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THE UNIVERSITY OF CHICAGO 
 
 FOUNDED BY JOHN D. ROCKEFELLER 
 
 CO-OPERATIVE CREDIT ASSOCIATIONS 
 IN THE PROVINCE OF QUEBEC 
 
 A DISSERTATION 
 
 SUBMITTED TO THE FACULTY OF THE GRADUATE SCHOOL OF ARTS 
 
 AND LITERATURE IN CANDIDACY FOR THE DEGREE OF 
 
 DOCTOR OF PHILOSOPHY 
 
 ( DEPARTM ENT OF SOCIOLOGY ) 
 
 BY 
 
 HECTOR MACPHERSON. 
 
 KINGSTON: 
 1910. 
 
I 
 
THE UNIVERSITY OF CHICAGO 
 
 FOUNDED BY JOHN D. ROCKEFELLER 
 
 CO-OPERATIVE CREDIT ASSOCIATIONS 
 IN THE PROVINCE OF QUEBEC 
 
 A DISSERTATION 
 
 SUBMITTED TO THE FACULTY OF THE GRADUATE SCHOOL OF ARTS 
 
 AND LITERATURE IN CANDIDACY FOR THE DEGREE OF 
 
 DOCTOR OF PHILOSOPHY 
 
 (department of sociology) 
 
 BY 
 
 HECTOR MACPHERSON. 
 
 KINGSTON: 
 1910. 
 
Hsfr^'^ 
 
CONTENTS. 
 
 PAGE 
 
 Chapter I. 
 Historical Survey, Showing the Quebec Associations in 
 Their Relation to the General Co-operative Credit 
 Movement 1 
 
 Chapter II. 
 The Organization and Operation of a Typical French 
 
 Canadian Co-operative Credit Association 22 
 
 Chapter III. 
 Economic and Social Effects of Co-operative Credit AsoO- 
 
 ciations in Quebec 49 
 
 Chapter IV. 
 The Possibilities of Co-operative Credit in Canada and the 
 
 United States 74 
 
 228277 
 
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 IVIicrosoft Corporation 
 
 http://www.archive.org/details/cooperativecrediOOmacprich 
 
CHAPTER I. 
 
 Erratum (pp. 34-35) : The maximum aimed at in the reserve 
 and provident funds is double and one-fmlf the amount of the 
 paid up stock, respectively. This is true of the Levis society. The 
 rule among the Quebec associations is a reserve which shall be 
 maintained equal to the total amount of the paid up stock plus 
 the funds held on deposit. 
 
 Thanking company, from whose profits every member, it was 
 expected, would derive at least an easy livelihood."^ But, com- 
 ing down to our own times, co-operative credit has now an 
 unbroken record of over half a century to vouch for it, and 
 that record is one which discloses an expansion and success 
 which are trurly marvelous. 
 
 The movement took its rise in Germany, which has been 
 called the fatherland of co-operative banking. In 1850, Herr 
 Schulze, Mayor of Delitzsch, who was also a judge and a 
 member of the Prussian National Assembly in 1848, established 
 in Delitzsch-Eilenberg his first loan society with a membership 
 of ten artisans. Two years later he remodeled his society as a 
 self-supporting institution, with a share capital.- In 1856, he 
 
 ^Mitford's History of Greece, iv. 22. Quoted by J. W. Gilbert : His- 
 tory, Principles, and Practice of Banking, i, 6-7. 
 
 ~C. R. Fay: Co-operation at Home and Abroad, 19-20. 
 
CHAPTER I. 
 
 HISTORICAL SURVEY, SHOWING THE QUEBEC SOCIETIES IN THEIR 
 
 RELATION TO TtlE GENERAL CO-OPERATIVE 
 
 CREDIT MOVEMENT. 
 
 Co-operation for the purpose of making credit available at a 
 reasonable rate of interest can no longer be looked at askance 
 as a new and untried phenomenon in the economic world. In- 
 deed, it would seem that the idea is as old as Xenophon. He, 
 it is said, conceived the plan of a bank to which all the Athenian 
 people might subscribe capital, and in the profits of which they 
 might all share. The object was to encourage wisely directed 
 commercial adventure by financial support at rates of interest 
 less oppressive than were extorted at that time ; and inciden- 
 tally to enrich the public treasury as well as the private citizens 
 of Athens. " Thus, while numbers of individuals were en- 
 couraged and enabled to employ themselves for their private 
 benefits, the whole Athenian people would become one great 
 banking company, from whose profits every member, it was 
 expected, would derive at least an easy livelihood."^ But, com- 
 ing down to our own times, co-operative credit has now an 
 unbroken record of over half a century to vouch for it, and 
 that record is one which discloses an expansion and success 
 which are trurly marvelous. 
 
 The movement took its rise in Germany, which has been 
 called the fatherland of co-operative banking. In 1850, Herr 
 Schulze, Mayor of Delitzsch, who was also a judge and a 
 member of the Prussian National Assembly in 1848, established 
 in Delitzsch-Eilenberg his first loan society with a membership 
 of ten artisans. Two years later he remodeled his society as a 
 self-supporting institution, with a share capital.- In 1856, he 
 
 ^Mitford's History of Greece, iv. 22. Quoted by J. W. Gilbert : His- 
 tory, Principles, and Practice of Banking, i, 6-7. 
 
 ~C. R. Fay: Co-operation at Home and Abroad, 19-20. 
 
Co-operative Banking in Quebec. 
 
 published a book setting forth the purpose and scope of his 
 scheme. Three years later he organized the ''Allgemeiner 
 Verband der Deutschen Erwerbs- und Wirtschafts-Genossen- 
 schaften," of which he was director until his death in 1883.^ 
 He was instrumental in securing the first co-operative law in 
 Prussia in 1867, which was made an imperial law in 1889.* 
 Thus arose what has come to be known all over Europe as the 
 town or industrial type of co-operative bank. 
 
 About the same time, another movement took its rise in Ger- 
 many which has meant even more to the poorer agricultural 
 classes than the town bank has to the larger landholders and 
 industrial classes. The honor of first establishing rural co- 
 operative credit associations belongs to Herr F. W. Raiffeisen, 
 burgomaster of a group of villages around Neuwied. He was 
 a man of great mathematical ability and, of broad and varied 
 experience. He was an ex-soldier, a wine-merchant, and had 
 rendered valuable service in superintending the building of a 
 railroad on the left bank of the Rhine. 
 
 Touched by the poverty of the rural classes around Neuwied, 
 Raiffeisen established, in 1848, a co-operative distributing soci- 
 ety for the purpose of assisting the poor to get their supplies 
 of potatoes and bread. The next year, under the patronage of 
 a number of wealthy philanthropists, he organized a credit and 
 loan society at Flammersfeld, designed to provide credit on 
 easy terms to needy farmers. The great importance of this 
 association rests upon the fact that it indirectly determined the 
 trend of the whole future movement of rural co-operative 
 credit in Europe. One thing * Raiffeisen learned from this 
 experiment. He became forever convinced that the crying need 
 of the poor was not for philanthropic aid, but for some sort of 
 organization which would enable them to obtain credit funds 
 for themselves. Hence, in 1862, he started another credit and 
 loan society at Anhasen, and in this association the membership 
 was made up of the borrowing farmers themselves.^ Four 
 years later Raift'eisen published his essay, "Die Darlehenskassen- 
 
 3Ibid., 20. 4Ibid., 21. 
 «Ibid., 19-20. 
 
Historical Survey. 
 
 vereine," in which he commended the Schulze-DeHtzsch type of 
 bank for towns and industrial centres, and the Anhausen model 
 for agricultural communities. But he seems gradually to have 
 changed his mind; and from 1873 until his death, in 1888, he 
 devoted all his energy to the furtherance of rural associations 
 of the Anhausen type.^ 
 
 With the establishment of these two models of co-operative 
 credit association, there was started a movement which has had 
 a tremendous influence on the rapid agricultural and industrial 
 development of Germany during the past sixty years. There 
 is scarcely a town of any importance but has its town bank. 
 These are often stately edifices, each with a well paid staff of 
 clerks and officers, where the most important banking business 
 of the city is transacted. On the other hand, the modest 
 Raiffeisen association has spread among the agricultural towns, 
 villages, and rural districts, carrying thrift, ambition and pro- 
 gress with it everywhere. 
 
 In 1905. there were in Germany 1,020 banks of the Schulze- 
 Delitzsch model, with a total membership of 586,595. Sixty 
 per cent, of these members availed themselves of credit ; and 
 the total loans granted in 1905 amounted to 3,000,000,000 
 marks, upon which was charged an average rate of 5.05 per 
 cent, interest. Of the country banks, the number for Germany 
 in 1905 stood at 13,181. The 10,786 of these associations be- 
 longing to the Imperial Union, for which reliable statistics were 
 available, had a membership of 954,473, and had granted credit 
 for that year aggregating 500,000,000 marks, at a rate of 
 interest which probably averaged about one per cent, less than 
 was charged by the town banks. The average credit advanced 
 per member was 500 marks, as compared with 5000 marks per 
 member granted by the Schulze-Delitzsch associations.'' 
 
 But the co-operative movement has by no means been con- 
 fined to the country of its origin. In 1865, Signor Luzzatti 
 established the Popular Bank of Milan with an initial capital 
 of 700 Hre, of which the founder himself subscribed 100 lire, 
 thus becoming the largest shareholder among the charter mem- 
 cibid., 20. ^ibid., 48. 
 
Co-operative Banking in Quebec. 
 
 bers of the association.^ But this small beginning furnishes 
 but a slight indication of the subsequent importance of the 
 movement. In 1906 there were 829 town banks in Italy, with 
 a capital of 133,000,000 lire, deposits of 700,000,000 lire, and 
 credits to the amount of 453,000,000 lire. The first rural bank 
 in Italy was established by Signor Wollemborg, a doctor of 
 Lorregia, in 1883. By 1906 there were 1,461 agricultural asso- 
 ciations in operation in Italy.^ Through this system of rural 
 co-operative credit, the entire agricultural situation has been 
 revolutionized; and not only has great material progress re- 
 sulted, but the accompanying intellectual and moral advance- 
 ment has been equally great, and has been spoken of in the 
 highest terms. ^° 
 
 In somewhat similar manner, the story might be told of the 
 way in which country after country has been invaded by the 
 co-operative credit movement until almost every part of Europe 
 has felt its influence. We have France with its 18 popular 
 banks and 1,638 rural associations in 1907;^^ Austria and Hun- 
 gary, where about 4,000 agricultural credit societies were in 
 operation in 1904;^- and Belgium with its 431 country banks, 
 December 1905, and a prosperous group of 17 town associations 
 doing business in 1906.^^ The movement has become firmly 
 rooted in Holland and Switzerland; it has taken possession of 
 Russia, Finland, Servia, and the Grand Duchy of Luxemburg; 
 it forms part of the general plan of co-operation by means of 
 which Sir Horace Plunkett and the Irish Agricultural Organi- 
 zation Society are bringing about a much needed revolution 
 among the poorer agricultural classes of Ireland; and it is being 
 tried by the British Government as a means of alleviating the 
 distress of the poverty-stricken millions of India.^* Speaking 
 of the Irish situation, in his book published in 1904, Mr. E. A. 
 
 sibid., 63. »Ibid., 67-69. 
 
 loE. A. Pratt, The Organization of Agriculture, 123. 
 
 lie. R. Fay, Co-operation at Home and Abroad, 68 and 72. 
 
 12E. A. Pratt, op. cit., 165 and 153. 
 
 13C. R. Fay, op. cit., 67-69. 
 
 i*See below Ch. iv, page 74. 
 
Historical Survey. 
 
 Pratt affirms that the value of the rural credit banks in Ireland, 
 and the part which they are already playing in the general agri- 
 cultural and economic development of the country, could 
 scarcely be over-estimated.^^ Mr. Desjardins, who is undoubt- 
 edly the best authority in America on the co-operative credit 
 movement, estimates that the number of associations in exist- 
 ence must now be somewhere in the neighborhood of 40,000, 
 and the annual turnover is probably around four billions of 
 dollars.^^ 
 
 From this imperfect sketch of the co-operative credit move- 
 ment, we can readily understand that a study of the societies 
 which are spring up among the French Canadians on the banks 
 of the River St. Lawrence is likely to present but little that is 
 new to the student of co-operation. The careful student, how- 
 ever, is well aware that the type of society developed in one 
 European country never corresponds in all detail with that 
 evolved when the principle is set to work under the different 
 conditions of another country. The variations arise from two 
 causes. Different promoters of the movement, having the ex- 
 perience of other leaders, and the methods of organization and 
 operation of other associations before them, introduce changes 
 which they think will be better adapted to their peculiar set of 
 conditions. Then, too, the associations are so democratic that 
 they inevitably take on differences of management, and show 
 results that are peculiar to the genius of each nationality or 
 class within a nation, among whom they come into operation. 
 Hence, the differences of environment between Europe and 
 America, and the fact that the French Canadian model is a care- 
 fully planned attempt to meet those differences by adaptations 
 based on the combined experience of European countries, may 
 lend to this investigation enough of interest to make it worth 
 while. 
 
