CO-OPERATION, a term in social economics, which, though of generic significance in the science of industry and trade, has a specific and technical sense, implying the association of any number of individuals or societies for mutual profit, whether in the purchase and distribution of commodities for consumption, or in the production of com-modities, or in the borrowing and lending of capital among workmen.
The most powerful co-operative force in the industrial system is what economists have termed " the division of labour," but that is in reality also a union and graduation of labour towards productive ends, and has its counterpart in the multiform divisions of capital in its application to the maintenance and extension of industry.
Co-operation, as technically understood, occupies a middle position between the doctrines of the communists and socialists (see COMMUNISM) on the one hand, and the private property and freedom of individual labour and enterprize on the other. It takes its departure from communism at a very definite and significant point. While the latter would extinguish the motive of individual gain and possession in the sentiment of a universal happiness or good, and remodel all the existing rights, laws, and arrangements of society on a basis deemed consonant to this end, co-opera-tion seeks, in consistency with the fundamental institutes of society as hitherto developed, to ameliorate the social condition by a concurrence of increasing numbers of associates in a common interest.
The co-operative societies, springing from this idea, though attended with the most varied fortune, have greatly increased in number and in amount of business in recent years. The form, particular objects, and organic rules of these associations are by no means uniform. But, as we find them in the principal countries of Europe, they may be divided into three general classes :—1. Societies of consumption, the object of which is to buy and sell to members alone, or to members and non-members under differing conditions, the necessaries of life or the raw ma-terials of their industry; 2. Societies of production, the object of which is to sell the collective or individual work of the members; 3. Societies of credit or banking, the object of which is to open accounts of credit with their members, and advance them loans for industrial purposes. There are numerous modifications of the principle, such as friendly societies, burial societies, societies of workmen which undertake the execution of work by contract, arrange-ments of private firms by which the workmen share in the profits of the employers, and building societies, now rife in most large towns, the object of which is to enable members to become owners of dwelling houses. But the above three categories define the distinguishing cha-racteristics of the co-operative society proper; and it is some-what remarkable that the three kinds of association have attained marked success in three different European countries. England stands at the head in societies of con-sumption ; France, in societies of production ; Germany, in societies of credit. With reference to this variety of result it may be observed that the social equality resulting from the great Revolution, in connection with the character of much of the manufacturing industry of France, has given that country a larger number of artizans who work in their own houses, and have a passion for independence in their handicraft, than is to be found in any other country. On the other hand, the masses of opera-tives in the factories and other great works of England, while retaining their position as wage-earners, have put forth most energy and attained their highest co-opera-tive success in societies for the purchase, and in some degree the production, of their own immediate necessaries of life. The less abundant capital, and the want of banks and other institutions of credit in the smaller towns and remoter parts of Germany, may explain in some measure the notable development of societies of credit in that country. But no account of the phenomena in Germany would be satisfactory without placing at the head of influences the personal agency of one man—M. Schulze, of Delitzsch (a town of only 6000 inhabitants)—who had the sagacity to perceive that societies of credit were the necessary foundation of the co-operative system, and who reasoned out principles, planned, and laboured with a skill, disinterestedness, and perseverance which have crowned his idea with remarkable success.
