Cooperatives, Consumers'

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COOPERATIVES, CONSUMERS'. Cooperatives (co-ops) for consumers are groups of people who band together in order to create a service, or to save money through volume buying. Consumer co-ops may be a utility company such as telephone, electricity, or cable services, an insurance cooperative, a housing cooperative, or other types.

Formal cooperatives have certain common traits. Each member has one vote no matter how many stocks they own—one criterion that sets a cooperative apart from a corporation. Members can purchase commodities or services at reduced rates because volume buyers pay less. When there is money left after co-op expenses are paid at the end of the year, members receive the net proceeds. If a cooperative is new and has start-up expenses, or a disaster strikes and it takes unexpected capital to keep the systems running, or the board of directors makes poor decisions, dividends may not be paid to members. If a coop fails, its members are not financially obligated for more than the value they initially invested.

In 1844 the Rochdale Equitable Pioneers Society, a food buyers' co-op, began in England. The Society started with twenty-eight men who decided to pool their money in order to buy foods in quantity, thus achieving wholesale buying power. This co-op was a model for other food cooperatives throughout the world, including the American colonies. Present day health food stores most closely resemble the Rochdale cooperative.

Food, however, is not the only commodity handled in a consumer co-op; clothing, bookstores, and housing are among the other possibilities. Most cooperatives require people to join and only allow members to participate, but co-ops that do not require memberships also exist, and they encourage individuals to buy shares. Shareholders generally commit to volunteering in the cooperative to keep the costs down for the products.

The physical layout of the retail and service or production areas are often more open to the clientele in a co-op, which makes members feel that they are part of the business. In a cooperative that does repairs, such as a bicycle shop, tools are available to be loaned to members and classes are held to teach repair techniques. The coop thus helps to increase people's independence while at the same time underscoring the value of helping each other.

There are also co-ops for group health coverage and other insurance. The first fire insurance company was founded in 1736, in Charlestown, Massachusetts. However, a huge fire devastated the town and the company then closed. Benjamin Franklin met with more success when he promoted his plan for house fire insurance by organizing the Philadelphia Contributorship in 1752. This company was the first successful mutual insurer in the American colonies. He said mutual insurance was a matter in which "everyman might help another, without any disservice to himself," and this principle continues to guide companies that join together to form insurance cooperatives. There are also consumer-owned insurance co-ops that offer group health care. Health Maintenance Organizations (HMOs) are co-ops, and hospitals and clinics create co-ops for purchasing supplies. As in other co-ops, they can buy more items for their money when they buy in quantity.

Rural electric co-ops brought lights and power to rural areas of the United States. Rural co-ops operate over 50 percent of the distribution lines for electricity, and in 2002 they provided electricity for 26 million people. Telephone company co-ops also continue to be an integral part of modern life, especially in rural areas, though some urban areas have begun to establish co-ops as well in order to get away from monopolies.

Housing co-ops are somewhat different in the way they are organized and operated. In a condominium, residents own their individual housing units. However, in a housing co-op corporation, title to the dwelling is held by the corporation instead of individuals. Yet, the philosophy of a co-op is upheld in that the individuals have input into how the housing unit is operated. Since such a co-op does not exist to make a profit, but only to provide housing for owner-residents, costs are usually lower for these residents. Housing co-ops have a board of directors and membership meetings. Frequently they hire a manager to oversee the day-to-day work, and the manager answers to the board. In fact, most co-ops operate within this same framework, since individual members do not have the time or the expertise to conduct daily business within the co-op.


Buford, James A., Jr. When the Lights Came On: A History of Pioneer Rural Electric Cooperative. Montgomery, Ala.: River City, 2000.

Shapiro, Sylvia. The Co-op Bible: Everything You Need to Know about Co-ops and Condos: Getting in, Staying in, Surviving, Thriving. New York: St. Martin's, 1998.


See alsoCooperatives, Farmers' ; Cooperatives, Tobacco ; Health Maintenance Organizations .

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