Commentary
Rural America Runs on Co-ops
By Dallas Tonsager, Under Secretary
USDA Rural Development
he debate over healthcare reform has resulted
in a great deal of renewed interest about the
cooperative model of business in the United
States. Regardless of whether co-ops
ultimately have a major role to play in the
healthcare plan Congress adopts, the increased attention to
this infinitely flexible business model is welcome by those of
us who promote the creation and expansion of cooperatives
— especially as we celebrate Co-op Month in October.
But some information about co-ops contained in press
reports and blogs of late should be corrected. Probably the
biggest misunderstanding is that co-ops are “quasigovernmental”
entities. They certainly are not.
Co-ops are a manifestation of all that is best about our free
enterprise system and democracy. Simply put, co-ops give
marketplace clout to people who on their own would wield
little power. In the cases of farmers, ranchers and fishermen,
co-ops are the business vehicle which helps them gain the
leverage they need to earn fair prices for their products in
markets dominated by ever fewer, larger buyers.
Co-ops not only help agricultural producers to market
their products, but to develop brand names and build
facilities that do value-added processing, thereby greatly
increasing the returns on their products. Land O’ Lakes
butter, Ocean Spray cranberries, Blue Diamond almonds and
Cabot cheeses are just a few examples of the hundreds of
well-known co-op-produced foods in your local grocery
store.
Farm supply co-ops also enable agricultural producers to
do bulk purchasing of the fertilizers and petroleum products
they run their farms on.
We are not talking small potatoes here. Agricultural
cooperatives, which range in size from small country grain
elevators to Fortune 500 companies, set a new gross sales
record of $191.9 billion in 2008, $45 billion more than in
2007. The total would have been even higher had it not been
for a sharp drop in grain, milk and fuel prices toward the end
of the year. Net income before taxes also set a new record of
$4.8 billion, $1 billion more than in 2007.
But farmer co-ops are only one sector of the co-op
economy. Utility co-ops, credit unions, food store co-ops,
building supply co-ops and dozens of other types of co-ops
all play a huge role in the economy. USDA recently helped
fund the first ever cross-sector analysis of all types of co-ops
in the United States. The study (conducted by the University
of Wisconsin Center for Co-ops and USDA Cooperative
Programs) found that the total economic impact of co-ops in
this nation is $653 billion and that co-ops pay the wages of
853,000 workers.
Electric and telecommunications co-ops helped bring
these vital services to rural America, and continue today to
make sure the lights stay on. Many utility co-ops are now
making major investments in renewable energy — such as
wind and solar power — and to expand the broadband service
so critical to the future of rural America.
USDA Rural Development, through its Rural Utilities
Service, provides low-interest loans to these rural co-op
utilities, which helps to partially offset the much higher costs
involved in providing service in sparsely populated areas
compared to densely populated cities. That hardly makes
them quasi-governmental entities. With any co-op — be it a
rural utility or farmer co-op, a credit union or housing co-op
— the ultimate power rests in the hands of the producers and
users. They elect the board members, and can replace them if
they don’t like the way the business is heading. Co-ops are
democracy in action.
Although there are dozens of different types of co-ops
operating in the United States, they all are based on the
philosophy of being operated solely for the benefit of the
member-owners of the business who use its services, not to
outside investors living in distant cities.
As Benjamin Franklin said at the signing of the
Declaration of Independence: “We must all hang together, or
assuredly we shall all hang separately.” Co-ops provide a
business vehicle that allows Americans to hang together.
(Franklin, by the way, knew this well, since he started what
may have been the first co-op in America, which provided
fire insurance.)
So let’s all dedicate ourselves this Co-op Month to taking
advantage of this unexpected windfall of publicity about coops
— even if it hasn’t always been accurate — by redoubling
our efforts to promote co-op education.
