The Local Economic Vehicle

Some Parameters

Jeff Coolidge

This is a layman's attempt to take a look at the legal commercial outlines of a range of cooperative modes of village life. The object is to help organize one's approach to developing a working model for cooperative activity.

The term "Local Economic Vehicle" could mean one or more "service cooperatives" such as we have in the U.S. for marketing certain ­ products or buying others. This sort of cooperative movement is fairly widespread in most countries and probably available to most ICA projects. It is largely a question of the village "plugging in" to the system and building awareness on the part of villagers.

At the other end of the spectrum you have the Israeli Kibbutz or collective, the ultimate in a cooperative community. The generic terms for the two extremes might be called Service Cooperatives and the Comprehensive Community Cooperative. (CCC)

The Israeli view appears to be that one must eventually go beyond the service cooperative for the following reasons:

1) To induce basic change

2) To prevent the rich poor gap

On the other hand the CCC is always resisted by the population so Israelis recommend caution and patience.

The Israeli models of the CCC are described briefly below.

1. Moshav Ovdim

This is the loosest and most individualistic of the Israeli CCC's. It is a community of individual small holders who each have equal land, water and other production assets. The Moshav controls all municipal and cooperative affairs, City Hall and the economy. (In Israel, most CCC land is owned by the state which leases it out on 50 or 99 year terms)

Each member pays $60 a month to the Moshav as tax (one example) and must sign his proportionate share of any debts incurred by the Moshav. Thus, the Moshav OVDIM corresponds to a limited partnership in U.S. business. The partners elect the management in the form of committees.

2. Moshav Shitufi

While similar to the Moshav OVDIM above, the Moshav Shitufi corresponds more closely to a stock company or corporation. All land, houses, machinery is owned by the Moshav and the members own an equal share of the Moshav. The Moshav owns and operates businesses, farm machinery, etc. Earning, after taxes, reserves, capital expenses are paid out in equal dividends to members. When members leave the Moshav, they are entitled to a return of capital, based on formula.

Both types of Moshavs are quite similar in their cooperative activities. They run community centers, buy and sell cooperatively, provide community health and education services. Membership is one man one vote and the membership meeting is the highest authority in all matters, including personal matters.

The differences arise in that in the Moshav OVDIM the individual family works its own plot of land and owns the buildings thereon. The family may even own its own tractor, though the Moshav will provide a pool of attachments, i.e., harrow, reaper, bailer, etc. which it rents out to the membership on an hourly basis.

A booklet is attached which outlines the basic charter and regulation of the Moshav Shitufi.

3. Kibbutz

There is also a document herewith which contains Kibbutz Society regulations. The Kibbutz is a commune in the purest sense except the family unit is still recognized. The guiding principle is from each according to his abilities to each according to his needs. As far as the state, or commercial code is concerned, there may be little distinction between the Kibbutz and the Moshav Shitufi. Both are corporate entities which can buy, sell, borrow, lend, operate businesses, contract for all manner of services, etc.

4. The Pre­Cooperative Village Society and the Moshav Olim.

These concepts are advanced by Dr. Yair Levi of Haifa University in Israel. The Moshav Olim does not appear in the regulations, but in Israel, institutions tend to develop in response to practical conditions. The Moshav Olim relates to settlements of traditional oriental societies as opposed to the more western and cosmopolitan Kibbuttsnif and Moshavorik. The Moshav Olim seem to become dysfunctional rather early on and are treated by rotating teams of experts who generally make things worse, which brings us to Dr. Levi's "Pre­cooperative Village Society."

According to Dr. Levi, there is a great danger in premature cooperative activity, particularly the purchase and handling of goods. Loss of control, theft, improper handling, etc. can cause misfortunes which poison village attitudes toward cooperative activities.

Thus one must first:

1) Change attitudes

2) Extend aptitudes

3) Slowly organize the cooperative

Dr. Levi recommends starting with a credit union, which is easy to control and the results can be easily observed by villagers. This approach appears to be similar to "service cooperatives" except the intent is eventually to integrate the parts into a whole, or a CCC.

5. Community Development Corporation (CDC)

The CDC could fit in with the "Service Cooperative"/Pre­cooperative approach. The CDC would be a corporation owned by the incorporated village organization or by individual villagers on an equal basis. The CDC would own and operate industries, buying and selling coops, machinery used by the community, the credit union, etc. The board of directors would be the economic committee of the incipient CCC.

The CDC could enter joint ventures, on behalf of the community, with individuals and companies providing financing, management, know­how, etc. Wealthiest individuals in the community could participate in this way, that is, by investing assets as an outside partner with the CDC. Through the CDC, the community and the individual members could share equally in all commercial results. When the CCC was formed, it could absorb the CDC.

6. Summary and Conclusion

Local law and custom will dominate any solution we seek, but we have enough data to construct a CCC as a legal entity out of any of the above models provided we add the relevant local laws to the mix. After that it depends on the Acceptance of local man, which in turn depends on the guilds, stakes, methodology and sensitivity of the catalysts.

The above models in Israel all depend on a hierarchical regional structure for viability. There are three national associations of Kibbutzim. Regional centers provide groups of settlements or villages with industrial centers, schools, hospitals, labor pools, expertise that the Israeli village needs but cannot support alone. This is a major issue for ICA projects whether we go the CCC route or not.

Finally, we have to be clear about the scope of the vehicle we are seeking. If it is purely economic, then we go the service cooperative route with a CDC. If we want to go beyond the economic then we adopt the Moshav, Kibbutz or similar CCC mode, after a pre­cooperative phase.