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The Pamphlet Collection of Sir Robert Stout: Volume 81

Chapter VIII. — Prospects of Co-Operation as a Social Movement in Australia

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Chapter VIII.

Prospects of Co-Operation as a Social Movement in Australia.

Private capitalists adopt the principle of co-operation and apply it to schemes of anything but a social character. They are, indeed, found to be so injurious to public welfare that they have become, in esse vel posse, objects of hostile legislation in every nation, and are now engaging the attention of the Australian Commonwealth Parliament. How far such legislation should be prohibitive, how far regulative, are questions of grave importance, and have a direct bearing upon the subject herein discussed. As previously pointed out, the heartless cruelties practised under the régime of unlimited competition by the owners of early industrial machinery, to which may be added the excessive exactions of rack-renting landlords, and the great national loss and vast amount of human suffering caused by the cruel evictions carried out under their unrestricted authority, discredited the doctrine of laissez faire to an extent that made State interference a matter of unavoidable necessity. Now the competitive system itself seems to be threatened with a general breakdown before the rising tyrannies of the combines and trusts, creating a new situation inviting measures of State interference which, in the absence of a countervailing social movement, may lead to direct State socialism.

The Manchester "Co-operative News" for 31st March, 1906, in a leading article on "Illegal Trade Combines in Canada," says:—"Under certain sections of the criminal code of Canada it is made an indictable offence for persons or corporations to combine to restrict trade and enhance prices against the general public. Sec. 18 of An Amendment to page 78 the Customs Act passed in 1897 reads:—'Whenever the Governor-in-Council has reason to believe that with regard to any article of commerce there exists any trust, combination, association, or agreement of any kind among manufacturers of such articles, or in any way to unduly promote the advantage of the manufacturer or dealer at the expense of the consumers, the Governor-in-Council may, through the judges of any Superior Court of Canada, inquire in a summary way into the bona fides of such combine."

Under this Act a number of prosecutions had taken place, and were active at the time when the issue of the paper from which the above extract has been taken was published, and heavy penalties were being inflicted. In delivering judgment against members of a combine of this character, "His Lordship Councillor Boyd" made the following remarks:—"There is no doubt that lawful combination may easily become unlawful conspiracy. A company of respectable people get together to control a trade. Their object of furthering their own ends obscures or blinds their moral sense as to the fair claim of others. Accordingly, they plan with dulled or forgotten perception of individual personal responsibility; fair dealing must not come in to lessen the prospect of goodly gain, and so is formed a monopoly which to them is justified by its profitable fruits, but to others becomes baneful, working harm and loss, stealthily depriving them of money without returning just value—in brief, cheating them."

It is not the legality of the combines as trading concerns that seems to be here called in question, but the legality of the practices in which they may be employed, as a citizen may be liable to prosecution without an attack being made upon citizen rights. A combine in itself, economically considered, may be a distinct advance upon the wasteful and ill-organised competitive system from which it springs, but, like any other system, it must confine its operations to legitimate objects and ways. The Standard Oil Trust, Cotton Thread, and other combines, are able to serve the public in their various lines more economically than can be possible by the page 79 over-manned, over-capitalised competitive trades by which the public consumers are burdened, supporting, perhaps, ten or more different establishments where one, under proper organisation, would be sufficient, and able to give better satisfaction to producer, trader, and customer alike. In this respect many writers fairly enough commend the evolution of the combine as a highly-developed form of social economy. Yet an organised system of trading by associations of private capitalists, however economical compared with the competitive system which it bids to supersede, cannot be a "social movement"—it cannot solve the "social problem." It possesses radical defects similar to those which constitute the principal objections to State socialism, and others to which State ownership and control of the industries would not necessarily be liable. It is calculated to destroy "individualism" in the average citizen to a greater extent even than could be fairly anticipated of State socialism, by reducing the working population to slavish dependence upon corporations of private capitalists, without that sense of responsibility which must always rest upon the State, however indifferently exercised, to give first consideration to public welfare.

