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Industrial Co-operation:





Labour Co-partnership.

THE self-governing workshops established by the Christian Socialists, as narrated in Chapter IX., were based on co-operation among groups of producers only.  On the other hand, production as carried on by stores or federations of stores is a branch of consumers’ co-operation, based on what may be called “the theory of consumers’ production,” [1] the theory that co-operative production ought to be carried on by organisations of consumers, combining to supply themselves.  The modern theory of Co-partnership sees truth in both these theories, and seeks to reconcile them by combining the consumer and the producer in a united organisation for co-operative production.  It also finds a place within such organisations for the man who merely finds capital, at least so long as the actual producers and the organised consumers cannot themselves find all the capital needed.

When in 1854 the Christian Socialists, as an organised body, had ceased to foster the formation of self-governing workshops, such workshops continued nevertheless to be formed in various parts of the country, as also did others, upon somewhat similar lines, formed under trade-unionist and other influences.  Many of these perished; but as time went on — and especially after the granting of limited liability to co-operative societies in 1862 — the numbers again increased, and they began to show more stability.  The ideal, however, was modified; individual sympathisers outside the workshop were admitted as members (as apparently they were in the Owenite workshops before the days of the Christian Socialists); so too were societies of consumers.  Thus, in the place of the old self-governing workshop, the modern Co-partnership workshop was developed.


But so numerous were failures and so few were successes that in 1883 only fifteen productive societies based on Co-partnership were known.  Just about that time there was a notable rally.  In November 1882, the Co-operative Production Federation was registered to bind together the existing Co-partnership societies for business purposes.


In 1883 was formed the Labour Association (now Labour Co-partnership Association) to “promote co-operative production based on the Co-partnership of the workers;” and in the same year the Co-operative Aid Association, to encourage the starting of productive societies, both by propaganda and by loans of capital.  This last method proved dangerous, and after many losses the Aid Association suspended operations; but the Labour Association, which confined itself to propaganda, and the Productive Federation, have continued to carry on valuable work.  The growth of societies was rapid in the eighties, so that when the Royal Commission on Labour sat in 1892, the fifteen societies had grown to forty-six.  In that year the Scottish Wholesale, which had shared profits with its employees since 1870, admitted them as members; and thenceforth the figures of its productive departments add largely to the total of co-partnership production.  The increase in the number of societies continued up to and including 1899; but during the two following years (marked by so much prosperity and by the excitement of the South African War) there was no net growth in number, though some increase still continued in the volume of trade and the amount of capital.  Since the end of the war and the return of harder times the growth of new societies has been rapid, and old have made good progress.


The following figures for 1883, 1893, and 1902 show the progress which has been made: [2]

Capital (Share, loan and reserve)£103,436£619,154£1,533,653
Profits£160,751£1,155,842 [3]£3,170,465 [4]
Dividend on WagesNot known£8,225£22,858

These figures refer to 107 English societies and five Scotch.  They do not include Ireland, though in that country there has been a very rapid growth of some hundreds of agricultural societies embodying the co-partnership principle in their rules.  The societies included here had divers origins, corresponding with those of the four typical societies mentioned on page 137.  Approximately, one hundred of them began with a group of producers, combining to carry on their industry without the intervention of an employer; some half-dozen, mostly very large societies, were organisations of consumers desiring to supply themselves; four or five are of capitalistic origin, beginning, that is, with employers in the ordinary sense; while two or three others are agricultural productive societies.  These last are a modification of the first group; they are organisations of producers, who, however, do not aim at combining their own labour co-operatively, but at marketing the products of their individual labours to the best advantage after, usually, converting them into a more profitable form, by means of labour employed on the co-partnership principle.

To divide the societies exactly into these four groups would be impossible: their characteristics blend one into the other.  If it were done as nearly as might be, we should find that, while the Scottish Wholesale and one or two other large societies of consumers’ origin account for much of the great increase of trade, capital, and profit, the societies of producers’ origin have also made great progress, their yearly trade exceeding £1,000,000, with capital and profits in proportion — that is, about one-third of the totals for 1902 given above.


