INTRODUCTION

CO-OPERATIVE banks have been before the world just about sixty years. In the words of M. G. Frangois, himself a banker
of standing, they have become a power in the world, a force to be reckoned with, a potent factor for good, for the democratisation of credit, for the relief of distress, for the creation of wealth, for the turning to account of industrial and agricultural opportunities. No country which has adopted them now wishes to do without them. Its leaders in economic opinion, its capitalists, its typical men of business may have expostulated against their necessity, have protested that there was no want, no room for them. The banks have come, and they have found wants waiting and uses abundant. Business has gravitated to them, thousands of needs for them have been discovered. Their merits have become known, recognised, prized. And they have proved most useful helps to social advancement and agricultural and industrial development. In Ge /many, where they have been longest established and have become most active in business and most powerful, they now provide millions of money to turn to productive uses, at the very points of the economic and social system that is, at the base of the pyramid where money help is most urgently called for, and can also effect socially and productively largest good. It is to the medium and small manufacturer and dealer, the artisan, the working man with the little needs of his household or his calling, the farmer and the small cultivator, that they bring longed for and valued help. A sovereign made available in that humble stratum, doubles, trebles, quadruples itself in little time and brings relief proportionately to the largest number. And the same quantity of gold diffused in that wide stratum produces more happiness and prosperity in a nation than when lumped together in heavy gilding at higher points. For a happy, well employed and well-to-do working class necessarily means a prosperous nation. From the bottom the benefit in this application rises to the higher strata much more readily and more effectually than it is apt to filter down through the impervious lining of capitalist pockets. And so the effect becomes spread out over the entire commonwealth.

In Germany, some 950 banks alone, of one particular type no doubt by far the best endowed and the most active according to well checked statistics, keep perpetually in circulation, for the payment of wages, the purchase of materials, in a word, in some shape or other making for employment of the labouring classes and the direct enrichment of the nation, that very “100,000,000,” on which Mr. Chamberlain, when addressing the Working Men’s Branch of the Tariff Reform League in May 1905, cast wistful eyes, declaring that with that sum to expend in additional wages he saw his way to doing great things indeed for the British working man. He thought he might obtain the money by putting additional duties upon foreign food stuffs and other articles. Co-operative banks have required no tariff, no increased import duties, no raising of the price of corn, to provide that ^100,000,000. It is produced by the people’s own efforts and thrift, and, being so raised, it finds employment almost automatically, very near the source from which it first sprung, in the most fructifying way. The need has in part first suggested the supply. No raid on the consumers’ pockets was required. Quite the reverse. Instead of taxing corn to produce the money, Germany, thanks to the good offices of co-operation of another kind, directly supported by co-operative banks, manages to raise the price of corn to the producer mainly by steadying it and rendering forced sales at times of cheapness, when they benefit only the speculating capitalist, avoidable by just that 2$. per quarter which Mr. Chamberlain has suggested as the proper addition, wherever co-operative granaries or grain storage houses are established and have been well conducted. In Austria and in Italy the result is only less in degree, but absolutely the same in kind; and hundreds of thousands of labouring and cultivating folk, small tradesmen and small dealers, steadily raise themselves from year to year in the social scale with the help of their co-operative banks, climbing up from rung to rung. Credit has now become accessible to the poor as well as to the wealthy in some shapes to the very poorest of the people. “It is impossible,” so remarked M. Luzzatti, with not unreasonable pride, in the course of one of his presidential addresses, ” not to acknowledge that we have delivered the small folk and the middle classes from crushing usury, that we have assisted commerce, and, lastly, that we have helped to cultivate throughout the fruitful tree of thrift on ground which previously appeared absolutely barren.” Aye, usury flees at the approach of co-operative banks, as mists do before the rising sun. Many a tale of such effect of theirs there has been to tell in the history of co-operative banking. It is the same thing everywhere, in Italy as in Germany, in Russia and Servia as in Austria. Moreover, usury only shows the effects of the want of working capital in their worst form. There is a milder form of pinch, more widely diffused, which in its aggregate effects hinders national prosperity even more. “Have you not made credit accessible to small folk to whom previously it was inaccessible, have you not popularised, democratised, decentralised credit, have you not taught people to bank, to place their money on deposit and draw it out when they need it; and do you not lend money to people who, even now, have no other bank to go to?” So I asked the manager of a People’s bank in the South of France, who, having high altruistic notions, considered mournfully that his bank was not doing enough. The answer to all these questions was distinctly in the affirmative. In fact M. G has done an immense amount of good without being fully conscious of it. The Raiffeisen bank makes it its particular aim to bring help to the impoverished, the neglected, the forgotten, provided that they can show that they are honest and have productive work offering, on which to employ themselves. The Italian banca popolare by means of its prestito di onore in a different way dives down as low.

Looking a little further afield, we find the self-same results apparent, proportioned to the time during which co-operative banks have been at work, in Belgium, in Hungary, in Poland, in Servia, in Romania. The tale is everywhere the same. A new cornucopia has been found for the poor which casts forth its fructifying golden showers, accessible to all who can show a claim to benefit by them.

