In principle, therefore, the member is free to join or to leave the society. But has the society the right to expel the member, if his presence should be deemed prejudicial to the interests of the society? Yes, in principle, and this right is provided for in the rules of the majority of societies. However, a recent law (1913) has placed a serious obstacle in the way of the exercising of this right, by exacting as a condition of this expulsion the calling of a special general meeting under conditions rigorously imposed by law (see later, Chapter XIII), that is to say, at least threequarters of the shares must be represented, and the decision must be passed by a majority of two-thirds of the votes. This is equivalent in large societies to a prohibition of expulsion. Probably when passing this protective measure for members the legislator was not thinking of co-operative societies; he does not mention them. A revision of this law seems to be necessary.

There is also the much discussed question as to whether a co-operative society should be open to all the members of a family, or to one member only. As a matter of fact there is generally only one person in a household who becomes a member of the consumers' society-the husband, although it is really the wife who does all the buying. As the purchases are made for the whole household it seems unnecessary for the other members of the family to join the society. They would have to pay the necessary sum to become shareholders, while neither they nor the society would gain anything-at least in turnover-because the store would not gain more custom thereby.

But it may be said that it is advisable for other members of the family-particularly the women-to become shareholders, in order that they may be able to take part in the general meetings and to use their influence in the administration of the society. Women are at present more or less excluded, owing to the fact that they are scarcely ever mem

bers. For this reason the Women's Co-operative Guild urgently presses for free admission of all the members of the family, for what English co-operators call open membership. Moreover, being a member has unquestionable value for young men and women, from the educational standpoint at least, and it assures the recruiting of new generations.

The experiences of several large societies which have adopted the principle of open membership seem to demonstrate that this system has the effect of materially increasing the amount of trade done by each family, contrary to what we might have expected. This may be due to a more constant frequenting of the shop by all the various members of the family, and a more active sense of social duty, once they have acquired the title of member.

Finally, this system has the advantage of increasing the proportion of the subscribed capital as compared with the amount of sales, as the family which was formerly content to have one share only now subscribes for several; we shall see in the following chapter that this increase of capital is highly desirable.3

3 Most of the Societies in the United States permit more than one member of the family to join. Usually, however, considerable urging is required before large numbers of women avail themselves of the opportunity.

CHAPTER IX

CAPITAL

(1) The Formation of Capital

The capital of co-operative societies is formed, first of all, as in all other forms of association, by the subscriptions of those who become members, that is to say by the subscriptions for shares. The French law of 1867, in order to make these payments possible for every purse, reduced the amount of a share in a co-operative society to £1, and by a recent law the maximum is fixed at £4, though for ordinary capitalist concerns the share is generally £20.1 The law also allows societies to be legally constituted on payment of one-tenth of the share, that is to say, the very small sum of 2s. per member. In England the share is £1 for both societies and companies. It was therefore not necessary to have a special law in favour of co-operative societies.

This is very little. Fortunately, consumers' societies, by the special nature of their business, do not require a large capital, for the reason that by their sales the capital renews itself rapidly, and even daily, as in bakers' shops, so that a small capital is enough for a large business. This is the

1 A few states in the United States have laws governing the value of a share and limiting the number of shares to a member of a cooperative. Thus New York State sets a share at $5 and permits no individual to hold more than 1000 shares. Generally, however, the local society is free to determine what value it wishes to place on a share and how many it will permit to a single member. There are societies which permit full membership privileges to the owner of one $5 share, and there are others which ask of each member as high as $50 or $100. Very few can get along well unless they receive at least $20 or $25.

principal reason for the success of consumers' co-operative societies as against producers' societies, from the point of view of ease of formation and speed of development.

Consumers' societies have been started and have succeeded without any original capital except a small entrance fee. As they buy their goods on credit from the wholesalers and sell them for cash to their members, they can start without money, except that necessary for their modest equipment.2 Thus the Bâle Society, which is one of the strongest in Europe (37,000 members, and a turnover of £1,080,000), started without capital, and an entrance fee of only 2s. 6d. In Belgium, the law does not require any subscribed capital. The Vooruit only requires an entrance fee of 10d., and 21⁄2d. for a pass book. These societies obtain sufficient working capital by selling tokens to their members, which serve as payment for bread and other goods. In Germany, the law permits the payment of one share of 1s. only but in practice the share is 30s.

Nevertheless, the capital accumulated under such conditions would be insufficient if the capital of consumers' societies were not endowed with the remarkable virtue of increasing automatically by the progressive additions of the dividends which the members often leave, either wholly or in part, in the hands of the society. Members are always asked to do this, and even compelled to do so when they have only

2 We know of very few societies in the United States capable of starting this way at the present time. Even the poorest of co-operators would advise that the group which could not raise any capital through the regular channels of assessment upon each member had better not attempt to organize at all.

Yet there are one or two exceptions to this rule. A society which was organized in Reading, Pa., in 1914 and began business with a capital of a bag of cornmeal, in 1921 had resources of $18,000. And a co-operative restaurant in Brooklyn was opened in 1910 without one cent of capital stock paid in, conducting its initial operations on $200 of borrowed capital. At the end of 1921 this Society had assets of $13,000, although not a cent of capital had ever been contributed by the membership.

Their divi

paid up a tenth or other fraction of their share. dends are retained by the society until the share is "freed," as it is called, that is to say fully paid up.

Not only do a great number of members leave their dividends on deposit with the society, but some bring to it their savings, as to a savings bank, either on current deposit or on deposit for several years.

If the capital of the British co-operative societies had been built up by the subscriptions for shares at one share per member only, that would only make a total capital for the 4 million co-operators of 4 million pounds, but the capital actually raised in 1920 was 76 millions.*

Thus the capital of societies is fed from three sources: (a) Shares subscribed on entrance; (b) dividends left on deposit or converted into shares; (c) loans from members. Of these three sources the first is the least important; the second brings in the most money, especially in England; in Switzerland, as we shall see, the third is the most important. Moreover, consumers' co-operative societies do not seek large amounts of capital, on the contrary, they are opposed to them. Many societies, by their rules, limit the number of shares which any member can hold, generally to five, following the example of the Rochdale Pioneers. In

3

* Author's Note. In this figure is included the figures for the two wholesale societies (almost £8,000,000). The capital of the retail societies was £48,240,000 in 1914, made up as follows:

In 1920 the share capital reached £76,000,000 and loan capital £10,000,000. The increase over 1914 is not in proportion to the increase in turnover.

The same miracle of the multiplication of pennies is realized by the individual members also. Thus, the example of a member of the Lanark Society is quoted, who, having subscribed for a few shares, left all profits with the society, and found himself after 36 years the possessor of £944.

3 Professor Hall is authority for the following statement: