Popular Science Monthly/Volume 17/October 1880/Cooperation in England
By GEORGE ILES.
AT the Coöperative Congress, held in Newcastle-on-Tyne, last May, some very interesting statistics were presented. The latest report of the Registrar is for 1878, and shows the membership of British coöperative societies to have been 560,703, having transacted during the year business amounting to $102,820,000. In 1861—the first year of the reports published by the Registrar—the membership was 48,184, with a business for that year of $7,360,000. This remarkable growth of coöperation within recent years has brought it from the obscurity of a theory, held by the general public to be either impracticable altogether, or practicable only within special and narrow limits, to the importance of a power which is transforming in appreciable measure the entire retail trade of Great Britain, and which, at the last election, had aroused an antagonism which excluded from Parliament two well-known publicists of high character and ability.
The coöperative movement, as far as it has gone, has been chiefly directed toward so improving the ordinary methods of retail trade as to confer moral benefit and material profit upon the working-classes. The wastes of our present plans of retail distribution are very obvious: our streets swarm with inconsiderable shops, repetitions of one another, and maintained at an enormous aggregate expense. Competition has far exceeded the bounds within which it does good, by spurring industry and inciting emulation; without regard to the strictly limited wants of a community, shopkeepers begin business in cities and towns where overtrading already prevails, and the consequence is loss to the investors and demoralization all round. Excessive competition has led to a system of giving credit, which supports dishonest debtors at industry's cost, and keeps multitudes of book-keepers, collectors, and lawyers employed at the charge of productive labor. Furthermore, under existing methods, the losses to society from adulteration continue and increase from year to year. The delusive appearance of cheapness is often bought at a ruinous price. Owen used to declare that an adulteration of pure long-fiber cotton with but one seventh of coarse short staple lessened the wearing value of the fabric one half, and, in the paint-trade, sulphate of baryta is largely mixed with white lead, yet the sulphate has no covering power whatever as a pigment, and absorbs much valuable oil. The standard of an article, such as coffee, sugar, or paint, once lowered by fraudulent admixture, can scarcely ever be raised again, as the common run of people are poor judges of what they buy, and hesitate to pay the price of a pure and sound article, instead of the current price for really inferior wares which look as well.
All this struck some needy flannel-weavers of Rochdale nearly forty years ago, and, by weekly subscriptions of twopence each, under the name of the "Equitable Pioneers," they began a small store for the sale of provisions and groceries; they did not attempt, at first, to sell dry goods or other merchandise subject to the caprices of fashion, or the equal caprices of a variety of customers, whose tastes might not be well judged by the managing committee. These Rochdale weavers plainly saw that all that keeps the big shops in a town from completely eating up the petty ones is the uncertain and fluctuating character of their custom; so they agreed among themselves to stick to their store for what it could sell them, which they could safely do, as they managed it honestly and well. Once, too, when their flour-mill went badly for a time, they kept on using the ill-made flour until they had all put right, showing their confidence in ultimate success by cheerfully bearing temporary loss. From two penny beginnings, the Rochdale store has grown until, at the end of 1878, it numbered 10,187 members, having transacted during the year a business of $1,450,000, with a profit of $257,000, the expenses being reduced by good management to two per cent. Although the "Equitable Pioneers" were by no means the first society formed in England for coöperative distribution, yet, as one of the earliest among existing societies, its preeminent success has made it the model for imitation wherever a new society is being established, or it is necessary to rectify the imperfect working of a society already in business. The "History of the Society of Equitable Pioneers to 1857," written by George Jacob Holyoake, attracted so much interest that a second era of their history to 1878 has been given to the world by the same author, who has also written the "History of Coöperation," in two volumes, which all should read who wish to know how the movement arose, who labored for it, and what its ultimate aims are.
The rules of the Rochdale society are accepted by the chief exponents of coöperation as being thoroughly wise and judicious. The society sells its goods at the current rates charged by retail merchants, thus avoiding the direct underselling of shopkeepers, and withholding the profits of their system from non-subscribers. Buyers are given metal tokens, representing the value of the cash they pay in. Quarterly stock is taken, and the rate of profit ascertained; then, after paying subscribers to capital their interest at five per cent, per annum, buyers are paid in cash, or credited in the ledger, as they choose, with the amount of their dividends, computed on the tokens brought in. The majority of buyers have their dividends credited to them, thus virtually establishing a savings-bank account, and affording the society means for the extension of its business. Connected with the store are a corn-mill, a shoe-factory, and a soap-factory.
