Part 15

Thus co-operation occupies the middle ground between competition and state or municipal socialism. In its technical sense, however, it does not cover the whole of this ground: it does not cover associations which are primarily for social, provident, or religious purposes, but only those closely connected with the production of wealth. We speak of co-operative societies for agriculture, for manufacturing, for retail, or wholesale distribution, for building or house-owning, for raising capital and so forth; while the great Friendly Societies (q.v.), though a part of co-operation as a theory of life, are not part of the co-operative movement. The line is somewhat hard to draw, and consequently is drawn somewhat arbitrarily. Thus while a society for building, or for the collective ownership of houses, is counted a co-operative society, a Building Society (as we ordinarily understand the term), though it be purely mutual in its basis, is not so counted in Great Britain, but is in the United States (see BUILDING SOCIETIES).

Robert Owen.

For the early history of the co-operative movement we have to look chiefly to Great Britain, and British co-operation acknowledges as its founder Robert Owen (q.v.). In every age and every country the origins of co-operation may no doubt be traced, where men have helped one another in the creation of wealth and agreed as brothers as to its division. In England long before the days of Owen there was much co-operation of miners and fishermen which, though scarcely obligatory on the individuals taking part in it, was largely regulated by custom. Coming to more purely voluntary associations, co-operative workshops are recorded, retail co-operation was practised in Scotland from the middle of the 18th century, while in England shops not unlike co-operative stores, but without the democratic element, were in one or two instances set up by benevolent individuals. It does not seem, however, that there was any theory of co-operation until Owen in England, and almost simultaneously Fourier (q.v.) in France, formulated their gospels, not identical, yet having much in common. Of these two Owen and his teaching are by far the more important.

The end of the 18th and the beginning of the 19th centuries were the culminating days of the industrial revolution, when the old organization of domestic industry had given way before the factory system, and the population of the factory districts was suffering a martyrdom, with ruin of body and degradation of character, from unbridled competition, long hours, women's and children's labour, pauper apprenticeship, great fluctuations of trade and employment, dearness and adulteration of provisions, the truck system and insanitary homes. Owen, having himself become a great employer of labour, after starting as a draper's assistant, saw that this was in every sense waste, and that as it paid the manufacturer to have the best machinery and not to overdrive it, but to tend it well and keep it in the best repair, so it would pay him, and abundantly pay the nation, to have the human machines well cared for, not overworked, and kept in the best condition. The popular individualistic philosophy of that day taught that the good of society would be achieved by each individual seeking in his business relations the interest of himself and his family; but Owen maintained that the well-being of the social body could only be served if each individual made that his conscious aim. For this reason he and his disciples were called Socialists. He taught further that a man's character depended mainly upon the circumstances which influenced his life; he emphasized environment, and all but denied heredity. At New Lanark, from 1799, he carried out these ideas among the workers in the cotton mills of which he was managing partner.[1] "For twenty-nine years," he wrote, "we did without the necessity for magistrates or lawyers; without a single legal punishment; without any known poors' rate; without intemperance or religious animosities. We reduced the hours of labour, well educated all the children from infancy, greatly improved the condition of the adults, diminished their daily labour, paid interest on capital, and cleared upwards of £300,000 of profit." So wonderful were the results upon the population, that New Lanark became a show-place of world-wide renown, and was visited by many of the greatest and most exalted people of the period.

While thus using his own power Owen not only advocated legislation to limit the hours of factory labour, but appealed to the public authorities to establish industrial communities, where the poor might be set to work, and be managed paternally on the principles of New Lanark. So great was his repute, and so influential the royal and other personages who gave him their support, that this appeal might probably have been successful had not Owen, in reply to complaints as to his religious views--which were deistic--and that his system was not founded on religion, made a public attack upon all accepted religions.

Failing to get the required support from the Government and magistrates, he still sought it from wealthy believers in his teaching, and a number of "communities" (see COMMUNISM) were founded in England and Scotland, and in the United States. These were intended to be self-supporting, the land and other means of producing wealth being owned in common, and work and education being regulated on Owen's principles. Owen well knew that most of them lacked the large amount of capital necessary, but his hand was forced by enthusiastic followers, and even the most hopeful of the experiments, that of Queenwood in Hampshire (1839-1844), was made prematurely and failed.

