Texte auf Englisch

When profits aren’t everything

On the contribution of Christian social reformers to the co-operative system – and how this has developed up to the present day.

Interviewer: Thomas Becker
Photos: Markus J. Feger

 

INGRID SCHMALE, born 1954, is a teacher and research fellow at the Department of Co-operative Studies at the University of Cologne. Her most recent publication is as co-editor of the book “Co-operatives as innovation. Co-operatives as a new form of organisation in the social economy” (pub. Springer 2017).

TRAUGOTT JÄHNICHEN, born 1959, is professor of Christian social teaching at the Protestant Theological Faculty at the Ruhr-University Bochum, and chair of the Board of Trustees of the Foundation for Social Protestantism.

Dr Schmale, were you surprised when the co-operative idea of Friedrich Wilhelm Raiffeisen and Hermann Schulze-Delitzsch was designated in 2016 as an Intangible World Cultural Heritage?

Ingrid Schmale: Yes, absolutely. In the preliminary stages I would never have really thought it was possible. But after seeing how intensively the Raiffeisen and Schulze-Delitzsch Societies had been working on it, I really got caught up in the enthusiasm when the decision was made in Addis Ababa. By chance it so happened that the following day we were celebrating the 90th anniversary of the establishment of our Department of Co-operative Studies in Cologne. So the decision came at the perfect time and we could announce the result with a degree of pride.

Traugott Jähnichen:  I had also not initially reckoned with success. But of course it can be seen that the co-operative movements in Germany and Europe have liberated many people from hardship and poverty. Today in the global context it is immensely important particularly in countries where there is international development co-operation, such as in Africa, Asia and South America. Those co-operatives, which are at least implicitly based on the German co-operative movement, offer help for self-help, so that the poorest among the poor can stand on their own feet financially.  The challenges to be found there are reminiscent of the bad situation in Germany in the middle of the 19th century when Raiffeisen developed his co-operatives.  His ideas are more relevant than ever.

What is unique about Raiffeisen in a historical context?

Schmale: He enabled people to help themselves. He created a framework of basic conditions which were necessary to overcome the difficult situation that prevailed in country areas in the 19th century.  It was the end of the feudal period that was accompanied by the liberation of the peasants. Most of the peasant farmers had to pay compensation to the landowners in order to buy their freedom out of bonded serfdom. And they had to buy from them the land that they wanted to cultivate.

Jähnichen: In that way many peasant farmers fell into debt. In addition, if the harvest failed then that could mean financial ruin. In order to get hold of new seeds or tools, the farmers had to get even further into debt and they often paid high interest rates. Raiffeisen wanted to release them from this slavery to interest, which was in part more radical than the rule of the landowners. For that reason it was important to establish co-operative banks and trustee savings accounts which granted relatively favourable credit terms to the farmers. In that way there was a chance, even after failed harvests, of being able to buy seeds or young animals and to cultivate their fields. Ensuring that small farmers had access to capital markets was an ingenious and innovative idea.

Schmale: And the fact that Raiffeisen ran this so systematically was the reason for his success. He was certainly not unique in his conviction that as a Christian he should do something for the poorer people in society. The idea of co-operatives was already in the air at the time and had been ignited across Europe. In England the Rochdale Pioneers had founded co-operatives and in France these were also springing up. The Protestant reformer Viktor Aimé Huber then took up the idea from England and France and was the first to spread it in Germany. Raiffeisen in Westerwald and Schulze-Delitzsch in Saxony had the organisational ability to implement such ideas.

Jähnichen: The co-operative system is based on trying to find answers to social questions. Originating in a crisis of industrialisation and a crisis in the system for social protection, there came about in the 19th century a profound social upheaval. And there were many middle-class Christian social reformers who became active out of a sense of responsibility. Mention can be made of Johann Hinrich Wichern und Theodor Fliedner, who tried to relieve hardship through social assistance. Both pursued a classic charitable approach to social assistance. Reformers like Raiffeisen, Huber and Schulze-Delitzsch offered help to enable self-help. Their starting point was that those affected just needed an impetus to get themselves organised and to manage their finances in solidarity with others. The core of the co-operative idea is to consolidate thinking about co-operation and to guide people into working together in solidarity, so that they represent their interests in common.

„For Raiffeisen, the individual was always part of the community” says Traugott Jähnichen

Raiffeisen and Schulze-Delitzsch represented very different approaches. How can these be characterised?

Jähnichen: Schulze-Delitzsch understood co-operatives mainly as instrumental – meaning that it only makes sense when people get together and benefit from their co-operation. Thus for him the individual is the main focus, whose interests should be furthered in economic terms. Raiffeisen on the other hand thought of the village community in a more traditional way. For him, the individual was always part of the community. Behind this thinking was a kind of concept of the body of Christ: for Raiffeisen the body of Christ was the collective body, the overriding principle. Co-operatives should serve the purpose of stabilising and strengthening this. That is Raiffeisen’s fundamental idea. He thought of this as focussing on the community in a traditional Christian way.  The approach of Schulze-Delitzsch also had a Christian background. But he was more of a liberal thinker rooted in the Lutheran tradition.

