Origins
Origins of the Co-operative Movement
The Rochdale Pioneers and the Establishment of the Co-operative Movement
Johnston Birchall’s book ‘Co-op: the peoples business’ is an excellent starting place for anyone wanting to study the Co-operative Movement. The story, right from the beginning has a direct bearing on the modern day co-operative movement. I would encourage anyone who is interested in the movement to read this book.
To give some background, I will give some examples of co-operatives which were set up before the Rochdale Pioneers:
- 1498: The Shore Porters of Aberdeen.
- 1760: Woolwich & Chatham Co-operative Corn Mill.
- 1761: The Fenwick Weavers.
- 1795: The Hull Anti-Mill Society.
By the 1820’s co-operative societies were using the dividend principle, for example Lennoxtown in Scotland and Meltham Mills in West Yorkshire.
In 1833, eleven years before the Rochdale Pioneers opened their shop at 31 Toad lane, a co-operative society had opened a shop at 15 Toad Lane which had to close after a couple of years.
There were approximately 500 co-operative societies by 1832 but by 1834 most of them had collapsed.
This is sometimes known as the first co-operative movement which was a failure.
Co-operative Congress had met three times before The Rochdale Pioneers opened their shop in 1844.
The Rochdale Equitable Pioneers Society was not the first co-operative, but it was the first successful co-operative, and it was from that co-operative that the Co-operative Movement was built.
The following notes are taken from Johnston Birchall’s book
‘Co-op: the peoples business’
The pioneers were all men from the broad working class movement which included Owenite co-operators, socialists, secularists, chartists, unitarians, teetotalers. They introduced the principle of political and religious neutrality to enable the working class movements to work together in acceptance of their differences. They came from communities which had been devastated by the consequences of the industrial revolution, and were determined to be victims no more.
On 15th August 1844 a meeting was convened and the objects and the rules of the Society were agreed, they were adopted from an existing friendly society and were registered with The Registrar of Friendly Societies on 24th October 1844.
The minimum shareholding was £1 just as it is today in the Co-operative Group.
There were 40 subscribers who agreed to pay threepence a week to raise capital in order to open a shop. This was just like today’s share offers which are launched in order to raise funds for a co-operative venture.
They raised £28 and succeeded in renting the ground floor of an old warehouse at 31 Toad Lane, Rochdale. At that time this building was 152 years old. They were not to know that from 1931 onwards that same building would house the Pioneers Museum and be visited by people from all over the world. Today, in 2012 it is being refurbished to serve a new generation of people who are interested in the Co-operative Movement.
Rent was £10 per year, the lease was in Charles Howarth’s name, no one recognised collective ownership at that time. Toad Lane probably means ‘The Old Lane’ in Lancashire dialect.
After repairs were made and fittings bought there was only £16 left to buy stock, so they bought 28 pounds of butter, 56 pounds of sugar, 6 hundredweight of flour, a sack of oatmeal and some tallow candles. The candles came in useful because they were refused a gas supply for lighting.
The store was opened on the evening of 21st December 1844. The pioneers were working men so the store was opened after work. William Cooper was the cashier and Samuel Ashworth was the salesman. At first the store opened on Saturday and Monday evenings. The committee met at the Weavers Arms.
After three months they were able to open every weekday evening except Tuesday and they added tea and tobacco to their stock.
Takings at the end of year one were £710. The membership stood at 74 and capital had grown to £181. The surplus was £22.
Progress was slow: they had to buy in small quantities, and the price and quality were not always good, some of the members were in debt to local shops and were constrained to shop there (in fear of legal action to recover the debt if they did not), and some of the members wives were not keen. G.J.Holyoake declares ‘if there are to be moral sellers, there must be moral buyers’.
Luckily he goes on to say, ‘A staunch section of them were true co-operators, and would come far and near to make their purchases, and , whether the price was high or low, the quality good or bad, they bought, because it was their duty to buy’.
Yet the directors must have been disappointed; at one point James Daly proposed that non buying members should be expelled, but Charles Howarth said it would destroy the freedom of the members, and the motion was withdrawn.
