A Short Course on Cooperation

When people talk about the future of the village, they usually pin their a Short Course on hopes on cooperation. The very term “cooperation” has become one Cooperation of the most popular words in our everyday language. In any newspaper one finds it dozens of times; the pages of books are full of it; it is heard at meetings, conferences, and congresses. After V. Lenin's last two articles on cooperation, it has become one of the foundations of our economic policy.

V. Lenin declared the exceptional significance of cooperation in the political and economic conditions of Soviet Russia and emphasized with particular insistence: “Now we must accept, realize, and provide extraordinary support for the only social order, which is cooperative order.”

However, despite all of this and the fact that there are several and not just one cooperative in every one of our volost [small rural municipality], not everyone -- even those who are practically familiar with cooperative work -- clearly understands its essence and is fully aware of its key ideas and organizational principles.

Thus, we have to pay special attention to clarifying the very nature of cooperation in the agriculture of the Soviet republics. We have to consider in detail its possible role in our villages and what it can do for the future of our agriculture.

We know that the most characteristic feature of the economic life of our time, which distinguishes it from the old times of our grandfathers, is the improvement of production machinery and a new, scientifically based organization of industrial and commercial enterprises.

Huge steam and electric engines of thousands of horsepower, giant retorts of chemical plants, multi-ton steam hammers stamping metal products with tremendous speed, automatic scales weighing hundreds of samples per hour with apothecary accuracy, and thousands of other instruments and machines that affirm the power of human genius -- those are the features of our time.

And this technical equipment is supplemented by the skillful organization of enterprises. The contemporary factory assembles hundreds and sometimes thousands of worker; it coordinates and unites their efforts in such a way that enables five workers to do the work that would require fifteen workers under bad organization. No less than the contemporary, production technology, workshops, factories, and enterprises of various kinds form production groups, trusts, and syndicates, thus, winning in the coordination of production and overhead and reducing costs. The entire strength of the industrial, capitalist countries of Western Europe and North America and all their economic power over the rest of the world depend on the skillful use of these two great principles of our time -- advanced technology and the proper organization of enterprises.

However, until now, both principles have been applied primarily in urban manufacturing, mining, and transport. Agriculture remains теория somehow unaffected by these achievements of human culture. Almost everywhere, farming followed the old path of thousands and millions of individual small farms scattered, unrelated to each other, and in general, not using much advanced machinery.

Certainly, such “backwardness” in agriculture is not because of accidental reasons but is because the production in farming depends primarily on land, crops, and livestock. Therefore, in many respects it differs from purely mechanical industrial production. Thus, the advantages provided by large size farms and improved machinery in farming are not as great as in industry. Small, technically weak farms in agriculture can show significant resistance to their larger competitors, which is absolutely impossible in industry. The recent, scientific studies (of V. Lenin, P. Lyashchenko, and other economists) of American and Russian farming prove that capitalism develops even in agriculture, mainly in the form of the exploitation of the small producer of agricultural products by all kinds of trading companies and enterprises that provide him with credit at high interest rates. The peasant wishes to preserve his economic independence but is, in fact, entirely at the mercy of financial and commercial capital, because he owes this capital a lot of money and cannot ignore it either to sell the products of his labor or to buy the necessary means of production.

All this makes the organization of agriculture on a new basis a most difficult and complex task.

When considering the millions of small, peasant economies -- unorganized, dispersed, developing on their own accord like the course of a large river -- any organizer of agricultural production can sometimes give up in despair. He can ask himself: Is it possible to organize agriculture like industry on new principles of modern technology and scientific organization? Are there any paths and ways to accomplish this?

We know that we have a large number of improved methods of agricultural technology: improved livestock breeds; improved machinery, fertilizer, and tillage techniques, livestock feeding, and primary processing of agricultural products. The question is how to implement these techniques in the very heart of the village; how to organize the peasantry so that all scientific and practical achievements usually accessible for only large-scale production would become available for the peasantry too.

This question is the most important one for agriculture! And the answer can be given by the application of cooperative principles to the organization of the village.