 As in the case of most of the European movements, this in 
 French Canada owes its being to the energy and enthusiasm of 
 
 i^E. A. Pratt, op. cit., 273. 
 
 i^Alphonse Desjardins, The Co-operative or Peoples' Banks, Bank- 
 ers' Magazine, Ixxviii, 922. 
 
Co-operative Banking in Quebec. 
 
 a single individual. Mr. Alphonse Desjardins was born at Levis, 
 Quebec, in 1854. He graduated from the college of his native 
 town in 1870, and shortly afterward went into journalism. He 
 early became engrossed in the study of economic and social 
 science, and epsecially was his attention attracted by the co- 
 operative movement which was spreading over Europe. He 
 had studied with the keenest interest the rapid development of 
 co-operation in Germany, France, Belgium, Holland and Den- 
 mark. This latter country he had seen pick herself up from 
 the very depths of despair after the unfortunate German war 
 of 1864, in which she lost the richest of her territory, and 
 through the adoption of the principles of co-operation and uni- 
 versal education, start on a career of rejuvenated prosperity 
 such as she had never known before her mutilation. He saw 
 clearly the important part which the Schulze-Delitzsch and 
 Raiffeisen banks had played in the industrial advancement of 
 united Germany; and he also knew what a similar system of 
 co-operative credit had accomplished for Italy. Moreover, for 
 the past thirteen years, he has had the advantage of being in 
 communication with most of the European leaders. This per- 
 sonal correspondence with the moving spirits of co-operation in 
 the old world has placed him in possession of a great deal of 
 information on the subject which has up to the present time 
 never been published. 
 
 Out of this mass of heterogeneous material Mr. Desjardins 
 arrived at a conviction of the supreme importance of the prin- 
 ciple of adaptation. First of all, an association must grow out 
 of local needs. Denmark, for example, the country which has 
 surpassed all others in co-operative organization, has never 
 adopted the credit form of society. Any attempt to engraft on 
 society an institution whose function is already adequately and 
 economically performed by others, would only be a useless ex- 
 penditure of energy and multiplication of machinery. Mr. 
 Desjardins has perceived that the success of co-operative asso- 
 ciations in infusing new hope and energy into the masses who 
 are struggling on the very margin of subsistence, lay largely in 
 their wide range of adaptability. Being himself a reformer and 
 
Historical Survey. 
 
 an enthusiast, as leaders of all sorts of schemes for the uplifting 
 of men must necessarily be, he at once began to look about for 
 some way in which his native land might reap some benefit 
 from the practical application of those principles which had 
 helped so much in improving conditions among the poorer and 
 middle classes of Europe. 
 
 His opportunity presented itself in the usnolved credit and 
 banking problem of his native province. The frequent refer- 
 ences, in the press and on the floor of the Canadian Parliament, 
 to the evil and extent of the practice of usury convinced Mr. 
 Des jar dins that the solution of this problem would mean ines- 
 timable benefit to his country, and more especially to his fellow- 
 citizens throughout 'Eastern Canada, where the money-lender is 
 practically the only resource of the poorer classes who may find 
 themselves obliged to borrow. He had the precedent of Hun- 
 gary, where the rural districts had been ground down for 
 generations under one of the most oppressive systems of usury 
 which the student of practical economics has ever encountered. 
 In the face of the most determined opposition, an effective sys- 
 tem of co-operative credit was established, which drove the 
 entire tribe of innkeepers and small merchants, whose real 
 business was the practice of usury, out of the country.^^ 
 
 But here in French Canada, where Mr. Desjardins was born 
 and bred, the situation had some peculiar difficulties of its own. 
 The population of the province of Quebec are for the most part 
 descendants of a hardy, thrifty stock of Northern France, who 
 seem to have brought with them from the motherland the habit 
 of storing their earnings in hoards of coin. Speaking of Canada 
 under the French regime, Professor Adam Shortt says : " The 
 tendency to private hoarding, which at that time was quite com- 
 mon and natural in all countries, was especially characteristic 
 of the French peasantry, and has remained so to this day in 
 both France and Canada."^^ After the conquest, " a large and 
 important section of the French Canadians possessed small in- 
 
 17E. A. Pratt, op. cit., 141-153. 
 
 i^Adam Shortt, The History of Canadian Banking, Currency and 
 Exchange, Journal of the Canadian Bankers' Association, vi, 152. 
 
Co-operative Banking in Quebec. 
 
 dividual hoards of specie, composed almost entirely of old 
 French coins, much worn and considerably over-rated ; they 
 were distrustful of paper money and exchanged it as speedily 
 as possible for coins. In this exchange, local prejudice and the 
 interests of the banks favored French silver. "^^ The banking 
 institutions of French Canada were but little patronized, either 
 in the use of their notes, or as repositories for savings. But 
 they found a field for profit-making in the collection of " all 
 the maimed and wayworn French coins on the continent," and 
 passing them out to the habitants at their much over-rated 
 valuation.^^ 
 
 This custom of returning bank notes for redemption in coin 
 had a steadying efifect upon the French Canadian banks which 
 placed them at an advantage as compared with the banks of 
 Upper Canada and the United States in time of crisis. They 
 v/ere forced to exercise caution and moderation in their issue 
 of notes by the fact that the notes were usually soon > returned 
 for redemption in coin. The amount of coin thus kept in cir- 
 culation made it easier for the Lower Canadian banks to re- 
 plenish their vaults with specie. Thus, for example, the three 
 French Canadian banks experienced much less difficulty in 
 weathering the crisis of the early twenties than did the banks 
 of the United States and Upper Canada. In fact, the Quebec 
 bank, with a patronage mostly confined to a select circle of 
 merchants within and about the city, experienced no great loss ; 
 while the two Montreal banks, though they suffered severely, 
 were able to pull through in solvent condition. ^^ 
 
 Another episode which had tended to shake the faith of the 
 French Canadians in banking institutions was the formation of 
 wild-cat banking schemes under the lax laws existing prior to 
 the confederation of the provinces. These spurious banks 
 found their opportuinty in two circumstances. There was, in 
 the first place, a deep-rooted race prejudice against the existing 
 institutions, which were almost entirely in the hands of the 
 
 i9Ibid., vii, 319. 
 
 2oibid., vii, 319; viii, 152-154. 
 
 2ilbid., viii, 2. 
 
Historical Survey. 
 
 English element; in the second place, the suspension of specie 
 payments by the regular banks of Lower Canada, in common 
 with those of the United States, during the crisis of 1837, gave 
 the best possible excuse for the refusal to redeem their notes 
 on the part of those institutions whose sole purpose of existence 
 was to get their notes into circulation. 
 
 Among other favoring circumstances was the fact that the 
 first bank to take advantage of the political and racial situation 
 was a perfectly honest and patriotic institution, the Banque du 
 Peuple of Montreal. This was a form of joint stock company 
 whose directors pledged themselves to unlimited liability, while 
 ordinary shareholders were liable only to the extent of their 
 subscribed stock. The notes of this bank were soon in circula- 
 tion, and, on political grounds, found a more cordial reception 
 than those of the regular chartered banks. However, the pur- 
 pose of this organization was legitimate business; and during 
 the crisis the Banque du Peuple entered into hearty co-operation 
 with the regular banks in weathering the storm of financial 
 stringency.^^ 
 
 The real evil arising out of the establishment of this institu- 
 tion consisted in the swarm of imitators which sprang up. The 
 promoters of these bogus banks were, for the most part, sharp- 
 ers from the neighboring states, who, if they even took the 
 trouble to establish headquarters, hired someone to look after 
 the obscure office in Lower Canada, while they attended to the 
 more important business of floating the spurious paper else- 
 where. They took care not to arouse suspicion by trying to 
 push their trade in the neighborhood of their nominal head- 
 quarters ; but throughout Western Upper Canada and the 
 adjoining states they managed to get considerable quantities of 
 their notes into circulation. In this they were favored by the 
 scarcity of a medium of exchange consequent upon the crisis. 
 Many a suspicion was aroused, to be sure, but so long as all the 
 banks in Lower Canada were refusing to redeem their notes, 
 there was no way of testing the solvency of these concerns. In 
 the meantime the notes were finding their way back to Lower 
 • 22ibid., ix., 1-5. 
 
10 Co-operative Banking in Quebec. 
 
 Canada, public indignation was aroused resulting in investiga- 
 tions in both Buffalo and Montreal, and a long list of the 
 issuers of spurious bank notes was published.-^ 
 
 Now it cannot be said that the French Canadians themselves 
 suffered any serious loss as a result of these banking swindles ; 
 and yet the publishing of the results of the investigations did 
 add considerably to the long-standing hereditary prejudice of 
 the average habitant against banking institutions in general. 
 
 As a result, the old tendency to hoard still persists in French 
 Canada. Thus, one side of the problem which Mr. Desjardins 
 had to solve was whether or not this inherent distrust of credit 
 and banking institutions would make the establishment of co- 
 operative credit associations among his countrymen an impossi- 
 bility. Would they entrust their representatives with the care 
 of their funds, and thus bring the combined savings of the 
 parish into a common fund from which the general demand for 
 credit could be met? Or would the tendency to hoard their 
 small surplus prove too strong for the new movement and leave 
 the usurer still in control of the credit business? Such a prob- 
 lem could only be solved by practical experiment. 
 
 He did not expect to have his plans meet everywhere with 
 an enthusiastic reception. But seldom have the ideas of any 
 reformer found an eager multitude waiting to receive them. 
 Even those principles whose subsequent development has 
 shown the most wonderful vitality have generally been forced 
 to begin their career by fighting for bare standing ground. This 
 has been to some extent true of the whole movement toward 
 economic co-operation; and almost without exception has it 
 been true of the credit and banking associations. In summing 
 up his conclusions, based upon a thorough acquaintance with 
 the subject, Mr. Henry W. Wolff finds that the movement has 
 everywhere met with the same fate. At the outset no country 
 has wanted it. No people has anticipated that co-operative 
 credit was adapted to its peculiar conditions. Almost invariably 
 has the founder met with the same cold indifference.^* Schulze 
 
 23Ibid., ix, 190 et seq. 
 
 24Henry W. Wolff, Co-operative Banking, 137. 
 
Historical Survey. 11 
 
 and Raiffeisen in Germany, Luzzatti in Italy, Ziller in Austria, 
 and other leaders almost as illustrious, have begun by bearing 
 almost the whole burden of the work which has since reached 
 such proportions in their respective countries. But in every 
 case, when the energy and enthusiasm of the reformer had pre- 
 vailed, and co-operative banking taken its place among the 
 economic and social forces of the country, there has been no 
 lack of praise and approval ; and people have wondered how 
 they ever managed without the credit associations. Everywhere 
 the experience with usury has been the same. Co-operative 
 credit has done for Europe, within the short period of six de- 
 cades, what century after century of religious condemnation 
 and repressive legislation had utterly failed to accomplish. 
 These societies are meeting in a legitimate and most satisfactory 
 way that fundamental need of credit which constituted the 
 raison d'etre for the usurer's practice. Hence, where co- 
 operative credit found its place in the social organism, 
 the usurer was sloughed of as a superfluous economic 
 appendage. Upwards of forty thousand peoples' banks are 
 cleaning out the plague of usury which had infested the old 
 world from its earliest history, with the same unobtrusive cer- 
 tainty which has marked the disappearance of other pests 
 before the advance of modern medicine and sanitary science. 
 
 With the history of this whole movement Mr. Des jar dins 
 was perfectly familiar. He had every confidence in co-opera- 
 tive credit as a ninstrument in furthering social and economic 
 progress; and saw no reason why its introduction should not 
 be a success among his fellow-countrymen in Quebec. So, fol- 
 lowing the example of many a worthy predecessor in the differ- 
 ent countries of Europe, he began his propaganda in his own 
 town. 
 
 Levis, the birthplace and presen thome of Mr. Desjardins, is 
 a city of some seven thousand inhabitants, situated on the right 
 bank of the Saint Lawrence, directly opposite the old historic 
 citadel of Quebec. The population is chiefly industrial. A 
 large number are railway employees ; others are engaged in the 
 Atlantic and inland shipping trade which is centred during the 
 
12 Co-operative Banking in Quebec. 
 
 summer months in the cities of Montreal and Quebec; while 
 two or three foundries, two machine shops, and a shoe factory 
 give employment to an industrious, wage-earning citizenship. 
 Back of the town to the south and east is a well-to-do agricul- 
 tural population from which the business section of the city 
 draws its chief support. This surrounding rural district ac- 
 counts for the numerous homes of retired farmers, who form a 
 stable, conservative yet thrifty element in all such agricultural 
 market towns. 
 