A trade depression could have wiped them out in 1847. Since 1845 all resistance to the new poor law had ceased in Rochdale, and so there was no unemployment relief available. Some members had to withdraw their capital to survive, but the Society continued to grow, though the surplus was down. 1848 began with great distress, but at its end trade was up to £2,276, capital to £397, the surplus to £118. 1849 was the turning point. The Rochdale Savings Bank collapsed, and many people lost their savings. They rushed to join the Co-op, which was now the only safe haven for their money. Membership grew from 140 to 390, trade from £2,276 to £6,612, capital from £397 to £1,194 and the surplus from £118 to a remarkable £561.
By the 1870’s the Rochdale Equitable Pioneers Society’s capital had reached over £300,000. By the 1850’s they had already started to sell wholesale to other Societies.
The Society was a remarkably efficient and effective retailer. But it aimed to be more than this; its objects included building houses, creating productive employment, buying land and eventually setting up an Owenite style co-operative community.
The Aims of the Pioneers
The aims of the pioneers were influenced by the two main visionaries of the co-operative movement, Robert Owen and Dr. William King. Owen’s vision was of a self-sufficient co-operative community, King was more pragmatic, advocating a three stage strategy, starting with a store, graduating to co-operative production and then forming either an urban or rural community in which members might live. The pioneers were even more realistic than King, because they drew this out to five stages, seeing the building of houses and the buying of land as preliminary to forming a complete community.
They added a sixth, the building of a temperance hotel but this never got underway.
The first aim was to open a store, as we have seen, this was achieved.
The second aim was ‘the building of a number of houses for members’. In 1861 the Pioneers set up a land and building company who’s aim was to ‘build a superior class of dwelling for the working men’. Twenty five houses were built on and behind Spotland Road, Rochdale.
In 1869 the company was taken over by the main Society as by now the Pioneers had entered into the provision of housing themselves. In 1867 they built a co-operative estate producing 84 houses in 5 substantial blocks of terraces and naming two of their roads Pioneer Street and Equitable Street.
By the end of the century the Society had become a big landlord with about 300 houses to rent. The pioneers had by this time also set up the Co-operative Building Society which would become a major lender of finance to people wishing to buy their own homes.
In 2012 the United Nations International Year of Co-operatives there is a renaissance of co-operative housing in Rochdale.
The third aim was ‘the manufacture of articles for employment of members’ suffering from unemployment or wage reductions. They were trying to alter not only the conditions under which people consumed, but those under which they laboured, and so took every opportunity to develop ‘producer co-operation’. Only five years after opening the store they went into tailoring, bootmaking and clogging, eventually setting up separate Societies for these enterprises. These Societies would have pioneers on their committees and substantial investment from the main Society, but if they foundered, they would not bring the main Society down with them.
In 1850 a Rochdale Co-operative Corn Mill was started by an independent committee.
The fourth aim of the pioneers was to buy or rent an estate of land to be cultivated by members suffering from unemployment. A co-operative farm was founded in 1871 Jumbo Farm, near Oldham but it was not a success, lasting only ten years. They were not to know then that the movement would one day be the biggest farmer in the U.K.
The fifth aim, the Co-operative Community, they never got round to.
As Johnston Birchall says, they had cashed in Owen’s vision of a thousand years of peace and plenty for a quarterly payment that would put shoes on their children’s feet and, in the hard times to come, food in their mouths. It is impossible to overemphasise how important the principle of the divi was for the future of the Movement. Just how important, and how it interacted with the other principles, will now be explained.
The Rochdale Principles
The Pioneers left very little to chance. They were cautious, practical and experienced people. They set out their rules in detail in 1844., then amended them in 1845 and 1854. They expressed eight fundamental principles. The first was democracy, the principle of one member one vote. There is nothing remarkable in this, since it is what chartism was all about, and in their chapels and friendly societies, and trade unions, the Pioneers would be familiar with it. What was remarkable was that they were applying it to business; they could have given votes in proportion to share capital, as in capitalist firms, or in proportion to purchases, but here power was shared out to persons not to property. Persons also meant women; though they do not seem to have taken an active role in the Society at this stage. Beatrice Potter pointed out that forty years before married women were allowed to keep their own property, women members got some control through having their own share account; the cashiers insisted that husbands who wanted access to it go through the courts first.
