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000, is selling expense.

These are enough examples of our
glorious 100 per cent, business system.
Our officials, the press, and the great
financial powers which control them,
demand that we loyally and patriotic-
ally support this system.

Do you know what they are doing
to people who do no more than point
out the futility and absurdity of this
sort of thing and advocate a way out?
They are sending them to jail, and
deporting them .



RIGHT PRINCIPLES AND
WRONG

Before co-operative wholesales pro-
ceed to start new branch retail stores,
because the existing societies do not
join them and give them their patron-
age, such wholesales should first seri-
ously look into their own capacity for
service and make it so worth while to
join that the societies can not afford to
stay out.

Shall societies grow up and then fed-
erate or shall they start as branches of
a central organization? Neither of
these conditions is the important
thing. The important thing is that the
local society shall be efficiently admin-
istered and shall develop administra-
tive power among its own members.
Lack of local control and experience in
managing their own affairs works the
harm.

The local societies which are closest
to the people are the most important.

J. P. W.



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CCM3PERATION



CONTRIBUTED ARTICLES



STORE MANAGEMENT

By RiCHABD Henschke

Manager, Utica Co-operative Society,

Utica, N. Y.

Address at the District Co-operative Con-
vention, at Paterson, N. J^ 1919.

The success of the Utica Society is
due to the efficiency of our members.
We have 295 members, and do a busi-
ness of $1,900 a week.

We have bought our own building
— ^a lot with a store on it, 35 ft. x 25 ft.
Upstairs we use as a store room. We
have also bought the adjoining lot,
62 ft. X 100 ft., and are building a
modem bakery — not as big as the
Paterson bakery, but it will be a nice,
uptodate, clean bakery 16 ft. high,
with many windows, big ovens and
uptodate machinery.

I had had no experience in the gro-
cery or bakery line and hardly any
experience in the retail trade, but I
realized that while a co-operative
store should be more than a place to
come to buy things cheap it must at
least be that. You have got to give
people some kind of an economic in-
ducement, but you must also make
co-operators of them.

For this purpose the magazine "Co-
operation" was the best means. I got
a copy and went before the Board of
Directors and suggested that we sub-
scribe for it for every member. I
said, "What is the use of an educa-
tional fund if you do not want to use
it?" It certainly has paid. I doubt if
we could have raised the money for
our building if our members had not
read in "Co-operation" what other
co-operators are doing.

Last January we had a meeting
when we decided to buy our own
home. Inside of forty minutes we
had nearly $10,000 subscribed, and
only a few members were present.

We soon had $22,000, and the
money is still coming in. We raised
our limit of stock from $100 per mem-
ber to $200. Then someone wanted



to pay in more so we raised it to $500.
Two or three have paid $1,000, which
we take as loan capital, on a ninety
days' demand note. Anyone can
come any time and demand $50 of
his stock, but only one has ever
wanted the money back. We have
about forty members who make week-
ly and monthly payments. They
would not do it except they know
there is something else in back of the
little store. That is what we have
accomplished by getting "Co-opera-
tion" in the homes of our members.

As manager, I have to open up the
store at 6.45 a. m. I buy the goods
for the bakery, the groceries, fruits
and vegetables. I have to supervise
the bookkeeping, arrange meetings,
and settle questions that come up.
On occasion I have to go out and wait
on the people. If one of the drivers
happens to be sick I have to go out
and deliver the goods. Once a month
I go out on the delivery wagons to see
our members who do not come to the
store, to keep them interested in the
store, and to show them the manager
is interested in them.

I have made an effort to get the
co-operation of our members. I made
the proposition to them to cut down
the cost of deliverv by delivering once
a day near the store and every other
day in the two other sections, instead
of making deliveries in all directions
every day. Deliveries now leave at
9 and 2.30, and there are no deliveries
made after the wagon leaves. This
plan works perfectly.

It is only the new members who
are not used to the method. When a
new customer calls up on the tele-
phone I always answer her and tell
her why she cannot get the goods that
day, if it is after the wagon has left.
I explain the system very carefully;
and so we do not lose that member.

