PART III.

SUGGESTIONS IN BEHALF OF WORKINGMEN.

CHAPTER I. THE DEVELOPMENT OF THE CO OPERATIVE MOVEMENT.

CHAPTER II.-THE LAW AND THE LABORER. PROGRESSIVE LABOR LEGISLATION

IN NEW JERSEY.

CHAPTER I.

THE DEVELOPMENT OF THE CO-OPERATIVE

MOVEMENT.

The enormous expansion of modern industrial enterprise requires a constantly increasing working capital, and those who are unable to control it are left behind in the race with their more favored competitors. Thus, there is a concentration of wealth into few hands-a tendency which has become one of the most dangerous signs of the times, for a really healthy competition is possible only with its widest possible diffusion, which is the ideal of the co-operative movement. It is in the successful accumulation of capital by those who have hitherto suffered from its aggressions that the enthusiastic advocates of co-operation see the road which leads towards the solution of the social question. And, while it is not at all certain that the goal will be reached even in this way, we cannot agree with the conclusions drawn by some critics of the development of the co-operative systems in the different countries.* Even industrial co-operation by no means has been the complete failure it is sometimes represented to be, although "it would perhaps have been further advanced to-day if co-operators had not been so faithful in their idolatry of their original ideal and had fostered instead of discouraging varieties of type which may yet justify their superiority by persisting and multiplying." And may there not be found some valuable suggestions in the answer of the founder of the German people's banks to a French economist who complained at the close of the '60's that the co-operative undertakings in France were in a state of decay because of the want of money, the inability to obtain credit? The establishment of credit institutions ‡ on the German plan, advised the late Dr. Schulze Delitzsch, would supply this want and give the French enterprises new life. It was wrong, he insisted, to attempt to proceed from the top downwards, for the most difficult form of co-operation, that of production, could not be successfully undertaken before the first stages had been passed. He claimed that a system of credit economy must be the foundation of industrial co-operation, which could only be gradually developed. This was one of the functions of the German credit unions. Their aim was to popularize (die Demokratisirung) capital, to assist the smaller tradesmen, artisans and laborers in their projects, as well as to encourage the spirit of saving among them.?

*At the close of this chapter is given a condensed account of the position of European and Australian productive co-operation.

†Rae: 'Contemporary Socialism."

Vorschuss und Creditvereine. They are variously called loan and credit unions, credit associations or banks, people's or co-operative banks.

¿See "Vorschuss und Credit-Vereine als Volksbanken," by Dr. H. Schulze-Delitzsch, published by Ernst Keil, Leipzig, 1876; also the annual reports of the attorney of the German Co-operative Associations (Genossenchafts-Anwalt) organized under the Schulze-Delitzsch system, published

The success of this form of corporation in Germany, we think, justifies us in devoting the greater portion of this chapter to a sketch of the

ORIGIN AND DEVELOPMENT OF CO-OPERATION IN GERMANY.

The idea of people's banks first took hold of public opinion in Germany in 1848, at a time when there was a general demand for banking facilities by those to whom the ordinary institutions were not available. The result was the establishment of a great many credit associations and loan banks in the larger cities. But their course of usefulness was of short duration, and they did not satisfy in the slightest degree the purposes for which they were organized. This collapse was to be expected. Failure was the necessary outcome of the wrong principle on which these pioneer enterprises were based, virtually that of charity. The capital was contributed by a few wealthy people, of good intentions, either outright as a gift, or as a loan, often without requiring or expecting interest for its use. The taint of benevolence stuck to all the business transactions. Ordinary precautions were not taken and considerable sums of money were lost; and the interest in the projects soon died out, for the creditors, instead of receiving thanks for their trouble, were met with reproaches from their debtors, who found themselves disappointed in their expectations. The result was as stated.

