EXPERIMENTS IN CO-OPERATIVE PRODUCTION.* PROFESSOR SEDLEY TAYLOR has done well

to republish his con- tributions to the discussion of the important subject of co- operation between capital and labour. He would have done better if, instead of contenting himself with merely collecting the disjecta membra of magazine articles and papers read to congresses and associations, he had reconstructed them, and made them into one organised body of doctrine and illustration. At present the essays are rather scrappy and disjointed, and though intrinsically interesting, they lose the further interest which might have been given them by a more skilful arrange- • Profit-Sharing Between Capital and Labour. Six Essays. By Fedley Taylor, M.A.. late Fellow of Trinity College, Cambridge. London ; Kogan Paul, Trench, and Co. 1884.

meat and.a greater embellishment of style. However, we must be content with what we have got, and be thankful to the author for the trouble he has been at in collecting the material of his book. There is probably no single topic in the whole range of theoretical political economy, or indeed in practical business and politics, which possesses the same importance as that discussed in this little book. The system of sharing profits between labour and capital is the only one which holds out the smallest hope of a lasting and adequate solution of the hitherto irreconcileable strife between employer and employed, between landowner and farmer and agricultural labourer, between manufacturer and workman, between shopkeeper and assistant. The co-operation of capital and industry is merely a development of that co-operation of capital which in joint-stock companies and co-operative stores has produced such enormous results and has under- gone such extraorjinary development in the last few years. But while the co-operation of capital has, in spite of many failures and disheartening disasters, conferred benefits which can hardly be over-estimated on the capitalist classes, and especially on people with small capitals, and has, no doubt, been the cause of great benefits to the working classes by the great development it has caused in the market for labour, yet it may be doubted whether it has not in many ways lowered, or at least not elevated, the position of the labourer. The managers of a company are bound to do the best they can for their shareholders ; and though sometimes they are generous with -other people's money for the benefit of their more important officials, yet it is questionable whether they are equally gener- ous or equally open to pressure when dealing with the rank and file. The well-known saying that a corporation has neither a body to be kicked nor a soul to be damned, forcibly -expresses the want of human sympathy which exists be- tween a company and its servants. It is not certain that the absence of individual relation between employer and -employed contributes even to the growth of personal independ- ence on the part of the latter. When we see the way in which railway officials play the part of dogs in office to the public, we may reasonably conclude that they are not over- scrupulous to the feelings or over-attentive to the wants and the necessities of their subordinates. There is less of a career open to industry and business genius in the service of a com- pany than in the service of an individual. Moreover, the sense of serving a company appears to produce that kind of dead- ness and general indisposition to all work except the irre- ducible minimum, which is apt to characterise the Govern- ment official whose shortcomings form Mr. Herbert Spencer's favourite theme. But whatever may be the disadvantages of the system of vast undertakings supported by the co-operation of capital, it is one that has grown, and is growing, day by day.

It is not too much to say that all its chief disadvantages may be removed, and the benefits it confers enormously increased, by adding to the co-operation of capital the co-operation of in- dustry,—by making the interest of the labourer identical with the interest of the capitalist. This can only be effected in one way ; and that is the way into which Mr. Sedley Taylor would guide us when he writes on the sign-post "Profit-sharing." The employed must be given a direct interest in the profits of the -employment, and an interest—not exactly perhaps commensu- rate, but an interest which, to use a legal phrase, ranks pari _pasta with that of the employer. The principle is, of course, no new one. The most ancient, and, in many respects, a most inferior, system of land tenure in Europe—that of the Metayer system; under which the profits of land are divided equally -between landlord and tenant—is merely a crystallisation of a particular and imperfect application of this system to agricul- ture. The absolute application of the system has always pre- vailed in the whale-fishing business ; and whenever commis- sions are given by way of per-tentage on orders got by com- mercial travellers, or on goods sold by linendrapers' assistants, or even in wages paid for piece-work in building, or mining, or what not, the principle is applied. Even when applied in the imperfect, piecemeal, unsatisfactory manner of the examples quoted, it works well. But it is its novel application in a direct, thoroughgoing, and logical manner to the great and compli- cated establishments of modern industry, and upon a permanent basis, to which the name of "profit-sharing" is par excellence applied, and to which Mr. Sedley Taylor calls attention in this book.

