FAQ: Cooperatives

What is the main idea of PROUT cooperatives?
Sarkar writes:

“A human being cannot live alone. If a person wants to drink water from a well, he or she needs a rope and a bucket, and to tie the rope one needs a hook. For all these things, the help of the others is indispensable. In society human beings have to work jointly with others so that everybody can move forward collectively. Society is the collective movement of a group of individuals who have made a unanimous decision to move towards a common goal. If human beings move closely together in all aspects of life, except for those few aspects which are very personal, the better it will be for the welfare of society. Only those things which cannot be done collectively should be done individually. So, it is always better for people to work together as far as possible – the more that human beings work together, the better it is. If this principle is not followed the spirit of society will be broken, adversely affecting the very existence of human beings. People have to eat food individually – another person cannot eat your food for you – however a meal can be shared collectively. Where individuality dominates human life, the environment, the welfare of different groups and even the continued existence of humanity may be adversely affected.” (Proutist Economics)

What is a prime advantage of the cooperative system?
Unemployment will be solved. As production increases, the need for more facilities and resources will increase. Educated people can be employed as skilled workers. Village people will not need to move to the city for employment. Nobody will be forced to retire. Rather, they can work as many years as they like.

What are the merits of the PROUT cooperative system?
Members can pressurise the government because of their collective strength and gain financial help and various facilities to increase production. They can pressurise the government to provide better irrigation facilities and high yielding seeds and even make infertile land productive. Furthermore, the maxim of cooperatives will be: “More production, more dividends and more bonuses.” Wages will be earned according to the amount of labor done by the laborer, while bonuses will be paid on the basis of the net per annum profit of the cooperative. Cooperatives can take huge loans from a bank or the government to purchase modern equipment and construct dams, barrages and shift or lift irrigation facilities to increase production.

Why does PROUT advocate the cooperative business model?
The cooperative system is the best system for production and distribution of goods. Cooperatives run by moralists will safeguard the common people against different types of economic exploitation. Intermediaries or middlemen will have no chance to interfere in the cooperative business set-up.

What is the main reason for the failure of business cooperatives?
The main reason is the rampant immorality spread by capitalist exploiters to perpetuate their domination of the economy.

What caused the failure of cooperatives in the past?
Economic centralization. It is extremely difficult for cooperatives to succeed in an economic environment of exploitation, corruption and materialism. In addition, cooperatives are forced to compete with the monopoly capitalists for local markets, while the rights of local people over their raw materials are ignored. These factors have destroyed the cooperative movement in many parts of the world.

Can you show the difference between PROUT’s cooperative model and that of others?
Here is a chart that differentiates between various forms of cooperative enterprises including Proutistic ones.

What is the difference between communist collectivist industrial undertakings and proutistic cooperatives?
There are many differences between the two, of which the following are amongst the most important:

  1. In PROUT the cooperative sector is the middle industrial tier between government run key industries (huge, complex, raw material) and private small enterprises. Under communism private enterprises were outlawed.
  2. PROUT’s approach to cooperative enterprise is based on voluntary cooperation, not forced cooperation. The Soviet farmers were forced to join, which were extremely unpsychological and therefore non-productive.
  3. Under communism everything was dictated from above, such as five-year plans for the industry. It was a party state dictatorship. In PROUT local people have all the say regarding development of local resources, their economic development, etc.
  4. The industrial approach of communism was on centralized; i.e. huge factories producing one item to be widely distributed. PROUT’s industrial and economic approach is based on complete and wholesome decentralization; local self-reliance, bottom-up economic governance.
  5. In Soviet collective enterprises wages were fixed per head. In PROUT cooperatives a minimum purchasing capacity will be secured on the basis of work, while there is much scope for earning extra in various ways; bonuses and piece work.

What is the main drawback of the commune system?
There is no personal ownership. Without a sense of personal ownership, the people do not labor hard or care for any property. Hence there is sluggish production and psychic oppression. The production and distribution systems of the commune system are fundamentally defective, exploitative and anti-human. Relationships are those of supervisor and supervised, or master and servant. This is detrimental to human progress.

What is a prime difference between the capitalist system and cooperative system?
In the capitalist system, raw materials are imported from other countries or regions in order to manufacture finished productions. Cooperatives will not do this. They will develop their own raw materials through research so that they are not dependent on foreign raw materials.

