Report of the ICA Commission on Co-operative Principles (1966)

Consideration of Co-operative Principles

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4. Disposal of Surplus (Savings)

The group of problems to be discussed under the above heading is complementary to that considered in the preceding section. After the question of fair remuneration of capital in relation to the other factors of production has been dealt with, there remain the problems involved in the equitable sharing among the members of a co-operative of any surplus or saving resulting from its activities. There are two main questions for solution: first, to find the proper balance between the interests of the individual members and those of the society as a whole; second, to do justice as between one individual member and another. The discussion of these questions has been much confused in the past through misconceptions springing from analogies mistakenly drawn between the financial benefits derived by members from their co- operative society and the profits distributed by joint-stock companies to the holders of their ordinary (equity) shares and, as a consequence, through the use of ambiguous terms. The Commission therefore feels obliged, at the risk of traversing what is to many very familiar ground, to clear the air by restating certain fundamentals.

The economic benefits conferred by co-operative societies on their members are of various kinds and become available according to circumstances in a variety of ways. They may take the form of money, goods or services. They may be immediate, short-term or long-term. Some may be enjoyed collectively; others can only be enjoyed individually. In deciding in what forms and in what proportions or amounts the surplus or savings shall be allocated or divided, the members as a body have, and ought to have, absolute discretion.

In reaching their decisions, however, there are two sets of considerations which, if they hope to prosper, they dare not neglect. On the one hand, there are considerations of business prudence; on the other considerations of equity. If they neglect the former, they will run into economic and financial difficulties. If they neglect the latter, they will provoke resentment and disunity in their society. In some countries a conspicuous economic benefit of a prosperous co-operative is a money payment or patronage refund it makes to its members periodically after its accounts have been balanced, audited and approved, along with the proposed allocations and divisions, by its general meeting. These payments are frequently called `dividend', and this is the first occasion of confusion, because the same term is used in company practice to denote payments to shareholders from profits. From this confusion arises another, namely, that the payment of a money dividend is an object, even the principal object, of a co-operative society, just as it is of a company. Despite all that has been done in the past to educate the public and the mass of co-operative members, to say nothing of politicians and tax-collectors, to understand that the sums distributed by co-operatives are yielded by a different type of economic organisation and result from a different series of transactions from company profits, the errors persist, first, that the principle of `dividend on transactions' implies an obligation on a co-operative to make a periodical distribution of its earnings, and second, that the rate of dividend is the most reliable index of its efficiency.

The fallacy is exploded by three well-known facts. The first is that co-operative societies can - and many agricultural supply societies, for example, do - adopt a policy of allowing their members to purchase at prices so near to cost that no margin remains large enough to be worth distributing, especially if the second and third facts play a role of any importance. The second fact is that business prudence sometimes counsels a society to place to reserve or capitalise the whole or greater part of its net earnings, notably when its own position is in any degree difficult or the general economic outlook is uncertain or if it is contemplating a new departure requiring all its financial resources. The capitalisation of surpluses, especially by unions and federations, has always been a powerful factor in co- operative commercial and industrial development. The third fact is that societies often devote a portion of their net surplus or savings to the provision of services for the common enjoyment of their members, as being more useful to them than individuals. The overriding consideration throughout is that whatever is to be done with a society's net surplus or savings is determined by democratic decision by the members according to their judgement of what is just and expedient. Moreover, the amount which is subject to their decision is not profit in the ordinary commercial sense.

