Get Rid of the Entrepreneur.

Such being, as I apprehend it, the true nature of coöperation, let us inquire as to the advantages which may be anticipated from it, if accomplished; as to the obstacles to be encountered by it; and as to the probability of its success in any such measure as to afford an appreciable relief from the peculiar hardships of the wages class. Let it be remembered that it is the question of wages, and not the question of labor, which coöperation aims to solve. The welfare of labor depends on the laws of production, under the rule of diminishing returns, taken in connection with the laws of population. The question of wages is a question in the distribution of wealth, and arises out of the dependence of a portion of the laboring population upon the entrepreneur-class for employment.

What, then, might we fairly look to coöperation to accomplish?

Considering the scheme from the laborer's point of view, we say:

First, to reap the profits of the entrepreneur, which are very large, large enough if divided among the wages class to make a substantial addition to their means of subsistence.

Second: to secure employment independently of the will of the "middle man." It has been shown in a previous chapter, that the interest which the employer has in production is found in the balance of profit left after the payment of wages. The payment of these, perhaps to the extent of ten, twenty, or fifty times his profit, is to him merely a necessary means to that end. It may be, as has been said, that his relations to a body of customers shall be such as to induce him to continue producing even though, for a time, he sinks his own profit. After the effect of this has been exhausted, however, and it is soon exhausted, he will pay wages only to get a profit. But the condition of the market will often be such as to render him exceedingly doubtful of his profit, or even apprehensive of a loss; and then his whole interest in production ceases. Because he can not see his way to make ten or five thousand dollars profit, he is ready to stop a production, the agencies and instrumentalities of which are wholly at his command, which involves the payment of one or two hundred thousand dollars in wages. Now, with reference to such an oft recurring condition of industry, a body of workmen may properly say that, while they cannot blame the employer for refusing to risk the payment of such large amounts in wages to them, without a reasonable assurance of getting it back, with a profit, in the price of the goods, yet they are much disposed to take the responsibility of production upon themselves. Thus, especially in branches of manufacture where the value of the materials bears a small proportion to the value of the finished goods, they might propose to go on producing moderately in spite of the most unfavorable aspect of the market, on the ground that they might just as well be laboring as lying idle, and sell the product for what it would bring. All they should thus receive would be clear gain, as against a period of enforced idleness, and it might not infrequently happen that, on settling up their venture, they would find a turn in the market giving them a compensation as large or nearly as large as usual.

But it may be asked why should not the employer in times of business depression, agree with his workmen to pay them whatever he should find in the result he could afford. But this would be coöperation, slightly disguised. The essence of wages is that they are stipulated beforehand: the essence of profits is that they are, as DeQuincey calls them, "the leavings of wages," and therefore vary as the product varies under the varying conditions of industry, natural or artificial. It is of the essence of the relation of employer and employed, that the employer secures to the employed their wages, and after that, appropriates his own remuneration. Were the employed to consent to give the employer his profit first, and take their wages afterwards, their relations would merely be reversed. Five hundred mill hands entering into this arrangement would become a body of coöperative producers; the so-called manufacturer would become simply their paid manager, their hired man.

It is true that arrangements for a "sliding scale" of wages, adapted to the market price of the product, are sometimes entered into in coal and iron mining; but these cover only a portion of the ground embraced in the coöperative plan, as the cost of materials and transportation, rent, interest, and the general expenses of business management, may vary so greatly as very much to reduce, and at times to destroy, the employer's expectations of profit, in spite of the sliding scale of wages.

Such, as we understand the matter, are the two economical advantages for which the wages class look to coöperation. There is still another advantage, non-economical and therefore not in our province, namely, the getting rid of the feeling of dependence and the securing of a higher social standing.

In addition to the advantages which the wages class have generally in contemplation when plans of coöperation are proposed, the political economist sees three advantages of high importance which would result from this system if fairly established.