What happens in capitalist and communist economies?
In capitalist economies labor does not work in the interest of management and management does not allow the rolling of money due to concentration of wealth. In communist countries, labor does not feel one with the job, hence production is always sluggish.

Why will the PROUT cooperative model be different?
Cooperatives are free from both the above defects. PROUT cooperatives are well-adjusted with human ideals and sentiments.

How will the people come to accept the cooperative system?
Through internal urge and through external pressure over time. People will never accept a system that is forcibly imposed on them. This change in collective psychology will not occur overnight, but will occur gradually as per the sentiment of the people. The time period from the first phase to the fourth phase of implementing the cooperative system can be called the transitional period for the implementation of PROUT.

How will the people be convinced about the merit of cooperatives?
There should be extensive training and education. However, moral education must take precedence over all other training, so that people learn to think for the collective interests before the individual interests.

What is the meaning of cooperation?
Cooperation means, something is done with equal rights, equal human prestige and equal locus standi, with mutual respect for each other, with each working for the welfare of the other.

What is subordinated cooperation?
It is when people do something individually or collectively but keep themselves under other people’s supervision.

What is coordinated cooperation?
It is when free human beings, each with equal rights and mutual respect work for the welfare of each other.

What kind of cooperation exists in the different socio-economic systems?
All socio-economic systems involve subordinated cooperation, which results in the degeneration of society’s moral fabric. In countries following the commune system, there is subordinated cooperation. It causes lower production and hence food shortages. This is the case in nearly all communist countries.

What is the inner spirit of PROUT cooperatives?
The inner spirit of cooperatives is one of coordinated cooperation. Only the cooperative system can ensure complete and lasting unity among the human race. PROUT says: “We want cooperatives, not communes!” and “We are not slaves of communes!”

According to PROUT, what will be the result of the cooperative system?
Human society will progress with accelerating speed, ushering in a new revolution in science. No part of the universe will be left unutilized. In the near future the intellectual capacity of human beings will increase immensely. Cooperatives will great assist this intellectual and also spiritual advancement of human beings.

What factors are required for cooperatives to evolve?
Cooperatives will develop nicely in a community which has an integrated economic environment, common economic needs, and a ready market for its cooperatively produced goods. All these factors must be present for the successful operation of cooperatives.

What are the three main factors required for cooperatives to thrive?
The three main factors required for cooperatives to thrive are morality, strong supervision, and the wholehearted acceptance of the masses. When these factors were present, cooperatives have invariably met with success.

How should cooperatives be managed?
Cooperative members should form a board of directors for each cooperative. The board should decide the amount of profit to be divided among members, the dividend to be paid. But the total profit should not be distributed as dividends. Some should be kept for reinvestment or for purchasing items such as tractors, manure, etc. Some should be used for increasing authorized capital. Some should be deposited in a reserve fund to use when production is low. The board of directors should be elected by the coop members.

What policies will cooperative members decide?
They will take decisions regarding agricultural production, price fixation and the sale of agricultural commodities. Prices of goods would also be fixed on a rational basis, and this price would include a rational profit of not more than 15 percent of the cost of production. In a decentralized economy, agriculture will have the same status as industry.

In electing the board of directors, what is the most important factor?
To ensure that no immoral person is elected to the board. All directors must be moralists.

How should the managerial staff of the cooperative be chosen?
The managerial staff should be elected by those who have shares in the cooperative. There should not be honorary positions, because this lead to corruption. Managers will have to be paid salaries according to their expertise. Also, cooperative members may also engage in manual labor, and for this they should be paid separate wages.

Will there be any scope for interest earning shares in the PROUT cooperative system?
No, there should not be profit-earning shares in cooperatives. Rather, shares should be according to the production of the land. In industrial cooperatives, there will be dividend-earning shares and not profit-earning shares as in bank interest. If there are profit-earning shares, the cooperatives will convert to commercial enterprises, which is not in the interest of the people. The spirit of the cooperative system will be destroyed and cooperative will go into the hands of capitalists.

Will there be transferable shares?
Members who purchase shares in the cooperative should have no power or right to transfer their shares without the permission of the cooperative, but their shares may be inherited. If some cooperative members have no descendants, then their shares should pass on to their legally authorized successors who will become members of the cooperative if they are not already members. The reason for this policy is that it prevents capitalists from purchasing large numbers of shares in a cooperative and speculating in the market place. This type of economic activity can easily lead to a depression

What are the two ways cooperative members can earn dividends?
They can earn dividends as a return on the land they gave to the cooperative, and also on the basis of their productive labor. Hence the total produce of the cooperative should be divided into two parts: 50 percent on wages for labor and 50 percent for the shareholders of the land.

