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a few years ago did not exist in this country. I believe in 1909 the first cooperative law was put on the State statute books. That was the California law, and it was an outgrowth of the movement particularly among the citrus fruit people in the lower part of California to devise a pyramided central selling agency.

The general, world-wide cooperative organization is what is known as the Rochdale Association. That is a capital stock corporation with certain fundamental limitations to it, based upon a recognition of the public service character of the society.

In 1911 Wisconsin, the State from which Senator Walsh originally came and the State where I now vote, produced the first cooperative type of law. This was the result of a conference between a very great authority on legislation, Dr. Charles McCarthy, who is now dead, and Sir Horace Plunkett, a very great authority on the British law. It resulted in the production of a bill based upon the theory that a cooperative corporation is something fundamentally different from a capitalistic form of corporation.

The principles embodied in the Wisconsin act are these: First. It is democratic. It provides for one man one vote. That means that it is organized around the individual and not the dollar. Second. It is created for service to members and not for profit to the corporation. To that end there is a limitation of dividends on capital stock, but it is recognized that in some types of cooperative organization it is necessary for farmers to have some capital stock. The Wisconsin law limits the dividends to 8 per cent at the present time.

It makes a further contribution to the theory of public service in that it requires a patronage dividend. It holds that cooperation is nonexclusive in character, because this law requires that nonmember patrons may benefit without joining, and at the same time have the privilege of joining if they care to.

To explain that further, it means that in the dividends nonmember patrons of a cooperation are allowed to share on a patronage dividend. basis, in a certain proportion according to the volume of commodities that they either sell through the association or buy from it.

In addition, the society or association must conform to certain specified requirements.

Its educational character is recognized in the requirement of a certain percentage of the profits being set aside for educational purposes. Its public nature is also recognized in provisions requiring publicity as to its affairs, just as we recognize the public nature of national banks by requiring inspection and publicity respecting their affairs.

Sir Horace Plunkett, whom I have just referred to, in a very interesting book on the country life problem in America, has this to say about the essential differences between the capital stock corporation and the cooperative. He says:

The distinction between the capitalistic basis of joint-stock organization and the more human character of the cooperative system is fundamentally important. It is recognized by law in England where the cooperative trading societies are organized under "The Provident and Friendly Societies' Act, " and the credit societies under the "Friendly Societies' Act."

Mr. Chairman, I find also that the Russian recognition of the cooperative movement is of fundamental importance in this connection. During the last year of the war I was sent abroad on mission for the Food Administration. Among other things I was charged to

study the food supply of Siberia and to make a study of the agencies there that were distributing food there. I found at the time I went into Siberia, in the fall of 1918—and I came out in 1919-that private business had broken down entirely; that the only agencies which had been strong enough to withstand the chaotic conditions which prevailed and during part of the time that I was in that country there was no government whatsoever the only threads that held together the populations were the four great cooperative agencies in Siberia. At that time it was estimated by the Russian authorities that approximately 80 per cent of such food supply as the people had, and such necessities of life, was being distributed through these organizations.

I made some inquiries, and after two or three months I was able to locate a copy of the law under which the Russian cooperatives worked. I found that under the old Romanoff government the monarchists feared the democratic influences of permitting local cooperatives to group together for the common sale of their products. Consequently, there had been a ukase forbidding this type of pyramiding to go into effect. But the center of the movement, which was at Moscow, recognized the essential need of a legal basis, and for several years they had been working and perfecting a cooperative law.

When the Romanoffs were thrown out, and the Kerensky provisional government came in a provisional government which the Allies recognized and worked with one of its first acts was to pass this enabling act. I had that translated, and I found that it was based upon the old Provident and Friendly Societies Act of Great Britain, just as our Wisconsin law also had its outgrowth from that act.

Under the Kerensky act, cooperatives are permitted to do everything that, and more than, is asked for in H. R. 2373.

One other point in that connection. Denmark is widely advertised as the most cooperative state in the world. The other night I was reading a book by Frederick C. Howe, in which he shows that approximately 90 per cent of all the farmers in that country are organized into one or more of 15 different types of cooperative societies. Naturally, I was interested in the legal basis of cooperation, and I find that Mr. Howe says this:

The cooperative movement is wholly voluntary. It receives no subsidy from the State, nor is it subject to reduction of any kind.