The Credit Society of M. Schulze is practically a bank, but a bank organized on principles specially adapted to the working classes within certain limits of transaction, to which it is strictly confined. The members of the society must be men of " self-help," able to work and in regular employment, and they must hold each one equal share of the stock-capital of the society, which may be paid up in full, or by regular instalment. Dividends are only paid to the members who have paid in full, the profits due on the partly-paid shares being added to these till they reach their full amount. It follows from the principle of the society— " in proportion to the chance of gain the risk of loss—" that when the share-capital has to be called upon to liquidate the debts, it is the capital actually paid in that loses. Equality of shares and equality of advantages and risks are thus attained. But in addition to the share-capital there is a reserve fund formed out of entrance fees and a percentage of the net profits. The order of liability for deficits in the balance sheets is thus (1) reserve fund, (2) paid-in capital, and (3) private property of the members— the final principle being that of unlimited liability. Every member is responsible for the debts of the society, and the society for the debts of every member. It is obvious that a company thus constituted, and composed of the most saving and industrious workmen of a town or district, offers a solid security, and consequently the share-capital is sup-plemented by loans for given periods of time, debentures, and savings deposits, the last having to be guarded by conditions as to notice of withdrawal. At the beginning of a society the paid-up share-capital may not be more than the proportion of 10 to 90 of borrowed funds, but it has to be brought up as rapidly as possible to 25 per cent., and should reach a maximum of 50 per cent. The share-capital, as originally fixed, has also to be increased as the business, and the amount of funds necessary for its transaction, increase; so that the amount of each share has thus to be supplemented plus the increase of business minus the increase of members. By these means the society is protected from too small a share-capital for its liabilities, and from the temptation of appropriating large dividends out of the surplus profit, accruing from borrowed funds. Another peculiarity of the German " credit union " is that it makes advances of the funds of which it is possessed to its own members only. The two great ends to be secured being the minimum of risk and the maximum of responsibility, the first is promoted by advancing money only for industrial purposes, within due limits, among borrowers whose requirements and circum-stances are or may be thoroughly known to the society, and the second by the fact that every member of the society is unlimitedly liable for any errors or losses that may arise in the administration. The advances are made in the usual forms of promissory notes with the indorsation of sureties, ordinary bills of exchange, and occasionally mortgages over real property in current accounts. Advances are not made for longer periods than the society can itself borrow ; partial repayment at dates is sometimes conditioned within the period of advance; and the interest charged follows the public money-market rate. It is thus that M. Schulze, through a series of skilful regulations beyond our space to follow, solved the problem, which vexed and puzzled the socialists of a past generation, of bringing capital direct to the workman or " immediate producer."
When the little " credit union " of Delitzsch was fully organized in 1852, popular opinion was so well prepared and enlightened on the subject by M. Schulze's efforts in the Prussian Parliament and on the platform, that similar societies were rapidly organized in other parts of the country. While each society had full powers of self-regula-tion, they were all much on the Delitzsch model, and a general affiliation was brought about for mutual counsel and encouragement. M. Schulze then applied in the legislature for corporate rights and legal status to the associations, and after tedious labours obtained them. In 1865 he established a central credit bank at Berlin, by which the societies, while depending mainly on local credit supplies, might have access, in case of need, to the general loan market. The " credit unions," though now numerous, are only a section of the co-operative movement in Germany.
The law of the Prussian Parliament granting corporate rights to loan and credit associations extends the same privileges to " raw material and store unions," " unions for the production and sale of finished wares on a common account," " unions for the purchase of the necessaries of life wholesale and the selling of them retail," and " unions for providing their members with dwelling-houses."
The history of the co-operative movement in France is much too extensive to be traced here. But it may be observed that the French co-operators have discovered, at various periods, a strong leaning to the opinion that, while they supply the labour, the state is under obligation to supply in whole or in part the capital and other means of labour ; and under this idea co-operation merges very nearly into communism. " L'état ! c'est moi," said Louis XIV., and in the days of democracy the same idea not unnaturally suggests itself to an overwhelming majority of the people. This was precisely the argument which the late M. Lasalle, following the French socialists, used against Schulze and the economists in Germany. " Society," he in effect argued, " consists of 96 prolétaires and four capitalists. There is the state ! The prolétaires have no capital, can save nothing, have nothing to save from. But the state, of which they are 96 out of 100, can come forward, cover the prolétaires with its credit, and give a new departure to the production and distribution of wealth. Capital in its personal accumulation is merely the spawn of ages of slavery, craft, and plunder." The discussion of this question had been exhausted in France more than once. Bastiat and Proudhon had quite recently fought it out between them. But there were also practical experiments and illustrations. On the revolution of February 1848, the French state recognized to some extent its duty to the prolétaires, organized national workshops, and voted 3,000,000 francs for the use of fifty-six co-operative societies. Three-fourths of these societies perished after a brief period. The state lost its money, and the members did themselves no good. Only a remnant, by organizing themselves on sounder principles, survived. The " Société des Tourneurs en Chaises," which refused assistance from the state, and declined the principle of equality of wages, is flourishing to this day. The Society of Masons, of Piano-Makers, of " Ouvriers Lunettiers," and others, have established a strong position, beginning with small capital, and increasing it to large amounts. In Lyons there are the " Société des Tisseurs," of 1800 members, and others ; at St Etienne the " Association des Rubanniers," of 1200 members, said to have half a million sterling of capital. The " society of production," of which there are at least forty examples in Paris alone, is found in nearly all the French provinces, and has proved the capacity of workmen by union to carve out business for themselves and be their own masters, while, in many cases, employing other workmen or auxiliaries at wages, who have no share in the profits. There are also in France more examples, probably, than in any other country, of workmen sharing in the profits of the firms by which they are employed, under arrangements offered and regulated by the employers or capitalists them-selves.
