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esty on the part of the employer, and it cannot be lost by reason of his death, discharge, or change of employment.

Profit sharing has failed because it is unbusinesslike and smacks of philanthropy. The average employer consciously or unconsciously expects something in return for the dividends which he distributes. And if he does expect a return, it is far better that he should pay for it by a method which is certain, fixed by contract or bargain in advance, and paid, not at long intervals, during which it is threatened by the varying fortunes of the business, but at the end of the week or month when ordinary wages are paid. Of course, if in addition to fair wages the employer wishes to distribute a gratuitous dividend at the end of the year, for which he expects nothing in return, the employee is not likely to object, and the generosity of the employer will probably do no harm. But such a system of profit sharing cannot be expected to become prevalent throughout a competitive commercial system in which most employers cannot be philanthropists, even if they desire. Moreover, human nature is so constituted that gifts of this kind create in the mind of the giver an inevitable expectation of recompense.

Industrial Democracy. The industrial organization of the past was despotic. The despotic principle, the one-man power, is an excellent thing in its own time and place. It gives to industry the elasticity, celerity, and general efficiency which come from singleness of aim; and in industry, despotism has continued longer than in the political sphere. But it is merely a phase of development and ought not to be regarded as final. Elsewhere the despotic principle has been softened or dissipated, in politics, in religion, in the family, and eventually this discordant element

is bound to disappear or undergo serious modification in industry. The whole labor movement is a concerted and united effort to achieve industrial democracy, which means self-rule, self-control, the self-direction of the masses in their efforts to gain a livelihood. It is primarily because profit sharing means a departure from, and not an approach toward, industrial democracy that we are forced to reject it as a progressive step in accomplishing those ends which the labor movement is inaugurated to achieve. A

far more consistent method of securing self-government is found in coöperation.

Coöperation is of two kinds, coercive and voluntary. Coer cive coöperation, which implies a partial or complete application of socialism, is discussed in another chapter.

Voluntary coöperation takes many different forms, among which we may distinguish: (1) distributive or consumers' coöperation, sometimes spoken of as coöperative buying; (2) coöperative borrowing or coöperative credit; (3) coöperative marketing; and (4) producers' or pure coöperation.

Consumers' or distributive coöperation has no necessary connection with the transportation of goods, but refers merely to a method of retail or wholesale exchange. Purchasers of groceries, dry goods, and the like come together to purchase what they need, and thus eliminate profits. They form a stock company, subscribe for shares, employ a manager and clerks, — who often do not even share in the profits, and start a business. Dividends are sometimes paid only on shares, but the approved way is to pay a moderate interest on capital and to divide profits among the customers in proportion to their purchases, the division. being made at the end of stated intervals. Usually a larger dividend is distributed to shareholders than to ordinary customers; and in some cases the employees receive as large a bonus as the shareholders. Profits are thus said to be divided among capital, custom, and labor. But so far as labor is concerned, the most that can be said is that it receives a small share of the earnings; labor does not coöperate in the sense that it has an important voice in the management of the business. The scheme is one of distributive coöperation plus profit sharing, not one of pure coöperation.

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Coöperative credit and coöperative marketing are familiar phenomena in the United States the first in the form of the well-known building and loan association; the second in the form of fruit growers' association, coöperative elevator companies, and the like, formed for the purpose of securing better terms and facilities from railroads, commission houses, and middlemen in general. In 1902-1903, for instance, there were 5299 building and loan

associations in the United States, with a membership of 1,530,707, and total assets of $577,228,014. About the same time (1902) there were also 994 coöperative telephone companies, operating 89,300 instruments.

The good which these coöperative associations have accomplished is enormous, and there can be no doubt of their practicability. They have not only proved commercially profitable to the participators, but they have trained them to "team work" and inculcated the spirit of mutual concession, the give and take of concerted endeavor, which makes for social solidarity and constitutes such an indispensable element of good citizenship in a democratic state.

