Part 23

The early retail societies found it hard to get good terms from wholesale houses, owing to the enmity of the private merchants. The law did not allow them to amalgamate and start a wholesale business of their own. But in 1862 the law was changed, and at once two coöperative wholesale societies were organized, the English and the Scotch. They are the models for the world. The two societies are virtually one, although maintaining different officers, rules, and stockholders. In fact, the wholesale societies are the federation of the retail and productive societies of England and Scotland. The English society requires the constituent societies to hold one $25 share for every five of its membership; the Scotch society one $5 share for every one of its members: i. e., an English coöperative shoe factory of two hundred members wishing to join the English Wholesale Society would take forty $25 shares, or two hundred $5 shares in the Scotch Society.

These Wholesale Societies are the grand Clearing House of nearly all the coöperative shops and factories of the kingdom, and the suppliers of all the coöperative retail stores.

And they are monumental institutions. In 1907 they had a membership of more than 2,615,000, a capital of more than $169,000,000, a surplus of $85,000,000. Their annual sales amount to more than $600,000,000, and their profits more than $60,000,000.

The English Society is the larger. It is a corporation that not only engages in wholesale trade but is a manufacturer, banker, importer; it packs meat, cures bacon, refines lard, binds books, grows tea, blends coffee, founders iron; it manufactures flour, butter, biscuit, sugar, pickles, cocoa, tobacco, candles, glycerine, starch, saddlery, furniture, clothing, corsets, underwear, brushes, crockery, tinplate, woolens, carpets and almost everything else that an average British home may need. It deals in coal, apricots, and wheat; has offices in New York, Toronto, Rouen, France; Denia, Spain; Copenhagen and Guthenberg, Sweden; has twenty-seven creameries in Ireland, tallow and oil works in Sydney, Australia; a "bacon factory" in Denmark, a tea plantation in Ceylon, and fruit farms in Shropshire and Hereford. Besides, it owns four steamers for the trade between Rouen and Manchester.

Its main offices on Balloon Street, Manchester, are enormous and palatial. Together with warehouses and stores, they cover a number of city blocks. Their offices in London compare favorably with any private establishment, and for efficiency they are second to none. Nearly 20,000 men are employed by this society. Some of its factories are large, e, g., the Leicester Shoe Works employ 1,446 men; the Irlam Soap Works, 702 men; Long Sight Printing Works, 941 men; the Middleton Pickle Works, 564, etc.

The chief offices of the Scotch Society are on Morrison Street, Glasgow. They manufacture umbrellas, tweeds, paislies, oatmeal, Aberdeen finnan-haddie, and other characteristic Scotch merchandise. Its capital is about $17,000,000.

Germany and Belgium, too, are furnishing successful coöperative associations. Mr. Orth describes them so well that I want to read what he says.

There are about two thousand of the coöperative supply societies among the farmers, with nearly one hundred and fifty thousand members. There are also about three thousand coöperative dairies, with two hundred and thirty thousand members, and one hundred and sixty coöperative wine cellars and two hundred and fifty-five coöperative warehouses and grain elevators.

It was natural that retail stores should be established next, on a coöperative basis. For some reason they did not thrive until about ten years ago. At that time a split occurred in the coöperative ranks, due to politics, and two federations or unions of Coöperative Societies were organized; the General Union or Liberal Union, and the Central Union or Socialist Union. The former is remaining stationary, the latter growing by leaps and bounds.

In every large city the coöperative retail society has a central plant. It usually includes a warehouse and bakery. The one located at Berlin is a good type. It is situated at Lichtenberg, a suburb. Here you see splendid buildings, in good architectural style, fitted up in the most modern manner; telephones to all departments, electricity, central heating plant, a uniform clock system for keeping time, etc. The whole plant cost $1,750,000. The great warehouse is full of groceries.

Although only a year in the buildings, they are already overtaxed and additions are planned. This central supply house looks after the sixty coöperative grocery stores in Berlin. It has a string of fine delivery autos. Any one can become a member by paying fifty pfennigs (12-1/2c.) admission, and forty marks ($10) a year. This, however, is taken out of his dividends.

The society also owns a fine row of apartment houses, which are leased to members at a low rental. The goods used are bought in the open market, or are supplied by the German Coöperative Wholesale Society of Hamburg. There is very little productive coöperation in Germany. There are 2,311 retail societies, more than two million members, and more than $5,000,000 in their reserve fund.

The Wholesale Society had a hard time of it until the spurt in favor of coöperation began a decade ago. Now it thrives, doing about $12,000,000 business a year.

