productive cooeperative companies are found operating small factories.  In England, there have been numerous successful societies, but all in small enterprises, mostly connected with agriculture.  Within the whole field of industry, this method of organization makes little if any progress.  Most experiments have failed and the successful ones have become or are tending to become ordinary stock companies with most of the stock in the hands of a few men.  Therefore, whether losing or making money, they nearly all cease to exist as cooeperative enterprises.  This result has disappointed the hopes and prophecies of many well-wishers of the working classes.

Sec. 15. #Its main difficulty.# The main difficulty in producers’ cooeperation is to get and retain managerial ability of a high order.  Failure to do this results in inability to maintain and keep in repair the equipment and to pay the ordinary returns to the passive investment, and financial failure follows.  There is no touchstone for business talent, no way of selecting it with any certainty in advance of trial.  This selection is made hard in cooeperative shops by jealousies and rivalries, and by politics among the workmen.  A man selected by his fellows finds it difficult to enforce discipline.  In cooeperation there is occasionally developed good business ability that might have remained dormant under the wage system; some work-men showing unusual capacity cease to be handicraftsmen.  But the unwillingness on the part of the workers to pay high salaries results in the loss of able managers.  Having demonstrated their ability, the leaders go to competing establishments where their function is not in such bad repute, and where they are given higher salaries, or they go into business independently, being able easily to get the needed backing from passive capitalists.

Cooeperative schemes thus suffer from the workers’ inability to appreciate the functions of enterprise and management.  Most men make a very imperfect analysis of the productive process.  They see that a large part of the product does not go to the workmen; they see the gross amount going to the enterpriser, and they ignore the fact that this contains the cost of materials, interest on capital, and incidental expenses.  Further, they fail to see that the investment function is an essential one.  The theory of exploitation, as explaining profits, is very commonly held in a more or less vague way by work-men.  With a body of intelligent and thoroughly honest work-men, keenly alive to the truth, the dangers, and the risks of the enterprise, cooeperation would be possible in many industries where now it is not.  Producers’ cooeperative schemes usually stumble into unsuspected pitfalls.  When a heedless and over-confident army ventures into an enemy’s country without a knowledge of its geography, without a map, and without leaders that have been tested on the field of battle, the result can easily be foreseen.