Poverty and Cooperatives

Features Derek Johnson4 December 2012 The cooperative model of business, as successfully exploited by Fonterra, has been promoted as a way of reducing New Zealand’s growing income inequality.According to the…


Derek Johnson
4 December 2012

Poverty and Cooperatives Archdiocese of WellingtonThe cooperative model of business, as successfully exploited by Fonterra, has been promoted as a way of reducing New Zealand’s growing income inequality.
According to the latest Ministry of Social Development Household Incomes in New Zealand report released in August, income inequality has hit a peak above any level measured since the early 1980s when the data was first collected.

This and other social data which give an unfavourable account of inequality in this country was behind a forum on October 18 that looked at the contribution cooperatives, in this United Nations International Year of Cooperatives, could make to reducing income disparities in the Wellington region.

The business of coops
Ramsey Margolis, executive director of the New Zealand Cooperatives Association, presented the cooperative as a business model that aims to produce profit as well as benefiting its members and society. As the most visible coop in New Zealand and the country’s largest business, Fonterra is a successful example of the model.

‘Cooperatives [start] when there’s a need for them, when the market fails to provide what people need’, he says. But a coop ‘needs to have a workable business plan as well as keen members willing to [invest in] getting it off the ground.’

He says a coop, as a democratically controlled business aiming to provide member needs, is profit conscious rather than profit maximising, since it doesn’t have ‘investors to feed’. Members define their needs and, ‘when you’re in business to supply members’ needs, you’re far more likely to behave in ethical and sustainable ways’.

But, Morris Altman from Victoria University said reducing income inequality and redistributing income would not necessarily increase the economic and social well-being of society as a whole. Professor Altman, who heads the School of Economics and Finance, said cooperatives do not necessarily lessen income inequality despite reducing poverty levels and boosting productivity through better incentives.

‘What matters,’ he says, ‘is that cooperatives can make society better off. If poverty alleviation is of any importance, cooperatives provide a powerful way of helping people help themselves, both materially and spiritually.’

While cooperatives should not be viewed as a solution for the desperate, they are ‘a powerful economic vehicle, available to us all’.

NZ Council of Christian Social Services (NZCCSS) hosted the forum in conjunction with the Closing the Gap Project at the Loaves and Fishes Hall.

NZCCSS’s policy advisor Paul Barber highlights the growing gap between the incomes of high and low earners as one of the problems of rising inequality.

Cooperatives have requirements for shared earning and risk and mutual accountability that are not necessarily a part of other forms of enterprise. Barber believes cooperative and mutual finance organisations offer the way forward ‘because they are more accountable to the people whose money they are investing and lending’.

www.nzccss.org.nz or www.nz.coop

Image: Ramsey Margolis, Professor Morris Altman, Paul Barber.