Of the "society of consumption" there are innumerable examples in the United Kingdom, the chief being the Rochdale, Leeds, and Halifax Societies, embracing nearly the whole working population of a large manufacturing district, and carrying out their operations, from the wholesale and retail stores to dairies, flour-mills, and other auxiliary branches, including libraries and newsrooms. The supply associations in London organized by members of the Govern-ment civil service have also attained much importance ; but, as these trade with the public, and divide large profits among privileged holders of shares, it has been questioned whether they can be properly regarded as co-operative societies. Nearly every town of the kingdom has a " cooperative store;" and when these are numerous in a district they usually affiliate, and open a common wholesale depart-ment in Liverpool, Glasgow, or some other emporium. The advantages in many cases may not be great, and after a brief existence the societies not unfrequently wind up. But when properly conducted and supported, they secure whole-some commodities, encourage among their members ready-money payments, and as the goods are sold at a fair margin of profit, there is every quarter or half year a dividend at the rate of 5 to 10 or more per cent, to the members on their share-capital, and a bonus to non-members on the amount of their purchases. One of the indirect advantages of the co-operative store, when established in a community, is its influence as a formidable rival on private grocers and dealers.
The most signal instances of failure of the co-operative principle in the United Kingdom have occurred in the sphere of " production," where France has given many successful examples. The united coal-miners of South Yorkshire purchased the Shirland Collieries in 1874 at a price of £70,000, of which they paid down £31,000, rais-ing the remainder of the purchase money in debenture bonds. The working and proprietary company thus formed has never been able to pay the interest due on its bonds, and the collieries have now passed into other hands for ¿£11,000 with the liabilities attaching to them, and the whole capital of the workmen has been lost. The purchase of collieries at a period when the coal trade and wages of mining labour were in a state of inflation, followed sharply by successive collapses, may account for this unfortunate result. The engineering factory at Ouseburn, bought up and worked for a time by operatives, is again, after a stoppage, re-established on a co-operative basis. But the failure of co-operative production has been recently illustrated in another form. In 1865 Messrs Briggs & Co., proprietors of the Whitvvood and Methley Junction Collieries, entered into a permanent contract with their workmen, whereby the latter were to receive, in addi-tion to the current rate of wages, one-half of the profits above 10 per cent, for the redemption of capital invested. As long as there were profits, and the rate of wages presented no difficulty, this answered well enough ; but when the tide turned, and there were no profits, but only loss unless wages were reduced, the situation was wholly altered in the estimate of the workmen, and the compact was broken up in 1874 on the demand of the men them-selves, who said they would prefer to be simply members of the " Miners' Union."
The numerous cotton factories in Lancashire, on a basis of small joint-stock shares, yielding in some cases large dividends, might almost be considered as great an example of co-operative production as any effort of the kind in France. The operatives have a large stake and much ad-vantage in those factories; but since the spinner or weaver does not necessarily work in the factory of which he has a small proprietary share, these joint-stock establish-ments are probably to be regarded more as investments of the savings of the operatives than as co-operative societies. The co-operative idea, as would probably be held by its most staunch propounders, requires identity of purpose and interest, with community of advantages and risks, though not necessarily absolute equality or uniformity of individual relations, among the co-operators. When the association passes into a mere investment and trading com-pany, the idea would seem to be lost.
The co-operative system in the United Kingdom has attained such magnitude as well as variety of development that our literature on the subject cannot be deemed so complete as would be desirable.
Mr G. J. Holyoake, than whom probably no one in England has
more command of the subject, is engaged on a History of Co-opera-
tion, the first volume of which has been published. Valuable
information on co-operative societies occurs in official documents ;
see, for example, the appendix of the Eleventh and Final Report of
Royal Commission on Trades Unions, 1869. (R. SO.)