BOOK FIFTH.

The Farmer as a Cooperator."

CHAPTER I.

THE PRINCIPLES OF COOPERATION.

N the conduct of any business there are two elements whose combination produces success or failure; these are the principles upon which it is established and the character of those in charge of it. A business, whether great or small, must be founded upon correct principles or it can not endure the strain of competition, and in the end will be unprofitable. An exceptionably capable or industrious man may for a time sustain a business against unfavorable conditions, and an incompetent or idle management may ruin a business however well planned, but in the long run a business must be wisely planned in order to endure, and if thus well founded it will succeed under ordinary management.

In a general sense all enterprises are cooperative wherein more than one person is concerned. A bank is a cooperative society for lending money; a railroad company is a cooperative society for building a railroad. Any business is cooperative wherein many persons unite for the attainment of an end desirable to all, but unattainable, or less readily attainable, by any of them singly. The ideas and conduct of such enterprises as are mentioned above, are fully competitive, and involve the profit of the few at the expense of the many.

It is desirable that the public acquire clearer ideas than are *See Appendix F for documents relating to corporation,

now prevalent as to the real meaning of cooperation. It is already a great factor in the business of the world whose importance is but dimly recognized by economists, or statesmen. No census of this, or, I think, of any country, includes in its tables the volume of cooperative business, of which no reliable statistics are attainable, but in California alone there are over eighty cooperative irrigating companies,* besides fruit marketing societies whose aggregate annual business is several millions of dollars. Cooperative business is increasing yearly, from natural causes. It is a natural development from excessive competition, and must increase as competition grows more severe. It is well, therefore, to understand precisely what it is.

Cooperation is the union of those of like interests for the purpose of more effectively competing with those of adverse interests. It is middle ground between individualism, in which each man competes with all other men, and State Socialism, or "Collectivism," which assumes such a union of all interests as to entirely suppress competition. It recognizes permanent differences of interest between classes, and assumes that these differences will be adjusted with least friction, by able representatives of the different classes, meeting together in the light of complete information and under a sense of responsibility. Incidentally the weaker in each class are helped by the stronger of the same class, as a matter of self-interest, regardless of sentiment, yet more or less moved by sentiment. Socialists favor it as a stepping-stone to socialism. Cooper ators regard cooperation as the final step, because it recognizes as permanent, cleavages of interest which socialism ignores or supposes can be united. The perfect form of cooperation is exhibited in the Trust. Socialism aims to make the state the industrial unit, involving the competition of one state with another, and ignoring the conflict of interest between classes within the state. Cooperation makes the class the unit within the state, and does not necessarily regard international

*From statistics gathered by myself, as Special Agent of the U. S. Department of Agriculture, unpublished when this is written.

boundaries. A distinct term is needed for this phase of cooperative effort.

In these pages, however, because I wish only to cover, in some detail, a rather narrow field in which I have had personal experience, I shall use the term cooperation and cooperative in the more restricted sense in which they are still used in common speech, and which includes only organized societies of operatives or producers to market their labor or their product, or of any class of individuals to purchase supplies. In this class of societies the fundamental idea is that of saving rather than of gain; of keeping what is already in possession, rather than of securing additional income or increase of capital. Of course the result, if success follows, is an increase of net income which may be expended or become capital. These enterprises also exclude the idea of individual profit to any one connected with the management."

*

It is true that cooperative enterprises in the above sense are sometimes established with the same idea of profit that obtains in other business; as a cooperative shoe factory, or a cooperative cannery, but it is probable that when such concerns are set up it is with the expectation of securing a higher price, or a more certain market, for some commodity produced by the founders, as the labor in the case of the shoe factory, or the fruit in the case of the cannery, and the tendency is to consume what would be profit in an ordinary business in higher wages, or higher prices.

In referring to the probable success or failure of a business enterprise, normal or ordinary conditions are supposed to exist. A flood, a fire, a robbery, or some general calamity may bring the best planned and best conducted enterprise to ruin. These are the chances of life to which all enterprises are subject.

The more common forms of cooperative enterprise are societies for the purchase of supplies needed, or the sale of products produced by their members. Societies for the pur

* While a bank is a cooperative money-lending concern, certain individuals, by engaging a certain amount of their own capital, and assuming the management, expect to profit by lending the money of their depositors.

chase of supplies on any considerable scale are in the nature. of regular mercantile concerns; the tendency of these in America is into the hands of a few persons, by the purchase of the stock at less than cost, or otherwise into the hands of the sheriff. In Great Britain they are remarkably successful.

The simplest cooperative enterprises are those for the sale of products of their members, and it is with these that these pages will be occupied, although of course the more general principles are applicable to all forms of cooperation. A "cooperative store" buys and sells, but the fundamental idea is buying cheaply and saving by its members. The fundamental idea of marketing societies is the highest attainable prices for products. These ideas are contradictory, but both forms are included in the term "distributive cooperation."

All business is a science whose laws must be obeyed or failure will result. It is not abstruse; on the contrary it is the simplest of sciences. It is a science best learned in the school of experience, and all who succeed in business have mastered its principles so far as they apply to the business which occupies them. They may never have, and most likely have not, seen or heard of any book relating to the principles of business, but if they pick up such a book in which the underlying principles of business are set down in an orderly way, they find little or nothing with which they are not perfectly familiar and are surprised that it should have been thought worth while to write and print such simple things. And yet it is true that the majority of business enterprises fail because these principles are not followed. Of course it is also true that many fail in business who understand its principles well enough, but have not the vigor and will power to always follow them.

The fundamental principles of business apply to the conduct of a farm, of course, as well as to pure trading, but their application to trade involves the knowledge of a good many facts and the perception of many relations which do not usually come within the experience of farmers or workingmen. If, therefore, farmers, through cooperation, engage in trade, they must, if they expect success, become familiar with these

things through other sources than their own experience. They must obtain and profit by the experience of others. The object of these chapters is to set forth the most important things to be considered in establishing cooperative enterprises and the most convenient methods of procedure both in establishing and conducting them.

Those characteristics of a person which are peculiar to himself as distinguished from the qualities and nature of mankind of his country and race are called his "personal equation." As these personal characteristics must be constantly taken into account in considering the probabilities of success or failure in business, it will be convenient as occasion arises to use this term for them.

The establishment of a cooperative enterprise is, in one respect, more complex than the founding of a personal business, in that its constitution must be such as to insure the best ability available, and perfect honesty for the conduct of its affairs. In a private business, the personal equation is fixed. What a man is, he is, and he is inseparably attached to his business. In a cooperative business the directors change, but, in the main, will usually represent the best available experience and ability of the membership; their election proves that, in the judgment of their fellows, they are the proper persons to direct the common affairs, and we can not go beyond that. But the active executive management, to be efficient, must be in the hands of one person, whose personal equation will have much to do with the prosperity of the concern, and there are natural laws which, if enacted into rules by the main body of the society, and carefully obeyed, will almost certainly insure honesty in this important position, and sufficient competence for its duties.

It has been said that the fundamental and natural laws of business will apply to the conduct of the farm and the workshop, but it is also true that business is the subject of municipal or statute law as well, and that statute law deals with traders in some respects otherwise than with farmers or workmen; and, in many cases, it has to deal with transactions which would not occur in a strictly farming business. Cooperative trading