Will cooperatives be taxed?
Taxes, levies, excise duties, etc., should be collectively paid by the cooperative, thus freeing for instance individual farmers from financial pressure and economic exploitation. In many economically developed countries, there are no land taxes because the revenue collected from such taxes is only a very small part of the total revenue.

Can cooperatives employ non-members?
The workforce in the cooperative system will be composed of for instance the shareholding farmers and non-shareholding labourers. Both groups will benefit: the shareholding farmers will get regular salaries for their work plus a return on their shares, while the labourers will enjoy stable employment and favourable wages.

There are two types of non-shareholding labourers working in agricultural cooperatives – those who are permanent labourers and those who are casual or contract labourers. The permanent labourers will get bonuses as incentives besides their wages, while casual labourers will only get wages for their labour. Those labourers who give the greatest service to the cooperative should get the greatest bonuses. Skilled workers should get paid more than unskilled workers. This will be an incentive for all to become skilled labourers and to work harder. Bonuses should be paid according to the amount of wages which should reflect both the skill and productivity of the labourer.

How will decentralized economy ensure the success of cooperatives?
Availability of local raw materials will guarantee constant supplies to cooperatives. Cooperatively produced goods can be easily sold in the local market. Economic stability will create increasing interest and involvement among cooperative members.

How will cooperatives sustain economic decentralization?
Those socio-economic units which do not have a sufficient supply of raw materials should manufacture synthetic or artificial raw materials. Suppose a unit or region does not have an adequate supply of fodder to feed its cattle or sheep. Will it import fodder from another unit or region? No, it should manufacture artificial fodder instead. Where fodder is available, grazing land, dairy farms and milk production can be developed. Where fodder is not available, synthetic milk will be produced. Similarly, it takes a substantial volume of cotton to produce garments. To transport large amounts of cotton also requires much energy, and so if it is not readily available, synthetic fabric can be produced instead. As science advances, cooperatives will develop and manufacture a great variety of commodities from synthetic raw materials. In the capitalist system, raw materials are imported from other countries or regions in order to manufacture finished products. Cooperatives will not follow this system. They will develop their own raw materials through research so that they are not dependent on foreign raw materials.

What areas of the economy should be managed through cooperatives?
Agriculture (below), industry and trade should be managed through cooperatives. Private ownership in these spheres should be abolished in stages. Only if it is a small-scale operation should an enterprise be privately managed. Hence, the cooperative system and decentralized economy are inseparable.

How will cooperatives benefit the farmers?
Farmers will enjoy more financial security, as the cooperative can advance money to the farmers and sell the crops at the most favorable time for the best price. The cooperative can determine how much to sell and when to sell in order to get maximum profit. The cooperative will also be able to fix the price and thus get the profits which are today taken up by middlemen and profiteers in the capitalist or individualistic system.

What is PROUT’s stance on land ownership?
(See also: Agrarian revolution)
There should be phase-wise socialization of land through agricultural cooperatives. Cooperative land ownership should be implemented step by step in adjustment with the economic circumstances of that area. During this process, the ownership of land should ot be in the hands of any particular individual or group.

What is PROUT’s two-phase plan to introduce cooperative land management?
First, all uneconomic land holdings should be required to join the cooperative system so that they become economically viable. Here, cooperatives will consist of only those people who merged their nonviable lands together to make them viable. For these lands, private ownership will be recognized, but agricultural activities will be conducted cooperatively. Dividends will be awarded based on the amount of land contributed to the cooperative. In the fist phase of PROUT’s two-phase plan, those owning productive land need not be persuaded to join a cooperative. However, if a land holding comprises land which is dispersed in small plots, then the scattered plots should be consolidated into one holding. Or, wherever small, scattered, uneconomic plots are located, they will have to be joined together under cooperative management. In the second phase, all people should be encouraged to join the cooperative system.