Here the Commission would recall that the questions whether to divide or not, and, if there is division, what shall be the method, have been constantly present to the minds of Co-operators throughout the Movement's history. Theoretically, in the pre- Rochdale Co-operative Movement of Great Britain, the net savings or surplus of co-operative societies were to be kept indivisible and added to the societies' capital in order to assist their development into self-supporting communities. Practically, division of net surplus amongst the members was widespread without any uniformity of method. Equal division, division according to capital contributions, division according to purchases were all practised. The Rochdale Pioneers, when faced by the same question, decided in the light of their experiences and after much reflection and discussion, that there should be division, for the cogent reason that in order to gain the support of any considerable number of members, their society must offer them some immediate or short-term advantages. The British wage- earners' economic position in the "hungry" 1840s needed relief there and then. It would not permit them to make sacrifices for a distant community ideal. The Pioneers' decisions to divide and to divide in proportion to purchases were really dependent on a previous decision as to price policy. They chose to retail goods at current market prices, at this would administratively be easier and simpler than sale at cost prices - costs and expenses were difficult or impossible to forecast accurately - and return to the members periodically in proportion to their purchases what they had paid over the counter in excess of the cost of procuring the goods they bought. The experience of over a century proved the practical wisdom of their decision, but it is significant that those who adopted Rochdale methods in several other countries tended to modify them, once again in the direction of conferring an immediate benefit on the member, by adopting an "active" price policy of slightly under-selling the market with the further consequence of lower rates of dividend on purchases.

Before passing to the discussion of these questions, it should be noted that a number of customs and conventions have grown up around the dividend system and these have more or less profoundly modified its practical application. One is a tendency to stabilise or even standardise the rate of dividend. On the one hand, the members in time come to reckon with a constant rate for the purpose of their personal or household economy, the managers tend to budget for a constant rate and include it in their calculation of prices, thus in effect turning the system upside down. In either case, the correspondence between the dividend rate and the trading results of a given balancing period may be broken, and the danger arises that a society, in order to maintain the regular rate, will pay a dividend in excess of its earnings and draw on reserves or development funds in order to do so. This temptation increases with the pressure of competition, but it is one which should at all times be strenuously resisted in the interests of sound management.

Co-operative societies have also to face the reactions of their competitors to the power of dividend to attract custom and buttress the loyalty of members to the co-operative store, whether they are purchasing consumption or production goods. This reaction takes the obvious forms of discounts, rebates, premiums, etc., which, if they represent cash or its equivalent, may appear more advantageous than a dividend for which the member must wait until the year's or half-year's end. Not seldom co-operatives have felt obliged to make some concession to offset these inducements, as, for example, by giving their members the choice of receiving discount at the time of purchasing or waiting for the dividend ultimately declared. No breach of principle is apparent here, if the rate of discount does not exceed the rate of dividend or patronage refund.

The Commission took note of the tendency for the role and importance of dividend in the economy of Co-operation to change with altered economic and social conditions, particularly in the countries of advanced industrial development. In these countries today, where competition is fierce, dividend rates display a downward trend, the combined result of diminishing trade margins in the branches in which co-operatives traditionally engage and of rising costs due to labour's increasing demands and to inflationary factors. The importance of dividend also declines in the estimation of the membership as increased earnings, full employment and state welfare services bring about greater security and higher standards of comfort, and with that, the power of dividend to induce constant and `loyal' purchasing over the whole range of commodities societies supply. Recent researches tend to confirm that the rate of dividend now exercises less influence on purchases of consumer goods, compared with their quality and presentation. The role of dividend in the self-financing of co-operatives is also liable to change. Members leave their dividends to accumulate in their capital accounts with their societies to a lesser extent than formerly, unless the societies adopt special measures to promote self-financing in new ways, designed to bring in additional cmpital for special new ventures or to enable the society to retain part of members' dividends as capital for long period, e.g. as int he family savings account system of the Swedish Consumers' Co-operative. Parallel changes are to be seen in the social, educational and recreational services traditionally provided by co-operatives out of their net earnings, as they are replaced by more comprehensive and effective state welfare and educational systems. This does not necessarily mean that the advantages of collective over individual expenditure are ceasing to be significant in co- operative economy but that the purposes for which allocations are made must change with the times, as new habits and modes of living open up fresh possibilities, notably in the cultural field. Nevertheless, all these differences imply no more than changes in the pattern of disposal of surplus; the elements remain unchanged. They still are: provision for the society's stability and development; provision for collective services; dividend to members according to transactions. In those parts of the globe where free market economies prevail and commodities are bought and sold by co-operatives to and for their members at market prices or prices varying according to market conditions, savings will be made and accounts will show surpluses, if societies are successful. Under these conditions there seems no need to depart from the principle, already observed for over a century as the most equitable and convenient, of distribution on the basis of transactions.