There is another distinction that goes to favour the popular plea for State socialism as against trading by combines. A system of manufactures and commerce by combines, however shrewdly organised and prudently managed on strictly legitimate lines, would yield no further benefits to wage-earners and consumers than would be barely sufficient to prevent opportunity being given for State interference, and to keep outside capitalists, if any, from "figuring against them," as I once heard a representative of the most powerful trust in the world express himself. After making this necessary concession to social interests in the interests of the organisation's own safety—a policy which is not always followed when a temptation to make plunder out of a "corner" presents itself—a balance of power still remains to combines, and fully exercised, to exact from the general public excessive page 80 profits—in known instances equal to from 75 per cent. to 100 per cent. per annum in bonuses and dividends upon share capital—which it would be the business of the State, were it the owner of the industries, to win for the public and devote to their cause in public expenditure. It is a situation in which it would be hard, if not impossible, for advocates of private enterprise and anti-socialists to hold their own against the logically stronger claims of State socialists, were the controversy left to be settled between them only.

A democracy, awakened to some sense of what is due to itself, i.e., to social and public rights, could never accept as the terminus ad quem of all social progress the best results of trade and commerce carried on by combines, or by any system of which private capitalism seems capable, and the anti-socialists, by not recognising and admitting this, and by taking up an attitude defensive of a system which, at its very best, is an exploitation of the mass that supplies the world's labour, and of the public consumer, to an extent that is daily becoming less and less tolerable, are pushing the controversy to an acute stage that may make more or less experiments in State socialism inevitable.

The same politicians and classes who, correctly enough, point out many serious reasons for objecting to State socialism, and make use of them as alarmist cries by which to unite the rest of the community against it, are the logical upholders of interests which, at the same time, constitute them the natural opponents of co-operation as a social movement, yet, by force of circumstances, are made to support a State policy that favours its evolution.

In the conflict of parties a situation is created that induces conservative politicians, manufacturers, private traders, and others—even landowners, if they be permitted to sell when they like, and misappropriate to themselves all the increment value given to the land by the public demand for it—to encourage the establishment by the State of close settlements of small producers on the land, from motives, not the least of which is to counteract the growing influence of State socia- page 81 lism as a specialised plank in the political platform of a solidly-organised and militant Labour party. If closer settlement is to prove a solid barrier against the advance of State' socialism, it goes without saying that land and water will have to be secured at values that will enable settlers, by the due application of intelligent industry on their part, to live in prosperity and comfort, otherwise, instead of being a remedy against State socialism, it may prove a new and dangerous power working the other way, and this is what the power which landowners possess to "confiscate" to their own private use an undue proportion of the fruits of other people's industries must undoubtedly lead to, if not checked.

The application of machinery to rural industries has helped to introduce co-operation to the small producers. When the State of Victoria granted a bonus on exports to encourage the butter-making industry, and employed experts, with complete plant, to travel from district to district to instruct farmers in the use of cream separators and butter-making machinery, and the economic value of co-operative creameries and butter-making factories, co-operation was started amongst the primary producers, and is developing into a self-reliant, self-expanding movement, extending to persons engaged in every form of rural industry. In the "Age" newspaper of 1st June, 1906, a paragraph report was published of proceedings at a conference of delegates from the Western District dairy factories, held at Warrnambool on 30th May, under the auspices of the Western District Factories Co-operative Produce Company. "The chairman, Mr. G. Stewart, of Colac, said that even their bitterest opponents had to admit that the co-operative selling companies had exercised a good influence on the market. Since the company had started, about a year and eight months ago, its turnover had amounted to £645,000. It had made a profit in that period of £4635 13s. 1d., much of which, under previous conditions, would have gone into the pockets of middlemen and speculators. Under the company's system £3710 of this surplus would be returned to the factories, and in addi- page 82 tion to this £800 would be set apart to a reserve fund. The company's secretary, Mr. Cameron, who supervised the business in London last year, had furnished valuable information which would result in substantial savings being effected for the associated factories. The manager (Mr. H. W. Osborne) urged the companies to remain loyal to the organisation. There was great joy in the camp of the agents when a company left the co-operative fold."

The above paragraph tells a story complete in itself, and points, with well-founded assurance, to much greater co-operative possibilities. Individual dairy-farmers come together to form local co-operative butter factories, followed up, as a natural evolutionary process, by a federation of all the co-operative factories throughout a wide province, in a conveniently situated central co-operative selling and purchasing agency of their own, with its own co-operative agency in London. This development was hastened by the scandalous manner in which the producers were treated by private middlemen agents, and a further development must assuredly follow, and result in a federation of every provincial organisation in one national centre—a Farmers' Central Co-operative Agency Society—for receiving consignments of every kind of rural produce from members, arranging for freights, regulating exports, grading and fixing prices against which to make advances to consignors—in short, to do everything in selling and buying, and, generally, that members stand in need of, and to act as a propaganda and educating agency for furthering the interests of members and the development of the movement.

