How Has Cooperative Business Grown?

By the time the Rochdale cooperative was fifteen years old, its reputation and its rules were known in America.

The first attempt to put the Rochdale principles into practice in this country was made by a cooperative formed in 1862 by a Philadelphia labor union. Unlike its model in England, this co-op failed after only four years. But its existence did much to popularize the Rochdale methods in the United States.

The growth of cooperation in this country since that time can be traced in the rise and fall of a number of farm and labor organizations that took turns in promoting the idea.

In the 1970’s the Patrons of Husbandry—better known as the Grangers—took the lead in sponsoring cooperative organizations among farmers. They were the first to apply Rochdale principles to the selling of farm commodities as well as to the buying of farm supplies.

In the 1880’s the Grange declined, and its place of leadership was taken by the Farmers’ Alliance—an organization likewise devoted to promoting the welfare of the farmer. The Alliance fostered many farm marketing and purchasing co-ops that are still in existence.

During the same two decades of the last century various labor groups were active in support of cooperatives in the cities and towns. The Sovereigns of Industry, an organization patterned after the Grange, encouraged consumer co-ops in New England and the Middle Atlantic states from 1874 to 1879.

In the 1880’s the Knights of Labor came to the fore. This fraternal order of workingmen aimed to set up a cooperative industrial system, and at first it tried to foster producers’ or workers’ co-ops in which the workers shared ownership of the industry. Through its efforts cooperatives were established all over the country to make boots and shoes, clothing, cigars, and stoves, to mine ore and cast metal, and to do other jobs. However, poor management and lack of capital brought about the downfall of these co-ops.

The consumers’ cooperatives that the Knights of Labor sponsored on a less ambitious scale were more successful. Many of them weathered early difficulties to become the parents of present-day consumers’ co-ops.

In the Twentieth Century

By 1900 only a handful of co-ops still functioned in cities and towns. In farm areas, on the other hand, cooperation was well rooted and continued to grow. Mutual fire-insurance companies, irrigation associations, cooperative creameries, grain elevators, fruit-marketing combinations, telephone companies, and purchasing co-ops multiplied in numbers and strength. From 1900 to 1914 the foremost organizations back of this growth were the Farmers Educational and Cooperative Union and the American Society of Equity.

The number of farm marketing and purchasing co-ops almost doubled between 1914 and 1920. The first World War stimulated not only this growth in numbers, but also the development of regional cooperatives. Since 1893 the California Fruit Growers Exchange had shown that farmers could profitably sell their produce in distant markets through cooperative organization. But it had few imitators until the first World War encouraged the formation of such regional cooperatives as the Dairymen’s League Cooperative Federation of New York, the Farmers’ Union Livestock Commission Associations of Omaha and other Middle Western cities, and milk-bargaining associations in regions surrounding many big cities.

At the same time, regional cooperative purchasing organizations were formed in the attempt to overcome wartime difficulties in obtaining good-quality farm equipment and supplies at reasonable prices. The Cooperative Grange League Federation Exchange, Inc. (G.L.F.), and the Eastern States Farmers’ Exchange, founded at the time, are the largest co-ops of their kind in the country today. The Farm Bureau Federation, organized in 1919, helped to promote other prominent marketing and purchasing cooperatives.

A New Departure in Cooperation

When the bottom dropped out of farm prices in 1920 and 1921, farmers’ marketing cooperatives took a new turn.

Instead of simply trying to improve their buying and selling efficiency, they attempted to control the supply and the movement to markets of various farm commodities.

Almost overnight state and regional “commodity marketing associations” for wheat, cotton, and tobacco were established. And through them, farmers believed, the prices of their produce could be maintained or raised. In order to give the associations the effective control over supplies necessary to “orderly marketing,” each member had to sign over to the association full authority or marketing his output for a certain number of years.

Strong state laws helped to put this new theory of cooperative action into effect. By 1928 broadly similar cooperative laws had been passed in forty-six states. Under the so-called “Uniform Marketing Law,” full title to the product when delivered by the farmer passed to the marketing association. The law had “teeth”—in the form of damages to be paid by the members if they failed to comply with contracts.

The speed with which this idea was taken over is shown by the fact that “commodity pool” associations claimed more than 500.000 members by 1925. Results soon fell below expectations, however, and membership dropped.

New life was given to the “control” idea by the Federal Farm Board, which was set up under the Agricultural Marketing Act of 1929. The board organized national or regional cooperative associations for cotton, livestock, wool, grain, fruits and vegetables, nuts, tobacco, and dairy products and eggs. Through its revolving fund of 500 million dollars, the board provided them with liberal financial backing. Its theory was that “such organizations, well managed and properly financed, will enable farmers to control their industry both as to production and marketing.” A number of these national and regional associations are still active, but they never succeeded in their chief aim, which was effective production and marketing control of specific commodities.

Since the Agricultural Adjustment Act became law in 1933, farm cooperatives have mostly gone back to the problem of developing better merchandising methods and have left the problem of controlling agricultural production to the government. As a result, cooperative marketing associations generally were in good shape to help carry the additional marketing loads which came with the second World War.

Farmers Co-op

Mechanized Farming: Cooperative Purchasing

Farmers now require large amounts of machinery, fertilizer, feed, petroleum, and other supplies.

These farm needs, and the difficulty of obtaining good-quality supplies at reasonable prices, have greatly stimulated cooperative buying of supplies since 1920.

Cooperative purchasing of petroleum products has grown in proportion as the gas engine has taken Old Dobbin’s place on the farm. The first oil-purchasing co-op was started in 1921, encouraged by the wide margins between costs and selling prices. By 1929, some six hundred had been set up, many of them tied together in regional wholesale associations.

The depression gave added stimulus to cooperative purchasing as a way of reducing farm-production costs. Purchasing cooperatives grew steadily up to the beginning of World War II and then expanded rapidly under the heavy demand for feed and other production supplies.

Consumers’ and Service Co-ops in Recent Years

The high living costs which prevailed at the close of the last war temporarily stimulated consumers’ cooperation in the cities. But a real spurt came with the hard times of the early 1930’s.

Before 1934 consumers’ cooperation had been largely a city movement. About this time the Cooperative League of the United States, established in 1916 to promote consumers’ cooperation, broadened its membership to include the stronger farmers’ purchasing associations.

The league has done much to popularize the idea of control over goods and services by the people who finally consume those goods and services. The fact that this idea has been accepted by associations serving both farm and city dwellers has done much to break down the isolation of consumers’ cooperatives in cities. Many of them, as a result, have joined regional purchasing federations and thus gained for themselves the advantages of cooperative wholesale sources of supply.

The increasing strength of city consumers’ co-ops is illustrated in the growth of the Eastern Cooperative Wholesale Society. Since its founding in 1936, this cooperative has built its business into a volume of more than $3,000,000 annually. It is the largest cooperative purchasing federation mainly serving city consumers’ co-ops.

During the past twenty years, cooperative business has established itself in a number of new fields. Some of these are credit unions, farm credit and rural electrification cooperatives, mutual automobile-insurance companies, cold-storage locker service associations, cooperative hospital and medical care groups, cooperative housing units, and cooperative burial societies.