The capital of the coöperative societies is, as a rule, nominally withdrawable. As large investments are often made in real estate, machinery, and other property not readily salable, the necessity has become evident that the trading capital of a society should consist in transferable shares—like those of a joint-stock company—while the deposit capital can only be withdrawable at call. Thus an element of stability is introduced, which prevents a temporary panic or stress of bad times from winding up a really sound society's business.
The societies are managed by committees usually elected for a year, and annual statements of affairs are required by the Government. To watch over the collective interest of the societies, they appointed in 1870 a Central Coöperative Board, with its office in Manchester: this body has obtained for coöperation all needful legislation, and the removal as far as possible of obstacles to its right action. The exemption of the societies as such from income-tax, the limitation of the liability of members for the debts of a society to the sum unpaid upon the shares standing in their names, and an easy method of bequeathing shares without expense, were assured by the Central Committee to which the Central Board succeeded. The Board since its formation has prepared and published the land, building, and mortgage rules, necessary to be observed by societies; and a series of general business rules well thought out and thoroughly tested by experience, whereby new associations may avoid the weaknesses and errors which have been the causes of coöperative failures in the past. For the further assistance of the societies scattered throughout the country, a general secretary of legal attainments is engaged to give such legal and practical advice as from time to time may be sought. The Central Board has established at Manchester "The Coöperative News," a weekly journal, and in addition it circulates broadcast coöperative tracts and pamphlets.
In 1864 a new and important application of the principle of association was made in Manchester—a wholesale society was founded, to supply some hundred and fifty stores. No more serious difficulty had hitherto been met by small new societies than that of buying well. Often remote from the great centers of production, and purchasing in small quantities through a committee or manager of defective knowledge of qualities and prices, much hard-earned money was wasted. Now, in buying through the Wholesale, a society avails itself of the services of expert buyers, who obtain, through their vast purchases, goods at the lowest current prices. Stores are not obliged, as they used to be, to buy more goods than they immediately require, to reach the minimum prices of the market; hence they can carry on business with less capital than they needed formerly. To detect adulterations and determine the quality of wares offered to it, the Wholesale Society employs an analytical chemist. The business of this vast organization now serves more than five hundred societies; it employs buyers in eleven towns and cities in England, Ireland, France, and America. Its subscribed capital is $686,000; the shares, which are five pounds sterling each, are issued on condition that an affiliated society takes out one for each ten members belonging to it, increasing the number annually as its members increase. One shilling per share must be paid on application, on which five per cent, interest is allowed; the remainder can be paid up at once, or be paid up by accumulation of dividends and interest. The sales of the Wholesale Society for the year ending January 11, 1880, were $13,166,545; yet the managers state that these large figures could have been more than doubled had all the societies in the kingdom been joined to the Wholesale, and had they bought from it all the supplies which, with advantage to themselves, they might have taken. The Wholesale Society transacts a large banking business, and this its best advisers deem should be placed upon a separate footing, with its special board of direction. Glasgow has a counterpart to the great Manchester establishment—the Glasgow Wholesale Society has a connection of one hundred and thirty-seven Scottish societies, and during 1879 did a business of $3,066,500.
As instituted at Rochdale, and in scores of other towns and cities, cooperation has been intended by its leaders not only to save to the working-classes the sums commonly absorbed by the wastes, expenses, and profits of ordinary retail trading; it has been designed to train workmen in thrift, in thoughtfulness for the future, and by the gradual accumulation of capital to enable them either to become self-employing, or to own shares in the manufacturing or mining company which may engage them. Some of the societies have provision for building cottages for members out of the dividends credited to them. At Derby and elsewhere hundreds of homes for workingmen have been bought in this way. Coöperation has diffused much knowledge of business, and interest in it, among classes who used formerly to know and care very little about it. The committee and general meetings are usually well attended, and often give scope and opportunity to ability which might without coöperation have lain dormant. Many useful suggestions in times of difficulty have been made by men and women whose only school has been that of hardship and penury.
Societies which strictly follow the Rochdale type set apart annually a portion of their profits for educational purposes, and as a result free libraries and news-rooms are attached to some of the larger stores; the love of information, however, is sometimes wanting in a society whose constant habit is to declare fat dividends. Such societies have averted from them the upward-looking countenances of true coöperators, who regard the lack of food for the mind as demanding at least the ample relief bestowed upon physical hunger.