The basic idea of agricultural cooperation is extremely simple. If we carefully consider the structure of the peasant economy, which is quite complex, we will easily see that, for a number of industries, its larger form will immediately ensure a greater direct benefit. Moreover, it is almost always possible to quite easily identify huge works and combine them into one common, big activity of neighbors without disrupting the work of other parts of the economy and without destroying the labor of the family economy.

A few examples will explain the essence of this statement. For instance, everyone knows the advantages of separators and mechanical churns over home butter making. However, separators and mechanical churns are inaccessible to a small peasant economy that has only one or two cows. For the separator to pay for itself, it is necessary to start processing as much milk as can be collected from twenty or thirty cows.

It is obvious that no single, peasant economy possesses such a herd and, consequently, no single peasant economy can afford the use of a separator. However, it is equally clear that nothing prevents twenty or forty farms from uniting into a union and building a small dairy factory together after refusing to make butter at home. Nothing prevents them from bringing their milk to the cooperative factory entrusted not only to make butter but also to sell it.

This simple idea has long been recognized by the peasant masses; in different regions of the USSR and Western Europe, dairy partnerships were established many decades ago. Today there are more than four thousand of them in Western Siberia, the Vyatka, Vologda, and other provinces of the North and in the Kuban. We see that they have united into local unions, which, in the summer of 1924, formed the All-Russian Butter Union entrusted to sell their butter in the domestic markets of the USSR and also in England and other foreign markets. This Union combines the production of butter from the milk of two million cows and is one the largest global companies on the butter market. Thus, it is natural that the Union can use all the technical achievements and all the organizational improvements available today.

The cooperative basis of processing and marketing of butter nearly always determines cooperative work in improving livestock and the conditions of animal housing, the development of partnerships for the joint use of breeding bulls, and for livestock insurance against mortality. In other words, soon after a dairy cooperation starts, all the foundations of peasant dairy production turn out to follow the principles of the largest production and most perfect organization.

The same cooperative principles can be used by the peasant to organize other branches of his economy. For example, if peasants in the potato areas are not able to sell their raw potatoes, they may cooperate to create a network of potato-processing factories that produce starch and finally a syrup. This allows them to make full use of all the advantages of this profitable crop and of factory machinery to process it. At the same time, by creating fields for producing improved varieties of potatoes and by supplying the production through potato cooperatives with the improved means of production, peasants organize the whole potato business at the highest technical level without destroying the peasant economies that form the basis of it.

The potato cooperation established the All-Russian Union, abbreviated as SoyuzKartofel [Soviet Potato], which unites many thou- teopma sands of peasant economies.

An even more powerful organization was created by the flax-growing peasants who united the peasant cooperatives of fifteen provinces in a union called L'noCenter [Flax Center], which was recognized in the world market as a company selling fiber of immaculate quality and sorting.

It is especially important that, despite the most difficult economic conditions of life in our Soviet country, despite crop failures, and lack of funds and credit, wherever we look -- even in the most remote districts of the USSR -- there are the same organizational processes in the production of many agricultural goods -- bread, sugar beets, poultry, cotton, viticulture and horticulture, agricultural machinery, fertilizers, seeds, and different items of peasant, everyday life and consumption.

Certainly, almost everywhere there are only the first and often timid and uncertain steps, but they convince us that the cooperative path is the only one and the right one for our peasantry. These steps show us that agricultural cooperation really allows the organization of the previously scattered peasant masses by connecting them directly to the centers of the economic and cultural life of the Soviet state and enabling them to use all the advantages of the large economy and improved machinery. Moreover, it is especially important that these large and organizationally perfect enterprises are forms of the social economy, i.e., in the social perspective, they are the highest form of organization.

However, let us consider what is necessary for peasant economies to form a cooperative, so that the joint venture will be really cooperative; what distinguishes cooperatives from private, commercial, and industrial enterprises with which they are often unfortunately confused.

We have already mentioned that the cooperative is primarily a union of farms and that the economies forming such a union are not destroyed but are still small labor economies.

However, in cooperatives, only a part of production forms a union, i.e., the part in which the large farm has an advantage over the small one, the agricultural co-operative is a supplement to the independent peasant economy, serves it, and makes no sense without such an economy.

In its further development, cooperation will increasingly turn different branches of the peasant economy into a public cooperative economy. Such elements of the social economy create in the peasant economy the foundations of the future, socialist organization of farming.