Each of these groups has, of course, its special characteristics, more particularly as to the distribution of power.  Where the workers have formed a society, they usually exercise the chief power. [5]  Where stores have done so, they are the most powerful element.[6]  Where the employer has converted his business and provided the bulk of the capital, he retains a very large part of the power for a considerable time;  [7]while large groups of farmers who form a co-operative dairy count for more in the management than the few workers employed therein. [8]


These different types are also especially representative of different parts of the United Kingdom.  The English societies are mostly formed by producers; the Scottish by consumers; while the agricultural societies, a few of which are found in England, are counted, as we have seen, by hundreds in Ireland.  The importance of the societies and the trades represented also vary very greatly.  In 1902 the Scottish Wholesale produced goods worth £1,580,713; the United Baking Society of Glasgow, £389,351; the Paisley Manufacturing Society (weaving), £88,770; while nine other societies exceeded £40,000, twenty-one were between £40,000 and £10,000, and the rest were smaller.  There were sixteen societies making boots, eighteen engaged in building or wood-working, twelve weaving cotton, wool, or silk, one spinning silk, six making clothes of various sorts, ten printing, two making watches, three cutlery, one padlocks, one nails, seven engaged in other metal trades, three in brush-making, and one or two each in bookbinding, piano-making, typewriting, cab-driving, barge building, barge owning, quarrying, brickmaking, leather-dressing, harness making, milling, baking, dairying, mineral-water making, sick nursing, and photography.  In addition, one society — the Scottish Wholesale, carries on a great variety of manufactures. [9]

A noticeable thing about the English societies is their tendency to group themselves in and around certain towns.  Thus, nine are found in Leicester, besides several in the villages around; five are in Kettering.  These are the most conspicuous instances, but it may be said generally that the presence of one successful productive society tends to make others spring up in the neighbourhood, more particularly where the store of the town is sympathetic and helps by investing money for buildings or working capital, as at Kettering, Wellingborough, and elsewhere.  In these cases the store and the local workshops form a strong co-operative group.  Desborough, with its two important productive societies and a flourishing store, which owns much of the land and has built most of the houses, is almost a co-operative community.


All these co-partnership societies have certain points in common.  Like the distributive societies, they are registered with limited liability, under the Industrial and Provident Societies Acts.  In the general meetings the rule of “one member, one vote” usually prevails, except that additional votes are given to other societies which hold shares, on the ground that they represent not one man but many.  The members elect a committee of management, and the committee appoints a manager.  In a few of the older societies the members employed, while voting to elect the committee, may not serve on it themselves: in others the proportion of employees on the committee is fixed: in others again all are equally eligible.  Practically always women have the same rights as men, both of voting at general meetings and of being elected to the committee; and minors of sixteen years and upwards are eligible for membership.  As in the stores, the first charge on the profits is “the wages of capital,” i.e., a limited rate of interest, usually fixed at five per cent.  Unlike the stores, capital usually receives in addition a small part of the remaining profits, if any; while the shares are not withdrawable, but only transferable to a purchaser or nominee.  But the essential features of a co-partnership society, which distinguish it from any other form of co-operative production, are three.


First, the workers, in addition to their wages and wholly apart from any capital they may hold, share directly in the success of the business.  This is accomplished by profit-sharing, though what is technically called “gain-sharing” or “produce-sharing” would serve in given circumstances.  If profits allow, a “dividend to labour” is paid in proportion to wages earned.

Secondly, the workers have a right to share in the capital by becoming members, whereby,

Thirdly, they share also in the responsibility and control.

Thus it is essential that, as the business grows and new workers are taken on, the door of membership be kept open to the non-members employed.  Power is indeed taken under the rules to refuse membership to workers whose character makes them personally unfit to be members, but this power is seldom if ever used.  No society which on any other ground refused membership to an employee would be acknowledged as a true co-partnership.  The share of profit allotted to non-members employed is, however, sometimes on a lower scale than that to members, or is conditional on their applying for membership.  It is also usual for a worker’s dividend on wages to be put to share capital until he holds some five, twenty, or fifty pounds therein.  A member has no right to employment by the society: it chooses its workmen where it can find the most suitable — among its members by preference, but if necessary outside.


