratic tendencies developing within the organisation. In most cases it may be found that the promoter of the takeover or the union leader (in several cases they are the same person) becomes the centre of power. Democratic functioning within the cooperative suffers, and soon the rank-and-file members become indifferent to its functioning.

From the above discussion we can see that democratic control by the collective is a crucial attribute in a worker cooperative. The main means of achieving this control is through worker-members’ participation at every level of decision-making.

This can be achieved partly by educating the worker-members on the principles of cooperation and the objectives of the cooperative movement. Cooperative education will help the workers understand the significance of the cooperative in changing their lives; in transforming them from mere executors of orders passed from the top to becoming empowered to give the orders which are to be followed by all.

At the same time it should be noted that there can be no cut-and-dried system of democratic control. Each cooperative needs to evolve its own means of involving its rank and file in its decision-making process. These means can be worked out through the concrete situation of the cooperative and its members.

In other words, there can be no magic formula or any standardised technique for ensuring democratic functioning within cooperatives. The cooperatives themselves have to come up with their own ways of ensuring that their organisational structures are conducive to a decentralised pattern of decision-making through which members at every level of the organisation can participate.

This aspect should not be underestimated as the very existence of a cooperative or, by extension, the cooperative movement, depends on democratic functioning and participative management as these will ensure the effective involvement of the ordinary members.

At the same time, this task may not be as difficult as it appears. A system of collective decision-making exists in all types of organisations. This is however restricted to the upper levels of the hierarchy. In all organisations where power is located at the top and is delegated to those below, whether in the state sector or private corporate sector, decisions are not taken by individuals alone. Instead, small committees are formed among the senior managers which discuss the various issues before coming to any decision. However, as one goes down the ladder, collective decision-making gives way to an authoritarian system wherein orders flow from the top and are executed by those below.

The point to note is that the basic unit of decision-making is not the individual but the small face-to-face groups that rule the corporate and bureaucratic worlds: the boards, sub-committees, executive councils, etc which meets regularly to plan and execute decisions.

The problem is thus of designing organisations which are technically competent but which also encourage decision-making throughout the organisation. Rather than being top-heavy, organisations must embody group structure throughout so that the different groups at various levels are coterminous with each other.

Conditions for Survival:

In this section, we will discuss some of the instances where workers have taken over production and management of then enterprise by forming cooperatives. When a firm becomes sick, the main sufferers are its workers as they are left without any means of livelihood. They therefore take up the challenge of running the establishment and, in the process, maintaining production, through their own initiatives in order to save their jobs.

There is some truth in this observation but it does not answer an obvious question: why are similar attempts not made in all firms that are sick or closed? Sickness alone cannot be the main reason for starting such ventures, and there are several other conditions that give rise to worker cooperatives in most cases in India it is found that the objective conditions for their formation and survival are based to three factors.

Firstly, the respective trade unions played a crucial role in mooting the idea and later in helping the workers run their enterprises. Secondly, the workers themselves responded positively to the idea and evolved their own structures of management and control of the enterprise.

Thirdly, the state played a significant role in encouraging their formation. There are other factors too such as marketing of the products, and competition from private enterprise, among others. We shall examine each of these factors through the cases of cooperatives in tea plantations and other industries.

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