There are a great many local coöperative building societies, with two hundred thousand members, and many other evidences that the spirit of coöperation is abroad in the land. In 1908 there were 4,105,594 persons actively interested in one form or another of German coöperation. In 1911 the number had increased to nearly five million.

In the little land of Belgium coöperation is at its best; not at its greatest showiness, nor maximum figures. But here, in this land of congested population, of illiteracy, of low wages and depressing conditions, the abject workingmen have taken hold of their own problems, asking neither sympathy nor favor, and have worked out a scheme of industrial coöperation that is a genuine achievement.

In 1873 bread was very dear in Ghent. Times were very hard. So high was the price of flour that many workingmen went hungry. A few of these workers united to do what they could to supply loaves at cheaper rates. They had $17 capital. They found an old cellar with an old oven in it, hired an old baker, and peddled the bread in baskets. Today there is a fine workingmen's clubhouse in Ghent, called "Vooruit." Across the façade stands the motto, "The Brotherhood of Workingmen Means Peace on Earth." This is the outgrowth of the cellar bakeshop. "Vooruit" stands for everything that is superb in coöperation. Here is not only a large lecture hall and café and offices of the unions; here is the studio of Van Biesbroeck, the workman-sculptor; here is a library, and in the neighborhood are stores, ware-rooms and shops. A few years ago it was found that many women were ruining their health by the long hours of service at the looms. "Vooruit" started a coöperative weaving shed, where the women work eight and three-quarter hours a day.

The bakery now does almost $1,000,000 worth of business a year; it makes 110,000 loaves a week. The eight thousand members of "Vooruit" have six drug stores, coal yards, many grocery stores and meat shops, a dry goods store, and other industries. All done by workmen in thirty years, workmen who were never highly paid and who trained themselves to do these things.

They meet every year, the eight thousand members, and vote on the price of bread. Sometimes it is one cent higher than the commercial rate, but their dividends more than cover this.

In Brussels is the famous "Maison du Peuple," the House of the People. It, too, began with a small bakery, employing two men and turning out five hundred and fifty-two loaves the first week. Today the "Maison" has twenty-five thousand members, two great bakeries, six warehouses, four butcher shops, twenty-five grocery stores, and numerous shops where various articles are made.

This "House," standing on Rue Joseph Stephen, cost $375,000 and was paid for by the Brussels workingmen out of their coöperative funds. The café, seating eight hundred people, is an animated place; every one seems content. The office of the savings bank is doing a rushing business, women and children bringing in the savings of the family for the week; the committee rooms are full of workmen planning some new enterprise. In the evening the lecture hall or theatre is crowded, the two thousand five hundred seats all taken, to see a play produced by an amateur company, all members of the "Maison."

All this, and more, in the form of coöperation. In 1907-8 the "Maison" made a profit of $134,000; of this about three-quarters was distributed as personal dividends to shareholders. The rest was spent on social benefits and a reserve fund.

In Belgium, then, you find all the coöperative activities united in each city under one general management. It includes groceries and clothing, medical aid, insurance, savings bank, clubhouse privileges, lectures, libraries, entertainments.

There are one hundred, and sixty-one distributive societies with 119,581 members; sixteen productive societies with 1,583 members. The Productive Societies include weaving, printing, cabinetmaking, tobacco and cigars, hardware and bakery. The total coöperative business is $6,800,000 a year, a large amount when you consider the diminutive size of the country and the poverty of the people.

The fact that in all of these countries coöperation is growing at a rate of increase of 20 per cent to 40 per cent proves that a need for it exists.

Now, Uncle Sam, we are starting these coöperative stores here, and the question with us and the one we are constantly asking, is what protection are we going to have from the trusts and monopolies which can, if permitted to do so, destroy us with low prices at any point, while they rob the people at some other point, to make up the losses, while ruining us. What we must have is legislation, to protect us, and if we can get it into this bill, I want it.