In the division of profit, besides the wages of capital and the dividend on wages, another and often a large share is usually allotted to the co-operative customers, i.e., the stores, as a dividend upon their purchases, while smaller shares go to a provident fund, to the remuneration of the committee, and to educational and social purposes.  In a few societies there is also a fund to reward inventions and special services — a wise provision for stimulating the zeal and intelligence of the members.  A typical distribution of profit, after paying five per cent interest on shares and allowing for depreciation and reserve, would be: one-tenth to provident fund, one-tenth to committee, one-tenth to share capital, one-twentieth to educational purposes, and the remainder about equally to labour and to customers.


A group of workers in a given trade, let us say they are printers — probably they are also members of the local co-operative distributive society
not satisfied to remain permanently wage servants, meet together to organise a co-operative workshop for themselves and those whom they may afterwards take in to work with them.  They put together a few pounds each towards capital, get sympathisers of their acquaintance to do the like, and perhaps obtain similar support from organisations such as trade unions and workmen’s co-operative societies: these are probably also their chief customers.  So they work on, every man interested in the profit — if there be one — and those who are shareholders interested also in the loss.  Probably they begin in a very small way.  By-and-bye, it may be, their trade grows to five, ten, fifty thousand pounds.  Still every new worker has a share in the profit, and an equal chance of becoming a member.

Such is a typical instance of a Co-partnership productive society.

Or it may be a society of consumers, or a federation of consumers’ societies, starting a bakery; or an employer who desires a higher relation with his workmen, registering his business as a co-operative society; or a group of small farmers or working peasants, who combine to build a dairy, to turn their milk into butter or cheese.  Each of these may be a typical instance of the Co-partnership principle, if the societies thus formed secure to the labour employed in such bakery, factory, or dairy, the right to share in the profit and to become members.


We see, then, the objects which co-partnership societies have in view; they claim to carry out the principle embodied in the rules of the Co-operative Union, “to conciliate the conflicting interests of the capitalist, the worker, and the purchaser, through an equitable division among them of the fund commonly known as profit.”  This is the basis, but it is by no means the completion, of their programme.  Much less is that programme summed up in the common phrase, “bonus to labour,” which seems to imply the idea — so foreign and repugnant to Co-partnership — of a benefaction from some superior power.

Taking a bird’s-eye view of these societies, before we begin to estimate the value of the system, we see them as groups of producers scattered here and there over the country by ones and twos, and occasionally in larger numbers, sometimes having come together of their own accord, sometimes on the initiative of the organised consumers, or of an employer; working sometimes to supply the great competitive markets of the world, but far more often the co-operative distributive societies to which they and their fellow working-men belong.  For in the great majority of societies these co-operative producers are store co-operators also.  We see them making goods which are thoroughly sound, which are sometimes of the very highest quality, and are always above the average of similar goods sold in ordinary shops to the working classes, even although the wealthy man may consider them somewhat rough.  We see all these producers sharing in the profit, responsibility, and control of their industry, and using part of its gains collectively for-provident, social, and educational purposes.  We find also the chief of these groups federated for mutual help, and conscious of forming a unity, a movement, based on an ideal common to them all.


The advantages of this system fall under two heads, material and moral.  On the material side, it yields a fund which enables the workman to increase his earnings, often by five or ten per cent.  At the same time, by making him a shareholder in the business employing him, it enables him to assert his claims and protect his rights.  But more important are the effects upon character.  It stimulates his zeal and careful working; and, as part owner of the capital with which he works, he feels (more or less, according to his nature) a share of the responsibility of the business, and is taught to look on industrial questions from a new point of view, no longer that merely of the wage servant.  Moreover, he takes his share in the democratic government, not of some far-away power, but of the workshop in which he spends his life, and he gets the training and education which such practice of democracy affords.  These are no small advantages.


