A Short Course on Cooperation

The amount of a loan issued on bail should correspond to the collateral and be no more than 3/4 or 2/3 of it. Products of agriculture can be accepted as the security of the borrower -- bread, flax, leather, etc., or cattle. The pledged agricultural products are usually transferred to the warehouse of the partnership, which often organizes their joint sale; the pledged cattle stay in the stable of the owner but become “prohibited', i.e. the owner is deprived of the legal right to sell, give away, or take these cattle anywhere without the special permission of the cooperative.

The loan can be issued both in money and in kind in the form of a warrant for the warehouse of the partnership. Such an issue of agricultural machinery, fertilizers, seeds, and other things does not violate the Rochdale principle of trading only for cash, because the necessary amount of money is immediately transferred to the account of the warehouse from the credit department of the partnership, which constitutes a cash payment. Thus, this is a combination of two types of operations -- purchase and credit.

Because the loan is provided and the borrower gave a debt receipt to the partnership, its board has the right to check if the money was used for the specified purpose. If the borrower lied, the partnership can demand an immediate return of the loan and exclude an unscrupulous borrower from the partnership. If the economic turnover for which the loan was taken is not over by the time of the repayment, or if the calculations of the borrower were not fully justified, he can ask the board to defer payment. After careful consideration of the circumstances and validity of the request, this can be allowed for usually no longer than six months.

If the borrower delays return of the loan for a few days without notifying the board, a special penalty is imposed on him for each day past due.

This is the crediting technique of credit cooperation.

Where does the partnership get funds for issuing loans to its members? These funds consist of 1) the fixed capital of the partnership, теория 2) the reserve capital of the partnership, 3) some special capital, such as long-term, loan capital, 4) the partnership's loans for different periods, 5) public deposits transferred to the partnership on different terms, and 6) the money saved by the partnership for different periods. Let us consider each of these sources separately.

The fixed capital can sometimes be made up of the share fees of members of the partnership, but, according to the Raiffeisen principles, it is usually borrowed as a long-term loan, which is gradually repaid by annual deductions from the partnership's profits. Such a method of accumulation ensures that, in a few years, the partnership will turn the fixed capital into the social capital accumulated in the course of its activities.

Today in the USSR, there is no final procedure for small credit organizations to accumulate fixed capital. However, it is most likely that the Central Agricultural Bank of the USSR will take the responsibility for financing the fixed capital of agricultural partnerships and will rely on local agricultural credit communities and local cooperative unions.

The Agricultural Bank as the center of all agricultural crediting should devote a significant part of its work to issuing all types of loans to the peasant economy through cooperatives. Issuing loans for the fixed capital of local partnerships should become the main bank's activity because of the simplicity of this work, on the one hand. On the other hand, only this bank can solve this task on a mass scale with the help of large and long-term state funds. In all likelihood, a part of state savings banks' funds and some insurance capital will be used to finance cooperative credit.

The reserve capital is accumulated by the partnership gradually -- by deducting a part of profits -- and serves as collateral for all the obligations of the partnership and as a source to pay accidental damages.

Special capital for different special purposes is accumulated either by special loans or by deductions, fees, and even donations. When it is already on the accounts of the partnership, special capital can be temporarily used for credit purposes. A special long-term loan capital can be used for direct crediting, and its accumulation is extremely important because of the very acute need of our village for long-term loans.

Loans are taken by the partnership when there is a lack of funds: usually these are short-term loans from other cooperative organizations, local banks, and even individuals. Provided the proper organization of the partnership's activities, such loans should not play an important role in its funds, because this is the most disadvantageous and expensive form of getting money.

The main source of funds for the cooperative credit should be the community itself, i.e., the peasants -- both members of the partner-ship and all willing local people -- should turn their available funds into the partnership's deposits. Under the developed and trusted cooperative movement and during the noticeable well-being of the pop- a.v. Chayanov ulation, the inflow of deposits to cooperative partnerships is usually so great that it ensures their crediting work.