Schmale: In comparison to Schulze-Delitzsch, Raiffeisen strongly emphasised the common land principle, whereby the property of the co-operative belongs not to the individual but to the community. His intention was that the co-operatives should establish an endowment fund, into which the profits of the co-operative would flow. But these profits should then be used for the benefit of the local community, especially the poor and the weak. Furthermore, profits from the endowment fund should remain within the co-operative body, in order to increase the equity capital of the bank. Raiffeisen did not envisage any distribution of profits to members, they received no dividends nor a share of the profits in any other way. Schulze-Delitzsch saw it quite differently: the members of a co-operative should share in the profits through dividend payments. The arguments over this question form one aspect of the so-called systems dispute between Raiffeisen and Schulze-Delitzsch in the 19th century.

Jähnichen: It must also be said that Raiffeisen also emphasised Christian communal life because it corresponded to his own social background experience in Westerwald. In Central Germany on the other hand, where Schulze-Delitzsch worked, a certain degree of industrialisation and indeed of secularisation had come about. He wanted everyone to be included, and so his co-operatives were not based on a decisively Christian concept. For Schulze-Delitzsch this was more down-to-earth and more modern; for him it was a matter of being able to integrate as many as possible on the basis of economic advantage and interest. Behind this lay the assumption that if each individual in the community was doing well, then the whole community was also doing well.

Schmale: Without this rational focus on the individual, typified by Schulze-Delitzsch, the co-operative system would probably not have been so successful in the long run. Schulze-Delitzsch drafted the law on co-operatives which came into force in Prussia in 1867 and with this specified the direction which would be the lead factor in the further development of co-operatives.  In this respect, Raiffeissen was on the “losing side” with his concept of the characteristics of co-operatives. But in their constitutions the members still have the power to bring about their own concept of a co-operative in the Raiffeisen sense.  So they could also make provision that the co-operative’s profits are not distributed, but are directed back into the development of community life.

That sounds almost socialist on the part of Raiffeisen. Do the ideas of Karl Marx come into play here, noting that he was born in the same year in Trier, only 200 Kilometres away?

Schmale: Raiffeisen and Marx are worlds apart. For Raiffeisen socialists and communists belonged to a “party of revolution”. Raiffeisen himself was a loyal monarchist and as mayor he was in the service of the Prussian government, against which he never rebelled in a seditious way – other than occasionally expressing defiant comments on administrative provision with regard to the poor and weak. For him the state was a kind of God-given order, which had to be preserved, albeit with the help of some reform. It is therefore obvious that in socialists and communists he saw a danger for the state.

Jähnichen: It also has to be recognised that in the middle of the 19th century there was a general unease in relation to liberal individual capitalism.  This unease was fed not just by socialist and communist ideals but also came from conservative Christian and radical liberal reasoning. This led to a process of fermentation in about 1850.  Co-operative impulses were partly seen as socialist. But it was a different kind of socialism from what we understand today, without the political and revolutionary perspective. Raiffeisen’s attention was principally directed against the credit lenders and financiers who demanded extortionate interest. For him these were the villains, who brought farmers into destitution and misery. He saw them as the expression of a capitalism that he had criticised in his writings.

If we look at the present: What has come out of Raiffeisen’s ideals – for example in the co-operative credit and banking sector?

Schmale: That is currently the largest co-operative sector in Germany, with 17 million members. For a long time it looked as if co-operative banks were on the way to distancing themselves from their origins. But since the financial crisis of 2007/08 and the international year of co-operatives, called by the United Nations in 2012, my view is that there has been a re-think. Since then many management boards have re-emphasised their co-operative nature and have reminded themselves of their spiritual roots.

Jähnichen: Before the financial crisis there were strong pressures to go along with the promises of high returns made by other banks, which involved radical risks that the co-operative banks were not prepared to take. So they were a stabilising element in the credit economy. Currently I see as problematic the fact that many local branches are being closed. Many members, especially in rural areas, experience this withdrawal from the front line as a contradiction of the co-operative idea.

Schmale: In many villages the closure of a bank branch is often the final touch of a collapsing infrastructure.  This means in part that provision is no longer guaranteed.

Jähnichen: This means that co-operatives maintain their own ideals in the face of economic efficiency.

Does that also apply to commercial co-operatives?