On the other hand, it may be freely admitted that the difficulties are not slight.  Discipline must be maintained in every organisation, and it has sometimes proved not easy to maintain discipline where every man has felt himself to be one of the owners of the place, relieved (as he may have foolishly thought) from the obedience of a wage servant.  The position of manager over men who, as shareholders, have the ultimate voice in the affairs of the society has not always been easy; and it is not always easy for working men to see the necessity for paying a manager liberally and securing a man of special ability for the work.  Trouble often arises also from a want of business knowledge, from insufficiency of capital, and from the difficulty of obtaining custom.  But all these things apply principally to the early days of a society.  Once it has become established they are felt less; business knowledge is acquired as time goes on; the importance of management is recognised; capital comes in as soon as it has been shown that its position is safe; a trade connection is in course of time got together, more especially among the distributive societies; and workers, if they have not at first realised it, learn the necessity of discipline and subordination.  At any rate, if these matters do not work out well, it means that the society does not become established but fails in its infancy.  It is the starting of a co-partnership business which presents the real difficulties, but happily in a large and increasing proportion of cases, these difficulties are overcome and success is attained.

Even in the starting the difficulties are chiefly felt where the actual producers are beginning with inadequate capital, not where an association of consumers, or any other body with large capital at its command, commences a co-partnership business; nor where an employer introduces Co-partnership into an established business.

An exaggerated view has often been taken of the number of failures in co-partnership societies.  The early years of any new form of organisation show many failures.  It was so with the early trade unions and the early stores; indeed there has never ceased to be a considerable proportion of failures among these organisations.  The same is true of co-operative production, and perhaps more true in proportion, as the work of organisation is there more difficult.  Of the workshops established before the time of Robert Owen, or by the union shops, or by the Christian Socialists, all but one or two have disappeared, and so too have almost all those registered under the Industrial and Provident Societies Acts in the early years of those Acts.  In 1884 it was calculated that only some 26 corn mills and 22 other productive societies were known to exist, [10] whereas 224 productive societies registered since 1852 had failed and disappeared.  This cannot be regarded as evidence of the failure of Co-partnership, seeing that only 24 of these failures gave any share of their profits to the workers and had therefore any claim to be called co-partnerships.  As time has gone on the proportion of failures has very decidedly decreased, and it is now scarcely greater than among distributive societies.  In spite of all difficulties the growth shown above has taken place, and as the great body of workers becomes more educated and better off, we may fairly expect the difficulties to become less.


There are, however, objections which are not in the nature of difficulties, but which have suggested the question whether the system has certain serious inherent faults.  First, there is the position of the non-members employed.  We have seen that no society is recognised as co-partnership which does not admit employees to membership.  But can this be secured permanently, or do the co-partnership societies tend to become knots of little masters?  In early days this occasionally happened.  Chiefly through imperfect rules the newcomers were not made into members.  But very few such societies now exist, and those few of course are not recognised as co-partnership.  Where the rules are properly drawn up at the commencement, the right of membership is secured to all employees who desire it, and the democratic feeling of a large body of working class members is found a sufficient security for the permanent maintenance of this right.


Again, do co-partnership societies tend to cut down wages; do the members, in fact, “sweat themselves” in order to obtain trade?  In practice, the tendency is found to be very much the other way; the members try to get themselves good wages and good conditions.  The best answer to any such doubts is that co-partnership societies almost everywhere have the support of the trade unions, and are known as paying standard wages, and often more than the best wages in the trade.


But again, must not the multiplication of societies in one trade lead to competition?  The answer is, first, that even in the boot trade — where societies are most numerous — so great is the variety of boots made that there is very little real overlapping; secondly, that eventually this difliculty must be met by the federation of societies.  In France, where societies in building, road-making, and other branches of work are numerous, it is found that they arrange among themselves to avoid tendering in competition.

Lastly, is there not so great a variety of rules among these societies, particularly as to the division of profits, as to prevent their offering any clear and satisfying type?  We have seen that, in spite of their variety, there are certain essential features common to them all.  That being so, the variety is in itself welcomed, as helping to show by experience what details are best, and to adapt the principle to the endless variety of circumstances.


The individual investor, who is himself neither an employee nor, of course, an association of consumers, but, to however minute extent, a “capitalist,” has been referred to above.  What may be his ultimate fate in co-partnership production it is difficult to say.  Probably he will become less and less necessary, and the capital he supplies will, more and more, take the form of loan capital; the rights, responsibilities, and powers of shareholders being more and more reserved for the actual workers and the actual consumers.  But this is a question for the future.