 In this limited population, composed of those having such 
 varied interests, Mr. D'esjardins found just what he wanted. 
 His purpose was to put co-operative credit to the test upon 
 American soil. If it should succeed at Levis, there would be a 
 practical demonstration of its adaptability to almost any condi- 
 tions to be met with anywhere in French Canada. 
 
 Among the diverse elements which make up the population 
 of Levis, Mr. Desjardins was a well-known personality. He 
 had grown up in the place. From childhood he had been known 
 and respected for his integrity. His training in the college of 
 the town had brought him into sympathy with the cultural and 
 religious life of his people. His career as a journalist had 
 increased his familiarity with all the different problems and 
 needs of his native province. His contagious enthusiasm and 
 firm perseverance eminently fitted him for leadership. Surely 
 it would have been hard to find one better fitted to undertake 
 the establishment of co-operative credit associations. 
 
 On the public platform and through the medium of the press, 
 and in private intercourse among his large circle of acquaint- 
 ances, he lost no opportunity of arousing interest in the move- 
 ment. He explained the advantages it had already brought to 
 different countries of Europe, and showed the benefits which 
 there was every re'ason to expect from its establishment among 
 his fellow-countrymen. 
 
 At length the time seemed ripe for action. In September, 
 1900, he brought a dozen friends together at his home, and 
 carefully unfolded to them his plan. During the three months 
 following they drafted a constitution, and began taking pledges 
 
Historical Survey. 13 
 
 for the first shares of stock, which were to be paid for subse- 
 quently in instalments. Then, on the sixth of December a 
 meeting was held at which about fifty of the more spirited citi- 
 zens of Levis formally adopted the constitution and by-laws, 
 and began business as " La Caisse Populaire de Levis." The 
 following twenty-fifth of January there appeared the first semi- 
 monthly statement, showing assets on hand to the amount of 
 $242. This must surely be considered a fair start, when we 
 take into consideration the small beginnings and early struggles 
 of most of the great European movements. 
 
 As to the subsequent growth and prosperity of the People's 
 Bank of Levis, we will permit a few statistics to tell their own 
 story. By the end of the fourth year of its existence the assets 
 amounted to $32,567.55, and since that time they have shown 
 a steady and rapid increase, as is shown by the following table : 
 
 Yearly Increase in Assets for the People's Bank of Levis. 
 
 Nov. 30, 1904 $ 32,567 56 
 
 Nov. 30, 1905 36,028 31 
 
 Nov. k>, 1906 43,529 80 
 
 Nov. 30, 1907 66,352 24 
 
 Nov. 30, 1908 83,891 35 
 
 Nov. 30, 1909 102,870 35 
 
 Then again, no better indication of the prosperity and use- 
 fulness of an institution of this kind could be asked for than 
 is furnished by the increase and volume of its loans. The fol- 
 lowing table from the '' Ninth Annual Report of the People's 
 Bank of Levis " speaks eloquently of the service being rendered 
 to the community by this association : 
 
 The Loan Movement of the People's Bank of Levis. 
 
 First year 50 loans, amounting to $ 3,667 21 
 
 Second year 161 " " 19,800 26 
 
 Third year 275 " " 27,036 34 
 
 Fourth year 268 " " 34,272 68 
 
 Fifth year 298 " " 40,586 80 
 
 Sixth year 368 " " 64,766 72 
 
 Seventh year 461 " " 86,963 15 
 
14 Co-operative Banking in Quebec. 
 
 Eighth year 518 " " 75,572 97 
 
 Ninth year 638 ' " " 110,404 47 
 
 Totals 3037 $463,070 60 
 
 The present condition of the People's Bank of Levis would 
 seem to indicate that its future progress is assured. But we 
 must not imagine that this success has been won without sacri- 
 fice. The founder was enthusiastic in his determination to give 
 the experiment every possible chance of success. In the home 
 of Mr. Desjardins the society was organized, and for the first 
 six years of its existence it found free headquarters in his 
 private office. Hither came all the members to pay the instal- 
 ments on their shares. Here, they negotiated loans and 
 transacted any other business they might have with the asso- 
 ciation. Furthermore, Mr. Desjardins, as manager and presi- 
 dent of the society, undertook to do the whole work of keeping 
 the accounts, etc., without a cent of remuneration. While he 
 was away on official duties during the sessions of the Dominion 
 Parliament other members of his family kept the books and 
 assisted the council and committees in transacting the business 
 of the association. During his visit at Levis, the writer had 
 access to the books of the association dating from its organi- 
 zation. In explanation of a great section of one of the books 
 which was written in a dainty feminine hand, the president re- 
 marked with some degree of justifiable pride: '' That was the 
 first time that I had been compelled to be so long absent since 
 La Caisse was organized. I was worried about the management 
 of the bank, and especially over the keeping of the books. One 
 evening, to my surprise, my wife volunteered to look after the 
 bookkeeping. It would mean some hard work on her part ; but 
 just then it looked as if the only alternative would be to hire a 
 bookkeeper. We were putting forth every efifort to accumulate 
 a reserve fund, and I feared that we could not very well bear 
 such expense at that time. I brought the matter of my wife's 
 ofifer of her services before the council of administration, and 
 they were willing that she should try the work with the assist- 
 ance of the council and committees. The result was that Mrs. 
 
Historical Survey. 15 
 
 Desjardins did the bookkeeping for the whole winter. Thous- 
 ands of dollars of business was transacted, as you can see, and 
 the books were found correct to a fraction of a cent." 
 
 And so it came about that during the first six years of the 
 existence of the Levis association the total expense of operation, 
 including printing, was but $543.57. But in the same period 
 a reserve fund of $3,341 was accumulated; and the sense of 
 security against any possible mischance which this reserve war- 
 ranted more than compensated President Desjardins and his 
 family for all the sacrifice which they had made. At the end 
 of the sixth year the prosperity and growth of the bank justi- 
 fied an increase in expenditure. Offices were secured in the 
 business section of the town, and a manager was regularly paid 
 to keep the books and attend to the office work, while Mr. 
 Desjardins still retained his position as president. With such a 
 record of devotion as this we can readily understand the pros- 
 perity which has attended the Levis association. Moreover, 
 the example of self-sacrifice set by the management of this 
 pioneer society has not been without its influence upon the new 
 associations which are now springing up all over the province. 
 
 But since Mr. Desjardins looked upon the Levis society in 
 the light of an experiment, he was not particularly anxious for 
 the establishment of other associations until this one should 
 have been given a fair trial. There was as yet no law providing 
 for the establishment of such institutions ; so that La Caisse 
 remained a purely voluntary organization for the first six years 
 of its existence. Nevertheless, the year after the formation of 
 the Levis People's Bank another association on identical lines 
 was organized in the neighboring rural parish of St. Joseph de 
 Levis. Here, although the nature of the community made im- 
 possible such rapid expansion as in the case of the Levis 
 society, the progress has been steady and the business con- 
 sistent with the needs of the membership. 
 
 Then in January, 1905, another association on the Levis 
 model was started at St. Malo, in the eastern outskirts of Que- 
 bec city. The expansion of this society seems to have been 
 rapid from the beginning. An article in the " Labour Gazette " 
 
16 Co-operative Banking in Quebec. 
 
 for March of that year reports that two hundred members had 
 already been enrolled, and the record shows a steady growth 
 since. 
 
 But the time seemed to have arrived when a wider expansion 
 of co-operative credit was justifiable and highly desirable. The 
 experience with these three associations had furnished sufficient 
 evidence of the fact that such societies could be made potent 
 factors in promoting the social and economic well-being of 
 French Canadian communities. All the expectations of the 
 ardent promoter had been fulfilled ; and he was now anxious 
 for provincial recognition. He wanted a law which would 
 make regular and legal what had up to this time been a purely 
 voluntary and extra-legal association. 
 
 We have already noticed that it took Schulze seventeen years 
 to secure legal recognition from the Prussian Assembly, and 
 that it was not until twenty-two years later that the law was 
 adopted for the empire. Mr. Desjardins found it much easier 
 to obtain recognition through a provincial law. Indeed, it 
 could scarcely be otherwise, as we see from a glance at the poli- 
 tical and industrial situation in French Canada. 
 
 Patriotic and enlightened French Canadians were painfully 
 conscious of the fact that their race was far from taking, in 
 the industrial, political, and cultural life of America, the place 
 which their great national traditions would lead us to expect 
 that they should occupy. The manifestation of this conscious- 
 ness was to be seen in the fervent efforts which a few of the 
 more progressive spirits were making towards the promotion 
 of educational and industrial reform. To be sure, they were 
 forced to march at a slow and cautious pace; for they found 
 themselves opposed by a powerful element in both church and 
 state which prefers to burn life's taper in adoration of the dry 
 bones of a dead past. These widely sundered points of view 
 have been the cause of a considerable expenditure of energy 
 in speech and writing, which on the whole seems to be resulting 
 in at least a partial victory for the progressive element. A sys- 
 tem of technical schools is in process of establishment, which,, 
 if carried through, would be a credit to any people. 
 
Historical Survey. 17 
 
 From this opposition of conservatives and radicals, Mr. Des- 
 jardins stood entirely aloof. He worked away quietly, and 
 incidentally secured the hearty support of both factions. The 
 church, with which every French Canadian movement has to 
 reckon, had the precedents of Italy, Austria, Hungary, Belgium 
 and other European coutnries where the Catholic clergy were 
 the foremost promoters of co-operative banking. The progres- 
 sive element, on the other hand, hoped that the movement might 
 result in benefits similar to those which had been realized from 
 its establishment in Europe. Besides, if an object lesson nearer 
 home were required, here were three prosperous crdit associa- 
 tions flourishing right beneath the shadow of the provincial 
 legislative halls. Mr. Desjardins had many warm supporters 
 in the legislature who were in sympathy with his aims, and saw 
 the value of the associations ; and so it came to pass that when 
 the Quebec Syndicates Act of 1906 came before the legislature, 
 it was passed without a single dissenting vote. 
 
 This act is described in the " Labour Gazette " of April, 1906, 
 as " an act to regularize the formation and organization of co- 
 operative societies among the laboring classes of the province, 
 . . . going into force on the day of its sanction. It provided 
 for the formation of production, consumption and credit asso- 
 ciations of a co-operative character at any place in the province,, 
 the territory within which an association is empowered to 
 operate being confined to the limits of a provincial electoral 
 district. The responsibility of members of co-operative associa- 
 tions is to be limited to the amount of their respective shares, 
 and only persons domiciled within the limits of the association 
 being permitted to become members." 
 
 In the matter of liability, limits of territory for each associa- 
 tion, and, in fact, throughout the general provisions of the act, 
 we see everywhere the influence of the constitution and by-laws 
 of La Caisse Populaire de Levis and its two sister institutions. 
 As these will be somewhat fully analyzed in the next chapter, 
 we need not tarry now over the provisions of the act. 
 
 The immediate result of the passing of the act was an awak- 
 ening of interest in co-operative credit over the entire province. 
 
18 Co-operative Banking in Quebec. 
 
 Letters of enquiry and requests for copies of the constitution 
 and by-laws of the Levis society began to arrive from all direc-. 
 tions. Scarcely a week passed but some parish sent in a petition 
 that Mr. Desjardins come in person and explain the organiza- 
 tion and advantages of his associations. These invitations are 
 gladly accepted whenever it is possible for him to get away 
 from other duties ; and each such meeting usually results in the 
 formation of a new society. The following list of associations, 
 indicating the location of each, will give an idea of the spread 
 of the movement up to the close of the last fiscal year. Several 
 societies have been organized since, and in a recent communi- 
 cation Mr. Desjardins states that he has about sixty applica- 
 tions for assistance in establishing new banks during the coming 
 spring and summer. As the geographical distribution of the 
 , following societies indicates, the province has been invaded 
 from one extremity to the other. According to all the reports 
 available the associations are, without exception, doing well; 
 so that there would seem to be no reason in the world why the 
 movement should not continue until the province of Quebec is 
 as well equipped with co-operative credit facilities as many 
 European countries already are.^^ 
 
 Name and Date of Secretary 
 
 Locality. Formation. President. or Manager 
 
 La Caisse 
 
 Populaire de Levis, Dec. 6, 1900 Mr. A. Desjardins. Mr. Desjardins. 
 " St. Joseph de Levis, July, 1901 Col. G. Vien. H. Bourassa, Sec.Mgr. 
 