His connexion with New Lanark also came to an end, not from any want of success, but through differences with some of his partners who objected to such matters as dancing, military drill for the children, and the wearing of kilts, but above all feared lest Owen's "infidelity" should undermine the people's faith.

Thus it might have seemed that Owen's life and fortune had been spent in vain, and resulted only in unsuccessful experiments; but this was far from being so. His teaching, and in particular his doctrines of circumstance, and of the conscious seeking after the social good, his belief in self-supporting communities, and his vision of a new moral and industrial world, had powerfully affected the working classes, indeed, all classes. Workmen in many parts of the country had formed groups with the ultimate object of founding self-supporting communities. If the government and the rich would not provide capital enough to start communities, the workers would start them themselves. Thus was the democratic basis given to co-operation. As a means they had been founding co-operative societies, which are sometimes called "union shops" to distinguish them from the later growth of societies of the Rochdale type. The members began by buying provisions wholesale and retailing them to themselves at current prices; the difference became capital, and as soon as possible one member was set to work to make boots and another clothes, and so forth, until ultimately the society should have capital enough to take land and form a community. Education also was prominent among their objects. These co-operative societies reached some 400 or 500 between 1828 and 1834, but the movement then collapsed. As the original enthusiasm died out, or members left the neighbourhood, or capital accumulated in the hands of the original shareholders, they almost all either failed or became private property. In those early days, moreover, the law gave no protection to the property of co-operative societies. This remained so until 1852, when the Christian Socialists (see SOCIALISM) among their many great services to the working classes secured such protection. In 1862 they secured also limited liability for the members.

Rochdale pioneers.

Before 1844 a co-operative society had already been formed and failed at Rochdale in Lancashire, yet some ardent spirits planned to form another. Twenty-eight poor men, flannel weavers and such like, got together a capital of £28 by twopenny and threepenny subscriptions, and in December 1844 opened in Toad Lane, Rochdale, a little shop from which, speaking broadly, the whole of British co-operation, and very much of that of other lands, has grown. Their objects were those of other co-operative societies of the time, including the ultimate aim of a self-supporting community. In this last they never succeeded, nor indeed did they attempt it; but they did succeed in vastly improving the position of millions of the working classes by enabling them to obtain their provisions cheap and pure, to avoid the millstone of debt, to save money, to pass from retail to wholesale trade, and from distribution to manufacturing, building and house-owning, ship-owning and banking; above all to educate themselves, and to live with an ideal.

The Rochdale Equitable Pioneers began their trading in the smallest way, the members taking turns to serve in the shop; yet where so many other Union shops had failed Rochdale succeeded, and it has steadily grown to an institution with some 14,000 members, doing a trade of £300,000, owning shops and workshops, a library and reading-rooms, making large profits, and devoting a substantial part of them to education and to charitable purposes. What was the reason of this difference? Chiefly it would seem a different method of dealing with the profits. Earlier "Stores" had divided these according to the capital contributed by each member, or else equally among the members: the Rochdale Pioneers determined that, after paying 5% interest on the share capital, all profit should be allotted to the purchasing members in proportion to their purchases, and be capitalized in the name of the member entitled, until his shares amounted to £5. Thus each member found it his interest to purchase at the store and to introduce new purchasers. The ownership of the store remained always with the purchasers, and each came under the magic influence of a little capital saved.

Growth of co-operative stores.

Not only did Rochdale store grow amazingly, but its example spread far and near. New stores were founded on the "Rochdale plan" and old stores adopted it; soon they were numbered by hundreds. In spite of many failures there were in 1906 more than fourteen hundred such stores in the United Kingdom, with nearly two and a quarter million members, over £33,000,000 capital, and sales exceeding £63,000,000 in the year. The number of societies does not increase of late years, the tendency being rather for established societies to open branches, but all the other figures increase rapidly from year to year.