UNCLE SAM: I do not see how any phase of what you have said can be governed by a financial and banking bill. It is true, that incidentally you may do a banking business in your coöperative societies. So far as you do, you ought to conform your practices with whatever we may decide upon in the way of banking laws. So far as you buy and sell, or manufacture, you are engaged in production and commerce, and not in the banking business. Under the circumstances, you are entitled to an answer, although a little aside from the subject in hand. Let me tell you, however, right here, and you may set it down as settled. That, if you start any coöperative associations for the production or distribution of goods of any kind, you shall have a square deal. I have been waiting patiently, but getting ready all the while, to put some of the managers of these monopolies in jail. You can take my word for it. You are going to have equal opportunities under the operation of just laws, if there is any way of giving them to you. And if your Uncle Samuel understands the situation, I think there is. Unfair chances, special privileges and monopolies cannot naturally and properly have any place in a country where all men are born free and equal under the law. The fact is, the law is sufficient now, but there is not a public sentiment strong enough to compel the courts to put men in jail for robbing their fellows through the forms of law; even if it is known that the laws by which they rob their fellows or are permitted or enabled to rob their fellows were passed expressly for that purpose. That is the fault of the times through which we have just passed. The time is now at hand when all this is to be reversed. The people have come to realize and appreciate the fact that it is ethically, morally, and justly speaking, as wrong to rob a man through the forms of law, as for the bully to fell a man in the streets and pick his pockets. The people are forming new ideals, and the judges are getting new ideas. These new ideals, and these new ideas, will soon handcuff and incarcerate the business culprits, the business bullies, just as the ancient ideals of the people, and the old ideas of the judges have, in the past, put the physical bully and the material thief in the dark, dank dungeon. I have altogether too many men, who are always inquiring how near they can go to the jail door and not get in. You mark my word, I am going to push some of them in very soon now. What I want is a nation of men who are imbued with a sense of justice and fair play in business; and who will regard business relations as moral obligations, and paramount to the technical letter of the law. When that day comes, one banker will not want his fellow-bankers to carry his reserves for him. The principle is the same, whatever the relation of men may be; therefore, you can take my word for it, that all those who want to coöperate to secure a greater degree of the profits of their labor, a greater degree of justice among their fellows, will find Uncle Samuel coöperating with them, in the preparation and execution of those laws which will make for a juster Government. Since this Government springs from the people, and belongs to the people, no part of the people, certainly no small part of the people, should be able to take unfair advantages and undue profits, by any legalized special privileges, or by the power of monopoly. I say to you now, that these should be, and will be destroyed, and that all men shall be equal before and under the law. This is the predestined purpose of this Government, and it will never come into its fulfillment until you learn, my boys, that you are your brother's keepers.

MR. MERCHANT: Uncle Sam, that's pretty good preaching; but how are you going to apply it to this banking question?

UNCLE SAM: Did not Mr. Laboringman just appeal to me to find out whether coöperative societies were going to have a fair show? I have just told him "Yes," and I intend they shall have it, and I know of no better place to begin than here and now. I am going to construct two or three pieces of machinery--a guillotine for the monopolies, and an electric chair for special privileges, and concoct a barrel of anesthetics for stealthy, statutory stealing.

MR. LAWYER: But all this kind of legislation must come under the sphere of the Sherman Anti-Trust Law. I think no one will contend that any aspect of coöperation, as represented by Mr. Laboringman, should be incorporated in our banking bill.

MR. BANKER: I agree with both Mr. Farmer and Mr. Lawyer, that we cannot make any provision for it at this stage of its development in this country; but who shall prophesy about a movement that has spread over the world, as this has, and is now growing at such a rapid rate? It is estimated that at least ten million in Great Britain are interested in it; more than five million in Germany, and that the outstanding coöperative investments in Continental Europe must exceed $5,000,000,000 by this time. Of course, these figures mean some banking sooner or later, in this country, when the movement once gets under way.

MR. FARMER: Yes, I agree to that, but any attempt on our part at this time to legislate in advance, would do more harm than good.

MR. LABORINGMAN: That is probably true, as it might interfere, as you say, with the movement. All I ask then, is that we have a fair field, so that we can develop along natural lines, and be protected in the exercise of our mutual coöperative rights. I thank you, gentlemen, for giving me, and my particular cause, so much of your time.

UNCLE SAM: Mr. Laboringman, your cause is their cause. Your cause is my cause. Your cause is our cause. Your cause is the cause of humanity. The principles upon which your cause rests, pushed to their logical conclusion, will secure social and industrial justice. There are many who have taken millions, yes, hundreds of millions, through the forms of law, but without any ethical right whatever. From them these millions will be taken away in time, through the forms of law; through the power of taxation by progressive income and inheritance taxes, and the injustice of today will be righted by the justice of tomorrow.

MR. BANKER: Uncle Sam, you have suggested a programme outside of banking legislation; but I must confess incidental to the cause presented by Mr. Laboringman.

MR. FARMER: Gentlemen, we have stayed longer tonight than on any previous night, and I must go now. So, good night.

UNCLE SAM: Mr. Farmer has forced an adjournment.

THIRTEENTH NIGHT

THE CLEARING HOUSE

UNCLE SAM: We are on the very last lap tonight, as I understand the situation. We have had the Standard of Value, Money, Currency, Exchange, Value, Price, Property, Wealth, Credit, Reserves, the Bank; and now comes the settlement of the claims against the bank in the shape of checks, drafts and bills of exchange.