The citizens of the great metropolis of England have not been ready learners of the men of Rochdale. In the vast extent of London workmen usually live at a distance from their workshops and factories, and the variety of industries is so great that the combinability of the workmen in a town of moderate size and tolerably uniform manufacturing production finds no parallel in London. Then, too, the varied excitements and amusements of the modern Babylon are held to make its work-people more volatile than their provincial brethren, and therefore less susceptible of becoming united and working together. Whatever may be the causes, the fact remains that coöperation scarcely exists in London among the poor, and is mainly confined to the vast associations of the middle and upper classes. The chief of these conduct the Civil-Service stores, the first of which was founded in 1864 by the Post-Office employees. Since 1864 other departments of the Civil Service have joined their confrères of the Post-Office, and the business transacted at their warehouses has become enormous. The principles of the London stores are essentially different from those of the provincial ones. In stores of the Rochdale type, capital as such receives no share in profits, it obtains only its interest at five per cent.; in London, subscribers to the capital stock of the Coöperative Associations need not be buyers at all, yet they share in the profits of the business; the plan being to set prices upon the goods sold as much below those of ordinary retailers as will enable the working expenses to be paid and give a reasonable return to the capital embarked. There is no provision in these associations for the accumulation of the sums saved by buying of them, and the underselling of the shopkeepers is direct, and not indirect, as in the provincial stores, where the current retail prices are charged, and the saving comes in the shape of a dividend every six or twelve months. The shopkeeping interest has been much more resentful of the London stores than of provincial ones. In dispossessing shopkeepers of their business, and subjecting them to hardship by employing the economical methods of coöperation, the factory operatives of Lancashire and Yorkshire had the justification of their pressing needs; no such justification, however, does the London shopkeeper hold that the people of wealth and title have when they desert his counter for the Civil-Service stores. He regards his profits as inalienable rights, and has at times published plaints on his losses of business in the daily press, at once sordid and silly. The Civil-Service Society has been imitated by several large associations among the army and navy, the clergy and the Nonconformists, who derive many noteworthy advantages from their coöperation. United, and being able to give life and fire insurance companies large lines of business without the usual expense of solicitation, members are enabled to take out policies in companies of standing at a discount. Combination, too, has reduced the charges for legal and medical advice, and whether in making his will, or having a tooth drawn, or having the accouchement of his wife performed, the London coöperator is better off than other men.
Although the stores, as the coöperative warehouses are called, transact but a very small fraction of the retail trade of London, they are finding imitators so fast that an entire change in the methods of doing business is being brought about. The old way of selling goods on credit and charging in prices a percentage large enough to cover the loss and expenses entailed by the system can not stand before the economy of buying and selling for cash. Then the vast scale of the business of the stores enables them to buy on the best terms directly from producers and manufacturers, and the charges of rent, taxes, and management, are proportionately much less than in small independent concerns. The percentage of total expense to business transacted is but 5 4 on an average for all the British societies, and is perhaps somewhat less in the London stores. Their business is rendered in a large measure uniform by being maintained by a known circle of customers with wants of a fairly calculable character; and large sums are saved by premises not being needed on a street of high rents for chance custom's sake; and the stores do not require to expend, when once-established, anything for advertisements or other solicitation. The chief retail streets of London contain frequent announcements of "Coöperative prices," "Discounts for cash," and "Discounts increasing with the extent of a purchase"—all evidencing attempts to employ the economical features of coöperation by firms competing with the stores.
No coöperator, however sanguine, believes that the stores will eventually supersede all retail shops. Taste and skill will always secure independence, and a better reward than falls to the lot of those who supply in an ordinary unexcellent way the general wants of their customers. An artistic cabinet-maker or upholsterer, as well as a really good tailor or shoemaker, will never need to offer discounts to retain business; but all the many things which one factory can turn out as well as another, or one importer can buy with as much facility as his neighbor, must inevitably be distributed, as the struggle for the means of existence grows sharper, with the greatest economy possible. The pleasures of shopping may lose some of their attraction when the cost of keeping up shops depending upon chance custom becomes understood, and when the managers of stores undergo such evolution as to enable them to display their goods with taste and effect. Some of the great English stores look as if all inducing to purchase by tasteful appeals to the eye were among the things to be left behind.