Through the able leadership of Mr. C. E. D. Meares, of New South Wales, a central society, constituted upon lines likely to develop this greater federal character, has been established in Sussex-street, Sydney, called "The Coastal Farmers' Co-operative Company," of which the members are maize-growers, co-operative butter factories, cheeseries, cooperative bacon-curing factories, breeders of cattle, pigs, poultry, &c. At the end of the fourth year of the society's page 83 existence the business turnover amounted to about £450,000, with results in every way far more satisfactory to members than could possibly be obtained through ordinary trade agency channels. They rely upon the State for nothing but their freedom as citizens. In agitating for a reduction of steamer freights to London, the directors of the co-operative butter factories, at the instance of Mr. Meares, appointed delegates (about twenty-five in number) to meet in conference at their own central Sydney agency, to discuss freights with representatives of the P. and O. and Orient S.S. Companies, and of the Lund and Aberdeen lines of steamers, and conducted their negotiations to a completely satisfactory issue without calling upon the Government for any assistance or patronage. Settlers in any country district desirous of starting a co-operative society of any description have only to apply to the manager of "The Coastal Farmers' Co-operative Company" in Sydney, and ready assistance is given them. There is a constant alertness manifested to take advantage of every opportunity to promote co-operative action amongst country producers so as to extend its benefits to the utmost limits of which the application of the principle is capable, and to consolidate the movement into one uniformly organised system. A similar disposition was manifested at the conference of the Victorian Western District co-operative butter factories delegates which met at Warrnambool, and it is clearly evident that the tendency is to keep on enlarging the area of primary producers' co-operative societies, applied to every kind of rural produce, and of their federation in provincial groups with a federal metropolitan centre, to the exclusion of all middlemen agencies and private traders whatsoever, and the discovery is soon made that every requirement may be economically purchased in wholesale quantities and distributed to members through the same agency. It is only a matter of natural development for the primary producers to form co-operative societies for manufacturing all implement and plant requisites for themselves, and settle page 84 many trust and combine troubles by distributing the surplus profits of the industry amongst themselves in proportion to their purchases, in true co-operative fashion. And this is not the only industry that farmers are likely to engage in to supply their own wants, when they get used to act cooperatively, win each other's confidence, and find money and safety in it. It is a movement that is bound to grow amongst rural producers now that it has taken considerable hold amongst them, affording practical evidence of the benefits derived from it, and the means of escape it provides from the exploitations of middlemen agents, private traders, and speculators, at whose hands they and their industries have suffered so many injuries and wrongs.

The prospects are not so encouraging when we come to look amongst the labour population for signs of that cooperative movement by which millions of the working population of the United Kingdom have raised their class in the social scale to a position of great material wealth and commercial influence. We have a few co-operative societies, but no working class co-operative movement. There is a Consumers' Society in Bendigo, started and successfully conducted by Mr. W. A. Hamilton, ex-M.L.A., and a thriving one at Ballarat, started by Mr. James Drummond, and making good progress under his management, whilst Mr. G. Thomp-son, of Adelaide, has rendered eminent services to co-operation in his city by starting the "Adelaide Co-operative Society" thirty-eight years ago, and guiding it to a state of well-established and growing prosperity. But to promote co-operation of a progressively expanding character, similar to what has been done in the United Kingdom, requires an ever active organised propaganda work and enthusiastic, energetic leadership. For lack of this the social field in Australia is little better than what is termed a "co-operative desert," with the trail of the politician over it all, to the neglect of all good social work. Had the great capacity of the Labour party for organising work been more employed in this direction, with some of the zeal and earnestness of page 85 which they are so capable, what great and beneficial results might have been produced long ere now.

The co-operative prospect brightens, however, when consideration is given to the success which has attended the "Civil Service Co-operative Society," started in 1902, under the leadership of Mr. T. M. Burke, and the friends whom he gathered round him, and to the promise it gives, by developments which are taking place in its constitution, of providing a purely co-operative object lesson of a magnitude sufficient to impress the wage-earning classes with a sense of what is possible to themselves whenever they may have the good fortune to be similarly led.

