Co-op Principles Then and Now (Part 2)

The co-op on Toad Lane was legally registered as the Rochdale Equitable Pioneers on October 24,1844, hence our reason for celebrating Co-op Month in October. The store opened for business on Saturday evening, December 21, 1844, the longest night of the year. After a full year in operations, the store had 74 member households, raised 181 pounds in capital, registered 710 pounds in sales and netted 22 pounds in savings. The average wage was a pound per week.

From the Toad Lane store sprang inspiration for the establishment ofsimilar cooperatives. Soon, throughout England and then the world, branch stores, reading rooms, department stores, tailoring shops and other cooperative enterprises were established. In 1844, 28 people began the Rochdale Co-op. Today, in the U.S. there are 100 million cooperative members and throughout the world over 700 million members.

Toad Lane yesterday and today

The co-op occupied the Toad Lane premises for twenty-three years. In 1867, the co-op moved down the lane into a fourfloor department store which the members had built to house their thriving business. The little store became a private shop. But as the power of cooperation grew, people coming to Rochdale from all over the world would inquire about the store which had given birth to modern cooperation. When they were shown 31 Toad Lane, they saw not the "Birthplace of Cooperation," but a shoddy little shop selling canaries and bird seed. At the 1914 Cooperative Congress it was therefore resolved to raise subscriptions to buy the building. Unfortunately, World War I impeded the campaign.

By the 1920s, enough money had been raised to buy the shop. The Cooperative Union and the Cooperative Wholesale Society drew up plans to restore the building to its original appearance, and the shop was officially opened as a museum in 1931. Between 1974 and 1978, the museum was closed to allow for extensive renovations and structural changes. The building is now in excellent condition. The renovated building and the Toad Lane Conservation Area was dedicated by Princess Alexandra on 13 May 1981. Along with the building next door, the short street is a well maintained attraction and one of the most visited sites in Rochdale's history.

The front room of the first floor of the museum depicts the simplicity of the original store with its meager supply of the shop's first few products: sugar, butter, flour, oatmeal, and tallow candles. Nearby are the benches where members waited to be served, the scale where their purchases were weighed, and the desk where their purchases were entered into the books of the cooperative. The rear room of the first floor depicts the history of the Rochdale Pioneers and the early leaders of the cooperative movement.

Originally a school and a chapel, which the co-op took over in 1848, were located upstairs. The co-op operated a library and classroom on the first floor, and a drapery and shoe repair service on the third floor. When the building was remodeled extensively in the 1970s, it was decided that the museum would be structurally safer if the third floor was removed. As a result, the second floor of the museum is a lofty and well lit meeting and exhibition hall. Around the walls hang many historical banners and photographs.

Rochdale is the mecca of any co-op pilgrim. To open the door and enter into the tiny shop where the modern cooperative movement began is a never to be forgotten experience for any co-op activist.

The original Rochdale Equitable Pioneers Society merged with the Oldham Cooperative Society in 1976 and then was absorbed into the Norwest Cooperative Society in 1982. A further merger made the co-op part of United Cooperatives. In 1989, the name of the Rochdale Equitable Pioneers Society was re-registered to revive the society as a supportive and promotional organization on behalf of the Pioneers Museum in Rochdale.

Greetings from the Mayor of Rochdale

On behalf of the citizens and the Rochdale Metropolitan Borough Council, I send greetings to all American co-operators in 1994. Little did the Rochdale Pioneers know in 1844 that their humble efforts to help themselves would have such impact. From the little shop which still stands on Toad Lane, the modern cooperative began its journey. Today, 720 million people in almost every country in the world participate in cooperative enterprises.

A 150 year anniversary is a special moment to both reflect upon the past and to plan for the future. I commend the American cooperative organisations for having the foresight to plan a "Cooperative Economic Summit." One hundred million cooperators working together on ideas and actions will have a powerful impact on your nation.

The ties between the co-operators of Britain and America have always been strong. Benjamin Franklin took the idea of mutual fire insurance to America and thus began cooperation in 1752. Many people from Rochdale became fervent cooperative . missionaries in America. From our cooperators you have learned about consumer cooperation, mutual insurance and building societies. From our cooperators we have learned about credit unions and agricultural cooperation. Sharing ourstrengths has bettered the economic and social life of the citizens of both countries. Your Cooperative Economic Summit can be a place to share your strengths.

One of the lessons learned from the Rochdale Pioneers is that "helping people help themselves" is a strong and most enduring form of economic development. The world has certainly changed a great deal in 150 years, but the need for cooperation among people remains. I am glad to see that you are focused on opportunities for cooperatives.

During 1994, Rochdale will welcome many co-operators to our town to participate in the anniversary celebrations of the Pioneers. On behalf of Rochdale, I'd like to extend a warm Lancashire welcome in particular to American co-operators. I am quite sure the Rochdale Pioneers would join me in wishing American cooperators all good fortune for a successful and forward looking Co-op Year.

