The most effective means of lessening the volume of interest, and bringing about a wider distribution of capital, is to be found in co-operative enterprise. Co-operation in general denotes the unified action of a group of persons for a common end. A church, a debating club, a joint stock company, exemplifies co-operation in this sense. In the strict and technical sense, it has received various definitions. Professor Taussig declares that it "consists essentially in getting rid of the managing employer"; but this description is applicable only to co-operatives of production. "A combination of individuals to economise by buying in common, or increase their profits by selling in common" (Encyclopedia Britannica) is likewise too narrow, since it fits only distributive and agricultural co-operation. According to C. R. Fay, a co-operative society is "an association for the purpose of joint trading, originating among the weak, and conducted always in an unselfish spirit." If the word, "trading" be stretched to comprehend manufacturing as well as commercial activities, Fay's definition is fairly satisfactory. The distinguishing circumstance, "originating among the weak," is also emphasised by Father Pesch in his statement that the essence, aim, and meaning of co-operation are to be found in "a combination of the economically weak in common efforts for the security and betterment of their condition."[154] In order to give the proper connotation for our purpose, we shall define co-operation as, that joint economic action which seeks to obtain for a relatively weak group all or part of the profits and interest which in the ordinary capitalist enterprise are taken by a smaller and different group. This formula puts in the foreground the important fact that in every form of co-operative effort, some interest or profits, or both, are diverted from those who would have received them under purely capitalistic arrangements, and distributed among a larger number of persons. Thus it indicates the bearing of co-operation upon the problem of lightening the social burden of interest.
From the viewpoint of economic function, co-operation may be divided into two general kinds, producers' and consumers'. The best example of the former is a wage earners' productive society; of the latter, a co-operative store. Credit co-operatives and agricultural co-operatives fall mainly under the former head, inasmuch as their principal object is to assist production, and to benefit men as producers rather than as consumers. Hence from the viewpoint of type, co-operation may be classified as credit, agricultural, distributive, and productive.
Co-operative Credit Societies
A co-operative credit society is a bank controlled by the persons who patronise it, and lending on personal rather than material security. Such banks are intended almost exclusively for the relatively helpless borrower, as, the small farmer, artisan, shopkeeper, and the small man generally. Fundamentally they are associations of neighbours who combine their resources and their credit in order to obtain loans on better terms than are accorded by the ordinary commercial banks. The capital is derived partly from the sale of shares of stock, partly from deposits, and partly from borrowed money. In Germany, where credit associations have been more widely extended and more highly developed than in any other country, they are of two kinds, named after their respective founders, Schulze-Delitzsch and Raiffeisen. The former operates chiefly in the cities, serves the middle classes rather than the very poor, requires all its members to subscribe for capital stock, commits them to a long course of saving, and thus develops their interest as lenders. The Raiffeisen societies have, as a rule, very little share capital, exist chiefly in the country districts, especially among the poorest of the peasantry, are based mostly on personal credit, and do not profess to encourage greatly the saving and lending activities of their members. Both forms of association loan money to their members at lower rates of interest than these persons could obtain elsewhere. Hence credit co-operation directly reduces the burden of interest.
The Schulze-Delitzsch societies have more than half a million members in the cities and towns of Germany, sixty per cent. of whom take advantage of the borrowing facilities. The Raiffeisen banks comprise about one-half of all the independent German agriculturists. Some form of co-operative banking is well established in every important country of Europe, except Denmark and Great Britain. In the former country its place seems to be satisfactorily filled by the ordinary commercial banks. Its absence from Great Britain is apparently due to the credit system provided by the large landholders, to the scarcity of peasant proprietors, and to general lack of initiative. It is especially strong in Italy, Belgium, and Austria, and it has made a promising beginning in Ireland. In every country in which it has obtained a foothold, it gives indication of steady and continuous progress. Nevertheless it is subject to definite limits. It can never make much headway among that class of persons whose material resources are sufficiently large and palpable to command loans on the usual terms offered by the commercial banks. As a rule, these terms are quite as favourable as those available through the co-operative credit associations. It is only because the poorer men cannot obtain loans from the commercial banks on the prevailing conditions that they are impelled to have recourse to the co-operative associations.
Co-operative Agricultural Societies
The chief operations of agricultural co-operative societies are manufacturing, marketing, and purchasing. In the first named field the most important example is the co-operative dairy. The owners of cows hold the stock or shares of the concern, and in addition to dividends receive profits in proportion to the amount of milk that they supply. In Ireland and some other countries, a portion of the profits goes to the employés of the dairy as a dividend on wages. Other productive co-operatives of agriculture are found in cheese making, bacon curing, distilling, and wine making. All are conducted on the same general principles as the co-operative dairy.
Through the marketing societies and purchasing societies, the farmers are enabled to sell their products to better advantage, and to obtain materials needed for carrying on agricultural operations more cheaply than would be possible by isolated individual action. Some of the products marketed by the selling societies are eggs, milk, poultry, fruit, vegetables, live stock, and various kinds of grain. The purchasing societies supply for the most part manures, seeds, and machinery. Occasionally they buy the most costly machinery in such a way that the association becomes the corporate owner of the implements. In these cases the individual members have only the use of the machines, but they would be unable to enjoy even that advantage were it not for the intervention of the co-operative society. Where such arrangements exist, the society exemplifies not only co-operative buying but co-operative ownership.
Agricultural co-operation has become most widely extended in Denmark, and has displayed its most striking possibilities in Ireland. Relatively to its population, the former country has more farmers in co-operative societies, and has derived more profit therefrom, than any other nation. The rapid growth and achievements of agricultural co-operation in the peculiarly unfavourable circumstances of Ireland constitute the most convincing proof to be found anywhere of the essential soundness and efficacy of the movement. Various forms of rural co-operative societies are solidly established in Germany, France, Belgium, Italy, and Switzerland. In recent years the movement has made some progress in the United States, especially in relation to dairies, grain elevators, the marketing of live stock and fruit, and various forms of rural insurance. The co-operative insurance companies effect a saving to the Minnesota farmers of $700,000 annually, and the co-operative elevators handle about 30 per cent. of the grain marketed in that state. In 1915 the business transacted by the co-operative marketing and purchasing organisations of the farmers of the United States amounted to $1,400,000,000.