The essence of the system of profit-sharing is that, after allowing for a fixed remuneration at the average rate of the capital employed in a business, the remainder of the profits should be divided rateably between capital and labour, and between employer and employed (the two sets of terms are not always identical in meaning), in proportion to the extent to which they contribute to earn the profits. How that pro- portion should be paid is matter of detail, and important matter of detail; but the important principle is that every one should be given a share in the fruits of his labour. As a matter of fact, and by way of a rule which affords a roughly just measure, the proportion payable to each of the employed is fixed, in the first instance, by the wages which they are paid. In case of private firms, the wages of the employer or manager are fixed at so much, and his share is proportionate to the amount so fixed ; and the wages of every one else at the actual rate are taken as the measure of his contribution and claim on the profits. The method of payment shows greater variations : sometimes the whole profits are banded over every year ; some- times part is handed over and part capitalised to form a kind of insurance fund, payable on death or retirement ; sometimes the whole profits are paid to the reserve fund. Which is the best method of payment is, perhaps, open to question. Probably a mixed system of immediate and reserved payments is the best. But in any case, the essential feature is maintained—that the workman has a direct personal interest in the results of his work. The system has been at work since 1842. It has been tried in France, in Germany, in England, and in Ireland,—in the building trade, in railway companies, in assurance companies, in publishing and printing, in agri- culture, and in mining. In all cases the results of its work- ing were marked and beneficial. Some of the experiments were temporary, and in some the system broke down ; but in all instances it worked well while it lasted. The first experi- ment discussed by Mr. Taylor, that of the Maison Leclaire, the Parisian house-decorator's business, is so well known that it hardly needs to have further attention drawn to it. It is suffi- cient to say that its institution was due to a desire on the part of Leclaire, the employer, to get honester and better work out of his men. The result has been not only to effect that very desirable object, and largely to increase the profits of his business, but also to make his men capitalists on their own account while largely increasing their wages. Leclaire died in 1872, but the house still goes on, and continues to increase in prosperity. In 1842 £475 by way of bonus in respect of profits were divided among 70 men ; in 1872 the sum of £3,530 was divided among 600 men ; in 1882, 29,630 was divided among some 1,100 men. These sums were, of course, in addition to the regular wages received by the men, which amounted in 1872 to £29,000, and in 1882 to 242,000 ; while £62,000 stands to the credit of the "Mutual Aid Society," a kind of benefit society consisting of employes, which is a sleeping partner in the business, and as such receives a yearly payment of five per cent. on its capital,—£8,000, one-half the whole employed therein. These results speak for themselves. That they were not due merely to Leclaire's individual genius is proved by the fact that they have been realised at an accumulated rate since his death. That they were not due to the nature of the particular business, or to the nature of Frenchmen, is shown by the fact that equally good results have been reached in other businesses and other countries. For instance, M. Bord, of Paris, a pianoforte maker, tried a similar experiment in 1865, to avoid a repetition of strikes :—

" After deduction from the net profits of interest at ten per cent. on M. Bord's capital, the remainder is divided into two parts,—one proportional to the amount already drawn as interest on capital by M. Bord, the other to the whole sum paid during the year in wages to the workmen. The former of these two parts goes to M. Bord ; the latter is divided among all his employes who can show six months' continuous presence in the house up to the day of annual dis- tribution."

The result was that in 1867 the bonus divided, in addition to wages at the full market rate, was £1,529, equal to 17 per cent- on the wages paid ; and in 1882 was £5,205, or 20 per cent. on the wages,—showing that the business of the firm and the em- ployer's profits had increased with the increase of wages.

By far the most striking illustration of the good effects of the system is the case of its application to agriculture in Ireland so long ago as 1831, before even Leclaire had tried it in France. A large part of Ireland was then in a state of civil war, as in 1881 :—

" In the county of Clare in particular, all decent persons of all opinions affirmed that the country was no longer tolerable as a place of residence. The serving of threatening notices, the levelling of

walls, the driving-off of cattle, the beating of herdsmen, the compul- sory removal of tenants, the levying of contributions in money, the robbery of dwelling houses, the reckless commission of murder, were driving the better class of inhabitants to desert their houses and seek refuge in some other quarter. Mr. J. S. Vandeleur had the cour- age to undertake an experiment in participatory agriculture on an

estate of 618 acres, called Ralahine Nor was be deterred from, but rather confirmed in, his purpose by the treacherous murder of his own steward, perpetrated with at least the connivance of some of his own labourers. The agreement between the proprietor and the whole body of workpeople—men, women, and children, fifty-two in all—was that Mr. Vandeleur was to supply the land, buildings, implements, stock, and stores, and pay daily wages at the ordinary rate. The Association was to supply to the proprietor produce to thb estimated value of £900 for rent and interest on capital."

