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Earlier this week the Los Angeles Times reported that over 100,000 cooperatives have been formed in Venezuela in the last year [2], forming “the centerpiece of President Hugo Chavez's new socialist model to create jobs and redistribute this oil-rich country's wealth.” By providing tax exemptions and interest free loans, as well as hundreds of millions of dollars in subsidies from oil and tax revenue, the Venezuelan government has given “groups and existing companies” all the reason in the world to form cooperatives. And while cooperatives have done much to alleviate poverty and redistribute wealth, a remarkable feet in this economically stratified petrocracy, I remain highly suspicious of the project. What it comes down to is that I don’t entirely trust Chavez. Olly Millan, Chavez’s minister of popular economy, has fought off allegations that the cooperative program is a top-down, soviet-style operation, explaining that [3], “The state is a non-invasive facilitator.” It provides money to the cooperatives, Millan says, but once the cooperatives are fully functional, private mangers, not government bureaucrats, make business decisions. While this is a relief, I am still a bit incredulous, especially because the movement is so heavily dependent on oil, a finite resource disappearing before our very eyes. So I am inclined to think that Venezuela is not the best place, after all, for examining successful cooperative models. Perhaps a better, or at least a less controversial, place is India, where cooperative success stories abound.

As in Venezuela, India’s cooperative movement took off thanks to a helpful nudge from the government. In1970 India introduced Operation Flood [4], a program to create a nation wide milk grid by tapping into the latent power of India’s dairy farmers. But because these farmers were scattered throughout the country, often in areas far from major cities, a serious logistical problem would need to be worked out. By establishing an extensive system of 70,000 cooperatives, 170 district dairy unions, and 25 state level federations, the government had found an answer. According to Monica Raina of the United Nations Development Program [5], “A milk producer becomes a member by buying a share of the co-operative after agreeing to sell milk only to it. Members elect a managing committee headed by a chairperson responsible for recruitment of staff in charge of day-to-day operations.” In this way, cooperatives function as democratic enterprises that represent the will of the producers.

The Amul Dairy Cooperative [6], which had been around since 1946, was integrated into this system, helping transform India into one of the world’s largest milk producing countries. Dr. Verghese Kurien, who founded Amul, has been profiled on Ashoka’s changemakers website [6]. Here is what they have to say about his organization:

Amul Dairy has organized over 10,000 village cooperatives, designed and implemented multiple interventions along the value chain. Together these cooperatives bring more than 10 million liters of milk to market daily, which makes them the leading player in the Indian milk industry. For many of India's rural poor, daily milk sales from the few cows they own is an essential part of their income. Yet the entire process from taking the milk to a market to selling it and collecting payments is fraught with inefficiency and unfairness. Amul Dairy has transformed the process for millions of small farmers by using an automatic, computerized collection system which reduces the time for weighing, quality testing and payment processing from a few hours with payment days later, to five minutes and immediate payment. Each day, milk is collected no more than 10 miles from the farmer, with this nationwide, decentralized, collection process. Amul developed a computerized quality testing machine, which makes the process transparent and fair to the farmer, and buys exclusively from women—a decision which has increased the status of the women, while developing a positive brand image for India's largest food products business.

As the case of Amul shows, cooperatives can be an integral part of economic growth in developing nations. It is also true that government can be an important catalyst, setting policies that integrate small producers into a more expansive economic system. But while government has the power to set responsible policies for poverty alleviation and enterprise development, it also has the power to introduce self-serving policies that are financially unsustainable. This, I fear, is happening in Venezuela.