Co-operation in New England, urban and rural

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RUSSELL SAGE FOUNDATION PUBLICATIONS

Author's Preface

THIS investigation into the nature and scope of industrial co-operation in New England was begun in 1907, subsequent to a year's study of industrial problems in Europe. A recognition of the success of the co-operative movement abroad in stimulating and developing the latent powers of mind and character in men ordinarily socially diffident or aggressively selfish, occasioned this attempt to ascertain in how far industrial co-operation was practiced in New England and the result of its operation there. It was found advisable to limit the research to the main types of co-operation: associations for the production and distribution of the immediate necessities of life. Four other local types of co-operation — co-operative telephone companies, mutual insurance companies, building and loan associations, and credit unions — are therefore omitted.

It is fair to state that the four kinds of co-operation excluded from consideration here are widespread and influential in New England. The co-operative telephone companies, though least important, still number probably over a score and are interesting examples of vigorous local endeavor to satisfy a common need. In some in-

XV stances each process in the installation of the telephone system has been managed in person by the co-operating members, even to the making and setting of the telephone poles. These independent companies have found it necessary, however, to make terms with the Bell Telephone system for other than local service and in consequence most of them are now controlled or completely absorbed by that company.

The mutual insurance societies are of two main sorts, commercial and fraternal — the latter in both city and country being usually an incidental activity of secret orders. Co-operative insurance in New England far outnumbers all other types of co-operation, but the societies are not interrelated and have no common literature.

The co-operative building and loan associations, frequently termed "savings and loan associations" and "co-operative banks," are America's best known type of co-operation and are federated into both state and national leagues. They are formed to promote thrift, and to facilitate the acquisition of homes. On October 31, 191 1, there were 160 of these "co-operative banks" in Massachusetts alone and well over 200 in the whole of New England, all operated and owned by the skilled workingmen and small tradespeople of the cities and mill towns.

The credit unions are a new undertaking in American co-operative history, founded in Massachusetts since 1909 to fill a need until that date

xvi met only by unscrupulous money lenders known as "salary loan sharks/' Their purpose is "to promote thrift among the members by giving them an opportunity to save money in small amounts, and to obtain loans at moderate rates for purposes which promise to be of benefit to the borrower/'* These societies are in the main like the Schultze-Delitzschf banks of Germany with limited liability of members; they were copied from the credit unions of Canada. Thirty-two such associations had been formed in Massachusetts up to October 31, 191 2, giving evidence of a movement of consequence.

All the four above-mentioned co-operative practices are incidental to the main course of producers' and consumers' co-operation which in Europe at least aims at the complete reconstruction of industrial and social life — and to make unjust destructive competition give place to brotherhood and opportunity.

A complete account of the distributive and

* See page 19 of Credit Unions : Statement and suggestions in regard to organizing and managing a Credit Union in Massachusetts. Issued by the Bank Commissioner of the Commonwealth of Massachusetts, June 1, 191 1.

f In 1850 Herr Schultze, Mayor of Delitzsch, Germany, founded a credit union in Eilenburg. This credit bank and others that followed had share capital of much higher denomination than the credit unions of Canada and Massachusetts and differed from these latter in other minor details. To-day there are over 1000 banks of this type in Germany. For an account of the methods of these banks see Fay, C. R : Co-operation at Home and Abroad. Part I (London, P. S. King & Son, 1908); and Wolff, Henry W., People's Banks, especially Chapter VI. (3rd ed., London, P. S. King and Son, 1910.)

xvii productive co-operative societies of New England is rendered especially difficult because of certain local peculiarities of the movement. The lack of federation of the associations is both cause and result of an extreme isolation. Few societies are aware of the existence of more than two or three others and no list is available. Directories of cities reveal varied types of stores or factories or clubs styled "co-operative." Many an ordinary dry goods or grocer's shop has used the title because it "sounded well." Philanthropic societies,* too, sometimes use the name to cover their own endeavors and the anticipated reciprocation of their clientele. Business corporations having features of mutual benefit, such as profit-sharing schemes in the business world, have a somewhat better claim to the use of the word. But the societies that once were or now are truly co-operative may or may not indicate this feature in their corporate name. These facts, coupled with the taciturnity and suspiciousness of both native and immigrant New Englanders, therefore, render an all-inclusive account of co-operative societies impossible. The unincorporated and most elementary form of co-operation can not usually be traced.

