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Industrial Co-operation:

THE STORY OF A PEACEFUL REVOLUTION.

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CHAPTER IV.

Table of Events

GENERAL EVENTSCO-OPERATION
1865 American slave emancipation.
1867 Reform Bill (workers in towns enfranchised).
1870 Elementary Education Act.
1871 Trade Unions legalised.
1878 Factory and Workshops Act.
Federation develops —
i. In production.
    (a) The Wholesale.
    (b) Co-operative Productive  
Federation
ii. In Education.
    (c) Co-operative Union.
Third period of activity of associations of producers (cf. 1830-35, 1850-55).
1864 English Co-operative
 Wholesale Society begins work.
1869 Scottish Co-operative
 Wholesale Society begins work.
1869 Co-operative Union.
1871 Co-operative News.
1873 Co-operative Wholesale Society’s Productive Works at Crumpsall and Leicester.
1876 Industrial and Provident Societies Act (banking included).
1876 Shipping undertaken by Co-operative Wholesale Society.— “The Plover.”
1882 Co-operative Productive Federation.

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Period III., 1864-1883.  The Consolidation of

the Co-operative State.

THIS is from all points of view an important period in the history of the British democracy.  The Reform Bill of 1867 extended the Parliamentary franchise to the working classes in the towns, so that the power to control legislation would have passed from the upper and middle classes to the mass of the people had they known their strength.  Further, the Elementary Education Act of 1870 and the Ballot Act of 1872 (the demand for vote by ballot had been one of the six points of the Charter) made still greater the real power of the people.

About a score of years after the same point had been reached by co-operators, trade unions gained the position of legally recognised bodies by the Trade Union Act of 1871, and secured a further triumph in 1875 in the Repeal of the Criminal Law Amendment Act.  Thus the work begun in 1824 by the repeal of the Combination Acts was completed after about half-a-century of persistent effort on the part of the workers; whilst the Factory Act of 1878 made more real, as regards the whole of industry, the advantages already conferred by previous Acts.

The seventies opened with a few years of brisk trade, and things seemed on the whole to be going well with the worker.  A comparison has been made [1] between this decade and that between 1830 and 1840, which may be described as the Revolutionary or Socialistic period of Co-operative History; and indeed many of the features of that time are reproduced in the period now under consideration.  Once again there is much experiment in Associations of Producers; there is, as has been seen, a great advance both in the organisation and in the membership of trade unions; there is lastly, once again, an interest taken in economic questions by the working classes themselves.  Moreover, this interest is once more in a Socialist aspect of political economy, due largely to the circulation of Henry George’s Progress and Poverty about 1881, and to the activity about that time of the earlier of the present-day Socialist organisations.

This will surely prove a fruitful field for co-operative enterprise!  It is a period of federation.  We look not merely at the work of this society or of that, but at the progress of societies organised into larger federations — whether for business, as in the Wholesale Societies and in the Co-operative Productive Federation, formed in 1882, with the motto, “Hold Together;” or for educational work, as in the Co-operative Union or the Women’s Co-operative Guild, founded in 1883.

CLASSIFICATION OF SOCIETIES.

The official classification of the work of the chief societies with which this chapter deals is as follows:— [2]

I. Distribution in Great Britain by —

(i.) Retail Distributive Societies;

(ii.) Wholesale Societies.



II. Production in Great Britain by —

(iii.) Retail Distributive Societies;

(iv.) Wholesale Societies;

(v.) Associations for Production;

(vi.) Corn Mill Societies.

For our general survey, however, in this and the following chapter, it is more convenient to revert to the broader classification of co-operative societies into —

1. Associations of Consumers, including all of the above classes but (v.); and

2. Associations of Producers.

This is at once more convenient and more in accordance with the economic fact that distribution and manufacture are not opposed but complementary functions, together making up the essential process of production.