The start of the society was a faulty one. This, under the conditions which prevailed, appears to have been unavoidable if a society was to be formed at all. The whole thing was the result of a sudden impulse, inspired by exciting circumstances, which at the time appealed strongly to the esprit de corps of the service. The members as a body were not well versed in the principles of co-operation, nor conversant with its history, and there was no time to undertake educational work. It was, therefore, decided to form a Civil Service Co-operative Society at once, so as not to lose an opportunity exceptionally favourable to the enterprise, although recognised principles vital to co-operation as an economic social movement had for the time to be disregarded. The society was formed with a fixed capital of £30,000, in 30,000 shares of £1 each, which, under the excitement of the moment, were promptly taken up by about 7000 members—an unparalleled success, but which soon proved that the society, under the rule adopted for raising the capital, was composed of members of the Civil Service, but was not of a Civil Service co-operative character. A Civil Service Co-operative Society should make room for every eligible member of the service to join the society as they might feel disposed, and should be free to issue shares in ready response to every such application. The other rules were of approved co-operative character, with the exception that a 10 per page 86 cent. rate of interest was made permissible to be paid to capital, fortunately disregarded in practice in favour of 5 per cent. only. After payment of this rate and all other expenses, what private traders call "net profits," were made returnable to members as savings upon their purchases. Business has been conducted upon strict cash principles, and this rule has, with little doubt, been a main factor in enabling the management to escape many troubles more or less serious. Notwithstanding this, so little did a large proportion of the members realise the true character of the movement they supposed themselves to be engaged in, that many hundreds of them failed to make their purchases at their own store, yet expected their shares to go to a premium, like those of a joint-stock company trading with the general public, and dividing all profits upon capital.

This want of fidelity to the store and to their fellow-members, and these unreasonable expectations, were absurd, of course, and very embarrassing to the management, who found it hard to amend the situation, because, by the joint-stock system adopted for raising capital, the doors were barred against receiving the continuous inflow of new members which the Industrial and Provident Act provides for. A co-operative distributive society is constituted to trade with its own members, and if its own members will not support the trade of their society the result must be obvious.

Early evidence was thus given of how necessary it was that this unworkable rule should be repealed as soon as ever practicable, and the society placed upon a proper co-operative foundation by the adoption of the only rule for raising capital by which the society could grow and prosper. This meant active propaganda work amongst the members, and the commencement of a very remarkable history in the annals of the co-operative movement.

The need for this educational work was anticipated by the establishment of a monthly newspaper called "The Federal Co-operative News" from the very first, and, at an early stage of the society's history, the directors called to their aid page 87 about 120 members, representative of the various branches of the Civil Service, and of the various suburban localities where members of the society mostly resided, and of these a propagandist association was formed, under the name of "The Co-operative Union." This body, in conjunction with the members of the board of directors and manager, have held regular monthly meetings in Melbourne, under the presidency of Captain J. C. Bartlett, president of the Civil Service Co-operative Society, and the benefits which have accrued to the society as the result of their deliberations in council and propaganda work in the field, have been so distinctly felt and appreciated that the "Union" has been made an elective and permanent institution. This supremely important development, and the special subjects to be discussed and objects to be realised, were the fruitful results of Mr. Burke's thoughtful studies of the work and objects of the "Co-operative Union" of Great Britain, which has a membership of "1230 co-operative societies, representing 2,115,995 individual members—93.6 per cent, of the total membership of the co-operative movement."

The work accomplished, or carried to the verge of accomplishment, through the instrumentality of this Civil Service co-operative propagandist association, may be summarised as follows:—
(a)By means of friendly personal interviews many of the non-dealine shareholders were induced to take a sensible and correct view of their obligations and responsibilities and to become purchasers from their own store. The loyalty of others was pre-served by similar means when wavering under the influence of temporary inconveniences they were not accustomed to experience when served by local tradesmen. The genuine co-operative sentiment, ready to submit to, and conquer, every inconvenience for the sake of a great principle, is a matter of slow growth, but the result of the mission work of the Union proves that in a large page 88 number of cases this was more for "want of thought than want of heart," and the co-operative spirit began to be kindled and fostered into life.
(b)Shareholders who, in the first burst of enthusisam, took up more shares in the capital of the society than were necessary to support their own individual contributions to the business, were persuaded to place the surplus in the hands of the management for sale to new members, so as to increase the number of store customers. There was no sacrifice in this, because increased advantages accrued to every member by the greater net profits realised for division upon purchases—a matter of more monetary importance than the 5 per cent. interest payable to capital.
(c)When, about the middle of the year 1905, the directors of the Civil Service Co-operative Society were anxious to raise a sum of £8000 upon debentures, in order to enable them to finance the society's new premises to completion, the matter was submitted to a meeting of the Co-operative Union, whose members took it up, and, in three weeks' time, more than the amount was at the disposal of the board.
(d)Through the same agency a scheme for the creation of a Civil Service Co-operative Credit Bank was discussed, and placed in the hands of a sub-committee for the purpose of putting it into practical shape. The Civil Service Co-operative Credit Bank has been, for some time now, a successful going concern, and many shareholders in the Civil Service Co-operative Society, who had previously been unable to extricate themselves from the books of private traders and deal with their own store, have been able to free themselves from these disabilities by money borrowed from their own financial institution.
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The Credit Bank is quite distinct from the Civil Service trading society, although closely allied to it, and, being co-operative, its customers have first of all to become members by holding at least a £1 share in its capital, which may be paid up by small monthly instalments.*

