1938: Cooperation

Cooperative enterprise is a form of organization through which individuals voluntarily undertake certain joint activities and share in the benefits or proceeds of their collective effort. The cooperative movement is broad in scope, ranging from the production and marketing cooperatives to the credit unions and consumer cooperative associations.

Production and Marketing Cooperatives.

In the producers' cooperatives, groups of workers agree to share in the ownership and operation of a business. They acquire the necessary equipment and materials, elect their own officers, and decide upon an equitable plan for the distribution of the proceeds.

Somewhat closely related, although differing in type of membership, are the agricultural cooperatives and marketing associations formed by independent producers. Through mutual agreement, the goods produced by the members are marketed by the cooperatives in the most efficient manner and at the highest prices obtainable. In addition, various services are provided at minimum cost, including such functions as assembling, grading, transporting, warehousing, insuring and financing. Membership and employee education has become an accepted activity of agricultural cooperation. Instruction in the principles of cooperative business, in agricultural methods, the use of farm machinery and experiments with new seeds, sprays, and fertilizers are included in the production-service divisions of the cooperatives. Any savings or profits of the associations are distributed as dividends to the participating members.

The cooperative principle has been applied both to the selling and the buying of goods. Cooperative purchasing organizations or buying pools are organized by producers in order to obtain price concessions and other advantages through large-scale, collective purchase arrangements. Farmers have also organized mutual companies to serve them in providing irrigation projects, fire insurance, livestock feed, and miscellaneous services.

Credit Unions.

Cooperative credit enterprises or credit unions are associations of individuals who invest their savings in a common fund, which, in turn, serves as the source for the granting of loans to those members who wish to borrow. Non-borrowing members receive a reasonable return upon their surplus funds, while borrowers obtain loans under relatively simple regulations and at low cost.

Membership in the foregoing cooperative enterprises is estimated at nearly 5,000,000.

Consumer Cooperatives.

Consumers' cooperatives are associations formed by consumers ostensibly to enable them to buy goods at retail at a lower net cost than can be secured in ordinary retail outlets. Membership is established through the purchase of shares of stock of low-par value, which bear a fixed return. Membership is unlimited, but the number of shares of stock held by each member is usually restricted. All stockholders are entitled to vote, but a stockholder may cast only one vote regardless of the number of shares that he holds. The retail stores are operated like any other outlets and in competition with them. Price cutting is not usually practiced, but goods are sold at prevailing market prices wherever possible and on a cash basis. From any surpluses which result, a part is set aside for expansion purposes, the balance being distributed as 'patronage dividends.' or rebates of a certain percentage of all purchases made by the members during the period. As the movement develops, the retail cooperatives organize cooperative wholesale enterprises and in time, production and processing units.

The modern consumers cooperative movement follows rather closely the original pattern of cooperation outlined by a small group of English weavers, who, in 1844, organized the Equitable Pioneers Society, in the town of Rochdale. Viewed in the light of its more immediate program, the movement merely supplements private trade and industry by offering consumers practical alternatives, where private ownership has failed to lower prices through the reduction of monopoly profits or by the elimination of wasteful expenditures. A more basic, longer-run element associated with the movement, however, is the attempt to bring about the slow socialization of industry through the cooperative process. In other words, capitalistic ventures would gradually be made unprofitable through the operation and development of nonprofit cooperative enterprises in competition with them.

Growth of Farmer Cooperatives in the United States.

Except for isolated experiment in 100 per cent industrial employee-ownership plans, both in the United States and in other parts of the world, no important developments have occurred within recent years in the formation of employee cooperatives. Farmer cooperatives in the United States have, however, taken important steps in the direction of producer-cooperation, and thousands of agriculturists have formed mutual companies in manufacturing and service enterprises. Feed-mixing plants, fertilizer factories, oil-blending plants, paint-manufacturing establishments, farm machinery and implement works, dairies and creameries, and food-freezing plants are illustrative of the many production enterprises which have been organized on a cooperative basis.

A survey, conducted by the Farm Credit Administration and completed in 1938, revealed that more than 10,000 associations in the United States were engaged in marketing farm products and in purchasing farm supplies. Of these cooperatives, approximately three fourths were primarily selling organizations, handling a total cash business of more than $1,750,000,000, while one-fourth concentrated on buying for farmer members some $330,000,000 worth of farm supplies. Thousands of these cooperatives perform both buying and selling services for their members. Leading products marketed by agricultural cooperatives include milk and dairy products, grain, livestock, fruits and vegetables, cotton, eggs, and poultry. Purchasing cooperatives which serve more than one million farmers handle a large variety of farm supplies and equipment. Feed for livestock and poultry is the largest item of cooperative purchases, followed in importance by oil and gasoline. Other products handled in large volume by these associations include fertilizer, farm machinery, binder twine, hardware, crates and baskets, spray materials, and seed. The local purchasing cooperatives are, in turn, served by purchasing 'wholesales,' which conduct their business over large geographical areas.

Total assets of American agricultural cooperatives exceed $500,000,000. Member-ownership capital in these associations is more than $285,000,000, representing either original investments or accumulated savings. Annual patronage dividends returned to farmers amount to approximately $25,000,000. More than 2,000 of these marketing and purchasing associations have been operating continuously for over 25 years.