What will be the third phase of cooperative land management?
There will be rational distribution of land and redetermination of ownership. Here two factors will determine the rational distribution of land:

  1. The minimum amount of land required to maintain a family.
  2. The farmers’ capacity to utilize the land.

What will be the fourth phase of cooperative land management?
In this phase there will be no conflict over ownership of land. People will by now have learned to think for the collective welfare rather than for petty self-interest. This will not happen overnight, nor can it be forced on the people (as was done in the Soviet Union). But through persuasion and proper mental preparation, the people will gradually be convinced to think first for the collective. Good examples of cooperatives must be established to convince the people of the merits of the cooperative system.

How will the problem of village / small town unemployment be solved?
Agricultural specialists and technicians will be required to continually develop agricultural techniques, hence these specialists will not need to leave their towns for the cities. They will get employment in their own towns, and this will also ensure rapid agricultural development.

What are economic land holdings?
Economic land holdings refers to those lands where output exceeds input. And so, uneconomic land holdings refers to those lands where input exceeds output, or where the market price of the produce is less than the cost of production.

What is the situation today with farmers?
They are forced to sell their produce for next to nothing because they desperately need money to pay off the loans they took for irrigation, seeds and labor. It is called “distress sale.” Cooperatives will solve this problem.

Can members of agricultural cooperatives form other types of cooperatives?
Yes, persons may be members of various forms of cooperatives (see below). Farmers may for instance create producers cooperatives to produce items for various industries. Thus, some farmers cooperatives may function as both farmers and producers cooperatives. Raw materials which are of non-farming origin, such as limestone for the production of cement, should be processed by producers cooperatives. Cooperatives which are only agricultural should sell their produce directly to the producers cooperative which in turn can manufacture a variety of consumer goods. Farmers cooperatives which also function as producers cooperatives can increase their profitability in various ways. For example, such cooperatives could produce oil from rice husks. The money earned may be reallocated and reinvested in the farmers-cum-producers cooperative or used for research and development. Members of a cooperative may also form an associated banking cooperative.

Except agricultural cooperatives, what other types of cooperatives does PROUT support?
PROUT promotes producers and consumers cooperatives, as well as other types of cooperatives:

  • Producers cooperatives include agro-and agrico-industries and non-agricultural industries.
  • Consumers cooperatives will distribute consumer goods to the community at reasonable rates and will share in the profits as well as draw salaries for their labor in the cooperative. Service cooperatives will not be in the arena of producers or consumers cooperatives.
  • Other cooperatives would include farmers cooperatives, banking cooperatives, housing cooperatives, family annuity cooperatives, service cooperatives etc.

What are producers cooperatives?
Producers cooperatives include agro-industries, agrico-industries and non-agricultural industries. The total profit of such cooperatives should be distributed among the workers and members of the cooperative according to their individual capital investment in the cooperative and the service they render to the production and management of the cooperative.

Along with large producer cooperatives, what other cooperatives should be formed?
Small satellite cooperatives should be formed to supply various items to large producers cooperatives. Employees of these small cooperatives may even work from their homes and involve other family members. Thus the large producers cooperatives will assemble the smaller parts made by satellite cooperatives.

What happens if cooperatives become too large?
It will be difficult to utilize natural resources efficiently, and this will lead to complications in production. In PROUT, the farmers’ cooperatives will themselves determine the size of the cooperatives.

What are consumers cooperatives?
Consumers cooperatives should be formed by like-minded persons who will share the profits of the cooperative according to their individual labour and capital investment. Those who are engaged in the management of such cooperatives will also be entitled to draw salaries on the basis of the services they render to the cooperative. Consumers cooperatives will distribute consumer goods to members of society at reasonable rates.

How will consumers cooperatives function?
Consumer cooperatives should be supplied with commodities from both agricultural and producers cooperatives. Commodities which do not go directly from agricultural cooperatives to consumer cooperatives should be produced by producers cooperatives. In addition, non-farming commodities should be compulsorily produced by producers cooperatives. For example, agricultural or producers cooperatives which produce cotton or silk thread should sell the thread to weavers cooperatives which can produce cloth on their power looms. Hand looms can also be used where intricate design work is required, but generally weavers cooperatives should install the latest power looms. The weavers cooperatives will in turn supply consumers cooperatives.

What are service cooperatives?
Service cooperatives will not be in the arena of producers or consumers cooperatives. Service cooperatives are a subtle type of cooperative coming within the arena of cultural cooperatives. An example would be a physicians’ service cooperative run by doctors who choose not to work in private practices. Doctors who have little capital and cannot afford to establish their own practices can also work in this type of cooperative.

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