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I want to say this, Mr. Chairman, that I am not here this morning to speak with any finality on this proposed legislation, but if I may put it in this way, to have a conference with you as to what the effect thereof will be.

The CHAIRMAN. Have any of the organizations that you represent passed upon this particular legislation ?

Mr. MARSH. Upon the principle of cooperation?
The CHAIRMAX. This particular legislation.

Mr. Marsh. Yes; they have very specifically declared we must change our system of marketing.

The CHAIRMAN. Upon this particular bill has there been any expression?

Mr. MARSH. No; this bill was not introduced at the time this conference was held.

The CHAIRMAN. Do you know if any of the organizations for which you speak have taken any action on this particular bill?

Mr. Marsh. I think not. Representatives have been here from time to time, and we have discussed the general principles of this bill. It is this point I would like to take up regarding this proposed legislation, and I would also state that we go a good dea] further on cooperation than the proposed legislation in itself, since the conference adopted unanimously a resolution in favor of Government ownership and operation of the railroads and merchant marine, realizing that transportation is vitally bound up with the success of cooperative organizations.

Mr. CURRIE. Was this action taken by the national meeting to which you referred?

Mr. MARSH. Yes; by the Farmers' National Reconstruction Conference.

Mr. CURRIE. And at that time there were various great problems relating to the reconstruction discussed?

Mr. Marsh. Yes. Immediately following the signing of the armistice representatives of most of these organizations came here and spent about a week working out a tentative reconstruction program, which was then submitted to the farm organizations of the country.

The CHAIRMAN. Will you give us the names of these delegates and the organizations they represent? Can you put that in the record ?

Mr. MARSH. I will have to send them to you.

Mr. CURRIE. Then at this meeting, which you say lasted about a week, this conference arrived at its conclusions with reference to these various problems?

Mr. Marsh. This tentative program was then sent to farm leaders and the farm press of the country, discussed and amended, in some respects, and by some organizations adopted, the American Society of Equity, for instance; then the delegates came back and the reconstruction program adopted in January was different in several respects from the tentative program, because we had the benefit of the criticism of the farm leaders of the country.

Mr. CURRIE. It just occurred to me, on the railroad problem alone, if you reached a conclusion in a week, and also took up various other great problems, you had done a great deal more than our distinguished committee in the House, which has been holding hearings since July 8 and just now are reaching their conclusions.


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Mr. Marsh. I might say that the conclusion as to Government ownership and democratic operation of the railroads was not arrived at in a week's consideration, but was the result of the suffering which the farmers had undergone under private ownership and operation of the railways, not for service, but to enrich a relatively few stockholders; similarly was that their experience with the merchant marine.

We approach the question of legislation regarding cooperation with a good deal of diffidence. We want cooperation. We want cooperation legalized, and our two main points or suggestions are these: First, that farmer organizations conducted for mutual benefit should be subject to some sort of supervision, but should not be subject to the provisions of any antitrust law; and, second, that we need a very careful definition of what a cooperative organization is. Those are our two main propositions.

Mr. MORGAN. Why do you believe that definition is necessary?

Mr. Marsh. I was going to take that up later, but will do so now. Because frequently as we study and analyze Mr. Hersman's billand you will understand our statements are not in the way of criticism but simply to try to get at what we are sure Senator Hersman and Senator Capper equally want to get at-it would seem to us that there is danger in several provisions of this bill. The packers or elevator men might decide that they are, or could be considered to be, a cooperative organization, and thereby get a complete immunity bath from the intention of the Sherman and other antitrust laws. It says, if I may just read this section, “members of agricultural organizations, orchardists, dairymen, etc.” You gentlemen know that the packers and every other big organization in this country are capable of being “ all things to all men,” if they may thereby increase their profits, and we are unable to see any provision in this bill which would prevent that, and we have discussed it with those who have had a great deal of experience in supervising big aggregations of capital. There is nothing in this bill which would preclude the packers or any of these farmers' competitors from buying a farm, going into the dairy business a little bit, and calling themselves a cooperative organization of farmers or any one of the classes covered by this bill.

Now, that may not be a valid objection, but we do not see anything in the bill which would preclude that being done, and we are mighty sure that these men, these captains of industry, will not fail to avail themselves of every possible opportunity to get for themselves the advantages and opportunities—I think “opportunities" is a better term, rather than “advantages "--which it is the intention of the introducer of this bill, and the intention of the farmers, should go only to farmers' cooperative societies.

Mr. NEELEY. How would you prevent that?

Mr. Marsh. May I just refer to a bill, and this is a tentative suggestion and may not be feasible, but suggest that one way of reaching it would be this: To limit the amount of stock that any one individual can hold; to carefully restrict the voting to one vote for one share or any number of shares of stock, and to see to it that no one or two individuals could amass and get into their own ownership a majority of the stock of such corporation, and therefore decide and manipulate the policy of the entire association.

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Now, Senator Capper has introduced a bill which he requested, he informed me, Mr. Jackson H. Ralston, counsel for the American Federation of Labor, to draft for the incorporation of cooperative associations in the District of Columbia, which I will file with the committee.

The CHAIRMAN. What is its number?

Mr. MARSH. Senate bill No. 3066, introduced September 23. Mr. Ralston made a very careful study, as Senator Capper has made, of course, of cooperation. This bill is chiefly regarding cooperative organizations of consumers, and tries to safeguard against the dangers to which I referred as seemingly existing, although inadvertently, in the Hersman bill. The provisions should clearly apply only to a bona fide organization of individuals who are not trying to carry on a business proposition for a business end solely for themselves but for the general welfare of their members. Mr. Ralston felt, and I am sure Senator Capper agrees, that some such provision should go into a bill providing for the incorporation of a cooperative association of consumers.

The CHAIRMAN. This bill doesn't propose any incorporation at all.

Mr. MARSH. No; but the same principles ought to apply, it would seem, because the packers do not care, or any other business industry--I cite them because they are one of the greatest menaces to the farmer to-day—they do not care what the organization is if they can get control and do so under the law.

Now, the first bill put in by Senator Capper had this provision, which I know has been discussed before you, and I shall try not to repeat any statements that have been made here. It said it should apply only to organizations not conducted for profit.” I have been listening to some of the discussions here, and there seems to have been an effort to differentiate between what you might call a holding company to look after the business end of these cooperative organizations and the individuals and persons who are members of them. It seems to us that is really a subterfuge. The intention of the introducer of this bill and those who want to get real cooperation, as we understand it to be, is to provide that these individuals may simply have an organization under which they can compete with the vast aggregations of capital existing in this country and under which they can either make direct connections, as producers, with the consumers in the cities, or the miners' cooperative associations, or the railway brotherhoods. I'mention these two branches of labor because they have made great progress in cooperative associations of consumers. They would thus eliminate all speculative associations of middlemen. We can not understand why this phrase, “not conducted for profit,” is put in there. We want these cooperative organizations to be conducted for profit, but as we construe the Hersman bill we are in doubt, very much so, as in line 2, page 2, as to the construction that would be put upon the provision reading “organizations instituted for the purpose of mutual help, and that pay annually no greater dividends on stocks or membership capital investment than the minimum legal rate of interest in the State where organized.” Now, I do not know what the minimum rate of interest is in a State, unless it might be that there are two rates of interest, one under specified conditions where it would be the minimum, and a larger rate under more hazardous conditions.


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Mr. NEELEY. That is fixed by statute.
The CHAIRMAN. I do not think any State fixes a minimum.

Mr. NEELEY. They fix what they call the regular rate of interest. In my State it is 7 per cent. You can go into contract at 8 per

cent. . If in writing, you can get 8 per cent.

Mr. CURRIE. The legal rate in Michigan is 5 per cent, but you can have a maximum rate not to exceed 7 per

cent. Mr. MORGAN. The legal rate applies when there is no specific contract.

Mr. CURRIE. But there is also a maximum rate over which you can not contract. Where no specific rate is mentioned then the legal rate applies. In Michigan it is 5 per cent, but if you wanted to contract you could provide for a payment of not exceeding 7 per cent, but in the absence of contract the legal rate will apply.

The CHAIRMAN. The rate is fixed as damages for refusing to pay either on civil contracts or on damages resulting from a tort. That is sometimes called the legal rate, but I think it is more properly what you would call a damage rate.

Mr. MARSH. Is that the maximum or minimum.

The CHAIRMAN. It is neither, because the minimum may be next to nothing.

Mr. MORGAN. I do not think there is anything like a minimum rate in law.

