Mutual Service – Chapter 6

COOPERATIVE BUSINESS ORGANIZATIONS IN THE UNITED STATES

Dividends of Cooperation

While pure cooperation is not a system of profit-making or profit dividing, still there are a

number of societies which do make and divide profits. In his book, “Consumers’ Cooperative

Societies,” that· world renowned economist, Prof. Charles Gide, says: “There

are a number of societies which pay more than 20 per cent. In France, the consumers’

societies of the miners of Anzin pay a dividend of 20 per cent, that of Saint-Remy-sur-

Avre paid 13 to 15 per cent for a long time, and that of Geneva had paid 13 per cent for

the last twenty years. There are also a few socialist societies in Belgium and France,

particularly in the Department du Nord, which pay even higher dividends-thus the Roubaix

Society pays 28 per cent, and the Vooruit, of Ghent, paid 38 per cent before the

war.”

From this it appears that cooperation is a good dividend maker when used for that

purpose. Those societies also render service while making their profits, and the ordinary

citizen receives the dividends. Of course the cooperative method can be used to make

profits. It has been used extensively by great combinations to benefit its members at the

expense of the outsiders. But pure and undefiled cooperation does not mean exploitation,

but service to all who will partake of it. All can join a cooperative society and share

equally in its benefits. This is not true of the great closed corporations of -capitalism.

They are formed for a few members only, who share equally in its benefits.

Cooperative Apartments 100 Per Cent Successful

Statisticians estimate that the amount of money now invested in cooperative apartment

buildings in the United States exceeds $500,- 000,000. People in New York City have

investments in these apartments amounting to over two hundred million dollars furnishing

homes for 70,000 persons. This has been a development of fifteen years.

In all of the large and progressive cities of the United States, cooperative apartment

buildings are being erected. New York City, because of its vast population, has more

such apartment buildings than have smaller cities, but this does not mean that they are

not a success in small cities, for they have been successful there as well. Champaign,

Illinois. with less than 20,000 population, has six such buildings. Long Beach,

California. has more than twenty of them. Chicago has over two hundred: There are

dozens of such houses in Washington, D. C., Detroit, St. Louis, Baltimore, St. Paul, San

Francisco, and Los Angeles.

The Chicago “Tribune” of August 1, 1926, says that people have invested in the “own

your own apartments” in Chicago over $100,000,000. The “Tribune” goes on to say:

Capital’s Attitude

“Twenty-five years ago it would have been extremely difficult to obtain a Joan for a cooperative

enterprise from any important American financial institution-although the

safety of ‘coop’ loans has been tested for over a hundred years in European countries.

But today the big life insurance companies. savings banks and other financial institutions

have hundreds of millions of dollars loaned on property operating cooperatively.

They, of course, are exacting in their requirements. They must be assured that the plan

of ownership and operation is built on sound, safe principles. They must know the location

(site) and construction make their loan secure. Their engineers watch every stage

of the construction. Their experts appraise the whole. All of which tends to verify the

owner’s judgment in buying an apartment in a building carrying a first mortgage loaned

by a responsible financial institution.”

The “Tribune” says that a list of the owners of cooperative apartments in New York City

is “like a ‘Blue Book’ or a ‘Who’s Who’ in itself. We have not the space to list them, but

here are a few: Chief Justice Charles Evans Hughes and former Secretary of State

Elihu Root, Mrs. William Vanderbilt, Percy Rockefeller, Henry F. DuPont, Edward W.

Swift, Stanley Field, John T. Mitchell, John G. Shedd, etc.”

The National Association of Real Estate Boards in 1924 found it necessary to establish

a cooperative section in response to a nation-wide demand from its members for information

and comparative statistics relating to financing, building, sale, and operation of

such properties.

The New York “World” of August 1, 1926, says:

“Cooperative apartments are selling much faster with the aid of Realty Acceptance Corporation

organized by Henry C. Montgomery to make buying easier .

‘Business closed by us during July, both in volume and loans to purchasers of cooperative

apartments, was twice that of any similar period since the corporation was organized

eighteen months ago,’ said he yesterday. ‘Our advisory committee is composed

of the principal real estate brokers, architects and builders active in promotion and sale

of cooperative apartments, and they report that buying during the first six months of this

year has been greater with demand constantly increasing, more than $200, 000,000

now being invested in this class of building in New York City, principally east of Central

Park and south of 59th Street.”’

The price of apartments varies from $20,000 to $150,000. On Fifth Avenue, New York,

seventy-five thousand dollar apartments are quite common. Many of the palatial homes

there have given way to apartment houses, as the value is too great for even millionaires

to hold longer as homes. Many of them now prefer owning an apartment to running

a home; they are saved the trouble as well as the expense. Very few feel the need

for the old-fashioned method 01 entertainment in their homes; public entertainments

have replaced it. So apartments are not only efficient, but fashionable as well.

In an article on “Own Your Own Flat” in the “Saturday Evening Post” of October 17,

1926, Mr. Frank Parker Stackbridge states that “The Vanderbilts have sold two or three

of their Fifth Avenue mansions, and their kin and kind are buying cooperative apartments,

where they can retain all that makes a Fifth Avenue address desirable at a tithe

of the expense of keeping up a home.”

