Lessons for cooperatives

I N the middle of the 20th century, when the future economic order of the country was under discussion, it used to be said: “Cooperation has failed; but cooperation must succeed.”

The book under review is an account of a cooperative society that was founded in the late 1920s and is still not only active but has made a deep impact on the construction sector in Kerala, and may, therefore, have lessons for cooperatives elsewhere, too.

In Kerala, the Uralungal Labour Contract Cooperative Society (ULCCS) is a well-known institution. It was founded in 1924, but it took a while for it to get its first contract, in 1927-28, which had a turnover of Rs.925. In 2016, its turnover was over Rs.260 crore. The first contracts were for laying small local roads. One of its latest projects is the establishment of a nearly 70-acre IT Park in Kozhikode in collaboration with the Government of Kerala. However, even with such perceptible changes, the society is still owned and administered by workers. That is the significance of the ULCCS.

Uralungal is a small village in the Malabar region, which was part of British India’s Madras Presidency in the early part of the 20th century. Even during the 19th century, Malabar had a large number of cooperative societies, largely under the control of the “upper” castes and landlords. According to the authors, “caste norms and practices permeated every aspect of public and private life, deeply entrenching a system of dominance and control”. The upper castes dominated social relations; the landlords the economic relations; and the feudal chieftains the political relations.

At the same time, Malabar was also noted for nationalist sentiments and social movements. The starting of a number of newspapers contributed to new forms of popular awakening. Among the social movements, the most prominent was the Sree Narayana Dharma Paripalana Yogam (SNDP) in the early part of the 20th century, working for an awakening of the landless and socially oppressed lower castes, although it was largely confined to Travancore. However, it had its resonance in Malabar when ideas of justice and equality found champions among the local leaders.

The work of Christian missionaries resulted in an increase in literacy levels, and factories sponsored and set up by the missionaries gave workers a sense of discipline. The emergence of the Communist Party in Malabar brought about a radical ethos, too.

It was against such a background that the ULCCS was started in 1924 as the first labour contract cooperative society. Its objectives were stated clearly: “The object of the Society shall be: to promote the economic interest of the labourers of the Society and to find suitable and profitable employment for them by obtaining contracts in government, public and private bodies or individuals, and by executing such contracts through or with the help of the members and to encourage thrift, self-help and cooperation among the members.” More specifically, the objective was to bypass the intermediary profit-seeking contractors in public work projects.

Democratic set-up

The society started with 10 founding members each with a single share. Six more members were added subsequently, and soon more members were admitted; by 2016, the society’s membership exceeded 2,000.

The membership was classified into different categories as and when it was found necessary. All the members attend the general body meeting, which makes major decisions such as the election of its five-member board of directors. They also participate in the day-to-day workplace discussions at the site. Every night, site leaders (members of the board of directors) would meet and collectively review the day’s work at all sites. The set-up, thus, has been exceptionally democratic.

In the early stages, the society, with its limited experience, concentrated in bidding for maintenance works in and around Uralungal. Even in getting contract for such works, it faced stiff competition from contractors who had the necessary contacts with officials. The only strategy that the society adopted then was to under-quote its tenders. However, as its work was satisfactory, its relationship with the local authorities improved and more government departments started using its services. Soon, the Public Works Department recognised the society’s works.

With contracts increasing, a major decision that the society made was to move from informal finance to institutional finance partly because the government paid the contractors only after the work was completed. Also, the construction activity required substantial working capital. The society, therefore, bought shares in the Malabar Central Cooperative Bank, which permitted it to take loans from the bank. The society also took loans from community members who were sympathetic to its cause.

Another method that it adopted was to have different “classes” of membership. The original members with share capitals were designated as “A Class” members. The government’s shares were designated as “B Class”. A “C Class” was added with only one share per member. The society was authorised to receive fixed deposits from the public and these deposit holders were treated as “D Class” members.

In the post-Independence period, the State government played a proactive role to encourage the cooperative ethos, which included direct financial support and various concessions and preferences to cooperatives while awarding public works. The E.M.S. Namboodiripad Ministry, in the late 1950s, set the pattern in this regard; subsequent governments followed the pattern. More recently, the Left Democratic Front government’s People’s Plan Campaign for Democratic Decentralisation gave additional impetus to cooperatives, the ULCCS in particular.

A rather intriguing problem that the society faced was shortage of labour. This was partly because of the expansion of its work, but largely because migration of workers from Kerala to the Gulf region and the withdrawal of the new generation of educated youth from construction work. By the beginning of the 21st century, the ULCCS was compelled to employ migrant workers from northern India. This led to the formation of “C Class” members largely consisting of migrant workers.

Response to changes

The society also had to respond to the rapid and substantial technological changes taking place in the construction industry, especially road construction. By the end of the 1990s, new standards were adopted in the construction of national highways. This meant introduction of new equipment, which led to drastic reduction in the number of workers required per kilometre of road (from over 600 to less than 400) and, more importantly, a more than doubling of fixed capital per worker. As a consequence, the society had to bring in a group of engineers and technicians into its membership rolls.

The history of the ULCCS, thus, is one of constant adjustment to changing circumstances, always keeping in mind the economic uplift and welfare of its members. Chapter 8 provides a detailed account of the changing socio-economic conditions of the workers.

According to the authors, “deep political commitment to egalitarianism, workers welfare and social progress without ever displaying narrow political party sectarianism” accounts for the success of the society. A broader question for consideration, therefore, is whether the success of the ULCCS can be emulated in other spheres. Its history yields at least two clues that can provide the answer to that question. The first is that the success of a cooperative depends on the extent to which its members take their responsibility seriously.

Cooperatives are not unfamiliar organisations, particularly in the banking sector as also in the manufacturing and agricultural sectors. What usually happens is that because the members largely become “sleeping partners” (as in the case of limited liability companies) the promoters take on themselves the task of running the organisation: where they take its objectives seriously, it works satisfactorily. However, there are immense possibilities of misuse and corruption, and far too often, that is the path cooperatives take.

The second is that cooperatives where workers take the lead to start and run the organisation are rare indeed. But what the history of the ULCCS shows is that it can be done. Indeed, even within the larger capitalist social order there is much scope for workers’ cooperatives. The thrust on decentralised economic decision-making and activity that the panchayati raj legislations initiated can be used to have a variety of local cooperatives in which workers can play decisive roles thereby becoming “within the old form the first sprouts of the new” as Marx famously stated.

The authors of the volume deserve special thanks for providing a detailed account of a pioneering and successful organisation that needs to be replicated in large numbers.