The stores have drawn attention to a principle which may yet find wide development—the organization of supply and demand, so that the uncertainties and difficulties of modern business may be made less oppressive than they are now felt to be. When a particular retail store has its permanent body of purchasers whose money conducts the concern, stocks of goods can be laid in with little of the doubt and uncertainty which must vex the ordinary shopkeeper and subject him to inevitable loss; the same principle leads to yet further economy when, as at Manchester, a wholesale society supplies a stated and large number of stores for their fairly predictable wants. A steadying of the fluctuations of production would occur were wholesale societies federated to manufacturing and importing societies; the whole series conferring mutual benefits among the members, and depriving the speculator, the corner-maker, and the fraudulent bankrupt of their spoils. Such is the ideal of coöperation, to which at a distance, toilsome indeed, its leaders are endeavoring to come in practice. Could the coöperative principle by the integrity and stability of a people spread throughout its trade, the perplexities and losses of business would be enormously reduced. The area over which a merchant's customers are now scattered usually prevents him from knowing much of their personal characters or circumstances. Competition, with its too cheap credit, has made it rarely possible for a wholesale merchant or manufacturer to ask his customer upon what grounds he should be trusted. The knowledge which in olden times used to be directly sought between man and man is now usually obtained through irresponsible commercial agencies, which, however honestly and ably managed, can not and should not take the place of direct inquiry of a trader seeking credit by the merchant or manufacturer who trusts him. The intermediation, too, of the commercial traveler, who does so much of the business of to-day, weakens the sense of responsibility felt at its height when merchant and customer meet face to face; and the extent of bankruptcy within recent years has undoubtedly been widened by the constant and undue solicitation to buy on the part of these commercial travelers, who are interested more in effecting large sales than in ascertaining the soundness of their customers.
The extension of railroads and other means of travel and transportation, by increasing the mutual invasion by merchants of each other's territory, has had the effect of making constant and expensive solicitation necessary to the maintenance of a "connection." The good will of a business year by year declines in value in the market. In some measure needless competition arises from the improved modern facilities of locomotion by virtue of a curious illusion: merchants and manufacturers seem to think that the mere aggregation of the small districts in which business was done in the past increases the area of the total market, as if taking down fences affected the aggregate acreage of contiguous farms. If the factories and warehouses engaged in the supply of the home market were distributed throughout Great Britain in sections of equal population, their over-supply would be plain.
For all the baffling difficulties which the enlargement of the area of trade has introduced into business, and all the parasitical expenses which have fastened themselves upon it, coöperation offers a remedy—a remedy, however, only to be applied as intelligence and trustworthiness advance. The costly war and waste of isolated competition are signs and tokens that men can not trust each other, and have not mutual forbearance enough to combine for common ends in securing for themselves competence and content.
The leaders of English coöperation, while busily engaged in forwarding their plans of distribution, are constantly striving to apply their principles to the more important field of production. If the identification of the interests of buyer and seller is fraught with advantage, still greater advantage awaits the successful fusion of the interests of capital and labor. Up to the present time, however, the experiments in this direction have not been promising, and the case of production now seems to stand where the case of distribution did forty or fifty years ago. Workmen are not educated up to it yet; neither, it would seem, are the men of capital. The Messrs. Briggs, at their White wood collieries, divided for several years a percentage of their profits among their employees, leaving for their own share a sum larger than they believed would have come to them under the usual system of hiring. A plan similar to that of the Messrs. Briggs has been followed by Messrs. Fox, Head & Co., at Middleborough. Another method adopted extensively in Yorkshire and Lancashire is for workmen to invest their savings in shares of joint-stock manufacturing companies. The vast business now conducted by coöperative stores has in some measure opened up a path for cooperative manufacturing, but to an extent very limited in proportion to the business transacted, and in a manner very remote from perfect coöperation. At the Leicester shoe-factory and elsewhere the workmen are hired for wages, just as ordinary capitalists hire, and have no share in profits. The difficulties of managing a store are not few, but they are far less troublesome than conducting production on purely coöperative principles. When every workman in a concern has a voice and vote, in the present state of morals and intelligence, the disputes are interminable as to their respective rates of payment, the proportions of profit which shall be divided between capital, labor, and buyer, and the general policy of the business. Many coöperative workshops have through these disputes failed miserably, and either fallen into individual hands or been converted into joint-stock companies. These failures of coöperative production have done somewhat to allay the bitterness of class-feeling among workmen toward their employers. They find how rare really good business ability is, and how necessary to success it is. They find that it is requisite at times to guard intentions secretly, and to practice a boldness quite impossible when hundreds of interests exist to be consulted, timid about deputing full powers either to managers or committees.
Workmen who have toiled to save a few pounds, and have lost them in a coöperative workshop, have awakened to the fact that the gains of the capitalist are not merely interest on his money, but also payment for the exercise of his judgment, foresight, and executive ability, without which his wealth, however great, would fast melt away in the strifes of business. It is true that coöperation seeks to abolish many of the hazards which make modern business require unusual talent for its management; judgment will be relieved from many questions when credit is curtailed, and consumers are federated to a factory conducted by their own capital and directors; yet in the actual present, while coöperation still remains in its infancy, the existing conditions of competition beset capitalists with difficulties of which only experience has made workmen aware.