5. Politics and Religion

The topics discussed in this section may appear at first sight to lie to a large extent on the fringe of the Co-operative Movement's proper concerns. The Movement's action has hitherto been, and, many believe, must always be, centred in the economic and educational spheres. For the better performance of these tasks, prudent co-operative leadership has constantly tried, as far as possible, to concentrate the attention of the Movement on them and avoid the risks of disunity and dissipation of energy incurred when issues of no obvious relevance, on which people are bound sooner or later to disagree, are imported into the consideration of Co-operative affairs. The strong feeling that this treacherous ground must be avoided at all costs found expression in the formula "Political and Religious Neutrality" employed in the Report adopted by the ICA Congress of 1937. The Report not only gives Neutrality the authority of a principle, but also imparts a wider significance to the term by linking it with race and nationality, as well as politics and religion. In the present Report, even where race and nationality are not specifically mentioned, they may be assumed to be covered by politics, for both are capable of erupting into political conflict in more than one region of the globe.

It is the term `Neutrality' itself which is increasingly called in question by Co-operators more or less everywhere. It was never a good term, because it carried overtones of passivity and indifference which did not harmonise with the facts or the practice of Co-operative Organisations which were not, and had no intention of being, indifferent or inactive where the interests of the Movement were involved. The term is to-day almost completely misleading and its use has been abandoned in favour of `independence' by many Co-operators. But to reject the term is not necessarily to abandon all the underlying ideas, and the Commission will attempt in the paragraphs which follow to bring out, as far as possible in a positive manner, certain considerations of significance for the formulation of co- operative policy in regard to politics and religion under contemporary conditions.

To begin with, there are considerations which may be called internal, because they concern the relations of a co-operative with its members. They have already been touched upon in this Report under the head of Membership. There should be no discrimination either among applicants for membership or among actual members, on religious or political grounds. No one should be obliged to subscribe to any doctrinal declaration. This leaves the member entirely free to hold whatever belief or opinion he chooses or to adhere to any religious or political organisation which attracts his sympathy and loyalty. On its side, the society will not compromise its freedom to carry out its proper co- operative tasks through subservience to any political party or religious organisation and will abstain from taking up attitudes on purely party-political or religious issues. Such a policy would not appear to involve any great formal difficulties in its implementation.

No firm line of demarcation can be drawn between internal and external considerations. They merge into one another. The external considerations are obviously those which spring from the relations of the co-operative unit, or the Co-operative Movement as a whole with the external social and political system. Economic interests and doctrines play an important, often a dominating, role in the shaping of political policy and the choice of its objectives. Co-operation, as a movement with an economic doctrine of its own and representing well-defined economic interests, cannot avoid involvement in affairs of government, which, whether they are or are not the subject of party conflict, are in their nature political. The action developed by the International Co-operative Alliance and a large number of its affiliated Organisations to promote the greater enlightenment of consumers and more effective protection of their interests include efforts to influence the legislative and administrative measures of governments, as well as the opinions, attitudes and policies of the national Co-operative Movements. Or again, it is inconceivable that at a period when the productivity and prosperity of agriculture are objects of such greater concern to governments, agricultural co-operative Movements should deny themselves the privilege, even if they do not regard it as a duty, of expressing the views of their members, giving government the benefit of their experience when it is considering farming policy and rural welfare, warning it against mistakes and complaining if the results are unsatisfactory.

