85. Coöperation in Distribution.—Another movement in the same direction is the spread of coöperation in its various forms. Numerous coöperative societies, with varying objects and methods, formed part of the seething agitation, experimentation, and discussion characteristic of the early years of the nineteenth century; but the coöperative movement as a definite, continuous development dates from the organization of the "Rochdale Equitable Pioneers" in 1844. This society was composed of twenty-eight working weavers of that town, who saved up one pound each, and thus created a capital of twenty-eight pounds, which they invested in flour, oatmeal, butter, sugar, and some other groceries. They opened a store in the house of one of their number in Toad Lane, Rochdale, for the sale of these articles to their own members under a plan previously agreed to. The principal points of their scheme, afterward known as the "Rochdale Plan," were as follows: sale of goods at regular market prices, division of profits to members at quarterly intervals in proportion to purchases, subscription to capital in instalments by members, and payment of five per cent interest. There were also various provisions of minor importance, such as absolute purity and honesty of goods, insistance on cash payments, devoting a part of their earnings to educational or other self-improvement, settling all questions by equal vote. These arrangements sprang naturally from the fact that they proposed carrying on their store for their own benefit, alike as proprietors, shareholders, and consumers of their goods.
The source of the profits they would have to divide among their members was the same as in the case of any ordinary store. The difference between the wholesale price, at which they would buy, and the retail market price, at which they would sell, would be the gross profits. From this would have to be paid, normally, rent for their store, wages for their salesmen, and interest on their capital. But after these were paid there should still remain a certain amount of net profit, and this it was which they proposed to divide among themselves as purchasers, instead of leaving it to be taken by an ordinary store proprietor. The capital they furnished themselves, and consequently paid themselves the interest. The first two items also amounted to nothing at first, though naturally they must be accounted for if their store rose to any success. As a matter of fact, their success was immediate and striking. They admitted new members freely, and at the end of the first year of their existence had increased in numbers to seventy-four with £187 capital. During the year they had done a business of £710, and distributed profits of £22. A table of the increase of this first successful coöperative establishment at succeeding ten years' periods is as follows:—
| Date | Members | Capital | Business | Profits |
| 1855 | 1,400 | £ 11,032 | £ 44,902 | £ 3,109 |
| 1865 | 5,326 | 78,778 | 196,234 | 25,156 |
| 1875 | 8,415 | 225,682 | 305,657 | 48,212 |
| 1885 | 11,084 | 324,645 | 252,072 | 45,254 |
| 1898 | 12,719 | ———— | 292,335 | ———— |
They soon extended their business in variety as well as in total amount. In 1847 they added the sale of linen and woollen goods, in 1850 of meat, in 1867 they began baking and selling bread to their customers. They opened eventually a dozen or more branch stores in Rochdale, the original Toad Lane house being superseded by a great distributing building or central store, with a library and reading room. They own much property in the town, and have spread their activity into many lines.
The example of the Rochdale society was followed by many others, especially in the north of England and south of Scotland. A few years after its foundation two large and successful societies were started in Oldham, having between them by 1860 more than 3000 members, and doing a business of some £80,000 a year. In Liverpool, Manchester, Birmingham, and other cities similar societies grew up at the same period. In 1863 there were some 454 coöperative societies of this kind in existence, 381 of them together having 108,000 members and doing an annual business of about £2,600,000. One hundred and seventeen of the total number of societies were in Lancashire and 96 in Yorkshire. Many of these eventually came to have a varied and extensive activity. The Leeds Coöperative Society, for instance, had in 1892 a grist mill, 69 grocery and provision stores, 20 dry goods and millinery shops, 9 boot and shoe shops, and 40 butcher shops. It had 12 coal depots, a furnishing store, a bakery, a tailoring establishment, a boot and shoe factory, a brush factory, and acted as a builder of houses and cottages. It had at that time 29,958 members. The work done by these coöperative stores is known as "distributive coöperation," or "coöperation in distribution." It combines the seller and the buyer into one group. From one point of view the society is a store-keeping body, buying goods at wholesale and selling them at retail. From another point of view, exactly the same group of persons, the members of the society, are the customers of the store, the purchasers and consumers of the goods. Whenever any body of men form an association to carry on an establishment which sells them the goods they need, dividing the profits of the buying and selling among the members of the association, it is a society for distributive coöperation.
A variation from the Rochdale plan is that used in three or perhaps more societies organized in London between 1856 and 1875 by officials and employees of the government. These are the Civil Service Supply Association, the Civil Service Coöperative Society, and the Army and Navy Stores. In these, instead of buying at wholesale and selling at retail rates, sharing the profits at the end of a given term, they sell as well as buy at wholesale rates, except for the slight increase necessary to pay the expenses of carrying on the store. In other words, the members obtain their goods for use at cheap rates instead of dividing up a business profit.
But these and still other variations have had only a slight connection with the working-class coöperative movement just described. A more direct development of it was the formation, in 1864, of the Wholesale Coöperative Society, at Manchester, a body holding much the same relation to the coöperative societies that each of them does to its individual members. The shareholders are the retail coöperative societies, which supply the capital and control its actions. During its first year the Wholesale Society possessed a capital of £2456 and did a business of £51,858. In 1865 its capital was something over £7000 and business over £120,000. Ten years later, in 1875, its capital was £360,527 and yearly business £2,103,226. In 1889 its sales were £7,028,994. Its purchasing agents have been widely distributed in various parts of the world. In 1873 it purchased and began running a cracker factory, shortly afterward a boot and shoe factory, the next year a soap factory. Subsequently it has taken up a woollen goods factory, cocoa works, and the manufacture of ready-made clothing. It employs something over 5000 persons, has large branches in London, Newcastle, and Leicester, agencies and depots in various countries, and runs six steamships. It possesses also a banking department. Coöperative stores, belonging to wholesale and retail distributive coöperative societies, are thus a well-established and steadily, if somewhat slowly, extending element in modern industrial society.
