The Wages Question: A Treatise on Wages and the Wages Class

Francis A. Walker
Walker, Francis A.
(1840-1897)
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1876
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London: Macmillan and Co.
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1888
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Part II, Chapter XV
COÖPERATION: GETTING RID OF THE EMPLOYING CLASS.

II.XV.1

IN its first and largest sense, coöperation signifies the union in production of different persons, it may be of different classes of persons, and it may be on the most unequal terms. In this sense, coöperation is compatible with the subordination of the employed to the employer and with the existence of industrial "principalities and powers." In the sense which has been made of late years so popular, and in which alone it will be used in this treatise, coöperation means union in production, upon equal terms. It is democracy introduced into labor.

II.XV.2

It is as we turn from discussing the industrial character of the employing class, that we can most advantageously consider the schemes proposed, under the title of coöperation, for the amelioration of the condition of the wages class; and, at the same time, it is as we try to find the real significance of these schemes that we realize most fully the confusion introduced into the theory of distribution by the failure to discriminate the entrepreneur-function, and by the undue extension of the word profits. In my opinion, it is simply not possible to give an intelligible account of coöperation through the use of the definitions by the text-book writers. If what we have called the profits of business are only "the wages of supervision and management," what is it that coöperation aims to effect? Supervision and management must still be exercised, or coöperation will come to a very speedy end. If supervision and management are to be exercised, it must be by some one, and if the present supervisors and managers (the employers, as I call them) are to be turned adrift or reduced to the ranks, then these duties will have to be performed by men now taking some other part in industry, and to them "the wages of supervision and management" will be paid. Wherein have the workmen gained anything? It is fairly to be presumed that these peculiar and difficult duties will not be performed any better by men chosen by caucus and ballot, than by men selected through the stern processes of unremitting business competition.

II.XV.3

If the wages of supervision and management are to be paid, in manner and in amount, as heretofore, to supervisors and managers chosen by the workmen themselves, we can readily understand that the pride of the workmen may be gratified (whether that will tend to make them more easily supervised and managed, is a question we need not anticipate); but wherein is the economical advantage? If it is said, wages are not to be paid to the supervisors and managers, under the coöperative system, equal to those paid under the existing industrial organization, while yet the work is done as well, what does this amount to but a confession that the sums now received by the employers are not wages, but something more than, and different from, wages; the difference in amount representing the power given to the employer by his industrial position to wrest an undue share of the products of industry?

II.XV.4

To repeat: if, under the coöperative system, the work of "supervision and management" is to be done by a new set of men for the same "wages," the workmen will gain nothing; if, on the other hand, the workmen, controlling the operations of industry for themselves, can get the work done for less (and the great promises held out as to the benefits of coöperation would imply that it must be for very much less), then it must be concluded that employers at present receive something more than and different from wages.

II.XV.5

But if we find it difficult to conceive what account one could give of coöperation, using the definitions of the text-books, we find that, if we stand aside and allow the text-book writers to state it in their own way, the result is not a whit the more happy. Prof. Cairnes, so highly distinguished for his justness and clearness of reasoning, stumbles, at the very threshold of the subject, across an obstacle of his own devising. Thus in the very act of bringing forward the scheme of coöperation as a cure for the industrial ills of society, he makes a statement of coöperation which reduces it to a nullity: "It appears to me that the condition of any substantial improvement of a permanent kind in the laborer's lot is that the separation of industrial classes into laborers and capitalists shall not be maintained; that the laborer shall cease to be a mere laborer—in a word, that profits shall be brought to reënforce the wages fund."*1 And again, more tersely: "The characteristic feature of coöperation, looked at from the economic point of view, is that it combines in the same person the two capacities of laborer and capitalist."*2 This needs but to be looked at a moment to reveal its utter fallacy. Remember, this is not the declaration of an irresponsible philanthropist that every workman ought to have a palace and a coach, but the grave statement of an accountable economist as to the manner in which the welfare of the working class may, under economical conditions, be advanced. What is this industrial panacea? Why, the laborers are to become capitalists. A most felicitous result truly; but how is it to be accomplished? By saving their own earnings? But this they can and do accomplish at present; and, through the medium of the bank of savings, they may and do lend their money in vast amounts to the employing class (oftentimes to their individual employers), and thus, under the present system profits (in Prof. Cairnes' sense) may be and are "brought to reënforce" wages. Is it, then, by saving somebody else's earnings, and bringing the profits thereof to "reënforce the wages fund"? But this is spoliation, confiscation, a resort which no one would be before Prof. Cairnes in denouncing, and whose disastrous consequences to the laborers themselves no one could more forcibly portray.

II.XV.6

We see, therefore, that Prof. Cairnes' statement is a form utterly without content. Coöperation is to be an admirable thing, because in coöperation the workmen are to be both laborers and capitalists. But if we inquire how they are to become capitalists, otherwise than at present, we fail to find an answer.

