1. Consumers' cooperation is the union of a number of buyers to save for themselves the profits of the merchants or agents. There are many classes of consumers' cooperation, but the chief ones are: (1) to sell goods (retail stores);

(2) to provide insurance (cooperative insurance companies);.

(3) to provide credit or capital (cooperative banks). These are also productive enterprises, for the merchant's work adds value to the goods, the insurance company and its agent do a real service, the profits of the small bank are, ordinarily, earned fairly under existing conditions. The terms producers' and consumers' cooperation merely set in contrast the part of the productive process that is undertaken. Producers' cooperation is concerned with the earlier steps, usually stopping when the product is disposed of to wholesale or retail merchants. Consumers' cooperation (often called distributive cooperation) is concerned with the later steps, the placing of a consumption good (rarely also productive agents) into the hands of the final user. It imparts the same value to goods that the retail merchant does. The one thing this class of cooperators is sure of when they begin is a number of consumers to make use of the service or products they purpose to supply; hence the name.

Costliness of competitive mercantile business.

2. The waste of competitive mercantile busiyiess is the source from which it is expected that the savings of the cooperative enterprise will come. It is a great expense to the retail dealer to secure a body of customers. Rent of store-room, clerk hire, interest on invested capital are fixed charges, which can be met only on condition of a regular and frequent turnover of the stock. To attract customers the dealer must have a well-located store, must advertise, keep open long hours, and pay idle clerks. Frequently he must give credit, raising the price enough to cover the expense of bookkeeping, collection, bad accounts, and loss of interest. The public's likings, whims, lack of judgment, and lack of business analysis make these charges necessary. There are many communities where it would be impossible to carry on a cash business even at considerably lower prices. Customers are exacting and require the costly delivery of small packages; two horses and a driver must travel two miles to deliver a spool of thread or a half-dozen oranges. Frequent changes of fashion and the shifting of customers from one store to another keep the merchant always insecure in his trade. A number of buyers mutually agreeing to pay cash, to buy at certain times, to place all their orders with one store, to go to a cheaper location, down an alley or into a basement, can save much of this cost on one condition: that the management approaches in its efficiency that of ordinary competitive business. In spite of all these advantages, if there is inefficient management the final cost will be no less than that of ordinary business.

3. Despite the possibilities of saving, most cooperative stores fail through a lack of good management. Note first the greater successes. Since 1842, from which time it dates, the cooperative-store movement has progressed steadily in England, where the scores of retail societies are federated and own large wholesale stores. The long experience has developed good methods and a conservatism almost inconceivable to an American mind. They are practically great stock companies in which one can buy a share at a small cost and become a purchaser at usual prices, receiving a dividend later according to the amount of his purchases. Cooperative stores in American universities are generally successful, apparently because they don't cooperate. Some get into politics and go the way of the wicked. The survivors gravitate into the hands of a committee of the faculty, which tries to employ an efficient manager, and administers the business as a public trust without private profit. The wastefulness of multiplying orders for text-books to be used by a class whose number is definitely known in advance, and the comparatively uniform character of the supplies, make economy peculiarly easy in this case. A large part of the services of the cooperative store, however, are indirect; it reduces and regulates the charges in the stores near by.

The more successful cooperative stores.

The failures and their causes.

Nearly all the Granger stores, started thirty years ago in great numbers, and most of the cooperative stores among American workmen, have failed. The failure is easily explained by the ignorance of danger, by lack of harmony, by credit sales, and by inefficient management. The wastes of competitive business are partly a tax imposed upon men (taken collectively) by their lack of business method; the community is not intelligent enough, honest enough, or self-sacrificing enough to do business in the most economical way. Partly they are the price paid for variety and change, and for the cherished American right "to kick" - something difficult for the members of a cooperative store to do without hurting themselves.

Profit-sharing and cooperation in relation to the enterpriser.

4. The experience with these plans verifies the analysis of the enterpriser's function: pure profits are the earnings of a productive service. Comparing these three plans, they are seen to be alike in seeking to make workers share some of the profits, to change the destination to which profits would go. The first would create profits by the effort of the workers, and give them a part of the saving. The second would have collective workers perform the enterpriser's work in the factory and get his reward. The third would have collective buyers do the work of the merchant and save his profits and other costs. The last is the easiest to do. Profit-sharing is next in difficulty, and producers' cooperation is the hardest of all to put into practice. In some cases, under some conditions, the enterpriser's services may be more economically performed than at present, for the waste is great. But taking men as they are and things as they are, in most places the enterpriser's service is necessary and must be paid for. His contribution to the success of the industry depends on his nature and ability, and it can be distinguished theoretically and practically from the contribution made by the workmen. Nothing but changes in human nature, in education, and in morality can diminish the necessity for his service.

Continued need of the enterpriser.

Questions On Chapter 32. Profit-Sharing, Producers' And Consumers' Cooperation

1. Describe any case of profit-sharing you may have seen in operation.

2. Is advertising of any social service or is its sole purpose to divert trade from one merchant to another?

3. In what ways are retail stores wasteful in their expenditures? Can this be avoided?

4. If you have seen a cooperative store in operation tell what was its success.

5. Are you willing to pay more for goods in order to have a choice of stores?