Self-Help by the People: A Short History of Cooperatives in Britain, With a Foray into the United States

NOTE: Images in this archived article have been removed.

 

In the fall of 2013, while reading The Many, Not the Few, Richard North’s account of British resistance to Germany’s bombing campaign in World War Two, a different kind of bombshell exploded from the page.

 

 

"Cooperative Wholesale Society? Largest food production system in Britain?"  I looked out the window to the sheep, heads down, grazing placidly in the pasture underneath the solar panels, a familiar scene in a world turned newly strange. "I’ve studied economic history for years. Why haven’t I heard of this before?"

 

In tracking down answers to these questions, I came across a vast ocean of material, hidden in plain sight. It tells a story of 175 years of successful self-help, of an international movement that built lasting economic institutions out of the pooled pennies of millions of working people. It’s a story of institutions based on principles fundamentally different than those taught in MBA programs and economics textbooks. It’s a story of successes and failures and lessons learned. It is a story that has much to teach us, as we haltingly go about building new institutions to assure our future security. In the following essay, I focus on Britain, because both the industrial revolution and the cooperative response to that revolution started in Britain. [In this, I make a distinction between institutional cooperation which arose in response to industrialization, and the informal cooperation that has been a part of everyday life throughout the ages.]

 

It began in the late eighteenth century, as people organized money and put steam engines and power looms together in the Industrial Revolution. Huge textile mills transformed the landscape while working people, forced off the land by the Enclosure Act of 1760, flocked to the mushrooming mill towns. Hand loom weavers were reduced from skilled craftspeople to mere machine tenders.

 

Beatrice Potter wrote of this time in The Co-operative Movement in Great Britain: "Whole districts were transformed from a country of homesteads, bordering commons and scattered far and wide among pastures and corn-fields, into a land thickly planted with cities, towns and suburbs: a whole class of middling folk, small owners and tiny capitalists, had been changed into opposing armies– the rich and the poor…. Mobs of starving factory hands paraded the manufacturing towns; secret societies honeycombed with sedition and conspiracy sprang up with amazing rapidity among the better paid artisans."^[3]

 

As in U. S. factory towns, British mill owners were often the landlords, and many workers bought their food through the "truck system"– aka  "company stores".  This situation was not only used to control workers, the threat of eviction a powerful disincentive to rousing the rabble. It also resulted in people paying inflated prices for the things they needed to stay alive. To make matters worse, The Corn Law of 1815 placed a tariff on imported food, and kept the price high. Also, most government revenue was raised by taxes on food and drink rather than by an income tax.  As a result, in the first decades of the nineteenth century, only the best-paid workers had adequate diets. This led to stunted growth in children, anemia in women, and epidemics of tuberculosis and other diseases for entire communities.

 

Leaders of the Church of England preached that this was God’s will, that wealth was God’s reward for righteous living. The upper class blamed working people as well, believing that they were ignorant because they were inferior, not because they had no education, and that they were poor because they were lazy and dissolute, not because they lived in a society that provided them few ways to better themselves.

 

Laws reflected this contempt for working people. The Combination Act of 1799 made trade unions illegal. Even after its amendment in 1824, union activity was severely restricted. The right to vote was limited to men who owned property. While the Reform Act of 1832 expanded suffrage, most working people were still denied involvement in electoral politics. The followers of the mythic Ned Ludd roamed the countryside in gangs, smashing the machinery that made wage slaves of them whenever they could get their hands on it. There appeared to be little alternative to rioting and destitution.^[4]

 

At the same time as capital was being organized, working people organized themselves into cooperatives, to meet needs the for-profit wage system proved incapable of meeting. Bread was a much more critical part of peoples’ diet than we now appreciate. It was over bread that many of the first co-op battles were fought. These early cooperative were in the form of what we would now recognize as buying clubs. People got together, pooled their money and, by buying in bulk, bought bread and other foods at the lowest possible price.

 

While these early co-ops addressed part of the problem working people faced, affordability, they were still buying from for-profit wholesale merchants. These wholesalers had an incentive to sell short-weight and adulterated product. Sawdust and clay were often found in bread sold to working families. Facing this, some of the late-eighteenth century co-operatives built grist mills and bakeries to produce baked goods for their own use.

 

In 1828 a monthly newspaper called The Co-operator began publication and was sold around the country. William King, its editor and publisher, is known as the first economist of cooperation. [For this account of King’s life and work, I am indebted to Johnston Birchall’s history of English cooperation.^[5]]The son of a minister, King studied political economy and moral philosophy at Cambridge and became a medical doctor and Fellow of the Royal College of Physicians. He moved to the coastal resort of Brighton, where he could have established a lucrative practice. Instead, he chose to be "the poor man’s doctor."

