Part 13

I refer, of course, to coöperation in business. By this term, I mean the growth of coöperative societies in which individuals are associated for mutual benefits and mutual profit. The ideal society is one in which the benefits and profits are distributed equitably among the members in proportion to their respective interests.

Coöperation is little understood by the great majority of our citizens; the full measure of its possibilities is comprehended by comparatively few. Because there have been many and conspicuous failures, and because abuses have marked the administration of some so-called coöperative societies, the average citizen is disposed to regard coöperation as an impractical dream, and in consequence, the really excellent progress is being made in the face of distrust that should be removed.

A knowledge of the facts will dispel this impression. Coöperation is a demonstrated success. The movement is a world movement. Coöperative societies are doing business successfully in every civilized country on earth. In this country they are doing business in almost every state. Everywhere the coöperative society, properly conducted, contributes to the material welfare of its members; in most places it is an important factor in social and moral advancement.

The modern coöperative movement commenced less than a century ago and began to assume importance about 1840. The earliest beginnings of coöperative business enterprises as we know them were the establishment of a little store at Rochdale, England, in 1844, and the founding of a coöperative credit society in Germany in 1849. The pioneer in agricultural coöperation was the rural credit society of Germany, the first of which was organized in 1862.

I mention these dates because they were the starting points from which has grown, in the comparatively brief period of sixty-five years, a vast web of coöperative enterprises encircling the earth.

SMALL BEGINNINGS LEAD TO LARGE SUCCESSES.

Each of the movements began in the smallest way. The German credit societies, both rural and urban, were founded for the purpose of providing credit to men who had no security to offer beyond their collective honesty, industry and business ability. The purpose was to help the very poor, and the success attained is attested by the comparative prosperity of German artisans and farmers, and by the present vast extent of the coöperative banking system. The Rochdale society was organized by ten poor weavers with a cash capital of twenty-eight pounds sterling, and from it has grown the great system of coöperative distribution of Great Britain.

THE COÖPERATIVE BANKS OF EUROPE.

The coöperative credit society, or bank, is the most common form of coöperation on the continent of Europe. Following the success of the system in Germany, it has been introduced, in varying forms and with varying degrees of success, in nearly all of the countries of continental Europe, rural banks usually preponderating in numbers and in importance. There are coöperative rural banks in Italy, France, Russia, Switzerland, Belgium, Holland, Austria and the Balkan states, also in Ireland, India and Japan. They have been introduced into Canada, and one such bank has recently been established in the United States.

Mr. Henry W. Wolff, in “People’s Banks,” says, “The year 1849 saw opened two vastly different roads to wealth—the California gold fields and the principles of coöperative banking.”

The advantages of the coöperative bank lie in the fact that it is operated in the interest of the borrowers and its sole purpose is to provide cheap credit. The members are the managers, the borrowers and the recipients of the profits.

It is estimated by competent authority that there are forty thousand of these banks in existence, with a total of more than three million members and assets worth more than a billion dollars.

In Germany more than one-half of the independent agriculturists are members of these banks.

Altogether there are 24,000 coöperative agricultural societies in Germany, of which about eighty per cent are federated in one great organization, and all of which are closely associated with the rural coöperative banks to which they owe their origin.

THE ROCHDALE SOCIETY OF ENGLAND.

The society formed at Rochdale, England, was wholly different from the credit organizations of Germany, which it preceded. Its purpose was not to provide credit, but to furnish the necessaries of life at low cost. Unlike the German societies, which were started by philanthropists for the benefit of the poor, the Rochdale society was started by the poor themselves. The mite of capital employed at the outset was secured by saving of two pence weekly from a starvation wage. Even this small saving meant sacrifice to the Rochdale pioneers, but it paid, for out of it has grown a great system that provides the British workman of today with all he requires at wholesale and manufacturer’s prices.

LARGEST BUSINESS IN THE WORLD.

The Coöperative Wholesale Societies Limited, of London, England, is said to be the largest business concern in the world. In 1908 it did a business of 570 million dollars. It is the central federation of the coöperative retail associations, one of which is in almost every village and town in England. It is a producer, manufacturer and shipper, as well as merchant. It owns plantations in various parts of the world; it sails its own ships; its chain of purchasing depots encircles the globe; it manufactures almost every article of household use and supplies the wants of more than eight million people. It is purely coöperative, all of its profits being distributed among the consumers in proportion to their purchases.

