The Masses (periodical)/Volume 1/Number 2/Co-operation in America

by Piet Vlag

CO-OPERATION IN AMERICA
The Methods, the Aims and the Achievements of the American Co-operative
By Piet Vlag

 

TRUE co-operation means a collective effort to secure the greatest good for the greatest number. The measure of its efficiency, therefore, may be measured by the number of people benefitted by its operation. The greater the number the greater its efficiency.

For example, when 100 shoemakers form an organization to produce collectively, they eliminate the profit which otherwise goes to the manufacturer. One hundred people are benefitted by this form of co-operation. Despite its small number, such an organization is still entitled to be called a co-operative. When, however, a similar organization proceeds to employ non-partners in the concern, and exploits them in the usual capitalist method, it ceases to be a co-operative and is transformed into a corporation.

A co-operative store organized by the American Wholesale Co-operative is conducted in the following manner: The goods are sold at the established market prices; not higher nor lower. Good quality is insured. The goods are purchased at the lowest possible prices. Profit is made on the purchases of the consumers. This profit is used, in the first place, to pay the operating expenses. After deducting the expenses the profits are divided among the consumers.

 

Declaring Dividends

The manner of dividing the profits among consumers may best be illustrated by a concrete example. The American Co-operative of Astoria, for instance, did a business from January 1 to July 1 (six months) of $20,000. After the operating expenses had been deducted $2,000 clear profit was left. Of these $2,000 12½%, or $250, were deducted for the sinking fund. Another 12½%, or $250, for Socialistic propaganda, and 2½%, or $50, as a bonus for the employees. The object of this latter rule is to stimulate the interest of the employees in the welfare of the concern.

After these deductions had been made $1,450 were left, or 7¼% on the total purchases ($20,000); therefore each consumer received a dividend of 7¼% on everything he purchased during the six months at the co-operative store.

The essential difference between this mode of declaring dividends, and the declaring of dividends on stock, is that the dividends are not declared on property rights, but upon the amount of purchases.

A member of a co-operative store who owns 100 shares receives 100 times the amount of dividends that the man receives who owns only one share. The co-operatives argue justly that the woman who bought $200 worth did twice as much toward the making of the profit as the woman who bought only $100 worth. They therefore decided that this woman is entitled to twice the amount of profit. This form of co-operation is about the best we know of. In this manner the greatest good for the greatest number is secured.

 

Corporations and Co-operatives

There are, on the other hand, many so-called co-operative stores which are, in fact, nothing more than corporations. For example:

A store was organized in a certain city in Jersey by about 75 members, and each purchased a share of stock for $25. After the store had been in operation for about a year, and it had made considerable profit, no dividend was declared. It merely tried to sell at the lowest prices possible and to give a better quality of goods.

As a result they increased their trade considerably, but they also decreased their membership. The members considered that it was of no importance to them to retain their membership in the organization, as the non-members were receiving equal benefit without any investment. Consequently the majority of the members withdrew the $25 which they had paid in for membership. At present this organization has about 25 members left who are the stockholders and owners of the store. It is misleading

 

Rufus W. Weeks

 

to speak of such a concern as a co-operative, because though it was started with the best intentions it developed into a corporation pure and simple.

 

A Promising New Plan

Another true form of distributive co-operation has developed recently in the United States. It is not impossible that this form of co-operation may prove to be what some of our wise men have been looking for. Many people with a considerable amount of gray matter under their hair have told us that co-operation could not be practiced in the United States as it was practiced in Europe, because different conditions exist here, and therefore different methods must be employed.

As we said, it is not impossible that the methods pursued by this latter form of co-operation might prove to be the best for America. At any rate, we believe that as far as small cities are concerned the plan is a practicable one. It is simple, and although it seems to work in exactly the opposite direction of the ordinary distributive co-operative, it produces the same result.

The plan is this: A number of people living in a small community form an organization. When they secure 100 members paying $10 each they have $1,000 which they use as a working capital. Then each member orders his goods through the secretary in bulk, weekly, semi-monthly or monthly—whatever is decided upon by the local organization. These bulk orders are combined by the secretary so that they form wholesale quantities. A wholesale quantity means an unbroken package. The orders are sent in by the secretary. Upon receipt of the goods from the wholesale house the individual orders are put up by the secretary, who is paid for his labor. Then the members call for their goods, for which they pay in cash. They are charged the wholesale prices. No profit is added. In this manner the consumers save directly from 20% to 25% on their purchases. The cost of operation is very low, and usually amounts to about 3% to 4%. It is low because no store is needed. A packing room is sufficient, and the putting up of the orders can be done in the evening by some one after work, at a very low cost. The operating expenses, amounting to 3% or 4%, are usually paid for by the members at the end of six months.