To more clearly understand the very essence of cooperation, let a Short Course on us compare two dairy factories -- a cooperative one created for their Cooperation own needs by peasant cattle-breeders, and a private one owned by a capitalist entrepreneur who rented it from GubSovNarKhoz [Provincial Council of National Economy]. Let us ask ourselves whose interests guide and manage the work of both factories.

A brief observation is enough to understand that the private factory will pursue the benefits of the capital invested in its turnover. Its main aim will be to organize the whole business in such a way as to obtain the most money, the highest net profit on the capital.

We see a different situation at the cooperative factory. Peasants invested the same capital in its organization and turnover as the private entrepreneur, but the interests of this capital and the task of obtaining the greatest net profit are secondary. The heart and the soul of the whole enterprise is the benefit of the peasants who deliver milk to the factory and who jointly created it in the interests of their economies. The cooperative factory can ensure a zero penny of profit on the capital spent on its construction, but it will still be profitable for peasants if it allows them to get more revenue for their milk than if they sell it into the wrong hands.

Let us further consider the structure of a consumer cooperation in which peasants unite for the joint purchase of products necessary for the household. Here we find the same differences from a private shop as we saw in the dairy artel.

The entrepreneur-shopkeeper puts the interests of his capital first.

He tries to get the biggest profit from his trade by any means, to the detriment and at the expense of his customers, but, in the consumer cooperative shop, the net profit on the capital invested in the goods is a secondary task. Certainly, capital is necessary for the consumer community, and economic turnover is impossible without capital.

However, it is not the interests of capital that manage the business but rather the interests of consumers, of those peasant households that joined efforts to create a consumer shop for their own needs.

For an ordinary shopkeeper, it is beneficial to sell bad products at high prices and to get the highest net profit. For a cooperative shop, profits can be very insignificant, but the products must be good and cheap. No cooperator would like to increase the profitability of his shop by adding sand to his bread and water to the milk for his children.

The most important part of cooperation is such a transfer of attention from the interests of capital to the interests of the peasants who united and created the cooperative enterprise for themselves. Cooperation will always use capital and very large capital, because economic life is impossible without it. However, the interest from this capital does not come first in cooperation but rather the interests of the economies it serves. In cooperation, capital is a servant and not a master. теория Therefore, management of the cooperative is arranged in such a way that it is controlled not by representatives of capital and not by those who gave a lot of money for the cooperative trade or production, but by the labor economies by which the cooperative was created and which it exists to serve. Thus, it is clear that the activities of rural cooperation are guided by peasant interests, and all its work is determined by them.

According to V. Lenin's letters on cooperation, in the capitalist society, the peasant cooperative movement was powerless to solve these tasks. Only after the transfer of power to the working people does cooperation with the support of state power acquire a completely different meaning and become the basis of a new social system of the village.

Therefore, cooperation cannot be limited to trade or industry. Interests of the peasantry are broader. Peasants are interested not only in buying cheaper and selling higher but also in many issues of spiritual life, issues of the mind and heart. Cooperation is not only to help the peasant to get greater benefits in his economy but also to help him in enlightenment, in the organization of his spiritual life. Cooperation can give a lot here, perhaps even much more than in other aspects of the village life.

We know that besides the opportunity to purchase a good agricultural machine inexpensively, one should be aware of the existence of such machines and be able to use them. To provide the peasantry with this knowledge, cooperation supplements trade with cultural-educational work in the village.

These are the differences between cooperative production and private entrepreneurship and trade.

After describing them we should also consider the differences between cooperatives and state enterprises, and we should find out why recently the government agencies have transferred and continue to turn a significant number of state agricultural enterprises into cooperatives.

The village is supplied with seeds and agricultural machinery, rental points, breeding bulls, and local potato-processing factories. Last year all dairy enterprises of GosMoloko [State Milk] were transferred to the hands of agricultural cooperatives. After the 13th Congress of the Communist Party declared a state policy of agricultural cooperation, we believe that such a transfer of economic activities from the state to the cooperative's shoulders will become more widespread.

Why is this so? Why is a cooperative system considered more perfect for the needs of the village than state enterprises?

