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YO-OPERATION has been a household word in the Middle West for so many years that when one suggests that there is something new developing along that line he is in danger of being passed by as an idle tale-teller, yet the fact is that we are on the verge of a great forward movement in co-operation that seems destined to do for the local co-operative groups what these groups, in the days of our fathers, did for the isolated farmers in the community.

To put it in a sentence: The next big advance in co-operation is the federation of the local co-operative groups and the creation by such federative action of central selling and buying agencies.

There are those who will tell you that farmer co-operation is perfectly all right, provided it sticks to the local neighborhood, but that it cannot go farther without certainly running into trouble and disaster. And in support of their contention they mention large cooperative enterprises that have failed, and because these have failed they argue, perhaps with some seeming of logic, that all other attempts of the farmer to carry his business beyond his local neighborhood are bound to fail.

So, they argue, it is the business of the farmer to produce his crops and live stock and dairy products, and, if he wants to do so, he may organize breeding circles and co-operative shipping associations and creameries and elevators, or any other purely local body of farmers and there he should stop!

If that were true-if the field of cooperation were so limited-I, for one, should feel pretty discouraged about the future of the farmer. But I am not discouraged as to the progress the farmer is going to make in the future, because I do not believe that his horizon is fixed or that his hands are tied to the things that he has done, and only to these.

The co-operative failures of the past, and there are many of them, are not at all confined to the more ambitious attempts of the farmer to follow his produce to market. The local co-operative association has gone to pieces times without number. One has no right to assume that co-operation will succeed or fail according as to whether it is or is not local. Some other test must be applied than that of size, or than that of distance from the farmyard gate.

Failures have been due principally, if not entirely, to two groups of causes: (A) Improper organization. (B) Bad management.

The latter cause accounts for the majority of failures of local co-operative enterprises, and the former for the more ambitious attempts at organization.

Bad management includes such matters as the selection of poor directors,


or a poor business manager, or of undertaking too much or too little-things that may happen to any organization, no matter how well planned it may be. Improper organization can somehow be tolerated in the local association, where hard common sense comes in and saves a situation that a little careful planning might have avoided, but improper organization is fatal to a large association, where the actual management is out of the hands of the individual members.

And under this head fall the mistakes and blunders and misjudgments that have made the whole question of "What is a co-operative concern?" such a hard one to answer.

These blunders include proxy voting, the holding of an indefinite number of shares, the payment of all dividends upon the basis of the shares held, and the cash buying and selling of produce.

Nor am I forgetting the worst blunder of all-that of starting a co-operative association without sufficient reason for its existence or with too little capital.

These are some of the known dangers to avoid, though there are others, such as the diversion of paid-in capital to organization expense, that cannot be for one little moment forgotten. And, knowing where trouble lies ahead, it ought to be fairly easy to lay a course for the future.

Over against these things that tear down the co-operative organization suppose we put the positive factors that time and experience show should be a part of the well-knit, socially correct, and businesslike co-operative association. The things that build up a solid co-operative business may also be grouped under two heads. They are: (A) Correct organization. (B) Good management.

Correct organization assumes, first of all, that there is a real business need for the co-operative concern. If not, it is a waste of time to start one. And it likewise is a waste of time to start an organization which is not heartily backed by those taking stock in it. The essential principles involved in proper co-operative organization are:

(a) One man, one vote.

(b) A limited number of shares to the stockholder.

(c) A reasonable rate of interest on shares held.

(d) The distribution of all surplus earnings, after the running charges of the business have been met, and after provision has been made for the safeguarding of the business, according to the patronage given the association.

Cast over in your mind the co-operative ventures that have failed, and you will be surprised to find how many of them have gone down to disaster be

cause one or more of these four basic laws of co-operative self-preservation have been disregarded.

In addition, the association that hopes to succeed must put aside any philanthropic roseate dreams. Unless the ledger can be made to show a favorable balance; unless there is fair assurance that it will do so, stay out of the trouble that lies just ahead-unless, in other words, working with each other pays better than working alone-work alone. The time may come when you can successfully co-operate, but that time has not yet arrived.

It is a social blunder amounting to a crime to start a co-operative concern where the business does not warrant it, or in such fashion that it fails for lack of support.

And right at this point enters a new phase of co-operation, in so far as the Middle West is concerned. In times past we have been entirely too anxious to get "co-operators"-falsely so called. We have taken it for granted that the man who bought a share or two of stock in the creamery or cheese factory or elevator would give the association his patronage, forgetting the long and bitter experience of neighborhood after neighborhood where men dreamed and planned and invested their money in cooperative ventures, only to see the members of the association listen to the voice of the tempter and sell their produce to competitive concerns.

Our Danish friends learned a long while ago the lesson which we are just taking to heart: That one's patronage is of far more account than one's share membership.

And the new thing we are introducing into Middle Western co-operation-the thing that is going to make it practically invulnerable against the attacks of competition-is the "produce contract."

According to this plan, the association is not merely a group of men who have built an elevator or a creamery or a potato warehouse with their joint capital; it is also a group of men who have pooled their selling by pledging it, under a written and bonded guaranty, to the association.

This assures the association, provided it has been organized in response to a real business need, the necessary volume of business with which to maintain itself, in spite of outside competition. The Minnesota Potato Exchange plan, for instance, provides that the grower shall give the local association a contract to deliver a stated acreage of potatoes, and performance of this contract is guaranteed by a $100 note given to the association for that purpose. If the grower deserts his association and sells to its competitors, the margin of profit

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