 " St. Malo Jan., 1905 M. Marquis. Jos. Delisle, Mgr. 
 
 " Paquetteville Sept., 1907 M. Lazure. M. Lapalme, Sec. Mgr. 
 
 " St. Bonaventure ...Nov., 1907 Rev. M. Gravel. Geo. Forest, Sec.Mgr. 
 
 " St. Isidore Dec, 1907 Rev. M. Roy. 
 
 " Contrecoeur Feb., 1908 Rev. M. Ducharme. 
 
 " Quebec Apr. 27, 1908 Dr. J. H. Bedard. 
 
 H. Lamontagne, Sec. Mgr. 
 " Nominingue ....Mar. 22, 190S 
 " Beauport ........ May 3, 1908 
 
 25Note: In a letter of July 5, 1910, Mr. Desjardins gives the number 
 of banks established up to date as 44; and informs us that the interest 
 in the movement is increasing in all sections of the province. 
 
Historical Survey. 
 
 19 
 
 La 
 
 Name and Date of 
 
 Locality. Formation 
 
 Caisse 
 St. Gregoire du Sault 
 
 Montmorency May, 1908 
 
 Montreal June, 1908 
 
 Maria Sep. 13, 1908 
 
 Rimouski Sep. 17, 1908 
 
 Cabana Sep. 20, 1908 
 
 I'Ancienne Lorette, Dec. 16,1908 
 
 St. Sauveur Dec, 1908 
 
 St. Charles de Bellechasse, 
 
 Jan., 1909 
 rimmaculee Conception 
 
 de Montreal ....Jan. 1, 1909 
 St. Victor de Tring, 
 
 Beauce June 27, 1909 
 
 St. Narcisse de Cham,- 
 
 plain July 4, 1909 
 
 Danville July 11, 1909 
 
 Black Lake July 18, 1909 
 
 St. Maurice de Cham- 
 plain Aug. 1, 1909 
 
 Sayabec-Rimouski, Aug. 8,1909 
 
 President. 
 
 Rev. M. Ruel. 
 L. Lefevre. 
 Rev. M. Smith. 
 L. G. Belzil. 
 Rev. E. Gagnon. 
 Rev. M. Faucher. 
 Dr. Jos. Gosselin. 
 
 Rev. M. Page. 
 
 Secretary 
 or Manager 
 
 L. G. Belzil, Mgr. 
 
 Dr. Cote, Mgr. 
 
 M. Drolet, Mgr. 
 
 M. Paquct, Mgr. 
 
 Rev. Recteur Daignault, S.J. 
 Rev. A. Morissette. 
 
 Jean Rancourt, Mgr. 
 Rev. Prosper Cloutier. 
 
 J. A. Gravel, M.P., Mgr. 
 Rev. J. E. Hebert. Felix Laclare, Sec. 
 Rev. Jos. Gagnon. J. A. Pinchaud, Sec. 
 
 Rev. J. U. Croteau, Mgr. 
 
 Rev. M. T. Caron. Z. Forest, Sec.Mgr. 
 Rev. J. C. Saidon. 
 
 Geo. Tremblay, Sec. Mgr. 
 Thetford Mines, Aug. 22, 1909 Rev. J. G. Goudreau. 
 
 Emile Vaillancourt, Sec. Mgr. 
 St.Theophile du Lac, comte 
 
 de Champlain...Sep. 6, 1909 
 de I'Enfant Jesus, comte 
 
 de Beauce ....Sep. 19. 1909 
 de St. Ulric de Matane, comte 
 de Rimouski. . . Sep. 26, 1909 
 de St. Ephriam, comte 
 
 de Beauce Oct. 3, 1909 
 
 de St. Paul de la Grand- 
 Mere, comte de Rimouski, 
 Sep. 26, 1909 
 
 Rev. J. P. Boulay. S. Lucien, Sec. Mgr. 
 C. A. Bilodeau. Jos. Nadeau, Sec. 
 
 Rev. Jos. Jobin, Mgr. 
 P. C. Saidon. 
 
 David Oullet, Sec. Mgr. 
 L. M. Morrissette. 
 
 U. E. Page, M.P., Sec. Mgr. 
 
 Rev. 
 
 Rev. 
 
 de Trois Riviers, Oct. 17, 1909 
 
 Rev. L. R. Lafleche. 
 
 J. H. Desroches, Sec. Mgr. 
 Rev. Jules Massicotte. 
 
 A. Lebrun, M.P., Sec.Mgr. 
 
 Having got the movement in Quebec so well under way, the 
 next concern of Mr. Desjardins was to secure an act from the 
 
20 Co-operative Banking in Quebec. 
 
 Dominion Parliament which would place similar associations 
 on a basis of legality and uniformity for all the different pro- 
 vinces. A bill was framed after the model of the Quebec 
 Syndicates Act of 1906, and introduced before the House of 
 Commons in 1907. The bill was referred to a committee of 
 enquiry, and strongly recommended. But, as it was then late 
 in the session no action was taken that year. 
 
 Perhaps one influence in holding the bill over was the strenu- 
 ous opposition of the Retail Merchants' Association of Canada 
 to the distributive part of the act. The delay enabled them to 
 thoroughly muster their forces for the next attack; so that 
 when the bill came up again, in the session of 1908, they were 
 prepared to fight it to a finish. Yet in spite of all opposition 
 the act passed the Commons unanimously. In the Senate, how- 
 ever, the opposition faction had more supporters, and the bill 
 was thrown out by a majority of one. 
 
 At the time of writing, the bill, in a somewhat modified form, 
 is before parliament again ; and it has been referred to Banking 
 and Commerce Committee for detailed consideration. The same 
 opposing forces are arrayed against it with more determination 
 than ever. Though somewhat discouraged, Mr. Desjardins is 
 still fighting the battle of co-operation. He has divided the act 
 into two bills, one dealing with co-operative credit, and the other 
 providing for the productive and distributive forms of co-opera- 
 tive activity. Should the opposition to distributive societies 
 prove too strong, he hopes still to be able to save the part of the 
 act providing for credit associations.* 
 
 But, in the meantime, the work of Mr. Desjardins has at- 
 tracted attention and is receiving recognition farther away from 
 home. As an expert in his field, he was called to deliver an 
 address before the Twentieth Century Club of Boston.^^ Later 
 
 *Note : The bill providing for co-operative production and distribu- 
 tion was defeated in the Commons by a small majority. The one deal- 
 ing with credit societies never came up for the final reading, and so died 
 a natural death. The friends of the bill, however, are confident that 
 next year there will be a different story to tell. 
 
 2«See the "Bankers' Magazine," Ixxviii, 922 ; or the Labour Gazette, 
 X, 103. 
 
Historical Survey. 21 
 
 he was asked to confer with the Banking committee of the State 
 Legislature of Massachusetts, on the subject of legislation to 
 establish and control co-operative credit associations. On the 
 basis of the report of this committee, the legislature passed an 
 act providing for the organization of societies throughout the 
 Commonwealth of Massachusetts, similar to those operating in 
 Quebec. This act became law in the spring of 1909, and 
 shortly afterward the pioneer society made its appearance in 
 Springfield. Since then a committee of the legislature has been 
 commissioned with the task of drafting a model constitution 
 and by-laws. These have been prepared, and, together with 
 literature setting forth the advantages of co-operative credit, 
 were sent to Mr. Desjardins for revision. He writes stating 
 that these are now about ready for publication, and that he 
 expects the movement in Massachusetts will soon be started 
 in earnest. 
 
CHAPTER 11. 
 
 THE ORGANIZATION AND OPERATION OF A TYPICAL FRENCH 
 CANADIAN CO-OPERATIVE CREDIT ASSOCIATION. 
 
 To the reader who is unfamiHar with the co-operative credit 
 associations of Europe, the name '' La Caisse Populaire de 
 Levis ', would convey but a very imperfect conception of the 
 purpose and scope of the modest institution at Levis. But the 
 person who had come in contact with the broad humanitarian 
 spirit animating the whole organization and activity of the 
 town and country banks of Europe would expect to find the 
 French Canadian societies dominated by something more than 
 the purely economic motive. The men who had breathed their 
 spirit into that system of associations which has spread over 
 Europe and India were more than financiers, and much more 
 than political economists in the narrow, classical sense. Schulze 
 and Raiffeisen, Luzzatti and Wollemborg were all of them men 
 to whom human welfare was the all-important consideration. 
 They valued institutions in proportion to their efficiency in 
 serving men, and never looked upon human beings merely as 
 one of the factors in production. They were separated by a 
 whole world-view from that class of antiquated thinkers who 
 prize ** cheap labor " and a stupid, plodding peasantry as the 
 only foundation upon which the economic, political and reli- 
 gious institutions of a country can stand secure. They ewre 
 men to whom " cheapness," poverty and ignorance were always 
 distressing. In a sense they were philanthropists ; and yet they 
 were far from practising that type of short-sighted philan- 
 thropy which, by giving without requiring effort in return, de- 
 prives human beings of that independence and self-reliance 
 which is the fundamental quality of manhood. Raiffeisen, as 
 we have seen, did start out on the charity plan of relieving dis- 
 tress, but soon came to the conclusion that education and a 
 proper organization of their own latent forces was all that was 
 
A Typical Society. 23 
 
 necessary to uplift the poor. And so it came about that self- 
 help was made the basis of the co-operative credit movement. 
 It was a plan to enable the poorer class to lay for themselves 
 the economic basis which must necessarily underlie all other 
 progress. 
 
 Where Raiffeisen had arrived after years of experience, Mr. 
 Desjardins took his point of departure. He stood steadfastly 
 for self-help, a consciousness of social solidarity, and a free 
 field to work in, as the fundamental conditions of human wel- 
 fare. The breadth of his view, and the general spirit of the 
 man are so well embodied in the second article of the constitu- 
 tion of the People's Bank of Levis, which sets forth the objects 
 of the association, that we here reprint the article in full : 
 
 Article 2. — The objects of the association are: 
 
 1. To protect its members against reverses of fortune, the 
 results of enforced idleness, sickness and want, by teaching 
 them the inappreciable benefits of wise providential measures 
 based on mutual assistance and co-operation, and, in particular, 
 by instilling and developing in them the taste for, and the con- 
 stant and energetic practice of, economy on the n^ost modest 
 scale ; 
 
 2. To aid them by a wise and prudent system of credit in 
 the shape of loans and advances, the proposed employment 
 whereof must be communicated to the association, be ap- 
 proved by it, and be in accordance with the spirit in which it 
 is founded; 
 
 3. To enable persons devoid of fortune, but who are honest 
 and laborious, to form part of the association by granting them 
 facilities for paying up their shares in the capital stock by 
 means of very small weekly instalments ; 
 
 4. To secure the practice of the Christian and social virtues 
 that mark the good citizen, the honest, laborious and honor- 
 able worker, by exacting above all moral warranties of the 
 highest order from the shareholders who borrow from the 
 association; 
 
 5. To combat usury by means of co-operation, by providing 
 all who are deserving of the same, through' their fondness for 
 work, their skill and the integrity of their conduct, with the 
 moneys they require for carrying on their business or occupa- 
 tion, thereby making them independent of lenders who levy 
 
24 Co-operative Banking in Quebec. 
 
 exorbitant commission or interest, or of those who impose too 
 onerous conditions in connection with credit ; 
 
 6. To foster the spirit of enterprise and promote local works, 
 whether of an industrial or agricultural character, by the pru- 
 dent use of the savings effected within the district covered by 
 the association's operations ; 
 
 7. To spread amongst its members a practical knowledge of 
 the elementary principles of economic science, 
 
 8. To teach them respect for their engagements, and also 
 the advantages inevitably derived by those who faithfully fulfil 
 the obligations they have undertaken ; 
 
 9. To create and foster mutual confidence between sharehold- 
 ers by means of economic relations based on the security of 
 warranties of a high character, inasmuch as they are founded, 
 in a very great measure, on morality, honesty, order, love of 
 work and prudence ; 
 
 10. To gradually procure them — by persevering efforts to- 
 wards secring economy and consequently a just measure of 
 credit — that economic independence which inspires and fosters 
 the feeling of personal dignity and convinces one of the need 
 of relying above all upon oneself to improve one's position 
 and raise oneself in the social scale. 
 
 The language may be a little stilted, and the sentiment savor 
 of being somewhat overdone ; but one has only to come into 
 actual contact with the enthusiastic founder and president of 
 the People's Bank of Levis to feel that the language accurately 
 embodies the man, not. only in his sentiment, but also in his 
 endeavors to bring his ideals to a practical realization. 
 
 In the matter of saving, Mr. Desjardins is a firm believer in 
 the old adage, " if you only look after the pennies the pounds 
 will take care of themselves." So, in the Levis society he makes 
 a bid for the pennies by ofifering a capital of shares, each of 
 which is small in amount, and may be paid for in small weekly 
 or monthly instalments. On the basis of these shares, the an- 
 nual profits are distributed. Then, too, the bank is open for 
 the savings of its members in amounts of not less than five 
 cents ; and on all deposits current savings-bank rates of interest 
 'are allowed. A school-children's savings department is also 
 opened in connection with the bank, which aims to encourage 
 the children in habits of thrift. In these various ways the co- 
 
A Typical Society. 25 
 
 operative credit associations contrive to build up a substantial 
 reservoir of capital from the multitude of tiny dribblings of 
 loose change which would otherwise, in all probability, be lost 
 in wasteful consumption. 
 
 But a reservoir of capital is a barren ideal to work toward 
 unless it can be made to serve some purpose in furthering social 
 welfare. The aim is to place this accumulation of capital at the 
 disposal of all members who, in the opinion of the society, can 
 use it honorably in productive enterprise. This supervision of 
 the application of the funds of the association is always insisted 
 upon ; and every member who applies for a loan must state 
 clearly the use to which he intends to put it. Any breach of 
 confidence in this regard is considered sufficient grounds for 
 the expulsion of a member. This rule of the association may, 
 at first sight, appear very arbitrary ; but in practice it has 
 proven one of the strongest educational stimuli in connection 
 with the institution. Public opinion is at all times a powerful 
 incentive to excellence ; and it is especially so where the public 
 is so much interested in each of its members as is the case in 
 co-operative credit societies. Feeling himself to be under the 
 critical eyes of his fellows, each associate is spurred to a dis- 
 crimination between the sound and the shaky business enter- 
 prise ; so that a refusal to grant a loan on this ground is 
 comparatively rare. 
 
 Nor does the educational value of the society end here. There 
 is, first of all, the aim to inculcate a true self-reliance in busi- 
 ness, such as can only be attained on the basis of economic 
 independence. But it must be economic independence of such 
 a type as goes hand in hand with the sense of social solidarity 
 which makes each member firm in upholding fairness and honor 
 in the management and use of the common funds. In this way, 
 the associations take their place as builders of character, and 
 of just the sort of character which is coming more and more 
 to be needed in modern industrial society. The idealism of the 
 article quoted above may possibly take us into an atmosphere 
 which feels too rare for ordinary economic activity to thrive in. 
 But a gentle dash of such idealism thrown into the management 
 
26 Co-operative Banking in Quebec. 
 
 of that conscienceless immortal created under corporation law 
 would certainly be a boon to the rest of society. The capacity 
 to mulct the public, to evade, twist or mold legislation, regard- 
 less of the general social weal, places a man's services at a 
 premium as a member of the average board of directors. And 
 so it is refreshing to find a business organization of the import- 
 ance of the Levis People's Bank trying to achieve success under 
 the guidance of such principles. 
 
 One thing that brings success within the range of possibility, 
 under such conditions, is the care exercised in the selection of 
 the membership. It is not an organization of capitalists in the 
 ordinary sense of the term. In fact, the amount of capital a 
 prospective member is likely to be able to invest in the stock of 
 the association is about the last thing to be considered in an 
 application for membership. Each application must come 
 before the Council of Administration for approval, and the 
 chief assets which are passed in review are those which are 
 woven into the warp and woof of the character and reputation 
 of the prospective member. As article nine puts it, " he must 
 be honest, punctual in his payments, sober and of good habits, 
 industrious and laborious." 
 
 In order that these character assets may be justly estimated, 
 it is necessary that the applicant be known to the council of 
 administration, or to some other shareholders who may vouch 
 for his integrity. This intimate knowledge of each other by 
 the members of the society is secured by the Quebec Syndi- 
 cates Act through the limitation of the field from which 
 member? may be received to one electrol district; although 
 shareholders who change their place of residence are not re- 
 quired to resign their membership. Thus, following the prece- 
 dent of European country banks, mutual acquaintance and 
 unquestioned integrity form the sine qua non of admission to 
 the association. To be eligible for membership comes to be a 
 badge of honorable citizenship, a distinction to be prized as a 
 sort of semi-public recognition of personal worth. 
 
 Moreover, there is a continuous incentive to maintain the 
 reputation which secured admission to membership. Any 
 
A Typical Society. 27 
 
 breach of faith, or the subsequent manifestation of any of the 
 quahties or actions which would have debarred an appHcant in 
 the first instance, furnish sufficient grounds for expulsion from 
 the association. A member may also be expelled if he becomes 
 bankrupt or insolvent, or should he in any way abuse the privi- 
 leges of the society through any violation of the constitution or 
 by-laws. 
 
 Having thus fulfilled the requirements of the association as 
 a man and as a citizen, the applicant for membership will have 
 comparatively little difficulty in satisfying the financial require- 
 ments for admission. He must purchase one share of stock, 
 the value of which in most of the Quebec associations in five 
 dollars. He must pay the entrance tax on his share of stock, 
 which in the case of the Levis association is ten cents for each 
 share. Then he may pay for his share in such weekly or 
 monthly instalments as will suit his convenience. The members 
 of the Levis bank are permitted to pay for their shares at the 
 rate of ten cents a week, thus allowing almost a year for the 
 payment of one share. Each shareholder becomes liable for the 
 debts of the society only to the extent of the amount of stock 
 which he holds. 
 
 Any person may withdraw from membership and receive 
 back all the instalments which he has paid on his shares, by 
 giving thirty days' written notice to the council of administra- 
 tion. Li the practice of the Levis association, even this thirty 
 days' notice has been waived, and a shareholder may at any 
 time receive cash for his stock. In the opinion of the members 
 of the council this policy has more than ofifset any possible 
 inconvenience which might arise by the absolute confidence in 
 the association which it has inspired. The entrance fees on all 
 shares are put into the reserve fund, and are not refunded when 
 members withdraw from the society. 
 
 In an analysis of the operations of the association, one of the 
 first things to be noticed is the fact that the co-operative banks 
 of Quebec confine their business almost entirely to their own 
 membership. Loans and discounts are granted only to mem- 
 bers ; and, stranger still, as it must seem to the student of co- 
 
28 Co-operative Banking in Quebec. 
 
 operative banking in Europe, it is from members alone that 
 savings and other deposits are received. Three general excep- 
 tions to the rule confining the business of the association to the 
 membership may be noted. In case more funds are required in 
 the regular business of the society than it receives from its 
 members, it may contract for loans from outsiders. Again, the 
 resources of the reserve and provident funds may be invested 
 at the discretion of the council of administration in such sound 
 business enterprises as seem likely to secure the greatest advan- 
 tage to the association. All speculation in stocks or other 
 doubtful investments are forbidden by special constitutional 
 provision. In addition to the two cases mentioned, we may 
 notice that a good part of the working surplus of the society is 
 usually kept on deposit in one of the regular chartered banks. 
 
 But, apart from these three classes of transactions, the busi- 
 ness of the association is confined strictly to the membership. 
 This policy stands in sharp contrast to that of many of the town 
 banks of Europe, where, as in Italy and Germany, the co-opera- 
 tive institutions often enter into active competition with the 
 regular banks in doing the ordinary banking business of the 
 city. But with a strictly limited liability, such as the members 
 of the Quebec associations enjoy, and with a share capital sub- 
 ject to withdrawal at any time, resulting in a variable capital 
 and a variable membership, we can readily see that it was 
 necessary to confine the regular business strictly to the members 
 of the society. Nevertheless, with shares withdrawable almost 
 at pleasure, and the membership available to every honest indi- 
 vidual on such easy terms, and since the capital invested in 
 shares is practically certain of earning a somewhat higher rate 
 than is paid on deposits, we can scarcely see why the limitation 
 of business to shareholders need be any handicap to the pros- 
 perity and usefulness of the association. 
 
 The great authority on co-operative banking, Henry W. 
 
 Wolfif, claims that, although the dealings of societies should be 
 
 with members only, the counters of co-operative banks should 
 
 be open to deposits from all the world. ^ Still, he insists that 
 
 ^Henry W. Wolff, Co-operative Banking, 64. 
 
A Typical Society. 29 
 
 these banks should remain the humble servants of the poorer 
 classes ; and regrets the capitalistic tendencies of many of the 
 European associations, where, as in Lombardy, they are doing 
 three-fourths of all the banking business.^ Now, if democracy 
 of membership combined with the greatest possible range of 
 service is the ideal, we can hardly conceive of a more effective 
 method of attaining that end than the policy pursued by the 
 Desjardins type of co-operative bank. 
 
 The first concern of the association is to raise capital in order 
 to be able to assist its members with loans and advances. The 
 Raift'eisen societies, as we have seen, relied chiefly upon pledg- 
 ing the unlimited liability of every member as security for the 
 funds which it secured from outside sources. In this way it 
 could obtain funds which it cotild re-loan to its members at 
 reasonable rates of interest. But in a thrifty French Canadian 
 community Mr. Desjardins felt that a proper encouragement of 
 saving would result in almost all the working capital required. 
 So he adopted two methods of promoting thrift, the selling of 
 shares, and the receiving of deposits. The share capital was 
 designed to furnish the more stable portion of the association's 
 funds. This method appeals to those seeking a more or less 
 permanent investment for their savings. It is encouraged by a 
 somewhat higher rate of interest than can be had in the ordi- 
 nary savings bank. But, besides this demand for a permanent 
 investment, there is always a considerable amount of money 
 afloat in a community which cannot be tied up for any great 
 length of time. Such funds are kept for the running expenses 
 of households, for the payment of rents, insurance premiums, 
 lodge dues, etc., as they mature. By offering a low rate of 
 interest, the association can have the use of considerable 
 amounts of this floating capital as deposits, payable on demand 
 or at the end of a period agreed upon. Greater care must be 
 exercised in the use of these funds by the society; but, never- 
 theless, they can be used in making all sorts of short time loans, 
 and a little experience enables the management to handle them 
 without danger and with great advantage to the society. Each 
 2Ibid.. 285. 
 
30 Co-operative Banking in Quebec. 
 
 member making a deposit is given a pass book in which each 
 withdrawal or new deposit is entered, just as in ordinary 
 banking. 
 
 Thus far in their experience the funds derived from these 
 two sources have been sufficient to meet all the demands of the 
 members for loans. 
 
 A restriction has been placed upon the amount of funds 
 available from share capital by limiting the amount of stock 
 which a member may hold. This restriction is a sort of safe- 
 guard in the interest of equality and democracy within the asso- 
 ciation. Each member, it is true, has only one vote, no matter 
 what his holdings of stock may be. But still it is thought that 
 if it were possible for one man to hold an unlimited amount of 
 stock, he might, by his prestige, or by the threat of the with- 
 drawal of his capital, be able to exercise an influence upon the 
 policy of the association which might be detrimental to the 
 interest of a majority of the shareholders. The limit was 
 started in the Levis society at $125, or twenty-five shares of 
 stock. The amount permitted to each associate was later raised 
 to $250, then to $500, and stands at present at $1000. Deposits 
 with the society are usually for smaller amounts, and no limit 
 has thus far been placed on the amount which a member may 
 place on deposit. 
 
 Out of the funds so raised, loans and advances are made to 
 the members of the association. The granting of loans is at 
 the discretion of the committee on credit. The loan may be 
 granted on the simple note or acknowledgment of the borrow- 
 ing shareholder ; or the committee may decide that the loan 
 shall i3e guaranteed by one or two other solvent members. Much 
 will depend upon the amount of the loan, and on the standing 
 of the borrower. But, as article fifty-one says, " the committee 
 must, above all, consider and obtain accurate information with 
 regard to the honor, the spirit of order, the activity, honesty 
 and ability of the borrower, for such are the chief warranties 
 exacted by the association." 
 
 In all cases the borrower must state clearly in his application 
 the purpose for which he wishes the loan. If that purpose is 
 
A Typical Society. 31 
 
 not in conformity with the aim of the association to encourage 
 the promotion of productive enterprise, the advance is straight- 
 way refused. " You see," said President Desjardins in discuss- 
 ing this matter with the writer, '' if we were to attempt to 
 finance every frivolous adventure requiring capital, the objects 
 of our society would be completely frustrated. For example, 
 just to show you what I mean, a young man came to me one 
 morning and told me he would like to have a loan of fifteen 
 dollars. ' Very well,' I said, * state your reason for wanting the 
 money and I will bring your application before the committee 
 at noon.' He hesitated, and, on my repeating the request, ad- 
 mitted that he was contemplating a pleasure-trip to visit some 
 friends and was a little short of cash. ' In that case,' I replied, 
 ' it would be absolutely useless for me to bring' your application 
 before the committee, as to grant such a loan would be a viola- 
 tion of our by-laws, which are equally binding on all the mem- 
 bers of our society.' And yet the young man's credit was 
 perfectly good. His purpose was simply outside the scope of 
 the association." 
 