Councillor Arnold Bagnall
His Worship the Mayor of Rochdale

Co-op Principles Then and Now
(Part 2)

Nineteen ninety-four marks the 150th Anniversary of the founding of the modern cooperative movement in Rochdale, England. From that small society there developed a set of practices and procedures which, formulated later as the Rochdale Principles, became guideposts to cooperatives around the world.

However, the principles of cooperation have been modified over time and are due to be modified again in 1995 in Manchester, when the International Cooperative Alliance holds its 100th Anniversary. Like most principles, especially those connected with economic activity, the changes in the post world war era have tremendously impacted the world we live in. However, each time the Cooperative Principles are re-framed, the important elements created in Rochdale are carried forward.

The Rochdale Pioneers adopted a series of laws, objectives, practices and procedures that assured their economic success. However, they never actually adopted as a group the specific set of principles known historically as the Rochdale Principles. Almost every major writer of the history of the Rochdale Pioneers has his or her own list of what the principles were, and each list is different both in content and number.

The Rochdale Principles were developed later, in the 1860s, as a means of consolidating the key elements of the success of the Pioneers in one set of easily understandable principles. It is important to understand therefore that the origins of the cooperative principles are not as clear as one would like. Nor is their development. The progress of the principles can be better understood within the historical framework of the times.

On October 24, 1844, the founding documents of the Equitable Society of Rochdale Pioneers were accepted by the government Registrar. Thus began the formulation of the cooperative principles. Most of the Pioneers were supporters of Robert Owen and Owenite causes as well as Chartism. Both these movements spoke of the development of another type of society, one with the goal of building self-help utopian communities separate from existing society. On the other hand, they recognized that existing society needed to be reformed, and great emphasis was placed on the development of employment, housing, democracy and equality.

The first statutes or goals as we would call them today were closely patterned after an Owenite society:

Laws and Objectives
of the Rochdale Society of Equitable Pioneers
Rochdale 1844

The objects and plans of this Society are to form arrangements for the pecuniary benefit and the improvement of the social and domestic conditions of its members, by raising a sufficient amount of capital in shares of one pound each, to bring into operation the following plans and arrangements.

The establishment of a store for the sale of provisions and clothing etc.

The building, purchasing, or erecting of a number of houses, in which those members desiring to assist each other in improving their domestic and social condition may reside.

To commence, the manufacture of such articles as the society may determine upon, for the employment of such members as may be without employment, or who may be badly remunerated.

That as soon as practicable, this society shall proceed to arrange the powers of production, distribution, education, and government, or in other words to establish a selfsupporting home-colony of united interests, or assist other societies in establishing such colonies.

That for the promotion of sobriety a Temperance Hotel be opened in one of the society's houses, as soon as convenient.

In 1844,1845, and 1854 the Society published a series of "practices," which were the basis for what became known decades later as the Rochdale Principles:

  1. Open membership.
  2. Democratic control (one man, one vote).
  3. Distribution of surplus in proportion to trade.
  4. Payment of limited interest on capital.
  5. Political and religious neutrality.
  6. Cash trading.
  7. Promotion of education

Let's look at the background to these principles.

1. Open membership.

A major difference between the co-op and other organizations. Almost every form of organization at the time was created to discriminate to ensure that its benefits went to its members who were of the same class, gender, masonic order or religion. The co-op allowed for everyone tojoin and for the newest member to pay the same to enter as the oldest member.

2. Democratic control (one man, one vote).

This one did not appear until the rules of 1845, although it is clear the co-op operated this way in its formation years. Although the principle was written this way (one man, one vote), a section of the rules of 1844 talks of the resignation of members in language that clearly anticipates both men and women leaving, therefore theirjoining. The important element here is that to a person the Pioneers were invested in democracy, especially through their involvement with Chartism, a popular movement which fought for one man one vote. The co-op, one of the first organizations to allow women to own property, went one step further and made it clear that there would be equality of opportunity for men and women to own shares in the store. However, they still spoke of one man, one vote.

3. Distribution of surplus in proportion to trade.

Charles Howarth, one of the original Pioneers is credited with developing this important principle. It is quite possible that Howarth borrowed the idea from Alexander Campbell, a Scottish Owenite who had visited Rochdale. Howarth, the Thomas Jefferson of the Pioneers, was looking for a way to reward loyalty and pay back the majority of profits to the consumer members. Profits to the user owner set co-ops apart from firms which pay profits to the owners of capital. The ‘divi' became the hallmark of the British cooperative movement and was copied all over the world. What the co-op needs is the patronage of its members.