These workmen's Co-operative Stores, or Distributive Societies, flourish chiefly in the north and midlands of England and in Scotland, but are found more or less all over the country. They, and practically all other British co-operative societies, are registered under the Industrial and Provident Societies Act, which constitutes them corporate bodies, with limited liability, and fixes £200 as the maximum that any member may hold in the share capital. Their government is democratic, based on one vote each, for man or woman; and their members or shareholders, and their committee-men or directors, are almost exclusively the more provident of the working classes, or belong to the class just above. Store societies are of various sizes, from the small village shop to the greatest of them all, the Leeds Society, with nearly 30,000 members, sales exceeding a million and a half sterling, and an elaborate organization of branches and manufacturing departments. Their method, the "Rochdale system," is as follows, subject to occasional variations. Membership is open to all who pay a shilling entrance fee and sign for a £1 share, which can be paid up out of profit. For the most part members may at any time withdraw their shares in cash at par. A record of each member's purchases is kept by means of metal tokens or otherwise, and at the end of each quarter, after paying a limited interest (never more than 5%, and in very many societies less) on shares, and, in some societies, paying a proportion of profit to the employees, the surplus is divided to the members in proportion to their purchases: non-members also usually receiving half dividends on theirs. Thus the members in effect obtain their necessaries at cost price. The dividend on members' purchases averages about 2s. 6d. in the £. In many successful societies even more is paid, but the average is falling. Where dividend is high, prices are often fixed above those current in the neighbourhood, so that the members, in addition to saving the retailer's profit, use their Society as a sort of savings bank, where they put away a halfpenny or so for every shilling they spend. In addition to retailing, a store often manufactures bread, clothes, boots and millinery, sometimes farms land, or grinds corn; usually for its own members only, but occasionally for sale to other societies also. Their productions in this way exceed £5,000,000 a year. They also invest large and increasing sums in building cottages, to let or sell to their members; and they lend still more largely to their members, to enable them to buy cottages.

Outwardly these stores may look like mere shops, but they are really much more. First, they are managed with a view not to a proprietor's profit, but to cheap and good commodities. Secondly they have done an immense work for thrift and the material prosperity of the working classes, and as teachers of business and self-government. But further, they have a distinct social and economic aim, namely, to correct the present inequalities of wealth, and substitute for the competitive system an industry controlled by all in the common interest, and distributing on principles of equity and reason, mutually agreed on, the wealth produced. With this view they acknowledge the duties of fair pay and good conditions for their own employees, and of not buying goods made under bad conditions. The best societies further set aside a small proportion of their profits for educational purposes, including concerts, social gatherings, classes, lectures, reading-rooms and libraries, and often make grants to causes with which they sympathize. Their members are prominent in local government affairs; co-operative candidates are occasionally run for town councils, and often talked of for parliament. Though the societies are non-political, and have refused to join the labour representation movement, they are usually centres of "progressive" ideas. There are of course many defects, and of their two million members a large, and many fear an increasing, proportion, attracted by the prosperity of the societies, think chiefly of what they themselves gain; but the government of the movement has, hitherto at least, been largely in the hands of men of ideas, who believe that stores are but a step to co-operative production, and on to the "co-operative commonwealth."

It is indeed only when we come to federations of co-operative societies, and above all to production, with its large number of employees, that the educational side of the movement and its power to promote industrial reform are most seen. The Co-operative Union, Limited, for instance, is a propagandist federation of all the chief co-operative societies in Great Britain, and some in Ireland. Its income of £10,000 a year is contributed by the Co-operative Societies. It looks after their legal and parliamentary interests, carries on much educational work by means of literature, lectures, classes, scholarships, summer meetings at the universities, and so on; organizes numerous local conferences for discussion, and once a year a great national co-operative congress, and exhibition of productions, in some chief centre of population. The Co-operative Wholesale Society, Limited, is a trading federation of the great majority of the English stores. Founded in 1863 on a small scale, it now counts its employees by thousands, its capital by millions, and its yearly sales by tens of millions. Besides its merchant trade, it manufactures to the value of £4,500,000, owning factories, warehouses and land in many districts. It imports largely, and runs its own steamships. It is also the bank of the co-operative societies, and the chief outlet for the always redundant capital of the well-established stores. The Scottish stores also have their Wholesale Society, not less important relatively. For many purposes these two are in partnership. In each of them the net profits are returned to the stores as a dividend on purchases, and thence to the whole body of members; but in the Scottish Wholesale a part is also paid to its employees as a dividend upon their wages. There are also a few local federations of stores, mostly for corn-milling and baking.

Co-partnership.