 In advancing credit for legitimate purposes, the advantage 
 and convenience of the borrower is always given the most care- 
 ful consideration, both as to the manner and time of repayment, 
 and as to the rate of interest charged. The instalment plan of 
 repayment is always encouraged where it is feasible. The in- 
 stalments may be placed on deposit and draw interest until 
 enough has been accumulated to pay the debt in full; or by 
 special arrangement, the instalments may be applied directly in 
 reducing the debt, interest being charged only on the unpaid 
 portions for the time which elapses from the granting of the 
 loan until each instalment is repaid. In the matter of repay- 
 ment, the widest latitude is permitted. In all cases, however, 
 it is considered a point of honor that the borrower live strictly 
 up to the terms of the agreement he enters into at the time he 
 receives the loan. 
 
 Take this example from the evidence of Mr. Desjardins be- 
 fore the committee appointed by the Dominion Parliament, as 
 an illustration of the terms wdiich a borrower may make with 
 
32 Co-operative Banking in Quebec. 
 
 his co-operative bank. '*A member of our society came about 
 the month of July last and said : * I expect a payment due me 
 of $150. I counted on it to pay the insurance premium on my 
 life, but the man who owes me the money has not come. The 
 premium must be paid to-morrow, and I have not a red cent in 
 my possession. I want you to let me have $150 in order to pay 
 my premium when due. What are the conditions ? ' I said, 
 * you have the option of either paying seven per cent, in ad- 
 vance, or eight per cent, with the privilege of then paying only 
 for the time you keep the money, or any part thereof.' He said 
 to me, * I prefer the eight per cent, rate because you might have 
 the money to-morrow or to-night.' He came the next morning 
 and got $150, after I had submitted his demand to the board 
 of credit. Five days afterwards he came back, and he had the 
 money from the man who owed him. He paid his premium and 
 said, ' now, according to the conditions, how much do I owe 
 you? ' I think it was twenty-three or twenty- four cents for the 
 whole amount."^ 
 
 In making loans and advances, the aim is to benefit the great- 
 est possible number of members. In order to do this, a number 
 of small loans are always given the preference,other things being 
 equal, over one large loan for the same amount. In fact, the 
 opportunity to place a large loan on favorable conditions must 
 frequently be rejected on account of the demand for credit in 
 small amounts. In justification of this policy, it is urged that 
 the member who is in a position to use profitably a large amount 
 of credit is usually so situated as to be able to get it on reason- 
 able terms from one of the chartered banks, or from some other 
 institution -dealing in credit. The poorer member, on the other 
 hand, could, in all likelihood, oflfer no security which such 
 dealers in credit would accept. 
 
 Thus, '* the greatest good to the greatest number " is the rule 
 which determines the distribution of credit to the members of 
 the society. First of all, the general meeting fixes annually the 
 amount which may be loaned to any individual shareholder, 
 just as it fixes the amount of stock which any member may 
 ^Report of Committee on Bill No. 2, 1507, page 13. 
 
A Typical Society. 33 
 
 hold. This is to prevent the possibihty of finding the loanable 
 funds of the association concentrated in the hands of a small 
 number of members. Below the limit set by the general meet- 
 ing the committee on credit exercise their own discretion in 
 advancing loans. They are supposed to be acquainted with the 
 financial standing and personal character of every member of 
 the association, and they decide each application for a loan on 
 its own merits. 
 
 In actual practice, however, the method is not so cumbersome 
 as it appears at first sight. The committee usually has prepared 
 a private list of all the members, placing opposite each name 
 the amount of credit he should be permitted to draw. This list 
 is placed in the hands of the president or manager, who is 
 thoroughly acquainted with the purposes for which it is per- 
 missible to make advances ; so that unless there are some 
 unusual circumstances to be considered, he may grant the loan 
 without a special appeal to the committee. 
 
 In this way the credit and loan side of co-operative banking 
 is managed in Quebec ; and the general policy in this respect is 
 much like that of the European associations. 
 
 From the foregoing account of co-operative credit operations 
 it- is apparent that these societies offer decided advantages from 
 the standpoint of the borrower. At all times the Quebec Peo- 
 ple's banks have steadfastly adhered to the policy of giving the 
 maximum amount of service consistent with safety. Never- 
 theless, in the course of the year's business substantial profits 
 accumulate in the treasuries of the associations. During the 
 fiscal year ending November 30, 1909, for example, the profits 
 of the Levis society were $4,861.72. For the preceding year 
 they amounted to $4,000.36. Now the question arises, how are 
 these profits distributed ? 
 
 First of all have to be met the running expenses of the soci- 
 ety. In the French Canadian associations these are invariably 
 light. We have already noticed this in connection with the 
 early history of the People's Bank of Levis. The only official 
 on a regular salary is the business manager, and he is paid ac- 
 cording to the time he devotes to the work of the society. Some 
 
34 Co-operative Banking in Quebec. 
 
 one is chosen as manager who can conveniently give the neces- 
 sary time to the affairs of the bank without interfering too 
 much with his regular occupation. At Levis, for example, the 
 present manager is a justice of the peace, — a much more im- 
 portant official in French than in English-speaking communi- 
 ties. Still, he manages the business of the Levis People's Bank 
 without much difficulty along with his professional duties, and 
 was receiving last year twenty dollars a month for his services. 
 Other expenses, such as printing, lighting, heating, and any 
 travelling expenses which officials may be allowed in accord- 
 ance with the constitution do not amount to a large sum in the 
 aggregate. So the total general expenditure for last year, 
 including the manager's salary, amounted to only $463.45 ; 
 which is a very small outlay compared with the service rendered 
 by the association.- 
 
 After payment of the general costs of operation comes the 
 claim for interest on deposits of which the society has had the 
 use. As we pointed out above, the interest varies somewhat 
 with the nature of the account, depending on the length of time 
 for which the association can depend upon the use of the funds. 
 But, in any case, the rates average about the same as those 
 allowed by other savings banks in the neighborhood. 
 
 When these necessary expenditures have been met, the next 
 important consideration is to provide a sound financial basis for 
 the association. Mr. Wolff thinks this is best secured, in the 
 village type of society, by unlimited liability. In fact, he deems 
 this form of liability indispensable to the security of the coun- 
 try bank.* But what the Raiffeisen bank attains by means of 
 unlimited liability, and what some other European models 
 secure by restricting the withdrawal of share capital, the French 
 Canadian associations aim to provide through a strong reserve or 
 rest fund. This is made up of the entrance fees on each share 
 of stock issued, together with an assessment of twenty per cent, 
 of the net profits of each year, until the fund reaches a maxi- 
 mum of double the amount distributed in profits on the paid up 
 stock of any year. The reserve fund remains the undivided 
 ^op. cit., 46. 
 
A Typical Society, 35 
 
 property of the society. It is invested by the council of admin- 
 istration in such ways as are attended with a minimum of risk; 
 and any poHcy which could possibly endanger the reserve is 
 absolutely unconstitutional. It can be used to meet only such 
 extraordinary losses as are beyond the other resources of the 
 association. For example, the Neuwied Central Bank of Ger- 
 many at one time lost so heavily through its liberality in fi- 
 nancing all sorts of co-operative schemes, that it was only able 
 to save itself from bankruptcy by cancelling dividends and 
 raiding its reserve.^ Such a predicament could not occur under 
 the conditions prescribed by the Quebec Syndicates Act ; and 
 yet the fact that there is a strong undivided fund waiting to 
 meet any emergency which might threaten the existence of the 
 society gives a sense of security to the entire membership, which 
 is a rtsong influence in promoting the prosperit}' of the asso- 
 ciation. 
 
 As a sort of outer bulwark, protecting the reserve citadel, is 
 the Provident Fund, designed to meet the first onslaught of any 
 disaster which might threaten the stability of the credit union. 
 It is constituted by means of a ten per cent, assessment on the 
 net profits of each year until the fund shall attain a maximum 
 of one-half of the yearly profits ("boni") distributed on the 
 paid up stock. 
 
 But, according to the constitution, the assessments for both 
 the reserve or provident funds may be increased or decreased 
 by vote of the general meeting. We notice, according to the 
 last annual report, that these funds are in such satisfactory con- 
 dition as to warrant the manager's recommending to the asso- 
 ciation a reduction for the coming year in the percentage to be 
 set aside for each of them from the net profits. He suggests 
 that fifteen and five per cent., respectively, will provide ample 
 addition to the reserve and provident funds for the next fiscal 
 year. In the history of the Levis society up to the present time 
 there has never been any occasion for a demand upon either of 
 these funds. 
 
 After these various claims have been met comes the distri- 
 sHenry W. Wolff, op. cit., 172-3. 
 
36 Co-operative Banking in Quebec. 
 
 bution of dividends or ''boni" on the paid up stock. Those 
 shares which have not been paid up during the entire year re- 
 ceive dividends in proportion to the time which has elapsed 
 since the last instalment was paid. The aim is not to pay very 
 high profits, but only such as shall ensure to those who invest 
 in shares a little better return on their savings than if they had 
 placed them on deposit. The constitution provides that, in case 
 the profits of any year, after deducting the expense of opera- 
 tion, the interest on deposits, and the regular assessments for 
 the reserve fund, are insufficient to pay a dividend equal, or 
 nearly so, to the average for the three years preceding, the gen- 
 eral meeting may order that the difference be made up out of 
 the provident fund. This reduction, however, must be made 
 up again as soon as the condition of the society will permit. 
 
 The following items from the Ninth General* Report of the 
 Levis association will serve to illustrate what has been said re- 
 garding the distribution of profits : 
 
 Profits for the year ending Nov. 30, 1909 $4,861 72 
 
 General expenses for the year 463 45 
 
 Interest on savings deposits for the year 592 53 
 
 Leaving a net balance of $3,805 74 
 
 Reserve fund standing from last year $4,101 87 
 
 Entrance fees for current year 283 35 
 
 Twenty per cent, of net profits 761 15 
 
 Present reserve fund .- $5,146 37 
 
 Provident fund standing from last year $ 912 59 
 
 Ten per cent, of net profits 380 57 
 
 Present provident fund $1,293 16 
 
 Then, drawing on the surplus to the extent of $46.86, a divi- 
 dend of four and a half per cent, was declared on the paid up- 
 stock for the year, making a total of $2,710.88 distributed in 
 **boni" on the 12,953 shares of stock which were paid up on 
 time to participate in the yearly distribution of profits. Sum- 
 
A Typical Society. 37 
 
 ming up the reserves as they stand at the end of the year, we 
 have: 
 
 Reserve fund $5,146 37 
 
 Provident fund 1,293 16 
 
 Undivided surplus 337 78 
 
 Total " patrimoine " $6,777 31 
 
 We come now to a more careful examination of the admin- 
 istration and management of these societies. Throughout the 
 constitution and by-laws of the Quebec associations every 
 possible precaution seems to have been taken to preserve the 
 democratic nature of the institutions. We have already had 
 occasion to notice that one man can have but one vote in the 
 general meeting, no matter what his holdings of stock may be; 
 we have seen that the amount of stock which one man may 
 hold is strictly limited by the general meeting; and that the 
 amount which any member may receive in loans is also limited 
 by the same authority. • Further, the general meeting, in which 
 each member has an equal voting power, and in which none 
 save corporations which have been admitted to membership 
 may vote by proxy, is the chief authority and final court of 
 appeal in all that pertains to the management of the associa- 
 tion. At the annual meetings are chosen the representatives of 
 the shareholders to whom is entrusted the administration and 
 supervision of the affairs of the society. These constitute: 1^ 
 a council of administration; 2, a committee on credit; 3, a 
 committee of supervision. 
 
 The council of administration shall consist, according to the 
 constitution, of nine members chosen from among the share- 
 holders by vote of the general meeting. The number, however, 
 may be changed in case the membership so elects. They are to 
 hold office for two years, five retiring by lot at the end of the 
 first year, and the term of the remaining four expiring at the 
 end of the second year, and so on. At its first sitting after the 
 general meeting the council of administration must choose a 
 president, a vice-president and a secretary, who constitute the 
 
38 Co-operative Banking in Quebec. 
 
 executive of the board, and besides, act as president, vice-presi- 
 dent and secretary of the association. 
 
