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the opportunity is even greater where these pro-
prietors are engaged in more or less uniform farming
operations. Districts where farms vary very much
in size and prosperity, and where various widely
differing methods of farming are in vogue, are not
suitable to co-operative experiments. These facts
explain the rapid growth of the movement in countries
such as Denmark and Ireland, where the whole
tendency of State policy has been towards the

54



THE SYSTEM APPLIED TO AGRICULTURE

creation of independent small-holdings, while England
with its large tenant farmers, engaged in stock-
breeding and similar occupations, is naturally behind-
hand.

Two particular technical difficulties beset the
promoter of co-operative societies where expert
advice is not forthcoming. The first of these con-
cerns book-keeping. It is obvious that the stability
of a society's business is largely affected by the
manner in which its accounts are kept ; but in a
very large number of farmers' societies the keeping
of the books is absolutely elementary and sometimes
non-existent. This difficulty has been dealt with
in all countries where the movement is far advanced
by insistence upon frequent audits conducted either
under Government supervision or by some properly
authorized central body and in all cases by duly
qualified persons. A contrast which illustrates the
difficulty is provided by the case of America, where
at present no such system exists. Such auditing
as is done is usually carried out by some member
of the society in his spare time, and very little atten-
tion is paid to it by the members in general. The
result of such a system is seen in the frequent and
unexpected failure of the societies. It is absolutely
necessary that some central body should have power
to supervise the auditing of farmers' co-operative
societies.

The second difficulty is that of conforming to
the requirements of the law, both at the time of
organization and in the subsequent conduct of the
society's business. As a rule those who are desirous
of founding a society do not know exactly how to

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CO-OPERATION FOR FARMERS

do it in such a way as to conform to the existing
law and at the same time to carry out their co-
operative intentions. If they have recourse to a
country solicitor, the result frequently is that they
find themselves registered as an ordinary joint-
stock company, besides paying a considerable amount
in legal fees. Even in places where a co-operative
law exists it is often of a confused nature (this is
particularly the case in the United Kingdom) and
it is safe to predict that the average solicitor will
know nothing about it.

But even when the co-operators achieve regis-
tration in the proper form, their legal difficulties
are by no means at an end. The correct interpre-
tation of the duties laid upon the committee and
officers in their rules, the making of the statutory
returns, and the carrying on of their business and
management of their relations with other parties
in conformity with law, are all matters requiring
a degree of technical skill which cannot be expected
of the average farmer and which is often outside
the competence of a low-paid manager or an amateur
secretary.

This discussion of the difficulties which confront
co-operative societies both before and after they
are actually organized and registered points the
way very clearly to the absolute necessity of two
things first, efficient leadership, and secondly,
adequate control. The vitally important question
is how this leadership and control may be supplied
in a way which will be acceptable to the farmers
and productive of permanent results.

In view of what we have said as to the attitude

56



THE SYSTEM APPLIED TO AGRICULTURE

of farmers towards outside 'interference, it would
be natural to conclude that leadership must always
come from within. It is a remarkable fact, how-
ever, that the kind of leadership which has produced
the most successful co-operative movements has
practically never sprung in the first instance from
among the farmers themselves. The present leaders
of agricultural co-operation in countries where it
is most flourishing are for the most part men who
could not be described as practical farmers. As
instances we have only to cite such names as Raif-
feisen, Schulze, Plunkett, Russell, Luzzatti and
Wollemborg. It is nevertheless true that it is very
difficult to persuade farmers to listen to the advice
of any outside person.

Thus we have two apparently irreconcilable facts :
farmers are not themselves, as a rule, successful
as organizers, yet they will not allow other people
to interfere with them. The only solution lies in
the appearance of a man of exceptional character
who will be able to persuade the farmer of his in-
tegrity and goodwill, and who is not engaged in any
occupation which would lead the farmers to suppose
that he was likely to profit by organizing them.

If such a man comes forward the question then
arises, what steps he can best take to promote the
movement. In every case it has been found that
the creation of a voluntary body which will both
organize and control co-operative societies has dis-
tinct advantages over any other method. Such
bodies exist, either as purely propagandist organ-
izations or as central associations for the local co-
operative societies, in practically every country in