We charge 4 per cent, for delivery.
We went at it in a roundabout way.
We told the members we would give
them white slips for the cash-and-
carry sales and pink slips for those



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that were delivered. At the end of the
year we would find out what it had
cost to deliver the goods and so de-
termine how much we had saved by
the new system of delivery, and de-
duct a certain percentage on the pink
slips and nothmg on the white slips.
We found it cost 4 per cent, (the dif-
ference between putting up the goods
over the counter and delivering it).
So we paid 10 per cent, dividends to
those with cash-and-carry slips and 6
per cent to those with the pink de-
livery slips. We have done more
than twice as much business as last
year, and yet we have not added any
expense to our delivery system. It
certainly paid us to make th?it move.

We paid last year rebates to the
members amounting to $1,900. One
third of it was really paid out in mer-
chandise, and $13X) they left on the
books as new shares. This year up to
July our net profits amounted to
$1,480. Considering that we moved
to our new home and have been work-
ing under difficulties by having the
bake-shop in one block and the gro-
cery store in another, we think we did
fairly well.

There is one point in Co-operation
that is important, and that is getting
the co-operation of your employees.
Everyone of our employees is a mem-
ber of the co-operative society. Some
were not when they came. None of
them was asked or told he had to be
a member, but everyone joined. They
come and say, "You can take a^ dollar
out of my wages and put it in the
share fund." We pay everyone good
wages and treat them well. There is
never a harsh word spoken. If they
are not fit they go out. We have no
talk. We pay union wages to clerks
and $4 more than union wages to the
drivers. We pay the overtime that
the Union demands. The hours of
employment for the people are gov-
erned by the law for women employ-
ees, and one afternoon off a week is
¥lven for longer hours to the men.
hey all get a week's vacation with
pay.

We demand courtesy, cleanliness



and honesty of our employees. We
tell them to treat the customers well
— make them feel at home, especially
to treat the children well, as they are
the ones who are going to be the
future co-operators. We never send
anything by a child that a grown per-
son would not take. Anything the
least damaged is never given to a
child. So we have a lot of children
coming to our store. The parents are
not afraid to send them.

Beside the membership books, I
keep three books — a journal, a cash
book and a ledger — ^and I can tell any
member just how he stands any time.
I can tell what our expenses are, and
can show any bill at any time. The
accounts are audited once a month.
The auditors examine the bills, the
cash, and see that everything is right.
The checks are made out by the man-
ager, signed by the treasurer and en-
dorsed by the president, and the bill
is with every check. We never sign
any checks ahead. This creates con-
fidence amongst the members. The
members have re-elected the officers
from year to year.

We feel that we have overcome our
worst struggles and are just about
getting on our feet.

We think the time will come when
we will be counted amongst the strongest
societies of the E^st. Utica has
a population of 80,000. We have
members of all kinds — representing
laborers, middle-class, doctors, archi-
tects, and so on.

We use the English language ex-
clusively in our meetings. We keep
away from politics and religion and
are Co-operators first and last. When
we leave the store we can believe and
do anything we wish, but while in the
store we are just Co-operators.

Note: — The Utica Society opened its
new bakery December 20th, and celebrated
the event by holding a reception and an
entertainment. The League's new movie
reel, showing pictures of some of the Eng-
lish Co-operative factories, was used, with
a story on Co-operation.



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CO-OPERATION AND RECON-
STRUCTION

By E. M. TousLEY^ of Minneapolis,

Abstract of Address before the Illinois
Farmers* Institute at Joliet, Illinois, 1919

Dr. T. N. Carver of Harvard Uni-
versity says: "Not agriculture alone,
but the whole modern world is suf-
fering from an inefficient system of
buying and selling. Let us remember
that no manufacturing city has ever
arisen in any country to first rank
among cities in either wealth or popu-
lation. The greatest growth is
achieved by cities whose chief busi-
ness is to trade in other people's pro-
ducts."

The reason I am interested in the
co-operative store movement is be-
cause that is the first link in the dis-
tributive machinery with which we
must all do business. Before you were
a producer you were also a consumer.
When your producing power is gone
you will still be a consumer. Every-
one must go to a store somewhere to
buy eighty or ninety per cent, of all
he must have with which to maintain
himself and his family. The moment
your product is separated from the
land, whether it be grain or vegetables,
or stock, that very moment it becomes
merchandise, and you are no longer a
farmer. You must take that mer-
chandise into the commercial world to
do business with other people, upon a
commercial basis, and not as a farmer.
You are no longer a farmer.