Production-credit associations are formed by farmer borrowers. A farmer borrows money at low interest rates from his association, which, in turn, discounts his note with the Federal Intermediate Credit Bank. Loans are made for the period from planting to harvest time. Production credit associations were first started in 1933. By July 1938, one million loans had been extended amounting to an aggregate of more than one billion dollars. Loans of $180,000,000 were outstanding in 1938. Approximately 6,700 credit unions and cooperative savings and loan societies are now operating in the United States. Membership in these associations exceeds 1,500,000, and outstanding loans are approximately $65,000,000.

Growth of Consumer Cooperatives in Europe.

The consumer cooperative movement has made rapid headway in Europe. In Great Britain, more than 1,100 cooperative enterprises serve a membership of more than 7,500,000 families. These establishments conduct an annual trade of over $1,000,000,000 or 12 per cent of the total national retail trade. In certain foodstuffs and household goods, the cooperatives control as much as 40 per cent of the retail trade. In Finland, greatest stronghold of the movement, one half of the population are members of consumer cooperatives, and it is conservatively estimated that from 25 to 30 per cent of the national retail trade and 40 per cent of all wholesale business is conducted by cooperatives. In Norway, Sweden, and Switzerland, approximately 10 to 12 per cent of the value of the retail trade flows through the cooperatives. In Switzerland, some of the towns are 100 per cent cooperative. In most of these countries, powerful national wholesales supply the local distributing outlets with the goods which they sell. Heavy capital investments in farms and plantations, mills, factories, and warehouses have enabled these cooperative unions to control completely integrated systems of production and distribution. Great strides have been made by them in the control of tea, breadstuffs, creameries, oil, boots and shoes, and electric bulbs.

Consumers Cooperation in the United States.

The development of consumers' cooperation in the United States has been relatively slow when compared with its growth in other nations. In recent years, however, American consumers have taken a more active interest in cooperation. Farm families have traditionally been in the lead in this country in consumer cooperative activity. The spread of the movement to the cities and to industrial populations in the aftermath of the depression following 1929 accounts to a large degree for the recent upsurge in membership and volume of business. Many of the new urban associations are found among professional and middle-class persons. Organized labor, churches, political clubs, fraternal orders and other groups are manifesting a lively interest in serving as organizational centers for new cooperative buying clubs or associations.

The first complete enumeration ever made of United States consumer cooperatives was undertaken in 1936 by the Bureau of Labor Statistics. The findings were reported in 1938, revealing that more than 3,600 retail cooperative societies were serving 677,000 families, and operating at an annual volume of $182,000,000. Included in the total of 3,600 stores and buying clubs were some 1,200 farmers' organizations engaged in the collective purchase of consumer goods, chiefly groceries and household needs. (Farmers' associations, which purchase only supplies used for production on the farm, such as feed, seed, fertilizer, etc., are not included here.) Another large group of cooperatives included in the tabulation were 1,150 petroleum associations handling the sale of gasoline and oil, auto tires and accessories, and various electric appliances. The balance consisted, in the main, of general store cooperatives, both urban and rural, carrying a varied line of groceries, meats, clothing, dry goods, fuel, hardware, and electrical appliances. In addition a few consumer-cooperative bakeries, creameries, cafeterias, water supply associations, and student supply stores completed the list.

This, however, does not tell the complete story of consumer-cooperative undertakings in the United States. The Marketing Research Division of the United States Department of Commerce reported in 1938 that, besides credit union and retail societies, there were almost 16,000 cooperative and mutual-assistance associations in such activities as housing, insurance, telephone and electrical service, and burial aid. Among these 3,700 telephone associations serve over 330,000 members; and 260 rural electrical cooperatives provide service to more than 161,000 farm families.

'Wholesales.'

About half of the 3,600 local retail cooperatives are members of some 30 wholesale buying associations. These 'wholesales' are formed for economies in volume purchasing and for control of quality. Member societies do not, however, obtain all their goods through cooperative 'wholesales.' Ownership and direction of the 'wholesales' ultimately vest in the individual cooperators who control the local societies.

Ten 'wholesales,' representing about 1,000 retail societies, pool their purchasing power in 'National Cooperatives.' This organization negotiates master contracts, by which goods are put under the cooperative label and delivered directly by manufacturers to the member regional wholesales.

Organization and Alliance.

Organization of the cooperative movement on a national basis is through the Cooperative League of the United States of America. Affiliated with the League are 5 regional and district leagues and other related associations. The League is itself a member of the International Cooperative Alliance, which is made up of the National Consumers' 'wholesales' and farmers' national federations of 40 countries, with an estimated membership of 100,000,000 people.

The greatest concentration of cooperative enterprise in the United States is in the North Central States. Minnesota, Illinois, Wisconsin, and Indiana are the leading states in which cooperatives have flourished.

Individualistic traditions, the lack of consumer-class consciousness, the heterogeneous population, and the hostility of middle-men have definitely held back the cooperative movement in America. Aggressive educational campaigns, the appeal to economies and to self-help, especially during depression years, and the friendly attitude of the Federal Government in the development of cooperatives have been responsible for some of the recent interest in the movement in the United States.