The Rise of American Cooperative Enterprise: 1620-1920 [1 ed.] 9780813411033

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The RISE OF AMERICAN COOPERATIVEENTERPRISE: 1620-1920

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The Interstate Printers & Publishers, Inc. Danville, Illinois

Joseph G. IS,napp

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AMERICAN COOPERATIVEENTERPRISE: 1620-1920

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Library of Congress catalog card number: 77-77564

THE RISE OF AMERICAN COOPERATIVEENTERPRISE: 1620-1920.Copyright© 1969 by The Interstate Printers & Publishers, Inc. All rights reserved. Printed in the United States of America.

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To

EdwinG. Nourse Dean of Scholars in American Cooperative Enterprise

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FOREWORD

In a fore\vord one may be personal, and it has seemed to me that readers might like to know how the author got involved in this field, and how this book came to ·be written. My story goes back to the fall of 1920 when I took a course in agricultural cooperation and credit at the University of Illinois under Professor Ivan Wright. My main recollection of this course is that for textbooks we used Cooperation in Agriculture ( 1913) by G. Harold Powell, and How To Cooperate and Double Profits ( 1915) ·by Clarence Poe. In those days cooperation was considered a con_tlng thing, ·but there was little organized information available on the subject. My interest in cooperatives was sharpened by the agricultural depression ,vhich began to influence my own affairs in 1921, and the dramatic crusade of Aaron Sapiro to organize agriculture along big business lines which was then attracting nationwide attention. When opportunity came to me in 1924, as a Fellow of the Food Research Institute at Stanford University, to select a subject fo·r my doctoral dissertation, I chose for study the pool marketing of wheat. To obtain a background for this study I made field excursions to examine the operations of the great agricultural cooperatives in California. In this way, I became acqt1ainted ,vith the California Frt1it Growers Exchange ( now Sunkist Growers), and the California Walnut Growers Association (now Diamond Walnut Growers), and other important California cooperatives. These field trips inspired my first writing on cooperation. I spent the summer of 1925 gathering at first hand information on the operations of the wheat pools in the United States and Canada. Fortunately the dissertation was prepared under the direction of Dr. Joseph S. Davis who ·brot1ght home to me that scholarship to be effective requires not only enthusiasm but infinite patience. My work for the doctoral degree was not completed in 1926 when I was invited 'b}· Dr. Edwin G. Nourse of the Institute of Economics (now incorporated in the Brookings 'Institution) to come to Washington,

D. C., to work with him on a study pf livestock marketing cooperatives, a subject of great interest to both of us. This was a tremendous opportunity for a budding agricultural economist with an interest in cooperatives for Dr. Nourse was then, as he is today, the Dean of cooperative theorists in the United States. He understood why and how cooperatives were important, as part of our economic life. I found especially congenial his belief that to understand an economic institution one must know its history. In the book that resulted from our study, The Coape1'ative Ma1·keting of Livestoc_k, there is this statement written by Dr. Nourse in the Introduction, to which I fully subscribe: The natural scientist has found that he must examine the lower forms of life as a preliminary to the study of the more complex. It is equally necessary that any really adequate study of the complicated economic institutions of today be grounded thoroughly in -the evolutionary process of which they are merely the latest stage. Cooperation is mucl1 too complex an economic and social institution to flourish on mere enthusiasm. It must be grounded on patient and fearless study of its past as well as its present manifestations and disinterested discussion of the issues on their merits. \

Being in Washington in the mid-1920's was a fortunate experience for a neophyte in the field of cooperative enterprise. Agricultural cooperation was in the national spotlight. The Division of Cooperative Marketing, established by the Cooperative Marketing Act of 1926, was shaping up with the gifted leadership of its chief, Chris L. Christensen, who was well versed in the long history of Danish cooperation. Forces ,vere then gathering for the passage of the Agricultural Marketing Act of 1929 which provided for an all-out effort to fashion strong national marketing cooperatives with the guidance and support of a Federal Farm Board. Most important to me, the American Institute of Cooperation, founded in 1925, was then establishing itself as a national forum for cooperative discussion and planning under the intellectual direction of Dr. Nourse, Chairman of its program committee. I was thus at the very center of things in what Charles W. Holman, long-time Secretary of the American Institute of Cooperation, was later to term "The Golden Age of Cooperation in America." Through working with Nourse and I-Iolman I soon came to know many of the leaders-Richard Pattee, Walton Peteet, John D. Miller, M. W. Thatcher, Charles C. Teague, Carl Williams, C. 0. Moser, Forrest Ketner, and John Brandt-who, for example were then shaping the course of cooperative advancement. In the fall of 1929, with our book on the cooperative marketing of livestock largely completed and with my doctoral thesis accepted by Stanford University, I was ready for a new adventure. This came in an opportunity to take charge of teachi11g,extension, and research in marketing and cooperative subjects at North Carolina State College, now North Carolina State University. My five years at Raleigh from 1929 to