If what Dr. Carver says is true, the
farmer is inefficient, the same as labor-
ing people are inefficient as buyers
and sellers. The whole game of dis-
tribution of farm products from start
to finish, from the time they are grown
and separated from the land, to the
manufactured product made in fac-
tories by the worker, all the machinery
of manufacture and of distribution is
owned and operated by the few who
know how to buy and sell. The re-
sult is that the people in the cities
who trade in the products that other
people have produced are the ones
who become wealthy and prosperous,
and the trading cities are the cities
that become great.



What matters it how much you
produce upon the farm if there is a
machine which stands ready, as soon
as you release the foodstuffs you have
raised to the markets of the world, to
take a big share, an unjust share, of
that which you have created by your
labor?

You all know what a common cor-
poration is. Corporations are provided
for by the laws of every state in our
Union, in possibly every country in
the world. They provide that three or
more persons may get together and
under the privileges and franchises
granted to them by law they form a
corporation and become what is
called, in leg^I parlance, an indi-
vidual.

Now, then, we will organize a
hypothetical corporation, a common
corporation, not a co-operative cor-
poration, to show the effect of such an
organization. We will make the
shares twenty-five dollars a piece.
We will go to Mr. Jones, we will say,
one of these poor farmers who has
not money enough to buy a farm and
pay for it. He is a renter with eight
children and is working like sixty to
make enough to feed them. We go to
Mr. Jones and say, "Jones, you have
to buy a lot of goods during the year,
don't you, to feed that large family of
yours?" Jones says, "You bet your
life we do." "We want you to join us
in our scheme, take a twenty-five dol-
lar share of stock in this store that we
are organizing. We know we can sell
enough goods to you and your neigh-
bors so that the profits will be very
large, and your twenty-fiVe dollars
will earn ten, fifteen, twenty-five or
fifty per cent., we don't know just
how much, but it is going to be a big
winner." So we get Jones to buy a
share and he puts in his twenty-five
dollars, his only object being to re-
duce his cost of living and to get more
money to feed and to educate his chil-
dren. We go now to another man by
the name of Brown and say: "Mr.
Brown, you have some money to in-
vest, haven't you?" He says, "Yes,
Sir." "Well, we are going to start a
stofe enterprise, a corporation, and



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COOPERATION



9



we believe it is going to pay big divi-
dends. The shares are twenty-five dol-
lars each, and we would like to have
you buy some." So we induce Mr.
Brown to take twelve shares. Hav-
ing no children, he does not expect to
patronize the store, he doesn't care
anything about that, all he is doing is
investing some of his surplus money
where it is going to bring him a big
return without work, so he takes
twelve shares, three hundred dollars*
worth. In the first place, under cor-
porate law, it is provided that in cor-
porations every share of stock is en-
titled to a vote.

In this corporation Brown has
twelve votes to Jones' one, which is
an injustice because a few can outvote
the majority. During the year we will
say that Jones buys three hundred
twenty-five dollars' worth of goods
at the store. That creates enough
profit, we will say, to pay six per
cent, on the capital, which will give
Jones a dollar and a half on his $25.00
share; and Brown, having twelve
shares, it gives him eighteen dollars
on his $300. But the purchase of that
amount of goods will create more
profit than nineteen dollars and a half.
I am quite sure of that because for
years we of the American Rochdale
League have been operating an audit-
ing and accounting department and
have audited many co-operative
stores, and we know the average per-
centages that pertain to their opera-
tion. The average gross profit on
sales is somewhere in the neighbor-
hood of about eighteen or twenty
per cent., and the average expense
rate of operation runs about nine to
eleven per cent., leaving a net gain of
pretty nearly an average of ten per
cent, in successfully managed stores.
Ten per cent, would then make thirty-
two dollars and a half additional
profit on Jones' purchases. In the or-
dinary corporation all the profits are
always divided or distributed upon
the amount of capital invested, which
gives Jones two dollars and a half
more, and it g^ves Brown thirty dol-
lars more as a second dividend. Fig-
uring up at the end of the year, we
see the results: Brown draws forty-



eight dollars and Jones draws oniy
four dollars. Jones, when he started,
wanted some help to feed those chil-
dren, and he gets back just fifty
cents apiece for the eight kids.
Jones' Patronage. .$325
Jones' Investment. . 25X 6% $1.50
Jones' Investment.. 25X10% 2.50

