CO-OPERATION AT OLDHAM.
AN " Oldham Coop," in the vernacular of the County Palatine, signifies an Oldham Co-operative CottonSpinning Company, for Lancashire folks are not wont to use four or five words when one will suffice; and others may adopt with advantage the convenient, if somewhat irregular, phrase which they employ. But it is well, for the benefit of the uninitiated, to explain that the Companies in question are not co-operative in the ordinary acceptation of the word. They are organised after the usual manner of joint-stock limited liability concerns ; there is a regular market for their shares, which may be held by anybody, and pass from hand to hand like the shares of an ordinary Company, and their fluctuations are duly recorded in the official list of the Lancashire Sharebrokers' Association. In one sense, however, they are co-operative ; for without the cordial co-operation of operatives and their former employers they never could have come into being, or, at any rate, have attained their present development. The capital for these enterprises is provided in two ways,—by ordinary subscription of shares, generally of small nominal value, and by loans ; and most of the shareholders, as also the majority of the lenders, belong to the operatives themselves, who thus practically own the mills in which they work. Yet it by no means follows that men hold shares in the concerns that provide them with employment. It may happen so, but it does not always happen, a peculiarity which is probably explained by the fact that a factory where many of the hands are shareholders is generally less successful than one where they are not. Discipline, which is as essential in a cotton-mill as an army, is not easily enforced in an establishment a considerable proportion of whose operatives are virtually the masters of the managers.
The distinctive features of Oldham Coops is their system of loans, a system which, together with some other advantages, has enabled them not only to overcome, but virtually to extinguish, the competition of private spinners. They are in effect both banks and factories. All take deposits ; and as they can afford a higher rate of interest than ordinary banks, they attract a great many. Some time ago the normal rate was 5 per cent. ; it is now 4 and 4-i. They accept sums as low as twenty shillings, payable on demand. According to the Official List of May 14th, the total amount of loan capital (exclusive of mortgages) held by the eighty-five mills whose shares are quoted, was about two-and-a-quarter millions, as compared with a paid-up capital of some four millions. Adding to the former of these sums the amount raised by way of mortgage, we have a total of nearly three millions of borrowed money. It is evident that no such proportion of his capital as is represented by these figures could be raised by a private mill-owner. He could not very well ask his operatives to lend him sums of twenty shillings and upwards without security, nor would it suit his purpose to invite confidence by the publication of a quarterly balance-sheet and an officially audited statement of his liabilities and assets. In other words, he is unable, save in exceptional circumstances and to a very limited extent, to trade on borrowed capital,—to reinforce the gains of manufacturing with the profits of banking. So being the unfitted, he has practically succumbed, and in many instances accepted the inevitable by turning his concern into a "coop." These concerns, known as "turnovers," are not generally in very high favour with investors ; for, other things being equal, old mills cannot compete with new ones. They are almost invariably too narrow to hold the wide selfactor mules now in vogue, which conduce to the greatest economy in production ; they are probably not fireproof, and have, therefore, to pay the highest rates for insurance against fire ; and being seldom fitted with the most improved engines, boilers, and shafting, are at a considerable disadvantage in the matters of even running, absence of breakdowns, and consumption of fuel. Hence old factories have, for the most part, been compelled to go to the wall, more especially as it is found in practice that joint stock concerns can be quite as efficiently, and even more economically, managed.
But there is no advantage without a drawback, and the very facilities we have enumerated are militating against the success of Oldham " Coops," and producing among them a fiercer competition than ever prevailed among their private predecessors. It is so easy now-a-days to start a cotton-mill. Old-fashioned spinners used to reckon that to build a big mill and set it going took two or three years. But building is now so well organised that the shell of a factory can be run up in a few months, and it must be a big one indeed that Platt Brothers cannot fill with machinery in one. Capital is, moreover, so easily obtained, and Oldham Coops have been on the whole so successful, that means for the erection of new mills are nearly always forthcoming. Even bad as times are, the dividends declared for the first quarter of the present year ranged from 3 to 13 per cent. (per annum), and the concerns that made no profit were surprisingly few. But this was due rather to an opportune though fortuitous rise in the market, than to the legitimate gains of trade ; and the advantage having disappeared, Oldham is now in the winter of discontent, and the immediate outlook is unsatisfactory in the extreme. " The rather better demand and steadier feeling that we reported in shares last week," says the Weekly Report of May 14, from which we have already quoted, " have entirely disappeared, and once more dull and inactive markets have become the predominant feature. On all sides, and in almost every department, complaints are common of the difficulty of getting investors to buy shares at anything near what are considered ruling prices. Quotations are not much altered, but they are adverse, with the tendency still downwards. The latest stocktakings are anything but encouraging."
This unsatisfactory state of things arises from the fact of increased production coinciding with a waning demand, the weaving branch of the cotton trade being, if possible, in a worse position than the spinning branch ; and there is not sufficient buying for export to make up for diminished consumption at home. There is, of course, a possibility that this depression may be only temporary ; but should it prove otherwise, the ordeal can hardly fail to be more or less disastrous for Oldham Coops, as albeit in ordinary times they are in a much better position than private enterprises, in bad times they are in a much worse position. They work, in great part, with borrowed money. In many instances, the proportion of loan to paid-up capital is one-half ; in some instances, it is threefourths. One large concern quoted in the Weekly List has £62,000 paid up and £101,000 on loan ; and there are said to be some not mentioned in the List whose position in this regard is still more unsatisfactory. Now, if the Coops do not make profits they cannot pay interest, and they sail so close to the wind, the competition among Managers and Directors to declare the highest possible dividend is so great, that few of them have put by any substantial reserve fund, or otherwise made provision for a rainy day. The consequence will be—unless a change for the better should speedily come to pass—that the depositors will want their money ; and as they cannot possibly get it (bricks, mortar, and machinery not being readily convertible into sovereigns), they will have to take the mills into their own hands, and work them. No bad look-out, as touching the depositors, for they would acquire going concerns at half their actual value, and a good deal less than half their cost ; but a very bad one as touching the shareholders, who must necessarily, should this contingency arise, lose the entire value of their shares.
We do not, however, for a moment anticipate either any permanent decadence of the cotton trade or a collapse of the Oldham Coops. The world must go on using cotton ; and as it is beyond question that Oldham spinners can produce cottonyarn more cheaply than any of their competitors, either home or foreign, their trade is not likely to leave them. But whatever may befall, and even if the Coops escape the danger that now threatens them, their managers will be guilty of something worse than folly if they do not take the warning seriously to heart, and reduce their liabilities within moderate limits. The system of unlimited borrowing on call is an essentially bad one ; it is incompatible with every principle of sound finance and safe trading, and, unless it be speedily abandoned, cannot fail to end in disaster and ruin. The remedy is in the hands of the shareholders. Let them resolutely refuse to take shares in any Coop which does not make it a rule to accept no more loans than it can easily repay, and none whatever the repayment of which can be demanded without notice.
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