 

His witness to want in the midst of wealth made him determined to find a different way. He started with the observation that work creates wealth, but because workers don’t have the cash to survive while the products of their labor are completed and sold, they go into debt to those who do. The owners of money claim the product of that work in payment of this debt, and wages were determined, not by the value of the products of work, but by ruthless competition between owners. In the pages of The Co-operator,  King wrote that to break out of this trap, workers themselves need to store up enough capital to control the product of their labor, and then, in control of both capital and labor, dispense with the capitalist altogether. But this is beyond the capacity of any individual working person. To build freedom from wage slavery, cooperative action is needed. Capital can be accumulated, partly out of the surplus of retail store operations, and partly from weekly membership dues. Then work can be found for members in the expansion of the operation. Eventually, the co-op can afford to pay pensions, and to buy land and put members to work producing food for the use of the organization.

 

King didn’t stop there. He also suggested that members who didn’t want to go back to farming could stay in town and still benefit from membership in, and patronage of, cooperative stores. Either way, King recommended starting with a store, because "We must go to a shop every day to buy food and necessaries– why then should we not go to our own shop?" [Before refrigeration, there was no such thing as leftovers.]

 

King filled The Co-operator with these ideas as well as practical advice on how to run such a store. He succeeded in doing what many social visionaries fail to do. King provided not only a vision of the future but also described a way to build that future. What he proposed was a revolution of shop keepers, the slow growth of a cooperative commonwealth, and the replacement of capitalist production for speculation and profit with cooperative production for use.

 

At its height, The Co-operator had a circulation of 12,000. Copies were passed from person to person and read many times over. Co-op stores set aside reading rooms, where literacy skills were taught and interested members could find the latest edition of  the paper. Education was critical for the cooperative enterprise as King saw it. Not only do people need the skills to run a store, they also need to be reminded of the simple truth: together we can do things that are impossible by ourselves. Through the pages of The Co-operator,  the cooperative movement came to know itself; and inspired by its publisher, people formed cooperative stores throughout the country.^[6]

 

The cooperative movement gathered in May 1831 at Manchester, in the heart of industrial Britain, at the first Cooperative Congress. Twenty people attended from around the country.  Delegates recognized the problems with dependence on  for-profit wholesalers and the importance of developing cooperative production and exchange alongside distribution. They adopted a resolution that stated they "considered it expedient to establish, as soon as possible, various Wholesale Trading Companies, formed by Unions of Co-operative Societies… in order to purchase and sell every article of general consumption, at the lowest possible price, for the benefit of the several societies forming such companies; and also to promote the sale and exchange of co-operative manufactures, and other produce."

 

SIx months later, the second Cooperative Congress was held in Birmingham, England’s other major industrial center. Enthusiasm ran high. Forty retail stores were represented and thirty others sent letters of support. Two Scotsmen walked three hundred miles from Glasgow to be there. The delegates resolved to appoint "co-operative missionaries" to promote co-op development around the country. In December, 1831 a wholesale cooperative was founded in Liverpool with twenty-one retail stores as members. By 1832 there were 500 retail co-ops in Britain, by some estimates. Two years later, all but a handful had closed their doors.^[7]

 

This massive collapse had multiple causes.  Many of these groups, inspired by the utopian socialism of Robert Owen and the writings of William King, held onto the savings with the intention of buying land and building houses for their members. These Owenite cooperatives out of necessity limited their membership, and so doing, limited the amount of money they could access as membership fees. This made them vulnerable to financial reversals.

 

There were other weaknesses that contributed to cooperative failure. A lack of shopkeeping experience and bookkeeping skills among members meant that many stores were poorly run. Sale on credit made proper bookkeeping even more important and led to many cooperative losses, as some members were not able to pay for items they had bought. 

 

Then there was the problem of pricing. Cooperators wanted to remove profit from the provision of necessities. To do this, they sold groceries at cost, and quickly learned that price wasn’t simple to determine. The cost of a loaf of bread was clear, but how to figure in rent on a storefront, or the value of the co-op shopkeeper’s time? When the market price dropped co-ops were left holding goods they couldn’t sell, as few of their members could afford to spend more than they had to on food. Also, this emphasis on lowest possible sale price often led to ruinous competition with for-profit merchants. 

