World Development, Vol. 9, pp. 55-72 0 Pergamon Press Ltd. 1981. Printed in Great Britain 0305-750X/81/0101-0055 %02.00/O Co-operatives and the Poor: A Perspective Comparative zyxwvutsrqponmlkjihgf UMA LELE” The World Bank, Washington, D.C. Summary. - Co-operatives have a universal appeal as an instrument of poverty alleviation and yet their record has been less than exemplary. This paper highlights dilemmas faced in co-oper- ative development between the objectives of growth and distribution, and those between de- centralization and equity. The paper identifies the various internal and external prerequisites for a successful co-operative movement. By examining the evidence with regard to marketing, credit and production co-operatives it argues that in the absence of such prerequisites, alternative forms of institutional arrangements may be as, or more effective than co-operative institutions. In any case a healthy movement which reaches the poor calls for institutional competition. I. INTRODUCTION Traditionally, co-operatives have been ex- pacted to serve a broad set of socio-political and economic objectives ranging from self-help and grassroot participation to welfare and dis- tribution, including exploitation of economies of scale and social control over resource allo- cation and mobilization. However, these various objectives are not mutually consistent. Because there is a substantial trade-off in the realization of many of these, it is necessary to weigh their relative importance in the needs and priorities of the individual country at any given point in time if performance of co-operatives is to be evaluated in an appropriate context. An attempt to fulfil a range of these conflicting objectives simultaneously has led to a broadbased disen- chantment with the co-operative movement. This paper highlights two sets of issues with respect to co-operative development. First it discusses the dilemmas faced in the short run between the objectives of growth and distribu- tion and those between decentralization and equity. The growth-distribution dilemma in- volves an inherent contradiction between the goal of local resource mobilization and the sub- sidies needed to reach the poor. The decentrali- zation-equity dilemma similarly results in a contradiction between the objective of grass- root participation and the paternalism fre- quently essential to achieve the welfare objec- tive. This paper illustrates that these dilemmas and contradictions are far more significant in explaining the limitations of co-operatives than is the concept of co-operation. This paper further points out the various external prerequisites in the form of physical infrastructure, market information, reguiatory institutions, technology, pricing policies towards commodities and capital, that an effective co- operative movement entails, in addition to the normally recognized internal one of proper management. In the absence of these varied prerequisities and especially due to the lack of recognition of the need for external provisions, co-operatives tend to be inefficient relative to other forms of traditional institutions even after receiving subsidies and other types of assistance, thus neither achieving efficiency nor equity. By analysing the three areas of agricultural marketing, credit and production in which the co-operative movement has traditionally been most active, this paper illustrates the various dilemmas and contraditions, and the precon- conditions necessary for co-operatives to reach the poor effectively. Finally, the paper points out the implications of the past experience for the future role of the co-operative movement. * Senior Economist, the World Bank. The views ex- pressed in this paper are those of the author and do not necessarily represent the views of the World Bank. Jayanto Rao made helpful comments on an earlier draft, and Brian Mellor reviewed literature. This paper is based on a draft prepared for a delib- eration on the subject held by the International Co- operative Alliance at Lo&borough, UK, in August 1977. - 55