Twentieth Century, July 5, 1894, 7-8.
CO-OPERATION.—EUROPEAN CREDIT BANKS.—VIII.
BY W. H., VAN ORNUM.
We now come to a most remarkable phase of cooperative work; remarkable alike for its present achievements and for the possibilities which it suggests It has wrought a transformation scene in the condition of a large part of the working people, and often among those of the very lowest, in at least three of the principle countries in Europe; and improved their material condition in many others, just in proportion to the extent to which is h is been applied. It has opened the way for mutual self help to the very poorest, inspired them with hope; aroused their self- respect, and stimulated their spirit of independence. It has been the means of making their homes more habitable, improving the culture of their fields by purchasing machinery, procuring fertilizers and buying stock, and has enabled them to got better prices for their products and to buy supplies at wholesale But the most wonderful effects have been wrought upon the people themselves, The idle have become industrious, the spendthrift made thrifty; the drunkard forsook his cups and the tavern hunter the inn. The illiterate, even when bowed with age, have learned to read and write, A Prussian judge reports that litigation, by reason of it, especially in the collection of debt, is sensibly diminished. Even one priest reports that the co-operative bank has done more, in his parish, to reform the morals of the people than all his ministrations. Those who study co operation more to arrive at a definite working principle and plans, than as a hazy sentimentalism, should carefully consider the European Credit Banks in all their details and variations. I say European, because, while the Credit Banks had a distinctively German origin, they have had a different development in different countries, according to the special needs and circumstances found in those countries In one country they have taught one lesson; and in other countries others. Or, rather, in one place they have taught one part and in another place another part of the same great lesson, that to operation is applicable to all the wants of human association, and that the development of the individual depends upon the extent to which he is enabled to cooperate with his fellows.
Herr Schulze-Delitzsch, a man of some means and a benevolent character, about 1845, observing the extreme straights to which the peasants were driven through the exertions of professional usurers, set himself to devise a plan of relief, The problem, according to his own words, was, “to procure capital without a capital of guarantee.” Passy, one of Schulze’s associates, put it, “to find means of giving credit to those who have no security to offer in exchange.” In other words, the question to be solved was, could labor be pledged for money?
Schulze’s first step was the formation of a co-operative association for the purchase of raw material, He next proceeded to the formation of a credit association, The dominating principle in this was benevolence, It was a capitalist institution, philanthropic, condescending, and was to be supplied with funds by those who did not expect to become borrowers, It looked to helping the people instead of developing a mutual self-help among the people themselves. Its weakness was, that it was not sufficiently co operative. It soon became evident that this would not accomplish the desired end; when Dr. Bernardi, a friend and fellow worker with Schulze, devised a more co-operative scheme, Still, it was sought first to protect the interests of the investor—the lender. Co-operative credit was of secondary importance. Money was borrowed from those who had money to lend; and business was done for a profit, Consequently, interest was kept at a comparatively high rate—ay, from twelve to fourteen per cent, afterward reduced to eight, Each member as required to subscribe for one share and no more, which was at first fixed at £30, payable in small installments. The bank was permitted to engage in all kinds of banking operations; but all money was to be loaned inside the association. All forms of security— mortgages, pledges, securities, bills of exchange, etc, were accepted. Loans were not restricted in amount, but must be made for short time, commonly for three months, with but one renewal. The administration was placed in the hands of a committee which drew a salary and a commission on the amount of the business done. These associations were based upon the unlimited liability of the members; that is, every member was liable for the debts of the whole association.
These associations multiplied with great rapidity. By 1883 more than 4,000 associations had been established with a membership of 1,200,000, and with a capital of £10,000,000, doing business at the rate, according to some estimates, of £100,000,000 a year, They had extended throughout
From the first, the government put every conceivable obstruction in Schulze’s way. He was politically a present ed man’ officially harassed and badgered, persecuted by the courts and tabooed by the press, But he added more to the wealth of German than the entire amount of the French indemnity. When the system was started it was almost impossible for a poor man to obtain a loan. Interest ranged from 50 per cent to 100 per cent and one instance has been recorded where 750 per cent was exacted. And yet, not withstanding the great benefit which these institutions brought to the people, there is no doubt that they are more capitalistic than co-operative They are open to the criticism of Father DeBesse of France that they are “fighting usury by practicing it." Almost every feature of them is capitalistic with a definite capitalization in shares with interest, usury and dividends and with fixed salaries and commissions to the responsible officers of the institutions Their success has been wholly due to the small element of co-operation which is found in their constitution, viz.: the unlimited liability of the members. In that way the members co-operate together to protect each other's credit and enable them to obtain loans which they could not do singly With this one exception, the Schulze-Delitzsch credit banks are pure and simple capitalism and while they have had a rapid development, and transact a vast volume of business, they have been subject to the same dangers that other capitalistic enterprises encounter. Failures have been frequent. Between 1875 and 1876 (one year) no less than thirty six associations ere declared bankrupt and 176 more went into liquidation In all cases however their failure has been directly traceable to greed and carelessness on the part of the officers and not to a failure of the principles of co-operation, as will appear later.
In sharp contrast to the Schulze-Delitzsch associations was the Loan Banks devised by Raiffeisen, a burgomaster in twenty five parishes in
In his official capacity Raiffeisen was brought in daily contact with the miseries of the poor during the famine of 1846 and 1847 The population was half starved ill clad, badly housed and badly brought up. By hard labor it could hardly eke out enough to keep body and soul together. The country was under the pest of remorseless usury. The people suffered in mute despair, deeming it utterly impossible to protect themselves from the exactions of the professional usurer. The whole district was turned into a usurer's hell.
Raiffeisen determined to take the cudgel and declare relentless war against usury. His first venture was a co-operative bakery. It was a signal success. It enabled the poor to buy their bread at just half the current price. He next started a Co-operative Cattle Purchase Association, which was again a success. The usurers, however, still held their money debts. To combat these, Raiffeisen now started his first bank with £300 which he had managed to scrape together. No one ever contributed a penny in share capital and yet from this small beginning, it has grown until it distributes its millions through its thousands of channels bringing comfort and plenty everywhere that it sets its foot. The usurers were compelled to relax their grasp and the people were given a new lease of life. Starting, as it did, in one of the poorest provinces in Westerwald, it has grown to enormous proportions with its branches reaching out all over Germany, Italy Austria and Hungary, with offshoots in France and Russia
Personally modest and unassuming Raiffeisen entered upon no noisy propaganda. He was content to work in his own limited way and sphere. It was five years before his second bank was formed and eight more until the third was started. After that, it was six years to the starting of the fourth. Since 1880 they have multiplied with great rapidity When in 1888 Herr Raiffeisen died a half of Germany mourned him as a benefactor No higher tribute can be paid to his practical good sense than this, that after a history of forty three years, out of more than 1,000 institutions established on his lines, and all dealing with the very poorest in their localities, they can boast that neither member nor creditor has ever lost a penny by them. This also teaches some further lessons that co-operation when organized on national lines, is applicable to the affairs of the poorest and most ignorant; and also that men, as a whole, are honest and upright in their dealings when it is possible for them to be so. In the face of such a history who shall say that co-operation is impracticable in any direction. Almost at the same time that Raiffeisen started his Loan Bank in
In the next will be given the details of the organization of the Raiffeisen Loan Banks