«Co-operation had been previously created by single individuals as a way

of transformation of the existing socio-economic system, and it  became later on a powerful

 social force only being closely connected  to that creative conception»

 

Ì.I. Tugan-Baranovskiy[1]

 

Rochdale Pioneers

 

A small industrial town of Northern Lancashire, which is situated near Manchester in Great Britain, is rightfully considered to be a cradle of world consumer co-operation. It has become known all over the world due to its brave citizens who dared to create the first-ever society of consumers. It has been spoken of for quite a long time, and even its name was translated into Russian differently in different periods of time: the spellings “Ðî÷äåëü” ['rot∫del] and “Ðî÷äýëü” ['rot∫del] were used more than a century ago, and the spelling “Ðî÷äåéë” ['rot∫deıl] is being used on geographical maps nowadays. Nevertheless, when making references to old sources and quoting them, we will use the modern spelling here.

Since the very creation of the Rochdale Society, an opinion was being expressed that the local activists just applied the principles that had already been well known. As a proof, the following facts were used.

Long before the Rochdale Society, the so-called «friendly societies» were founded in England, aiming initially at financial assistance to widows, orphans, and aged people. Foundation of the first such societies was ascribed to Daniel Defoe (1660 –1731), who was the author of “Robinson Crusoe”, a book liked by many people from their childhood. The first society of that nature was established as long ago as in 1696, and the very fact that there were 300 thousand of such societies by 1863 evidences of their rapid proliferation.

Later on, Robert Owen (1771–1858), a manufacturer and social reformer, who is also said to be a «spiritual parent of co-operative movement», together with his learners opened a shop where workers could by the goods at somewhat lower prices comparatively with those fixed by the other tradesmen.

Daniel Defoe’s and Robert Owen’s experience does not belittle by no means the significance of the initiations of Rochdale citizens, who are called “Rochdale Pioneers” or “Rochdale Fair Pioneers” that emphasizes one of the indispensable conditions of successful co-operation: fair intensions and fair dealing. It is just their example that is referred to in the world literature as the first successful practical attempt of establishing a co-operative consumer’s society. However that may be, whether the Rochdalers implemented their own ideas, or somehow applied the experience of others, — such consumer’s association has apparently demonstrated how profitable may be an enterprise if being managed by fair people, who know their business and are devoted to it.

 

...This is how it began. One Sunday, when workers gathered to discuss current affairs, Charles Govards, a weaver, proposed to “arrange a friendly shop”. When proposing, he emphasized: «...I have a special idea... In my opinion, no one should buy the goods in that shop on credit, and the profit received shall be distributed irrespectively of how much money one has invested, but depending on how much one has purchased in the shop” (M.L.Kheysin. “What does a consumer’s society mean and what is the good of it». Kharkov, 1919, p. 4–5). Having discussed the proposal, the workers agreed that it would be the best way to get free from the dictation of middle traders, and they made the following decision: to make weekly investments of 2 shillings and 2 pennies in order to accumulate the amount required to start a business. It was on December 21st, 1843, and there were 14 initiators. It is appropriate to mention here the old English Monetary Unit System: Pound Sterling (₤) as a main unit consisted of 20 shillings, and every shilling consisted of 12 pennies. So, there were 240 pennies in a Pound Sterling. In 1971, when the decimal system was introduced, shilling was abolished, and from then on the British Pound consisted of 100 pennies.

The brave Rochdalers could begin their trading activities no sooner than in a year, when «there were 28 pioneers; their capital had increased up to ₤ 28. They regarded that amount to be sufficient to start a business: they opened their shop on December 25th, 1844» (N. Ballin. «Co-operation in the West. Labour Unions in England». St. Petersburg, 1871, p. 131). It seems that this date can be regarded to as the birthday of the first consumer’s co-operative society.

₤ 13 from the said amount were spent to take on lease a shop in Toad Lane, to purchase equipment and inventory, and ₤ 15 were spent to buy flour, sugar, and butter. And it was decided at the General Meeting that every member would receive five per cent of the profit, as well as dividends from the amount spent by him/her when purchasing the goods from the Society, that would be paid out four times a year. It is the latter — the receipt of dividends depending on the purchasing and further realization of the goods — that has proved to be a radically new thing determining the subsequent successful functioning of the Society.

