The coöperative association differs from the corporation or stock company in three essentials. First, it is democratic in its control; all true coöperative organizations employ the principle of "one man, one vote," the influence of each member of the association being equal as far as the legal control of its administration is concerned. The individual members and not the amount of stock owned controls the policy of the association. Coöperation is democracy applied to business. Second, the coöperative association is organized to secure more efficient service rather than to exact profits. This is a point upon which there is much misunderstanding upon the part of those starting coöperative enterprises and which requires further explanation. Third, the earnings or savings of the association (commonly thought of as "profits") are distributed among the members or patrons of the association _pro rata_ according to the volume of the business which they have transacted with the association, so that although its control is democratic its benefits accrue according to the amount of financial interest involved. There are certain other principles of business procedure which have been found essential to the successful operation of different kinds of coöperative associations, but these three--individual voting, service rather than profits, and pro-rating the earnings--are fundamental to all truly coöperative associations, and it is to this combination of business methods to which the term coöperation has now come to be applied in a technical sense.
Exclusive of associations formed for coöperation in the general sense of the term, i.e., for various purposes of farm operation as mentioned above, farmers' coöperative associations may be divided into three general groups: for buying, for selling, and for finance.
Coöperative buying has been most successfully developed by industrial workers in towns and cities and is commonly known as "consumers' coöperation." Starting with a few poverty-stricken workers who pooled their meager savings so that they could buy at wholesale and share in the profits of the retailer, the Rochdale system has grown until the wholesale coöperative societies of England and Scotland are probably the largest general merchandising corporations in the world, doing a business of approximately a billion dollars a year.