First: coöperation would, by the very terms of it, obviate strikes. The employer being abolished, the workmen being now self-employed, these destructive contests would cease. The industrial "non-ego" disappearing, the industrial egotism which precipitates strikes would disappear also. Second: the workman would be stimulated to greater industry and greater carefulness. He would work more and waste less, for, under the coöperative system, he would receive a direct, instant, and certain advantage from his own increased carefulness and laboriousness. It is true that the pressure thus brought to bear upon the individual laborer is not so great as in the case of the individual proprietor of land, since there the gain is all his own, while here the workman has to divide with his fellow-coöperators the advantages of his own extra exertions, looking, though not with absolute assurance, to receive an equivalent from each of them in turn. Third: the workman would be incited to frugality. He has at once furnished him the best possible opportunity for investing his savings, namely, in materials and implements which he is himself to use in labor. Especially in the early days of coöperative industry, when the great need of coöperators is capital, will this pressure be felt, constraining the workman to invest in his trade all of his earnings that can be spared from necessary subsistence. Capital thus saved and thus invested is likely to be cared for and used to the best ability of the coöperators. They will make the most of it, for it will have cost them dear.

The additional considerations that coöperation tends to improve the moral, social, and political character of the workman, by giving him a larger stake in society, making his remuneration depend more directly on his own conduct, and all allowing him to participate in the deliberations and decisions of industry: these considerations, being non-economical, belong to the statesman and the moralist.

Here are several distinct advantages, not fanciful but real and unquestionable, which together make up an argument for coöperation which is simply unanswerable and overwhelming, unless there is validity in our theory of the character and functions of the employing class.

In spite of these marked advantages, however, we have to note that coöperation in mechanical industry has achieved a very slight and even doubtful success. Mr. Frederick Harrison has called attention in the Fortnightly Review to the fact that the vast majority of all the coöperative establishments maintained in England are simply stores, i.e. shops, "for the sale of food and sometimes clothing." "These, of course, cannot affect the condition of industry materially. Labor here does not in any sense share in the produce with capital. The relation of employer and employed remains just the same, and not a single workman would change the conditions of his employment if the store were to extinguish all the shops of a town."

The industrial coöperative societies, Mr. Harrison continues, are mainly flour mills and cotton mills. The flour mills chiefly supply members, though they often employ persons unconnected with the society, at ordinary market wages, and on the usual terms. They are joint-stock companies, for a specific purpose, like gas or railway companies. The only true instances of manufacturing coöperative societies of any importance are the cotton mills. "Some of the mills never got to work at all; some took the simple form of joint-stock companies in few hands; others passed into the hands of small capitalists, or the shares were concentrated among the promoters. In fact, there is now, I believe, no coöperative cotton mill, owned by working men, in actual operation, on any scale, with the notable exception of Rochdale.... Here and there, an association of bootmakers, hatters, painters, or gilders, is carried on, upon a small scale, with varying success.... But small bodies of handicraftsmen (or rather artists), working in common, with moderate capital, plant and premises, obviously establish nothing."

This is certainly a discouraging account to come from a labor-champion, at the end of thirty years of effort, and after the inauguration of so many hopeful enterprises which have enjoyed an amount of gratuitous advertisement, from philanthropic journals and sanguine economists, which would have sufficed to sell a hundred millions of railroad bonds, or make the fortunes of a hundred manufacturing establishments.

A later writer gives a not more encouraging picture: "A large proportion of all coöperative societies are dealers in food, provisions, and articles of clothing, consumed chiefly by themselves and families. Others, but in a small ratio, are manufacturers of flax, spinners of cotton or wool, and manufacturers of shoes, etc. But very few of them succeed; and the failures are to be found chiefly in these attempts at production."

The same tale comes from France, where these enterprises were inaugurated during the revolutionary period of 1848. M. Ducarre's report of 1875, from the Commission on Wages and the Relations between Workmen and their Employers, claims even less success for coöperative production in that country than is reported in England and Germany.