 

Processes external to the movement were in operation as well. People started mobilizing for universal male suffrage under The Chartist banner in the early 1830s. Mobilization in support of a charter of civil rights diverted attention and interest from cooperative development at a time when retail stores came under great stress.

 

As "The Hungry Forties" began, across northern Europe potato blight wiped out the staple food of working families. Food prices rose, often as the result of profiteering. Fierce competition between mill owners led periodically to glutted markets, and mill closures and layoffs followed as owners waited for the market to clear.  As G. D. H. Cole wrote a century later, "The tremendous fluctuations of industrial activity were, indeed, a very fruitful cause of misery, and in this respect, ‘The Hungry ‘Forties’ were worst of all….Between 1836 and 1849 there were two years of serious crisis, nine more of depression, one fair year, and only two years of reasonably good trade and employment."^[8]

 

Charles Dickens visited Manchester and toured northern England in 1843, and this experience inspired the writing of his best known work, A Christmas Carol.   The next year, in the nearby town of Rochdale, twenty-eight unemployed textile workers came together to inaugurate the Rochdale Society of Equitable Pioneers. As stated at the time, they intended to open a cooperative store for the benefit of the Society’s members, to manufacture items for sale through the store and to provide employment for members, as well as to purchase or rent land for the operation of cooperative farms. Summing up, the Pioneers wrote, " Our purpose is to arrange the powers of production, distribution, education and government to establish a self-supporting home colony of united interests." In short, they were talking of building a cooperative commonwealth.^[9]

 

Making weekly contributions as they could, it took The Pioneers four months to raise the £28 they needed; and on December 21, 1844, the longest night of the year, they opened their store on Toad Lane. The inventory was meager. After paying rent for a year, there was enough money to buy twenty-eight pounds of butter, fifty-six pounds of sugar, six hundred pounds of flour, a sack of oatmeal and some candles.^[10]

 

What made this humble beginning noteworthy were the lessons the Pioneers drew from the previous decades’ cooperative experience. They expressed these lessons in seven principles on which they built their enterprise, principles that have come to be known as the Rochdale Principles and which form the foundation of many modern co-ops.

 

The cooperative retail store as defined by the Rochdale principles was a democratic, self-governed organization. To this end, a one-person, one-vote rule was adopted, independent of the amount of money a person had invested in the co-op. In line with this, interest on capital invested in the co-op was limited. Investment in the Society was to be motivated by support of the project, not the desire for profit.

 

Recognizing that the strength of cooperation lies in numbers, they declared the Society open to anyone who wanted to join. To reduce barriers to membership, a principle of religious and political neutrality was adopted. No position on political or religious questions would be taken to alienate potential members.

 

As the greatest barrier to co-op success was a poorly managed store, and proper bookkeeping central to the enterprise, promotion of education was a core principle of the Pioneers. However, the Society saw its role, and the role of education, in broader terms that mere vocational training. By giving people experience and education in governing their own enterprise, the foundation would be laid for their participation in the governing of the nation. Political as well as economic democracy was the goal. Having seen the danger debt posed to both the cooperative store and its members, trade was conducted on a cash basis only. ^[11]

 

The most critical principle, the one that addressed the pricing problem and the issue of maintaining member loyalty, was the principle of sale of goods at market prices, and the return of excess cash flow to members in proportion to their purchases. [I call this "excess cash flow" and not "profit" because, as the co-op store was taking money from its owners, the transactions were transferring money from one co-op pocket to another. How can you profit from yourself? You can’t.] 

 

Most of these principles were applied by co-ops prior to 1844, but the Equitable Pioneers, by bringing them all together for the first time, created the foundation for a co-op system that worked. In the wake of their experiment, co-operative retail stores expanded throughout the country.  By the mid-1850s this expansion was so great that retail co-ops competed with one another in their purchase of goods from for-profit wholesalers.

 

Production for use expanded along with this increase in the number of retail cooperatives. In 1832, twenty-nine retail societies were involved in production of goods, from cutlery to shoes, beaver hats and other clothing.  In 1850, the Equitable Pioneers set up a corn mill, and began selling corn meal to thirty neighboring cooperatives. Four years after that, the Rochdale Society took part in the formation of the Co-operative Manufacturing Society to operate a textile mill. It started off small, with one room full of looms, and in a few years, had expanded to a full-sized mill powered by a pair of steam engines, playfully christened "The Co-operator" and "The Perseverance."