Much inevitably depends on the manner and methods by which the Co-operative Movement seeks to intervene in a given political situation. On the one hand, Co-operative Organisations need to choose the methods which promise to be most effective. These range from private representations to government departments and deputations to Ministers to lobbying in parliament, agitation among the public or alliances, temporary or permanent, with political parties. On the other hand, they have to consider which methods will secure the maximum of consent and support among their members and entail the minimum risk of division. Those co- operative organisations are not necessarily the most powerful or influential which take part in election campaigns and seek representation in parliament. Those which are content to work on the administrative level and have earned the confidence of government because of the wisdom and objectivity of their advice, may play an even greater role in shaping policy and determining final decisions. From the point of view of keeping the members' loyalty and support, those organisations which adopt a consistent policy of non-partisanship, that is to say, independence of party and entanglements and intervention based exclusively on co- operative interests and co-operative principles, are obviously on safer ground. The overriding consideration is that any weakening of a co-operative's unity impairs its power to act effectively, not merely in the political field, but in all the other fields as well. Yet in these days, it is not always safe to abstain from taking up attitudes or engaging in action on political issues which have any bearing on the Movement's interests or prospects. To declare neutrality, as has been well said, is to express a political point of view in any case. It is inconsistent with the aims and spirit of the Co-operative Movement that its leaders and members will endeavour to act, in political as in other matters, so as to promote unity and reduce conflict by seeking at all times the highest common measure of agreement.

This consideration is of the utmost importance if the Co- operative Movement is to make its most effective contribution to the solution of those great human problems, which although they cannot be resolved without governmental and inter-governmental action of more than one kind, transcend politics and even religions. Great world issues - such as the avoidance of war, disarmament and the consolidation of the bases of peace through the extension of international collaboration in every sphere; the deliverance of the under-privileged half of mankind from hunger, want, squalor and ignorance: the assertion and maintenance of human rights to individual freedom, equal citizenship and personal development - are not questions on which Co-operators can profess neutrality or indifference. The Movement's philosophy and its practice, the whole trend of its growth and extension, are carrying it onward towards an era of international integration of which the International Co-operative Alliance is the precursor and, in a sense, the progenitor.

The present generation of Co-operators, moving about the world to a greater extent than the previous one, is learning from its own experience that co-operative brotherhood transcends all limitations. It is of the utmost significance that in congress after congress of the International Co-operative Alliance, the delegations of the national movements, whatever their social, economic or political background, will make every possible concession and strain every resource of language and phraseology in order to secure unanimous agreement on resolutions about international peace. In this way the practice of the Alliance illustrates the statement in its rules that Co-operation "is neutral ground on which people holding the most varied opinions and professing the most diverse creeds may meet and act in common". Just as peace is not simply the absence or cessation of war, so the attitude of Co-operators to political questions is not simply the negative one of abstention, but the positive reflection of their resolve to meet and work together on common ground.

It will be clear from the foregoing that the Commission feels that it cannot follow the Report of 1937 in giving the same absolute authority to Neutrality as a principle. Neutrality in certain circumstances is a right and proper policy. There should be freedom at all levels of the co-operative structure for the individual members, primary societies, secondary organisations and international institutions, to take to political questions the attitudes which are necessary or most appropriate to their circumstances at any given time or place. This freedom includes independence of alliances or engagements which may impair the performance of their basic task in the economic and educational fields. It is also subject to the primary need of promoting at all levels that unity amongst co-operators which is indispensable to the successful fulfillment of the Movement's mission.