Total Returns.. $4.00

Brown's Investment $300X 6% $18.00
Brown's Investment 300X10% 30.00

^Total Returns $48.00

Difference in favor of Brown, $44.00.

Who had to work and earn this
fifty-two dollars? Did not Jones do it?
Didn't he have to work and earn the
three hundred twenty-five dollars be-
fore he could spend it in the store?
He certainly did.

Assuming that there was ten per
cent, profit over and above the ex-
pense of doing the business, and the
interest on the money, which we
must assume of course, because there
were other traders, then every time
he bought a dollar's worth of goods
he received only ninety cents of value
over the counter, did he not? Was
not that extra ten cents his when he
earned the money? Was it not his
when he laid it on the counter, and
got back only ninety cents of value
in goods? Was it not still his when
it was put into the till? I am speak-
ing from the standpoint of fairness
of equity, and of scientific economics.
But Brown, who created not one
penny of value — he invested his
money, it is true — but if the use of
money is worth only six per cent., if
that is the value of its wages for a
year, can you tell me why you should
pay Brown eight or nine times what
is equitable and just for the use of his
money?

Under the corporation system
money continues to draw not only
six per cent, once a year, but many
times that amount several times a
year. You know that there is a law
upon the statute books of nearly
every state which fixes the legal rate
of interest beyond which no man can
contract to loan his money. Now, why
is there such a prohibitive law upon



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10



COOPERATION



the statute books? You have a law
on the statute books of Illinois pro-
viding that no one can loan a neigh-
bor a sum of money and charge him
more than seven per cent, for its use
for a year. If you do, the law steps
in and says, "Look here, Mister, that
is unfair and unjust, we will not let
you do it. If you make a contract
like that we will confiscate all your
interest." At least there is a penalty
attached.

But that same man can put his
money into groceries, invest it in food
or other necessities of life, and can
turn it over not once a year at seven
per cent., which the law provides, but
he can turn it over at a much greater
rate if his competitive profiteers will
allow him to do so. Not once a year,
but many times a year. What is the
difference in principle? There is
none.

We will now reform this corpora-
tion. We will make the whole institu-
tion co-operative. The same men will
have the same amounts invested.
Jones buys the same amount of goods
he did last year. This year we turn
to Mr. Jones and say, "Jones, every
time you bought a dollar's worth of
goods, you only got ninety cents*
worth of value from the store. This
extra ten cents of each dollar is yours.
We simply hand it back to you."
That makes thirty-two dollars and a
half, which added to the interest of
six per cent on his investment equals
thirty-four dollars for Jones. But
when we pay Mr. Capitalist Brown
his six per cent, for the use of his
three hundred dollars, we say, "You
did not do anything to help this thing
along. We will pay you your wages
for your capital only." Do you see the
difference? Brown gets but eighteen
dollars under this plan, as follows:
Jones' Investment. .$ 25X 6% $1.50
Jones' Patronage... 325X10% 32.50

Total Returns $34.00

Brown's Investment $300X 6% $18.00
Difference in favor of Jones.. $16.00
Mr. William Maxwell, of Scotland,
president of the International Co-
operative Alliance, delivered a lecture
upon co-operation in Minneapolis a



few years ago, and said that he had
frequently heard of men drinking up
their farms, but until he got into the
Co-operative Movement, he never
heard of a man eating himself into a
home. Mr. Maxwell said that he knew
literally of thousands of working men
who had built their homes, furnished
them and paid for them out of the div-
idends from their co-operative store.
That is what he calls eating them-
selves into a home. He said that
many a Scottish mpther, when her
children were eating at the table,
would pat them on the back and say,
"Eat hearty, my children, eat hearty,
the more you eat the more dividends
we get."