In a republic of working people, both the state and cooperative are the governing bodies of the same working masses and serve the same needs of the working people. Therefore, the decision about which of these bodies to entrust with economic work is made every time, depending on which of these bodies is technically most effective.

The elected representatives of the working people manage the cooperative in its smallest structures under the daily vigilant control of the members of cooperative who elected them. It is not governed by a.v. Chayanov administrative orders of the center. It is flexible in economic activities A Short Course on and allows the fastest and most free manifestations of the beneficial Cooperation local initiative. Therefore, cooperation is the best decision if organized, local, self-activity is required, if every individual case demands a flexible adaptation to the local conditions, and if one should take into account the smallest features of every place and every month of work.

All of these requirements -- the necessary initiative of the masses, flexibility in organization and activities, ability to adapt quickly, and exceptional sensitivity to the needs of the working masses -- are necessary for work in the village. That is why in our Soviet state, whenever cooperation becomes strong enough, it captures -- one after another -- the different branches of economic work in the village, which was previously dominated by state enterprises consisting of specialists and employees appointed by the center.

Readers can express concerns that after transferring the economic work to cooperatives, it will no longer be controlled by the governing bodies of the Soviet state. Thus, such a transfer will destroy all planned considerations that are absolutely necessary under the current, difficult conditions of our national economy. However, this fear is completely unfounded, because agricultural cooperation represented by its financial and trade centers and local unions is so deeply integrated into the general system of the government agencies of the USSR and works in such a close connection and coordination with them that there can be no contradictions in their work. On the contrary, it is due to the transfer of all economic work in the village to a cooperative that the whole village is being drawn into the mainstream of the planned economy, which became possible only thanks to cooperation.

Cooperation reorganizes the scattered, individual, peasant economies into higher forms of social economy, which is the main task of creating a new village.

What we have already said is quite sufficient to understand what the development of cooperation can mean for the village and what a great future cooperation has. All this makes every village worker pay special attention to the study of this new phenomenon of rural life.

In the following chapters, we will consider the history of cooperative ideas and will examine in detail the organizational forms of these ideas in every branch of cooperative work.

Chapter 2. A history of the cooperative movement

The history of cooperation can be traced from the mid-igth century. In the early lgth century in England, there was a man named Robert Owen, who was an industrial figure and, while observing the life of the working people, often thought about how to improve their hard fate.

Robert Owen believed that the human world was not arranged in the right way and too many things in people's lives did not correspond to reasonable grounds. He said that people should help each other to live with friendly joint efforts and should establish special communities to jointly organize their economic life.

His lofty doctrine on new life foundations very soon attracted many supporters in England, but the attempts to implement the ideas he preached in real life failed. Robert Owen based his doctrine on the spiritual unity of people, but he paid little attention to the development of a form for the practical implementation of his ideas and to how they corresponded to the development of the economic life of his time.

However, despite the small success of their practical implementation, the ideas of Robert Owen became widespread in England. A few decades later, in the 1840s, in a small English industrial town, Rochdale, a group of weavers, who considered themselves Owen's followers, founded the first cooperative, which became a model for others and started the practical implementation of the great teacher's covenants.

1) Foundations of consumer cooperation established by the Rochdale weavers

The cooperative founded by the Rochdale weavers in the small Toad Lane of the provincial town was not the first consumer community. In history, there were many attempts to arrange the public sale of essential goods for the benefit of people. However, all such undertakings very soon failed and perished due to the unsuccessful arrangement. And only simple Rochdale weavers, who had long thought about how to improve the life of the working people, managed to find the grounds that allowed their cooperation to develop instead of failing. Therefore, the Rochdale weavers are rightly called the founders of consumer cooperation and of the great cooperative movement.

What were the main principles implemented by the Rochdale weavers? Everyone understands that if you buy any goods from a wholesaler in a retail store not in small quantities but in large quantities, the purchase will cost less and the quality will be better. Therefore, every buyer who wants to get good products at a cheap price should buy them not in arshins [0.71 meters] or pounds but in big pieces, wagons or poods [16.3 kg], and not in a small shop but directly at a factory or in a large wholesale store.