II.XV.7

No! Coöperation, considered as a question in the distribution of wealth, is nothing more or less than getting rid of the employer, the entrepreneur, the middleman. It does not get rid of the capitalist. In modern industrial society, that society which Prof. Cairnes is contemplating when he finds the condition of the workman hard and requiring relief, there are three functions, not two merely; and the reform to be effected through coöperation, if indeed coöperation be practicable, is by combining in the same person, not the labor function and the capital function, but the labor function and the entrepreneur function.


II.XV.8

What then is the attitude of laborers in coöperation? To the employer they say: You have performed an important part in production, and you have performed it well; but you are now relieved. You have charged too high for your services. Your annual profits, taking good years and bad together, are greater than we need to pay to get the work done, if we will take the responsibilities of business on ourselves, and exercise a forethought, patience, and pains we have had no call to exercise while you were in charge. Up to this time the state of the case has been this:

1. A product, varying with seasons and circumstances multifarious.
2. Our wages, fixed; you making yourself responsible for their payment, whatever be the character of the season or the state of the market, yourself receiving nothing till we are paid.
3. From a variable quantity deducting a fixed quantity leaves a variable remainder, viz., your profits fluctuating with good or bad fortune, good or bad management.

II.XV.9

Hereafter the state of the case will be:

1. A product, variable, so long as the laws of nature remain the same.
2. A fixed salary paid to a manager whom we select, and to whom we make ourselves responsible with whatever we possess, meanwhile receiving nothing till he is paid.
3. From a variable quantity deducting a certain quantity leaves a variable result: our earnings, no longer called wages, greater in good years, smaller in bad years; greater as we labor with zeal and conduct our business with discretion, smaller as we fail in either respect.

II.XV.10

One word more before we part. We intend no disrespect. With workmen who are ignorant, dissolute, unwilling to subordinate the present to the future, incapable of organization, such services as you are qualified to render are absolutely indispensable; and we will not say that such remuneration as you exact is excessive. But we profess better things. We are prepared to exercise patience, industry, economy, and to subject our individual desires to the general will, for the sake of dividing among ourselves the profits you have been accustomed to make out of us.*3 We know it will be hard; but we believe it can be done. If men are not fit for an industrial republic, then they must submit to the despot of industry, and they have no right to complain of Civil List and Privy Purse. But we are republicans, cheerfully accepting all the responsibilities of freedom, and boldly laying claim to all its privileges.

This is, in effect, what the laborers, by coöperation, say to the entrepreneur. Do they give the capitalist his congé after the same fashion? Do they assert independence of him, and ability to go along without him? Not in the least. Not a word of it. Coöperation is not going to rid them of dependence on capital. They are to be just as dependent on the capitalist as were their employers whose place they aspire to fill. They know that they must have just as much and just as good machinery, just as abundant and good materials, as competing establishments under entrepreneur management. So far as they themselves have capital, the results of their savings out of past wages, they will employ these and receive the returns therefrom directly, instead of lending it to the entrepreneur through the savings bank and getting interest therefor. So far as they want capital for their operations over what they can scrape together, they must go to the banks or to private lenders, and pay as high a price for its use as their quondam employer was wont to do; indeed, for awhile at least, probably a higher price, as their credit will not be likely to be so good at first as his. And if coöperation should start earliest, and make most progress, in those industries where the amount of capital required is comparatively small, this would be but a recognition [???] the fact that coöperation has no tendency to free the laboring class from any domination of capital, of which complaint may have been made, but that its sole object is to

GET RID OF THE ENTREPRENEUR.

II.XV.11

Such being, as I apprehend it, the true nature of coöperation, let us inquire as to the advantages which may be anticipated from it, if accomplished; as to the obstacles to be encountered by it; and as to the probability of its success in any such measure as to afford an appreciable relief from the peculiar hardships of the wages class. Let it be remembered that it is the question of wages, and not the question of labor, which coöperation aims to solve. The welfare of labor depends on the laws of production, under the rule of diminishing returns, taken in connection with the laws of population. The question of wages is a question in the distribution of wealth, and arises out of the dependence of a portion of the laboring population upon the entrepreneur-class for employment.

II.XV.12

What, then, might we fairly look to coöperation to accomplish?

II.XV.13

Considering the scheme from the laborer's point of view, we say:

II.XV.14

First, to reap the profits of the entrepreneur, which are very large,*4 large enough if divided among the wages class to make a substantial addition to their means of subsistence.

II.XV.15

Second: to secure employment independently of the will of the "middle man." It has been shown in a previous chapter, that the interest which the employer has in production is found in the balance of profit left after the payment of wages. The payment of these, perhaps to the extent of ten, twenty, or fifty times his profit, is to him merely a necessary means to that end. It may be, as has been said, that his relations to a body of customers shall be such as to induce him to continue producing even though, for a time, he sinks his own profit. After the effect of this has been exhausted, however, and it is soon exhausted, he will pay wages only to get a profit. But the condition of the market will often be such as to render him exceedingly doubtful of his profit, or even apprehensive of a loss; and then his whole interest in production ceases. Because he can not see his way to make ten or five thousand dollars profit, he is ready to stop a production, the agencies and instrumentalities of which are wholly at his command, which involves the payment of one or two hundred thousand dollars in wages. Now, with reference to such an oft recurring condition of industry, a body of workmen may properly say that, while they cannot blame the employer for refusing to risk the payment of such large amounts in wages to them, without a reasonable assurance of getting it back, with a profit, in the price of the goods, yet they are much disposed to take the responsibility of production upon themselves. Thus, especially in branches of manufacture where the value of the materials bears a small proportion to the value of the finished goods, they might propose to go on producing moderately in spite of the most unfavorable aspect of the market, on the ground that they might just as well be laboring as lying idle, and sell the product for what it would bring. All they should thus receive would be clear gain, as against a period of enforced idleness, and it might not infrequently happen that, on settling up their venture, they would find a turn in the market giving them a compensation as large or nearly as large as usual.