Public and official sources of information have also proved of little value. Except in Massachu-

* For example, the Morgan Memorial Co-operative Industries and Stores of Boston, and the St. James Co-operative Sales of New Bedford.

xviii setts where in 1907 the Bureau of Statistics of Labor published a special bulletin (No. 47) on Distributive Co-operation in New England, state departments of labor have yielded no records of co-operative societies. The Massachusetts report was more limited than its title would indicate but it contained useful statements from 24 societies. Except for Maine the state departments of agriculture have proved ignorant of the co-operative organization of farmers within their boundaries. The files kept by secretaries of state of the corporations organized under their laws, have been of some service, especially in Massachusetts where statements of the assets and liabilities of all corporations are required and are published tannually. Dairy commissioners in Massachusetts, and Connecticut have the names of associations within the dairy industry. But aside from these meager records and except for some slight assistance from state colleges, there has been no official source of data.

Private sources have proved more fruitful and among these the annual reports of all the state granges and of the state dairymen's associations of Vermont and Maine were of much value. Files of the Arena and its successor, the Twentieth Century Magazine, of the New England Farmer, the Maine Farmer, and especially the New England Homestead have also been of use. Chief reliance, however, has been placed upon correspondence with the secretaries of the co-operative associations

xix which had been ascertained to be in operation, and upon schedules of from 20 to 40 questions filled out by their officers. Visits were made to the places of business of more than 100 societies.

A report on the subject of co-operation in New England was prepared by the writer in 1908 for the research department of the Boston School for Social Workers. This original study, a typewritten copy of which is permanently available among the doctors' theses of 1909 in the library of Harvard University, was an economic treatise on Distributive and Productive Co-operation in New England. The present volume by complete adaptation of the original material, and by exclusion of technical economic argument and of much detail, is intended as a practical treatment of the subject for popular use. During the summer of 191 1 the status of New England co-operation was entirely recanvassed, by letters to the old associations and to others more recently formed, and by examination of all available published data of the intervening period. The statistical tables have been brought down to date, the descriptive portions of the report largely rewritten, and an introductory and concluding chapter added to show the relation of co-operation in New England to the general co-operative movement elsewhere.

XX

Table Of Contents

PAGE

Introduction. By Francis G. Peabody, LL.D. v Author's Preface xv

Part I Co-operative Associations Of Workingmen

I. The Nature of Co-operative Enterprise . 3

II. Survivals of Early Movements . . 13

III. Associations among Immigrants ... 28

IV. Co-operation in Manufacture. ... 48 V. Needs and Trend of the Movement . . 58

PART II CO-OPERATIVE ASSOCIATIONS OF FARMERS VI. The Grange and General Agricultural Co-operation 87

VII. Co-operative Sale of Produce VIII. Co-operation in the Dairy Industry IX. Interpretation and Prospect .

Tables

1 12 132 175 187

APPENDICES I. Laws Relative to Co-operative Corporations in Connecticut and Massachusetts . .189 II. By-Laws of the Riverside Co-operative

Association of Maynard, Massachusetts . 193

III. Constitution and By-Laws of the Greystone

and District Co-operative Association . . 199

IV. By-Laws of the New England Cranberry

Sales Company 207 xxi

PART I

Chapter I The Nature Of Co-operative Enter- Prise

AIMS AND PRINCIPLES

THE past century has been characterized by a widespread abandonment of domestic and small-scale manufacture for large-scale production. The chief grounds for this transition are conceded to be, first, the use of steam, and later, the introduction of electric power in industry, which have made possible large undertakings and the employment of great numbers of operatives by single owners of capital. Two of the more serious social results of this revolution in industrial methods have been the severance of the personal relation and the increasing disparity in wealth between the employer of labor and his many employes. The increased output made possible by large-scale production has also stimulated expansion of trade, which in turn has tended to destroy in commerce as in industry the personal contact and the comparative similarity in fortune and interest of shopkeeper, employe, and client. Moreover, the possession of great wealth has materially increased the power of employer or capitalist to do good or ill in business, in politics, and in general social life. Protest against the misuse of this power has given rise to industrial co-operation.

