tea by the chest, sugar by the hogshead, which they sold to each member at market prices. They were surprised to find a large profit by the operation, which they divided proportionally to the capital subscribed. Others soon joined them; they took a store-room, and in 1882 there were 10,894 members, with a share capital of $1,576,215, and with realized profits in that year of $162,885. They have erected expensive steam flourmills, and the society occupies eighteen branch establishments in Rochdale. Libraries containing more than 15,000 volumes, and classes in science, language, and the technical arts, attended by 500 students, have been maintained. The extension of the Rochdale store led to the necessity of a wholesale establishment of their own. It is now a large institution with branches in London and Newcastle. "It owns manufactories in London, Manchester, Newcastle, Leicester, Durham, and Crumpsall; and it has depots in Cork, Limerick, Kilmallock, Waterford, Tipperary, Tralee, and Armagh, for the purchase of butter, potatoes, and eggs. It has buyers in New York and Copenhagen, and it owns two steamships. It has a banking department with a turn-over of more than £12,000,000 annually.' The following figures for England and Wales tell their own story as to the progress of co-operation:

Several persons each subscribe a sum to make up the share capital of a store, and a person is selected to take charge of the purchase and care of the goods. The advantages of the plan are (1) A division among the co-operators of all the net profits of the retail trade; (2) a saving in advertisements, since members are always purchasers without solicitation; (3) no loss by bad debts, since only cash sales are permitted; and (4) security against fraud as to the character of the goods, because there is no inducement to make gains by adulterations. It is often found that the capital is turned over ten times in the course of a year; while the cost of management in the wholesale Rochdale stores does not amount to one per cent on the returns.

1

66 Fawcett, Manual of Political Economy" (last edition), chapter on Cooperation.

Giffen, "Progress of the Working-Classes in the Last Half-Century," p. 19.

2

The arrangement of obligations in due order of their priority, which has been recommended by Mr. Holyoake,' is as follows: of funds in the store, payment should be made, (1) of the expenses of management; (2) of interest due on all loans; (3) of an amount equivalent to ten per cent of the value of the fixed stock to cover the annual depreciation from wear and tear; (4) of dividends on the subscribed capital of the members; (5) of such a sum as may be necessary for an extension of the business; (6) of two and a half per cent of the remaining profit, after all the above items are provided for, for educational purposes; (7) of the residue, and that only, among all the persons employed, and members of the store, in proportion to the amount of their wages, or of their respective purchases during the quarter. The payment of dividends to customers on their purchases seems now to be considered an essential element of success.

$5. Productive co-operation presents many serious difficulties, the chief of which is the need of managing ability. Some one in the association must know the wholesale markets well, the expectation of crops connected with his materials used, the proper time to buy; he must know the processes of the special production thoroughly, the best machinery, the best adaptation of labor to the given end; he must know the whims of purchasers, and be ready to change his products accordingly-in short, a man eminently fitted for success in his own factory is essential to the profitable management of one belonging to a body of co-operators. It has been already seen how large a variation in profit is due to manager's wages; and it is very often only his skill, prudence, and experience that make the difference between a failure and a success in business. Unless co-operators are willing to pay as large a sum for the services of a good manager as he could get in his own

1 "History of Co-operation in England” (2 vols., 1879), p. 105.

Mr. Holyoake ("History of Co-operation in England," p. 99) quotes as follows from another's experience: "My own pass-book shows that I paid on November 3d, of last year (1860), £1 to become a member of a co-operative store. I have paid nothing since, and I am now credited with £3 16s. 6d, nearly three hundred per cent on my capital in a single year. Of course, that arises from my purchases having been large in proportion to my investment. In a cooperative store you get five per cent upon the money which you invest as a shareholder; and, if the store be well conducted, you will get seven and a half per cent addition."

3 For a full account of the proper steps to be taken in establishing a store, with many practical details, see Charles Barnard's "Co-operation as a Business," p. 119.

establishment, they can not secure the talent which will make their venture succeed.'

In France the national workshops of Louis Blanc, established in 1848, were a failure. Nowhere has it been more clearly seen that state help has been disastrous than in France, where the Constituent Assembly voted 3,000,000 francs for cooperative experiments, all of which failed. Curiously enough, distributive co-operation has not succeeded in France, because, owing to a wide-spread dislike of the wages system, workmen will try nothing less than productive schemes. And their success in this has been no greater than might be expected, when inexperience is put to a task beyond its powers."

3

In Great Britain and the United States there have been some successful experiments in production; and Mr. Holyoake holds that, although workmen certainly do begrudge the manager's salary, productive associations are possible when managed by a board of elected directors. He urges, moreover, that, as in distributive co-operation, if profits are shared with customers, there will be insured both popularity and continuity of custom without the cost of advertising, and such expenses as those of travelers and commissions. The plan of actual operations upon which successes have been reached in England seems to be briefly this: (1) To save capital, chiefly through co-operative associations; (2) to purchase or lease premises; (3) to engage managers, accountants, and officers at the ordinary salaries which such men can command in the market according to their ability; (4) to borrow capital on the credit of the association; (5) to pay upon capital subscribed by members the same rate of interest as that upon borrowed capital; (6) to regard as profit only that which remains after making payment for rent, materials, wages, all business outlays, and interest on capital; and (7) to divide the profits according to the salaries of all officers, wages of workmen, and purchases of customers. Those mills and factories which have sprung out of the extension of distributive associations, as at Rochdale, seem, and naturally so, to have been most successful. They have gradually trained themselves somewhat for the work, and their customers were beforehand secured. That is, where the difficulties of the manager's function have been lessened, they have a better chance of success. And yet it must be said that productive associations will gain largely from the efficiency of the labor when working for its own interest; and this is an important consideration to be urged in favor of such associations.