II.XV.16

But it may be asked why should not the employer in times of business depression, agree with his workmen to pay them whatever he should find in the result he could afford. But this would be coöperation, slightly disguised. The essence of wages is that they are stipulated beforehand: the essence of profits is that they are, as DeQuincey calls them, "the leavings of wages," and therefore vary as the product varies under the varying conditions of industry, natural or artificial. It is of the essence of the relation of employer and employed, that the employer secures to the employed their wages, and after that, appropriates his own remuneration. Were the employed to consent to give the employer his profit first, and take their wages afterwards, their relations would merely be reversed. Five hundred mill hands entering into this arrangement would become a body of coöperative producers; the so-called manufacturer would become simply their paid manager, their hired man.

II.XV.17

It is true that arrangements for a "sliding scale" of wages, adapted to the market price of the product, are sometimes entered into in coal and iron mining; but these cover only a portion of the ground embraced in the coöperative plan, as the cost of materials and transportation, rent, interest, and the general expenses of business management, may vary so greatly as very much to reduce, and at times to destroy, the employer's expectations of profit, in spite of the sliding scale of wages.

II.XV.18

Such, as we understand the matter, are the two economical advantages for which the wages class look to coöperation. There is still another advantage, non-economical and therefore not in our province, namely, the getting rid of the feeling of dependence and the securing of a higher social standing.

II.XV.19

In addition to the advantages which the wages class have generally in contemplation when plans of coöperation are proposed, the political economist sees three advantages of high importance which would result from this system if fairly established.

II.XV.20

First: coöperation would, by the very terms of it, obviate strikes. The employer being abolished, the workmen being now self-employed, these destructive contests would cease. The industrial "non-ego" disappearing, the industrial egotism which precipitates strikes would disappear also. Second: the workman would be stimulated to greater industry and greater carefulness. He would work more and waste less, for, under the coöperative system, he would receive a direct, instant, and certain advantage from his own increased carefulness and laboriousness. It is true that the pressure thus brought to bear upon the individual laborer is not so great as in the case of the individual proprietor of land, since there the gain is all his own, while here the workman has to divide with his fellow-coöperators the advantages of his own extra exertions, looking, though not with absolute assurance, to receive an equivalent from each of them in turn. Third: the workman would be incited to frugality. He has at once furnished him the best possible opportunity for investing his savings, namely, in materials and implements which he is himself to use in labor. Especially in the early days of coöperative industry, when the great need of coöperators is capital, will this pressure be felt, constraining the workman to invest in his trade all of his earnings that can be spared from necessary subsistence. Capital thus saved and thus invested is likely to be cared for and used to the best ability of the coöperators. They will make the most of it, for it will have cost them dear.

II.XV.21

The additional considerations that coöperation tends to improve the moral, social, and political character of the workman, by giving him a larger stake in society, making his remuneration depend more directly on his own conduct, and all allowing him to participate in the deliberations and decisions of industry: these considerations, being non-economical, belong to the statesman and the moralist.


II.XV.22

Here are several distinct advantages, not fanciful but real and unquestionable, which together make up an argument for coöperation which is simply unanswerable and overwhelming, unless there is validity in our theory of the character and functions of the employing class.

II.XV.23

In spite of these marked advantages, however, we have to note that coöperation in mechanical industry has achieved a very slight and even doubtful success. Mr. Frederick Harrison has called attention in the Fortnightly Review*5 to the fact that the vast majority of all the coöperative establishments maintained in England are simply stores, i.e. shops, "for the sale of food and sometimes clothing." "These, of course, cannot affect the condition of industry materially. Labor here does not in any sense share in the produce with capital. The relation of employer and employed remains just the same, and not a single workman would change the conditions of his employment if the store were to extinguish all the shops of a town."

II.XV.24

The industrial coöperative societies, Mr. Harrison continues, are mainly flour mills and cotton mills. The flour mills chiefly supply members, though they often employ persons unconnected with the society, at ordinary market wages, and on the usual terms. They are joint-stock companies, for a specific purpose, like gas or railway companies. The only true instances of manufacturing coöperative societies of any importance are the cotton mills. "Some of the mills never got to work at all; some took the simple form of joint-stock companies in few hands; others passed into the hands of small capitalists, or the shares were concentrated among the promoters. In fact, there is now, I believe, no coöperative cotton mill, owned by working men, in actual operation, on any scale, with the notable exception of Rochdale.... Here and there, an association of bootmakers, hatters, painters, or gilders, is carried on, upon a small scale, with varying success.... But small bodies of handicraftsmen (or rather artists), working in common, with moderate capital, plant and premises, obviously establish nothing."