We have also seen the capitalist in touch with Co-partnership at another point, viz., where the owner of a business has taken his workers into partnership, and made it into a completely co-partnership society.  There are, however, many businesses in which the amount of capital needed is so great that this is impracticable.  Nor are they more suitable for complete consumers’ co-operation, since those whom they serve are often either a fluctuating body — like shippers of goods, railway travellers, hotel visitors, and so forth — or are not inclined to co-operate, or are scattered all over the world.  These businesses are the great examples of capitalistic industry, and after making every allowance for the growth of voluntary associations, and of State and municipal enterprise, they seem destined long to hold a place among us.  But in them also Co-partnership has found a place, and promises to find an increasing place.  For where the workers employed have been given a share in the profits, and where those profits have been accumulated as share capital in the business employing them, another form of Co-partnership, less complete than those which we have already considered, is revealed.  It is a form which has probably a very great future before it, as the means by which great businesses may be transformed into co-operative shape.  Indeed, in at least one instance this has actually happened. [11]  Advocates of Co-partnership welcome all such attempts made in good faith, not only when amounting to a complete system of Co-partnership, but even when only amounting to steps in that direction — steps calculated to benefit the workers materially, to educate them, and to lead the way to better things.


But to return from this “Transformation of Capitalism” to the co-operative movement strictly so-called, how far can co-partnership societies — whose origin, growth, advantages, and difficulties we have seen — be considered a fulfilment of the co-operative ideal?  It cannot be denied that within itself a co-partnership society is admirably co-operative: on the other hand, in the relations of co-partnership societies one to another, or in their relations as producers to the societies of consumers, can we say that there is any element of co-operation?  To deny it would be greatly to overstate the matter, but it is quite true that in both respects there is much to be done in order to complete their co-operative organisation.


The element of co-operation between one productive society and another already exists in the Co-operative Productive Federation.  Founded, as we saw, in 1882, the objects of the Federation were to market the goods of the societies in common, to raise capital in common, and to serve other common purposes; and while it has not done all that was expected of it, it has done enough to rank as a distinct success.  It has raised several thousand pounds of loan capital, which it has re-lent to the societies for the extension of their businesses; it has done much in the organisation of exhibitions, in looking after the general interests of the societies, in issuing a Year Book and other literature, and in maintaining a feeling of unity and a spirit of co-operation among the societies.  Those who desire to see the principle of federal unity more completely applied should certainly desire, not only the development of the Federation, but its more complete recognition as the representative of the federated societies within the co-operative movement.  But there is much more to do in this direction.  The Federation has hitherto failed to achieve anything of importance for the joint marketing of the goods of the societies, or the avoidance of possible competition among them.  This problem has not, as we have said, become practically urgent, but it cannot be denied that when a large number of societies exist in the same trade, it is necessary for the perfection of the co-operative principle that some thorough form of federation among them should exist.  The absence of this largely accounts for co-partnership societies multiplying so much more slowly than the growth of the whole co-operative movement would warrant.  The later comers have found themselves regarded by many as competitive rather than as co-operative growths.


Next, as to the relation of co-partnership societies to the societies of consumers, which are usually their chief or only customers.  Co-operation to be complete, must certainly regulate the exchange of wealth between one body of producers and another.  We need, therefore, some co-operative relation between the productive societies and the distributive.  Such a co-operative relation exists in the very large number of cases where stores are customers and also shareholders in the productive society, thus sharing in its management, profit, and responsibility, exactly as stores share in, say, a federal corn mill.  In nearly all successful co-partnership societies a large number of stores are members, and in some cases they exercise by far the greater part of the control.  Thus a co-partnership society is commonly a federation of distributive societies with a body of producers; it regulates co-operatively the exchange of wealth between them, subject, as in all co-operation, to the ultimate control of market values and of trade union standards.

It must, however, be remembered that many co-partnership societies do a part, and some do the greater part, of their selling in the open market, in which case federation with the consumer is impracticable.  This cannot be considered an objection to them from a co-operative point of view, since there is and must long remain (as we have seen) an immense volume of trade beyond the reach of consumers’ co-operation.  Unless the workmen engaged in the industries which produce for that trade are condemned permanently to mere wage service, they must be free to organise on a Co-partnership basis.

Still, the question remains whether, in that much larger part of the trade of co-partnership workshops which is done in supplying the distributive movement, the co-operative relation between the producer and consumer would not be at once simpler and more complete if the Co-operative Wholesale Society represented the co-partnership productive societies.  This, in the first place, would involve membership of the Wholesale being open to the productive societies, which at present is not the case.  Subject to that, it is a very attractive proposal; but unfortunately where it has been tried it has not often succeeded.  To complete the co-operative relation between the consumer and the co-partnership producer, it would seem necessary for the productive societies first to complete a federal organisation among themselves, and then for that federation of productive societies to enter into relations with the great federations of consumers’ societies.


In addition to federations of productive societies on the business side, the Labour Co-partnership Association, already mentioned, is largely a federation of productive societies for propaganda, though a large number of individuals, trade unions, and distributive societies also subscribe to it, and so help to spread knowledge of the principles of Co-partnership throughout the country, far beyond the limits of the co-operative movement.  It would be unreasonable to expect this work to be done wholly by the co-partnership societies, only a few of which have large resources.

Lastly, we must consider the future of Co-partnership.


In forecasting it we have really to forecast, in that industrial democracy which we call co-operation, the working out of the two great principles of central unity and freedom of the parts; a problem which every form of democracy has to solve.  In other words, we must reconcile federation and decentralisation.  It is easy for a village to be self-governing; it is not difficult for a great nation to build on universal suffrage a government so highly centralised that the freedom of local government, and almost the identity of the individual, are lost.  But to build up a great community which shall enjoy central unity and at the same time a real self-government of all its subordinate groups of members, in all those things which concern them primarily or exclusively this is a task of tremendous difficulty.

On the consumers’ side of the co-operative movement we have an excellent example of what should be aimed at.  There every store manages its own affairs in a purely democratic way, without outside interference, while the stores are federated together for common business purposes in the great Wholesale Societies, which, as their representatives, control matters the societies could not manage individually without waste and some measure of competition.  On the producers’ side, such an organisation is not so easy; at any rate it has not yet been worked out.  The mere division by districts, which is so natural in the case of stores, is not applicable to productive societies.  For these, like trade unions, must be federated not merely according to their geographical position, but first trade by trade, and then all trades together.  In essence, nevertheless, there is needed (at least according to the ideal of co-partnership co-operators) the same organisation on the productive side of the movement as exists on the distributive.  They desire to see, that is, a great number of societies enjoying self-government in the management of their own affairs, bearing the responsibility for any mistake they may make, and relying upon the efforts of their own members and workers for their education and development; but all federated together for the avoidance of undue competition, for carrying out common purposes, and for arranging a truly co-operative relationship with the corresponding federation on the consumers’ side of the movement.

Of the two forms of co-operative production, each has achieved (still according to the same ideal) one-half of true and successful democracy.  The wholesale, or federal, system has central unity.  Co-partnership societies have the freedom and responsibility of each group of workers; the task which the future presents to them is to perfect the federal relation already begun, among themselves, and between themselves and the consumer.

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1. See Chapter XV., page 123.

2. For full details of these figures see Labour Co-partnership," July, 1903.  The figures there given are taken from the Annual Report of the Co-operative Union and the balance sheets of the Societies.

3. Including £306,060 by the productive department of the Scottish Wholesale.

4. Including £1,580,713 by the productive department of the Scottish Wholesale.

5. E.g., in the Leicester “Equity” Boot Society the workers control the society, and have always elected practically all the committee.  A contrary instance is that of the Paisley Manufacturing Society, which began as a purely producers’ society, and is now almost entirely controlled by the stores, which have since become members.

6. E.g., in the United Baking Society of Glasgow the committee are representatives of the stores holding shares.

7. E.g., in the society “William Thomson and Sons,” which had been Mr. George Thomson’s private business, the rules were so framed at the commencement as to give him very great power.  With the full consent of the members he has always remained manager and the leading spirit of the society.

8. The Brandsby Dairy in England, or any one of the Irish Co-operative Dairies, will serve as an instance.

9. See Chapter XIV., page 116.

10. Working-men Co-operators, page 1-21 (Revised Edition).

11. As an example of complete transformation, the great Ironworks and Familistère, established by Godin, at Guise, in France.  As an example of partial transformation, the Crystal Palace District Gas Company, near London.