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CO-OPERATION FOR FARMERS

Europe. They perform the necessary functions of
issuing standard bylaws, giving business advice,
publishing papers, organizing new societies, super-
vising existing ones, maintaining the co-operative
spirit and principles, and, above all, auditing the
books and watching over the legal interests of the
local societies. It must depend largely on local
conditions whether such a body, arises as a result
of a federation of local co-operative societies or
whether it is created first and then creates other
societies. There is a good deal to be said for both
methods. As a type of the former we may cite the
great German federations,, wiiile the latter is well
illustrated by the Irish Agricultural Organization
Society. Further details of the methods of working
of these bodies will appear in the appropriate chapters.
The only alternative method of organization which
suggests itself is through a Government Department.
There are many who advocate that the work of the
voluntary body should be done by Government,
or at least by an official agency. This view is par-
ticularly popular in North America, and has resulted
in the establishment of various State or Provincial
Offices for the organizing and control of co-operative
societies. The arguments for and against are many
and forcible, and the matter is of so much impor-
tance that w r e propose to devote a separate chapter
to the subject. We need here only summarize the
main argument. The test of practical experience
has shown that, as a rule, the co-operative movement
is most satisfactory in those countries where the
greater part of the work has been done by voluntary
bodies. The first reason w r hich mav be suggested

58



THE SYSTEM APPLIED TO AGRICULTURE

for this is that co-operation is essentially founded
on self-help through mutual help, and the spirit
of self-help must be considerably weakened by re-
liance on the Government. Furthermore, while the
responsibility of committees may be sapped in this
way the supervision on which they rely is apt to
be more mechanical and half-hearted when carried
on by Government officials rather than by those
whose hearts are in the movement. Finally, the
dangers of political interference are always great,
and there is historical evidence to which we shall
refer in our chapter on the subject, to show that the
pressure of vested interests may drive the Govern-
ment into seriously handicapping or even opposing
the development of co-operation. There are, there-
fore, decided limitations to the extent to which the
Government can hope to take part in the organ-
ization of a co-operative movement, and it will
usually be found that the line is drawn at the
point where education ends and actual business
organization begins.



59



CHAPTER IV

TYPES OF CONSUMERS' CO-OPERATION



WE have already pointed out that the simplest
form of organization by farmers lies m the
formation of societies for the collective purchase
of the raw materials and requirements of their pro-
fession. Such societies can be profitably set up in
every rural district except perhaps those now
increasingly rare in which operations are carried
on on so large a scale that each farmer is in a position
to do his business satisfactorily by direct bargaining
with the wholesaler o.r manufacturer.

Every agriculturist, whatever his system of
farming, from fruit-growing or intensive market
gardening to the most primitive grazing ranch,
necessarily requires to buy year by year a certain
amount of fertilizers, spraying materials, feeding-
stuffs, seeds, implements, machinery, or general
equipment. The more diversified the operations
undertaken the more varied the need but in any
case there is a bare minimum which must be obtained
whatever the conditions.

All these articles pass through the ordinary trade
channels from the manufacturer to the whole-
saler, and thence by way of the retailer to the con-
Go



TYPES OF CONSUMERS' CO-OPERATION

sumer, and all of them pay the tax of the profits
required by each person through whose hands they
pass. Obviously the purchase can be cheapened if
they can be bought without the intervention of one
or other of these factors. Now the most obvious
factor to eliminate is the retailer. His functions
are to get the goods in large quantities from the
wholesaler, to store them, to break bulk, have them
in readiness for the purchaser when required, and
deliver them in appropriate quantities. The pro-
cedure is simple, but it involves considerable trouble
and risk, and high expenses for accommodation,
capital and labour ; consequently the tax paid to
the retailer is one of the heaviest items in the total
cost to the consumer. Every thinking farmer must
eventually realize this, and seek to avoid this tax
by doing business direct with the wholesaler. Here,
however, he is met by the difficulty that the whole-
saler will sell only in certain large quantities, and
that his terms as to payment are far more exacting
than those of the average retailer. Furthermore,
the railway and shipping charges for small lots
coming a long distance are disproportionately high.
Finally, the farmer who wishes to buy wholesale must
make up his mind exactly what he wants at the
beginning of the season, since he cannot afterwards
walk in and fill in the gaps by small supplementary
orders.

The vast majority of farmers are deterred by these
reasons, and frequently also by their ignorance of
the sources of supply and the ways of the business
world, from dealing direct as individuals. Collective
action, however, will remove a great number of the

61



CO-OPERATION FOR FARMERS

difficulties while preserving the bulk of the advantages.
The possibilities of such collective action are, as a
rule, first seen in connection with some very simple
transaction in a standard commodity. A number
of farmers in a given area are all purchasing basic
slag in moderate quantities at the same time of the
year. They discover the great difference between
the wholesale and retail price of this article, and they
decide to bulk their purchases and so get the benefit
of the cheaper terms.- Provided they pay cash with
their order and that their total requirements make
up at least a wagon-load, they are able in this way
to effect considerable economies while still getting
a guarantee of quality. All that is needed in the
way of machinery for such transactions is that one
of their number should consent to act as secretarj 7 .
He will collect the orders and the cash, transmit
them to the wholesale house, conduct the corre-
spondence and receive and distribute the manure
at the railway siding. Even if he is paid a small
commission by way of compensation for his services
this will be far less than the charges exacted by the
retailer.