We of America pride ourselves on the giant enterprises on this side of the Atlantic. Even while we condemn the systems which have made them possible, we marvel at the genius of the captains of industry and finance who have built them. Yet here is a concern, said to do a business four times greater than the Steel Trust, which is without a captain of industry, a great financier or a merchant prince. It is a product of a system, one of the best features of which is that it does not concentrate great wealth in the hands of a few.

WHERE COÖPERATION IS A NATIONAL TRAIT.

Agricultural coöperation finds its most complete development in Denmark. Almost every Danish farmer is a member of one or more coöperative societies. Coöperation is almost a national trait. So general is the use of coöperative methods in Denmark that some one has said when a Dane wishes to buy or sell anything his first impulse is to form a society to do it.

Yet coöperation is of comparatively recent growth in Denmark. There have been coöperative stores since 1866, but it was not until 1881 that the first coöperative dairy was established, while bacon curing and egg societies date from 1887 and 1895, respectively.

There are more than a thousand coöperative dairies in Denmark; there are five hundred egg societies, and numerous other coöperative producing and selling price associations. Eighty-three per cent of the cows milked in 1909 were in coöperative dairies; 66 per cent of the bacon was cured in coöperative factories.

The coöperative societies are thoroughly organized into federations, and the whole business of production and sale is systematized. The federations exercise the closest supervision over production. High standards of excellence are required and long lists of rules are rigidly enforced. A bad egg is occasion for a fine in a Danish egg society—and there are no bad eggs in Denmark.

In the twenty-five years from 1881 to 1906, Danish exports increased from $11,840,000 to $77,800,000. Behind these figures is a story of a nation’s progress from poverty to prosperity, a progress in which coöperation has been the principal and dominating factor.

THE COÖPERATIVE PRINCIPLE AMPLY DEMONSTRATED.

To tell, even in merest outline, of the successful coöperative movements of Europe would require more time than is at my disposal. I have cited these because they are the most conspicuous and far-reaching, and because they afford three wholly separate and distinct and entirely different demonstrations of the correctness of the coöperative principle. Coöperation in Europe has been in most cases the resort of dire necessity. It does not follow, however, that coöperation can be successful only under circumstances of poverty and want. If it will raise men from poverty to a competence, it will add to the prosperity of the already prosperous.

RISE OF COÖPERATION IN AMERICA.

The coöperative movement in this country began to assume importance about 1850. Prior to this time there had been many associations for the advancement of various interests, but these were, as a rule, educational in purpose. Real progress in business coöperation began after the close of the Civil War, and may best be described as a series of great movements in which the farmers were usually the principal actors. These culminated in the Grange movement of the early seventies in which millions of farmers, united in a great national society, undertook to revolutionize the existing economic system by taking over to themselves the functions of middleman, merchant, baker and manufacturer, and to form a great agricultural trust that would dictate the price of farm products and combat growing railroad and other monopolies.

THE GREATEST REVOLT IN HISTORY.

This was probably the greatest revolt of farmers in the history of the world. It is simply astounding to read of the enterprises, colossal in the aggregate, that were launched. Millions were invested in banks, stores, warehouses, implement and other factories, railroads and selling agencies, nearly all of which collapsed within a few years leaving only experience and deficits behind. Of those that survived, the greater part soon adopted the methods, aims and purposes of ordinary corporations. Here and there, however, a coöperative enterprise continued to live, and some of these are doing business to this day.

Following the Grange movement came a number of state, interstate, and national organizations, which grew steadily more political in their aims until they culminated in the Farmers’ Alliance and People’s Party. The adoption of the main planks of these by then older political organizations marked the close of an epoch in agricultural agitation and opened the way for a more strictly economic development of the coöperative idea.

THE FIRST GUN IN A GREAT FIGHT.

While the great movements of the twenty-year period between 1870 and 1890 did not accomplish all that was expected of them, they did accomplish much. They were the pioneers in organized opposition to the growth of monopoly in this country. The organization of the Grange was the firing of the first big gun in the fight against special privilege, a fight which will go on until equal privilege prevails.

The Grange has never ceased to be an active factor in agricultural affairs. It has been a principal agent in the development of agricultural education and in the improvement of agricultural practice, a strong local force in country life, and a constant factor in the later growth of coöperative endeavor.

PROGRESS OF PAST TWENTY YEARS.

Since the period of great organizations, the coöperative movement has attracted less attention, but has accomplished more in the world of business. The results are manifested principally in three classes of coöperative enterprise, stores, marketing associations, building and loan associations. Other forms of these societies that are making progress include industrial plants, supply societies and insurance associations. The coöperative credit society that has attained such proportions in Europe is practically unknown here, but there seems to be an excellent field for it, especially in the South.