II.XV.25

This is certainly a discouraging account to come from a labor-champion, at the end of thirty years of effort, and after the inauguration of so many hopeful enterprises which have enjoyed an amount of gratuitous advertisement, from philanthropic journals and sanguine economists, which would have sufficed to sell a hundred millions of railroad bonds, or make the fortunes of a hundred manufacturing establishments.

II.XV.26

A later writer gives a not more encouraging picture: "A large proportion of all coöperative societies are dealers in food, provisions, and articles of clothing, consumed chiefly by themselves and families. Others, but in a small ratio, are manufacturers of flax, spinners of cotton or wool, and manufacturers of shoes, etc. But very few of them succeed; and the failures are to be found chiefly in these attempts at production."*6

II.XV.27

The same tale comes from France, where these enterprises were inaugurated during the revolutionary period of 1848. M. Ducarre's report of 1875, from the Commission on Wages and the Relations between Workmen and their Employers, claims even less success for coöperative production in that country than is reported in England and Germany.*7

II.XV.28

In Switzerland, the nursery of accomplished artisans, whose citizens are trained in self-government more perfectly than those of any other country in the world, we find, at the latest date for which the facts are given,*8 only thirteen small coöperative societies of production. In these inconsiderable results, if not failure, of coöperative manufacturing, we find the most striking testimony that could be given to the importance of the entrepreneur-function in modern industry. Small groups of highly skilled artisans—artists, Mr. Harrison would call them—carefully selected, using inexpensive materials and small "plant," and working for a market*9 close at hand, perhaps for customers personally known, may achieve success by the exercise of no impossible patience and pains. But where laborers of very various qualifications, of all ages and both sexes, are to be brought together in industries which involve a great many processes requiring differing degrees of strength and skill, and which produce goods for distant, and perhaps, at the time of production, unknown markets, we see as yet scarcely a sign of the services of the employer being dispensed with. What, then, is the reason for this comparative failure of industrial coöperation? I answer, the difficulty of effecting coöperation on a large scale is directly as its desirableness. It is solely because of the importance of the entrepreneur-function that the employing class are enabled to realize those large profits which so naturally and properly excite the desires of the wages class; and it is for precisely the same reason that it is found so difficult to get rid of the employing class.

II.XV.29

The qualities of the successful entrepreneur are rare. We need only to look around us, within the most limited field, and for the shortest time, to see how vast a difference is made by the able, as contrasted with the merely common-place, not to say bad, conduct of business; and how great losses may be incurred by the failure to realize all the conditions of purchase, production, and sale. And the more extensively markets are opened by the removal of commercial restrictions, the more intense competition becomes under the opportunities of frequent communication and rapid transportation, the richer the prizes, the heavier the penalties, of the entrepreneur; the wider the breach between the able and the commonplace management of business. In these days, a person who should, upon the strength of respectable general abilities, undertake a branch of manufacture to which he had not been trained, and in which he had not long been exercised in subordinate positions, would run a serious risk of sinking a large part of his capital in a few years, it might be in a few months; and this, without any great catastrophe in trade, or any flagrant instance of misconduct in the operations undertaken. Simply not to do well is generally, in production, to do very ill.

II.XV.30

It is, of course, hard for workmen to see such large amounts taken out of the product to remunerate the entrepreneur, leaving so much the less to be divided among themselves; and the ambition which leads them to attempt to earn these profits by undertaking this part in industry, is wholly honorable and commendable. But it is clear that it is a great deal better, even for the work-men, that this heavy tax should be paid to the entrepreneur, than that production should be carried on without the highest skill, efficiency, and energy. The proof is that, as a rule almost without exception, those employers who make the highest profits are the employers who, when regularity of employment is taken into account, as it ought to be, pay the highest wages. Business must be well conducted, no matter how much is paid for it: that is the first condition of modern industrial life. The question who shall conduct it, must, even in the interest of the working classes, be secondary and subordinate.

II.XV.31

Is it asked, why may not the men who have the knowledge, skill, and experience requisite for the conduct of business, be employed as agents of coöperators, receiving wages for their services? In the first place, I answer, the same men cannot conduct the same business as well for others as for themselves. You might as well expect the bow to send the arrow as far when unbent as when bent. The knowledge that he will gain what is gained; that he will lose what is lost, is essential to the temper of the man of business. No matter how faithfully disposed, he simply cannot meet the exigencies and make the choices of purchase, production, and sale, if the gain or the loss is to be another's, with the same spirit as if the gain or the loss were to be all his own. That alertness and activity of mind, that perfect mingling of caution and audacity, those unaccountable suggestions of possibilities, opportunities, and contingencies, which, at least, make the difference between great and merely moderate success, are not to be had at a salary.*10

II.XV.32

Yet I do not claim that the effect of this would extend so far as to neutralize all the great advantages*11 of coöperation. If a body of workmen possessed the faith and patience necessary to carry them through the period of outlay and experiment, if they had the good judgment to select the best manager they could find, the good sense to pay him enough to keep him solidly attached to them, and the good humor to support him heartily, submit promptly to his decisions, and remain harmonious among themselves, coöperation might become a triumphant success with them. But let us see how much all this demands from poor human nature.

