As already noted, the co-operative stores exemplify a third type of co-operative production. In some cases the productive concern is under the management of a local retail establishment, but the great majority of them are conducted by the English and Scottish Wholesale Societies. As regards the employés of these enterprises, the arrangement is not true co-operation, since they have no part in the ownership of the capital. The Scottish Wholesale Society, as we have seen, permits the employés of its productive works to share in the profits thereof; nevertheless it does not admit them as stockholders, nor give them any voice in the management. In all cases the workers may, indeed, become owners of stock in their local retail stores. Since the latter are stockholders in the wholesale societies, which in turn own the productive enterprises, the workers have a certain indirect and attenuated proprietorship in the productive concerns. But they derive therefrom no dividends. All the interest and most of the profits of the productive establishments are taken by the wholesale and retail stores. For it is the theory of the wholesale societies that the employés in the works of production should share in the gains thereof only as consumers. They are to profit only in the same way and to the same extent as other consumer-members of the local retail establishments.
The most effective and beneficial form of co-operative production is evidently that which has been described as the "perfect" type. Were all production organised on this plan, the social burden of interest would be insignificant, industrial despotism would be ended, and industrial democracy realised. As things are, however, the establishments exemplifying this type are of small importance. Their increase and expansion are impeded by lack of directive ability and of capital, and the risk to the workers' savings. Yet none of these obstacles is necessarily insuperable. Directive ability can be developed in the course of time, just as it was in the co-operative stores. Capital can be obtained fast enough perhaps to keep pace with the supply of directive ability and the spirit of co-operation. The risk undertaken by workers who put their savings into productive concerns owned and managed by themselves need not be greater than that now borne by investors in private enterprises of the same kind. There is no essential reason why the former should not provide the same profits and insurance against business risks as the latter. While the employés assume none of the risks of capitalistic industry, neither do they receive any of the profits. If the co-operative factory exhibits the same degree of business efficiency as the private enterprise it will necessarily afford the workers adequate protection for their savings and capital. Indeed, if "perfect" co-operative production is to be successful at all its profits will be larger than those of the capitalistic concern, owing to the greater interest taken by the workers in their tasks, and in the management of the business.
For a long time to come, however, it is probable that "perfect" co-operative production will be confined to relatively small and local industries. The difficulty of finding sufficient workers' capital and ability to carry on, for example, a transcontinental railroad or a nationwide steel business, is not likely to be overcome for one or two generations.[157]
The labour co-partnership form of co-operation is susceptible of much wider and more rapid extension. It can be adapted readily to the very large as well as to the small and medium sized concerns. Since it requires the workers to own but a part of the capital, it can be established in any enterprise in which the capitalists show themselves willing and sympathetic. In every industrial corporation there are some employés who possess savings, and these can be considerably increased through the profit sharing feature of co-partnership. A very long time must, indeed, elapse before the workers in any of the larger enterprises could get possession of all, or even of a controlling share of the capital, and a considerable time would be needed to educate and fit them for successful management.
Production under the direction of the co-operative stores can be extended faster than either of the other two forms, and it has before it a very wide even though definitely limited field. The British wholesale societies have already shown themselves able to conduct with great success large manufacturing concerns, have trained and attracted an adequate number of competent leaders, and have accumulated so much capital that they have been obliged to invest several million pounds in other enterprises. The possible scope of the stores and their co-operative production has been well described by C. R. Fay: "distribution of goods for personal consumption, first, among the working class population, secondly, among the salaried classes who feel a homogeneity of professional interest; production by working class organisations alone (with rare exceptions in Italy) of all the goods which they distribute to their members. But this is its limit. Distribution among the remaining sections of the industrial population; production for distribution to these members; production of the instruments of production, and production for international trade; the services of transport and exchange: all these industrial departments are, so far as can be seen, permanently outside the domain of a store movement."[158]
The theory by which the stores attempt to justify the exclusion of the employés of their productive concerns from a share of the profits thereof is that all profits come ultimately from the pockets of the consumer, and should all return to that source. The defect in this theory is that it ignores the question whether the consumers ought not to be required to pay a sufficiently high price for their goods to provide the producers with profits in addition to wages. While the wholesale stores are the owners and managers of the capital in the productive enterprises, and on the capitalistic principle should obtain the profits, the question remains whether this is necessarily a sound principle, and whether it is in harmony with the theory and ideals of co-operation. In those concerns which have adopted the labour co-partnership scheme, the workers, even when they own none of the capital, are accorded a part of the profits. It is assumed that this is a fairer and wiser method of distribution than that which gives the labourer only wages, leaving all the profits to the manager-capitalist. This feature of co-partnership rests on the theory that the workers can, if they will, increase their efficiency and reduce the friction between themselves and their employer to such an extent as to make the profit sharing arrangement a good thing for both parties. Consequently the profits obtained by the workers are a payment for this specific contribution to the prosperity of the business. Why should not this theory find recognition in productive enterprises conducted by the co-operative stores?