When people are convinced of the strength and complexity of cooperative organizations, they usually transfer to them at a quite low interest rate all their savings “for a rainy day', which were previously stored in thrift-boxes, stockings, and chests. People make deposits from spare cash that they cannot invest more profitably for some reason, and they temporarily make deposits from their working capital if it is not needed for production purposes for several months during the dead season.

Deposits can be time and non-fixed/on-call. If the person has a non-fixed deposit, he usually pledges to inform the board of the partnership a few days before he will reclaim it, and. in the case of a large deposit -- a few weeks before reclamation, so that the sudden withdrawal of a large sum will not damage the partnership's business.

The amount of deposits made by the member of the partnership is kept secret. They can be recovered or prohibited to be used only by order of the judiciary.

The interest paid by the partnership on time deposits cannot be changed before the maturity of the deposit. The interest on on-call deposits can be changed any time by a resolution of the board.

These are the sources of funds for the crediting work of the partnership.

To finish the description of cooperative credit, we should focus on the very important circumstances of crediting work.

1) When considering the crediting activities of the partnership we said nothing about how the interest rate on its loans is set. We could not explain this without having described the sources of the partnership's funds. Now we can indicate that the interest rate on loans is determined entirely by the interest rate at which the partnership can get funds as loans or deposits. Having received the funds for deposits, for instance at eight percent per annum, the partnership adds to this interest another two or three percent to pay the board members and to create profit, and issues loans at ten or eleven percent per annum. The difference between loan and deposit interests is called - percent stress', and, in a well-developed partnership, it should be as small as possible. Profits and funds for salaries of the board should be increased not by higher “percent stress' but by the growing credit turnover.

2) When issuing loans, the partnership has to take into account not only the available amount of cash but also the terms on which they were given. Four-month deposits cannot be given for seven months, because, when the time comes to return the deposit, there will be no

way to get this money from the borrower. In other words, the terms

of loans should always more or less correspond to the terms of de- teopma posits and taken loans, because any disparity can put the partnership in an extremely difficult situation.

3) The distribution of profits from credit operations deserves special attention. Because credit partnerships have no shares, their members cannot receive profits on shares. Similarly, there are no profits on the credit or deposited ruble, which is typical for other cooperatives. All profits of the cooperative credit are usually turned into social capital. Before the war, usually in credit partnerships, forty percent of profits were deducted for the fixed capital, twenty percent for the reserve capital, and the remaining forty percent for the various agricultural and cultural needs of the local population and sometimes also for special capital.

Chapter 5. Cooperative sales of agricultural products

In short, this is how the cooperative credit works. If you take a deeper look at this work, you will easily see that the cooperative credit is much more important than just helping individual economies. As credit cooperation develops and strengthens, it inevitably absorbs all the spare cash of the village as deposits and supplements them with public funds and capital received from the banks. Thus, a credit cooperation makes loans cheap and accessible for every peasant and introduces them into ordinary life. In agriculture, just as now in industry, most of the working capital will be invested and borrowed mainly from cooperatives. Dairies and potato-grating plants, stud farms, machine and grain-cleaning stations, mills, and other cooperative facilities will be built and organized on cooperative capital, in these cooperative buildings and all sales, purchases, and processing operations will be implemented on the same cooperative capital. In other words, provided the wide scale of all the above-mentioned operations, we will see a gradual cooperative socialization of all capitals in agriculture and in the marketing of agricultural products.

Contemporary capitalism is usually called financial, because its main owner and organizing and leading force is the bank capital, which finances industry and trade and provides funds for their entire turnover. Provided the development of cooperative credit and a powerful inflow of funds to the peasant economy with its help, the financial capital will gain a governing and all-determining role in the countryside. However, this capital will not be the capital of bankers but rather public, cooperative, and state capital.