 

The Hungry Forties ended in 1848 with The People’s Spring, a season of uprisings across Europe. Before it was put down, insurgents in France, under the leadership of Louis Blanc, established the national workshops,  a series of worker directed enterprises, as a means of assuring employment and survival. The attempt was subverted by the provisional government in Paris, which was not prepared for such extremes of worker empowerment. Blanc was exiled and ended up in London, where he came to influence the Christian Socialists. In previous decades, the Christian Socialists used their upper class status and access to the halls of power to push for expansion of male suffrage and the amendment of the Combinations Act’s restrictions on labor organizations. After 1848, they were also great proponents of workplace cooperation along the lines that Blanc attempted to implement. This resulted in a divide within the British cooperative movement, between the Christian Socialists in the south of the country, promoting workplace cooperatives, and those cooperators, concentrated in the industrial heartland of the north, who followed the Rochdale model of consumer cooperation.

 

With the success of the Rochdale experiment, the number of co-op stores increased dramatically, and the need for a wholesale cooperative became increasingly pressing.  With the aid of the Christian Socialists, the New Providential Securities Act was passed in 1862, which made such national cooperative organizations legal. The next year, the Co-operative Wholesale Society (CWS)  was founded in Manchester. It began to acquire the productive facilities built by local retail co-ops and to provide wholesale services to its members- the retail co-ops.   In 1868, Scottish cooperators followed suit with the formation of the Scottish Co-operative Wholesale Society (SCWS).

 

In London in 1869, the Co-operative Union Congress demonstrated how far the movement had gone. Representatives from 560 retail societies across England attended, representing 172,000 members and doing £6 million in business in the preceding year.  Cooperators in the trade unions attended as well, and letters of support from cooperators in Norway, Italy, Denmark, France and Germany were read before the Union. Cooperation was an international movement, and The Co-operative News had an international circulation. In the final decades of the century, the British cooperative movement elaborated the trends already set in motion.^[12]

 

 

As the CWS took on the job of wholesale purchasing agent for the movement, financial arrangements between elements of that movement grew increasingly complex. Retail societies had trouble transferring funds to the Wholesale to pay for goods received. The Co-operative Congress in 1869, and again in 1870, requested that the CWS provide banking services for its members to make trade across the movement easier. However, government authorities mistrusted the solvency and stability of co-op institutions and made co-op banking illegal. To get around the law, the Wholesale set up a "deposit and loan department" in late 1872 to provide account services to its members. Four years later, the law was changed and the CWS Banking Department came into existence.^[13] [The Co-op Bank, which grew out of this department, found itself in difficulty after the crash of 2008 when it attempted to build a banking empire by buying up troubled banks loaded down with toxic mortgage backed securities. In the end the bank required a massive bailout from the Co-op Group,  the modern incarnation of the CWS.]

 

After 1875, the CWS and SCWS cooperated in the purchase and shipment of foodstuffs from overseas. Wheat from Canada and the US Midwest, cheese from Belgium and citrus from Africa were carried on ships owned by the Wholesales. By preferring cooperative products in their purchases where possible, they supported the international cooperative movement in the nations where they did business.

 

To further the cooperative goal of education of working people, the Co-operative Union set up a Central Education Committee in 1883 to promote "the systematic study of cooperation and the social sciences." The committee coordinated with other organizations interested in the education of working people. More retail co-ops set up education committees as well and set aside part of their surplus funds for educational purposes.

 

Also in that year, the Women’s Co-operative Guild was established as part of the Co-operative Union, to further the particular interests of working women. The Women’s Guild became a pillar of the women’s suffrage movement in later decades. It wasn’t until 1918 that the right to vote for women over 30 years old was won.

 

In 1896, the Glasgow cattle merchants tried to shut down cooperative butcher shops by refusing to sell to SCWS buyers. In response, the Scottish Wholesale leased land and bought cows, and provided co-op butchers with co-op cows.^[14]  In the early years of the twentieth century, the rise of for-profit chain stores moved the CWS to develop its productive enterprises as a means of increasing efficiency.  Later, in the 1920s, this militant cooperation broke the power of the radio and toiletries oligopoly by prompting the CWS to build factories to produce such items for use by the retail societies. 

 

The cooperative movement continued to develop globally. The International Cooperative Alliance (ICA) was founded in London in 1895. By 1908 it had 25 countries represented in its membership and the CWS and SCWS were operating in India, Ceylon as well as 15 European countries, Canada the United States, Nigeria and Australia.