The aim of co-operation is the substitution of common ownership and operation of trade and industry for individual or capitalist ownership. The co-operator seeks common ownership not through the government, as does the socialist, but through voluntary association of producers or consumers. The immediate economic purpose is to save money for the members of the association or to earn for them some form of middleman's profits. Thus, associations of workingmen producers seek to have factories and workshops owned by the operatives there employed. The profits of the industry do not go to a capitalist owner, but are divided equitably among employes.* The consumers' associations, which are relatively of vastly greater importance, are unions of men who seek to reduce the cost of living by owning stores, bakeries, etc., by eliminating all unnecessary expense in business operations, and by distributing among themselves the profits which ordinarily go to retailer, middleman, or producer. The ethical purpose is to moralize business by elimination of the frauds and graft which are too prevalent in competitive industry, to produce and sell only goods of high quality made under proper conditions, and to promote fraternity in the industrial

* See Chapter IV, p. 48. 4

NATURE OF CO-OPERATIVE ENTERPRISE

world. The vital fact of co-operation which has everywhere given the movement significance is that it aims to conduct business democratically — with open membership and equal voting power — and that it further seeks to secure the common good through self-help untrammelled by patronage or by governmental compulsion. Co-operative societies then may be defined as associations of men who seek to better their condition through uniting their capital and their effort democratically in the common pursuit of honest trade or industry.

Co-operation as actually practiced today, especially in Europe, covers in some degree every phase of business. It is found in farming, manufacturing, banking, insurance, and in both wholesale and retail distribution. It has attained pronounced success in two sociologically distinct fields : among workingmen who are organized primarily as consumers of goods and among farmers who hitherto have co-operated most readily as producers. Workingmen's associations are found in cities and in manufacturing towns and villages; farmers' associations in regions predominantly rural, though they may penetrate the city for purchase or sale of goods. Both of these main divisions include co-operative banks, stores, and factories, but the problems that characterize them differ widely. The rural associations are formed by men who are owners of private property and employers of labor, — petty capitalists who organize to overcome the handicap of geographical isolation and to gain larger profit from the commerce with the city. The urban group is intimately bound to the labor problem, is constantly concerned with questions of capital versus labor, with methods of profit-sharing, with trade-unionism and socialism. The essence of co-operation may be traced in primitive communal practice, or in certain phases of mediaeval guild systems. Modern industrial co-operation, however, began in the factory towns of England and is the direct outgrowth of popular reaction against the evils of nineteenth century competition. The prophet of co-operation was Robert Owen, a manufacturer, at whose instigation hundreds of consumers' clubs were established in Great Britain between 1820 and 1840. Owen's intention in proposing these associations was to establish not a co-operative movement like that of today, but socialism of a type already in part outgrown. The business methods of these original associations which sold goods at cost were faulty. The active enmity of private tradesmen whose prices were undercut was needlessly aroused and no margin of profit for the common purchase and sale of goods was left which could be reserved and drawn upon in times of business stress. The inevitable result was the failure of the movement.

THE ROCHDALE MOVEMENT

Modern co-operation is essentially democratic — a people's movement far more truly than either

NATURE OF CO-OPERATIVE ENTERPRISE

trade unionism, agrarianism, or even socialism in its prevalent orthodox form, can be. Its effective practice dates from the adoption of a specific business and social policy drawn up in 1844 by a group of 28 flannel weavers in Rochdale, England. The dramatic early history of the co-operative grocery store with which the Rochdale Equitable Pioneers' Society began is, in the rough, quite commonly known, and is in some degree reproduced in the story of all new associations, especially where, as in New England, they are unaided either by a co-operative union or by the state. The business principles of this association require detailed mention since, directly and indirectly, they have served quite largely as model for successful co-operative societies of every sort throughout the world. The Rochdale principles were:

1. Open membership with shares of low de-

nomination— usually at £1 or $5 each and payable by instalments, so as to be within the reach of all.

2. Limitation of the amount of shares to be

held by any one member, to prevent wide inequality in financial status of members.