But they have done little and promised to do little in solving the labor problem or in essentially improving the distribution of wealth. They are, for the most part, composed of small capitalists, farmers, or salaried men, - not wage earners, and in organization differ little from democratically managed stock companies of the usual type. Many, if not most, of the marketing associations are profit-making concerns whose employees have no more voice in the selection of their bosses, and no more share in the management of the business, than the employees of an ordinary corporation. Even in the British coöperative societies the employees have no share in the management, and though some of the associations - notably the Scottish Wholesale Society indulge in a mild species of profit sharing with their employees, the result is not industrial democracy, not self-government, but merely joint-buying plus a paternalistic scheme of profit sharing. The limits of the success of the British coöperative movement are suggested by the fact that the employees of the coöperative societies have formed themselves into a trades union for the betterment of their condition of employment.

While consumers' coöperation and coöperative marketingboth designed to abolish the profits of the middleman-are important and praiseworthy forms of economic association, they have little effect upon the wage-earning classes, and offer no remedy for the antagonism between capital and labor in manufacturing industries. The variety of coöperation which really

copes with these questions and seriously attempts to regenerate the wage system is producers' coöperation. The essential features of this form of coöperation are (1) that each group of workers is to be associated by their own free choice; (2) that these associates shall work under a leader elected and removable by themselves; and (3) that the collective remuneration of the labor performed by the group shall be divided among all its members (including the leader) in such a manner as shall be arranged, upon principles recognized as equitable by the society themselves.1

Successful coöperative experiments fulfilling the above conditions are seldom met with. They are not unknown. Here and there a man of transcendent commercial genius and extraordinary sympathy has succeeded in democratizing his business, turning it over to his employees and so impressing his spirit and his methods upon his successors that the business continues to prosper under the régime of self-government. An illustration is found in the Godin Familistère of Guise, France, which, beginning with a scheme of profit sharing in 1877, has finally resulted in the establishment not only of a coöperative manufacturing enterprise, but in the successful conduct of what practically amounts to a coöperative community.

But such cases are rare. Most experiments in producers' cooperation have failed, and we fear they must continue to fail. They simply cannot meet the competition of businesses organized in the ordinary way, directed by one man or set of men with all the efficiency, mobility, and adaptability that come from singleness of aim and undivided management. Industrial democracy, as achieved in the coöperative form of industrial organization, is too unwieldy, too slow, too mechanical. Multitudinous management means relatively uncertain, indecisive, and inefficient management.

A modified form of producers' coöperation is not unknown among the manufacturing industries of this country. An approximate idea of the extent of this form of industrial organization may be gathered from recent census statistics. In 1905 the statistics of manufactures relating to form of busi

1 Schloss, Methods of Industrial Remuneration, p. 228.

ness organization show a separate class of "miscellaneous business organizations" which we are told consists almost entirely of coöperative manufacturing concerns. There were in this group 3203 establishments (constituting 1.5 per cent of all manufacturing establishments) with a capital of $20,729,744 (0.2 per cent of the aggregate capital), employing 8520 persons (0.2 per cent of all wage earners), producing goods with an annual value of $54,466,028 (0.4 per cent of the aggregate product). Most of these associations are coöperative creameries; and it is interesting to note that in this great industry which was coöperative in origin the proportion of coöperative concerns is steadily diminishing. These figures furnish a maximum estimate of producers' coöperation in the United States, and a large majority of the concerns credited to coöperation in this enumeration would fail to satisfy a strict definition of producers' coöperation. For the most part they represent a form of coöperation among farmers and small capitalists who stand on an equality as among themselves, but give their employees no real share in the management of the business.

The wage system, whatever its defects, has one striking virtue certainty. The wage earner knows what to expect and gets what he expects. He is insured against risk of loss, and although he may pay too high a price for his insurance, the insurance itself is a highly desirable thing. It is one of the weaknesses of producers' coöperation that the workman is encouraged to invest his savings in the hazardous competitive experiments in which he is engaged. He becomes part owner of the enterprise, to be sure, but by doing so he assumes the risk of failure, a risk which, other things being equal, it is desirable to eliminate. It is probable that the ultimate method by which industrial democracy is achieved will retain that feature of the present wage system by which most of the workers are insured against business losses.

Indeed, we expect to see industrial democracy achieved through the labor organization. Since the formation of the trades union and the introduction of collective bargaining, the range of this bargaining has constantly widened. Beginning with questions of wages, hours of labor, and apprenticeship, it has gradually spread, until at the present time some unions bargain about the sanitary conditions of the work, the introduction of safety devices, the employment of women, the use of machinery, and the status of the men with whom their members work. A very few powerful unions insist that the foreman under whom their members work

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