In Switzerland, the nursery of accomplished artisans, whose citizens are trained in self-government more perfectly than those of any other country in the world, we find, at the latest date for which the facts are given, only thirteen small coöperative societies of production. In these inconsiderable results, if not failure, of coöperative manufacturing, we find the most striking testimony that could be given to the importance of the entrepreneur-function in modern industry. Small groups of highly skilled artisans—artists, Mr. Harrison would call them—carefully selected, using inexpensive materials and small "plant," and working for a market close at hand, perhaps for customers personally known, may achieve success by the exercise of no impossible patience and pains. But where laborers of very various qualifications, of all ages and both sexes, are to be brought together in industries which involve a great many processes requiring differing degrees of strength and skill, and which produce goods for distant, and perhaps, at the time of production, unknown markets, we see as yet scarcely a sign of the services of the employer being dispensed with. What, then, is the reason for this comparative failure of industrial coöperation? I answer, the difficulty of effecting coöperation on a large scale is directly as its desirableness. It is solely because of the importance of the entrepreneur-function that the employing class are enabled to realize those large profits which so naturally and properly excite the desires of the wages class; and it is for precisely the same reason that it is found so difficult to get rid of the employing class.

The qualities of the successful entrepreneur are rare. We need only to look around us, within the most limited field, and for the shortest time, to see how vast a difference is made by the able, as contrasted with the merely common-place, not to say bad, conduct of business; and how great losses may be incurred by the failure to realize all the conditions of purchase, production, and sale. And the more extensively markets are opened by the removal of commercial restrictions, the more intense competition becomes under the opportunities of frequent communication and rapid transportation, the richer the prizes, the heavier the penalties, of the entrepreneur; the wider the breach between the able and the commonplace management of business. In these days, a person who should, upon the strength of respectable general abilities, undertake a branch of manufacture to which he had not been trained, and in which he had not long been exercised in subordinate positions, would run a serious risk of sinking a large part of his capital in a few years, it might be in a few months; and this, without any great catastrophe in trade, or any flagrant instance of misconduct in the operations undertaken. Simply not to do well is generally, in production, to do very ill.

It is, of course, hard for workmen to see such large amounts taken out of the product to remunerate the entrepreneur, leaving so much the less to be divided among themselves; and the ambition which leads them to attempt to earn these profits by undertaking this part in industry, is wholly honorable and commendable. But it is clear that it is a great deal better, even for the work-men, that this heavy tax should be paid to the entrepreneur, than that production should be carried on without the highest skill, efficiency, and energy. The proof is that, as a rule almost without exception, those employers who make the highest profits are the employers who, when regularity of employment is taken into account, as it ought to be, pay the highest wages. Business must be well conducted, no matter how much is paid for it: that is the first condition of modern industrial life. The question who shall conduct it, must, even in the interest of the working classes, be secondary and subordinate.

Is it asked, why may not the men who have the knowledge, skill, and experience requisite for the conduct of business, be employed as agents of coöperators, receiving wages for their services? In the first place, I answer, the same men cannot conduct the same business as well for others as for themselves. You might as well expect the bow to send the arrow as far when unbent as when bent. The knowledge that he will gain what is gained; that he will lose what is lost, is essential to the temper of the man of business. No matter how faithfully disposed, he simply cannot meet the exigencies and make the choices of purchase, production, and sale, if the gain or the loss is to be another's, with the same spirit as if the gain or the loss were to be all his own. That alertness and activity of mind, that perfect mingling of caution and audacity, those unaccountable suggestions of possibilities, opportunities, and contingencies, which, at least, make the difference between great and merely moderate success, are not to be had at a salary.

Yet I do not claim that the effect of this would extend so far as to neutralize all the great advantages of coöperation. If a body of workmen possessed the faith and patience necessary to carry them through the period of outlay and experiment, if they had the good judgment to select the best manager they could find, the good sense to pay him enough to keep him solidly attached to them, and the good humor to support him heartily, submit promptly to his decisions, and remain harmonious among themselves, coöperation might become a triumphant success with them. But let us see how much all this demands from poor human nature.

In the first place, there is the all-important choice of a manager. Not to dwell on the danger of a body of workmen mistaking presumption for a true self-confidence, a brave show of information for thorough knowledge, an affected brusqueness for decision of character; or being led away by the plausibility and popular acts of a candidate, we have the almost certainty that such a body would, in the result, lose the best man, if not by turns every competent man, through indisposition to pay a sufficient salary. In his address before the Coöperative Congress already quoted, Mr. Thomas Brassey asked: "Where shall we find coöperative shareholders ready to give £5,000 a year for a competent manager? And yet the sum I have named is sometimes readily paid by private employers to an able lieutenant." But it is not merely an able lieutenant, but a "captain of industry," that coöperators must secure, if they are to conduct purchase, production, and sale in competition with establishments under individual control. Can we imagine such a body paying $50,000 a year to a manager, when they receive on an average not more than $500 themselves? Would not jealousy of such high wages sooner or later, in one way or another, overcome their sense of their own interest? Even if we suppose them intellectually convinced of the expediency, upon general principles, of paying largely for good service, will they not be found calculating that for this particular manager this particular sum is altogether too much, or, without any disparagement of his merits, experimenting to see how much they can "cut him down" without driving him off, an experiment always dangerous, always breeding ill-feeling, and preparing the way for a separation. For why should the man who has the skill and knowledge necessary to conduct business on his own account be content to remain on a salary greatly below the amount he might fairly expect to earn for himself? Is it said his salary is regular and his profits always more or less uncertain? But the men of the temper to conduct business are not generally timid men or self-distrustful; they like responsibility and the exercise of authority—it is a part of their pay. Nor are they averse to a risk well taken; it braces them up and makes the game exciting. Is it said that want of capital may constrain some of the best men to seek employment at the hand of such associations? This is true, in a degree, and here is one of the possibilities of coöperation. Yet if a man have the real stuff in him, want of capital is not likely long to keep him under. The history of modern industry teaches that. Getting into business in the most humble way, the merchants from whom he buys his materials, those to whom he sells his products, and the bankers to whom he resorts with his modest note, all soon take his measure, and when they have taken his measure they give him room. Genius will have its appointed course: antagonism and adversity only incite, inspire, instruct.

We have thus far spoken only of those difficulties of coöperation which attend the selection and retention of able managers. On the difficulties to which this is but an introduction, arising out of the tendency to intrigue which exists in all numerous bodies, and the disposition to meddlesomeness on the part of committees or boards of directors, I need not dwell. A sufficient lively impression of them is likely to be created by the merest mention. I will only further refer to an embarrassment which attends the extension of the coöperative plan to all branches of manufacture which employ laborers of very different degrees of industrial efficiency. Thus, in a cotton or woolen mill are to be found persons of both sexes and of all ages, earning under the present system from a few pence up to as many shillings a day. Under the coöperative plan, how is the scale of prices to be fixed? To say that all should be paid alike would be monstrous, impossible. It would be grossly unjust, and would be quite sufficient to wreck the enterprise from the start. But if the laborers are to be paid at different rates, who, I ask again, is to determine the proportions in which the product shall be divided? How is general consent to be obtained to a scheme which must condemn the great majority to receive but a contemptible fraction of their proportional share? Without general consent, what chance of harmonious action? But if we suppose the scale of distribution to be fixed, who is to assign the personnel of the association to their several categories, to say that this man shall go into one class, and that man, who thinks quite as well of himself, shall go into a lower class? Is there not here the occasion, almost the provocation, of disputes and bad blood highly dangerous to such an enterprise?

I have no desire to multiply objections to this system or to magnify the scope of those that offer themselves to view. Heartily do I wish that workingmen might be found rising more and more to the demands which coöperation makes upon them; but I entertain no great expectations of success in this direction. The reduction of profits through increasing intelligence, sobriety and frugality on the part of the wages class, securing them a prompt, easy and sure resort to the best market, is the most hopeful path of progress for the immediate future. There are of course some departments of industry where the services of the entrepreneur can be more easily dispensed with, than in others. Here coöperation under good auspices may achieve no doubtful success.