 The most extensive powers are vested in the council of ad- 
 ministration. The members, known as directors, meet as often 
 as necessary in the interests of the association. They control 
 the admission of new members, and determine the conditions 
 upon which stock may be transferred or withdrawn ; they ap- 
 point or remove employees, fix their remuneration and deter- 
 mine their duties ; they choose the salaried manager who has 
 access to their meetings, keeps the books, signs documents as 
 representative of the society, and, under the supervision of the 
 council and committees, conducts the business of the bank; they 
 call special meetings of the entire membership when they think 
 necessary; and, in brief, '' they take all the measures they deem 
 advisable in the interest of the association not within the juris- 
 diction of the general meeting, or not inconsistent with the 
 general by-laws or law."*' 
 
 The committee on credit consists of the president and four 
 shareholders appointed at the general meeting. These four 
 members are elected for three years, two retiring each alternate 
 year. Three of them must be present in order to render a valid 
 decision. They represent the association in determining the 
 credit which may be allowed to each member, and no applica- 
 tion for a loan may be complied with until this committee has 
 passed its approval. Nor can any action in such matters be 
 taken unless the members present are unanimous in their deci- 
 sion. But in case they cannot agree regarding the granting of 
 a loan, or should they refuse to advance any credit at all, the 
 shareholder concerned may appeal to the council of adminis- 
 tration. The council hears the evidence submitted by the mem- 
 "bers of the committee on credit, and also the case of the 
 interested shareholder; after which the case is decided defi- 
 nitively by a majority vote of the board of directors. 
 
 The aim in selecting this committee is to choose the" most 
 widely acquainted, level-headed members of the community. 
 They must know, or make themselves acquainted with, the 
 
 ^Constitution of the Peoples' Bank of Levis, Article 69, Clause 10. 
 
A Typical Society. 39 
 
 financial standing and moral character of every borrower ; they 
 must be men in whose judgment the association has the fullest 
 confidence; and they must be above the suspicion of acting 
 from jealousy or any purely selfish motive. As a safeguard 
 against selfishness or partiality, no member of the committee 
 on credit may borrow from the association, or become surety 
 for any loan or advance during his term of office. They have 
 power to demand the fullest information regarding all matters 
 concerning the credit of the association ; and under their direc- 
 tion all the regular financial statements are drawn up. 
 
 At the annual meeting another committee of three share- 
 holders is also selected. These have been called, for want of 
 a more adequate English term, the committee of supervision. 
 They must not hold any other office or salaried position in the 
 association during their term as members of this committee. 
 They are elected for one year, and are re-eligible. They form 
 a permanent board of supervision, audit and general criticism^ 
 which watches over all the operations of the society. They 
 must frequently check the cash, and examine securities and in- 
 vestments ; they see to the enforcement of the by-laws, and the 
 carrying out of the regulations and decisions of the general 
 meeting; they may control the decision of the committee on 
 credit regarding loans and renewals ; they have access to all 
 documents ; and may demand accurate information regarding 
 every transaction in connection with the operations of the asso- 
 ciation. As advisers and critics, all other officials must hearken 
 to their council. Where they find anything remiss in the man- 
 agement of the society they must report their observations in 
 writing to the council of administration. Should the council 
 not act at once, or should they find any serious violation of the 
 constitution, they may proceed to call an emergency meeting. 
 In the event of circumstances calling for extraordinary pro- 
 cedure, they have power to suspend the operations of the asso- 
 ciation entirely until a meeting of the shareholders has been 
 called to consider the situation. 
 
 Owing to their authority over the committee on credit, the 
 members of the committee of supervision are placed on the 
 
40 Co-operative Banking in Quebec. 
 
 same footing in the matter of obtaining credit from the associa- 
 tion. They can neither act as surety nor receive a loan during 
 their term of office. 
 
 Apart from our consideration of the general meeting, the 
 council and two committees, we must look briefly into the duties 
 of two or three separate officials. These are the president, 
 vice-president, manager and secretary. 
 
 The president presides over the general meeting of the share- 
 Tiolders, and over the meetings of the council of administration. 
 He decides points of order, and in case of an equal division of 
 those present over any question, he has the casting vote. In 
 case of his temporary absence or inability to act from any cause 
 his place is taken by the vice-president. In the event of the 
 resignation or death of the president the vice-president succeeds 
 him for the remainder of his term of office. 
 
 The president may also fill the office of manager, as is the 
 case- in many of the French Canadian associations. The man- 
 ager has charge of the books of account, takes care of the 
 securities and cash belonging to the society, and under the di- 
 rection of the council and committees conducts the business of 
 the association. He must, at the discretion of the council of 
 administration, furnish security, which shall be in the form of 
 a guarantee policy from an insurance company, upon which the 
 society pays the premium. 
 
 As provided in article 122 of the constitution, " the secretary 
 has custody of the archives of the association; he draws up 
 minutes of the general meetings of the shareholders, and of 
 the meetings of the council of administration. He gives com- 
 munication of the same at the meetings of the association and 
 of the council. He performs all the duties connected with his 
 office." 
 
 On the basis of our study of the Quebec societies, we are in 
 a position to venture a few observations in comparison of the 
 French Canadian type with some of the prevailing forms of 
 European co-operative banks. While a complete comparison is 
 not attempted, a few of the outstanding features of the societies 
 
A Typical Society. 41 
 
 will be emphasised by placing them alongside of those developed 
 in the different conditions of the countries of Europe. 
 
 Take first the Raififeisen organization, which is the prevailing 
 form of country or village bank in Europe. We note the simi- 
 larity in the general humanitarian purpose of the two types of 
 association, in the economy of management, in the strict super- 
 vision of the use of the loans granted. But we have the un- , 
 limited liability of the Raiffeisen shareholder as compared with 
 the very limited responsibility of the member of the Quebec 
 societies. Then, we have Raiffeisen's utter disregard of share 
 capital as a means of accumulating funds. In fact, he only 
 tolerated share capital because the Prussian law, secured under 
 the influence of the Schulze-Delitzsch faction, forced it upon 
 him. However, the shares were only a nominal compliance 
 with the law, being as low as a farthing or half-cent a share in 
 some instances.' Over against this indifference to share capital 
 we have the effective use of moderate priced shares by the 
 Canadian associations. In Quebec we have a much greater 
 emphasis on the importance of raising the funds for the use 
 of the society among its own members. The Raiffeisen bank 
 works on a smaller scale, and among people of more limited 
 means than the average French Canadian association. Hence, 
 it lays more stress on the stimulation of enterprise than on 
 saving. In order to secure the necessary capital, each member 
 is pledged to unlimited liability.. Often some rich man unites 
 with the society, and on the basis of his security capital may 
 be borrowed on easy terms to lend to those who need credit.^ 
 
 If we now turn to the Schulze-Delitzsch model, the " town " 
 or " people's bank " of Europe, we find other points of similar- 
 ity and difference. In the first place, we are struck by the 
 greater expenditure in the operation of the town bank. Many 
 of them, as we have noticed, occupy handsome buildings and 
 employ quite a staff of clerks and officials. This is in marked 
 contrast with the humble Raiffeisen societies with their volun- 
 
 ^Henry W. Wolff, op. cit., 92. Cf. C. R. Fay, Co-operation at Home: 
 and Abroad, 43. 
 
 8H. W. Wolff, op. cit., 93. 
 
42 Co-operative Banking in Quebec. 
 
 tary service ; and also differs from the economical management 
 of the Desjardins model. Schulze went on the assumption that 
 paid service is always best and cheapest in the long run. 
 Raiffeisen, working chiefly among those with very limited 
 means, whose time is not placed at a very high money value, 
 disallowed all remuneration. Mr. Desjardins, living amidst the 
 somewhat intermediate conditions of a French Canadian com- 
 munity, chose a type a little nearer the Raiffeisen than the 
 Schulze ideal in the matter of expense. Each is perhaps best 
 in its own peculiar social environment.® 
 
 In his attitude toward share capital, we find that Schulze 
 emphasized, very strongly, saving, thrift, and self-help. These, 
 he believed, could best be promoted by the selling of stock. 
 Thus far he was in perfect unison with Mr. Desjardins. They 
 differ, however, as to the size of the shares to be used. Schulze 
 considered that his object could be best attained by issuing large 
 shares; while Mr. Desjardins maintains that the small share is 
 most effective. In the European town bank the size of the 
 share varies from society to society, but the minimum is about 
 thirty dollars. ^*^ In Quebec most of the associations use a five 
 dollar share, and Mr. Desjardins considers this plenty large 
 enough. The ordinary man, he finds, takes a pride in adding 
 to the number of his shares. The greater effectiveness of the 
 large share in Europe rests upon the fact in the people's banks 
 liability was originally, and is still largely unlimited. Where 
 a man pledges himself to unlimited liability in order to obtain 
 the advantages of co-operative credit, his object has been at- 
 tained by the purchase of one share. It is found that in socie- 
 ties of unlimited Hability most members purchase but one share. 
 Hence the necessity that it be large if it is to be a means of 
 accumulating capital. 
 
 Another point of difference lies in the scope of the business 
 done. We find the people's banks of Europe in active compe- 
 tition with the regular chartered banks. In Germany the co- 
 operative bank often does the bulk of the business in a city. 
 
 »Ibid., 112. 
 
 IOC. R. Fay, op. cit., 22-23. 
 
A Typical Society. 43^ 
 
 We have already referred to the situation in Lombardy, where 
 the people's banks control three-quarters of the banking busi- 
 ness. In Quebec the aim is rather to supplement than to sup- 
 plant the regular banks. It often happens that members who 
 wish large advances and can give good security, are refused 
 accommodation on the ground that the funds can be used for 
 small loans to poorer people, while the rich member will have 
 no difficulty in obtaining credit at a chartered bank. 
 
 When we come to consider the Luzzatti or Italian model, we 
 find some points of closer similarity to the working type in 
 French Canada. In the first place, we have limited liabiUty in 
 common. Then, the Quebec societies have practically adopted 
 Luzzatti's plan of making shares small and having them paid 
 up in instalments stretching over a period of ten months. The 
 Italian shares are withdrawable and transferable as in the Cana- 
 dian associations. But the disposal of shares is very strictly 
 supervised in Canada; while we find Mr. Wolff deploring the 
 fact that the easy transfer of shares of some Italian banks is 
 absolutely faulty from the co-operative point of view." Again, 
 the counters of Italian banks are open to deposits from all who 
 come ; while in French Canada savings are received from mem- 
 bers only. On the other hand, both systems are alike in being 
 entirely independent of government aid. In this respect they 
 differ from the German, French, Austrian and Hungarian asso- 
 ciations, as well as those being established in Ireland and India. 
 In all of these countries the societies have been more or less 
 pampered by government assistance. The best authorities on 
 co-operative banking are opposed to the granting of govern- 
 ment aid ; or, in any case, maintain that it should be only spar- 
 ingly used as a step toward independence. Mr. Desjardins 
 stands for the Italian policy of self-reliance, and opposes gov- 
 ernment assistance under all circumstances. He would be glad 
 to have the Canadian government show enough interest in the 
 movement to clear the way by suitable federal legislation; but 
 beyond this he thinks it would be a mistake to go. 
 
 Again, the Quebec associations strictly forbid the granting of 
 
 1^ Henry W. Wolff, op. cit, 66. 
 
44 Co-operative Banking in Quebec. 
 
 credit to officials and committee members who have anything 
 to do with the handling of the funds, or who control the mak- 
 ing of loans. Nor are such persons permitted to act as surety 
 for others borrowing from the society. The tendency in 
 Europe at the present time is toward the adoption of a similar 
 policy. The German societies have suffered severely in the past 
 through the granting of excessive credit to members of the con- 
 trolling boards. Many German and Austrian associations have 
 tried to meet this situation by the appointment of a separate 
 appraising committee to deal with loans to officials and boards. 
 But even this has not always proven a sufficient safeguard. ^^ 
 The tendency to favor officials with unjustifiable credit has 
 been so persistent that the Quebec societies disallow the prac- 
 tice entirely. 
 
 We have already pointed out the difficulties encountered by 
 the Neuwied Central bank as a result of financing other co- 
 operative enterprises. It is a common thing for the local 
 Raiffeisen associations to act as purchasing and distributing 
 agencies for their members. When confined strictly to the 
 humble country bank, where the business is very small, this 
 practice seems to have resulted in little harm. But Wolff is 
 strongly of the opinion that co-operative credit associations 
 should confine their activity entirely to the banking business. ^^ 
 In this respect, Mr. Desjardins is fully in accord with him. On 
 the basis of his wide study of the subject, he has come to the 
 conclusion that productive and distributive co-operative societies 
 should always be separately organized from the credit and 
 banking associations. This, of course, does not hinder a man 
 from being at the same time a member of several societies 
 organized for different purposes. By keeping the associations 
 separate, each is forced to stand or fall on its own merits; 
 and the failure of one branch of co-operative enterprise need 
 not bring about the downfall of the whole movement. On this 
 account the Quebec societies confine themselves entirely to the 
 credit and banking business. 
 
 i2Henry W. Wolff, op. cit., 74 and 198-9. 
 i^Ibid., 173. 
 