6. Business Practices

Under this heading the Commission considered two important groups of problems which, if not of equal interest to all types of co-operative association, are of special concern to all those engaged in trade, whether in consumers' or producers' interests. In respect of both the Rochdale Pioneers made strict rules for themselves. They decided to practice cash payments in buying as well as selling. They also decided to deal in goods of the highest standards of purity, and, when selling them, to give full weight and measure. The Report of 1937, while it made no reference to the second rule, declared that the first was a principle to be closely adhered to for both financial and moral reasons. In the judgement of the Commission these rules are applications to particular problems, within a limited field, of considerations which need under present-day conditions to receive a broader formulation and are capable of considerably wider application. Although neither has the universal validity of a principle, they are nevertheless so important as guides to business policy as to require discussion in this report.

To begin with, it should be borne in mind that the term `cash trading' has never meant simply that goods have to be paid for at the moment they are handed over the counter or delivered at store or domicile. General trade practice has always permitted a little latitude. A few days' delay in payment is not held to conflict with the cash rule especially if payments are regularised so as to be conterminous with the receipt of wages or salaries, weekly, fortnightly or monthly. And, if consumers' co-operatives find themselves obliged to conform more or less to what is considered sound practice in retail trade in general, the same is also true, say, of agricultural marketing or industrial producers societies, which allow their customers whatever trade terms are usual in a given market. Cash trading and its alternative, credit trading, in one form or another, require to be considered together in the light of what common sense indicates as financially sound. Despite the strictness of the Rochdale rule, it is not possible to say that either is at all times entirely good or entirely bad. Each stands or falls in relation to the whole set of circumstances in which it is employed.

The Rochdale Pioneers had good reasons for adopting their rule of cash payment. Experience of earlier co-operative enterprise had shown them that unregulated, indiscriminate credit to members could be a mortal disease to young co-operatives. So long as their range of commodities was virtually limited to foodstuffs of daily consumption, in which the turnover was rapid, they could well dispense with credit. Apart from safeguarding the liquidity and financial stability of their society, they desired to help their members to emancipate themselves from debt, mainly to shopkeepers. When wages are low and employment irregular, the retailer is the working-class consumer's nearest source of credit after his savings are exhausted. The position of the small agriculturist living on subsistence level or even below, is very similar and leads to similar results chief among them a debt- servitude which may be lifelong. The remedy, though applied in different ways and through different forms of organisation, is fundamentally the same, a financial discipline which encourages and assists thrift, while making unregulated and unsecured credit difficult or impossible. People who consciously suffered under a burden of debt could be roused to make the effort involved in changing their buying habits, if liberation were brought within their reach by co-operative enterprise.

It would be different with a later generation, born and brought up under more comfortable and easy conditions. Higher earnings, greater spending power, greater family possessions in savings and real property, rising standards of comfort, a rise in the social scale, a widening range of goods and services on which money could be spent - all played their part in creating among the public a mentality easily accessible to the suggestion of the salesman to buy now and pay later, dividing the total due into periodic installments within the customer's earning capacity. Under these conditions co-operative societies, whether consumers' co-operatives extending their assortment of commodities from food to clothing, ironmongery and furniture, or agricultural societies extending their business into, say, machinery, were forced to face the fact that they could not secure or retain their members' custom without providing facilities for payment equal to those offered by their competitors. The traditional rules were breached and the breaches were widened. Even the rule in the agricultural co-operative movement of granting credit for production rather than for consumption was no longer applicable in those newly developing countries in which the cultivator had to receive credit in order to subsist and work until his crops were harvested and marketed. The private merchants and producers made him advances on the security of his growing crop; unless a co- operative could do the same it was hardly in business at all.

The crux of the question is how far, if at all, the grant of credit should be combined with the purchase or sale of commodities. Credit is a service which entails costs like any other. Members of a co-operative society purchasing on credit receive a service which, unless a special charge is made, they obtain at the expense of the cash-paying member. This is inequitable, and the costs may also be difficult to calculate when they are incurred in innumerable tiny transactions. The general practice of consumers' co-operatives is, therefore, to require purchases of good and small household articles to be made for cash, all the more because the commodities are, for all practical purposes, consumed immediately. For larger and more durable articles it is possible and usual to make special arrangements, including the payment of an appropriate interest to cover extra costs and risks.

