The Present Application of the Rochdale Principles of Co-operation (1937)

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Other Basic Principles of Co-operation not expressly included in the Rochdale Rules

Throughout the course of the enquiry, the Committee have been faced with the necessity of limiting the main lines of their Report to those Co-operative Principles expressly set out in the Rules of the Pioneers. Certain other essential conditions of the constitution and practice of Co-operative Societies have inevitably emerged during the discussions, which it is absolutely necessary to include in this Report as representing the Co-operative System, some o~ them to no less a degree than the seven Principles already dealt with which are enshrined in the Rules and practice of the Rochdale Society.

In this category are the Principles of `Trading Exclusively with members' and `Voluntary Co-operation,' which are dealt with in the following sections.

Trading exclusively with Members (Non-members' Trade)

Two questions were included in our Questionnaire with a view to ascertaining in how many countries the practice was prohibited by the rules and excluded, in fact, from their transactions; also to what extent it was practised by those Organisations which recognised it.

Eight National Organisations in five countries state that their rules and practice provide for the exclusion of non- members' trade, while thirty-five organisations in thirty countries admit the practice to an extent which varies from 0.2 per cent to 83.7 per cent of the annual business of the societies.

It was argued before the Committee that trade with non-members constituted no hindrance to the application of Co-operative Principles if the profits on non-members' trade were allocated by the rules either to the inalienable reserves of the Society - even in the case of liquidation - or to disinterested enterprises, and that in some countries it was practised as a means of propaganda with a view to hastening the recruiting of new members.

The Committee are of opinion that the Principle of dealing exclusively with members cannot depend upon the constitution of the Rochdale Pioneers' Society but is inherent in the co- operative idea.

The essence of our system is that it should not make profit, and its greatest contribution to economic life is that it furnishes a new basis of commerce and industry-therefore of society-in which the profit making motive is eliminated. That result can only be realised completely when the trade of the society is exclusively with its own members.

The question that immediately presents itself in the presence of the widespread practice of trading with the public is - How far is it possible to admit the practice and maintain the genuine co-operative character of the enterprise? The Committee think an arbitrary interpretation of the Co- operative Principle of trading exclusively with members cannot be sustained, and that the amount of transactions of a society or movement with other than members in the ordinary transactions of primary societies of consumers should be reduced as far as possible. It is suggested that if `Open Membership' and the simple facilities for entrance adopted by the Pioneers were universally adopted, there would be little ground or cause for trade with non-members, have to meet casual and accidental demands.

There is also a further type of trading which has been mentioned in the debates, and that is tendering for and fulfilling contracts of the Municipality and the State. The Committee have no hesitation in accepting the contention that in all public contracts for the service of the community, the co-operative movement should take its part and demonstrate the superiority of the co-operative economy.

Co-operative Wholesale societies in their operation of production present a less simplified problem. The necessity with every productive enterprise of disposing of its by- products, which may be either altogether unsuitable for, or in excess of, the needs of the co-operative community in whose service the production is carried on, is of very long standing and has passed into the category of things accepted. The sale of the by-products of an industry in the only markets which are open to them, whether co-operative or not, is a necessity of most forms of production. When it comes, however, to the disposal of the basic products of the enterprise, the question needs more careful consideration and even definition. Several forms of this development have been considered by the Committee.

Another fact that should be faced in this connection is that non-members' trade is closely connected with the principle of the 'elimination of profit.' In so far as these types of development succeed, they must detract from the claim that co- operative enterprise eliminates profit. It is doubtful, however, whether co-operation has ever eliminated profit but only the profit-making motive. Still further, it is clear from the replies to our Questionnaire that in certain countries where the national organisations quite freely put their productions in the open market, they also accept the position that they should be taxed in exactly the same manner as private traders.

Voluntary Co-operation

The idea of obligatory membership of a Co-operative Society never entered into the conception of the Rochdale Pioneers, neither in planning their society nor in its subsequent development. The lot of the Weavers was a hard one, and the conditions of their employment, when work was to be had, severe. They suffered from low wages, bad housing conditions, adulteration of food and the system for `truck' which were the evil emanations of the capitalistic economic system. Politically, however, they enjoyed a free citizenship a little in advance of any other country. They were free as air to risk their savings in an Utopian enterprise and to carry with them all their comrades and compatriots. The `voluntary' basis of their society was, therefore, a 'sine qua non'. Any other idea was to them unthinkable.

The voluntary participation of individuals in associated effort in any country can only be restricted by the State itself, and not by any provision which it is in the power of the Association to make for itself, and it is, in fact, only in countries where limitations and restrictions are imposed by the State that the `voluntary' character of co-operation or co-operative membership is destroyed.

There are also certain instances in which societies are organised to serve the needs of sections of servants or employees of the State. Membership on the part of those eligible is obligatory, and the general public is excluded.

The Committee feel, therefore, that they have only to stress the need for the complete recognition of this Principles as fundamental to the Co-operative System.