In all branches of coöperative activity in this country there is a lamentable lack of coördination. The stores are as a rule isolated from each other or associated in small groups, and they lose the advantage gained by the British societies from the concentration of their wholesale business. The marketing associations are for the most part separate, although there has been some movement toward federation in certain lines.

MOVING ALONG RIGHT LINES.

While federation would, in most cases, work to mutual advantage if well managed, the fact that such federations are rare does not argue against the associations or the movement of which they are a part. On the contrary, it is to the advantage of the coöperative movement that it is developing for the most part in small units, each of which must learn to stand on its own bottom. Federation, with its great advantages, will come when coöperation in this country is ripe for it.

According to a recent bulletin of the International Institute of Agriculture, this country leads all others in coöperative marketing. Coöperative dairies exist in every state where dairying is an important industry; there are six hundred in Minnesota, three hundred in Wisconsin. There are about sixteen hundred warehouses in the grain belt. There are marketing associations in almost every important fruit district. There are insurance societies in many states, coöperative associations for handling cotton and tobacco. Coöperative irrigation has proven so successful in the West that Uncle Sam is building irrigation systems to be operated coöperatively and private capital is doing likewise, some of the largest private projects selling the water system with the land with coöperative ownership and operation by the farmers as the ultimate aim.

The largest and most comprehensive farmers’ society is the Farmers Educational and Coöperative Union, a national organization which follows more nearly than any other now in active existence the early idea of development by propaganda. It has branches in twenty-five states and a total membership of about 3,000,000 persons. It is especially strong in the South, where it operates 2,000 cotton warehouses and 6,000 cotton gins. In other sections it owns and operates large numbers of grain warehouses, also fruit handling and marketing agencies, coal mines, fertilizer factories and numerous other enterprises.

THE CALIFORNIA FRUIT GROWERS’ EXCHANGE.

We have in California what is probably the largest and most successful coöperative association of producers engaged in marketing a single line of production. This is the California Fruit Growers’ Exchange. It maintains what is said to be the most efficient selling organization in the world, having agents in all of the principal cities and many of the smaller points of the United States, also at important centers in Europe. It handles now about 75 per cent of the orange and lemon crop of California and returns to its members, after deducting all expenses, more than $20,000,000 a year. It has been in business several years and is a demonstrated success in every particular. It has standardized the fruit pack of the state, reducing packing and marketing costs and increased selling values to the growers, and freed the citrus fruit growers from the exactions of the fruit marketing companies.

The exchange is purely coöperative. It is organized under the corporation laws of California with a capital stock of $10,000, but no dividends are paid on this stock and no assessments levied. Money for operating expenses is secured by levying an assessment on the growers at the beginning of the season in proportion to the estimated crop of each. When the crop is sold the proceeds, less the expenses actually incurred and paid, are paid to the growers.

The organization consists of a central exchange, which is the marketing concern, sixteen district exchanges and 104 local associations. The locals elect the directors of the district exchanges, which in turn elect the directors of the central body. The fruit is gathered and packed by the local associations, which are independent units and usually own their packing houses. It is shipped through the district exchange. The routing and sale is in the hands of the central exchange.

It is worthy of especial note that the California Fruit Growers’ Exchange has succeeded by the merit of its business methods. It does not now and it never has had a monopoly of the California crop. It began with less than a third of the crop, and for some years handled less than half of it. It now ships about 75 per cent of the oranges and lemons grown in the state.

It should also be stated in this connection that there are a large number of men in the business of growing fruit in California, who have had extensive business experience before becoming tillers of the soil. They were not afraid to unite, not afraid to adopt modern business methods, not afraid to pay large salaries for the skill necessary to succeed. I understand that the manager’s salary is upward of $10,000 a year.

Viewed in the large, the coöperative movement in America is making rapid strides. It is handicapped by lack of knowledge of coöperative methods, and by lack of adequate laws governing the organization and conduct of societies.

The most crying need is a more widespread knowledge among coöperators themselves of the true principles of coöperation. There are hundreds of so-called societies in which coöperation is by the many for the benefit of the few. In some instances they are actually controlled by the concerns which buy their products; in many more an excessive profit is secured by a small coterie, usually in the form of dividends on stock.