Here again, the question of combining credit with trade arises in another form. Are members of the sales staff competent to judge credit-worthiness and allow credit? The answer must be: not by any means always, unless they undergo special training. The alternative is set up a special credit union or credit department, operating alongside of the selling departments, to take the responsibility of extending credit, and so enabling the trading departments to work to all intents and purposes on a cash basis. It would seem that unless special care is taken to separate credit from trade, societies are li_ble to incur costs of which they may be for a long time unaware. Societies are naturally anxious to increase their volume of trade, but an increase obtained by extending credit at too high a cost cannot be regarded as sound business. A further factor is the heavy drain credit, when it is extended for six or eight months, may make on the capital resources of an agricultural trading society. The capital employed for members' credit is not available to the society for its development. It is inevitable therefore that, where no co-operative credit organisation already exists, co- operators think of creating one especially in order to relieve the burden on the trading societies.

When the problem of credit is considered from the standpoint of the members, the outstanding fact is that they are exposed all the time to the blandishments of sales people of all types, offering all kinds of commodities on what are called `easy terms' which may turn out to be impossibly hard. The evil results of yielding to the temptation to overspend and the usurious practices of many credit-selling enterprises are notorious and have been the subject of preventive and restrictive legislation in a number of countries. The problems of Co-operatives which desire to avoid placing themselves and their members at a disadvantage by not providing credit facilities is to provide credit on fair terms for them without joining in the competition to induce them to spend more than prudent household or farm management would permit at any given time. It may be plausibly argued that, with managed economies less liable to booms and slumps, and with full employment, the practice of splitting large items of expenditure, such as furnishing a home, into monthly installments related to the buyer's present and prospective income, is a much less risky practice than it was, both for the consumer and a co-operative society. It is even argued that such a practice is justified in order that consumers may enjoy the rapid rise in the standard of comfort which modern technical and economic progress has made possible. Nevertheless the fact remains that the system of cash payments has its economic merits and advantages for both co-operators and their societies and that, at times, it is a mistake to forfeit them for the sake of the convenience of credit buying. Co-operatives have a responsibility towards themselves and their members to decide carefully when, and in what manner, it would be permissible to rely on credit, especially in regard to articles of consumption.

The important thing is to hold the balance fairly and, for co-operative societies especially, to look at the question of cash or credit policy, not only from the standpoint of their own business advantage, but also from the standpoint of the true economic and moral interests, short-term and long-term, of their members. Moreover, societies will be failing in their educational duty if they do not take pains to instruct their members in the issues involved, so that they make intelligent decisions which will later justify themselves by their consequences, in terms of both co-operation and good household or farm management.

The reasons why the Rochdale Pioneers found it necessary to emphasise their determination to sell goods which really were what they professed to be and not to cheat in weighing and measuring are well-enough known to economic and social historians. There were adulteration of food and other malpractices common in distribution business int he first half of the 19th century in Europe, and by no means unknown to our own time. But the idea underlying the Rochdale rule has to be expressed in a much broader context today and in the future. It is that co-operative institutions, in all their activities especially where they have to deal with the general public, should be characterised by a high sense of moral and social rectitude. When there is scarcely any branch of commercial activity in which co-operatives of one type or another may not now be found, co-operative institutions should be able to justify their existence, not only by the advantages they yield to their members, but also by their sense of responsibility and their high standards of probity in all that they undertake. The temptation to copy the doubtful practices of competitors should be resisted, even when societies appear to suffer financially because of them. Adulteration, said one 19th century publicists, was an aspect of competition. It is to the honour of the Rochdale Pioneers that they began to shift the area of competition from fraud and adulteration to purity and good quality, some years before the state intervened to set minimum standards and to punish those who failed to observe them. More than one co-operator, versed in the economic and social problems of the newly-developing regions, has emphasised that a similar role could be played by the Co- operative Movement in countries where the government has not yet been able to deal effectively with adulteration. Just as consumer co-operatives can set standards of purity in foodstuffs, so it is possible for agricultural societies to counteract dishonest trading by supplying farmers with goods and chemical fertilisers of good quality.