The above considerations give an entirely different connotation for the modest work of our cooperative partnerships. Despite its everyday character, they make it the most important work in the creation of a new, social-economic system by providing the whole system of agricultural credit -- from local agricultural partnerships and their unions to the agricultural bank of the USSR -- with an absolutely exceptional value in the socialist construction of our country.

We have already mentioned the benefits of cooperation for peasants in getting cheap loans and purchasing goods. However, cooperation is even more beneficial in marketing the products of peasant labor. Those who visited our northern flax fairs before the revolution understood quite well the losses of the peasantry from such sales. When the peasant got to the fair with his flax bundles, his flax was pulled and broken, which confused the peasant. By agreement, dealers beat down the price, defamed the goods, and, finally, gave the peasant short weight on the hop. The flax gathered by the dealers was bought by a county trader and then sold at a wholesale price. It was bought by a foreign company and sent to England or other countries by sea to finally appear on factory spindles.

The peasant was selling flax clean and dry at a cheap price; the factory received it with impurities and damp at a high price. Only the dealers and traders profited. It seemed very easy to send flax directly from the peasant to the factories' spindles, and many Russian public figures have long thought and talked about this. However, it is easier said than done. There were much greater obstacles to cooperation in marketing agricultural products than in purchasing them.

These obstacles were primarily determined by the technical organization of marketing. Consumer cooperatives received their goods from factories and wholesale enterprises as sorted, weighed, and packaged. The marketing cooperation dealt with the raw product and had to do all the sorting and packaging by itself, at first without proper skills and knowledge and only gradually learning the technique.

In the most difficult part of trade -- the sales -- the consumer society had to compete with the small rural shopkeeper, who was quite weak and did not have much capital. But the sales cooperation selling the goods abroad had to compete with the largest, old companies in the world with huge capital, many years of experience, and excellent knowledgeable employees.

It was difficult for a cooperation to break into the big market, especially because the buyers had become so used to the falsified Russian flax that, at first, they paid the same price for the pure, cooperative flax as for the flax with impurities, because they did not trust its purity. However, after long efforts, the cooperation managed to win the competition and gradually arrange cooperative sales of flax, eggs, and hemp. Perhaps soon we will manage to arrange the mass cooperative sale of bread, to which serious steps have already been taken.

The grounds of sales cooperation are very simple.

An agricultural partnership or a special sales cooperative, which wants to arrange cooperative sales of, for instance, flax, rents convenient warehouses, gets a press for packing flax into bales, invites an experienced sorter, who knows how to work with the fiber, sets the days and hours for accepting the goods, and proceeds to work.

Every peasant, a member of the cooperative, brings his flax fiber to the cooperative, the sorter examines it, identifies its quality, di- teopma vides the fiber into varieties if it is not uniform, weighs it and, after accepting it , gives the peasant a receipt stating that the cooperative has accepted from him, for instance, “5.5 poods of the first grade flax at the price of 10 rubles per pood, and 10 poods of the second grade at the price 8 rubles per pood, i.e., in total 15 poods for 130 rubles.” The prices are set by the board of the cooperative according to the market situation and are posted for everyone to see together with the samples of sorting.

The flax accepted from the peasant is sorted in special warehouses by specified varieties and mixed with other peasants' flax of the same varieties. Thus, as they say, flax is “depersonalized', i.e., each strand of the fiber loses its connection with its owner, mixes with other similar strands, and, in the future, the owner has the right not to the flax that he produced and brought to the cooperative, but only to the same amount of the same varieties of flax or rather to the cost of them.

Impersonal flax is pressed by varieties into bales and goes on sale.

Usually the peasant who brought his flax to the cooperative needs money and cannot wait for the cooperative to find a buyer for his goods, which often takes three to four months. Therefore, the cooperative usually provides the peasant immediately with a loan secured by his goods and constituting 60, 75, or even 100 percent of their estimated price. After the goods are sold, the cooperative takes the amount issued from the proceeds, and the peasant gets all the surplus except for a small commission percentage.