The net profits were to belong to the Association, but were to be expended, not in individual distribution, but in purchasing the live stock, and for other objects advantageous to the association, " with presumably ultimate division among the labourers." The experiment only lasted two years, as at the end of it Mr. Vandeleur lost his estate by gambling, and the new proprietor would not continue it. But while it lasted the steward said :—

" At harvest time the whole society used voluntarily to work longer than the time specified, and I have seen the whole body at these seasons act with such energy, and accomplish such great results by their united exertions, that each and all seemed as if fired by a wild, enthusiastic determination to achieve some glorious enter- prise."

One of the labourers said of the steward :— " Formerly we were looked up3n as mere machines, and his busi- ness was to keep us in motion. For this reason it took the time of three or four of us to watch him, and, when he was fairly out of sight, you may depend we did not hurt ourselves by too much labour ; but now that our interest and our duty are made to be the same, we have no need of a steward at all."

This experiment differed from that of Assiugton in that the control of the business—the determination of what should be sown and when, and the sale of produce—was left to the proprietor and his steward. Until the labourer has been educated up to a higher point, some such control is per- haps necessary. For one thing, if the control were vested in the general body it is highly probable that, having once established a substantial reserve fund, the . Association would wish to keep others out and become themselves in turn employers of labourers under themselves without participation in profits,—becoming, in fact, as was at one time charged against Leclaire's establishment, nothing more than a " combination of little masters." The Ralahine method is a useful stepping-stone to the more perfect Assington system, and, being less perfect and more in consonance with the esta- blished system, is, perhaps, more capable of immediate success, and more likely to secure its adoption by landowners and em- ployers. It is not every one who is ready to give up a position of power even for profits ; but when it is fairly brought home to them, every one would be willing to share profits with his labourers when he not only ministers to their well-being but in- creases his own profit too. We have not space to deal with the greatest English experiment in this direction—that of Messrs. Briggs's collieries in 1864-1875. Its breakdown was due to causes which are hardly at work now—intense and deep- Tooted personal hostility between trades unions and employers, and a somewhat arbitrary temper, perhaps, on the part of the particular employer. It is plain that to ensure permanent success the partnership between employer and employed should be put on a basis which cannot be altered without the formal consent of both parties, and the association should, if possible, be registered under the Companies Acts, so as to acquire an independent status.

This is the method adopted in the latest experiment of the 'kind in this country,—an experiment which already gives good hope of success. In 1883 a company was formed, under the auspices of Mr. Albert Grey, on the model of the Leclaire establishment in Paris, to carry on the same business—of painting, decorating, and furnishing houses. The Decorative Co-operators' Association, Limited, which has its head-quarters in Oxford Street, has a capital of £10,000 (of which half only has been issued) in £1 shares. The interest on capital is limited to 5 per cent. The profits, after payment of interest, are divided,—quarter to the managers, quarter to the " Mutual Aid Society " or Insurance Fund, and half to the workers and the Reserve Fund; 20 per cent. going to reserve and 30 per cent. divisible among the workers, in proportion to the wages earned by each. It is intended that, if the workers are willing, part of the bonuses should be paid in the shares of the company ; so that a ready way is provided for them of becoming themselves

capitalists and finding an investment for their savings. The company, though started as from February, only really got to work in the latter part of the year, but earned enough to pay nearly £3,000 in wages ; and the speed and earnestness of the workmen has given such satisfaction that additional workshops have already had to be provided. There is not the smallest doubt that the effect of the system must be satisfactory. A new source of profit is tapped in the saving of the expense of superintendence and the greater energy and thoroughness which a man puts into a job when a direct and immediate, as well as a future or indirect, benefit accrues by doing a job quickly and well. The experiment will be watched with close attention by every one who is interested in the pro- gress of the working.classes, and if successful, as no doubt it will be, we may hope to see it extended to other trades and tried on a larger scale. We heartily recommend Mr. Sedley Taylor's book to those who are desirous of seeing not merely what results may be anticipated, but what results have actually been realised by profit-sharing.