October, 1851, found Schulze-Delitzsch in a very serious predicament. The continental preparation for a judge is not precisely the same as for a lawyer. He had never been admitted to the bar. He was out of a job, and practically excluded by the royal hostility from the only occupation for which he was peculiarly fitted. He was middle-aged and far too old to master a new profession easily. He had a wife and child dependent on him. The income from his wife's dowry was scanty, and his own savings were small In this predicament he returned to Delitzsch where his family was given a separate apartment on the second floor of his father's house. For several months Schulze-Delitzsch did nothing. Then he began to do some odd jobs as a law clerk, but for a considerable period his income was precarious, to say the least.

During all this time he had kept up his interest in his less well-to-do townsmen. In the anxious summer of 1849, after he had lost his position as Patrimonial-Richter and while the indictment was still hanging over his head, he had founded his first cooperative society. This was a friendly society of the type which provided insurance against sickness and death. It seems to have been similar to the English societies. But it is not likely that it was copied from them directly, for similar institutions had long before this spread into Germany. In the autumn of this year (1849) he founded two cooperative purchasing societies to be described later, and in 1850, the year of his trial, he founded a loan association.

This loan association, as started in 1850, copied the English model with which Schulze now seemed to be familiar through the writings of Huber. This society consisted of honorary members as well as beneficiaries. Even this association marked a step in advance, for in this organization, for the first time in Germany, borrowers were required to make

regular contributions toward the capital of the creditor society.' But when Schulze-Delitzsch was sent to Wreschen, the honorary members withdrew. This was partly because of his absence, but largely because of the general spirit of reaction which spread all over Germany in the years immediately after the unsuccessful revolution of 1848. Thus on his return from Wreschen Schulze found in his society only the beneficiary members, the would-be borrowers. And these too were in a bad way, for the society's capital had been mostly lost through unwise loans. By the spring of 1852 it looked as if everything he had ever tried had been a failure, and he was forty-three years old.

At this point Schulze-Delitzsch, without apparently realizing its importance in any way, made his greatest single contribution to progress. This lay in an apparently slight change in the constitution of his society. If he had striven to get in a new set of wealthy patrons or honorary members, perhaps the English history would merely have been repeated, certainly he would not have been the founder of a new type of society. As it happened, he merely accepted the situation as it then was, and reorganized the society on the basis on which it then existed-a society of borrowers only. It was thus the first really independent organization of small borrowers of the lower social class. Thus was created in 1852 his first people's bank.

Before taking up the history of this institution it is well to point out that these associations will have at least one advantage which no movement in cooperative finance had previously had. That advantage is thoroughly trained leadership. Schulze was, through Huber, Rodbertus and otherwise, familiar with the English and French experience. Through his service on the assembly's committee on peti

1 M. Fassbender, F. W. Raiffeisen in seinem Leben, Denken und Wirken, p. 103.

tions he was familiar also with the Prussian experience. His training in law at least warned him what dangers to avoid, while his experience as Patrimonial-Richter had brought him into daily contact with the needs and difficulties of the people he was to help. In addition to this, his own character was well adapted to the task. With one possible exception, certainly no other leader in cooperative finance has ever been so ideally equipped.

From the reorganization of this cooperative society in 1852 until his death on the twenty-ninth of April, 1883, Schulze's life was so absorbed in the cooperative movement that it can be profitably considered only in connection with that aspect of the movement which was his special interest, and to which he gave his name the Schulze-Delitzsch banks.

CHAPTER IV

SCHULZE-DELITZSCH: HIS PROJECT OF 1852

BECAUSE the organization of his first bank formed so decisive a turning point in his life, and because the plans for this institution are so important for our purposes, it seems worth while to study somewhat in detail the steps by which this bank was developed. Let us follow, then, the development of its business policy.

It will be recalled that in the summer of 1849 SchulzeDelitzsch founded a friendly society, and, in the autumn of that year, a cooperative purchasing society for cabinetmakers. Finally, in the winter of that same year, he organized a cooperative purchasing society for the master shoemakers of his village. These were the first true cooperative societies in Germany, if we accept as our definition of cooperative societies the following fairly common description; namely, societies, not for profit on capital invested, which exist to further the economic life of their members.1

In his own mind Schulze-Delitzsch's activity throughout was designed to benefit both laborer and small business man. Throughout he seems to have regarded the two as identical. Actually his work chiefly aided the small business man. The members of his associations were, at first at least, men of the rank of our shoe-repair men today, men running their own little shops and doing their own work. These men were handicapped in competition with the larger business enterprises and with factories by this fact among

1 W. Wygodzinski, Das Genossenschaftswesen in Deutschland, p. 16 ff.

others: they could not buy their materials in quantity and could not pay cash. They had neither money nor credit.

To meet this condition, the shoemaker's cooperative purchasing society secured a loan of $720.00 with which it bought in Leipsic a supply of leather. The size of this purchase enabled the society to buy at a lower price than its members were ordinarily able to buy. This supply the society resold to its members at an 8% advance. But, in spite of this increase in price, the shoemakers received their raw material at a price about 15% less than usual. The 8% profit of the society was for three purposes: paying the interest on the borrowed capital, covering the cost of management and building up a surplus in the society's coffers.1

But this purchase at wholesale, instead of solving the problem, served only to bring to light a second and more serious aspect of the master handworker's difficulties:the members of the cooperative purchasing society did not have the money with which to buy this cheap raw material from their own purchasing society. Credit in some form was necessary.

The cooperative purchasing society might itself perhaps have given credit. But at this point Schulze decided on a policy which since that time has been basic in the development of the Schulze-Delitzsch cooperative societies: namely, the separation of credit and sales.

Those who could pay cash were not to have the usefulness to them of their purchasing society handicapped by any credit risks. The high additional cost of goods at retail is in part due to just this credit risk. The good customers and the cash customers are charged enough to cover the losses due to the bad debts and the expense of collecting from some of the credit customers. But the ordinary re

1 W. Wygodzinski, op. cit., p. 17.