This writer further states that: “A man of quite moderate means, however, as such things

go in New York, can own a slice of air on Fifth Avenue. Twenty-four thousand dollars will

buy a space big enough to be properly termed a home in one apartment house, which,

by the way, was completely sold out, from the plans, months before it was completed.

That is not the highest price, nor the lowest. The twelve room and five-baths apartments

sold for from $34,000 to $75,000. Ten-room spaces with four baths brought from

$20,000 to $45,000.”

Nice apartments in good neighborhoods can be obtained in most cities for a few thousand

dollars. By combining through cooperative purchase, apartment owners can have

their homes in an exclusive neighborhood in the finest kind of buildings, with service

equal to the finest hotels, at about one-fourth the price.

There are two plans for owning your own apartments one as an investment, the other as

a home. The first is classed as a “Semi-cooperative” plan and the second as pure or

“100 per cent Cooperative.” The first plan permits the investor to rent his apartment to

another, the second permits owners only to occupy the apartment.

While owners only occupy these houses they can and do hand-pick their neighbors. By

choosing their neighbors, they avoid social conflict, racial prejudices, business enmities,

a different code of social ethics. The fact is those with the mutualistic spirit or cooperative

tendency are the highest type of humanity, and when they assemble they have the

highest type of society on this old earth. The 400 rule is exclusive, the mutualistic is inclusive.

The owner of an apartment is under no more obligation to associate with other occupants

than he would be in a hotel or general apartment house. but if he does so wish he

has the assurance that they are persons who have passed the same standards of manners

as have been applied to himself, and so are not going to intrude upon his privacy

or otherwise annoy him by doing things which he would not think of doing,

The maintenance cost of each apartment is determined by the number of rooms and

their location in the building. Usually the owner’s lease runs to himself, his heirs or assignees

forever. Each owner agrees to pay, in monthly installments. bis share of the total

cost of maintaining and operating the building. A certain part of each monthly payment

is set aside for the amortization or paying off of the first mortgage on the property,

for the paid-in capital stock seldom equals the total value of the property. The corporation’s

equity usually runs between 40 and 60 per cent of the total value of the property.

This provision for the amortization of the mortgage is Ollie of the assurances the owners

have that their investment is not going to depreciate.

By owning their own apartments people have relieved the pressure of high rental rates

and saved to themselves from 30 to 50 per cent of usual rentals. These purchases are

made by a small down-payment with monthly installments. which in about five years

saves more than the original purchase price. The purchaser saves the operating expenses

and the landlord’s profits, and makes himself the owner of real estate instead of

worthless rent receipts.

Bankers regard cooperative apartments as strong security because the permanent residence

of the owners gives assurance of upkeep and lessens operating expenses.

Apartments are sold to responsible persons only, which greatly increases the security.

There is no doubt that cooperative housing is basically sound, as the history of loans on

such properties prove. The life insurance companies lend a high percentage on first

mortgages in cooperative buildings.

Cooperative Business Organizations

There are a number of organizations in this country that combine the profit-making system

with the cooperative method for the benefit of their millions of members. That is,

these organizations stand about half way between the corporations and pure cooperatives.

There is a general impression that the joint stock company in business, banking,

and finance, is doing about all of the business in this country, but there are large fi-elds

from which they have been practically excluded by the advancement of the business

cooperative organizations. The following constitute the principle organizations of this

character:

The number of mutual building and loan associations in the United States in 1927 were

12,800, with a membership of 11,275,000 persons and assets of $6,280,000,000. In that

year, it is estimated, 450,000 homes were financed by these associations, which loaned

about $1,600,- 000,000 for home construction purposes. The fraternal life insurance societies,

with $340,- 485,532 of assets and $8,687,939,447 of policies in force; the old

line companies, or most of them, with $8,652,318,490 of assets and $50.- 290,710,180

of life insurance in force; and the savings hanks with 10,057,435 depositors and

$6,904,825,000 of assets, are of the pure associations form without any capital stock,

and, excepting the savings banks, are largely cooperative. The 5,424 farmers’ associations,

which did over $2,200,000,000 of cooperative buying and selling last year. are

mostly of the non-stock type.

The credit unions have been in existence in the United States sixteen years. Massachusetts

has about 100 of them j New York has 115, other states have anywhere from one

to fifty. There are 24 states which have enabling legislation that permits the organization

of credit unions, and their rapid development is assured. New York, in 1924, had a total

membership in these credit unions of 67,500, with resources of $10,500,000 and total

share capital of $8,578,000.

The Associated Press, which distributes the news of the world twice a day throughout

the land, is a non-stock association j and its constitution and by-laws are one of the very

best examples of how a membership corporation can be cooperatively used for economic

purposes.

Some of these organizations have been in existence for seventy years, proving that

they are not a fiy-by-night kind of enterprise. There have been but few failures in these

lines, far less than in any other business known to the writer.