3. Democratic government, each member to

have but one vote, irrespective of the number of shares that he or she may hold.

4. Sale of pure goods and fair measure at pre-

vailing market price, to avoid arousing needlessly the destructive hostility of local merchants.

5. Cash sales, to avoid loss through delayed

payments and uncollectable accounts, to reduce bookkeeping costs, and to insure purchase of goods on most advantageous terms. 6. Payment of not more than 5 per cent interest on shares, the rest of the profits, after deduction for depreciation and reserve, to go partly to an educational fund, partly to charity, and the remainder to be distributed to purchasers whether members or not, in proportion to their trade at the store.

The Rochdale pioneers, with a social farsightedness as rare as the economic sagacity of their business principles, drew up a social program which has largely governed the expansion of the co-operative movement. On a basis of complete religious and political tolerance, with membership open to all, they sought ultimately to establish co-operative methods throughout the whole range of the production and distribution of goods, and to unite all men in a world-wide brotherhood. They aimed to do this cautiously by rendering secure each step in the development of their association. Thus they planned to begin with a store for the co-operative distribution of household necessities. As capital accrued from the profits of their business, the store was to be followed by the purchase of factories in order to give employment to the unemployed members of the association and to make more cheaply the goods sold in the shop. Further capital was to be invested in farms for the production of raw materials and in the building of sanitary homes.

NATURE OF CO-OPERATIVE ENTERPRISE

Finally, by the encouragement of similar associations in other towns, and by federation for both business and social advantage, the goal — a co-operative commonwealth — was to be approached.

Other associations following the principles and program of the Rochdale store, were organized in British factory towns. In 1864 these local associations were federated for wholesale distribution and in 1873 they began centralized co-operative manufacture of goods. I n 1 869 the Co-operative Union * was established for purposes of education, propaganda, and the general protection of the movement. In 191 1 these federated co-operative associations in Great Britain comprised f over 2,700,000 members, and jointly owned $60,000,000 of stock in trade,

* Situated in Manchester, England. In 191 1 there were 1531 local societies affiliated with the British Co-operative Union, of which 1407 were distributive associations and the remainder chiefly productive. The scope of the Union's activity may be indicated by a list of its committees and their functions. (1) Office Committee, Executive, (2) Finance Sub-Committee, to check accounts and control expenditure, (3) Educational Committee, to promote classes in the sciences, in bookkeeping, in co-operation, and to provide lecturers, scholarships, and diplomas, (4) Productive Committee, to advise and aid productive associations, (5) Parliamentary Committee, to watch legislation and protect co-operative interests in Parliament, (6) Committee of Trade-Unionists and Co-operators, to settle disputes and maintain cordial relations between the co-operative and trade union movements, (7) Exhibitions Committee, to organize and control exhibitions of co-operative production, (8) Propaganda Committee, to help establishment of new societies or branches of existing stores and aid struggling associations with advice and loans, (9) International and Foreign Inquiry Committee, to work with the International Co-operative Alliance, attend foreign co-operative congresses, and report on foreign methods. See chapter XXII of Catherine Webb's "Industrial Co-operation," 4th Ed. revised, Manchester, 1910.

f Statistics compiled by the Co-operative Union, published on pp. 594-5 of the Report of the 44th Annual Co-operative Congress, Portsmouth, 1912.

>,ooo,ooo of land, buildings, machinery, and fixed stock, $40,000,000 of house property, and $95,000,000 otherwise invested. Their sales for that year amounted to over $500,000,000 and the net profits saved were $60,000,000.

Similar associations on the continent of Europe, though of more recent foundation, are growing each year in membership and success, but the proneness of a large proportion of the continental associations to restriction of membership on political, religious, or professional lines has seriously impeded organized expansion. Of these non-Rochdale movements, only the most important, that of the socialists, has reached New England. Their associations differ from the prevalent Rochdale practice* in that no interest is paid on invested capital, for according to socialist principles "all wealth is due to labor," and "capital is unproductive." If dividends on purchases are granted, they are usually paid in store coupons rather than in money. The major portion of trade profits is used as a fund to furtherpolitical socialism. In Belgium and to some extent in France and Italy, People's Palaces have been built by socialist co-operators, on the bases of the above principles, with shops, bakeries, libraries, theaters, cafes, and meeting halls for trade unions and all labor interests, — centers for the business, education, and recreation of "the people." Today in Europe the question of method and of aim between non-partisan co-operators of the Rochdale

* See Chapter 1 1 1, p. 29. 10

NATURE OF CO-OPERATIVE ENTERPRISE

type and the socialists are vital international issues. No other forms of co-operation are important.

