Thursday, November 22, 2007

Cooperatives and Civil Society: Preparing for Globalization

Cooperatives and Civil Society: Preparing for Globalization

Third Sector Views Issue No. 3 June 1996 (a publication of the Cooperative Foundation Philippines, Inc.)

Civil society must rapidly facilitate the formation of an alternative economic system that will serve the needs of the poor or those that are marginalized by the effects of economic globalization.

The existence of numerous cooperatives, community associations, trade unions and sectoral organizations, NGOs and social movements in the Philippines is now being regarded as evidence to the strength and vibrancy of the country's civic life. Civil society in the country is said to be much stronger than in many Asian countries where the impulse of citizens to self-organize may be restricted. The proliferation of organizations for cooperation and mutual help is considered as an index of the development of social capital. Thus, the strength of civic associational life has encouraged sober hopes that Philippine society will eventually live up to its potential in overcoming underdevelopment and social inequalities.

Cooperatives and civil society, however, must face up to new challenges brought about by rapid global changes. There has been much optimism about the prospects of unprecedented economic growth in view of the APEC summit in Subic this November. Optimism about the country’s prospects rests on the fact that it is in the midst of the fastest growing region in the world. To take advantage of the Asia-Pacific boom, government is undertaking a massive restructuring of the economy towards liberalization and taking an active part in building APEC as a free trade area.

Globalization is not something that is yet forthcoming. Globalization has been sweeping the world. Rapid advances in information and communications technology have made global business networking possible, offering business actors with great flexibility in tapping capital, materials, technologies and markets anywhere in the world. Multinational corporations and multinational finance are leading this process, with the largest bulk of global trade actually being made between subsidiaries of the same multinational corporations. It is also said that in any 24-hour period, some US$350 billion circulate around the world via computers in speculative trade in financial currencies, without connection to the actual exchange of trade and services.

The new global economy also rests on the pillar of liberalized trade and investment policies. On the assumption that the creation of wealth and generation of employment can be rapidly facilitated with liberalized trade and investment, economies are gearing to open up wider than before and countries put pressures on one another to open up their economies.

Despite the bullish economic forecasts, however, the prospects of a developmental and environmental crisis have not significantly diminished. Economic growth as currently unfolding is creating islands of industrial growth amidst a wide sea of stunted development. The powerful forces of economic globalization exclude more and more people from mainstream economic development, especially those belonging to the bottom layers of society, those without land, those with little education, and those discriminated against because of their gender. Economic growth is also being paid for by depleted natural resource base and polluted air, waters and soil and these are all most likely to continue despite more growth and even as a direct result of growth.

The UNDP reports in 1996 that despite the dramatic surge in economic growth in a few countries, 1.6 billion people were left behind and worse off than they were 15 years ago. Likewise, 89 countries are worse off economically than they were 10 years ago. The very rich are getting richer. The assets of the world’s 358 billionaires have reportedly exceeded the combined annual incomes of countries accounting nearly half of the world’s people. UNDP calls this “ruthless growth.” Despite the triumphal march of the neoliberal economic model worldwide, global inequalities are worsening.

Even in terms of sustaining growth in the usual sense, there seems to be little to be enthusiastic about the country's plunge in APEC. The Philippines remains as a net importer, with exports generally consisting of low value added products such as semi-processed materials, garments and electronics. It appears that the Philippine trade strategy has been based on the interests of narrow sectors such as the sugar planters and garments producers that are too dependent on their relationship with the US. For instance, the sugar industry live and die based on the US imposed quota. This is the reason why productivity in sugar is the same as 100 years ago.

We also can not pin our hopes on our supposed comparative advantage in labor export. Remittances from OCWs constitute about 30 per cent of GNP. Surely this is the single most important source of income that is keeping the economy afloat. We should also take into account, however, that our neighbors such as China, India, Pakistan and Vietnam have huge labor surpluses and are all starting to have a more open and outward orientation.

Developing trade competitiveness of the Philippines requires a strong government that is able to negotiate and leverage in behalf of the national interest. There must be an industrial policy that uses the right incentive system to encourage local industries to produce high-value-added goods. But this will be determined by how well we keep our house in order. We cannot be competitive if most of our people have little purchasing power. The size of a country's domestic market is one of the most important bargaining chips the country could use in international trade negotiations. We can not bargain effectively if our domestic market remains undeveloped due to the stalled implementation of redistributive asset reform (like agrarian reform) and poor agricultural productivity.

In the face of these trends, the relevance of organization, capacity-building and mobilization of the affected sectors for collective economic, political and social action remains undiminished. Cooperative organization and action remains as the most effective mechanism to defend the poor and vulnerable sectors against the negative effects of economic globalization.