It would appear that if coöperation could be introduced anywhere, it would be in agriculture: yet in no department of production have the experiments tried proved less satisfactory. One reason which, in addition to those already enumerated, will probably always serve to delay the extension of the coöperative system in this direction, is the great difficulty of determining the actual profits of a year or a term of years, with reference, as is essential, to the value of unexhausted improvements. So long as the coöperators hold together and divide the yearly produce, all goes well; but if at any time one desires to withdraw, and men will not enter into associations of this character without the right of retiring, at pleasure, without forfeiture, the question of undivided profits becomes of the most serious importance. To settle it with absolute justice is simply impossible, and no method of arriving roughly at a result of substantial justice, is likely to avoid deep dissatisfaction and sense of wrong.

The difficulties of industrial coöperation have been so manifest that schemes have been suggested for avoiding them in great part, by methods which should sacrifice a proportionally smaller part of the advantages looked for from coöperation. Among these schemes, one, which seems to have been first definitely brought forward by Mr. Babbage, has been tried upon a considerable scale. By this plan, which may be called one of partial coöperation, the employer is induced to admit his workmen to a participation to a certain extent in the profits of manufacture, while himself retaining the full authority and responsibility of the entrepreneur. By this plan the employer might fairly hope to attach his workmen to himself by more than the slight tie of daily or monthly employment, and to interest them so directly in the production of the establishment, as to secure a greater activity in labor and more carefulness in avoiding waste. The resulting advantages to the workmen would clearly be both moral and economical. There is quite a body of literature relating to the experiments in this direction, of MM. Leclaire, Dupont, Gisquet, and Lemaire, in France; of the Messrs. Briggs, owners of extensive collieries and others in England; of a few manufacturers in a small way in Switzerland, of M. Cini, an extensive paper manufacturer of Tuscany, and the Messrs. Brewster, carriage manufacturers, of Broome st., New York. That something of the sort is practicable, with the exercise of no more of patience, pains and mutual good faith than it is reasonable to expect of many employers and many bodies of workmen, I am greatly disposed to believe. Many experiments, and probably much disappointment and some failures, will be required to develop the possibilities of this scheme, and determine its best working shape, yet in the end I see no reason to doubt that such a relation will be introduced extensively with the most beneficial results.

The objections which have been shown to exist to productive coöperation do not apply with anything like equal force to distributive coöperation, so-called (but which could more properly be termed consumptive coöperation), that is, the supplying of the wages class with the necessaries of life through agencies established and supported by themselves.

By productive coöperation, workmen seek to increase their incomes.

By distributive or consumptive coöperation, they seek to expend their incomes to better advantage. They no longer seek to divide among themselves the profits of manufacture, but the profits of retail and perhaps even of wholesale trade.

The advantages of this species of coöperation are:

First: the division among the coöperators of the ordinary net profits of the retail trade.

Second: the saving of all expenses in the line of advertising, whether in the way of printing and bill posting, or of the decoration of stores with gilding and frescoing, with costly counters, shelves, and show cases, with plate glass windows and elaborate lighting apparatus, or of high rents paid on account of superior location. The aggregate saving on these accounts is very large. The "union" store may be on a back street, with the simplest arrangements, yet the associates will be certain to go to it for their supplies, without invitation through newspapers or posters.

Third: a great reduction in the expenses of handling and dealing out goods. The retail trader must be prepared at all times to serve the public, and he does not dare to greatly delay one while serving another, lest he should drive custom to a rival shop. He is therefore obliged to be at an expense for clerks and porters far exceeding what would be required were the trade of the day somewhat more concentrated. Some curious results of observations concerning the average number of customers in shops in London, are given in Mr. Head's paper before the Social Science Association, which may be summarized as follows:

Now coöperators can effect a great saving in this respect. Being sure of their custom, they can control it, and concentrate it into a few hours of the day, or perhaps of the evening wholly.