The conferences on the protection and enlightenment of consumers, convened during the past eight years by the International Co-operative Alliance, have given plenty of evidence that governments cannot be relied upon always to give adequate protection to consumers or even effectively to enforce their own legislation. The rise of consumers' secretariat is proof of consumers' suspicion of and discontent with the manner in which they are sometimes treated by the manufacturers and sellers of new products or old products, made or preserved by new processes, which do not justify in use the claims made on their packages or by those who advertise or sell them. The relatively slow processes of protective legislation mean that it nearly always lags considerably behind the inventiveness of manufacturers and technical innovators in making new marketable products. There is therefore still need of an organisation like the Co-operative Movement which can, not only agitate and protest, but supply economically practicable alternative products which are genuine and reliable. No less than the Rochdale Pioneers, the Movement today is capable of shifting the ground of the competitive struggle and of leading trade into a newly and socially reputable paths. But if it is to do so, the ethics of co-operative business must be invariably high, higher and never lower than the law requires, and publicly known to be so.

7. Education

It is no mere coincidence that so many eminent pioneers and leaders of Co-operation have been also great popular educators. The effort to reshape the economic system on the basis of Co- operative principles requires a different discipline from those of either individual or governmental enterprises. Co-operation as a form of mutual aid appeals to other motives than man's selfish or self-regarding impulses or obedience to duly- constituted authority. Collective self-discipline is not a wild or self-propagating but a cultivated growth. Co-operation requires of those who would practise it effectively the acceptance of new ideas, new standards of conduct, new habits of thought and behaviour, based on the superior values of co- operative association. No co-operative institution, therefore, can be indifferent, in its own interest and for its own survival, to the need for educating its members in appropriate ways.

For the purposes of Co-operation, however, education needs to be defined in a very broad sense which includes academic education of more than one kind but much besides. It includes both what people learn and how they learn it. Every phase of experience, which adds to people's knowledge, develops their faculties and skill, widens their outlook, trains them to work harmoniously and effectively with their fellows and inspires them to fulfil their responsibilities as men or women and citizens, can have educational significance for Co-operation. Less and less in the contemporary world can education be limited to what is learnt in schools and colleges at special periods of people's lives. The Co-operative concept is of education as a life-long process.

All persons engaged in Co-operation need to participate in this process of education and re-education. For the present discussion they can be divided into three groups. There are, first, the members, those in whose interests co-operatives are established and who, because of their democratic constitution, collectively exercise supreme authority over them. There are, in the second place, the office-holders, whether they are members' elected representatives or professionals employed by the co- operatives. The education which both these groups require consists mainly of knowledge of technical skill, and a training and behaviour. The knowledge must be as accurate, as systematic and as up to date as they have time and capacity to absorb. It will include not only knowledge of the special forms of co- operation in which they are engaged but also knowledge of the economic and social environment in which their societies operate.

In respect of the elected officers it will include a great deal of business knowledge; in respect of the professional employees, it will include all that will make them at least as competent as those engaged on the corresponding levels of the private and public sectors of economy. The employees will also need the best available training in the appropriate techniques, that is obvious. It is not so obvious and therefore needs emphasis, that the democratic processes of co-operation need technical skill quite as much as the economic, and that the members and their representatives need to be trained to use these processes skilfully and effectively to their society's advantage. Without drawing hard and fast lines, it may be said that the education of the members forms part of adult education and is carried on today in a decentralised manner by methods of discussion and various kinds of group work, whereas the education of employees and officials for careers in the Co-operative Movement is carried on in technical training institutions and universities. The establishment by national co-operative organisations of central co-operative colleges and training schools is today, it is gratifying to note, becoming normal. The number of universities with special institutes or departments for co-operative studies and research is also on the increase.

The third group consists of people who are potentially, rather than actually co-operators - the greater public still outside the Movement's membership. More and more, with the passage of time, the Co-operative Movement will be obliged, if it is to make headway, to keep the public better informed than in the past about its aims, its organisation and methods, its achievements and its plans for the future. Further, when it has a point of view justified by its own experience, which needs to be put in the interests of the whole body of consumers or producers on an issue of public policy, it should speak out with clarity and force. The battle for the acceptance of co-operative ideas has to be fought in the intellectual, as well as the economic field.

In view of the Commission, education of appropriate kinds for the different groups of persons who make up all but the very simplest of co-operative societies is a necessary responsibility of co-operative institutions. It by no means follows that they all have to provide every kind of education they require. The expansion of national systems of public instruction can and will take some of co-operators' educational burdens off their shoulders. Nevertheless, it will not relieve the Co-operative Movement of the educational responsibility it alone can discharge of educating people in the ideals of co-operation and the proper methods of applying its principles in given circumstances. it cannot devolve this function on any other institution. Of course, the many thousands of small co-operative societies in remote neighbourhoods have few resources for educational work. It is, therefore, the duty of the secondary organisations, more particularly the unions and federations which undertake promotional and supervisory functions, to provide all kinds of assistance - publications and audio-visual aids as well as technical guidance - which will ensure that there is in every locality a nucleus of alert, reasonably well-informed co- operators with an outlook extending beyond the area of their primary society.

The Commission would emphasise the fact, of which co- operative educationist have become increasingly aware in recent years, that the movement's educational standards must be constantly rising if they are to match those of the outside world. The structural changes which the Movement in many countries is now being obliged to make, with all the concentration and construction of larger-scale operating units they entail, demand at the highest level personnel with experience in and training for management and administration equal to the best employed elsewhere. This problem of education is plainly insoluble apart from problems of recruitment, remuneration and promotion, but its emergence is evidence that the time has come, if it is not overdue, when the Co-operative Movement has to regard its educational activity much more seriously than it has often done in the past. It should define its educational problems in much broader and more comprehensive terms and provide in its budget sufficient funds for a well- planned educational programme.

As one example, the Commission would refer to the idea of the co-operation of co-operative organisations discussed in a latter passage of this report. More and more this co-operation will have to be organised and carried on across national frontiers and from continent to continent. It is a fundamental task of the International Co-operative Alliance to promote and assist its extension, while serving itself as an instrument of collaboration for an increasing number of purposes. It should be self-evident that training for this kind of international co- operation is something which will inevitably outrun the capacity of the national co-operative schools to provide. Training for international co-operation must be established on an international basis. The Commission would therefore point out that the idea of setting up, under the auspices of the International Co-operative Alliance and in close association with its Secretariat, a co-operative education centre and training institute, is already an old project of which the Authorities of the Alliance have more than once signified their approval. Such an institute, with an international staff recruited from the most eminent co-operative educators of the world, is needed to produce leaders capable of spearheading the accelerated development of co-operation on the international level now within the Movement's reach. The time has gone by for small beginnings. The Alliance's resources are too small to permit it to undertake this task alone. The national institutions, especially those powerful organisations now operating in the field of trade and finance, should joint together and come to its assistance, not least in the interests of their own future development.

The Commission has no hesitation in accepting Education as a Principle of Co-operation - as the principle, in fact, which makes possible the effective observance and application of the rest. For the Principles of Co-operation are more than verbal formulae, more than articles in a rule book, to be literally interpreted. In the last analysis the Principles embody the spirit of Co-operation, which has to be awakened and renewed in every fresh generation that takes over the work of the Movement from its predecessors. That awakening and renewal depend, more than anything, upon the care and assiduity with which each generation keeps the torch of education aflame.