Two other subjects that have been mentioned, neither of which can be said to be essential to any definition of the Rochdale System, are 'Sale at Current or Market Prices' and 'The Disposal of Collective Assets,' which are dealt with in brief memoranda.

Sale at Current or Market Price

This question impinges closely upon the Principle of `dividend on Purchase,' inasmuch as it affects the genuineness of the surplus and the usefulness of the institution as a price fixing medium. Perhaps, however, its effect upon the purchasing power of the consumer is the aspect which appeals most strongly to the section of the membership which disposes of the least financial resources.

Research amongst the achieves of Rochdale for guidance upon this undoubted practice of the Pioneers does not yield much result. It appears evident, however, from contemporary history that the first motive which influenced the Rochdale Co- operators was the all-round convenience of adopting current prices for their business.

It has been stated by more than one continental interpreter of the Rochdale System that the practice of the co-operative movement, first adopted by the Rochdale society, of selling goods to their members at the prices current in the market or the sphere of their societies' operations, was a Fundamental Principle of Rochdale, and they have even given it pride of place in their list. We cannot find any justification for this view. It was nothing more than a means for meeting the immediate necessities of their business, a temporary expedient which possessed nothing of that `eternal principle of life' which characterises the true fundamentals of the Rochdale System. Sale at current prices provided a margin over the cost of the commodity which would cover the cost of management, depreciation, interest on capital, etc., without involving loss to the society as the trading unit. Any downward trend of prices which left out of account these elementary responsibilities of trading would not only be contrary to co- operative principles but inimical to the financial soundness of the organisation.

It also blunted the edge of the sharp opposition of private traders which the new system of co-operation provoked, but inasmuch as one of the main purposes of the `Store' was to cheapen the cost of living, selling at market price was a double measure of protection to the growing association, to be abandoned for more drastic but equitable price cutting when the society should reach that stage of stable and efficient organisation which would enable it to give to its members the immediate benefit of their association.

There is no reason to think that the Rochdale Pioneers attached any greater importance to this practice than is indicated above. Neither is there any ground for thinking that they regarded the market price as other than an upward limit, if not an absolute maximum. The practice which obtains in many societies today of charging high prices to produce high dividends on the pretext of thrift is opposed.to the spirit of the Pioneers, and is inimical to the interest of the community in general beause in results in a general increase in prices instead of acting, as co-operative trading should do, as a salutary check upon the exploitation of the consumer.

It is interesting to note that where co-operative production is highly developed and distribution efficiently organised, the `current price' of certain commodities tends more and more to be decided by the policy of the co-operative society, and to compel the private trader to conform to its standards.

In the view of the Committee, this is the proper function of Co-operation and, taken in conjunction with what has been said elsewhere in this Report concerning the usefulness of co- operative trading as a price fixing standard, they urge that the Movement in every country should direct its administration to achieve control of the markets.

The Disposal of Collective Assets

The question of the proper method of the disposal of the Collective Assets of a Co-operative Society was raised at the beginning of the enquiry and, by common consent, a question was added to the original Questionnaire with a view to ascertaining the practice of the Movement in each country. The replies received showed that in a considerable number of countries the Principle of the Indivisibility of Reserve Funds and Collective Assets was observed and, in several of them, had the force of law. In others, the provision was contained in the model rules of the National Organisation, or in those of the Societies.

In other countries, notably in Great Britan, the fund which remains over on the liquidation of a society, after all its obligations have been met, is regarded as the property of the shareholding members of the society at the time of the liquidation, or dissolution, and is divided amongst them in proportion to their shares. The view is held by some members of the committee that this latter course is contrary to the Principles of Co-operation, which provide that the surplus resulting from the operations of the members with the society shall be divided in proportion to those operations. They content that shares in a co-operative society have no claim upon any part of those surpluses beyond the limited amount of interest that may be accorded by the rules. The Reserves for the Society are accumulated from various sources, and only in part from the operations of the members. On the other hand, that portion of the Collective assets which is derived directly from genuine co-operative activities results largely from the operations of the past members of the society on which the members remaining at the time of the liquidation have no legitimate claim.

In modification of that view, it is urged by others that the need for such a provision either in our statement of Principles, or the rules or practice of the societies, is unnecessary in those countries where, as in great Britain, Co- operative Societies are established without definite term to their existence, and, in fact, only liquidate or dissolve by reason of their inability to meet their obligations to their creditors when it is clear no collective assets remain for disposal.

The supporters of the Principle of Indivisible Reserves urge that the practice of most countries, supported as it is by the law of some, should be regarded as the correct co-operative practice and be recommended for adoption by all. That practic} and law provide that the collective assets of a society, after the settlement of all its just debts, shall be passed over to some other co-operative organisation, such as the National Co- operative Union, to be used for purposes of financing new co- operative enterprises; assisting societies in difficulties; or to works of social welfare, education or public utility. This recommendation is, therefore, submitted by the Special Committee in the hope that it will receive full and favourable consideration.

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