Strongly contrasting with this production by associations of consumers, or "consumers' production," is the co-partnership, or labour co-partnership, branch of co-operation. Its simplest form is an association of producers formed to carry on their own industry. Originally such societies were intended to consist solely of the workers employed; the ideal was the "self-governing workshop," introduced from France by the Christian Socialists of 1850; but membership is now open to the distributive societies, which are the chief customers, and usually, to all sympathizers. Shares are transferable, not withdrawable. Profits first pay the agreed "wages of capital," usually 5%, and of what remains the main part goes to the employees as a dividend on their wages, and to the customers as a dividend on their purchases. In well-established societies the dividend on wages averages about 1s. on the £. This is not usually paid in cash, but credited to the employees as share capital, whereby all may become members. Besides other producers' associations, more or less co-operative, there are over a hundred co-partnership societies at work in England, against a dozen or fifteen in 1883. They are engaged in boot-making, printing, building, weaving, clothing, wood-working, metal-working, and so on. Some of them are very small, while others have businesses of £50,000 a year or more, the average being about £10,000. The majority show fair, sometimes large profits. Each is governed by a committee, which is elected by the members and appoints the manager. A minority of them sell in the open, i.e. the non-co-operative, market, and a few sell largely for export.

Rival theories.

We constantly hear that co-operative production is a failure. There have no doubt been failures, especially of big experiments attempted among men totally unprepared. But many of the failures counted were not truly co-operative. At the present day consumers' production is successful beyond all question, while the net growth of producers' associations in the last twenty years has been marked both in number and importance. These two forms of production best illustrate the two rival theories which divide British co-operation, and between whose partisans the conflict has at times been sharp. The consumers' theory maintains that all profit on price is abstracted from the consumer, and must be returned to him; while to him should also belong all capital and control, subject to such regulations as the state and the trade unions enforce. This theory is fully exemplified in the English Wholesale Society, and in some of the smaller federations for production, which employ workmen, whether co-operators or not, for wages only, and admit no individual, but only co-operative societies, to membership. It is also exemplified by the great majority of the stores, though in their case the employee may become a member in his capacity as a consumer. The co-partnership theory, on the other hand, maintains that the workers actually employed in any industry, whether distributive or productive, should be partners with those who find the capital, and those who buy the produce, and should share with them the profit, responsibilities and control. The consumers' party contend that societies of producers make a profit out of the consumers, and thus are never truly co-operative, while as they multiply they must compete against each other. The co-partnership party answer that labour at least helps to make the profit, and that competition, as yet almost insignificant between their societies, can be avoided by federating them (a process long ago begun) for buying and selling in common, and for other common purposes, while leaving each the control and responsibility of its own internal affairs. They further advocate the eventual federation of the productive wing of co-operation with the distributive, for settling prices and all matters in which their interests might conflict. In this way they say the co-operative system may extend indefinitely without sacrificing either individual responsibility and freedom, or a general unity and control, so far as these are necessary to secure the common interest. On the other hand they hold that the opposing system tends more and more to centralization and bureaucracy, and divorces the individual workman from all personal interest in his work, and from any control over its conditions. They contend, moreover, and it is indeed admitted that, in spite of the great advantages which consumers' production has in its command of a market and of abundant capital, only a small part of industry can ever be carried on by associations of the persons who actually consume the produce. Outside this small part, therefore, voluntary co-operation is impossible except as some form of co-partnership.

On the working-out of these two principles depends the future of co-operation. The example of Scotland probably throws light on the problem. There co-operative production, amounting to some millions sterling, is nearly all carried on by federations of consumers' societies, including the Scottish Wholesale, which apply more or less successfully the co-partnership principle--i.e. their employees are admitted to share in profits, and may become members, whereby they are further admitted to share in capital and control. The type of organization hence resulting is very much the same as where a society of producers admits consumers' societies to membership, and sets aside a proportion of the profits to be returned to them as dividend upon their purchases. To this combined type, we have seen, English productive societies, started by producers, have come; and it would appear that those started by consumers must ultimately tend to it. However, in spite of honoured leaders of the early days, the consumers' party is at present greatly in the ascendant in English co-operation, and even in the Scottish federations it is almost strong enough to abolish co-partnership, and allow no one to share in capital, profit or control except in his capacity as a consumer.