1939: Cooperation

The cooperative movement in the United States continues to make its greatest headway among agricultural groups. Marketing, purchasing, insurance, irrigation, credit, and many other services are being performed to an increasing extent by farmers' cooperative associations. In these cooperative undertakings. American farmers have been getting a considerable amount of assistance from the Farm Credit Administration. This governmental agency, through its several units, seeks to aid cooperatives in solving their problems and in developing new methods so that they may operate most effectively.

Farm Cooperatives.

During 1939 a volume of business amounting to approximately 2½ billion dollars was done by the agricultural marketing and purchasing cooperatives. About three-fourths of the farm cooperatives are marketing associations, handling a large variety of crops among which cotton, dairy products, livestock, poultry and eggs have been gaining in relative importance. Grains, fruits, and vegetables continue to occupy an important place in the cooperative marketing program.

Cooperative purchasing during the past year has continued to grow. Through 10,000 local cooperative groups, approximately 2,000,000 farmers obtained farm supplies with a retail value exceeding $400,000,000. One of the most important products bought cooperatively is petroleum, which constitutes about one-fourth of the total purchases. Feed, fertilizer, seed, and machinery are also prominent items on the list of cooperative purchases.

More than $11,000,000,000 worth of insurance was in force in 1939 through farmers' mutual insurance companies. All varieties of farm risk are handled by these farmers' mutuals although emphasis is placed upon windstorm and fire insurance. Over 60 specialized farmers' mutual windstorm insurance companies are in operation, while 300 fire insurance groups also write windstorm policies. Such insurance exceeds one-fifth of total property insurance in force. The mutual fire insurance companies, about 2,000 in number, insure well over half of all insured farm property in the United States, and in a few of the northern states in which farm mutuals are relatively numerous, nearly three-fourths of the business is done by these organizations.

Approximately half of the 15,500 farmers' cooperative associations and mutual companies in the United States used borrowed funds in connection with their operations. Especially in need of credit were tobacco, cotton, grain, and creamery cooperatives where substantial investments in inventories and physical facilities were required. Borrowing during the year exceeded 300 millions. While the principal sources of credit were the commercial banks, about one-fourth of the loans were obtained through the banks for cooperatives.

Production credit for individual farmers to finance all types of farm and ranch operations is extended to several thousand farmers and stockmen through some 535 production and credit associations at interest rates of 4½ per cent. Longer term loans are obtained through 4,000 local national farm loan associations which are serving over 600,000 members, who have cooperative mortgage loans outstanding of nearly two billion dollars. These loans are amortized in from 20 to 30 years. Interest rates in 1939 were down to 4 per cent on new loans.

Credit Unions in the United States.

Approximately 8,000 credit unions and cooperative savings associations are now operating in the United States. Of these 3,200 are Federal credit unions, chartered and examined by the Farm Credit Administration. These cooperatives are organized for the purpose of promoting thrift among their members and creating a source of credit for provident and productive purposes. Although some of the associations have been formed by farmer cooperatives, the majority of them are urban groups whose membership consists of employees of large business firms, labor unionists, teachers, church congregations and government employees. Membership in these credit unions exceeds 2,000,000 and total loans during 1939 amounted to roughly 200 million dollars. Illinois was the leading credit union state, both in number of associations and members.

Cooperation also takes the form of workers' industrial production cooperatives. This type has not been very widespread. The best contemporary illustration of it in the United States is the cooperative clothing workers project in Hightstown, New Jersey.

Consumer Cooperatives in the United States.

Consumer cooperation, while still in its infancy in the United States, (accounting for less than 2 per cent of retail sales) continues to show signs of growth. The Cooperative League of the United States is the leading national unit of the consumer cooperative movement. During 1939 this organization had associated with it 19 regional groups. Included among these are the National Cooperative and the United Cooperative, which are federations of large wholesale cooperatives. Collectively, they serve almost 2,000 local associations with about 1,000,000 patron members. Unaffiliated associations probably accounted for an additional million cooperative retail members. A large proportion of these consumer groups are rural organizations supplementing farmers' purchasing associations in the buying of household supplies, groceries and wearing apparel. Other leading units are the cooperative oil associations which operate filling stations and cooperative chain grocery and food stores. The balance of the list is made up of clothing, dry goods, and electrical appliance stores, and cooperative bakeries, creameries, cafeterias, and water supply associations. Interim reports by regional cooperative units showed a trend toward increased sales during 1939. Eastern Cooperative Wholesale (largest cooperative wholesale in the East) estimated its total business for the year at roughly $1,000,000 against slightly more than $700,000 in 1938. The Central Cooperative Wholesale (cooperative grocery distributor) reported monthly sales in September 1939 at $430,000 — the highest in its history.

In addition to these retail cooperative societies there are thousands of other associations in such fields as life insurance, medicine, burial aid, housing, laundry, and miscellaneous services. Cooperative college bookstores, cafeterias and dormitories have also grown in size and number. Although not directly linked with the cooperative movement, various consumer service organizations such as Consumers Research and the Consumers Union have aided the movement to a considerable extent by making the consumer increasingly aware of his role as a buyer. These groups compile information on consumer goods and services and offer assistance on matters relating to family income and the expenditure of earnings. The Consumers Guide service of the United States Agricultural Adjustment Administration is of a similar character. See also INTERNATIONAL CONFERENCES AND CONGRESSES.

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.