Chapter V.

People's Credit Banks.

Mr. H. W. Wolff, the authority upon "People's Banks"—under which title he published a valuable little book in 1893, and who is a frequent contributor to the Manchester "Co-operative News" and to periodical publications on co-operation and popular finance—when commenting upon the differential lines upon which co-operation was developed in the United Kingdom and on the European Continent, observed:—" People naturally seek relief first where the shoe pinches them most." In Britain the pressing need of the ill-paid millworker was to escape the exactions of the private trader; on the European Continent the immediate necessity was to liberate the small farmer, peasant proprietor and city artisans from the clutches of usurious moneylenders.

In Germany about 1849 Schulze-Delitzsch commenced an agitation for persuading individuals of a craft or trade to form co-operative societies for obtaining loans for their members on easy terms, for the repayment of which all the members were to be collectively responsible. It is easy to understand that no person could gain admittance into a society of this kind unless known to be of irreproachable character both as man and as workman, and the responsibility being collective, care was to be taken that no loans would be granted for general debt-paying purposes. They must have some specific and approved object in view to which the advances must be applied, and to no other.

In 1850 an association was started at Delitzsch—Mr.. Schulze's native place—and another soon after at Eilenburg by Mr. Schulze's friend Dr. Bernhardt which at the start was rather the more successful of the two; 396 members joined the Eilenburg society the first year, depositing with the bank page 49 £336; £555 were borrowed by the bank, enabling it to make advances of £1320 for the year, by which a profit of £21 7s. 6d. was realised. This was considered satisfactory, and association after association sprang up, until, in 1883, there were 4000 of various sorts established thoughout the country, having a membership of 1,200,000 persons, with more than £10,000,000 capital. Mr. "Wolff says that Herr Schneid, of Vienna, calculated that these banks must have been doing business at the rate "of at least a £100,000,000 a year." The aphorism of the distinguished Italian statesman, Signor Luzzatti, that "the best guarantee of a co-operative bank is to be found in the character of its members" truly represents the verdict of experience. As the number of societies increased the economic step was taken to consolidate them into a federation, with a common central office and directory, to supervise and finance them like so many branches of a co-operative whole. Contemporaneously with the work done by Herr Schulze-Delitzsch for the financial relief of artisans and persons engaged in small industries in towns, Herr Raiffeisen was engaged amongst the rural population in similar work for rescuing the peasantry from the toils of the moneylenders. As Burgomaster "of Flammersfeld, likewise in the Westerwald, with a union of twenty-five parishes under him to administer . . . Raiffeisen had the crushing troubles of the poor peasant cultivators brought vividly before his eyes in the famine years of 1846 and 1847." The picture drawn of the situation by Mr. "Wolff is that of utter misery. The dwellings—wretched hovels at best—land, cattle, and the whole miserable future of the peasantry, were in the hands of heartless moneylenders; the whole district was "converted into a usurers' hell." If Raiffeisen could only organise the peasantry into self-help associations much good could be done. His first step, and by no means an easy one, was to raise a fund of £300, with part of which he established a co-operative bakery at Flammersfeld, which had the effect of bringing down the price of bread to just one-half.

"The next step," Mr. Wolff says, "was the formation of a co-operative cattle-purchase association . . . which move attacked the usurers in one of their strongest outworks, and reduced their mastery at a vital point." But the "citadel"—the cruel rate of interest charged for existing debts—had yet to be dealt with. To inaugurate a system whereby that evil could eventually be overcome, Raiffeisen, in 1849, "set up his first 'Loan Bank'" with the balance of the £300 remaining after the establishment of the co-operative bakery, "and offered the peasantry who would subscribe to his rules to supply them with money for their needs." "The Flammersfeld Loan Bank," Wolff tells us, "did its work well," and by it "Raiffeisen carried his idea to practical triumph, furnishing a precedent for further extension." Notwithstanding this, "progress was at first slow. It took five years before Raiffeisen managed to form a second bank—that was in 1854, a third in 1862, and a fourth in 1868. From 1880 they commenced to multiply freely. By 1885 their numbers had, in Germany alone, grown to 245, by 1888 to 423, by 1889 to 610, and by 1891 to 885." In 1893, when Wolff's book on "People's Banks" was published, "there were 1000 Raiffeisen banks in Germany alone," and "after forty-three years' experience, they can make it their boast that by them neither member nor creditor has ever lost a penny." Wolff pathetically remarks that: "When in 1888 it was announced that Herr Raiffeisen had breathed his last, half Germany mourned over her benefactor, by the name by which he is still fondly remembered, that of 'Father Raiffeisen.'" Some of the benefits which followed in the wake of co-operative banking are described in a paper read by Mr. Wolff before the Annual Congress of British Co-operators which met at Peterborough in 1898, as follows:—"Thirty years ago Germany knew no co-operation applied to agriculture. Its co-operative banks grew to be strong, and now there is not a country which can compare with it in co-operation of the agricultural type, all of which has fol- page 51 lowed naturally in the wake of banking. Co-operative supply societies, insurance societies, dairies, creameries, cheeseries, winepresses, coal societies, sugar refineries, sale societies, &c., spring up as if by magic, multiplying by the hundred, borrowing their first money from the bank and repaying it by easy instalments out of profits."