86. Coöperation in Production.—But the greatest problems in the relations of modern industrial classes to one another are not connected with buying and selling, but with employment and wages. The competition between employer and employee is more intense than that between buyer and seller and has more influence on the constitution of society. This opposition of employer and employee is especially prominent in manufacturing, and the form of coöperation which is based on a combination or union of these two classes is therefore commonly called "coöperation in production," as distinguished from coöperation in distribution. Societies have been formed on a coöperative basis to produce one or another kind of goods from the earliest years of the century, but their real development dates from a period somewhat later than that of the coöperative stores, that is, from about 1850. In this year there were in existence in England bodies of workmen who were carrying on, with more or less outside advice, assistance, or control, a coöperative tailoring establishment, a bakery, a printing shop, two building establishments, a piano factory, a shoe factory, and several flour mills. These companies were all formed on the same general plan. The workmen were generally the members of the company. They paid themselves the prevailing rate of wages, then divided among themselves either equally or in proportion to their wages the net profits of the business, when there were any, having first reserved a sufficient amount to pay interest on capital. As a matter of fact, the capital and much of the direction was contributed from outside by persons philanthropically interested in the plans, but the ideal recognized and desired was that capital should be subscribed, interest received, and all administration carried on by the workmen-coöperators themselves. In this way, in a coöperative productive establishment, there would not be two classes, employer and employee. The same individuals would be acting in both capacities, either themselves or through their elected managers. All of these early companies failed or dissolved, sooner or later, but in the meantime others had been established. By 1862 some 113 productive societies had been formed, including 28 textile manufacturing companies, 8 boot and shoe factories, 7 societies of iron workers, 4 of brush makers, and organizations in various other trades. Among the most conspicuous of these were three which were much discussed during their period of prosperity. They were the Liverpool Working Tailors' Association, which lasted from 1850 to 1860, the Manchester Working Tailors' Association, which flourished from 1850 to 1872, and the Manchester Working Hatters' Association, 1851-1873. These companies had at different times from 6 to 30 members each. After the great strike of the Amalgamated Society of Engineers, in 1852, a series of iron workers' coöperative associations were formed. In the next twenty years, between 1862 and 1882, some 163 productive societies were formed, and in 1892 there were 143 societies solely for coöperative production in existence, with some 25,000 members. Coöperative production has been distinctly less prosperous than coöperative distribution. Most purely coöperative productive societies have had a short and troubled existence, though their dissolution has in many cases been the result of contention rather than ordinary failure and has not always involved pecuniary loss. In addition to the usual difficulties of all business, insufficiency of capital, incompetency of buying and selling agents and of managers, dishonesty of trusted officials or of debtors, commercial panics, and other adversities to which coöperative, quite as much as or even more than individual companies have been subject, there are peculiar dangers often fatal to their coöperative principles. For instance, more than one such association, after going through a period of struggle and sacrifice, and emerging into a period of prosperity, has yielded to the temptation to hire additional employees just as any other employer might, at regular wages, without admitting them to any share in the profits, interest, or control of the business. Such a concern is little more than an ordinary joint-stock company with an unusually large number of shareholders. As a matter of fact, plain, clear-cut coöperative production makes up but a small part of that which is currently reported and known as such. A fairer statement would be that there is a large element of coöperation in a great many productive establishments. Nevertheless, productive societies more or less consistent to coöperative principles exist in considerable numbers and have even shown a distinct increase of growth in recent years.
87. Coöperation in Farming.—Very much the same statements are true of another branch of coöperative effort,—coöperation in farming. Experiments were made very early, they have been numerous, mostly short-lived, and yet show a tendency to increase within the last decade. Sixty or more societies have engaged in coöperative farming, but only half a dozen are now in existence. The practicability and desirability of the application of coöperative ideals to agriculture is nevertheless a subject of constant discussion among those interested in coöperation, and new schemes are being tried from time to time.
The growth of coöperation, like that of trade unions, has been dependent on successive modifications of the law; though it was rather its defects than its opposition that caused the difficulty in this case. When coöperative organizations were first formed it was found that by the common law they could not legally deal as societies with non-members; that they could not hold land for investment, or for any other purpose than the transaction of their own business, or more than one acre even for this purpose; that they could not loan money to other societies; that the embezzlement or misuse of their funds by their officers was not punishable; and that each member was responsible for the debts of the whole society. Eight or ten statutes have been passed to cure the legal defects from which coöperative associations suffered. The most important of these were the "Frugal Investment Clause" in the Friendly Societies Act of 1846, by which such associations were allowed to be formed and permitted to hold personal property for the purposes of a society for savings; the Industrial and Provident Societies Act, of 1852, by which coöperative societies were definitely authorized and obtained the right to sue as if they were corporations; the Act of 1862, which repealed the former acts, gave them the right of incorporation, made each member liable for debt only to the extent of his own investment, and allowed them greater latitude for investments; the third Industrial and Provident Societies Act of 1876, which again repealed previous acts and established a veritable code for their regulation and extension; and the act of 1894, which amends the law in some further points in which it had proved defective. All the needs of the coöperative movement, so far as they have been discovered and agreed upon by those interested in its propagation, have thus been provided for, so far as the law can do so.