Fourth: a saving, of vast moment, in the abolition of the credit system, involving as that does the keeping of books, the rendering of accounts, and much solicitation of payment, and, secondly, a very considerable percentage of loss by bad debts.

Fifth: security, so far as possible with human agencies, against the frauds in weight and measure and in the adulteration of goods, which are perpetrated extensively under the system of retail trade, the poorest customers being generally those who suffer most.

The difficulties of consumptive are fewer and less severe than those of productive coöperation. To handle and sell goods is a much less serious business than to produce them. When once marketed, the contingencies of production are past, the quality of the goods is already determined, and in the great majority of cases, only moderate care is required to prevent deterioration. Then again, the profits of retail trade are relatively higher, for the capital and skill required, than the profits of manufacture; and hence there is more to be gained by total or even a partial success. Finally and chiefly, the destination of the goods is already practically provided for; the members are certain to take off what is bought, if only ordinary discretion is used; waste and loss are therefore reduced to the minimum.

There are, therefore, powerful reasons, in the nature of the case, for the success of consumptive coöperation. The facts bear out the prognostication, although even this form of association has had many disappointments and often come to grief, not always from causes easily to be determined. "Coöperation," says Mr. Holyoake, the historian of the movement in England, "is the most unaccountable thing that is found amongst the working classes. Nobody can tell under what conditions it will arise. Why it flourishes when it does, and why it does not flourish when it should, are alike inexplicable. Why should it succeed in Rochdale, Blaydon, and Sowerby Bridge, and never take root in Birmingham, Sheffield, or Glasgow? There is no place in Great Britain so unlikely as Sowerby Bridge to produce coöperators. There are no places so likely as London, Manchester, Liverpool, Leeds, and Sheffield. Yet coöperators in some of these places make no more progress than a society of Naggletons. In Sheffield the socialists have tried coöperation; the Methodists have tried it; the Catholics have tried it; but neither Owen, Wesley, nor the Pope have any success in that robust town, where mechanics have more advantages, independence, and means, and as much intelligence as in any town in England." We may fairly presume that the case is not altogether so mysterious as Mr. Holyoake would make it out to be. Lack of interest in the result, and consequent lack of the patience, pains, and self-denial necessary to achieve success, and unfortunate choice of managers, through indifference or intrigue, would probably explain most of the failures of coöperative trading, where the principle of cash payments has been strictly adhered to, and where the enterprises have been confined to the supply of the coöperators with the simple necessaries and comforts of life, without venturing into lines where fashion and taste predominate. The latest statistics attainable show 746 coöperative societies existing in England and Wales. The total share capital reaches £2,784,000. The money taken for goods sold during the year was £11,379,000. The largest of all these societies is the "Civil Service Supply Association," which musters 4,500 associates, and which in the six months ending February 28, 1874, took in, from sales, £819,428.

It is to be noted that these "stores" do not try to undersell the retail shops, but sell their goods at ordinary prices, and divide all profits, after a reasonable addition to the "reserve," annually or semi-annually, among their stockholders. The sums thus coming once or twice a year to a workman are likely to be so considerable as strongly to suggest the savings bank.

In France, M. Ducarre's report, while announcing the comparative failure of coöperative societies of production, states that those devoted to the supply of articles for consumption, have at once had a much wider trial and achieved a much larger degree of success. In Germany, Belgium, and Italy, the movement for consumptive coöperation is in full present vigor. Even in little Denmark, where but one industrial coöperative society exists, 37 coöperative establishments are reported for the sale of articles of domestic consumption. In Austria, account is given of 237 coöperative store-unions. In the United States, consumptive coöperation has been widely established in connection with the "Granger" movement, and also, more on its own merits, through the organization known as the "Sovereigns of Industry."