Signori Luzzatti and Leone Wollomborg were instrumental in introducing these "first aids to agriculture" into Italy, where they have thriven immensely. The campaign was started in 1863, and in 1898 there were said to be 700 People's Banks spread over the country, with over 400,000 members, mostly small farmers, small traders and working men. On the 25th May, 1866, what has since come to be known as the Giant People's Banks at Milan, was opened in a small hired room with £28 capital—an amount exactly equal to that with which the Rochdale Pioneers started their co-operative trade. "Now," says Mr. Wolff in 1893, "this same bank is one of the marvels of Italy. It is lodged in a palace, it employs, in addition to 130 or 140 unpaid officers, about 100 clerks. In 1889 its members' roll stood at 16,392. It has grown since."

The democratic character of the bank may be seen by the statement that in 1889 it had lent out £4,601,616 in 162,789 loans, 129,401 being for less than £40, 13,349 for less than £4, many as little as 8s. In "Le Credit Pratique," by M. Charles Rayneri, reviewed by E. M. Lynch in the "Gentleman's Magazine" for August, 1895, credit is given to Wollomborg for having established People's Banks upon the strict Raiffeisen system in Italy to relieve the Lombard cultivators who were ground down by usury. In 1883 he opened a loan bank at Lorregia in the face of hostile criticisms on the score of the unlimited liability element and others, but "before eleven years were over Wollomborg could point to fifty-two rural banks founded under his auspices."

The characteristics of the banks are said to be these:—

1.	Unlimited liability of members.page 52
2.	Strict territorial limits, the bank members being drawn from a small area, within which neighbours are conversant with each other's affairs.
3.	The directors receive no fees or salaries.
4.	There is no capital (consequently there are no dividends).
5.	General expenses are cut down to the lowest possible point, and
6.	The reserve fund may on no account be shared out.

Caution is exercised in making advances; only members can borrow, and the money is to be used for the purpose for which it is lent, and none other. The family type is observed, and all know each other's circumstances. This system confers upon members the power to borrow cheaply and lend safely as no other can.

Mr. Bolton King, an English landowner who devotes his time and energies to establish co-operative settlements on his own estate, and interests himself in the co-operative movement generally, contributed a highly interesting article to the "Independent Review" describing what association and credit banks have done for Italy. The following notice of the article, which appeared in the "Age" newspaper of 4th April, 1904, under the cross heading "Co-operative Farming," is well worth the quoting:—"By co-operation the peasant farmers of Italy," it is said, "are rapidly transforming their condition, and throughout whole provinces the peasant has never been more prosperous than now.

"They buy what they want in quantities at wholesale prices, cultivate their land with improved implements according to scientific methods, and sell their produce in the best markets. Co-operative dairies are now numbered by hundreds, and in some places these have increased the incomes of the small cowkeeper by one-third, while returning the shareholders a dividend of 7 per cent. The same principle is being applied to wine-making, and is just beginning to show itself in silk culture. In bygone years the peasant page 53 farmer could do nothing for want of capital to improve his little lot of land. But now the village banks supply his financial needs at a low rate of interest. There are upwards of 1000 of these in Italy, with a membership of 120,000 persons. They advance loans in sums ranging from 2s. 6d. to £25. . . . Agricultural syndicates, of which there are 300 with an annual turnover of upwards of £1,000,000 sterling, enable the small farmer to buy as advantageously as the richest of his class, and Mr. King mentions that the syndicate at Parma, which does an annual business of £40,000, has only lost £4 in bad debts in nine years."