However, no matter how beneficial this advice is, the question unwittingly arises: can our peasant, worker, or simple townsman store up for the future use butter in barrels, flour in wagons, and textile in bales? It goes without saying that any consumer cannot do that individually. First of all, he never has enough money to pay for these

large purchases, and the needs of his household are not measured by

wagons or barrels but by pounds of bread and a few pieces of herring,

by arshins of chintz and not by bales of it. a.v. Chayanov

However, if tens, hundreds, and thousands of buyers unite to buy a Short Course on the goods they need together, they will immediately get the oppor- Cooperation tunity to buy goods in the largest quantities and will turn into one very large, wholesale buyer. Then the goods purchased will be cheap and of good quality.

This simple idea is the basis of consumer cooperation, and it is clear to any person who has ever thought about his economy. Certainly, this idea was known long before the Rochdale consumer shop in Toad Lane. However, despite numerous attempts, the idea failed previously to be put into practice. Obviously, it is not always easy to realize even a clear and simple plan. We will try to find out the reasons for it. Why did only the Rochdale weavers manage for the first time to establish consumer cooperation?

The simplest way for a joint purchase is when several families knowing each other decide to buy, for instance, some fabric for the summer, raise money together and make a joint purchase, let us say, at the factory of the Bogorodsky Trust, and then divide the purchased bale of chintz or sarpinka [printed calico] according to their orders.

However, such a joint purchase is not yet consumer cooperation.

It goes without saying that if you buy all the products you need for the household in this way, you will have to gather every day, collect money for the joint purchases, take turns to go shopping. There will be no time for anything else, and the trouble will be extremely burdensome for everyone.

Therefore, people have long sought a good way for the joint purchase of all necessary goods -- collecting money, establishing a small working capital, and electing a trusted person to open a small shop from which they can get the jointly purchased goods. Such a community that opens a shop of goods it needs for joint money was named a consumer cooperative. Such shops were opened long before the enterprise of the Rochdale weavers, but they managed to find only the right principles for consumer cooperation. What were they?

In the first unsuccessful attempts of joint purchases, the public shop bought goods at wholesale prices, added the overhead costs of transportation and maintenance of the shop and warehouse, then calculated the price of goods by weight, and sold them at this price to the members of cooperation. The goals of the community were achieved. The goods were of good quality and much cheaper than in private trade. However, such communities very quickly weakened and perished.

The cheap public sales irritated the neighboring shopkeepers who drew such a weak and fragile community into fierce competition by dropping their prices much lower than the cost prices. They suffered some losses but achieved their goal of using the irresponsibility of buyers and turned them away from the public shop and, thus, destroyed the cooperative. There were even cases when traders bought теория up the goods of the public shop at cheap prices with the help of unscrupulous members of the cooperative and then sold these goods in their shops at a good profit.

However, the huge disadvantage of selling goods at cost prices was that the cooperative could not increase its capital. Its current assets, composed of meager share contributions, had always been insignificant, and the economic strength of the cooperative was negligible. The cooperative did not have profits from the sale, could not increase its current assets, and often did not have money when there was an opportunity to buy a cheap and good product. Even with the smallest losses, its capital and the cooperative itself were destroyed.

To avoid these adverse consequences, the Rochdale weavers decided to sell goods in their public shop not at cost prices but at the same market prices as the neighboring traders.

When trading at market prices, the still weak cooperative was not involved in a struggle with rich traders, which was unbearable for the cooperative in the beginning. The profits from market prices significantly increased its economic power, replenished its meager working capital, and strengthened the viability of the cooperative union. That is why the principle of selling goods to members of the community at market prices, which was established by the Rochdale weavers, is considered one of the most important foundations of consumer cooperation.

However, one can ask what the benefits are for the consumer from bustling about and opening a cooperative shop, if it sells goods at the same prices as private shopkeepers?

The answer to this question can be given by another rule introduced by the Rochdale weavers: in the cooperative, the profits from the consumer, determined by the market prices and forming the income of the shopkeeper in private trade, are returned to the consumer at the end of the year.

Suppose that this year, our consumer shop sold goods for 10,000 rubles and received 800 rubles of profit. This profit is received from members-consumers and must be returned to them. Per every ruble taken by the shop, eight kopeks were the profit and ninety-two kopeks were the cost price of goods with all the overhead. Thus, if I bought goods in our shop for 100 rubles, then the shop received eight rubles from me as a profit, which will be returned to me at the end of the year. For instance, if you bought the goods for 800 rubles this year, then the shop received sixty-four rubles of profit from you, which will be returned. If your neighbor bought the goods for 125 rubles, then at the end of the year he will receive ten rubles back.

Thus, when trading at our shop not at cost prices but at market prices, we, the consumers, do not lose anything, because all the profits of the shop will be returned to us at the end of the year. Moreover,

we benefit greatly from the profits of the shop. If our shop traded at

cost prices, then every day we would buy small things and would get a small profit of fifteen or twenty kopeks per day or even less. Such a.v. Chayanov a benefit would be little appreciated and completely lost in our every- a Short Course on day life. Cooperation The situation changes completely if our shop takes these kopeks and ten-kopeck coins as its profit. This will strengthen the shop and, at the same time, our ten-kopeck coins of one day will be added to the ten-kopeck coins of other days. The shop will turn into our caring piggy bank and a savings bank that will accumulate for us and give us a few dozen rubles at the end of the year. And this amount of money means a lot to the peasant, worker, or employee with a modest income. In any case, such an amount received in a lump will immediately bring much more benefit than penny savings made during the year.

That is why the return of profits to consumers according to their purchase of goods is considered the second great foundation of consumer co-operation.

However, if we study the life of our Russian consumer cooperation, we will see that even the best consumer communities usually do not distribute all their profits among customers. First of all, big money is spent to expand and strengthen trade, i.e., this money is added to the fixed or reserve capital.

We already know that without a lot of capital the public shop can be weakened, things in the shop will go badly, there will be few goods and few choices, the members-consumers will not be satisfied with their shop and will go shopping in private trade. Therefore, it is in the interest of the consumer himself to ensure the most extensive development of public trade possible and to accumulate such capital that the shop will never lack working capital. Collecting such money by share contributions is very burdensome for members-consum- ers, and it is much easier to get money from trade, i.e., by allotting a part of the profits.

Cooperatives also allot considerable funds for so-called “cultural-educational purposes”.

Cooperation gets stronger when it attracts more members and when they hold on more firmly to their cooperative. Therefore, the more widespread the right knowledge about cooperation, the stronger the cooperation.

Moreover, cooperation should not forget that “man shall not live by bread alone.” When selling cheap bread, sugar, nails, and textiles, cooperators should not ignore the spiritual life of a person. Together and under the guidance of the local departments of public education, cooperatives strive to provide their members with good, entertaining, and useful books, to establish folk theaters, libraries, folk houses, and tea houses, and to organize public readings to teach their members of the ways to farm to make two ears grow where currently the labor of the peasant makes only one grow. All this requires large expenditures and consumers-cooperators who willingly allot them from their profits.

Thus, the profits of cooperative trade are partly returned to the consumer, whereas the rest of them are spent to expand trade and for cultural-educational purposes, e.g., forming public and socially useful capital. Such an accumulation of public capital by allotting a part of the profits is considered one of the most important foundations of not only consumer but also of all other types of cooperation.

However, the above mentioned rules do not exhaust the covenants of the Rochdale weavers for us.

According to the next rule, which is often forgotten by Russian cooperators, the cooperative shop should sell goods for cash only. Taking goods on credit is not allowed in the cooperative, according to the founders of consumer cooperation. This requirement is perplexing and seems especially difficult to fulfill for the working people who support cooperatives. It may seem that the very public shop should come to the aid of the worker when he does not have enough money for daily bread. However, the Rochdale weavers strongly insisted that this rule should be strictly followed.

Why is that? Why can a shopkeeper sell his goods on credit, whereas a consumer community cannot? We will consider this issue in detail and very carefully.

Certainly, a shopkeeper selling goods on credit does not do that from a kind heart but rather for his own benefits. But what kind of benefits?

It has long been said not to look a gift horse in the mouth! Similarly, one should not be picky and demanding of goods taken on credit. Therefore, when selling goods on credit, without money, the shopkeeper gets rid of all the shelf warmers and products of poor quality, and, at the same time, increases their prices compared to the sales for cash. Thus, the losses of the shopkeeper from the delay in money return and failure to pay debts are covered by the profits from high prices and from the expensive sale of bad goods.

Public trade cannot do this; it cannot slip a buyer a bad product instead of a good one, cannot give short weight or inflate prices by selling goods to the poor buyer on credit. Therefore, public trade cannot cover the losses inevitably determined by the failure to pay debts, which can lead to other significant losses and destroy the whole consumer cooperation.

It should also be noted that when selling on credit, the public shop will always be short of cash and forced to take goods on credit, i.e., the shop will receive goods less regularly, they will be of worse quality, and the shop will repeatedly miss good chances to buy cheap goods of the best quality. Therefore, no matter how hard it is for the labor cooperator, if he values his consumer community and does not want to bring it to ruin, he should completely refuse to sell goods on credit. If there is a very great need for sales on credit, then it is possible

to accumulate special capital by allotting a part of profits, which will

be used for loans to poor consumers, while the main trading capital

of the cooperative must make its turnover only for cash.

Thus, there are three main foundations of consumer cooperation. a Short Course on

1) The selling prices of the consumer cooperative should be the Cooperation prices of the usual retail trade and not the wholesale prices, because this is the only way to get a sizeable profit. Small allocations from it will allow an increase in the working capital of

the cooperative and will provide the consumer community with free cash that will significantly strengthen its economic power.

2) All profits of the consumer shop should be distributed among individual buyers, not according to the money contributions made at the opening of the shop, but based on how many rubles they spent on purchases during the year.

3) To preserve the integrity of public cooperation and ensure its sustainable organization, we must refuse to sell on credit, because, without usurious interests, sales on credit are too unprofitable.

It is also necessary that every consumer makes a labor contribution to the organization of the shop, that consumers-members work as cashiers and even as countermen, i.e., that they participate in the cooperative with their own labor.

These are the foundations of the great undertaking of consumer cooperation which were laid in 1844.

A lot of water has flowed under the bridge of history since then. The structure of economic life has changed in many way. Capitalism has developed its new forms, and the social revolution in Russia has put forward a number of new ideas of economic organization. And, certainly, the principles of the Rochdale weavers, while remaining the same in essence, have been partly modified and partly supplemented according to the eighty years of changes in the conditions of economic life and especially under the new forms of its organization in our Soviet state.

The necessity to revise and supplement the Rochdale principles was recognized long ago. Recently this question has been put in line by the conference of cooperators-communists. It should be assumed that in the coming years the theoretical cooperative idea will manage to establish the basic principles of consumer cooperation relevant for the new forms of our economic life.

It is said that Moscow was burnt down by a penny candle. Similarly, from a small shop in the basement of a small house in Toad Lane, a huge social movement began and developed so quickly that after a few decades it had spread to all countries of cultural humanity. The development of this movement did not always go smoothly. Many cooperatives perished, and, in most cases, not because the Rochdale rules were bad, but because they did not follow them.

Today, a few decades after the modest attempt of the weavers, consumer cooperation has managed to remove from its path a shopkeeper,

a trader, and other intermediaries, to unite tens of millions people, to

build huge warehouses, its own factories and plants, ocean steamers теория and railroads, hotels, hospitals, libraries and schools... Great seeds planted by Robert Owen have begun to bear fruits.

2) Raiffeisen principles

A quarter of a century after the first consumer cooperative was established in England, in a small German village, a local volost foreman proposed the creation of a first, credit partnership -- the most important type of village cooperation.

Raiffeisen, the founder of credit cooperation -- its “father” -- as German cooperators like to say, was born in 1810 and died in 1888.

He devoted all his long life to selfless service to the peasantry. As the volost foreman, he knew the village's needs very well and often thought about how to free the German village from the hands of usurers. In those times, usury was exceptionally widespread in the German village. Just like greedy leeches, the usurers sucked all the power out of the working peasantry. At first Raiffeisen tried to help the trouble by creating special unions that bought cattle for their poorest members. However, these unions were based on charity; they existed for a while but were gradually weakened, the flow of donations ceased, and the unions perished. By the end of his life, Raiffeisen realized that charity could not help poor peasants and began to think about helping peasants not by charity but by principles of mutual help for the working peasantry. Raiffeisen knew very well the main causes of rural poverty, and, after long years of reflections, he found a way to fight against them and described this in 1866 in the book, Credit Partnerships as a Means of Eliminating Poverty. On April 25, 1869, in the small village of Geddesdorf near the town of Neuwied, he managed to establish the first credit partnership.