When we finish this conversation we can, I hope, begin to put things together, that is, make use of our material.

MR. BANKER: Uncle Sam is right, we shall be ready to do some constructing when we have disposed of the Clearing House, which is destined to play a gigantic part in the future of American banking. This is true because the Clearing House is bound to become the machinery by which all American banks are to coöperate and protect themselves through their combined strength; and it will be a splendid exhibition of what true coöperation can accomplish.

The character and origin then of the Clearing House, its present and prospective function, must be carefully studied by us, if this assumption is correct.

MR. MERCHANT: The character of the Clearing House, or the principle upon which it works, is simple enough; although its operations are vast, and its achievements in times of financial stress have been most striking, even though not always satisfactory.

The principle of clearing is, as I have just said, simple indeed. If I have a claim against Mr. Manufacturer, and he has an equal claim against me, we clear them by exchanging our claims with each other. If one of you gentlemen should sue another for one hundred dollars, and the other should make a defense by pleading an offset of one hundred dollars, and the court should allow both claims, you would clear them through the court, the one offsetting the other; that is all there is of the principal involved.

MR. BANKER: Mr. Merchant, you have put this matter more simply than any book has ever done. Indeed, I had not reduced the transaction to such simple terms. To put it in the form of a definition, as you stated, it would read this way: "To offset one claim against another, and pay the balance, if any, is clearing them."

I had thought that it would be my particular task to explain this transaction of clearing, and after a good deal of meditation I had worked out a thought which I am sure is next best, after your definition; and it will take us one step nearer to the Clearing House, without getting into any of its complexities. My illustration is this: if there were but one bank in a town, and all the people did their business through this single bank, by depositing their money and checks, and then paid all their bills, with checks on the bank, apart from any outside business, every debt in the town would be paid by check, and there would be no need of any money at all as the claims and debts would be exactly equal, and would always cancel each other to a cent.

MR. LAWYER: What you have said about one bank in a town is equally true of two, three or four, or any number of banks, if you assume that every person in town does his entire business through the banks, providing, of course, that the banks get together, and offset all the checks and drafts they receive during the day. There might be something to pay from day to day for the time being, but all would be adjusted in the end, without any variation or difference.

MR. BANKER: Precisely so, but when you get those bankers together, for the purpose of trading checks, you have created a Clearing House.

Stephen Colwell says: "Clearing is beyond all question, the simplest, the most economical, and when applicable, the most efficient of all modes of paying debts; it is precisely analogous to balancing accounts."

James G. Cannon, author of the leading work upon the history of American Clearing Houses, describes a Clearing House "as an office, established by the banks of a city, where their representatives meet daily to exchange drafts and checks, and adjust balances." Again, "as a device to simplify and facilitate the daily exchanges of items, checks, drafts and bills of exchange, and the settlement of balances among the banks, and a medium for muted action upon all questions affecting their mutual welfare."

You would think that the Clearing House was such a simple matter, and such a great advantage that a Clearing House would have been thought of, and put into operation as soon as banks got under way, but not so. Their development and establishment, as we know them today, has been slow indeed, and the early history of their origin most interesting.

Jevons says: "About the year 1775, a few of the London bankers hired a room where their clerks could meet to exchange notes and bills, and settle their mutual debts. The society was of the nature of a strictly private club; the public knowing nothing about it, and the transactions being conducted in perfect secrecy. Mr. Gilbart tells us that even in this form it was regarded as a questionable innovation, and some of the principal bankers refused to have anything to do with it. By degrees, however, the convenience of the arrangement made itself apparent, more bankers were admitted to the Society, and a distinct committee and set of rules were formed for its management. Although it remains to the present day a private and voluntary association, unchartered, and in fact unknown to the law, the Clearing House has steadily grown in importance, and in the publicity of its proceedings.

"Several important extensions of the clearing work have been made in the last twenty-five years. After the rise of the London joint stock banks, subsequent to 1833, they were for a long time refused admittance to the Clearing House; but in June, 1854, they were at last allowed to join the Association. The Bank of England long remained entirely outside of the confederation, but more recently, it has become a member." (Written in 1875.)

The establishment of Clearing Houses in English cities, outside of London, did not take place until a century, almost, after that in London went into operation, or as late as 1872, which was just five years short of a century later.

As early as 1831 Albert Gallatin presented a plan for a Clearing House in New York, and so perfectly outlined the scheme, finally adopted, that I want to read it to you. And I want to impress upon you the fact that Gallatin was one of the very ablest economists that we have ever produced.