The second principle was open membership. At first they limited the number of members to 250, probably because they had not yet realised that they could grow by opening branches, and because they did not have much legal protection; the 1852 Industrial & Provident Societies Act, which some influential supporters sponsored for their benefit, gave them proper legal status, (though full limited liability was not granted until 1862) and so after this, membership was allowed to grow and grow. The Act allowed them to sell to non members, but this remained the exception, the rule being that the members and the users of the co-op’s services were one and the same. The important point about this principle is that it was a generous one. It allowed new people to come in on a down payment of only a shilling, making the social wealth built up by past generations instantly available to newcomers. There would be none of the hoarding of profits by the original shareholders that we find in capitalist companies. The application of this principle can be judged a success; having aimed at a membership of 250, by 1880 the co-op had over 10,000 members, a large proportion of the local population.
The third principle was fixed and limited interest on capital. ‘Fixed means that interest does not rise or fall with profits as it does in a capitalist company, and ‘limited’ means that the Society will only pay out for capital what it absolutely has to in order to finance its own development. It was one of Robert Owen’s principles, that while capital has to be paid for, it should not enable the lender to cream off the surplus made from the labour of others. In this case the rate was fixed in 1844 at 3.5 per cent, then set at varying rates by members meetings, until in 1854 a maximum of 5 per cent was written into the statutes. Holyoake points out that many co-op’s had failed because they refused to pay interest on capital at all, but the Pioneers were pragmatists; they recognised that in order to attract capital they had to pay for it and that owners were entitled to some payment for the risk attached to lending it.
The fourth principle; distribution of the surplus as dividend on purchases, the famous ‘Co-op divi’. This was the decisive step in breaking with the old Co-operative Movement which had assumed that surpluses would be built up until a co-operative community could be formed. There are in fact three kinds of people who can benefit from surpluses: those who lend capital, those who work in the business and those who are consumers. The distribution on the basis of purchases marked the Society off from both capitalist and worker owned enterprises and turned the Pioneers (though they may not yet have realised it) into a consumer co-operative. There was nothing remarkable in this. Though one of the Pioneers, Charles Howarth, had to reinvent the idea (perhaps because it had been frowned upon by strict Owenites. Alexander Campbell, the ‘father of Scottish co-operation’ had been recommending it ever since 1822, and there were in fact several co-op’s which had been using the dividend principle since the mid 1820’s, including Lennoxtown in Scotland and Meltham Mills in Yorkshire. A meeting of the First Western Union Co-operative Society in1832 had reported that dividend on purchases
would confer immediate benefit upon all those who dealt extensively with the store and remove the discouragements which the most zealous and persevering co-operators had hitherto experienced </democracy>
In practice it did just that. Holyoake tells some remarkable stories of poor people who, having been in debt to shopkeepers for thirty or forty years, suddenly found themselves with money in their pockets and £20 in their share account. Though the dividend was low at first, three pence in the pound, it rose steadily until the Society was paying two shillings and sixpence in the pound (twelve and a half p).
One old man claimed that in 11 years he had accumulated £77 in dividend, which had kept him out of the poor house in his old age.
The fifth principle was cash trading. This may seem unimportant today, and is no longer regarded as an essential principle, but to the Pioneers it was most important; though they knew it would restrict their membership, they felt so strongly that they wrote into their rules that any officer giving or taking credit was to be disqualified from office and fined ten shillings. There was a universal dislike of being in debt to shopkeepers, but more than that, there was a realisation that previous societies had foundered on credit. As Holyoake said:
So many co-operative experiments had been stranded by credit, that an almost universal opinion was prevalent, not only in Rochdale, but throughout the country and in Parliament, that co-operation was an exploded fallacy.
Again, the principle seems to have paid off because, though its strict application in the early years undoubtedly limited its growth, the Society grew anyway.
