distributive movements looking to Rochdale as their prototype;
and in the United States of America there are at least continual
attempts to spread Rochdale co-operation. Of these foreign
stores, however, many exhibit important modifications, such as
unlimited liability, and selling at cost price, or between that and
market prices. On the whole we may say that Rochdale Co-operation
is the most extended and the most typical. It, and the
workshop movement springing from Fourier, and the socialist co-operation
of Belgium and elsewhere, are certainly the forms which
have most of the ideal of democratic equality and social reconstruction.
Other forms look more to the money benefits accruing
to the members, seeking to supplement the present order of
society, rather than to bring in a new order. Among these other
forms—separate in origin, in methods, and largely in spirit—the
most important are credit co-operation, or people’s banking, and
agricultural co-operation, two forms until recently unknown in
the British Islands.
Confusion has sometimes arisen from the fact that while Rochdale Co-operation sets itself against “credit,” continental co-operation is more concerned with obtaining credit for its members than with anything else. But credit is used in two senses. The English workman employed Germany and credit co-operation. for wages is against the credit which means spending them before they are earned: continental co-operation seeks by collective credit to put into the hands of working peasants, craftsmen and traders, the stock and the tools without which their labour is vain. Credit for consumption is the road to poverty; credit for production the road to well-being.
Just as with co-operation in labour and in purchase, so mutual help in obtaining credit may doubtless be traced in primitive forms far back into history. It was certainly more or less “in the air” in Germany and France about 1848 and even earlier; but the beginning of systematic organized credit co-operation may be definitely fixed in the year 1849, when Raiffeisen began his Darlehnscasse, or loan bank, in Rhenish Prussia. Curiously enough it had also a second and entirely independent origin. For in the following year Schulze-Delitzsch, in a distant part of the same kingdom, established his Credit Society based on an entirely different system. As this second system spread much more rapidly than the other and attained, as indeed it retains, much greater commercial magnitude, it came to be regarded as the beginning of credit co-operation, of which for a long time it was the only important form. These two remain the two distinct types in every land. Thus Germany, which has innumerable co-operative societies of every form and of great importance, is in particular the mother of credit co-operation.
In the famine years of 1846 and 1847 and for some years after, Friedrich Wilhelm Raiffeisen was a burgomaster in the barren Westerwald. The people were hopelessly ground down by debt to money-lenders for small doles of capital, advanced to purchase stock, or meet times of special Raiffeisen loan banks.difficulty. It occurred to Raiffeisen that by combining to borrow a moderate sum of money on their joint responsibility, and afterwards to lend it out among themselves in small sums at a slightly greater rate of interest, the peasants might obtain relief from their burden of usury, and at the same time get the capital necessary to make their labour productive. Accordingly in 1849 at the little town of Flammersfeld, he set up a “Loan Bank.” Despite its success, it remained the only one of its kind for five years, when Raiffeisen founded a second. There was no third for eight years more: it was only in 1880 that they began really to spread, but now they are found in many lands and are counted by thousands.
Such a bank is essentially an association of neighbours. Besides borrowing, it also receives savings deposits, which often produce a large part of, or even all, the capital it needs. Usually a few of the members are comparatively well to do people, who join to help their neighbours by increasing the society’s credit. This Raiffeisen considered essential. They have no actual privilege, but by common consent they take a leading part. In the true Raiffeisen bank the liability of each member is unlimited, but limited liability has been introduced in some of its modifications. The Society confines its operations strictly to a small area, say a parish, where everyone knows everyone. Each borrower must specify the purpose for which he wants a loan, say to buy a cow or drain a field, or pay off a money-lender, and this is rigorously inquired into. Only members can borrow. Any member, however poor, can borrow for a profitable approved purpose, and no one, however rich, for any other. Practically all the members see that the money is applied as agreed; and, while the loan is often made for a long period, a year or two—even for ten or more—so as to repay itself out of the profit, power is reserved to call it in at short notice if misapplied. Loans are repayable by periodical instalments, but repayments must be made with absolute punctuality. No bills, mortgages or other securities are taken, except a note of hand either alone or with one or two sureties. There are two committees, one to lend and do the work of the society, and the other to supervise the first; and on both of these it is understood that the richer members are to be in a majority. No committeeman or officer receives any remuneration for his services, except that the accountant gets a small salary. Originally there were no shares, and when in 1889 the legislature ordained that there must be shares, the Raiffeisen banks made theirs as small as possible, generally ten or twelve shillings. Nothing is paid on the shares as interest or dividend, all profit being voted once for all to the ordinary reserve and the indivisible reserve, the latter the backbone of the system. In every large district the Raiffeisen banks are federated in a Union, and these Unions culminate in a General Agency. As an intermediary among themselves, and between them and the money market, the banks have also a central bank with a capital of £500,000, and with ten provincial branches. A great deal of agricultural co-operation has arisen from these banks as centres, and with the money they have supplied.
Raiffeisen banks boast that neither member nor creditor has ever lost a penny by them, and while this is denied it seems at least near the truth. Their credit is so good that they can obtain money at very low rates, and as their expenses are trifling they can re-lend to their members at rates but little higher. In Germany they usually lend at about 5%. Only men of good character can obtain membership: thus, besides spreading prosperity, they have everywhere been great promoters of sobriety and good conduct. They were only intended to meet the needs of the peasants, especially of the very poorest, and for this purpose they have proved admirably suited.
Very different were the people among whom Schulze-Delitzsch established his form of co-operative credit; and very different the organization he adopted and the results which have flowed from it. In 1850 Franz Hermann Schulze was a judge in his native town of Delitzsch, almost at the Schulze-Delitzch banks. middle point of the southern edge of Prussia, and established there his first Vorschussverein, or Advance-Union. He had been in England and knew something of our co-operative movement, but he scarcely seems to have derived any part of his inspiration from it. The people he desired to help were townsmen, especially the small craftsmen working on their own account, the joiners, shoemakers and so forth; and his ideal was to do this merely by stimulating their thrift.
In a Schulze-Delitzsch bank, a number of such men combine together to raise a capital of guarantee: to do this every member takes up one share and one only, which is of large value, say £30 or £50 or even much more, but can be paid up by small instalments. Thus every member is committed to a long course of saving. On the strength of this capital in course of formation, and the unlimited liability of the members, the bank is able to borrow, or to receive as savings and deposits from members and others, a much larger capital. The funds so constituted it lends out at the highest rates it can command, originally 12% or 14%, but now very much less, and varying, of course, with the market. It lends to members only, but to any amount, for any purpose and on any good and sufficient security, whether acceptance, promissory note, overdraft, discount, mortgage, pledge, surety or what not. The loans, however, are always for a short period,