II.XV.33

In the first place, there is the all-important choice of a manager. Not to dwell on the danger of a body of workmen mistaking presumption for a true self-confidence, a brave show of information for thorough knowledge, an affected brusqueness for decision of character; or being led away by the plausibility and popular acts of a candidate, we have the almost certainty that such a body would, in the result, lose the best man, if not by turns every competent man, through indisposition to pay a sufficient salary. In his address before the Coöperative Congress already quoted, Mr. Thomas Brassey asked: "Where shall we find coöperative shareholders ready to give £5,000 a year for a competent manager? And yet the sum I have named is sometimes readily paid by private employers to an able lieutenant."*12 But it is not merely an able lieutenant, but a "captain of industry," that coöperators must secure, if they are to conduct purchase, production, and sale in competition with establishments under individual control. Can we imagine such a body paying $50,000 a year to a manager, when they receive on an average not more than $500 themselves? Would not jealousy of such high wages sooner or later, in one way or another, overcome their sense of their own interest? Even if we suppose them intellectually convinced of the expediency, upon general principles, of paying largely for good service, will they not be found calculating that for this particular manager this particular sum is altogether too much, or, without any disparagement of his merits, experimenting to see how much they can "cut him down" without driving him off, an experiment always dangerous, always breeding ill-feeling, and preparing the way for a separation. For why should the man who has the skill and knowledge necessary to conduct business on his own account be content to remain on a salary greatly below the amount he might fairly expect to earn for himself? Is it said his salary is regular and his profits always more or less uncertain? But the men of the temper to conduct business are not generally timid men or self-distrustful; they like responsibility and the exercise of authority—it is a part of their pay. Nor are they averse to a risk well taken; it braces them up and makes the game exciting. Is it said that want of capital may constrain some of the best men to seek employment at the hand of such associations? This is true, in a degree, and here is one of the possibilities of coöperation. Yet if a man have the real stuff in him, want of capital is not likely long to keep him under. The history of modern industry teaches that. Getting into business in the most humble way, the merchants from whom he buys his materials, those to whom he sells his products, and the bankers to whom he resorts with his modest note,*13 all soon take his measure, and when they have taken his measure they give him room. Genius will have its appointed course: antagonism and adversity only incite, inspire, instruct.

II.XV.34

We have thus far spoken only of those difficulties of coöperation which attend the selection and retention of able managers. On the difficulties to which this is but an introduction, arising out of the tendency to intrigue which exists in all numerous bodies, and the disposition to meddlesomeness on the part of committees or boards of directors,*14 I need not dwell. A sufficient lively impression of them is likely to be created by the merest mention. I will only further refer to an embarrassment which attends the extension of the coöperative plan to all branches of manufacture which employ laborers of very different degrees of industrial efficiency. Thus, in a cotton or woolen mill are to be found persons of both sexes and of all ages, earning under the present system from a few pence up to as many shillings a day. Under the coöperative plan, how is the scale of prices to be fixed? To say that all should be paid alike would be monstrous, impossible. It would be grossly unjust, and would be quite sufficient to wreck the enterprise from the start.*15 But if the laborers are to be paid at different rates, who, I ask again, is to determine the proportions in which the product shall be divided? How is general consent to be obtained to a scheme which must condemn the great majority to receive but a contemptible fraction of their proportional share? Without general consent, what chance of harmonious action? But if we suppose the scale of distribution to be fixed, who is to assign the personnel of the association to their several categories, to say that this man shall go into one class, and that man, who thinks quite as well of himself, shall go into a lower class? Is there not here the occasion, almost the provocation, of disputes and bad blood highly dangerous to such an enterprise?

II.XV.35

I have no desire to multiply objections to this system or to magnify the scope of those that offer themselves to view. Heartily do I wish that workingmen might be found rising more and more to the demands which coöperation makes upon them; but I entertain no great expectations of success in this direction. The reduction of profits through increasing intelligence, sobriety and frugality on the part of the wages class, securing them a prompt, easy and sure resort to the best market, is the most hopeful path of progress for the immediate future. There are of course some departments of industry where the services of the entrepreneur can be more easily dispensed with, than in others. Here coöperation under good auspices may achieve no doubtful success.

II.XV.36

It would appear that if coöperation could be introduced anywhere, it would be in agriculture: yet in no department of production have the experiments tried proved less satisfactory.*16 One reason which, in addition to those already enumerated, will probably always serve to delay the extension of the coöperative system in this direction, is the great difficulty of determining the actual profits of a year or a term of years, with reference, as is essential, to the value of unexhausted improvements. So long as the coöperators hold together and divide the yearly produce, all goes well; but if at any time one desires to withdraw, and men will not enter into associations of this character without the right of retiring, at pleasure, without forfeiture, the question of undivided profits becomes of the most serious importance. To settle it with absolute justice is simply impossible,*17 and no method of arriving roughly at a result of substantial justice, is likely to avoid deep dissatisfaction and sense of wrong.

II.XV.37

The difficulties of industrial coöperation have been so manifest that schemes have been suggested for avoiding them in great part, by methods which should sacrifice a proportionally smaller part of the advantages looked for from coöperation. Among these schemes, one, which seems to have been first definitely brought forward by Mr. Babbage,*18 has been tried upon a considerable scale. By this plan, which may be called one of partial coöperation, the employer is induced to admit his workmen to a participation to a certain extent in the profits of manufacture, while himself retaining the full authority and responsibility of the entrepreneur. By this plan the employer might fairly hope to attach his workmen to himself by more than the slight tie of daily or monthly employment, and to interest them so directly in the production of the establishment, as to secure a greater activity in labor and more carefulness in avoiding waste. The resulting advantages to the workmen would clearly be both moral and economical. There is quite a body of literature relating to the experiments in this direction, of MM. Leclaire,*19 Dupont, Gisquet, and Lemaire, in France; of the Messrs. Briggs, owners of extensive collieries and others in England;*20 of a few manufacturers in a small way in Switzerland,*21 of M. Cini, an extensive paper manufacturer of Tuscany,*22 and the Messrs. Brewster,*23 carriage manufacturers, of Broome st., New York. That something of the sort is practicable, with the exercise of no more of patience, pains and mutual good faith than it is reasonable to expect of many employers and many bodies of workmen, I am greatly disposed to believe. Many experiments, and probably much disappointment and some failures, will be required to develop the possibilities of this scheme, and determine its best working shape, yet in the end I see no reason to doubt that such a relation will be introduced extensively with the most beneficial results.


II.XV.38

The objections which have been shown to exist to productive coöperation do not apply with anything like equal force to distributive coöperation, so-called (but which could more properly be termed consumptive coöperation), that is, the supplying of the wages class with the necessaries of life through agencies established and supported by themselves.

II.XV.39

By productive coöperation, workmen seek to increase their incomes.

II.XV.40

By distributive or consumptive coöperation, they seek to expend their incomes to better advantage. They no longer seek to divide among themselves the profits of manufacture, but the profits of retail*24 and perhaps even of wholesale*25 trade.

II.XV.41

The advantages of this species of coöperation are:

II.XV.42

First: the division among the coöperators of the ordinary net profits of the retail trade.

II.XV.43

Second: the saving of all expenses in the line of advertising, whether in the way of printing and bill posting, or of the decoration of stores with gilding and frescoing, with costly counters, shelves, and show cases, with plate glass windows and elaborate lighting apparatus, or of high rents paid on account of superior location. The aggregate saving on these accounts is very large. The "union" store may be on a back street, with the simplest arrangements, yet the associates will be certain to go to it for their supplies, without invitation through newspapers or posters.

II.XV.44

Third: a great reduction in the expenses of handling and dealing out goods. The retail trader must be prepared at all times to serve the public, and he does not dare to greatly delay one while serving another, lest he should drive custom to a rival shop. He is therefore obliged to be at an expense for clerks and porters far exceeding what would be required were the trade of the day somewhat more concentrated. Some curious results of observations concerning the average number of customers in shops in London, are given in Mr. Head's paper before the Social Science Association,*26 which may be summarized as follows:

1st observation: time, 4 to 6 o'clock P. M.; in 88 shops there were 76 persons = .86 persons to a shop.
2d observation: time, 11 A.M. to 1 P. M.; 54 persons in the same 88 shops = .61 persons to a shop.
3d observation: time, 2 to 4 P.M.; 114 persons = 1.3 persons to a shop.
Average of the three observations: .92 persons to a shop.

II.XV.45

Now coöperators can effect a great saving in this respect. Being sure of their custom, they can control it, and concentrate it into a few hours of the day, or perhaps of the evening wholly.

II.XV.46

Fourth: a saving, of vast moment, in the abolition of the credit system, involving as that does the keeping of books, the rendering of accounts, and much solicitation of payment, and, secondly, a very considerable percentage of loss by bad debts.

II.XV.47

Fifth: security, so far as possible with human agencies, against the frauds in weight and measure and in the adulteration of goods, which are perpetrated extensively under the system of retail trade, the poorest customers being generally those who suffer most.

II.XV.48

The difficulties of consumptive are fewer and less severe than those of productive coöperation. To handle and sell goods is a much less serious business than to produce them. When once marketed, the contingencies of production are past, the quality of the goods is already determined, and in the great majority of cases, only moderate care is required to prevent deterioration. Then again, the profits of retail trade are relatively higher, for the capital and skill required, than the profits of manufacture; and hence there is more to be gained by total or even a partial success. Finally and chiefly, the destination of the goods is already practically provided for; the members are certain to take off what is bought, if only ordinary discretion is used; waste and loss are therefore reduced to the minimum.

II.XV.49

There are, therefore, powerful reasons, in the nature of the case, for the success of consumptive coöperation. The facts bear out the prognostication, although even this form of association has had many disappointments and often come to grief, not always from causes easily to be determined. "Coöperation," says Mr. Holyoake, the historian of the movement in England, "is the most unaccountable thing that is found amongst the working classes. Nobody can tell under what conditions it will arise. Why it flourishes when it does, and why it does not flourish when it should, are alike inexplicable. Why should it succeed in Rochdale, Blaydon, and Sowerby Bridge, and never take root in Birmingham, Sheffield, or Glasgow? There is no place in Great Britain so unlikely as Sowerby Bridge to produce coöperators. There are no places so likely as London, Manchester, Liverpool, Leeds, and Sheffield. Yet coöperators in some of these places make no more progress than a society of Naggletons. In Sheffield the socialists have tried coöperation; the Methodists have tried it; the Catholics have tried it; but neither Owen, Wesley, nor the Pope have any success in that robust town, where mechanics have more advantages, independence, and means, and as much intelligence as in any town in England."*27 We may fairly presume that the case is not altogether so mysterious as Mr. Holyoake would make it out to be. Lack of interest in the result, and consequent lack of the patience, pains, and self-denial necessary to achieve success, and unfortunate choice of managers, through indifference or intrigue, would probably explain most of the failures of coöperative trading, where the principle of cash payments has been strictly adhered to, and where the enterprises have been confined to the supply of the coöperators with the simple necessaries and comforts of life, without venturing into lines where fashion and taste predominate. The latest statistics attainable show 746 coöperative societies existing in England and Wales. The total share capital reaches £2,784,000. The money taken for goods sold during the year was £11,379,000. The largest of all these societies is the "Civil Service Supply Association," which musters 4,500 associates, and which in the six months ending February 28, 1874, took in, from sales, £819,428.

II.XV.50

It is to be noted that these "stores" do not try to undersell the retail shops, but sell their goods at ordinary prices, and divide all profits, after a reasonable addition to the "reserve," annually or semi-annually, among their stockholders. The sums thus coming once or twice a year to a workman are likely to be so considerable as strongly to suggest the savings bank.

II.XV.51

In France, M. Ducarre's report, while announcing the comparative failure of coöperative societies of production, states that those devoted to the supply of articles for consumption, have at once had a much wider trial and achieved a much larger degree of success.*28 In Germany, Belgium, and Italy, the movement for consumptive coöperation is in full present vigor.*29 Even in little Denmark, where but one industrial coöperative society exists, 37 coöperative establishments are reported*30 for the sale of articles of domestic consumption. In Austria, account is given*31 of 237 coöperative store-unions. In the United States, consumptive coöperation has been widely established in connection with the "Granger" movement, and also, more on its own merits, through the organization known as the "Sovereigns of Industry."*32


Notes for this chapter


1.
"Some Leading Principles," etc., p. 339.
2.
"Essays on Political Economy." How singularly unfortunate this would be as a definition, even were Prof. Cairnes not mistaken in his general view of coöperation, will be seen when we say that the above would be a very good description of a peasant proprietor, or small American farmer. He "combines in the same person the two capacities of laborer and capitalist." Is he [???] coöperator?
3.
"A scheme... by which the laborer can unite the functions and earn the wages of laborer and employer by superseding the necessity of using the services of the latter functionary."—Prof. Rogers, Pol. Econ., 108. This is a strictly accurate, and but for the regretable use of the word wages, would be a felicitous, statement of the design of coöperation.
4.
"Double interest is, in Great Britain, reckoned what the merchants call a good, moderate, reasonable profit." Adam Smith 1, 102.

Sir Arch. Alison gives as an argument against what would practically be coöperation, that the profits if divided among the laborers, "would not make an addition to them of more than thirty or forty per cent"—(Hist. Europe, xxii, 237.) "Profits" here include both the returns of capital and the gains of the middleman. Prof. Senior says; "it may be laid down generally, that in no country have profits continued for any considerable period at the average rate of fifty per cent per annum." (Pol. Econ., p. 140.)

Mr. Purdy estimates the division of the annual product of the land of England and Wales as follows:

Landlord's share (returns of capital)... £42,955,963
Farmer's share (profits)... 21,477,981
Laborer's share (wages)... 39,766,156
  £104,200,100
[Statistical Journal [illegible text—Econlib Ed.]iv, 358.]

5.
Fortnightly Review, III., 482.
6.
Social Science Transactions, 1871, p. 585.
7.
"Les sociétés coöpératives n'ont pas en jusqu'à ce jour en France le succès qu'elles ont obtenu, soit en Angleterre, soit en Allemagne.... En France, les societés de production n'existent qu'à l'état de minimes exceptions"—pp. 264-5.
8.
Report of Mr. Gould, on the Condition of the Industrial Classes, 1872, p. 355.
9.
"Pour la petite industrie, les placements sont en quelque sorts assurés; le marché est là sous les yeux du producteur, il en peut à chaque instant consulter les besoins, il reconnaît à des signes certains l'engorgement et la pléthore, aussi bien que l'insuffisance et la disette."—Blanqui (aîné), Cours d'Économie Industrielle, II., 62.
10.
"It is impossible to hire commercial genius, or the instincts of a skilful trader."—Fred'k Harrison, Fortnightly Review, III, 492.
11.
"I am confident that the manual operations will be skilfully and probably more diligently performed in a coöperative establishment. The personal interests of the workmen will be so directly advanced by their application and perseverance that they will naturally work hard. But their best efforts will fail to ensure a satisfactory result, unless the general organization is perfect also."—Mr. Brassey, at Hali fax. The Times' Report.
12.
The Times' Report.
13.
My honored father has told me of the discussion once held over a note for $250, offered at the bank of which he was a director, signed with the then unknown name of James M. Beebe.
14.
Mr. Thornton (On Labor, p. 441) argues that while societies of workingmen may be unable to administer their affairs directly, they may be competent, like political societies, "to provide for their own government." To the contrary, Mr. Harrison urges (Fortnightly Review, III., 492) that "he who is unfit to manage, is unfit to direct the manager."
15.
Mr. Babbage has shown (Econ. of Manufactures, p. 172-188) that the earnings of persons employed in the production of pins, in his day ranged from 4½d. to 6s. If the workmen who were capable of doing the higher parts of the work (pointing, whitening, etc.) were to be put to making the whole pin, through all the ten processes described, the cost of the pins would be three and three-quarter times as great as under the application of the division of labor, with payments to each workman according to his capacity.
16.
An apparently successful experiment in this direction obtains notice in Prof. Fawcett's Pol. Econ., pp. 292-3, note.
17.
Perhaps the difficulty of the problem will be best outlined, to those who are not familiar with this special subject of undivided profits, or "unexhausted improvements," in agriculture, by presenting the following classification of tenants' expenditures on the soil, which was embraced in the Duke of Richmond's Bill of 1875. That bill divided improvements into three categories; permanent, wasting and temporary. In the first class were included reclaiming, warping, draining, making or improving watercourses, ponds, etc., roads, fences, buildings, and the planting of orchards and gardens. With respect to these, it was proposed that an outgoing tenant should be allowed compensation for the unexhausted value of such of them as he might have made within 20 years of the termination of his tenancy with the written consent of his landlord. The second class included liming, claying, chalking, marling, boring, clay-burning, and planting hops, and it was proposed that the tenant should be able to claim for these processes, if done within seven years of the end of his tenancy, no consent being necessary. So also with respect to the third class—consuming by cattle, sheep, or pigs, of corn, cake, or other feeding stuffs, or using artificial manures—where, however, a claim could not go back beyond two years.
18.
In Mr. Babbage's admirable little work on "the Economy of Manufactures," published in 1832, a plan of industrial organization is proposed on the idea that "a considerable part of the wages received by each person employed should depend on the profits made by the establishment." (pp. 249-50.)
19.
J. S. Mill, Pol. Econ., ii. 335-7.
20.
Thornton "On Labor," pp. 369-84—McDonnell's Survey of Pol Econ. 220-1.
21.
Report of Mr. Gould on the condition of the industrial classes 1872, p. 355.
22.
Report of Mr. Herries on the condition of the industrial classes of Italy. 1871 p. 234-5.
23.
The proposal of the Messrs. Brewster was most honorable at once to the good feeling and to the sagacity of the members of the firm, especially Mr. J. W. Britton, with whom the enterprise originated. The firm offered to divide ten per cent of their net profits among their employees, in proportion to the wages severally earned by them, no charge to be made by the members of the firm for their services prior to this deduction of ten per cent, or for interest on the capital invested; the business of each year to stand by itself, and be independent of that of any other year. This handsome proposal was accepted by the employees, and an association formed. The plan worked to the satisfaction of all parties, as high as $11,000 a year being divided among the hands: but at the great strike of the trades in New York three years ago, the workmen of this establishment were carried away by the general excitement, and the strong pressure brought to bear upon them from the outside; and the scheme was abandoned. So long as it worked, it worked well; and showed that the plan had no financial or industrial weaknesses. The failure was at the point of patience, forbearance and faith, a very important point; but may not masters and men be educated up to this requirement, in view of the great advantages to result?
24.
For remarks of Messrs. Mill and Cairnes respecting the "excessive friction," and consequent undue profits and expenses of retail trade, the reader is referred to page 313-5.
25.
Very recently the coöperative societies of England have decided on a new and far reaching step, and have undertaken the importation of foreign supplies required for their numerous stores and shops. This step evidently involves a very large addition of responsibility and risk, without, as I should apprehend, a proportional gain in the event of success.
26.
Transactions, 1872, pp. 449-50.
27.
Soc. Science Transactions, 1864, p. 6-8.
28.
P. 265.
29.
McDonnell's Survey of Pol. Econ., pp. 224-5.
30.
Report of Mr. Strachy, 1870, p. 512.
31.
Report of Mr. Lytton, 1870, p. 564.
32.
I am disappointed to find so little precise statistical information in Mr. Chamberlain's work on the Sovereigns of Industry. Figures of arithmetic are more needed than figures of speech, in discussions of coöperation.

Part II, Chapter XVI

End of Notes


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