Occasional transactions of this kind frequently
constitute the first lesson in co-operation. No
constitution is required the farmers merely combine
on a voluntary basis for the special purpose of buying
one consignment of slag or similar commodity. If
the experiment is a success, however, as, barring any
unusual accident, it is bound to be, the more ener-
getic spirits will wish to keep the association in
existence for the purpose of dealing in the same
way with other commodities. The extent to which

62



TYPES OF CONSUMERS' CO-OPERATION

this can be profitably done depends very largely
on the uniformity of size and methods among those
concerned. Where the farms of a considerable area
are all of approximately the same size, and operated
on similar lines to one another, their requirements
will obviously be very much the same and conse-
quently the opportunities for collective action will
be very great.

Granted that such conditions exist, the necessity
will soon be felt for expanding the voluntary pur-
chasing association into something of a more perma-
nent and flexible nature. The first development will
probably be the provision of some storage accommo-
dation. This will serve the purposes of enabling
farmers to fetch their goods at a time convenient
to themselves without running the risk of being
charged demurrage by the railway company, and
also of allowing goods to be purchased in appro-
priate lots which may not correspond exactly to
the orders received. Once this step is taken, however,
we pass at once into the realm of business. For as
soon as rent has to be paid the association begins
to have financial responsibilities apart from its indi-
vidual members. And again, as soon as the secretary
begins to buy goods on behalf of the association,
as against merely transmitting the orders of the
individuals, he will, if he has any business instinct,
begin to seek for opportunities to buy these goods
at the most favourable time of the market. Here
at once some element, however legitimate and con-
servative, of speculation enters into the transaction.
From that time the voluntary form of association
ceases to be adequate, for under this form every

63



CO-OP,E RATION FOR FARMERS

individual is made liable to an unlimited extent for
anything which may go wrong and also the whole-
saler is unlikely to deal with a mere combination
of individuals except where he gets cash with the
order. The next step, therefore, is for the farmers
to get their association registered under the appro-
priate law as a co-operative society with limited
liability and in this they will be helped in most
countries by one of the advisory federations to which
we have already alluded.

Once a co-operative society of this kind has been
formed it may develop its activities in many direc-
tions, but its form will remain approximately the
same and its purpose will be constant namely, to
supply its members with all the requirements of
their industry with the maximum of economy and
of the best possible quality. The principles on which
the business is done based on those of the Rochdale
Pioneers have already been described. As regards
the extent and nature of the business, the size of the
membership and the area covered, these will vary
widely according to local circumstances. It may
be assumed that the basis of the business will always
be the supply of fertilizers, seeds and feeding-stuffs.
The addition of implements and machinery on the
one hand, or domestic requirements on the other,
are important developments which we shall discuss
at greater length. There are also other functions
beyond the purchasing of requirements e.g. the
sale of members' produce or such enterprises as
milling, which demand attention.

We may first outline briefly the general course of
development of such a society. We have seen how



TYPES OF CONSUMERS' CO-OPERATION

the simplest operations can be carried out by what
may be called an instinctive combination. At the
present time almost every country is so well pro-
vided with co-operative machinery that those who
take part in such a combination are practically
certain to come under the influence of an advisory
federation which will show them the advantages of
establishing a properly registered society. As a
consequence it often happens that societies are set
up which never develop beyond this preliminary
stage owing to some lack either of initiative or of
occasion. These societies do a useful work up to a
certain point by enabling their members to obtain
a supply of materials in an advantageous manner.
But their operations are purely seasonal, and there
is no centre, in the way either of buildings or of a
permanent staff, to focus the activities of the society.
In such circumstances it cannot be said that there
is much opportunity for the display of co-operative
spirit ; the members practically never come together
as such, and the continuance even of the limited
operations of the society depends upon the willing-
ness of whoever is chosen as secretary to carry out
the duties of book-keeping, collection of orders, and
distribution of goods in return for a meagre com-
mission.

In an energetic neighbourhood where a real need
for collective action is felt the society will soon
leave this stage behind. The first step will be the
provision of a small capital either by shares, deposits,
or bank overdraft, for the purpose of free working.
One immediate use to which this capital will be
put is the erection, purchase, or renting of a building

65 F






CO-OPERATION FOR FARMERS

for storage. As soon as the ' capital and building
are provided the secretary will be in a position to
go into the market and buy for resale to members.
It will often happen that in this way he will be able,
especially if he is quick to take advantage of dis-
counts and has good business instincts, to offer more
favourable terms than any trader with whom he is
competing, as his expenses will be limited to a small
rent and a 2j per cent, commission for himself. This
will at once attract a large amount of custom, and
very probably at the end of the year the society
may show a hundred pounds or so of surplus. The
way is at once open to further developments, and
the appetite of the members for co-operation being
whetted they will desire to do as much of their
business as possible in this way. They will argue
that where they have economized in the purchase
of manures and seeds there is no reason why they
should not do the same with other articles, and
they will probably add flour and coal and perhaps
bacon, tea, and sugar to their list. Agricultural
implements and machinery will also be a natural
line for them to deal in.