Schmale: Partly, yes. Let’s take a look at the so-called incorporated co-operatives, which include large business concerns such as Rewe or Edeka. In each case their core business consists of co-operatives, in which individual shopkeepers have come together in order to buy in bulk. At the time these co-operatives were dependent on their members to specify the business policy. But today the momentum operating within the integrated co-operatives is decided more by the business headquarters, which don’t necessarily take note of the local or regional characteristics. There is certainly a need to draw attention to the restriction that for some years now regional products must be clearly and visibly presented among the product ranges on offer to customers.

Is the concept of participation no longer actively lived out?

Schmale: In the case of Rewe it is the case that the co-operatives – and there are lots of them – are still active and that the members have voting rights. But with one exception they no longer operate a common merchandising business which was previously their remit. That is now integrated into the central headquarters.

“Until recently co-operatives were regarded as old-fashioned and obsolete” says Ingrid Schmale. “Today we are well aware of the advantages of co-operative forms of organisation.”

Is the organisational structure of the co-operatives maintained because of its good reputation?

Schmale: No, I think that the reputation plays a very subsidiary role, because until recently co-operatives were regarded as old fashioned and obsolete.  Today we are well aware of the advantages of co-operative forms of organisation. One example that could be given is that a takeover by another concern can only be made it all the members agree. So Rewe or Edeka could not be taken over by capital investors without the agreement of the members, which used to be the general case a few years ago.

Let’s take a look at the housing sector, in which a number of co-operatives are active. In large cities apartments and houses are partly being auctioned off in order to achieve the highest possible profit for individual members.  Have they abandoned the ideal of orientation to the common good?

Jähnichen: Keeping an eye primarily on the individual interests of the co-operative members reminds us of the approach of Schulze-Delitzsch. Support of their economic interests was his primary aim. Raiffeisen on the other hand would have had a problem with auctions selling to the highest bidders and preferred to organise sales according to need. But how can that be sustained today? At the time of Raiffeisen life and the markets were organised on an easily understandable and small-scale level. Things are very different today – and this is a problem for co-operatives.

Is market logic predominant?

Schmale: Partly, indeed, as is demonstrated by plenty of examples. But there are a good many co-operatives which are pro-active in the immediate environment where they operate, and in addition there are those for whom the public benefit is a fundamental principle. These are co-operatives that work for the good of a particular town district, renting out apartments according to need, and whose profits, if not used for the development of the co-operative on behalf of its members, are invested in benevolent or cultural purposes. There are also many co-operative banks which ask what is lacking in their region and what is needed to make it worth living in the towns and villages. The VR-Bank Nordeifel for example has worked alongside many new co-operatives when they were being founded and indeed supported them. Amongst these are co-operatives bringing different generations together, a family co-operative, an orchard co-operative and a guesthouse/restaurant co-operative, as well as several school co-operatives and a village shop.

How widespread is the principle of co-operatives in the sphere of the church and diaconal work?

Jähnichen: Looking at this worldwide it is strongly established, especially in development co-operation.  Here we can for example of point to Oikocredit, a co-operative founded by the World Council of Churches which grants credit in countries in the Southern hemisphere. In all of these there is an advantage in the co-operative marketing of their products. Among those active in this sector are for example the Fair-Trade marketing association Gepa. The Protestant agency Bread for the World (Brot für die Welt)  also supports local co-operatives and grants micro-credit.

And in Germany?

Jähnichen: The Bank for Church and Diaconia (KD Bank) is active in the financial sector as a registered co-operative company. In addition there are individual examples of the participation of local churches in energy co-operatives. But in general it has to be noted that there is at the present time a gap emerging in relation to the overlaps between church, diaconal social work and co-operatives. I think that this is related to the development of the welfare state in the 1960s and above all the 1970s. Since then the church and the diaconal services have been service providers for the state. This has had more to do with social assistance than with self-help.

Dr. Schmale, are you surprised that at present the church and the diaconal service is less involved in the co-operative system?

Schmale: No. I think this is because for decades the co-operative societies did not regard the social or cultural aims set out by newly founded co-operatives as economically sustainable, and favoured other legal structures for co-operative projects which are more related to a social economy. This only changed in 2006, when the law relating to co-operatives was amended in Germany under pressure from EU legislation.  This included the clause that co-operatives are able to promote the social and cultural interest of the members alongside their economic interests. For this reason co-operative societies are part of a trend whereby those who offer social services join forces to organise the care and support of children or those in need of care. Many co-operatives also organise workshops for people with disabilities.  I can see a lot of potential for church and diaconal work here.

Jähnichen: Perhaps the Raiffeisen anniversary reminds us that we should find ways of rediscovering co-operatives. We are seeing changing needs arising in respect of financial and economic crises, of housing shortages in towns, of the energy revolution, of bottlenecks in the care system and the collapse of rural infrastructures.  In this I see new points of reference for church and diaconal work.

Conversation between the two specialists on the co-operative movement Professor Traugott Jähnichen and Dr Ingrid Schmale in the Theological Library of the Ruhr University in Bochum.

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