 

The capacity of the CWS was tested in November, 1913, by a strike of Irish transportation workers. The strike spread from the docks into a general strike that dragged on for weeks. In Dublin, strike funds were rapidly expended and working families began to feel the bite of hunger. The British Trades Union Congress voted to set up a £5,000 support fund and approached the CWS to supply the needed material aid. Wholesale employees, working overtime for no pay, gathered, weighed, and wrapped thirty thousand aid packages, containing pounds of tea, sugar, margarine, jam, bread and potatoes. The food ship, as it was known, was at the Dublin docks in forty-eight hours.  By the time the strike ended in February, the CWS had supplied Irish workers with hundreds of tons of food in support.^[15]

 

By the end of the 1930s, production for use was being conducted in co-op factories making the following: wagons, barrels, furniture, bottles and jars, shoes, leather goods, caps, hats, shirts hosiery, ties and other garments, cattle feed for co-op cows, seeds for co-op farms, radios, rope and twine, cigarettes, candies, drugs, beef and poultry from co-op slaughterhouses, cutlery, biscuits and bread, jams and jellies, margarine and butter, and tea. The Wholesale milled the wool and cotton fabric that went into the clothing it manufactured. The CWS also ran a steamship line, and a print shop that produced a daily newspaper and labels for CWS merchandise. It operated a coal mine as well as an engineering department that designed and built the Wholesale’s facilities.Life insurance and banking services were provided to members as well.^[16] All of this was the product of working people’s pooled resources, constructed through a not-for-profit market system.

 

Cooperative development took a somewhat different course in the United States. As freedom of association is guaranteed in the U. S. Constitution, labor unions had no legal limits on their actions, although there were many practical limits. Unions were central to the cooperative movement in this country.  In the 1830s workplace cooperation was promoted by unions as a way for working people to improve their lives and maintain their status as skilled craftsmen while avoiding the disruption and often disastrous results of strikes. Prior to the Civil War, a network of cooperative stores known as the Workingmen’s Protective Union, operating as buying clubs, stretched from Massachusetts west to Illinois and north to Canada, and had 1200 affiliated stores. After twenty years, they fell victim to internal dissension, competition with for-profit stores and the economic chaos of the War.

 

 As described by Steve Leikin in Practical Utopians^[17], after the Civil War, first the Sovereigns of Industry and then the Knights of Labor sponsored workplace cooperatives throughout the country. In contrast to the situation in Britain, workplace, rather than consumer, cooperation became predominant. When consumer cooperation was engaged in, through the opening of co-op stores, it was often viewed as a way of accumulating the capital needed to start a workplace co-op or as an outlet for co-op produced goods,  rather than an end in itself.  In the 1870s, The Sovereigns operated six stores in Philadelphia and negotiated special discounts with certain manufacturers for coal and flour. Two cooperative shoe factories, one carpet weaving co-op and a saw and tool manufacturing association agreed to special deal for union members. The Sovereigns did well, but when the economy slumped at the end of the 1870s, and both co-op and for-profit producers became pressed, such sweetheart deals became more difficult to negotiate. As the benefits of membership evaporated under competitive pressure, so did the Sovereign’s membership. By the end of the decade, the organization was defunct.

 

The job of promoting the welfare of working people then fell to the Knights of Labor, the largest labor organization of the 1880s.  The Knights advocated workplace cooperation as emancipation from wage slavery, and urged its members to buy co-op products as an expression of union solidarity. It set up a national  Co-operative Board to facilitate working men becoming their own employers. Calling it a tax, local assemblies opposed the dues levied to support the Board, which left it with very limited means to pursue its goals. (After two years, the Co-operative Fund held less than a thousand dollars.) This left co-op development to the locals.

 

While the national Assembly of the Knights called on its members to support the cooperative endeavors of the locals, the system worked. The 800,000 Knights of Labor represented a ready, national market for cooperative production. But when the union was blamed for the Haymarket riots of 1886 and repressed by government forces, this market was shattered and with it, so were the cooperative workshops.  While cooperative enterprises flourished in the agricultural sector, the experiments in nineteenth century industrial workplace cooperation left little trace on the U. S. economic landscape.

 

In contrast, the CWS, played its part in World War Two.  Workers for The Wholesale set to sewing uniforms and making boots for soldiers. Cooperative furniture factories turned to building gliders for the invasion of France. Co-op farms churned out food that was canned as rations in co-op canneries.  The Cooperative Movement played an integral role in the triumph of the democracy which its members had worked so long and hard to become a part of.^[18] Though recently shaken by bad management decisions and economic turmoil, the  Co-op Group continues to be an important part of the British economy.

 

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