And, while assisting people with credit for outlay which repays itself, the banks at the same time most effectually check improvident lending improvidence of every kind. “The best guarantee of a co-operative bank,” so urges M. Luzzatti, who originated the People’s banks movement in Italy, “is the moral worth of its members.” Co-operative banking could not exist where there is improvidence. The first step which a bank is bound to take, from regard for its own safety, is to make the improvident thrifty, the reckless careful in some applications even the drunkard sober, the evil liver well-conducted, the unlettered capable of using the pen. In this way it has become a moralising and educating agent of the greatest value to the nations among whom it acts. The effect is everywhere acknowledged and prized. It is the same in the plains of Lombardy and Venetia, on the banks of the Rhine, in the mountains of Thuringia, and in the newly broken deserts of primitive Servia. Accordingly, statesmen favour the
banks in some instances unfortunately to excess and priests and clergymen have admitted that the banks are more effective in raising the moral tone among their flocks than their own ministrations, in spite of all their sacerdotal authority.

It is foreign to the purpose of this book to repeat the description of the seemingly miraculous work of co-operative credit which I have given in People’s Banks, to tell the tale of the little villages of tumble-down cottages peopled with families of evil reputation, so much in debt that not only their wretched starving cattle, but even their ricketty furniture, had ceased to be their own, and they were held in helpless thraldom by the merciless usurer turned into homes of plenty, and order, good husbandry, good conduct, accumulating wealth ; to relate over again the history of the early struggles and eventual brilliant triumph of the little Italian Village bank, the very humility of which, in M. Rostand’s words, constitutes one of its main attractions ; to describe how this system of democratised banking has spread over whole realms, brought wealth to many thousands of villages, on a larger scale reformed national banking in great business centres, how, taking advantage of every opportunity offering, it has successfully raised itself to the position of a great financial power. My present business is rather with the machinery than with the results.

I must, however, for one brief moment dwell upon the enormous services which co-operative banks have rendered to the cause of thrift as, in M. Luzzatti’s words, “perfected savings banks.” I shall show in a subsequent chapter to what essential extent this work forms an integral part of their programme and their plan. In any case, by presenting themselves to people in a sympathetic form, they have conquered the affection of those people and much more actively stimulated thrift than ordinary savings banks could possibly do. And they have made such thrift serviceable to the country by abstaining from locking up the money which it yields in unprofitable State securities, sending it back, instead, into productive uses, so as to restore thereby to the local people the command of the money which themselves had first contributed, and so ensuring a double benefit.

Another point upon which I should, in passing, like to lay stress is the remarkable adaptability which co-operative banking has shown itself to possess. It has readily found for itself a place in Russia, as well as in Germany ; in Italy as well as in Hungary; it suits the Canadians, and it appears to suit the Indians. It fits into the economy of every race and every climate. And, as it shapes itself in accordance with varying national character, so it also proves applicable to every variety of business or calling. It helps the artisan to buy his tools, the working man to purchase his house, or household goods, the hawker his barrow or his donkey, the small cultivator to acquire his cow or goat, the small tradesman to buy his materials cheaply, or else to tide over a bad time when he cannot sell his goods except at a loss ; but it also provides working funds for large undertakings, such as co-operative dairies, the purchase of costly agricultural machinery, of motive power and the like, and it lends out millions, cheaply and more considerately than any other agency, on mortgages on land. It helps the individual and it helps the society. Although in its individual application it shields the humble, there is in its collective capacity nothing too large or too ambitious for it.

It has had a very powerful effect in cheapening money, reducing the rate of interest, and so making money much more accessible for productive purposes. It has, in fact, carried the world a good bit nearer to the ideal state in which cash is to become a mere commodity, freely purchaseable and saleable by and to any one ; and freer play promises accordingly to be given to intelligence, technical proficiency and moral qualities.

It is not surprising that such remarkable results should have impressed opinion to the extent of suggesting some almost thaumaturgic agency concealed under its homely face. It all
seems so wonderful! I hope to show that there is no more wonder-working about it than sound economic causes necessarily producing good results. We are apt to forget sometimes how much we have done on other ground by appropriate action, by democratising forces and spreading them out, reduced in price, over a larger area, to make the same quantity of material yield a very much larger amount of work no matter whether it be precious metals, or coal, or electricity, or warmth, or air. Democratised banking, that is, banking rarified so as to become more widely diffused and to penetrate into narrower nooks and channels, may be shown to have intensified the effective power of credit in the same way.