Do you not see that after paying
each factor in the proposition justly,
the remainder, if any, should go back
to the man who creates it? Is it not
only just to him, but it redistributes
the wealth created by labor among
the people who create it and does not
concentrate it into the hands of a few
who do not create it.

The laborer must have something
to say in the directing of the enter-
prise for which he is working, and
secondly, he must have a share in its
profits. Those two principles are fun-
damental. They are in the co-opera-
tive plan, because each man has an
equal vote regardless of the shares he
holds, no proxies are allowed in vot-
ing, and the rate to be paid to capital
invested is limited to the amount
which it can command in that partic-
ular community. The balance of the
profits are distributed back to those
who created them by their trade, al-
lowing non-members one-half the rate
of trade dividend that the stockhold-
ers themselves take. Never call an
association genuinely and fully co-
operative until you have that last
feature in it. Therefore, if you are at-
tempting to run a co-operative so-
ciety and it does not provide, among
other things, that it shall allow non-
fetockholding patrons, whether it be
an elevator or a store, or a shipping
association, or anything else, at least
one-half the rate of patronage divi-
dend that the stockholders them-
selves take, let me ask you what con-



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COOPERATION



11



sistency there is in such an organiza-
tion? You organize co-operatively in
order to prevent the other fellow
from making profits out of you, do you
not, because you consider it wrong?
Therefore, if you organize co-opera-
tivelv and take all the profits you can
get from the fellow who is not a mem-
ber you place yourself exactly in the
same position that the profiteer has
placed himself in.

I want to quote just a few figures
here, and then tell you what we have
done in co-operation. This is from an
editorial in the Sioux City Daily Trib-
une of about a year ago, entitled "De-
tails on Profiteering." It goes on to
show how the American Metals Com-
pany is cited as an illustration of
profiteering during the war in order to
lay a foundation for it to continue
greater profiteering when peace
comes. I will read Uie amounts. The
chairman of the board gets $179,653.
These are just salaries, mind you. The
president, $364,326. Vice-president,
$221,596. Another vice-president,
$147,930. Manager of the St. Louis
office, $148,536. Manager of the Den-
ver office, $136,553. Henry Brewer,
vice-president, $82,810. Mr. Ruse,
cashier, $79,069. How would you like
to be cashier for about a month?
These conditions stare us in the face.

In the Northwest there are
many co-operative store companies
and societies; I might say, approxi-
mately one thousand. I consider the
store fundamental, because that is
where all of us must go all our lives
to buy. In taking over its ownership
and management you will begin to
learn genuine business principles co-
operatively applied, and from that you
can go on with the other steps. There
are over seven hundred co-operative
creameries in the state of Minnesota,
and so on, with many other institu-
tions. During the past fourteen years
I have been connected with upwards
of four hundred co-operative stores.
Some of these have quit business,
scHne have failed, as is but natural so
long as the human element must be
contended with. But on the other
hand hundreds of these stores that our
League has helped to organize have



now been in operation all the way
from a few months to fourteen years.
They have paid back to the people
hundreds of thousands of dollars. One
store company where the farmers in-
vested all told but twenty-five thou-
sand dollars of capital, has already
paid back to the people over eighty
thousand dollars in earnings, and still
has in reserve over sixty-five thousand
dollars of undivided earnings being
used as working capital. This in seven
years' time only. Many other stores,
though not so large, have done nearly
as well.



FABLES IN FACT

The Stag in the Ox Stall

By A. D. W. (After Aesop)

A manager hard pressed for time
failed to keep careful records in his
store. He took refuge in the thought
that the directors would not notice it
as long as all seemed well.

Some of the watchful ones, how-
ever, who knew what should be done,
questioned him, but he replied:

"Ah 1 if only I can hide my records
until I find time I can fix them up all
right." And they were satisfied for
they knew he meant well.

The store did a brisk trade and
everyone thought "Surely, the sav-
ings will be large this year"; but the
doubting members said:

"We are glad that the store seems
so successful but our directors have
not yet received the auditor's report.
Nothing escapes the auditor's eyes."

Soon the day drew near for the an-



Online LibraryCooperative League of the U.S.A.Co-operation, Volume 6 → online text (page 2 of 31)