The point will now have been reached at which
it will become desirable that the secretary, who
has hitherto been more or less an amateur part-
time worker, should develop into or be replaced by
a qualified whole-time manager, and if the turnover
continues to increase this manager will need one or
more assistants. It will probably be found, how-
ever, as the demands of the staff and the premises
become heavier, that the margin of profit available
on the sale of agricultural requirements, which is

66



TYPES OF CONSUMERS' CO-OPERATION

at best very narrow, will not be sufficient to meet
them. Therefore if a society is to continue to
develop it must add other activities. The question
will then arise whether or not the co-operators shall
take the step of supplying themselves through the
society with all their requirements, domestic as well
as agricultural in other words, whether they shall
open a retail shop. The answer to this question will
depend, of course, in the first place on the spirit of
the people concerned, but an important bearing on
it will be the attitude of the local traders. It
has frequently happened, particularly in the earlier
stages of the co-operative movement, that these
traders have shown a great and not unnatural
hostility. This hostility has occasionally taken the
form of boycotting the members of the local society
refusing to sell them tea, sugar, and groceries, if
they did not also buy manures and seeds. The
usual effect of such a boycott is to drive the society
into providing everything that its members require.
In this way many flourishing co-operative stores
have sprung up in rural districts in Denmark and
Ireland particularly. The same policy has also been
adopted in Switzerland, Hungary, and other countries.
There are many arguments both for and against
this development. Against it it has been argued
that the undertaking is a risky one and outside the
competence of the ordinary farmer, requiring as it
does skilled management, knowledge of the markets,
and a more or less speculative investment of a certain
amount of capital. The advocates of what is called
" legitimate -trading " hold that the farmer should
confine himself to business arising out of his own

67



CO-OPERATION FOR FARMERS

industry following the old proverb that the cobbler
should stick to his last they claim that the business
of trading is the function of the trader and should
be left to him. Against this view it is reasonable
to argue that it is little use enabling the farmer to
acquire the requirements of his industry at a reason-
able rate if he has to pay an undue tax on every-
thing which he and his family must consume to keep
themselves alive. Furthermore, the general store
provides almost the only available means of extending
the benefits of the co-operative system to the land-
less labourer. This class depends on a weekly or
daily wage and derives no benefit from the agricul-
tural society or creamery, nor even, as a rule, from
the credit society. But the possibility of buying
the articles of everyday consumption at reasonable
prices is of the greatest benefit to them.

It must also be remembered that where an agricul-
tural society, confining itself to purely agricultural
business, attempts to compete with a trader who
does a general trade, the result is that the most
profitable end of the business is left in the traders'
hands, and with the margin so obtained he is able
to undercut the society in the matter of manures
and so on, and thus tempt the members away from
their society.

The weight of the argument seems to most co-
operators to be strongly in favour of general trading
except where local conditions make it either unneces-
sary or undesirable. But we must bear in mind
the fact that it will always make a greater appeal
where farms are small and the district backward.
The American rancher and the prosperous English

68



TYPES OF CONSUMERS 1 CO-OPERATION

tenant farmer are not so much interested in small
economies. Thus we find that the rural store has
developed most strikingly in Ireland, Denmark, and
Hungary and Switzerland.

What such societies may develop into even in the
poorest agricultural districts is well illustrated in
the case of the Templecrone Co-operative Society
at Dungloe, in Co. Donegal. So many visitors have
been attracted to this out-of-the-way spot by the
romantic tale of its success as told by A.E. and others
that we need not go into details, but a brief, state-
ment may be of interest.

The Templecrone Society was started in 1903, as
a result of the desire of small farmers in one of the
most barren parts of a typical western district
between the hills and the Atlantic to obtain guaran-
teed manures at a reasonable rate. The moving
spirit was one " Paddy " Gallagher, lately returned
from working in a coal-mine. The first transaction
was a purchase of twenty tons of manures from a
neighbouring society. When it was found that this
deal had resulted in a saving of 40 in addition to a
guarantee of qualit}', the demand for a local society
became intense, and with the help of the I.A.O.S.
a few farmers started business in a small cottage on a
hill where seeds and manures were sold two nights
a week. After a few months meal, flour, and bran
were added to the list, and the society moved into
a store of its own, which measured about twelve feet
square. In the teeth of intense opposition from a
combine of local traders, against whom they were
supported by the Scottish Co-operative Wholesale
Society, the pioneers kept on bravely. Mr. Gallagher



CO-OPERATION FOR FARMERS

became an expert in the packing and grading of eggs,


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Online LibraryLionel Eldred Pottinger Smith-GordonCo-operation for farmers → online text (page 5 of 17)