Online Library of Liberty: Economics, vol. 2: Modern Economic Problems

companies with most of the stock in the hands of a few men. Therefore, whether losing or making money, they nearly all cease to exist as coöperative enterprises. This result has disappointed the hopes and prophecies of many well-wishers of the working-classes.

§ 15. Its main difficulty. The main difficulty in producers’ coöperation is to get and retain managerial ability of a high order. Failure to do this results in inability to maintain and keep in repair the equipment and to pay the ordinary returns to the passive investment, and financial failure follows. There is no touchstone for business talent, no way of selecting it with any certainty in advance of trial. This selection is made hard in coöperative shops by jealousies and rivalries, and by politics among the workmen. A man selected by his fellows finds it difficult to enforce discipline. In coöperation there is occasionally developed good business ability that might have remained dormant under the wage system; some workmen showing unusual capacity cease to be handicraftsmen. But the unwillingness on the part of the workers to pay high salaries results in the loss of able managers. Having demonstrated their ability, the leaders go to competing establishments where their function is not in such poor repute, and where they are given higher salaries, or they go into business independently, being able easily to get the needed backing from passive capitalists.

Coöperative schemes thus suffer from the workers’ inability to appreciate the functions of enterprise and management. Most men make a very imperfect analysis of the productive process. They see that a large part of the product does not go to the workmen; they see the gross amount going to the enterpriser; and they ignore the fact that this contains the cost of materials, interest on capital, and incidental expenses. Further, they fail to see that the investment function is an essential one. The theory of exploitation, as explaining profits, is very commonly held in a more or less vague way by workmen. With a body of intelligent and thoroughly honest workmen, keenly alive to the truth, the dangers, and the risks of the enterprise, coöperation would be possible in many industries where now it is not. Producers’ coöperative schemes usually stumble into unsuspected pitfalls. When a heedless and over-confident army ventures into an enemy’s country without a knowledge of its geography, without a map, and without leaders that have been tested on the field of battle, the result can easily be foreseen.

The coöperative principle has been embodied much more successfully and on a larger scale in America in the form of producers’ selling organizations or of consumers’ coöperative stores. As, however, both of these forms of organization have been developed in America more largely by farmers than by wage-workers, the discussion of them may better be undertaken in connection with problems of rural organization rather than with those of labor.

References.

Adams, T. S., and Sumner, H. L., Labor problems. 8th ed., N. Y. Macmillan. 1914. Chs. IV, IX, X.

Burritt, A. W. and associates, Profit sharing, Its principles and practice. Pp. 328. New York. Harpers. 1918.

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Online Library of Liberty: Economics, vol. 2: Modern Economic Problems

Commons, J. R., (Ed.), Trade unionism and labor problems. 1905. Second series. Boston. Ginn. 1921. (Selected readings.)

Commons, J. R., and Andrews, J. B., Principles of labor legislation. Rev. ed. Harper, 1920. Ch. II, secs. 1-3.

Fay, C. R., Coöperation at home and abroad. N. Y. Macmillan. 1898. Gilman, N. P., Profit-sharing between employer and employee. Bost. Houghton. 1889.

National Civic Federation. Profit Sharing by American Employers. New ed. 1921. (Analysis of 200 plans.)

Schloss, D. F., Methods of industrial remuneration. 3d ed. N. Y. Putnam. 1898.

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