There is no scientific foundation for this distinction [between distribution and manufacture] . . . . The furniture dealer moves and re-arranges matter so as to make it more serviceable than it was before, and the carpenter does nothing more. [3]

Associations of Consumers are of the Rochdale type in that they seek to eliminate profit in the ordinary sense, returning to the customer as quarterly or half-yearly dividend the surplus remaining over between wholesale and retail price when all expenses have been paid.  In so far as they supply only their own membership — and this is usually the case — they are as manufacturers working for a known market, producing for use rather than for profit. [4]

Associations of Producers are primarily combinations of workers seeking to eliminate, not profit, but the need for a capitalist employer, so that the workers may “receive all the net profits arising from their labour.” [5]  Usually, however, workers, although they may participate in the privileges and responsibilities of management, form but a part of the Associations.  These Associations frequently find their chief customers among co-operators, but they sell also in the open market. [6]

As we go on we shall notice in the Associations of Consumers the same two stages of development as in the Union Co-operative Shops —

(i.) Distribution;

(ii.) Manufacture.

While some forms of production, e.g., the work of distributing in retail quantities, dress-making, boot-making, baking, are advantageously carried on by one society, organised in the first place for distribution; other forms of production, such as corn-milling, the manufacture of machine-made boots, weaving, tea-growing, can obviously be supported, as a rule, only by many such societies acting jointly.  Production in this way by several societies is known as federal production.

In following the history of Associations of Producers we shall notice —

(i.) The type of the self-governing workshop in early days;

(ii.) The movement towards Co-partnership, later.

Of the government and management of these two main types of co-operation, associations of consumers and associations of producers, a word may be said here.  The association of consumers is practically open to all within reach of a co-operative store.  Membership consists as a rule in the holding of a 1 share; but this may usually be acquired by the accumulation of the dividend received on purchases, the only money payment being the entrance fee, generally one shilling.  Membership carries with it the right and responsibility of managing the society, by members’ business meetings, and the election of a committee of management.  The usual rule is, “one man, one vote.”  These societies may therefore be looked upon as thoroughly democratic (1) because the constitution gives to every one of the members equal privileges in managing the society; (2) because all may join.

On the other hand, in associations of producers management may rest either (1) in the body of workers, or (2) in the owners of capital, or (3) in both.  We have seen that the first was originally aimed at, but as time went on the owners of capital acquired a predominant if not exclusive control.  The most recent ideal, expressed in the term “Co-partnership,” is joint control, the balance of power varying in different associations.  These societies cannot be considered democratic precisely in the same sense as those of consumers, for obviously there is a narrower limit to the number of those who can join as workers or capitalists, and governing power is unequally distributed.  But in so far as the worker can, either directly or through an employees’ society, have a voice in the conditions and control of his daily work, the factory may claim to be a democracy.

ASSOCIATIONS OF CONSUMERS

Co-oporative societies, federated for the most part into the Wholesale Societies, now pass rapidly from stage to stage of development.  After its registration in 1863 — one of the first results of the Industrial and Provident Societies Act of 1862 — the Co-operative Wholesale Society got to Work in 1864 as a wholesale agency, supplying goods at cost price, plus a small commission to cover expenses.  Soon, however, it adopted the Rochdale plan of selling at ordinary market prices, and returning the surplus to purchasing societies in proportion to their purchases.  So that 1864 repeats in wholesale trading the Rochdale experiment of twenty years earlier in retail trade.  Once again the plan is successful.

The Headquarters of the Co-operative Wholesale Society were (and still are) at Manchester, but soon outlying departments were found advisable to enable it to purchase advantageously in distant markets.  Thus very early there were butter-buying depots in Ireland, followed by depots in New York, Hamburg, Copenhagen, &c., for various goods.  Distributive branches were opened in Newcastle, 1871, and in London, 1874.  Additional salerooms have also been established in various other towns.  In addition to the original grocery, there are now drapery, furnishing, boot, and other departments.

Of the two stages of production — manufacture and distribution — only the latter had as yet been undertaken by the Co-operative Wholesale Society.  Its next step — one of the most momentous — was the undertaking of the stage of manufacture.  Co-operators became, through their Wholesale Society, not only merchants but manufacturers.  In 1873 biscuit and confectionery works were opened at Crumpsall, near Manchester, and boot works at Leicester.  Since then, step by step, more of the necessaries of life have been manufactured by the Co-operative Wholesale Society — not only boots, but flannel, shirts, and cloth; soap, candles, starch; furniture and tobacco; besides biscuits and sweets, jam, pickles, sauces, and butter.  Eggs are packed, lard refined, flour ground, and fruit grown.  But we are anticipating — to the period now under consideration belongs only the beginning of manufacturing activity.

Another development took place soon after the first factory was opened.  Co-operators, through the Wholesale Society, became their own shippers; first chartering and finally purchasing their first ship, the “Plover,” in 1876.  The banking department is just a little older than the manufacturing, having been started in 1872.

The Scottish Wholesale Society so closely resembles the English in the broad outlines of its history and organisation that it requires little notice here.  It was established in 1868; and while remaining an Association of Consumers, it so far adopts Co-partnership as to give to employees a bonus on wages equal to the dividend paid to purchasers, and to allow employees to take up a limited number of shares through an Investment Society. [7]

ASSOCIATIONS OF PRODUCERS

These societies may be described as being during this time still in the experimental stage, and the basis of experiment was still, as a rule, some form of the self-governing workshop advocated by the Christian Socialists in the preceding period of activity.

The experience gained by the promoters of these associations was fruitful experience.  The believers in the ideal of workers’ associations learned the limitations under which government by the workers may be carried out, and the extent to which it is possible; so that the theory of the purely self-governing workshop did not long survive the period under consideration.

Among the various experiments alluded to a few may be considered a little more fully.

Profit-sharing was, as we have seen, introduced into the Scottish Wholesale Society in 1870.  The best known experiment in profit-sharing of this period is, however, outside the co-operative World — Henry Briggs and Co. adopting it in 1865 at their Whitwood and Methley collieries and abandoning it in 1875.

The Hebden Bridge Fustian Society, founded in 1870, illustrates in its own history the passage of the control from the original group of workmen who founded it, to the distributive societies and individual capitalists who support it.  Here labour shares in the profit made, although a determined effort was made about 1875 to stop this arrangement. [8]  No employee, however, may sit on the committee, nor do the shares allotted to the employees out of profits entitle them to a vote in the general management of the society.

Of the numerous metal-working ventures of this period — for the crop of six co-operative societies sown in Sheffield in 1873 is typical of other places — only the Sheffield Cutlery and Walsall Padlock societies survived in 1903.  Engineering on a large scale has not proved a success co-operatively; even the Ouseburn Co-operative Works (1871-1877) failed, although supported by capital from the Wholesale and various retail distributive societies.

The Leicester Hosiery Society (founded 1876) had in its early stages a history similar to that of many other co-operative productive works in that its control passed largely into the hands of the distributive stores which bought its goods and supplied much of its capital.  Recently, however, it has, like the Littleborough Manufacturing Society (flannel, &c.), reached a further stage in federal control, having been in 1903 merged into the Co-operative Wholesale Society. [9]

Other societies established during this period and still persisting are the Manchester Co-operative Printing (1869), Airedale Worsted (1872), Edinburgh Printing (1873), and the Northampton Productive Boot and Shoe (1881) Societies.

EDUCATIONAL WORK

The tendency towards the federation of societies (themselves a federation of individuals) which marks this consolidating period is seen in the propagandist side of the movement no less strongly than in the business side.  Already there had existed for some time a North of England Conference Association, when, in 1869, a London Congress, with Thomas Hughes as president, revived the series of congresses held in London in Christian Socialist times (1850-55), and thus established the Co-operative Union.

The London Congress was the beginning of a series unbroken down to the present time, and arranged for the second congress to be held in Manchester, 1870.  This was attended by north country delegates, but the amalgamation of the London and the North Country organisations was not complete till 1873; for although congresses were held each year under a Central Board, this Board at first reflected its dual origin, being elected in two sections, London and provincial.  The Newcastle Conference of 1873, however, re-organised the Central Board and did away with this distinction, thus completing the general work of federation for propagandist and educational matters.  To the Co-operative Union belong co-operative organisations of all kinds — associations of producers, whether of the self-governing type (e.g., Kettering Boot and Shoe Works) or founded on modern co-partnership lines; associations of individual consumers, from the smallest distributive store to the self-contained Leeds Society, with its own productive departments, its own corn-milling, tailoring, and bootmaking; and in addition the two great federal consumers’ associations, the English and Scottish Wholesales.  In it are included societies of the most heterogeneous character — societies for engineering and for agriculture, for quarrying and for fishing, for bookbinding and for butter-making, the Co-operative Building Society, the Co-operative Insurance Society, the Co-operative Newspaper Society, and a Sectional Educational Association.  For it the geographical limits which separate Scottish and English societies into distinct trading concerns do not exist, and the Irish Sea is no longer to prove a barrier to complete consolidation.  In fact, there is no limit to the bodies corporate which may be admitted to the Co-operative Union if they accept its aims; but there are no individual members. [10]

The organisation of the Union is based on an elaborate system of electoral and working divisions, each society subscribing according to its membership and having voting power in the same proportion.  The governing body thus elected — the Central Board — does most of its work through the seven Sectional Boards (Midland, Northern, North-Western, Scottish, Southern, South-Western, and Western), and by committees usually meeting at Manchester.  Although the Co-operative Union acts by elected representatives through its Central Board, it has another recognised way of registering its opinion, namely, the Annual Congress.  At this Congress societies are represented by delegates, approximately in proportion to their membership; and questions affecting what may be called the external work of societies are decided — the relation of co-operators to legislative measures, forms of common educational work, points of co-operative ethics, and principles affecting the policy as distinct from the practical management of societies.  In fact, the Central and Sectional Boards receive from the Annual Congress — the societies in session — instructions for the work which is entrusted to them, as well as receiving a mandate from the societies which are their electoral constituents.  Congress has an “Initiative Power:” hence an individual society failing to make its voice heard in its own section may have the opportunity once a year of bringing its opinions before the whole of the co-operative world.

It has been said that Congress merely registers “pious opinions” which are not carried out in the daily practice of co-operators, and there may still be some grounds for this accusation.  But while it has no legislative control over the internal affairs of societies, its influence is increasingly felt, and its decisions respected even on business questions.  A good illustration of this is its discouragement of “over-lapping” — the establishment of one co-operative society within the working area of another.  Even in such matters as credit-trading and profit-sharing, where enthusiasts feel that its power falls short of what they expect, its influence may be greater than is apparent; for while it may fail to lead co-operators forward, it may be powerful in preventing retrogression.  On any important question it may voice the opinion of the more advanced among co-operators, and may thus help to educate co-operative opinion by keeping the ideal ever in sight.

The registration of the Co-operative Newspaper Society in 1871 for publishing the Co-operative News, the recognised organ of the movement, was a step forward in educational work, following naturally on the formation of the Co-operative Union.  All is interesting to notice that, after paying interest on capital at 5 per cent, the profits are added to reserve or used in improving the paper.

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NOTES

1. Trade Unionism. Webb. Page 361.

2. Board of Trade Report, 1901, xii.

3. Marshall, Principles of Economics, Vol. 1., Book II., Chapter III.

4. See Chapter X.

5. Tracts on Christian Socialism, No. 5, pages 9 to 21.

6. See Chapters IX., XVI., and XVII.


7. See Chapter XIV., page 118.

8. The Story of the Formation of the Hebden Bridge Fustian Manufacturing Society, by Joseph Greenwood (Co-operative Union pamphlet).

9. The Littleborough Manufacturing Society came into the hands of the Wholesale Society through liquidation, whilst the Hosiery Society was purchased as a going concern, solvent and profit making.

10. See Chapter XXII, page 196.