And further:

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The cooperative movement is the great cohesive element in the democracy of Denmark. * Cooperation has not only eliminated excessive and needless overhead expenses, it has changed the social structure of the country.

The Danish Government does not fear any harmful effect of a cooperative monopoly because the Danish Government has learned that there is something in the cooperative movement which we may call idealism, a practical idealism. And that the benefits both to town and to country are so great that it can permit the farmers' cooperatives to do very much as they please.

As to fears which may be entertained in connection with farmers forming a monopoly, I shall not undertake to say what a monopoly is. No one in this hearing has yet defined it; but, Mr. Chairman, I would call your attention to the fact that the ordinary corporation laws and I do not speak as a lawyer, but only as a student of the cooperative movement and as a hired man of farmers-permit at

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the present time the formation of huge aggregations of capital wherein the stock votes. Such are the U. S. Steel, the International Harvester Company, which deals very intimately with farmers, Standard Oil, and the great food combines such as Swift, Armour, Cudahy, Wilson & Company and Morris Brothers. In addition to that, sir, the conditions of organization, as we have attempted to show, prevent farmers from using successfully this particular type of corporate organization.

I do not know of any better way to illustrate that than to refer to the experiences of the Grand Junction Fruit Growers' Association out in Colorado, which I investigated some years ago. They had formed originally as an ordinary corporation, and in those days all of the growers took stock-that is, all of the growers who desired took stock-in the organization and attempted to market their products.

In the course of time land boom came to Grand Valley, and prices of land went up in some of its districts as high as $3,000 or $4,000 per acre. The wise farmers in that community promptly sold their land to new people, whom down in Texas we call "home suckers," but most of them kept their stock in the Grand Junction Association. Within a very few years there came a fight between the growers who desired to secure a living price for their apples and the former growers who were stockholders and who desired to make a profit on the work of their corporation. That resulted in reorganization after reorganization.

I could duplicate that story by hundreds of stories showing why farmers can not successfully use that type of corporation to carry out their work. The larger the corporation the more stockholders and the less efficiency there is for farmers.

Section 6 of the Clayton Act gives the same right to nonprofit nonstock organizations by saying:

Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws.

Yet I have undertaken to show, by a list of requirements, that the cooperative capital stock corporation formed under such advanced theories as are found in the cooperative law of Wisconsin differs from the nonstock, nonprofit organization listed under section 6 mainly in only two points: (1) It allows farmers to provide the capital necessary for transacting their affairs; (2) it permits nonmember patrons to share in the benefits of the organization.

In answer to the thoughts brought out in respect to monopoly, cooperatives hold that largeness is not necessarily a condition of evil. Largeness is, however, in this day, one essential of successful and economical production and distribution.

Mr. Chairman, if the cooperative movement-which I might have said a little earlier in my testimony has proven to be a bulwark against bolshevism in Siberia is not permitted to follow its logical trend, we may find that farmers will have to compete with corporate farming. In connection with my studies of the Texas land question I ran into a most remarkable condition down near Corpus Christi in

what is known as the Taft Ranch. There is a tract of about 80,000 acres on which some 4,000 souls live. It is owned and operated by a corporation and by subsidiary corporations. Fourteen thousand acres of this land is operated on a farming basis, and the remainder is operated on a ranching basis. The farms are handled by a combination system of tenant and manager.

In studying the economies of farm management, the corporation has found that certain types of implements should be used for the 12,000 or 14,000 acres as a whole. In other respects, however, each individual manager on each farm of a 1,000-acre unit is required to manage that farm as if he alone were controlling it. But if he wants a tractor, or if he wants a threshing machine-it does not happen to be threshing machines down there but if he wants some labor gangs, or if he wants an extra number of horses for a particular part of the work, there is a supplementary reserve force which is kept by the general superintendent. This force of men and implements is moved from farm to farm. They have found that to do this enables them to produce cotton and forage stuffs more economically than by the individual unit system.