Having opened their first shop, the members of the Society have received quite a lot of criticism, offences, and sneers to their address. Spectators said: “all the goods can be taken by the armful” (N. Ziber. “Consuming societies”. Kiev, 1869, p. 8.) We would like to note here the peculiarity of old terminology, which we shall have in view henceforward: consumer’s societies were called “consuming” at that time. As soon as several weeks later the brave Rochdalers realized that they were not mistaken in their reckonings and plans. Another 50 individuals have joined them, and tobacco and tea were added to the initial range of goods. In spite of criticism, difficulties of the formation period and severe competition, the basic capital of the society had increased from ₤ 28 up to ₤ 182.

But further expansion of trade was restrained by acute shortage of funds. That is why a crucial, in our opinion, decision was made at one of the Meetings, namely not to pay out dividends and profits to those members, whose investment was less than 5. That resulted in increase in capital, and in 1848 it amounted to ₤ 397.

Increase in capital was accompanied by an increase in quantity of the Society members. While only 6 individuals joined it in 1846, 1847 and 1848 gave 30 new members each, and 250 individuals joined it in 1849.

Aiming at further increase in capital, the Society issued a thousand of shares of 1 each in 1846, and the capital increased up to ₤ 253. For the first time, the shop was open only in the evenings and two days a week, but up to the end of the second year it was open every day, and, apart from the goods mentioned above, meat was also sold in it.

Developing progressively, the Society numbered 390 members by the end of 1849, and its capital had increased up to ₤ 1195. All that allowed the Society as early as in 1851 to have a five-storeyed Trade House and 23 Affiliates trading in almost all kinds of goods, instead of an unsuited shop (“with cracked walls”). The capital amounted to ₤ 150,000, and profit amounted to ₤ 50,000. Spectators witnessed: “Rich shop of chandlery was besieged by customers. [...] Tradesmen enjoy the confidence and do not exploit charlatanism and market fraud. [...] Polite attendance, accurateness and order prevail in the Rochdalers’ shops” (N. Ziber. “Consuming societies». Kiev, 1869, p.56). At that time the Trade House worked not two days a week in the evenings, as before, but every day and full-time. And the goods were sold not only to the Society members, but also to all those who wished.

The fact that the goods were sold to those who were not the members of the Society both stimulated the increase in profits and raised the Society’s authority that is a very important thing at the initial stage of any business.

The following fact illustrates how flexible the Society was in responding to processes that took place in it: as soon as the leaders, during the further work, realized that the main shareholders infringed upon the interests of other members of the Society and restrained its progressive development, it was immediately decided to limit the amount of investment held by an individual member, to 100 shares of ₤ 1 each.

Nikolay Ballin, the organizer of the first consumer’s society in Kharkov and in Ukraine, who visited Rochdale in his time, evaluated that decision as follows: “ before that resolution was made, those Society members who held shares for the amount of more than ₤ 100 could have an excessive influence on the Society affairs and somewhat exploit the majority of the Society indirectly, they could prevent further development of the Society by fostering an element of self-help, which is harmful to social element” (N.P. Ballin. Labour Unions in England, ð. 137). Since that time that regulation was widely used in the world practice of consumer’s co-operation.

Charle Jide emphasized in his time: “the aim of consumer’s co-operative societies is manufacturing of consumer products”. Taking into account their success in trade, continuous growth of sales, and increase in circulating assets, we can say that the Rochdalers were ready to organize their own enterprise, and in the fifties of the XIX century they proceeded to implement that. They started from leasing a mill, but they reject that project subsequently, because the mill was of low capacity. In 1851 they built their own mill with 16 grindstones and began to provide the members of their Society, as well as of other 57 consumer’s societies, with a high-quality pure flour that was an uncommon thing for England of those days.

It was the next step in development of their business when in 1855 they opened a spinning-mill and a cotton mill. Four years later the capital that had been invested into these two enterprises became 21 times as much. Later on the Rochdalers founded their own tobacco factory and bakery.

Efficient management of Rochdale enterprises and high productivity of labour was evidenced by average profit that amounted to 7–10 per cent and was higher than that of the competitors. Moreover, the workers employed with the enterprises of the Co-operative Society were more independent financially in comparison with the workers of other enterprises. Thus, all the 50 workers of Rochdale Taylor’s Workshop got the highest wage in the town, although they worked one hour less than the others. And here one might agree with such a conclusion: “ The faster the development of enterprises of consumer’s societies, the more independent are workers from capitalists. Since 1862 the British Consumer’s Societies has distributed about ₤ 75 million of dividends. This money has been lost for capitalists” (V. Totomiants. “Power of co-operation”. Moscow, 1903, ð.9).