In France the principle of association applied to land and rural industries has received a development of its own, characteristic of what appears to be a genius possessed by the French people for that kind of organisation. In an article published in the Manchester "Co-operative News" for 30th June, 1900, under the capitation, "Organised Co-operation in Agriculture Mr. Wolff says:—"The French agricultural syndicates are formed under a Trade Union Act, restoring to the French working men the right of free association for the furtherance of common class interests which the Government of Louis Philippe had taken from them in 1834. The word agricultural' was inserted with no direct design, but its insertion has proved exceedingly valuable." Agricultural syndicates are formed under this Act with the object of defending "agricultural class interests in any way that may commend itself to them." They combine "all classes interested in agriculture, from the great aristocratic landlord, with his tens of thousands of acres, down to the humblest cottier who ekes out a bare subsistence by wage-labour, and only cultivates his little plot at home in off hours." In a syndicate at Castlenaudry there were said to be 600 agricultural labourers amongst the members. The first syndicate was formed at Blois in 1883, and in seventeen years' time, in 1900, the number of syndicates increased to about 2500, with 800,000 members. "They have been successful in 'democratizing,' as they love to call it, the use page 54 of artificial fertilisers, feeding stuffs, modern implements, &c., by bringing down prices 20, 30, and even 50 per cent., and, at the same time, in moralising the market by effectually checking, if not altogether extinguishing, adulteration, short weight and similar abuses. . . .In the backward state of the French agricultural population all this cheapening and purifying would have been useless had not technical education, the setting up of classes, laboratories, &c., gone hand in hand with co-operative supply."

It is a fine sentiment to say of land, "tickle it with a hoe and it will laugh with a harvest/' but to put mere labour on the land unskilled in the conditions necessary to its profitable culture can only end in failure, and amongst the qualifications necessary to success the capacity for co-operative effort on the part of settlers is not the least. There are orchardists and small settlers now who are able to get fairly good return from their land and plantations, but who fail to make their industries profitable simply for want of co-operative action in preparing their products for market and for purchasing supplies. This is a matter for settlers already established to attend to on their own account, without going, as the saying is, cap-in-hand to a Government for assistance.

If the wealthier French landowners made the conditions of entrance into agrarian associations anything at all high—as they might have done without causing surprise or comment—the small cultivators might have been excluded, but they could be formed into co-operative unions of their own, and work their way to success as members of the class have done elsewhere. The struggle might have been greater and longer, but co-operation overcomes all that; yet the whole movement could not have been as effective as on the larger scale, which developed into proportions of a national character. The population engaged in small rural industries in France are too numerous, and their total produce of too great a value, to be ignored in any agrarian co-operative movement. Persons engaged in any particular industry, such as grain-growing, wine-making, dairying, or any other page 55 special rural occupation, form syndicates of a primary or unitary character to protect the special interests of a class, and these units again combine to form syndicates for dealing with interests which are common to all of them. In this way a network of highly efficient co-operative agencies are formed, federating in cantonal and provincial centres, and, as Mr. Wolff says:—"Uniting all—and above all—there is the National Union. Only by such organisation could the French farmers have succeeded in extorting from the railway companies substantial reduction of rates for the forwarding of produce. Only by such union could they have organised a large trade to Paris and to other countries in their produce—wines and apples, strawberries, onions, early vegetables, &c." They combine to prepare their common produce for market—"manufacturing their fruit into pulp, pressing their olives for oil, &c. They insure in common against a variety of risks, including workmen's accidents. They have reduced the sale of beasts to so simple a method that a provincial farmer need only put his animal into a truck, knowing that it will be carried safely to Paris, put upon the market, and sold to best advantage." Stud animals are purchased for common use, "and herds have accordingly improved beyond recognition. The apple orchards of Normandy have benefited, being planted with superior varieties of fruit. Dairies, of course, have obtained better value for milk drawn from improved cows," and winegrowers have been able "to replant those wide expanses of land devasted by the phylloxera."

For fuller information upon this absorbingly interesting subject Mr. Wolff refers the readers of the "Co-operative News' to what he characterises as "an excellent little book" on "Agricultural Syndicates and Their Work" by the Count Rocquigny.

Other countries, like Belgium, Denmark and Holland, furnish convincing evidences of the enormous improvement which has been made in the condition of rural populations and in the increase of national prosperity wherever agricul- page 56 tural co-operation and People's Co-operative Banks have been securely established. Distributive and wholesale co-operation, after the Rochdale plan, has of late years made great and systematic strides on the European Continent, and the whole movement is steadily extending from centre to centre and from country to country, and a cosmopolitan character is given to it by the holding of regular annual co-operative congresses, consisting of delegates from the various national co-operative centres. The International Co-operative Congress of 1903 was held in September at Buda Pesth, the capital of Hungary, under the presidency of Count Karolyi, called the "Raiffeisen of Hungary" because of the leading part he took in establishing credit banks for farmers in that country. On the opening day of the congress Count Tisza, Hungary's then Prime Minister; Count Darayi, the ex-Minister for Agriculture; Dr. Erstl, a representative of the Austrian Ministry of Trade and Commerce, were present.