On top of that combination of agricultural and ranching activities they have built cotton gins, a cotton-oil mill, a packing plant, and a dairy. They sell their cottonseed to their own cotton mill. Their cottonseed meal goes to their ranching department. They sell their hogs to their packing plant, and such part of their beef as the packing plant can use. The only thing that goes off the ranch is the cottonseed oil and the surplus products from the beef ranch.

In addition they have erected stores and banks, and the entire population thus purchases its entire necessaries of life from the company, paying a large percentage of the wages which they receive from the company.

I speak of that without any critical feeling, but only to illustrate the type of competition which farmers are facing in this country. The only way in which they can meet this competition is by the cooperative use of the instruments of production. On the other hand the only way they can meet the large aggregations of capital that are now engaged in exploiting the facilities of distribution is by having their own machinery with which they can reach the consumers.

The fight of the cooperatives is not with the consuming public. It is to get closer to the public by eliminating needless waste. An example of this may be found in the present effort of the Maryland and Virginia Milk Producers' Association. It is a small matter, but it illustrates the attitude of our associations who are trying to persuade Washington restaurant and hotel keepers to sell milk in pint bottles for 10 cents a pint. The June price received by the producers of this district is 3 cents per pint, and we feel that the present price of 10 cents a glass, and 15 cents in pint bottles, is highly exorbitant, We feel that this tendency to maintain a high price is having a tendency to restrict consumption. The farmers of the country are just now very deeply interested in extending by every means possible the field of consumption in the products that they are producing.

They are asking authorization as to structure. They are volunterily placing themselves under supervision. That is because they racognize that the cooperative movement is semipublic in its char

acter.

Right on the floor of the Senate yesterday and to-day the fight is going on to put a supervision over the Chicago packers. The packers are opposing any form of governmental supervision. The cooperatives are asking for authorization for a certain type of supervision. I think that their willingness to have this must be accepted as a proof of their desire to keep within the ethical standards of conduct and at all times within the law.

Senator Walsh, the other day you asked the opinion of some of the gentlemen present as to why, on line 8 of H. R. 2373, there had been a change in the phraseology to read now, "Such products of persons so engaged," and you also asked for information as to the authorship of the present act.

The movement for this legislation originated in the National Board of Farm Organizations, on the initiative of the National Milk Producers' Federation. The original bill which was introduced in the Senate by Senator Capper, and in the House by Representative Hersman, asked more spedifically than does the present bill for exemptions. The bill as it now reads is almost entirely the product of the mind of Representative Andrew J. Volstead, of Minnesota. In preparing it he called into conference some of our representatives. The present bill contains that change, which was entirely at the instance of Mr. Volstead, and because of the fact that representations— I believe I am correct in this-had been made from such States as Wisconsin and Minnesota and other States where there are Rochdale types of cooperative laws such as I have explained this morning.

In Wisconsin we require that a cooperative association shall distribute dividends to nonmember patrons. Consequently, on the theory that the cooperative movement is still evolutionary, and that the Federal Government must or should be guided somewhat in its conception of legislation by the practices which prevail in the States where cooperation is most advanced, this change was made in the bill.

The question was also asked as to the price-fixing powers of the Secretary of Agriculture in connection with this act. We do not feel that at the present time price fixing is necessary. Price fixing by the Government carries with it the moral obligation to sustain price. I remember, Mr. Chairman, sitting in with Mr. Cotton and Dr. McCarthy and Mr. Hoover and the Chicago packers when I was an employee of the Food Administration, when the proposition was put up to the packers that they undertake to stabilize the prices of hogs on the hoof. The packers at once came back with the proposition, which the Government had to meet fairly, that the naming of a price by the Government necessitates that the Government shall undertake to sustain the price. Before it was possible for Mr. Hoover in the fall of 1918 to issue a statement in which he said that he would undertake, in so far as it was possible, to make a price for packers' droves on the ratio of 13 to 1, he had to negotiate with the allied export purchasing commission, and even with the diplomatic representatives of the other nations, to make sure that contracts could be made which would stabilize the price, or give anything like a stabilization. I was not in the country at the time when Mr. Hoover's promises fell due, and I am not advised intimately as to whether the Government ever kept its promise to the farmers. Likewise, when the fair-price commission named the price of wheat

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