Looking back at the experience of the “Rochdale Pioneers”, it should be noticed that as early as at that time a diversified nature of consumer’s co-operation was being formed. Along with trade and production, the foundation of procurement activities was laid. It can be supported by the fact that 147 bulls, 1013 sheep, 674 pigs, 324 lambs and 95 calves were not only sold in 1861 in five Society shops, but was initially prepared and then sold. In 1863 the Society opened a slaughterhouse.

Variety of plans and their successful implementation was also evidenced by the fact that the Society purchased land, built scores of houses, ant it also has founded an insurance society and a funeral fund for indigent people.

Enlightenment and charity were considered by the Society to be the main directions of its activities. Continuous growth of profit allowed the Rochdalers as early as in 1849 to open a library with a reading-hall. In 1866 it numbered 4000 books, and subscribed to more than 200 magazines, newspapers, atlases, and other tutorials. From time to time the Rochdalers published almanacs and brochures on their own, giving some insights into the essence of co-operation and its advantages. More than two per cent of profits were invested into enlightenment activities annually. The Society owned a school for 500 pupils, paid tuition fees for the children of the Society members, etc. All these facts, from the very creation of the Society, demonstrated a social orientation of co-operation.

Grounding on the available information that was mentioned above, let us illustrate the yearly dynamics of growth in number of members (left bar), in assets (capital) (middle bar), and in profits (right bar of the diagram) of the Rochdale Consumer’s Society. Absence of the right bar for 1844 evidences of the absence of profits at the beginning of their activities, and absence of the middle bar for 1843 evidences of the absence of initial capital (assets) at that time.

 

The following table shows the subsequent growth in figures of the Rochdale Consumer’s Society:

 

Year

Number of members

Assets (capital),

 Pound Sterling

Turnover,

 Pound Sterling

Gains,

 Pound Sterling

1849

390

1,193.19.1

6,611.18.0

561.03.9

1854

900

7172.15.7

33,364.00.0

1,763.11.2 1/2

1859

2703

27,060.14.2

104,012.00.0

0,739.18.6 1/2

1864

4580

55,840.00.0

174,206.08.4

22,163.09.9

1865

5326

1866

6246

99,989

33,931

 

It is necessary to explain here that according to the English System of Numerals Indicating Amounts of Money effective as of those times, thousand digits were to be delimited from the lower digits by a comma, shillings (one twentieth of a pound) were to be indicated to the right of the first dot, and pennies (one twelfth of a shilling) were to be indicated after the second dot. Friction 1/2 indicates a half of a penny that was the smallest monetary unit of that time.

It is possible to illustrate the amounts mentioned above graphically by means of the following diagram, which requires quite a different scale of representation. It starts from 1849, a year that was the last in the preceding diagram. The figures are shown with five-year intervals up to 1864, inclusively, and further in respect of two successive years (figures on turnover are not included into the diagram; absence of two bars means the absence of relevant information for the year 1865):

 

Rapid development of the Consumer’s Society in Rochdale may be evidenced by the following results: for the 22-year period of existence the number of the Society members has been multiplied by 223, its assets (capital) — by 3671, gains (for a 21-year period) — by 1050, and turnover (for a 20-year period) — by 245. (N. Ziber. “Consuming Societies”. Kiev, 1869, ð. 52).

 

What is the secret of such a rapid development of the Rochdale Society of Consumers?

First of all it is necessary to take into account that those times were characterized by an increasing exploitation of workers: they were suffering both as producers and as consumers. Harassing labour and scanty wage were supplemented by constantly growing prices of goods and services. Moreover, the middlemen between production and customers received the main profit, without improving the quality of the goods in essential manner. Thus, by the beginning of the XX century average profit received by manufacturers and factory owners made about 14% (tobacco) and approximately 4% (food), but middle-traders received mostly not less than 30 % profit, and sometimes more than 100 %. Rates of profit received from mediation are evidenced by the following fact: «...A Swiss worker, who earned 1000 francs per year [at that time], spent 700 francs per year on his living essentials, and minimum 200 francs from that amount deposited in a trader’s pocket as a remuneration for mediation” (V. Totomiants. Power of co-operation”. Moscow, 1903, ð.4). That was the reason why many people, and not just organizers, but ordinary members of societies, realized that profits from the enterprises of consumer’s societies were for the good of workers. And this is not the whole story: profits they received from co-operation “slipped from the fingers of capitalists making them weaker” (V.Totomiants. Quotation, ð.9).

It is important that workers being under conditions of severe exploitation and poverty had a clear idea of economic advantages from joining a consumer’s society. In search of proofs we can once again, apart from the facts mentioned above, refer to N.P. Ballin, who wrote while analyzing the experience of “Rochdale Pioneers’ Society” that one of the workers invested into the common capital 1 shilling when joining the Society in 1850. And by 1861 that amount has increased to £ 98, 13 shilling and 4 pennies. Everyone will agree that it was a considerable amount for one member of the Society, taking into account that 28 Rochdale weavers began their business with £ 28 only.

To the undoubted advantages of the Society we can refer the simplicity of its Charter, the simplified admission procedure, small amounts of contributions and possibility to make them by installments, selling the goods to those who were not the Society members, etc.

That was the reason why the Rochdale Co-operative Society has played such a significant, exclusively important role in the subsequent development of co-operative movement in England. It was also promoted by rapid growth of working class in England, “awakening of its self-cognition and self-organization”, wide “campaign of English Christian democrats, who considered co-operation to be a powerful instrument for raising the working masses”, adoption of several laws (1852, 1862, 1892), which “granted consumer’s societies the rights of legal entities and delineated their liabilities” (D. Ivantsov. Consumers co-operation”. ð. 76).

These are the main prerequisites that promoted wide proliferation of co-operative movement in England, which is demonstrated by the following table.

Year

Number of consumer’s societies

Number of their members

1863

460

108588

1875

1163

479284

1883

1165

681691

1893

1421

1169000

1903

1455

1987000

1913

1387

2880000

 

Here are the same figures but illustrated more apparently by means of two separate diagrams:

 

Number of consumer’s societies in England

 

Number of members of the consumer’s societies in England

 

Proliferation of consumer’s societies, their enriching experience, and increasing efficiency of their functioning, on the one hand, and disconnection and limited opportunities of each separate society, on the other hand, raised a necessity of their integration into unions. And it was once again in England that for the first time in the world an experiment was implemented which is still used in the world practice. North-English Union of Wholesale Purchase was founded in 1862, and Union of English Societies was founded in 1870. So, having united separate individuals, co-operative societies began to integrate into “co-operatives of co-operative societies”, in other words into super-co-operative societies. These exclusively important events not only imparted further acceleration to the development of English co-operation, but also demonstrated to the world a unique experience of going through such a difficult process from the very creation of one (the first) consumer’s society consisting of 28 workers up to foundation of a powerful national co-operative union comprising more than 1000 societies with more than 500000 members.

So, those fair Rochdale pioneers have accomplished their dream. Their invaluable experience laid the basis of subsequent development of co-operation first in France and Germany, in Europe as a whole, and then in the USA, Russia, and Ukraine.

 

While tracing these tendencies and visiting Rochdale personally, Nikolay Ballin, who was a public figure, a writer, and a teacher of Kharkov University, was governed by not just an idle curiosity, but an aspiration to get an insight into co-operative experience and to introduce it in Ukraine, particularly in Kharkov, which is in Slobozhanschina, using local traditions of mutual aid as a basis.

This subject will be addressed in the next publication.

 

* * * * *

 

Main Principles of the “Rochdale Society of Fair Pioneers”

1. Capital shall be formed by means of share contributions made by members of the co-operative society (each member of the co-operative society owns a share he/she made, with interest charged on it).

2. Goods shall be sold for cash payment.

3. Goods shall be sold at average market prices.

4. Profit received by the co-operative society shall be distributed among its members proportionally to the amount spent by them to purchase the goods in the co-operative shop.

5. Goods to be sold shall be of good quality, of proper weight, and should be measured by precise measuring tools.

6. All the shareholders shall have equal when solving the co-operative matters.

7. Part of profit shall be assigned for raising the cultural level of members.

8. Absolute neutrality in respect of political and religious matters.

 



[1] (Vakhitov. Cooperation, theory, history, practice; p. 24)