In 1850, Dr. H. Schulze, a lawyer in Delitzsch, a small town in Prussian Saxony, made his first attempt in this line and founded a "society of mutual credit" among the poorer mechanics there. This differed from the associations mentioned above only in the fact that he required a stated interest of from five to ten per cent. for the use of money loaned, as well as a regular monthly payment of a few cents (one Groschen), which were credited to the share account of the borrowers, who were also members. Here, indeed, was the germ of the later organized people's banks; but the efficiency of this concern was not great, as the funds collected did not exceed 180 to 200 thalers, or less than $150. In 1851 a similar association was organized at Eilenburg by two German philanthropists, who proceeded on the principle of the unlimited or joint and several liability (solidarity) of the members, a plan which had been found to work very successfully in connection with two raw materials" associations of shoe and cabinetmakers, started in 1849, at Eilenburg and Delitzsch. This second bank prospered so well that it was able to advance 8,801 thalers in loans during the first year of its existence. The next year, Dr. Schulze-Delitzsch, who had retired from the Prussian civil service, reorganized the Delitzsch Society on the principle of the present credit banks. Then followed several similar undertakings, and in 1855, when the first edition of "Vorschuss und Creditvereine als Volksbanken"† appeared, seven people's banks were doing a flourishing business. From that time they have been increasing in Germany in number and influence. In his report for 1884, Dr. F. Schenck, the present attorney (Anwalt) of the co-operative societies, stated that 1,965 of these credit associations were in operation in the Empire.

by Julius Klinkhardt; as well as the Blaetter fuer Genossenschaftswesen, edited by the attorney, at present F. Schenck, Berlin.

A very superficial view of these institutions is taken in Holyoke's "History of Co-operation." "The difference between German and English co-operation is this: the German co-operator sets up credit banks, the English co-operator sets up stores. The Germans lend money, the Englishmen make it."

*A Thaler was somewhat over 71 cents.

†See above.

"Jahresbericht ueber die auf Selbsthuelfe gegruendeten deutschen Erwerbs und Wirthschaftsgenossenschaften." See above.

In 1859, the founder called together a congress of delegates from the existing associations, for the purpose of discussing matters of common interest and in order to adopt general regulations of government. That congress met at Weimar, and one has annually assembled since then, but now includes in its constituency all the co-operative associations belonging to the General Co-operative League ("Allgemeiner Verband der deutschen Erwerbs und Wirthschafts-genossenschaften ") whose business affairs are managed by a central bureau (Berlin), under the direction of an attorney. Its interests are further promoted by the publication of a weekly journal, Blätter für Genossenschaftswesen. Of very great value also has been the Central German Co-operative Associations Bank. This was established in Berlin in 1864, and connects the individual societies with the larger banking institutions; its share capital amounts to nine million marks.† Each kingdom and province in addition has its local co-operative league. There are now thirty-three of these sub or provincial leagues, to which an aggregate of 1,030 organizations belong-only a small portion of the total number. In 1884 there were known to be in existence 3,822 of these, comprising 1,9€5 people's banks, 1,146 societies in various branches of industry (raw materials supply, magazine and productive), 678 consumers' unions and 33 building associations. But it is estimated that the total Schulze-Delitzsch co-operative enterprises aggregate 3,900, with a membership of 1,500,000, and doing business transactions (loans, sales of goods, etc.,) amounting to 3,000,000,000 marks. The total capital employed cannot be less than 800,000,000, of which nearly one-third is share capital and reserve, the balance being borrowed money.

While the co-operative movement in Germany has branched out in all directions, it is especially characterized by the rapid development of the loan or credit banks, popularly known by the name of people's banks, which constitute, at present, the bulk of the co-operative associations. Briefly stated, the scheme of organization is as follows: The borrowers of money, as a general rule, are themselves the owners and managers of the institution which gives them credit; as members they share the profits and losses of the enterprise, which is conducted on strict business principles. Creditors receive interest for the use of their money; and this is also required from those to whom loans are extended. The directors and other officials and employes are remunerated in proportion to services rendered. The members must be stockholders and acquire their shares either by payment for them in full at the start, or in installments. The sum of money actually paid in is the basis for the division of profits as well as of losses. Dividends are credited to the share account until the par value has been reached. Thus a constantly increasing capital is accumulated. All additional money needed is borrowed on the credit of the association, the members of which are also individually liable for the debts thus contracted (Solidarisher Haft aller Mitglieder). Provision is made for a reserve fund to be drawn upon in case of extraordinary losses, and for this the entrance fees and a certain percentage of the profits are set apart. The number of members is unlimited. Any one who is legally competent, of good moral character and able to support himself, may join by subscribing for one share but no more. Withdrawal is permitted under certain restrictions. *Deutsche Genossenschaftsbank von Sorgel, Parrisius & Co., Berlin.

†A Mark, about 231⁄2 cents.

Not including 800 organized under a different system (Raiffeisen) from the Schulze-Delitzsch. The General Co-operative Act (1868) of the North German Confederation, now the Imperial Law, requires the articles of association to be signed by all the members of the society, filed with the Commercial Court (Handelsgericht) and recorded in the co-operative register. The