The Farmer and His Community

by Dwight Sanderson

The coöperative association differs from the corporation or stock company in three essentials. First, it is democratic in its control; all true coöperative organizations employ the principle of "one man, one vote," the influence of each member of the association being equal as far as the legal control of its administration is concerned. The individual members and not the amount of stock owned controls the policy of the association. Coöperation is democracy applied to business. Second, the coöperative association is organized to secure more efficient service rather than to exact profits. This is a point upon which there is much misunderstanding upon the part of those starting coöperative enterprises and which requires further explanation. Third, the earnings or savings of the association (commonly thought of as "profits") are distributed among the members or patrons of the association pro rata according to the volume of the business which they have transacted with the association, so that although its control is democratic its benefits accrue according to the amount of financial interest involved. There are certain other principles of business procedure which have been found essential to the successful operation of different kinds of coöperative associations, but these three—individual voting, service rather than profits, and pro-rating the earnings—are fundamental to all truly coöperative associations, and it is to this combination of business methods to which the term coöperation has now come to be applied in a technical sense.

Exclusive of associations formed for coöperation in the general sense of the term, i.e., for various purposes of farm operation as mentioned above, farmers' coöperative associations may be divided into three general groups: for buying, for selling, and for finance.

Coöperative buying has been most successfully developed by industrial workers in towns and cities and is commonly known as "consumers' coöperation." Starting with a few poverty-stricken workers who pooled their meager savings so that they could buy at wholesale and share in the profits of the retailer, the Rochdale system has grown until the wholesale coöperative societies of England and Scotland are probably the largest general merchandising corporations in the world, doing a business of approximately a billion dollars a year.

Coöperative buying of farm supplies, fertilizers, machinery, spraying materials, feeds, binder twine, etc., is one of the first forms of coöperative effort ordinarily undertaken by farmers' associations, and is carried on by numerous methods. In most cases the services rendered in the business management of such buying is at first largely on a voluntary basis or is but poorly paid. Only in a few sections of the country has the coöperative buying of agricultural supplies assumed a permanent or stable form of organization, and in those cases it is very frequently a department of a coöperative selling association, such as a fruit exchange. From an educational standpoint there is much to be said for commencing coöperation through organization for buying agricultural supplies, for through it farmers are trained in the principles of coöperation with the greatest possibility of advantage and the least risk of loss. There is little probability of loss in judicious coöperative purchases of carload lots with orders in hand, while in coöperative selling, unless marketing facilities are so bad as to force him to take the risk, the chance of loss is a serious consideration to the farmer. This point has been well stated by Edwin A. Pratt, a leader of agricultural organization in England, who says:

"Inquiry into the conditions under which organization of agriculture has been successfully carried out in other countries showed that a beginning had invariably been made with the simplest form of combination for the joint purchase of agricultural necessaries. In this way the advantages of coöperation could be brought home to cultivators, who were gradually educated in the theory and practice of combination without having their suspicions aroused and their mutual distrust stimulated by proposals that they should at once alter their old conditions of trading in accordance with that system of combination for transport or sale which really constitutes not the beginning of agricultural organization, but one of the most difficult and most complicated of all its many phases."[30]

One of the allurements of coöperative buying has been to at once establish a coöperative store for a general merchandising business. The history of such stores started by granges in the 70's and 80's is instructive in this connection. A few of them survive, but most of them were failures. Only after years of experience and education in coöperative purchasing and other coöperative enterprises have the aims and methods of operating coöperative stores been sufficiently appreciated by most rural communities to ensure their successful establishment. We have already considered (page 48) some of the considerations which should govern the attempt to compete with local merchants. Generally the successful operation of a coöperative store is more difficult for an average group of farmers to manage than the simpler forms of coöperative purchasing, or coöperative credit or selling associations.[31] Moreover, a coöperative store will seriously affect the solidarity of a small community unless a goodly majority, both from farm and village, are convinced of the necessity of competing with local retailers and will give the store their patronage. Except in the buying of agricultural supplies, which may be considered rather as the raw materials and equipment of the farm as a manufacturing business and which are therefore entitled to wholesale prices, consumers' coöperation as usually conducted through coöperative stores is not a distinctively agricultural problem, but is the same for the farmer as for the villager or industrial worker, and its desirability and limitations are determined by similar considerations.

With the change to a commercial type of farming and with the higher price of land, the American farmer has had to make larger use of borrowed capital and his business has been seriously hampered by a lack of credit facilities to meet his needs. Probably in no field of coöperative effort have the benefits been more apparent than in that of the rural credit banks which are found throughout Europe and which have thoroughly demonstrated their usefulness. Attention has been called to the fact that our best farm lands are more and more operated by tenants, and that this is inimical to strong community life. One of the reasons for this tendency has been the inability to secure long-term loans on farm real estate by the man who has little capital of his own. As lands rose in value this became increasingly difficult. To meet this situation a commission representative of all sections of the United States visited various countries in Europe in the spring of 1913, and as a result of their report, in 1916 Congress finally enacted the Federal Farm Loan Act establishing a system of farm land banks. Under this system one-half of the value of a farm and buildings up to $10,000 may be borrowed and paid off under the amortization plan in from five to forty years at a low rate of interest. The details of the system do not concern our present discussion, but the essential feature of the system is the local land bank through which the loans are made and collected. The local land bank is strictly a coöperative society organized to secure long-term credit facilities for its members under the terms of the federal act through the regional land banks of which each local bank is a member. Like other coöperative associations, the area in which the local bank does business is not necessarily that of a community, it may be a whole county where there are but few members, or there may be more than one bank in a single community, but more commonly it is located at a village center and tends to become a community institution.

Equally important for financing the current expenses of farming operations and to make possible the orderly marketing of crops, is the farmer's need for short-time credit. Our banking system has been developed to meet the needs of the business world, and the period for which loans can be made is too short to meet the needs of the farmer, who often requires credit for six months to a year. In some ten states legislation has been passed authorizing the formation of local credit associations, which are really local coöperative banks, but the number of credit associations established in rural communities has been insignificant, thirty-three out of a total of thirty-six being in North Carolina.[32] The tremendous losses suffered by American farmers during 1921 and their inability to secure sufficient credit from their local banks has shown the necessity for better short-time credit facilities, and bills are now before Congress which will enable the local land banks to also handle short-time loans in coöperation with the Federal Reserve Banks. If this is done, the amount of business done by these local banks will be greatly increased and the coöperative principle in banking will be greatly strengthened.

Coöperative selling associations have had a rapid growth in the United States during the past decade. In 1919 the federal Bureau of Markets estimated that agricultural products worth one and a half billions out of a total of nearly nineteen billion dollars sold from farms were marketed through coöperative associations, and the total has greatly increased since then. The California Fruit Growers' Exchange, probably the largest coöperative selling association, does a business of over $50,000,000 annually and has one of the most efficient distributing systems in the country.

At the present time some very ambitious programs of national organizations for coöperative marketing are being started, such as the United States Grain Growers, Inc., which is modeled after the successful Canadian Grain Growers, Inc. One of the chief obstacles to all such plans of effectively organizing the marketing of various agricultural products is the fact that a strong central organization can be developed only by the federation of local associations whose members understand the purposes of the organization and are loyal to them. The history of all coöperative movements shows that those which have been permanently successful have arisen through the federation of strong local associations, and numerous failures of well-intentioned efforts at large-scale coöperative marketing have been due to the fact that numerous local associations cannot be organized by the parent association with any assurance that they will function effectively.