Stock dividends are the rock on which many promising coöperative efforts come to grief. It has been customary in many states to organize under the corporation laws, the members taking stock. Where no restrictions are placed upon the number of shares which one person may hold, or upon the dividends that may be paid, the tendency is for the stock to concentrate in a few hands, when dividends on stock are likely to be more sought than profits for members. I know of instances where so-called coöperative enterprises have paid as high as thirty per cent per annum in dividends to a small ring of stockholders.

A CALL FOR CONSTRUCTIVE STATESMANSHIP.

Where special statutes are enacted providing for the formation of coöperative societies, there is often a lack of wise restrictions in the interests of the average member. The laws are sometimes excellent in what they permit coöperators to do but inadequate in what they require them to do. The enactment of laws adequately fostering coöperative enterprises and safeguarding the interests of the coöperators calls for the best constructive statesmanship of the Nation.

Among the provisions that should be inserted in every state law authorizing the formation of coöperative associations are the following:

That no person shall hold more than a stated number of shares of a stated aggregate value.

That dividends on stock shall be limited to a fair interest return.

That all profits, in excess of interest on capital and such reserve as is deemed necessary, shall be distributed equitably among members in accordance with business done or work performed.

That an annual report be made to the Secretary of State showing the nominal and paid-up capital, the assets and liabilities, the dividends paid on stock, the profits and how they are distributed.

That the word “coöperative” shall be made a part of the name of any concern licensed to do business under the provisions of this act.

That all concerns doing business in the state at time of this enactment which use the word “coöperative” in their titles shall be required to reorganize under this act or change their name.

A great stride forward will have been made when in every state of the Union there are laws requiring the equitable distribution of the profits of coöperative endeavor, control of societies by members, publicity of all important acts, and confining the use of the word “Coöperative” to concerns that meet these requirements.

Good laws alone will not solve the problem. Some associations are eminently successful under the ordinary corporation laws, some will fail under any legal system that can be devised. The successful conduct of a coöperative society requires intelligence, business capacity and honesty. I know of no plan of coöperation that is “fool proof” nor do I know of any legal safeguards that will render it safe from those whose methods are of the dark lantern and the jimmy.

WHAT A COÖPERATIVE SOCIETY IS NOT.

The coöperative society in its best sense is not a revolt against oppression or unjust exactions. It is a business system. Its purpose is the promotion of the three big “Es”: economy, efficiency and elimination of waste.

Coöperation is not a cure-all; it will not solve every problem; it will not solve any problem unless it is handled properly and wisely.

Successful coöperation does not mean monopoly. Few attempts by coöperators to monopolize their product have been successful; I know of none that have been successful for an extended period.

Coöperation is not communism. It does not mean collective ownership of property, but collective activity by individual owners of property.

A coöperative society resembles a corporation in that the capital and services of a number of persons are united for the purpose of carrying on a business. It differs from the corporation in two very important particulars as follows: First, the recruit in a coöperative enterprise is the man and not the dollar; second, the purpose of the coöperative society is not to build a profitable business, but to add to the profit of the individual businesses of its members.

CAUSES OF FAILURE.

Failures in coöperative enterprises have usually been due to too much confidence and too little actual knowledge of the business undertaken. Men engaged in production have undertaken the business of distribution on a large scale without any previous knowledge of distributive methods. In many cases coöperators have expected too much and have been dissatisfied with moderate returns; in others there have been no returns because the business was neither well conceived nor well conducted. In many instances success at the outset has led to unwarranted expansion that spelled disaster. Personal likes and dislikes and petty jealousies have led to disruption; a good manager has been discharged to make room for a favorite of a dominant faction, or a poor manager has been retained because the membership did not know he was a failure. There is a strong tendency among coöperators to resent high salaries, and low grade managers are often the result. Members are frequently disloyal and weaken the society by doing a portion or all of their business with its rivals. Members of marketing associations frequently coöperate as some men pray—only in times of impending disaster.

A coöperative enterprise, to be successful, must be one for which there is a place and an opportunity. Sound business judgment must characterize its management. There must be a responsible head and a definite policy. The manager must be capable and experienced and the one test of his work must be the results he is able to show. There must be a system of accounting that will show these results in detail. Dependence for success must be upon the merits of the methods employed, never upon the mere right of coöperators to do their own business in their own way. Most important of all, the membership must be intelligent and willing, on occasion, to suffer temporary loss for the greater gain to be secured by loyalty to the concern. It must be borne in mind that a coöperative enterprise in entering a competitive field has got to compete, and its strength lies in the loyalty of its membership.

SHOULD BE TAUGHT IN THE SCHOOLS.