What were the foundations of this first credit partnership laid by the “father' of credit cooperation?

Raiffeisen knew very well that every peasant often needed money for his economic turnover, especially if he had extended or improved his economy. However, it was often impossible for him to get money. The peasant tried different ways and, in the end, he still had to turn to his village's kulak-usurer, who willingly lent money at a monstrous interest rate. He would lend twenty rubles, and a month later demand thirty rubles.

Under such loan conditions, one could never make any improvements in the economy, because the monstrous interest paid to the kulak would negate any profit that a new cow, thresher, or a seed drill would bring.

At the same time, quite a lot of free money accumulated in cities is put into banks and very willingly lent at small interest rates based on reliable ideas and on good securities.

It would be very good for every peasant to go to the city to a bank and borrow the money needed. However, this is hardly possible. One cannot go to a distant city to get twenty, thirty, or even fifty rubles, because one must pay for the train ticket and will have spent much more than he will get from the borrowed money.

Moreover, the bank will never lend money to an unknown person. A Short Course on And even if the peasant offered to secure the loan with his livestock, Cooperation buildings, and the entire harvest, the bank cannot check his capital.

This is because the money borrowed is so insignificant that no interest will cover the expenses of the bank inquiries about the peasant's property and especially the expenses of sending a special person to collect non-payment. Therefore, there is no point for banks to lend money to peasants in small quantities. The bank will not even consider loans of fifty, a hundred and fifty, or two hundred rubles.

Raiffeisen had long thought about everything mentioned above. Finally, he suggested that the peasants of his volost establish a union that would borrow money in large amounts secured by the mutual responsibility of its members and by all their property.

Five or six hundred peasant families united usually need a few tens of thousands rubles for their economic turnover. This amount of money is so large that even a very small interest will pay for special trips to the city and correspondence with the bank. And, for the bank, such a large loan is sufficient to cover with interest the costs of inquiries and possible collection of non-payment. The property of five hundred peasant households is more than sufficient to secure a loan.

Therefore, the first principle of Raiffeisen -- a joint money loan of many peasants united, which is secured by mutual responsibility and by all the property of members -- ensured the inflow of capital into Raiffeisen communities and became the basis for the development of credit cooperation.

However, this rule cannot be considered the most important one for credit cooperation. It was introduced by Raiffeisen not so much as the basis of cooperative credit but rather as a well-known security for banks and other institutions and individuals that loaned money to the cooperative. The mutual property liability of cooperative members was understandable and inspired the respect of all capitalist and financial figures of the time.

However, Raiffeisen considered the true basis of cooperative loan not how it would be secured but who would get the borrowed money and on what it would be spent. Therefore, according to the most important Raiffeisen's rule, if a partnership gets money secured by mutual responsibility, this money should be given to its members only for productive needs.

Money cannot be taken from the cooperative for a dress or food but only for such expenses that affect economic turnover and, at the end of this turnover, return to the owner with a big profit. That is, money may be taken for such expenses that justify themselves and allow the owner not only to repay the loan but also to get a good profit.

This is the most important Raiffeisen principle that determines all others.

If the basis of cooperative credit is the loan for productive purposes, it is obvious that the credit partnership must keep a watchful eye on the borrowed money to ensure that it is not wasted in vain but is spent exactly for the productive purposes for which it was taken. To make such an observation possible, it is necessary to know the borrower very well and to not lose sight of his economy. First of all, it means the requirement to lend money only to the members of the partnership, i.e., to the people well known to share mutual property liability.

In order for the board of the partnership to watch its borrowers, it is also necessary that their economies are under the constant supervision of board members. This is possible only when all the economies of partnership members are located near each other, i.e., when the municipality in which the partnership works is small, the number of its members is small, and its turnover is not big.