For example: A woman who has purchased during the six months $200 worth from the co-operative, and thus saved from about $40 to $50, is taxed with $6, or 3%, on $200 to pay the running expenses. There is no fear that she will not pay this, as her original investment of $10 covers her share of the operating expenses. Unless she pays she cannot continue to deal with the society, and her membership money is forfeited.

 

Connection Between the Wholesale Co-operative and the Retail Stores

The relation between the retail organizations and the American Wholesale Co-operative is the same as the relation between the consumers and the retail stores. A wholesale profit is made and declared in the same manner to the stores, as the stores declare their dividends to the consumers. For example, if the wholesale should declare a 5% dividend, the store which during the previous year did $10,000 worth of business with the wholesale would receive a dividend of $500. These $500 would be added to the assets of the store, and thus the consumers would be the ultimate beneficiaries of the wholesale, just as they are of the retail.

 

Paternalism

Many people seem to believe that the American Wholesale Co-operative is a concern started by a few well-meaning individuals to benefit society at large. Let us assure you, once for all, that the American Wholesale Co-operative is no such paternalistic institution.

For two very good reasons: First, because there are so very few paternalists; and, secondly, because we do not believe that any movement can gain real force until it is operated by and for the people.

For example, the co-operative movement in Germany, known as the Schultze Delitz movement, was essentially paternalistic, and although it was backed by a large capital the co-operative movement did not gain impetus in Germany until the working people took a hand in it. When they began to invest their savings in the co-operatives instead of in the banks, and did things for themselves instead of having them done for them, the co-operative movement began to grow. We do not mean to imply, however, that we have not received and welcomed the support of such comrades, as themselves could do very well without the benefits of co-operation. If it were not for Rufus W. Weeks, Chas. K. Ovington and Helen Phelps Stokes, neither the American Wholesale Co-operative nor a number of retail co-operatives would be in operation to-day. But, as a whole, the support of these comrades was not meant to furnish a capital, but merely to furnish the means with which to agitate for co-operation.

It has been argued that the co-operative movement in the United States has not the same chances of success as the co-operative movement in Europe, because the trusts are too highly developed, and the working class cannot supply sufficient capital to effectively combat them. Is this true? We wish to say that the co-operative movement in Europe has grown phenomenally during the past ten years. The German kartels were much further advanced ten years ago than our tood trusts to-day, with the exception of the meat trusts.

We know as well as our critics that in order to build up a successful co-operative movement a large capital is necessary. But we are also confident that this capital can be secured, but only through hard and persistent labor.

The American Wholesale Co-operative has issued 5% interest-bearing bonds, and although it does not expect to sell enough of these bonds within a few weeks or months to be able to build up an enterprise capable of eliminating the middleman, it does not doubt that at some time in the future the working class of the United States will begin to realize that it is to their advantage to put their savings in their own co-operatives instead of in the banks.

 

The Socialist Press and Co-operatives

The working people of the United States are certainly not poorer than the working people of Germany, Belgium and Denmark. The working people of Europe managed to raise sufficient capital to establish some of the largest and most powerful distributive co-operatives in the world. There is, perhaps, one difference. The German party press officially urged the people to join the co-operative and stand together solidly. We have as yet not been able to induce the Socialist press in the United States to take any such stand. That our comrades do have the necessary money to invest in their own enterprises is best proven by the recent report on the Wilshire matter.

It was reported in the papers that a very large amount, approximating a million dollars, was collected by Comrade Wilshire to invest in gold mines and rubber plantations.

In my opinion, the trouble with the American workingman is not lack of money, but lack of confidence in his own ability to do things. We have here a great deal of talk about a party-owned press, about party-owned enterprises, but we have as yet never been able to induce the Socialists to invest in their own enterprises the amount of money that was invested in the Wilshire gold mines and rubber plantations.

Strange as it may seem, we are led to believe that with all the enlightenments on the subject the Socialists do not as yet understand the capitalist system. Many still prefer to give their little savings to a bank, where they receive 3% or 4%, or nothing at all. These banks loan their money to small stores, larger stores and manufacturers at 6% to 7%. The stores use this money in turn to exploit the working class, or the original investors of the money, out of from 20% to 25%.

These are facts with which every Socialist ought to be acquainted by this time, and yet in the face of this knowledge they actually support capitalistic institutions, and merely talk about supporting their own institutions.

The question as to what results the American Wholesale Co-operative has thus far obtained is rather difficult to answer. But those connected with the co-operatives have reason to be gratified with what has already been achieved.

More than 200 stores have been organized throughout the United States as a result of our efforts.

We are receiving daily communications from people with whom we have been corresponding for the last year or so telling us that they have started co-operative enterprises of some sort. Yet it would be misleading to say that all these stores are connected with the American Wholesale Co-operative. There is no doubt, however, that as the movement grows a system of centralization will develop in which the American Wholesale Co-operative will play no small part.