4. Payment of limited interest on capital.

This principle is derived from the work of Robert Owen. He had developed it in relationship to his model mill at New Lanark in Scotland. Owen had set a fixed and limited interest on capital he borrowed to finance his factory. By paying a fair rather than speculative return, Owen was able to use the additional profits to provide better wages and working conditions to his workers. The intent of the Pioneers was to adequately reward capital but to use the majority of profits to reward usage. The other distinguishing element was that shares in the co-op were maintained at par value to which interest would be paid, rather than the shares being decided in the market and being generally related to profitability. The shares had a purpose as capital to be obtained responsibly, equitably and regularly from the members. The shares were not a speculation for profit but were necessary for the co-op to operate effectively on behalf of the members. The emphasis on the members providing their own capital was to ensure their economic freedom from the money lenders of the day.

5. Political and religious neutrality.

This principle was added because of Owen, who held a wide range of views on society which were very progressive for their day. A number of them were repugnant to many religious groups. Because many of the earlier co-ops were regarded as the refuge of Owenites they were boycotted. As a result, the Rochdale Co-op adopted this principle to ensure that the society did not become a lightning rod to the issues of the day which had no relationship to the co-op store.

6. Cash trading.

The Pioneers were well aware of the mistakes made by the earlier co-op in Rochdale which had occupied and failed at 15 Toad Lane a few years earlier. One of the major causes of failure had been extending credit to members as the other shops did. On the other hand the other shops then had to raise their prices to cover these losses. The co-op felt strongly that it would serve its members better if it educated them to budget their wages and buy at the co-op.

7. Promotion of education

This principle appeared in 1854 after the Registrar allowed co-ops to set aside monies for education. Prior to that the co-op had illegally set aside money for education. Initially the Pioneers focused on educating their members through providing courses, adult classes, lectures, newspapers and a library. Education was then a passport to prosperity and economic freedom. Through their education programs the Pioneers were to give their members the tools to get better jobs and gain newer skills. Later, as public education filled their role, the co-ops concerned themselves much more with the role of cooperative education.

In the 1860s the Rochdale co-op issued in its annual almanac a list of its rules of conduct. This list was the precursor to the formal Rochdale Principles. Of the nine items listed, five ended up in the Rochdale Principles: open membership; one member, one vote; limited interest on capital; cash trading; and education.

Two additional principles which are important to consumer cooperatives were left off:

  • That only the purest provisions procurable should be supplied to members; and
  • That full weight and measure should be given.

Two other almanac items relating to management and financial reporting were operational in nature and were also not included. Distinguishing between principles and practices has never been easy.

As the Rochdale Principles took shape it became evident that they more closely resembled the principles of consumer cooperation. While most co-ops in Britain were consumer owned, many throughout Europe and the rest of the world were not. Efforts were then begun to re-shape the principles to meet the need of an everwidening use of the cooperative model. The ICA efforts to look seriously at this problem in the l930's were put on hold by the outbreak of World War II. In 1945 in neutral Switzerland the effort began again. After a thorough review and with the hard work of a special committee the 1966 ICA Congress in Bournemouth, England met and adopted the following wordings:

1. Membership of a cooperative society should be voluntary and available without artificial or any social, political, racial or religious discrimination to all persons who can make use of its services and are willing to accept the responsibilities of membership.

2. Cooperative societies are democratic organizations. Their affairs should be administered by persons elected or appointed in a manner agreed by the members and accountable to them. Members of primary societies should enjoy equal nghts of voting (one member, one vote) and participation in decisions affecting their societies. In other than primary societies the administration should be conducted on a democratic basis in a suitable form.

3. Share capital should only receive a strictly limited rate of interest, if any.

4. The economic results arising out of the operations of a society belong to the members of that society and should be distributed in such a manner as would avoid one member gaining at the expense of others. This may be done by decision of the members as follows: a) by provision for development of the business of the corporation, b) by provision of the common services; or c) by the distribution among the members in proportion to their transactions with the society.

5. All cooperatives should make provision for the education of their members, officers, and employees and of the general public in the principles and techniques of the cooperation, both economic and democratic.

6. All cooperative organizations, in order to best serve the interest of their members and their communities, should actively cooperate in every practical way with other cooperative at local, national and international levels.

The next step in the development of the principles is now taking place. For the past four years the ICA has been conducting a worldwide study of the practicality of the principles. When the ICA Congress gathers in Manchester, England in 1995 to celebrate its 100th anniversary, the ICA will offer the delegates a revised set of cooperative principles. Look for recommended changes in the areas of democracy, limited interest on capital, and education. Anticipate references to community, the environment and the role of workers, and possibly a mission statement with a list of objectives.

The drafters of the revised principles are well aware of the social and economic changes occurring throughout the globe and that there are members of cooperatives and credit unions in almost every corner of the globe. There are greater numbers than ever before of people using a wider range of cooperatives to meet their needs. How can one set of principles provide a home for that many cooperatives? With their sense of the history and tradition of the Rochdale Pioneers and their belief in the potential and future of cooperatives, the authors will undoubtedly create a set of principles that will continue to guide us for the future.

See other articles from this issue: #053 July - August - 1994