The sixth principle was selling only pure and unadulterated goods. This was not a written rule, but appeared in an important statement of first principles in the Almanac of 1860. We might think that providing wholesome, and untainted food and giving full weight and measure to the customer ought to be taken for granted in a consumer owned and controlled business. Yet there were considerable trading risks involved. Take the case of the flour which, though produced in their own mill, was rejected by members because it was browner than usual. Holyoake tells us that the directors could have bowed to pressure to add chemicals to whiten it, but that this was so much against their principles that they preferred to take the risk and after much discussion with the customers the pure flour eventually gained acceptance. Looking back on the story many years later Holyoake added this comment;
The members had become more intelligent; they had learned the nature of good flour when they had it; their tastes were better educated than that of many gentlemen of the middle class, and the Directors were able to tell the purchasers, in a reckless manner ‘if they wanted to adulterate the flour they could do it themselves’.
More generally, the effect of such commercial honesty was that buyer and seller were able, for the first time, to meet as friends, without suspicion on either side. Their surroundings may have been humble, the warehouse at Toad Lane unfashionable, but the relationships between the people were of the highest quality. Members were able to send their children on errands to the store, knowing that they would not be taken advantage of, and that all would be treated alike and given the right quantity and quality of provisions. Adulteration remained a feature of commercial life well into the 20th century, but as Holyoake describes it, the members of this humble co-op had gained access to goods which even the well off could not be sure of obtaining.
The seventh principle was education. The famous rule appears in the 1854 statutes, that a separate and distinct fund be set up for the ‘intellectual improvement of the members’ and their families. It was to be funded out of a 2.5 per cent levy on surpluses, and to have its own committee of 11 members, appointed at the annual meeting. The rule was a way of making systematic what the Pioneers had always done: as Owenites, they believed that only through basic education could people’s characters be changed, and as followers of Dr. King that only through acquiring commercial skills could they trade successfully. In 1846 they were already holding regular Saturday afternoon discussions at the store, and in 1848 they were able to set up a newsroom and book department, buying up the library of a failed people’s Institute. By 1850 they were running their own school and adult education classes, and by 1860 had established the principle that each branch should have its own newsroom and library above the store.
So keen were they on education that they had originally proposed a levy of 10 per cent on surpluses, but because education had (through an oversight) not been included in the 1852 Act, the Registrar of Friendly Societies would not let them register it. The contest with the registrar lasted several months, but eventually the 2.5 per cent seems to have been agreed as a compromise: it is a compromise that many co-op’s since then have found hard to live up to, but which is always cited as the measure of how committed they are to education. It caused disappointment at the time: Holyoake comments bitterly that the law seemed to prohibit workers from educating themselves, but the government refused them the vote on the grounds that they were not educated.
The eighth principle was political and religious neutrality. Political neutrality was assumed from the start, at least between different types of radical: chartists, Owenites,Anti Corn law Leaguers and so on. G.D.H.Cole says that this does not mean that they expected to admit political conservatives, but there is no evidence that they ever tried to deny membership to anyone on political grounds, and some of the early members must have been less radical than the Pioneers themselves. Religious neutrality was also assumed from the start, because among the Pioneers were Owenite secularists and members of a Unitarian congregation; at least one of them, John Garside was a local preacher. So they were reared in what Holyoake (himself a militant atheist) called ‘a school of practical toleration’.
Finally, in the 1854 statutes, the Pioneers added one more principle, that of disposal of net assets without profit to members; in the unlikely event that the Society might be wound up, the trustees would have to pay everyone what they had in their share accounts, and then distribute the rest of the assets to other co-operatives or to a charity. This means that no one would be tempted to break up a co-op just to get at the assets. It is a rule which, with open membership and continued growth, they did not really need, but which has become crucial to the success of worker co-op’s; in France, for instance, the state insists on it, and so the worker co-op movement has had a firm basis upon which to build.
This is now enshrined in British law.
The Rochdale Equitable Pioneers Society built the foundations of the Co-operative Movement which has grown to its present day strength. Many of the issues which the Pioneers had to deal with are the same as the present day Co-operative Movement has to face. An understanding of the road which previous generations of co-operators took will help us in the modern day Co-operative Movement.