Mr. Marsh. That is the point we raise. Suppose a group of men did not have much capital, but wanted to organize a cooperative organization. The business seems, perhaps, a little risky, they have to issue some stock to get started. We feel that the restriction to the minimum legal rate in cases of individuals and farmers wanting to organize a cooperative association-men who have very little cash of their own and have to issue considerable stock—that the restriction that the dividend on that stock shall be only the minimum permitted in the State might seriously militate against that stock in order to start their undertaking or cooperative enterprise. Of course you gentlemen know that the big business enterprises are desperately opposed to all cooperative associations of farmers.

Mr. MORGAN. Why do you make that statement? What do you base that on? In European countries they have never been opposed to them; they have encouraged them. Do you base that simply on opinion or something they have done to discourage you?

Mr. Marsh. Things they have done, and the reports which come to us from men who are in this cooperative work. For instance, as I started to say, and which is by way of illustration

Mr. HUSTED (interposing). You say big business is opposed to cooperative undertakings by farmers." What class of big business do you refer to?

Mr. MARSH. Specifically, the Minneapolis Chamber of Commerce; and I am going to ask permission to read into the record a letter which I have not with me, by Mr. R. L. Harmon, of one of the largest cooperative organizations of the northwest, the Equity Cooperative Exchange, stating how they had three grand legal fights when they started their cooperative associations, with the Minneapolis Chamber of Commerce.

The CHAIRMAN. What organization do you have reference to?

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Mr. Marsh. The Equity Cooperative Exchange. Mr. J. M. Anderson is president of it, and they have had a great deal of controversy with the Minneapolis Chamber of Commerce. Mr. C. H. Gustafson, the president of the Nebraska Farmers' Union, has given us similar information—and I am sorry he is not here. He is chairman of the committee on packing plants and allied industries of the Farmers' National Council. He has reported to several committees here the opposition which they have met from the grain exchanges and from the live-stock exchanges—the live-stock exchanges, of course, being controlled by the packers—in their efforts to get in on these exchanges, and while their cooperative work started only three or four years ago, in spite of the opposition, which they hope to overcome in the near future, they have grown so that they are now doing about a hundred million dollars worth of cooperative buying and selling for the farmers of Nebraska.

The CHAIRMAN. I understand that the bulk of the wheat in my section is handled by cooperative elevators owned by the farmers.

Mr. Marsh. They have had great progress, but they have had an awful fight.

The PRESIDENT. We have State laws that give them a pretty good chance to cooperate.

Mr. Marsh. Precisely, but they had to fight to get those laws. I think the filing of this letter with the committee would be of value.


St. Paul, Minn., October 18, 1919. „FARMERS' NATIONAL COUNCIL,

Bliss Building, Washington, D. C.

(Attention Mr. Geo. P. Hampton.) GENTLEMEN : We have just received a request from Mr. Fred E. Osborne, who has been in Washington, D. C., to supply you with the salient facts leading up to the organization of the Nonpartisan League in North Dakota, and beg leave to submit them briefly in this letter :

For many years, beginning about 1905, and growing more insistent from year to year, there had been a demand for freedom from the tyranny of the grain trade as manipulated through the Minneapolis Chamber of Commerce by the control of terminal elevators and large lines of country elevators throughout the spring-wheat belt, including Minnesota and the Dakotas (particularly North Dakota), where they were able to absorb the grain crop under rules and at prices which they absolutely dictated.

The agitation for better conditions finally led in 1908 to a more or less loose organization of farmers for the purpose of attempting the marketing of their grain, and by 1911 the sentiment in North Dakota had become so pronounced and widespread that a number of the farmers gathered at Fargo from both sides of the Red River and organized and incorporated the Equity Cooperative Exchange.

The exchange is a thoroughly cooperative organization, paying interest on the actual money invested in its stock and aiming to pay back all net profits to the patrons of the company over and above what are required for operation and safeguarding of future development.

This organization was started by genuine farmers who worked their own farms and had but scant business experience. After struggling along with very small capital and under great difficulties at Fargo and Moorhead (Moorhead being just across the river in Minnesota from Fargo), they finally decided that they should establish their marketing organization at the natural grain market-Minneapolis-and proceeded to secure offices and establish themselves there in the Corn Exchange Building.

They thought that all that was necessary for them to obtain marketing liberty was to establish their firm at the natural market and announce that they were ready to handle grain. They had no idea but that they would be able to sell every bushel consigned to them without any difficulty. They found, however, that the big mills in Minneapolis would not buy a bushel of their

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