The cooperative movement is currently embodied in the Philippines by over 37,000 formally registered cooperatives. Only 4,516 were registered before R.A. 6938 was enacted in 1990. The rest were registered after the enactment of the law. We have therefore a very young movement. About 65 per cent of the coops are agricultural multipurpose cooperatives, although the share in terms of assets of industrial and service coops is increasing. The rest are credit, consumer, service, producer, marketing and non-agricultural multipurpose cooperatives. In general, any group of persons that is consistent with the ILO definition and operating according to the ‘cooperative principles’ as defined by the International Cooperative Alliance (ICA) and the law may be considered as a cooperative. Under R.A. 6938 only registered cooperatives may be called cooperatives. If we include countless other grassroots and popular associations engaged in socioeconomic solidarity and mutual help, the cooperative sector in its generic sense is actually much larger.

By adopting cooperation as a social practice and hoping to propagate it, cooperatives have created a movement among themselves, even without central control or formal unity. By identifying themselves as cooperatives and by wanting to be recognized as such, they have bound themselves to certain norms, values and principles by which they can be judged and tested, even if these norms, values and principles themselves are dynamic and changing. It is this shared identity that will tide cooperatives over whatever threats the changing economic setting may pose.

Much has yet to be done, however, in terms of developing viable and sustainable cooperatives that can increase the leverage of the poor in accessing markets, tapping financing and resources, and influencing decision-making. While the cooperative movement has managed to dramatically increase its membership base over the past five years, there has been little achievements so far in terms of integrating and mobilizing its collective economic potentials for greater competitiveness in the national economy. Functional linkages that take advantage of combining the market capacity of cooperatives are lacking. There is also a lack of mutually beneficial linkages between the cooperative sector and other popular and social movements. However, things are changing. National cooperative organizations are increasingly pursuing greater unity and cooperation in view of current economic trends.

The idea of developing competitiveness for organizations that are supposedly based on the values of cooperation may seem odd. But there is no denying the fact that cooperatives, in order to be viable and effective in serving its constituents, ought to be efficient and innovative, which are the hallmarks of competitiveness in the usual business sense. The distinction is that in the cooperative setting this could be achieved through greater cooperation or what has come to be called in business parlance as strategic alliances.

The task, in our view, is for the cooperative movement and the rest of civil society to rapidly facilitate the formation of an alternative economic system that will serve the needs of the poor or those that are marginalized by the effects of economic globalization. We envision an associative economic sector composed of cooperatives and other membership organizations primarily of people of limited means. By establishing horizontal and vertical economic linkages between these people’s organizations, we can build an economy based on our own values of cooperation and mutual help, self-reliance and participation, trust and sharing and non-exploitation.

Such will be the basis for strengthening the people’s claim-making power over resources and public policies, bargaining power in the market and generally, countervailing power vis-à-vis the more established power centers and market players.
The commercial success of private businesses has been made possible by business networking. Thus, they have been able to achieve competitiveness through cooperation. This offers some lessons. Organizations of civil society, cooperatives, NGOs, the labor unions and social movements must forge functional economic ties and networks of cooperation in order for them to become a significant player in the life of the country.

The common efforts of cooperatives and other civil society organizations can focus initially on areas where there are chances of success. In fact there are certain areas where cooperatives enjoy relative visibility and therefore it will be of great importance to determine how cooperatives may be strategically positioned for leadership and competitiveness in these areas. In the utilities sector, the degree of presence of cooperatives is underscored by the existence of large national transport service federations and a national rural electric cooperative association. In the field of insurance, there is a successful national cooperative insurance system. Meanwhile, the cooperative banking system has proven itself to be a significant alternative to private commercial banking and usury in the countryside while the credit union movement is in the forefront of current attempts to establish a national cooperative apex bank.

While cooperatives in these areas have yet to measure up to the market potential, their achievements are already a great step ahead of certain areas where attempts to establish national cooperative systems failed, as in the case of agricultural marketing. The development of the agricultural cooperative sector since the turn of the century has been marked by islands of inspiring success stories amidst a sea of colossal failures. Despite the existence of consumer cooperatives, the cooperative movement is still very weak in the consumer retail sector while a cooperative sector in manufacturing and industry is virtually nonexistent. But these areas, which pertain to food security, consumer welfare and industry, can be the subject of joint planning too by the NGOs, the social movements and cooperatives. Developing strategic alliances among cooperatives and with such compatible organizations must be pursued systematically in order to develop the competitive advantage of the associative sector in various areas of the economy.

The situation nowadays demands innovative strategies for harnessing the potential of the people for mutual help and cooperation. The spirit of civic responsibility developed through decades of social and political action by the NGO-PO community must be translated into networks of economically and socially beneficial cooperation. In addition to the various efforts to contend with the schemes of transnational capital, as manifested in the APEC process, building the economy of the popular sector should be given a prime importance.

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