HISTORY OF AGRICULTURAL CO-OPERATION ABROAD

The history of agricultural co-operation is obscure. Spontaneous local associations for purchase, manufacture, or sale of goods have probably existed among farmers since the days of primitive communism. Agricultural co-operation as an organized movement for business improvement and social betterment is, however, comparatively recent, and has only begun to borrow in method from the urban movements exemplified by the workingmen's co-operative associations, or to federate on matters of common importance. It ordinarily varies widely from community to community according to the prevailing local crops, possible markets, and the constitution, habits, and needs of the population. Co-operative purchasing associations are everywhere desirable. In Germany they are largely an off-shoot of the credit association or Raiffeisen bank,* a type of rural society that is scarcely known in America; in France they usually spring from the agricultural

*Banks of this type, founded by F. W. Raiffeisen in Flammersfeld in 1849 and modified somewhat later at Neuwied, have spread throughout the world, counting 15,500 local agricultural credit associations in Germany and 33,700 in Europe as a whole in the year 1910. Membership is restricted to the parish, there is little or no share capital, money as a rule is borrowed by the association on the unlimited liability of all members and loaned to individual borrowers, under close surveillance, for productive purposes only. Detailed explanation of the methods of these banks may be found in the books by Fay and Wolff mentioned in the note on page vii of the Preface.

II syndicates which are farmers' unions roughly corresponding in their activities to the granges of American farmers.

In Denmark, which is the most co-operative nation in the world, co-operation in significant form began only thirty years ago in the dairy industry. Notwithstanding its late adoption co-operative enterprise now embraces all of the agricultural industries upon which the commerce of Denmark is based, and has raised the whole country from poverty to prosperity and efficient democracy. In Ireland co-operation was urged upon the depleted farming population in the 90's by a handful of men of vision and tireless determination. In 19 10, 800 farmers' associations were revitalizing Irish rural communities.

The co-operative movement today has reached every continent of the globe, but it is in Europe, where the movement is oldest, that its results are best recorded. In England, the general movement is still less than seventy years old, and on the continent of Europe but half that age; organized agricultural co-operation is in most places still more recent. Yet the urban and rural movements are already federated both nationally and internationally on matters of common interest and are constantly increasing in their social value and effectiveness.

Chapter II Survivals Of Early Movements

THE United States was a nation of farmers until far into the nineteenth century. New England in 1820 counted but two towns of over 10,000 inhabitants; in 1830, three. The farm homes were largely self-sufficing, the families raising their own food, weaving and making their own clothes. It was not until 1830 that industrialism was at all widely felt in what is now the predominantly manufacturing district of America. It was not until the 30% therefore, that the minds of the New England people turned to the need of industrial co-operation.

THE NEW ENGLAND UNION STORES

The first important co-operative movement began in Boston among the working classes. Its aim, like that of the English societies, was to reduce the cost of living by saving to the consumer the wastes occasioned by the credit system and to secure to him honest goods, fair measure, and the profits of the private retailer.

Clubs with these objects in view, spontaneous in origin and unrecorded, probably existed long before this century and exist today in fair frequency among neighbors in city or country — usually for joint purchase of eggs, butter, or other home necessities. In the beginning these clubs owned no real estate, delivered no goods, and sold at cost price. One member of the group did the buying, ordinarily with little or no stipend for his services. For one to whom the time involved in collecting and filling orders was of slight account, the saving through wholesale purchase was in itself ample compensation. The New England Association of Farmers, Mechanics, and other Workingmen,* discussed co-operation of this elementary type as early as 1832, but without unanimity. Later a few of its members joined their orders for household goods and got them at wholesale houses, with the price per article considerably reduced.