1934, the years of the Great Depression, convinced me that the main hope for agriculture lay in the better organization of farmers. I was caught up in the efforts of the Federal Farm Board to help build a strong cooperative for des-perately pressed tobacco growers. Concurrently, I became involved in the drive to consolidate cooperative purchasing efforts in North Carolina ·by the formation of a state-wide purchasing cooperative. As secretary of the organizational committee for this proposed organization I was 1able to help 1bring into being the Farmers Cooperative Exchange-the F. C. X.-which has since 1becomeone of the major cooperatives in the nation. With the reorganization of federal agricultural agencies in the early days of the New Deal I was invited in the summer of 1934 to join tl1e staff of the c·ooperative Division in the newly formed Farm Credit Administration to develop a research, service, and educational program for cooperative purchasing associations. This was a pleasing opportunity, for cooperative purchasing was then entering its period of most rapid growth, and it gives one satisfaction to be in on the ground floor. In this work I was able to work intimately on practical problems ·with the great pioneers in this development-H. E. Ba·bcock, James A. McConnell, Quentin Reynolds, W. G. Wysor, Harvey Hull, Marvin Briggs, Howard Cowden, Murray Lincoln, Clark Brody, H. S. Agster, Emil Syftestad, E. G. Cort, John Lawler, Harry Beernink, Clyde Edmunds, Charles Baker, C. H. Becker, Lloyd Marchant, M. G. Mann, D. W. Brooks, Charles McNeil, and many others. The mid-1930's were exciting years to be back in Washington, D. C. The Banks for Cooperatives were being o·rganized and the research, service, and educational program of the government with cooperatives, which had been a·bsorbed by the Federal Farm Board, was being reinstated and strengthened in the Farm Credit Administration. The Rural Electrification Administration was being set up to serve the electric cooperatives, then in their infancy. The credit unions were being encouraged ·by national legislation and sentiment for consumers' cooperation was building up, sparked by the popularity of Marquis Childs's book, Sweden-T'he Middl,e Way, which found in cooperatives a solution for many economic problems. It was a period of cooperative euphoria, when the future just around the corner seemed bright. It was then that I 1beganto think about writing a book on cooperative purchasing associations to search out the lessons of their experience. I was impressed by their vision and accomplishments and it seemed to me that they were giving a new dimension to the concept of cooperative enterprise. My \vork during World War II furt..lier convinced me of the need for an in-depth study of these associations. With the close of the war the Brookings Institution gave' me the opportunity to do what

I had in mind and the Farm Credit Administration granted me two leaves of absence for six-month periods in 1945 and 1946 for this purpose. As I began to dig into the roots of cooperative purchasing I found them so entangled with those of other forms of cooperation that I could not unravel them without studying the whole cooperative ·plant. Irresistably, I found myself broadening my inquiry with the concurrence of Dr. Nourse, ·whose disposition has always been to go to first causes. Thus, the study grew into an examination of the evolution and status of cooperative enterprise in the United States. With active administrative responsibilities in government I was unable :to complete this project in the time allowed, so it was put aside until it could ·be given more research and reflective consideration. Moreover, since the cooperatives then were changing rapidly under many influences it seemed wise to let these changes proceed further before completing the book. So while working on current cooperative affairs I kept building my files and gathering pertinent information. One major advantage came from this postponement. My position as Administrator of the Farmer Cooperative Service from 1953 to 1966 enriched my opportunity to observe almost all aspects of cooperative development. When I settled down to complete the book in 1966, free from official responsibilities, I found that the subject could not be encompassed in one volume. The natural division point was 1920 for ·before that year cooperative enterprise ·was finding itself. From then on it began to expand and widen its sphere of influence. The present volume I call The Rise of American Coaperative Enterprise for this ibook examines the evolution of cooperative enterprise in the United States from its origins to the time when it represented an articulate and promising institution. A second volume in prep~ration, to be called Tlie Advance of American Coaperative Enterprise, will deal with the great ampli£catio11 of cooperative development during the years from 1920 to 1970. Together these two volumes will comprise a history of cooperative enterprise in the United States. In The Rise of American Cooperative Enterprise I have tried to tell the story of how cooperative enterprise grew up naturally and spontaneously in many areas and under differing conditions in response to economic and social problems. This book •will make clear that the great cooperatives of today did not spring into existence by government fiat. Although assistance from the government in the form of researcl1, educatio11,laws, and credit has been of great value our modern cooperatives represent the product of years of cumulative effort by millions of people. This background has made them experimental, innovative, and pragmatic. I am presenting this volume in five parts. Part One covers the years from 1620 to 1896, when cooperative enterprise was gaining a foothold

in the United States. Part Two enquires into the economic, social, and political factors favorable to cooperative enterprise that were active from 1897 to 1920. Parts Three, Four, and Five examine the substantial progress of different forms of cooperative enterprise during those years. The final chapter, "The End of the Beginnings," evaluates cooperative enterprise in 1920, the year that marked the close of the period of establishment and the starting of the modern period of expansion and development. " Joseph G. Knapp Bethesda, Maryland June 1969

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AUTHOR'SACKNOWLEDGEMENTS

I am indebted to many colleagues and associates for their encouragement and counsel in the preparation of this book, but four names may well come at the head of this list. First comes Dr. Henry C. Taylor, pioneer and historian of agricultural economics and one of the founders of the American Institute of Cooperation. His understanding of the nature of cooperation and its importance for agriculture and his faith in my work in this field have been an inspiration and a support.~ Even befor:e Dr. Taylor organized the Bureau of Agricultural Economics, Charles J. Brand, as first Chief of the Office of Markets, inaugerated the program to improve the marketing of farm products through cooperative associations. He took a lively interest in my early work on this book and was of unfailing encouragement. George E. Farrand, the innovative lawyer who helped fashion the California Fruit Growers Exchange ( now Sunkist Growers) and many of the other California cooperative associations, was generous with essential information and ·beneficial advice, and helpful criticism of early chapters in their first draft. The long-continued interest and help I have received from Dr. Edwin G. Nourse, Vice-President of the Brookings Institution and later the first Chairman of the Council of Economic Advisers, is gratefully acknowledged in the Foreword and at various places throughout the book. Of others who have helped to bring this study to fruition, I would especially thank my long-time colleague, Kelsey B. Gardner, who has read all of the manuscript with a critical ,but friendly eye. I wish also to thank the following for their review and suggestions on certain chapters: Martin A. Abrahamsen, I through IV; Wayne D. Rasmussen, I through IX; Robert B. Tootell, VI and VII; William I. Myers, VI, VII, and XXII; Florence Parker, XXI; and David Angevine, XXI and XXII. '

"Dr. Taylor died on April 28, 1969, ,vhile.·this book was in production.

Many others, who cannot here be n~med, have also provided helpful information or other assistance. I wish also to record here my sincere appreciation to The Cooperative Foundation, and a number of associated cooperatives and persons, for a generous grant that has helped me meet typing, travel, and other incidental research expenses. l am indebted also to many cooperative associations for their confidence in this book as expressed by advance orders to ensure its publication.

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OTHER BOOKS BY JOSEPH G. KNAPP

The Cooperative Marketing of Livestock [with Edwin G. Nourse] ( 1931)

The Hard Winter Wheat Pools: An Experiment in Agricultural Marketing Integration (1933)

E. A. Stokdyk:·Architect of Cooperation ( 1953)

Seeds That Grew: A History of the Cooperative Grange League Federation Exchange ( 1960)

Farmers in Business (1963)

Great American Cooperators [with associates] ( 1967)

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TABLE OF CONTENTS ;1

Part One.

