More radical than profit-sharing, which involves only a change in the method of payment of wages, is co-operation, which involves a change of management as well. Its final goal, in the minds of its advocates, is the radical modification if not ultimate abolition of the present wage system. While profit-sharing is paternalistic and is directed to an increase of production, co-operation may be said to be democratic, and to aim at a more equitable distribution. Under this plan the laborers hope to divert to themselves the large amount of profits which they now see going into the possession of their employers. By eliminating the manager or enterpriser they hope to save his profits for themselves. Two different kinds of co-operation are usually distinguished—distributive or consumers’ co-operation, and producers’ co-operation—which we may profitably take up in turn.
Successful consumers’ co-operation may be said to have originated in Great Britain when twenty-eight Rochdale workingmen founded their famous society of Equitable Pioneers. The success and growth of this remarkable experiment, starting with a capital of £28, to a great system of 8,000 members with a capital of £200,000 in 1874, is a most romantic story. It was largely imitated and retail co-operative stores sprang up all over England. In 1864 the English Co-operative Wholesale Society was started, for the purpose of the joint purchase of supplies for the retail co-operative stores on better terms than these could secure singly from ordinary wholesalers. It effected large economies and was successful from the beginning; by 1901 it had a capital of £2,500,000 and acted as purchaser for over 1,000 retail societies. From buying, the society soon passed to making its own goods and now manufactures directly a long list of commodities. In 1868 the Scottish
Wholesale Society was inaugurated upon practically the same plan. Consumers’ co-operation has met with considerable success in Europe also. In the United States, however, experiments of this kind have in general had only a brief existence. It is impossible to say how many such societies exist today as no adequate statistics on the subject exist. Trade union stores in New England, the grange stores of the Patrons of Husbandry and later similar ones of the Sovereigns of Industry, and a few sporadic movements since in different parts of the country, show what has been attempted. The reasons for the lack of success in this country are not hard to find. Co-operation requires a willingness to take considerable trouble for small economies, which American workingmen, with their generally high wages, have not yet been willing to take. It also requires a considerable degree of homogeneity in thought and interests on the part of a people, which is naturally less present in the United States with its large admixture of foreign population than in England or the countries of Europe.
The methods of the Rochdale Society will serve as an illustration of the way in which the savings effected by co-operation are distributed among the members. Any one might become a member upon payment of one shilling and was then entitled to trade at the store. The prices charged were those current in the town, but purity of goods was assured; cash payments were an essential feature. At the end of the year the profits were divided among the members in proportion to the amount of their purchases. On the other hand, it may be noted that no attempt was made to, introduce profit-sharing with the employes, who are paid ordinary but good wages only. Other forms of consumers’ co-operation are those which undertake to supply insurance, or credit, like the co-operative insurance companies, banks, and building and loan associations. The latter especially have had considerable success in the United
States and have helped many a laborer or man of small means to the ownership of a home.
Producers’ co-operation differs from that just described in that it is a union on the part of laborers to do away with the employer and to secure for themselves the profits. The object of the first is to lower prices for the co-operators as consumers; the object of the second is rather to secure higher prices for themselves as producers by eliminating the profits of the industrial manager. They hope to perform his function by their collective effort, and to manage as well as labor; indeed, by diminishing friction and strikes they even hope to increase the profits. Examples of successful co-operation of this sort are not numerous, as it has great difficulties to contend with. Most of the experiments have failed, though recently it would seem that the movement is making substantial though slow progress, especially in France and England. Most of those in the latter country, however, seem to be of simple industries, as agriculture and dairy-farming. The most notable example of successful productive co-operation in the United States has been furnished by the coopers of Minneapolis, who organized a shop of their own in 1868 and have steadily increased their business since that time. Other instances often cited are the wood-workers in St. Louis and boot and shoe companies in Massachusetts. More recently there has been a considerable extension of co-operative creameries, cheese factories and similar businesses of a simple kind.
The advantages of co-operation are summed up as follows by President Walker.[37] From the laborer’s point of view: “First, to secure for the laboring class that large amount of wealth, which ... goes annually in profits to the employer. Second, to secure for the laborer the opportunity to produce independently of the will of an employer.... In addition to these, the political economist beholds in cooperation
three sources of advantage. First, co-operation would, by the very terms of the case, do away with strikes.... Second, the workman would be incited to greater industry and to greater carefulness in dealing with materials and with machinery. Third, in no small degree frugality would be encouraged.” To these may be added other advantages, mostly realizable, however, in consumers’ co-operation. Saving in store-room, clerk hire, advertising, book-keeping, etc., is effected, while above all, the practice of cash payments saves all loss from bad debts. The initial success of the Rochdale pioneers was in large part due to the economy in this line, as a system of long credits burdened the retail trade of England at the time they began. In this country the large department stores have introduced this system and have thus been able to give their customers lower prices, and by so much have lessened the motive for consumers’ co-operation. The educative effects of successful co-operation upon the participators in developing habits of thrift, careful management and a knowledge of business principles, is one of the chief advantages of the system. The ultimate ideal of enthusiastic co-operators does not, however, stop short of a mere saving in price. The goal is stated as follows by the Right Relationship League of America, which has several co-operative stores in the Northwest: Consumers’ co-operation is merely the first step which “will lead next to co-operative production, next to public ownership of natural resources and finally to complete industrial and economic equality, social and political right relationship—the Kingdom of God on Earth.”
The defects of co-operation have already been suggested in the account of their failure. In the first place, the importance and need of intelligent and efficient management are usually underrated by workingmen. They are unwilling to pay high salaries and as a consequence lose the best men and secure inefficient service. Co-operation has therefore succeeded best in retail trade where the processes are
comparatively simple, or in those branches of production where industry counts for most and management for least. But even if it were possible to secure an efficient and progressive manager for a co-operative shop, it is found very difficult for a man chosen by the workmen to enforce discipline among them. A second disadvantage is the difficulty of securing capital. Where, as in many branches of large-scale manufacturing today, the average investment of capital amounts to more than $1,000 per employe, the impossibility of obtaining this by the contributions of the workers is obvious. Nor are capitalists usually willing to lend to such organizations, as the risks are too great. To meet this difficulty Ferdinand Lassalle, a German socialist, proposed that the state should advance the necessary capital to associations of workmen. But the experience so far with productive co-operation would seem to suggest that the social benefits would not equal the waste of public capital. There is danger also that if successful the co-operative associations would tend to become monopolies; they are profit-seeking societies and would probably not differ materially in their methods from ordinary joint stock enterprises.