In 1845 a purchasing club of this sort in Boston sold stock, established a store, and kept on hand a surplus supply of provisions beyond the amount for which orders had been placed. The store soon commanded the attention of neighboring towns, and new co-operative associations were founded, resulting by 1847 in the formation of a federation for purposes of general co-operative purchase and for propaganda. The federation adopted the title Workingmen's Protective Union, which in 1849 was

* This association was an organization of open membership formed to reduce the hours of labor, to destroy the trucking system, and to promote the education of workingmen and their children. See Proceedings of the New England Association of Farmers, Mechanics, and other Workingmen, Dec. 16, 183 1.

changed to New England Protective Union.* The local shops were termed Union stores. Membership in the local divisions was restricted to men of good character; no man using or selling intoxicating liquors was eligible. The program adopted was one of broad social amelioration to which co-operation, mercantile and fraternal, was the means.

In business practice these stores at first sold goods only to members and at a price slightly above cost, allowance being made for rent of the building, for agent's salary, and other expenses, plus a slight reserve kept for contingencies. Later, the shops were opened to all comers; but nonshareholders paid market prices while members either bought goods at reduced prices, the usual Union method, or received their profits in the form of dividends on their shares. Certain recognized co-operative principles, such as cash sales, open membership, equal voting by members irrespective of number of shares, and federation of societies for wholesale purchase, were at first generally adhered to. There is no evidence that dividends were declared on purchases to members and non-members, as was the practice of the co-operators of England during this period. Dividends if paid at all were paid only to members and on shares.

Union stores increased rapidly throughout the northeastern states in the early 5o's. - There is

* A full account of the early history of co-operation is contained in the Eighth Annual Report of the Massachusetts Bureau of Statistics of Labor. 1877. See also Bemis, E. W.: Co-operation in New England. American Economic Association, 1886.

record of about 700 such societies, mostly in New England. But as the movement extended attention was paid more and more to the securing of economic advantages, and the social and ethical aims became less prominent. The decline of the movement was marked by certain deviations from recognized co-operative principles, such as extended credit, limited membership, disloyalty to the federation. Ill-advised ventures were undertaken, many of them in regions of insufficient trade and with untrained managers. Hence it is not surprising that with the hard times of 1857 and the general commercial uncertainty occasioned by the Civil War, the whole system fell to pieces. Some associations failed disastrously, but it is stated that the majority of Union stores disbanded without loss to members on the original investment, while many distributed large accumulations of earnings.

In general, these stores sold out to private firms or fell into the hands of a limited number of their former members. There are, however, four survivors among the Union stores, two of which, through sixty years, have retained enough of the old co-operative features to make them worthy of study.

The purer type of these two is the Central Union Association of New Bedford, Massachusetts. It was founded in 1848 by thrifty mechanics, coopers, whalers, and shipbuilders of that city, as Division number 55 of the Workingmen's Protective Union and still has 348 members, mostly men and women of fair means. Until its incorporation in 1906 no member held more than one share. Now there are three or four who hold more than one, but voting remains by members rather than by shares, so that democracy is maintained. Over half of the employes are shareholders. In the annual statement of September, 19 10, the society reported outstanding share capital of $10,560, a stock on hand of $7,563, and a surplus of $6,039; it owns no real estate and has no debts. Since 1894 it has annually distributed 10 per cent dividends on shares, besides the small rebates* on all members' purchases which have been paid since the founding of the store. Previous to 1892 the society, by practicing every economy, had for over fifteen years distributed dividends on shares varying between 25 and 33 per cent. This store was almost the last in New Bedford to adopt the delivery system. When finally in 1894 the management yielded to the general practice and put on teams, the dividends fell off to 10 per cent and have never recovered. Credit has been allowed to members and to non-members for years, but with discrimination. The store has been managed for many decades by a man who began as clerk in 1850. Apparently there has been little interference on the part of the members,

* For example, butter, coffee, baking powder, etc., at the rate of 2 cents per pound; eggs, 2 cents per dozen; potatoes, 2 cents per peck; flour, 25 cents per barrel, or 3 cents per bag, etc. 2 17 for it is difficult to obtain a quorum for the semi-annual meetings. Administration has been efficient and the stockholders have confidence in it.