112. RELATION OF PROFIT SHARING TO COÍPERATION.—Profit sharing permits the workmen to secure more than a regular wage from a given enterprise, without, however, giving them any control over the management of the business. Co÷peration goes a step farther, and attempts to dispense with either a number of middlemen or with the managing employer, or with both middlemen and employer. In the case of a profit-sharing scheme in which the share of the profits accruing to the workmen is invested in the business for them, ultimate control of the enterprise may come into the hands of the workmen through profit sharing. In such a case the plant might be conducted co÷peratively. In practically every instance, however, co÷peration does not grow out of profit sharing, but arises independently.
113. ESSENCE OF COÍPERATION.—The essence of co÷peration is that a group of individuals undertake to perform for themselves those functions which are commonly carried on by the business man. Co÷peratives are often workmen, though not necessarily so.
Under the co÷perative plan, all of the profits of the enterprise are divided among the co÷perators; on the other hand, the risks of the business must also be borne by them. Management of the enterprise is conducted partly by officers or committees serving without pay, and partly by paid agents. The general policies of the business are settled by the co÷perators acting as a body.
Co÷peration seeks to exchange the centralized control of the business man for the diffuse control of a group of co÷perators. This arrangement, its advocates hope, will permit wealth and power to be distributed among more and more people, and especially among those classes that possess relatively little property. Let us inquire briefly into the four types of co÷peration.
114. CONSUMERS' COÍPERATION.—Consumers' co÷peration, also known as distributive co÷peration or co÷peration in retail trade, is the most common form of co÷peration. It is also probably the most successful form.
In this form of co÷peration, a number of individuals contribute their savings to a common fund, buy certain desired commodities at wholesale prices, and distribute these among themselves. Generally, the co÷perative store sells to its members at the regular retail price, but at stated intervals throughout the year the profits of the business are distributed among the co÷peratives in proportion to the amount of their individual purchases. Thus the difference between the wholesale and the retail price—minus the expense of conducting the store—goes to the co÷perators, instead of to a store keeper or other middleman.
One of the best examples of consumers' co÷peration is the Rochdale Society of Equitable Pioneers, established in England in 1844. This type of co÷peration has also been remarkably successful in Germany, Belgium, and other continental countries. The idea was taken up in the United States about the middle of the nineteenth century, and at the present time there are in this country about 2000 co÷perative stores, many of them doing a thriving business. These stores are located chiefly in New England, the North Central States, and the West, few being found in the South.
115. COÍPERATION IN CREDIT.—Credit co÷peration may take any one of a number of forms. In one of the best known forms, a group of persons form a credit society by contributing a proportion of their personal savings to a common fund. On the strength of this capital, and of their own individual liability, they borrow more capital. The total amounts thus got together are then loaned to the members of the society at a specified rate of interest. This rate of interest is higher than that at which the group had borrowed money from outside sources; nevertheless, it is lower than the rate members would have to pay if they individually sought loans at a bank. This is the aim of co÷peration in credit: to enable persons of small means to secure loans without paying the high rates which as individuals they would ordinarily have to meet, if, indeed, they as individuals could secure loans under any conditions.
Credit co÷peration has been most successful in Germany, particularly among artisans and small farmers. It has also attained considerable success among the small tradesmen and artisans of Italy. In the United States co÷peration in credit is less highly developed, but recently its influence has been slowly increasing. In many cases it supplies the principle underlying building and loan associations in this country.
116. COÍPERATION IN MARKETING.—The co÷perative principle has also been applied to the marketing of agricultural products. In Denmark, for example, it has been found that farmers can market their dairy products co÷peratively, and thus save for themselves much of the profit that would otherwise go to commission agents and other middlemen. A similar saving has been effected in Holland, Belgium, and, to some extent, in France. Of recent years, co÷peration in marketing has become important in the United States, finding particular favor among the farmers of the Middle and Far West. At the present time there are in this country more than two thousand co÷perative cheese factories, and more than three thousand co÷perative creameries. There are also more than a thousand societies for the co÷perative marketing of fruit, as well as numerous live-stock selling agencies.