(e)Several discussions have taken place at the Union meetings about the advisability of taking steps for rescinding the joint-stock rule by which the capital of the society has been raised, and for adopting the Rochdale system, which the Industrial and Provident Act provides for, and, although no formal resolution had been carried at the time this was being written, it was almost assured that the Union were prepared to recommend the change and aid in its accomplishment.

The Co-operative Union have rendered essentially important services to the board of management in advancing the interests of the society. They were enabled to transfer the society's business to the handsome building erected on the society's own freehold—land and buildings costing £30,000—before the third year of the society's existence entirely lapsed. They assisted very materially in providing the society with a Civil Service Co-operative Credit Bank ally, which, whilst accommodating members with loans, also relieves the store from liability to have to refuse credit for goods in instances when it might be painful to deny it, and adds immensely to the store's attractions; by their efforts the members of the society were increased in numbers from 7000 to 9000 by the better distribution of its 30.000 shares, increasing the business to an annual turnover of more than £100,000—not one-half of what it might be "were every member giving loyal business to the store. It now only requires that the Rochdale system of admitting members and raising capital should be adopted to give the society a true co-operative constitution, freely opening its doors to every eligible member of the Civil Service ready and willing to enter it.

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But even were this last condition, so necessary to complete its constitutional co-operative character, complied with, it would still fall short of being typical of co-operation as a social movement so long as the society retained its class limitations.

A co-operative movement, to be a social movement, has to be a people's movement, without class distinctions. For want of this broad social character, the Civil Service Co-operative Society has already come into practical competition with co-operative societies founded on the broader type in Bendigo and Ballarat. To support this view, it is not necessary to prove that the provincial societies should have lost one member or one customer on this account, or that the Civil Service Co-operative Society's branches opened in those localities should have dealt in any instance with one person outside their own class. What violated the economic character and confraternal spirit of co-operation was that two co-operative societies should have been found occupying one and the same territory. This "overlapping" is one of the special evils against which the leaders of the movement are constantly on the alert as an unnatural form of competition, and is certainly a breach of the monistic conception of society, so lucidly denned by Huxley, of which co-operation bids to be the practical economic embodiment.

The managers of the Civil Service Co-operative Society soon came to realise the significance of this unco-operative situation, and took early steps to amend it. The experience, however, was a valuable one, and a gain to social evolution. The concession made to a principle essential to co-operative unity, when sanctioned by the members of the Civil Service Co-operative Society, may be accepted as an indication that the institution is automatically developing into a broad people's movement. This is more than confirmed by an important progressive step which the directors of the society and members of the Co-operative Union have taken to persuade eight or nine other co-operative societies throughout the country to federate with the Civil Service Society to page 91 establish a central co-operative purchasing society on the lines of the Great Manchester and Glasgow Wholesales. This, when completed—as it promises to be—must do away with the last vestige of class distinctions, making all members of one organised body. The smallest society will be able to secure wholesale supplies at prices equally favourable with those which the largest purchaser can command, and every successful new society that joins the federation will always add to the strength and security of the whole.

Everything considered, it may be regarded safe to assume that co-operation, both on the Rochdale system and on that which fits in with the economic requirements of primary producers, is on the eve of becoming a well-organised social force in this new land, with a propaganda of its own for promoting the movement, without calling upon the State for aid in any matter which co-operators as individuals can manage much better for themselves. The State, however, is bound to act a part of supreme importance in forming rural settlements for placing primary producers on the land under conditions that will enable them to co-operate in marketing their produce and obtaining supplies, and to surround themselves with the comforts and amenities of a civilised existence. This is a matter that requires separate consideration.

* "See Appendix—"The Civil Service Co-operative Credit Bank."