We should never forget that the money given by the cooperative to the peasant for his flax at its acceptance is nothing else than a loan secured by flax and not a payment for flax. We have two operations here -- 1) joint sale of flax, and 2) issuance of a loan secured by flax, and not just one operation of purchase and sale. Therefore, if under the confluence of adverse circumstances, the joint sale of flax provides less revenue than the loan issued, and the proceeds from the sale do not repay the loan, the cooperative can and should demand from the peasant payment the loan balance in cash.

Such a payment is unpleasant for the peasant's empty pockets and can determine distrust in the cooperative. That is why cooperatives do not usually issue the entire loan but only three-quarters or another part of it, so that, even in the case of a cheap sale, the loan will not exceed the amount received from sales. This part will increase if the cooperation does well, and if it can get higher prices in the wholesale market than at the agricultural fair.

It goes without saying that, for the sales cooperation that is striving to sell its goods on the largest foreign market, the transformation of an association of small cooperatives into powerful cooperative unions becomes especially important. Only huge batches of flax of different qualities will allow a cooperation to take a strong position inthe market. The larger its turnover, the greater influence it exerts on the level of prices, thus, ensuring the peasant a high payment for his agricultural labor. A.V. Chayanov

In its first years, the flax cooperation united its cooperatives into a Short Course on dozens of unions and merged these unions into its center called the Cooperation Flax Center. It is the All-Russian Union of peasant flax-cultivators and hemp-producers. It meets all the needs of the flax-growing economy, sells peasant flax for tens of millions of rubles, supplies peasants with good seeds, and leads the entire, local flax cooperation.

Many peasants followed the path of flax-cultivators: for instance, the hemp-producers in the Chernihiv and Orel Provinces, who organized the hemp cooperation; the peasants of the Kostroma and Vladimir Provinces, who organized the sales of potatoes; the cotton-growers of the Turkestan Province, Voronezh Province peasants, who organized the joint sales of eggs, and, recently, steps have been taken for the joint sale of bread.

Thus, it should be noted that sales cooperation does not only increase the incomes of the peasant by selling his products at higher prices but it also has a great impact on the organization of his production. By paying higher prices for good varieties and by informing the peasant of the market demand, a cooperation sometimes makes him change the whole organization of his economy and develop it on new, improved principles. That is why, although at first glance sales cooperation looks just like a trade, we always consider it the first step in the organization of production and call it production cooperation.

However, it should be noted that many agricultural products have to be processed in order to be sold in a good, distant market at a high price. These are milk, vegetables, potatoes, and fruits. They are very heavy and difficult to transport. They become profitable and non-perishable goods only when processed into cheese or butter, into dry vegetables, starch, or syrup and preserves. Therefore, when arranging a cooperative sale of these products, we should, at the same time, arrange their cooperative processing. The model of such a cooperation for marketing and processing is the most widespread type of cooperative -- the dairy, the organization of which will be described in the next chapter.

Chapter 6. Dairy artels and other animal husbandry cooperatives

Chapter 7. Conclusion

Our short course on cooperation is about to end. Certainly, in such a small book we could not describe with sufficient completeness all types of cooperation that already exist or can exist. However, we hardly need such a description. We outlined the main principles that cooperative workers use to develop cooperation. We also described such methods and cooperative enterprises that allow peasants to get a better future.

Everyone looking at the vivid rural life and knowing the great principles of cooperation will easily see where and how cooperation can help the peasantry.

In rural life, there are many cases, in which cooperation is a true helper to the working man. The same principles that form the basis of dairy partnerships can be used in processing agricultural products -- in drying vegetables, canning, potato-grating, and even sugar production. The same cooperative principle as in the bull union can be applied in the partnership for the joint use of machines. Great cooperative principles can help a lot in the handicraft industry, in land issues, and in soil improvement. Thus, almost all aspects of life can take advantage of cooperation.