In his opening address Count Karolyi said:—"Every co-operative centre ought to bear in mind the aim of all co-operation, and that was greater social force through co-operation, greater economic knowledge through practical instruction, and, moreover, a higher moral development through the need of being equitable. It was not State socialism that was wanted, but liberty."

The italics are mine, as I desire to point out how the practical adoption of co-operative principles on the Continent of Europe, for the solution of social problems, had vastly altered from the ideas of State socialism which characterised the revolutionary doctrines which animated the "Internationalist" movement of the early seventies of which Karl Marx was the inspiring genius. The discussions at the Buda Pesth congress throw a good deal of light upon this aspect of the question. On the second day Count Rocquigny—the author of the little book so highly commended by Mr. Wolff—read a paper on "The Duty of the State Towards Co-operation: Should it Subsidise it or Not." page 57 He said "that the Delft congress had laid it down that the State should not sanction measures which might interfere with the free growth of the movement ... and the time had now arrived when it was advisable to determine with somewhat greater precision how the State ought to act with regard to the movement. He admitted that co-operation must, if it were to be co-operation at all, remain essentially a product of free private enterprise, that spontaneity and independent action must constitute its title of honour, which must never be sacrificed, as it would be if the State were to become too much a master of it. There were countries in which self-help, having been cultivated for a long time back and perfected and fortified, was sufficient in itself, but in the majority of countries the spirit of private enterprise had scarcely yet taken sufficient root to leave co-operation to its own resources. Therefore, for some time, in his opinion, those countries must need the sheltering protection of the State."

A delegate from Wiesbaden said that "forty-four years' experience in Germany proved conclusively that the intervention of the State was absolutely unnecessary." A Russian delegate was of opinion that the State could aid financially without loss of co-operative independence. A Hungarian delegate favoured State aid, another opposed it. The British delegates were against State aid, but Mr. W. Maxwell, chairman of the Scottish Co-operative Wholesale Society, Glasgow, gave cautions expression to the sentiment that there might be circumstances surrounding some of the Eastern countries which Western co-operators did not understand, and which might call for help even from the State, and that it might be left for those countries to receive or reject such measures of State aid as might be held out to them. At the same time he confessed to having no faith in State aid. The glory of the co-operative movement lay in the fact that it had been built up by the working classes without going cap-in-hand to anybody, and all that co- page 58 operators should ask of the State was that it should treat them as peace-loving citizens."

A resolution was submitted to the congress declaring "that co-operation warranted a moderate intervention of the State for the purpose of encouraging its application in countries in which private enterprise was not strong enough to serve such purpose of itself, but that this intervention should not injure any other interests entitled to consideration, nor degenerate into permanent assistance, since that would prevent co-operative institutions from acquiring vitality of their own."

The anti-State sentiment was sufficiently pronounced to make it evident that the proposition, although so cautiously worded, could not be carried as a resolution of congress, and rather than introduce an element of discord into the deliberations of "The International Co-operative Alliance" by a formal vote on a question which, under many conceivable circumstances, might require to be decided upon grounds of expediency, it was decided to leave it an open one.

"This had the twofold advantage of giving a free hand to the various countries, and removing any need for a sacrifice of principle on the part of those who regard self-help as the fundamental basis of all co-operative effort."

This was a wise decision, calculated to preserve "The International Co-operative Alliance" from liability to come under an influence that might develop sectarianism in its ranks, and left the movement, in relation to State aid, exactly in the position reasoned out by Mill in the passage quoted from his work in my preliminary remarks, namely:—" Government aid, when given merely in default of private enterprise, should be so given as to be as far as possible a course of education for the people in the art of accomplishing great objects by individual energy and voluntary co-operation." With close settlements already in existence, self-help associations have proved amply sufficient to provide members with every necessary requirement, financial and otherwise, for develop- page 59 ing their resources and marketing their produce on terms as economical as could be commanded by means of Government aid, and even more so, for by the exercise of self-reliance their trustworthiness is far more likely to become securely established in public confidence in proportion as, by the judicious use of co-operative methods, they succeed entirely on their own merits, than by leaning upon the State, whose own credit is liable to suffer depreciation, injurious to the interests of all concerned, when employed to meddle with social experiments which clearly fall within the province of citizens to work out for themselves.