PROBINGS

I. Early Explorations II. Urban Experimentation

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III. The Agrarian Groundswell

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IV. Growth of Independent Agrict1ltt1ra1 • Cooperatives

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Part Two. FORMATIVEFORCES V. The Influence of New Rural Forces VI. The Contribution of the Country Life M,ovement VII. The Coming of Cooperative Financing Institutions VIII. Federal Government Encouragement

IX. Assistance from the States

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110 121 143 161

X. Fann Organization StimulationThe Farmers' Union, the Equity> and the M.F.A.

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XI. Farm Organization StimulationThe Grange and the Farm Bureau

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Part One PROBINGS

In the first four chapters of this book, cooperative enterprise is traced from its informal beginnings in early colonial days down to the time when it was fairly well rooted as a form of business in a vigorous expanding nation. By 1896, the great period of settlement and westward expansion was over and the general structure of our economic system was largely formed. The first chapter reaches from the Mayfiower Compact to the Civil War-which Charles and Mary Beard c1iaracterized as "the second American Revolution." In the two centuries and more covered by this chapter, the pattern for later cooperative development began to emerge. The next three chapters examine hoiv cooperative enterprise took on form and substance in the turbulent period of economic and social change ushered in by the Civil War. Buoyant enthusiasm was being tempered by economic realities. In 1896, cooperation was on the threshold of its modern development. The entire period from 1620 to 1896 for cooperatives was one of search and experiment. It can be characterized as a time of probings tvhen much was learned but little of a tangible 1iature was accomplished .

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Chapter I

EARLYEXPLORATIONS

In the 240 years from the settlement of New England to the opening of the Civil War, cooperation as a method of social and economic organization was feeling its way, adjusting to a developing environment, experimenting in new techniques. It was a time of discovery, with new lands, new people, new problems, and new solutions. A vigorous young nation was emerging and movii.1glustily toward maturity.

ColonialOrigins When tl1e Pilgrims came to America in 1620, tl1ey were by co1npact a cooperative organization bound together to meet the vicissitudes of an unknown and unsettled country. 1 In their priinitive surroundings, the Pilgrims soon fou11dthat mutual help in building and maintaining homes was indispensable, and this conclusion was encouraged by the religious teachmgs of their church and their democratic form of government by town meetings. The concept of mutuality was ·also suited to their first industry-fishmg, in which fishermen pooled labor and risk and shared in the catch of cod and mackerel. 2 The New England settlers also brought with them the English system of common fields and fences which was in itself an embryonic form of cooperation. The early practice in this regard has been described as follows: The tillage and mowing land of the community was laid out in common fields, which were surrounded by common fences. The fence, of posts and rails witl1 a ditch before it, was constructed and kept in repair by holders of aJlotments within the fields, each man being responsible for a certain length of fence in proportion of the extent of his alloh11ent. It ought to be uoted here -t11atalthough tillage was .carried on in a comn1on field, it was not tillage in common. Every settler cultivated his own allotment; he was, however, under restriction as to choice of crops and date of harvest. 8

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THERISEOFAMERICAN COOPERATIVE ENTERPRISE

In this period, a strong communal spirit, fostered ·by the vicissitudes of living, manifested itself i11 forms of cooperation which were often of a compulsory 11ature. This is shown by a law passed by the Massachusetts ' Bay Colony in 1646: Because the harvest of hay, corn, flax, and hen1p comes usually so near together that much loss can hardly be avoided~ it is ordered and decreed by this court, that the constable of every town, upon request made to lilin, shall require artificers or handicraftsmen, meet to labor, to work by the day for their neighbors needing hin1, in mowing, reapi.J.1g,a11d inning thereof, and that those whom they help sl1all duly pay them for their work, and if any person so required shall refuse, or the constable neglect his office herein, they shall each of the1n pay to the use of the poor of the town double so much as such a day's work comes unto; provided no artificer, etc., shall be compelled to work for others while he is necessarily attending on like business of his own. 4

Such forms of "compulsory" cooperation gradually gave way to "voluntary" cooperation of groups of settlers~' in heavy tasks, as, for mstance, in log rolling bees, corn husking bees, etc., which soon became a significant feature of colonial agriculture in the North, and ·as the pioneers moved westward, they took their "ha·bits of group cooperation" with them. 5 Tl1is tendency of Americans to work together on common problems greatly impressed our first foreign visitors: It is necessary to remark, that in the early part of the settlement of a country like this, a great number of things occur necessary to be done, whicl1 require the united strength of numbers to effect. In those parts, money cannot purchase for the new settler the required aid; but that kind and generous feeling which men l1ave for each other, who are not rendered callous by the possession of wealth, or the