Sixteen years ago, in 1908, when Russian cooperators first met at the All-Russian Cooperative Congress, our cooperative movement timidly took its first steps, modestly learning from its foreign fellows -- cooperators of England, France, and Germany. Today, by the scope of work, Russian cooperation is the first in the world. There are tens of thousands of cooperatives in all regions of the Soviet Union, which unite millions of members -- peasants, workers, and townspeople: hundreds of unions have linked cooperatives into a single whole теория and given it exceptional power.

As of January 1, 1924, the agricultural cooperation of the RSFSR consisted of 12,000 agricultural and credit partnerships, 1,500 dairy artels, 500 other types of cooperatives, and about 11,000 agricultural communes -- approximately 25,000 cooperatives of all types.

The whole cooperative network includes as members approximately 1.5 million peasant economies representing mainly the middle and poor strata of the village. However, in the general mass of peasant economies, the number of economies participating in the cooperative movement is still small -- about twelve percent. Nevertheless, in some regions, the cooperative movement is much more successful, for instance, in the Kimry district of the Tver Province or in the potato Shunginsky district of the Kostroma Province, where the overwhelming majority of the local population is involved in cooperation.

To perform large-scale trading operations and technical management, thousands of scattered cooperatives unite in local county or district unions, the number of which is more than 300. For certain operations, especially if they are located remote from the center, these unions form provincial or even regional unions. All this cooperative structure has a common center -- the All-Russian Union of Agricultural Cooperatives, or Selsksoyuz, and a number of special centers, such as the Flax Center, Soviet Potato, and the very young Butter Center and the Fruit-Wine Union.

In addition to these special agricultural centers, there are three auxiliary co-operative centers: Vsekobank (All-Russian Cooperative Bank), Strakhsoyuz (Cooperative Union for Insurance), and the All-Russian Cooperative Publishing House. These centers unite not only agricultural but also consumer cooperation.

This is the complex scheme of the current state and organization of agricultural cooperation, which is nothing but a form of economic organization of 1.5 million peasant economies that make up its basis.

All this represents a strange and unprecedented economic power and promises a bright future to the Russian peasant provided... that he will not change his cooperation for the lentil soup of an obliging shopkeeper or dealer, just like Jacob sold his birthright for a mess of pottage.

Russian peasant, your future is in your hands! There is no other way for you to achieve the bright happiness of working life than through cooperation. Know that this way is the only way! To lose it means to die.

In the first chapters of our book, we mentioned that to develop and prosper, the peasant economy should organize its farming and animal husbandry in a new way. Today we see that this new farming, new improved machines, breeding cattle, improved seeds, cheap credit, and profitable sales are accessible to the working peasant only if

he unites with other peasants. Only by relying on the union cooperative principle of the socialized economy can the peasantry use all the achievements of agronomic science in their fields and stalls, in order to, indeed, make two ears grow upon a spot of ground where only one is growing now, shake off the burden of usurers and buyers-ups, and take confident steps to a better future.

We see this better future as a complete reorganization of our agriculture. Certainly, today's cooperative undertakings will develop further and further, seizing newer and newer branches of agriculture to organize new forms of social cooperative production. These cooperative undertakings in the form of auxiliary enterprises will gradually and powerfully develop into the main form of agricultural production, which will introduce large-scale production and mechanization principles wherever they can be advantageous.

Thus, we will see a new and unprecedented form of agriculture based on socialization, perfect technology, and the scientific organization of production. This future makes us consider our work (which superficial observers define as only the sale of butter and purchase of plows) as the future, grand, social-economic revolution that will turn a scattered, spontaneous, peasant economy into a coherent, economic whole and a new system of organized farming. And this future makes us totally agree with the idea of Lenin's deathbed article that the development of cooperation coincides in many respects with the development of socialism.

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