No more is it astonishing that the tale of all this useful work reaching our shores sometimes in rather distorted versions should have excited at any rate some, at the time, unfortunately still rather languid interest. In truth, it is in the outlying parts of our country rather than in the heart of the Empire that attention has been awakened. This is really perfectly natural. For wherever co-operative banking has as yet penetrated, it is specifically the poor districts rather than the wealthy that have shown themselves eager to take it up. The man who has got a little, and has become accustomed to old, humdrum ways fails to detect at once the advantages which co-operative banking offers him. His tolerable familiarity with business, which ought, as one would think, to lead him to seize upon it with readiness, and discover in it many benefits, does not help him in his stolid submission to the existing order of things. The man who has next to nothing, to whom i may be a boon and a treasure, who sees opportunities crowding in upon him, which, if small to others, are great to him, naturally has a much quicker eye. At the Co-operative Congress at Peterborough, when I read a paper on co-operative banking, the great leaders of the movement, princes of the Wholesale Society, and others with substantial deposits and investments laid up, pooh-poohed incredulously. Like Esau, they “had enough.” It was the poor, with their cottage plots, their little patches of potato and cabbage land, who insisted, with impressive emphasis: “We want agricultural banks.” In the same way, our British small folk generally, both industrial and agricultural, have evinced little eagerness for the new banking. The poorer and quicker Irish only needed to be told of it to detect in it at once the remedy of all others needed ; and the difficulty has, I believe, been rather to restrain them from forming “agricultural banks” recklessly, than to stimulate them to form such. The movement in Ireland is, after all, still small and humble. But it has brought substantial benefits to those who have joined in it, and the banks are loved and valued for their results. They have rendered help such as the older popular credit institutions, most notably the Loan Societies, so well known in that country, have failed to render. The beginnings of the little pioneer banks established in India under the Act of 1904, being necessarily adapted to local circumstances, are distinctly encouraging for the same reason. In India, where the terrible mahajan rules, distress is great, indebtedness is oppressive, and the need of help is pressing. Even at this early stage the pioneer banks have taught people thrift, which was not long ago looked upon as unattainable among them. Elsewhere, Canada, Jamaica and Barbadoes have experimentally taken action; and Canada already has some very
good results to show.

There seems ample reason for holding that in England and Scotland co-operative banks are wanted as much as elsewhere. The most conclusive proof is perhaps to be found in the various organisations already existing, as a kind of tentative embryo banks, to render at any rate part of the same services. Such are the old Friend of Labour Loan Societies, the Funding Clubs, the Slate Clubs, the Self-help Societies, one or two very well regulated societies formed specifically for the Civil Service, and some others of the same kind. Imperfect as their methods are, their services are in request; and there seems to be also a good deal of small lending- going on in friendly societies. By the side of this, in at any rate one of our best co-operative distributive societies, the same object, of providing money for members, is attained by making shares freely withdrawable, which enables members to purchase them when they have money and sell out when they are anxious to realise. This is very elementary. But all these things indicate the consciousness of the want of some appropriate agency for obtaining temporary accommodation in money. In Edinburgh there is a properly organised co-operative society, bearing the name of ” Co-operative People’s Bank,” which renders admirable service in providing working men with money wherewith to purchase their own dwellings, those famous Edinburgh ” flats.” Nevertheless the movement generally still hangs fire.

The reason, as I believe, is, that the question is not yet fully understood even in quarters in which one would look for better discernment. It would be ungracious to go into particulars. But the evidence is not far to seek. One telling proof perhaps is the ease with which well-meaning men, whom one would suppose to be possessed of greater familiarity with business, allow themselves to be decoyed into giving support to, and pronouncing their benison upon, schemes which have nothing whatever co-operative about them except the name, which in their case is clearly used as a “drawboy” only, and which threaten to lose their supporters their money schemes
which sometimes, though bishops and deans extol them as the coming friend of the poor, the Labour Department, more conversant with such things, refuses to recognise as at all co-operative. There have been several such already. I am regularly asked to join in promoting them, with a reward placed in prospect, and some passage penned by me quoted to recommend and accredit the venture; therefore I know about these things. But even where genuine co-operative banking is earnestly desired, it does not seem yet to be everywhere quite fully realised with what extreme caution and circumspection one ought to proceed, more particularly in the first stage; nor quite to be understood what are the moving causes and what the besetting dangers. It seems to be thought all only a matter of rules rules, unfortunately, often enough very arbitrarily drawn when in truth the important part is the principle ; and the rules, which must needs be elastic and adaptable, so as to fit in with varying circumstances, take only second rank. Acceptance of the tale of success coming from abroad seems sometimes to be held to be enough. It appears to be thought that understanding is bound to follow in the wake of belief. Banks are labeled this, that, or the other, according as they are marked by some outward mechanical feature which is supposed to make the sole difference between one type and another. The various systems are, however, not to be either learnt or taught in this rough and ready manner. And it is idle, when the relic blood will not liquify, to find fault with the Saint and call for State aid as a deus ex machina, since it will certainly not supply better knowledge, nor better results. It is only a good understanding of the principle, an intelligent application of the machinery, which will produce good co-operative banking. Mere mechanical rule-of-thumb management must needs wreck the bank. In People ‘ s Banks I have compared co-operative banking to a piece of machinery, in which every spring, every wire, is alive, and knows and consciously performs its duty, being endowed with the capacity of rendering discriminating service, according to the merits of each case, watching and checking the other parts. Such description I hold to be the only one at all capable of giving an idea of the work to be accomplished. It is useless, therefore, to look only to ” rules” as settling the matter. My hope and desire is that what will be told in the following pages will make the machinery of co-operative banking more fully understood, and so pave the way for more satisfactory experience.

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