1 Cf. Walker, "Wages Question," p. 276.
2 Godkin, "North American Review," 1868.
3 "History of Co-operation," vol. ii, chap. ix.

The Sun Mill,' at Oldham, England, was established for spinning cotton in 1861 by the exertions of some co-operative bodies. Beginning with a share capital of $250,000, and a loan capital of a like amount, it set 80,000 spindles in operation. In 1874 they had a share capital of $375,000 (all subscribed except $1,000), and an equal amount of loan capital, while the whole plant was estimated as worth $615,000. Two and a half per cent per annum has been set apart for the depreciation in the value of the mill, and seven and a half per cent for the machinery; so that in the first ten years a total sum of $160,000 was set aside for depreciation of the property. The profits have varied from two to forty per cent; and, while only five per cent interest was paid on the loan capital, large dividends were made on the share capital. During the last few years the Sun Mill has on an average realized a profit of 12 per cent, although it is known that the cotton trade has suffered during this time from a serious depression.

Many experiments, however, have proved failures; and sometimes, when they are successful (as in the case of the Hatters' Association in Newark, New Jersey 2), the workmen have no desire to share their benefits with others, and practically form a corporation by themselves. The mere fact that they do sometimes succeed is an important thing. Then, too, they have an opportunity of securing by salaries that executive ability in the community which exists separate from the possession of capital. And in these days, in large corporations, the manager is not necessarily (although he often is) a large owner of capital. The last annual report of the Co-operative Congress (1882) shows the existence in England and Scotland of productive associations for the manufacture of cloth, flannel, fustian, hosiery, quilts, worsted, nails, watches, linen, and silk, as well as those for engineering, printing, and quarrying; and these were but a few of them."

In the United States there have been some successes as well as failures. In January, 1872, a number of machinists and other working-men organized in the town of Beaver Falls, Pennsylvania, a Co-operative Foundry Association for the manufacture of stoves, hollow-ware, and fine castings. On a small capital of only $4,000 they have steadily prospered, paid the market rate of wages, and also paid annual dividends, over and above all expenses and interest on the plant, of from twelve to fifteen per cent. In 1867 thirty workmen started a co-operative foundry in Somerset, Massachusetts, with a capital of about $14,000.

1 Holyoake, "History of Co-operation," p. 131.
2 Godkin, "North American Review," 1868.
* Pp. 27, 31, 32.

In the years 1874-1875 the company spent $5,400 for new flasks and patterns, and yet showed a net gain of $11,914. In 1876 it had a capital of $30,000, and a surplus fund of $28,924.1

§ 6. The difficulties of productive co-operation arising from the need of skilled management, together with the existing unsatisfactory relation between employers and laborers when wholly separate from each other, have led to a most promising plan of industrial partnership by which the manager retains the control of the business operations, but shares his profits with the workmen. The gain through increased efficiency, greater economy, and superior workmanship, recoups the manager for the voluntary subtraction from his share, and yet the laborers receive an additional share; but more than this, it educates the laborer in industrial methods, discloses the difficulties of management, and stimulates him to saving habits and greater regularity of work. This system is particularly adapted to reaching those laborers who would not themselves rise to the demands of productive co-operation.

A

The principle was tried on one of the Belgian railways. "Ninety-five kilogrammes of coke were consumed for every league of distance run, but this was known to be more than necessary; but how to remedy the evil was the problem. bonus of 34d. on every hectolitre of coke saved on this average of ninety-five to the league was offered to the men concerned, and this trifling bonus worked the miracle. The work was done equally well, or better, with forty-eight kilogrammes of coke instead of ninety-five; just one half, or nearly, saved by careful work, at an expense of probably less than one tenth of the saving.""

The experiment which has attracted most attention in the past has been that of the Messrs. Briggs, at their collieries in Yorkshire, England. The relations between the owners and the laborers were as bad as they could well be. "All coalmasters is devils, and Briggs is the prince of devils," ran the talk of the miners, when they did not choose to send letters threatening to shoot the owners. In 1865 Messrs. Briggs tried the plan of an industrial partnership with their men, purely from business considerations. Seventy per cent of the cost of raising coal consisted of wages, and fully fifteen per cent of materials which were habitually wasted. The whole property

1 Barnard, "Co-operation as a Business," pp. 150-152. 'Holyoake, "History of Co-operation," p. 235.

"See Thornton, "On Labor," p. 370. Also see "Parliamentary Documents," 1868, 1869, xxxi; "Trades-Unions of England," by the Count de Paris; Brassey's "Work and Wages," chap. xiii.