In the second place, the workers in these concerns ought to be permitted to participate in the capital ownership and management. They would thus be strongly encouraged to become better workers, to save more money, and to increase their capacity for initiative and self government. Moreover, this arrangement would go farther than any other system toward reconciling the interests of producer and consumer. As producer, the worker would obtain, besides his wages, interest and profits up to the limit set by the competition of private productive concerns. As consumer, he would share in the profits and interest which would otherwise have gone to the private distributive enterprises. In this way the producer and consumer would each get the gains that were due specifically and respectively to his activity and efficiency.
Advantages and Prospects of Co-operation
At this point it will perhaps be well to sum up the advantages and to estimate the prospects of the co-operative movement. In all its forms co-operation eliminates some waste of capital and energy, and therefore transfers some interest and profits from a special capitalist and undertaking class to a larger and economically weaker group of persons. For it must be borne in mind that all co-operative enterprises are conducted mainly by and for labourers or small farmers. Hence the system always makes directly for a better distribution of wealth. To a considerable extent it transfers capital ownership from those who do not themselves work with or upon capital to those who are so engaged; namely, the labourers and the farmers; thus it diminishes the unhealthy separation now existing between the owners and the users of the instruments of production. Co-operation has, in the second place, a very great educational value. It enables and induces the weaker members of economic society to combine and utilise energies and resources that would otherwise remain unused and undeveloped; and it greatly stimulates and fosters initiative, self confidence, self restraint, self government, and the capacity for democracy. In other words, it vastly increases the development and efficiency of the individual. It likewise induces him to practise thrift, and frequently provides better fields for investment than would be open to him outside the co-operative movement. It diminishes selfishness and inculcates altruism; for no co-operative enterprise can succeed in which the individual members are not willing to make greater sacrifices for the common good than are ordinarily evoked by private enterprise. Precisely because co-operation makes such heavy demands upon the capacity for altruism, its progress always has been and must always continue to be relatively slow. Its fundamental and perhaps chief merit is that it does provide the mechanism and the atmosphere for a greater development of the altruistic spirit than is possible under any other economic system that has ever been tried or devised.
By putting productive property into the hands of those who now possess little or nothing, co-operation promotes social stability and social progress. This statement is true in some degree of all forms of co-operation, but it applies with particular force to those forms which are carried on by the working classes. A steadily growing number of keen-sighted social students are coming to realise that an industrial system which permits a comparatively small section of society to own the means of production and the instrumentalities of distribution, leaving to the great majority of the workers nothing but their labour power, is fundamentally unstable, and contains within itself the germs of inevitable dissolution. No mere adequacy of wages and other working conditions, and no mere security of the workers' livelihood, can permanently avert this danger, nor compensate the individual for the lack of power to determine those activities of life which depend upon the possession of property. Through co-operation this unnatural divorce of the users from the owners of capital can be minimised. The worker is converted from a mere wage earner to a wage earner plus a property owner, thus becoming a safer and more useful member of society. In a word, co-operation produces all the well recognised individual and social benefits which have in all ages been evoked by the "magic of property."