A Typical Society. 45 
 
 Finally, we note that the Quebec Syndicates Act makes local 
 control a fundamental principle of the Canadian associations. 
 No branch system or other centralized organization is thus far 
 permitted. In Europe, on the contrary, the establishment of 
 branches and the centralization in unions constitutes one of the 
 most distinctive features of the movement. We found Schulze- 
 Delitzsch, in 1859, organizing his ''Allgemeiner Verband der 
 deutschen Erwerbs- und Wirtschafts-genossenschaften."^* In 
 1899, Raiffeisen established the " General Verband landlicher 
 Genossenschaf ten " ; and the precedent so established has been 
 generally followed throughout Europe.^" The bank of Augus- 
 burg, for example, with its 250 branches, covers the whole 
 province of Upper Bavaria ;^^ the co-operative bank at Milan 
 has 300 local branches ;^^ and the town banks of Switzerland 
 ere concentrated in the Swiss People's Bank with its branches 
 all over the nation.^^ Then we find the rural banks of France, 
 to the number of 1,638, affiliated in the " Caisses Regionales," 
 and the " Centre federatif du credit populaire en France " 
 uniting the town banks ;^^ the Belgian " Boerenbond Beige," 
 held together by its system of central banks i^'' and the Swiss 
 Verband, consolidating the country banks of that nation.^^ In 
 fact, almost everywhere in Europe we find the co-operative 
 banks united in strong federations around systems of central 
 banks. 
 
 This system of centralization has its advantages. Indeed, 
 where the government is promoting the movement, as is so fre- 
 quently the case in Europe, some form of organized union is 
 indispensable. Whatever may be the effect of this dependence 
 upon state aid, its dispensation necessitates union and some 
 measure of government inspection. With or without govern- 
 ment assictance, centralization may be effectively used in 
 establishing new societies. In Finland, for example,^^ and in 
 
 14C. R. Fay, op. cit., 20. i^jbid., 21. 
 
 i«H. W. Wolff, op. cit., 86. i7ibid., 152. 
 
 ISC. R. Fay, op. cit., 67. isibid., 68-70. 
 
 2oibid., 69. 2iibid., 74. 
 
 22E. A. Pratt, op. cit., 192-3. 
 
46 Co-operative Banking in Quebec, 
 
 the Grand Duchy of Luxemburg,^^ central banks were estab- 
 lished first to act as agencies in organizing local associations. 
 Even in Quebec, though there is no legal or financial connection 
 of the different associations, it is difficult to see how the work 
 of organization would go on without the unifying spirit of Mr. 
 Desjardins. Seldom has a " caisse " been started without his 
 presence; and the Levis association with its constitution and 
 by-laws has served as a model for all the others. In a letter 
 of March 22, 1910, he writes : *' More than sixty invitations 
 have been received by me for new ones to be established in the 
 course of the spring and summer." 
 
 The chief advantage of centralization, however, comes from 
 its efficiency in circulating and equalizing financial reseurces. 
 This is desirable whether the banks be independent or state 
 aided. Indeed, it is maintained that where the surplus of one 
 locality can be brought to supply th^ deficiency of another, any 
 necessity for outside selp usually disappears. The central 
 bank, being in touch with all the affiliated branches, acts as a 
 sort of clearing house for funds. Surplus and deficit balance 
 each other throughout the system, and the resources of the 
 whole union generally balances the call for loans and advances. 
 
 In case the funds within the union are insufficient, the cen- 
 tral bank may serve as a medium through which funds may 
 be secured on reasonable terms from outside sources. These 
 institutions are supposed to be organized on the regular limited 
 liability basis ; and to be in touch with the capitalist money 
 markets of the country. Hence, they may be expected to secure 
 better terms for loans than the less experienced local credit 
 associations.^* 
 
 Possibly the main objection that can be urged against central 
 banks is that they may result in the concentration of capital in 
 certain districts to the impoverishment of others. There is a 
 tendency among thrifty but unprogressive people to over- 
 emphasize saving to the neglect of the stimulation of enterprise. 
 The expectation of profits is a necessity if saving is to be stimu- 
 
 23lbid., 223. 
 
 240n this whole subject, see Wolff, Co-operative Banking, 50-60. 
 
A Typical Society. 47 
 
 lated; and this in turn demands that there be enterprise and 
 fruitful investment somewhere. If the surplus may be trans- 
 ferred through a central bank to some neighborhood where 
 investment is easy and business keen, there will be less incen- 
 tive to develop local resources. The end and aim of co-opera- 
 tive effort, however, should be to ferret out every profitable 
 way in which credit may be employed in the immediate neigh- 
 borhood. One of the most serious charges brought against 
 chartered and savings banks, insurance companies, etc., is that 
 they drain the different localities of the funds which should be 
 utilized at home. Under a centralized system of co-operative 
 credit the same evil might possibly result. 
 
 Then, too, there is a sense of security and confidence in the 
 fact that the funds of the society are being invested right under 
 the supervision of the membership. This means a great deal, 
 especially to people whose knowledge and interests extend little 
 beyond their native parish. Among such simple-minded folk 
 there is a feeling that you never can tell what will happen to 
 your savings if they are sent away to the big city, where all 
 sorts of money-making schemes are being hatched. As we shall 
 see, this confidence in home management, and in the local use 
 of funds, has been an important factor in determining the suc- 
 cess of the French Canadian associations. 
 
 Still, we believe that the time is not far off when some system 
 of centralization would be of considerable benefit to the Quebec 
 societies. There have already come to light several instances 
 in which some banks have had more funds than they could 
 possibly find use for, while others had a greater demand for 
 loans than they could meet with their own resources. It would 
 obviously be to their mutual advantage if such associations 
 could be made to supplement each other. We can see no reason 
 why this could not be accomplished with safety on the plan 
 proposed by Schulze-Delitzsch of having a strong, independent 
 joint stock bank bound to the co-operative banks through a con- 
 trolling interest in its stock.^^ Indeed, many of the other forms 
 of centralization seem to be giving excellent results in Europe. 
 
 25Henry W. Wolff, op. cit., 160-162. 
 
48 Co-operative Banking in Quebec. 
 
 We may expect to find the Quebec societies grapple with this 
 problem as soon as the need of a solution becomes imperative. 
 It is probable that some scheme of interrelation will be worked 
 out which will preserve local independence, security and enter- 
 prise; and, at the same time, enable each of the societies to 
 stimulate the others by an interchange of ideas, and to render 
 each other financial assistance which shall be mutually advan- 
 tageous. 
 
CHAPTER III. 
 
 ECONOMIC AND SOCIAL EFFECTS OF CO-OPERATIVE CREDIT 
 ASSOCIATIONS IN QUEBEC. 
 
 The Province of Quebec, over which these societies are 
 springing up, stands easily second among the provinces of the 
 Dominion in population and in the development of its resources. 
 First comes Ontario, the banner province of the federation. At 
 the outset of our study of this part of the problem, let us take 
 such a bird's eye view of the economic and social situation as 
 we can obtain from the following sets of figures comparing 
 Ontario and Quebec. The statistics are from the census of 
 1901, except where another date is given, in which case they 
 are taken from a compilation issued by the Department of the 
 Interior in 1909: 
 
 Quebec. Ontario. 
 
 Area 351,873 sq. mi. 260,862 sq. ml 
 
 Population 1,648,898 2,182,947 
 
 Families 307,304 455,264 
 
 Houses 305,527 459,742 
 
 Average size of family 5.36 4.97 
 
 Area in crops 4,704,396 ac. 9,212,478 ac 
 
 Values of : 
 
 1. Farm lands 248,236,361 $536,755,663 
 
 2. Buildings 102,313,898 211,206,905 
 
 3. Live stock 58,488,457 131,827,762 
 
 4. Implements 27,038,205 52,697,739 
 
 5. Field crops 44,851,108 102,138,819 
 
 6. Forest products 18,969,716 21,351,898 
 
 7. Fisheries (1907) 2,047,390 1,935,025 
 
 Education : 
 
 1. Number of schools 6,549 6,413 
 
 2. Number of teachers 13,139 10,643 
 
 3. Number of pupils 372,599 478,549 
 
 4. Expenditure $4,465,537 $8,769,876 
 
 Manufactures (1905) : 
 
 1. Capital $255,497,662 $397,484,705 
 
 2. Wages 47,160,452 82,415,520 
 
 3. Value of product 219,861,648 367,850,002 
 
50 Co-operative Banking in Quebec. 
 
 Judging from the above figures, and many others that might 
 be given, we see that Quebec occupies no mean position among 
 the provinces of the Dominion. This would be still more evi- 
 dent were we to take the corresponding statistics for the other 
 provinces into consideration. 
 
 Still, the person who has obtained his first acquaintance with 
 the social and economic life of Quebec from the data of the 
 census, is apt to be somewhat disappointed on coming into close 
 quarters with actual conditions. The measure of his disap- 
 pointment will depend, to be sure, upon the economic, social and 
 intellectual environment in which his own standards have been 
 formed. If he be a native of Eastern Ontario or of the Atlantic 
 seaboard, it is quite possible that he may be familiar with in- 
 dustrial conditions differing little from those prevailing in 
 Quebec. It is hardly likely that he will have sprung from any 
 community less in touch with modern intellectual life. But, in 
 the Eastern Provinces and neighboring states there are many 
 communities that present just as unprogressive an aspect, 
 economically, as any part of this French Canadian province. 
 Should our investigator have come from central or western 
 Ontario, or should he be famiHar with conditions in the western 
 provinces, or in any one of the great mjaority of the United 
 States, he will be impelled to search for a cause of the general 
 slowness of progress which prevails over the greater portion of 
 Quebec. 
 
 He turns first to the natural resources of the country. The 
 land suitable for iagriculture forms a comparatively small pro- 
 portion of the total provincial area. But the soil is of good 
 quality and is undoubtedly capable of yielding much better 
 returns than it does under present methods of agriculture. As 
 we shall see in the next chapter, however, this is a criticism 
 which might apply with equal force to most of the older sections 
 of the United States and Canada. Many agricultural commu- 
 nities in Quebec in proximity to the cities are worked in an 
 up-to-date manner. But as one passes down the St. Lawrence 
 on either bank he will have little difficulty in imagining himself 
 among the small peasantry of certain parts of Europe. The 
 
Economic and Social Effects. 51 
 
 land itself in many sections is surveyed in such a manner as 
 to make effective agriculture impossible. The farm may have 
 a frontage which resembles a town lot in its narrowness, and 
 which may stretch back from the highway a mile or two, de- 
 pending on the amount of land a man owns. This is an advan- 
 tage from the point of view of the '' habitant," who so loves to 
 be in constant social intercourse with his fellows. The houses 
 are generally built on the front of each farm, giving the public 
 highway the appearance of a long country village street. Peo- 
 ple at work in the fields, or at milking time morning and 
 evening, may shout a greeting to each other. After the day's 
 work is over, and on Sunday afternoon, they gather together 
 on the verandas formed by the wide projecting eaves of the 
 humble cottages, and enjoy the community life which means 
 more to the French Canadians than worldly prosperity. 
 
 As we study the work on these farms, we find it in marked 
 contrast to agriculture elsewhere in America. The crops vary 
 a great deal. In some places the land is naturally poor; in 
 others it has become impoverished ; again we strike rich bottom 
 lands with fertility still unexhausted; while occasionally we 
 come upon farms which have been maintained or built up by 
 scientific agriculture.^ Manual labor, and especially the work 
 of women and children, is a much more prominent factor in 
 rural life than elsewhere in Canada and the United States. The 
 scythe, the cradle, and the hand-rake are still important imple- 
 ments on most of the farms. The machinefy for the utilization 
 of horse-power often appears inefficient to one brought up on 
 a central Ontario farm. Going back the long narrow lane, we 
 meet the farmer on a light single waggon piled high with about 
 one-quarter the amount of hay usually seen on a two-horse 
 waggon-rack. Further back, we find a son riding a one-horse 
 mower in a field of clover. The fact that a light single harrow, 
 and in some cases a one-horse plow, were used in preparing the 
 soil explains the unevenness of the surface, and, in part, the 
 
 iM. Leon Gerin, Deux families rurales de la rive sud du Saint- 
 Laurent Des Memoires de la Societe Royal du Canada, Troisieme 
 Serie, 1908-9, Vol. ii, Section 1. 
 
52 Co-operative Bankii^g in Quebec. 
 
 lightness of the crop. The farm buildings are, for the most 
 part, small and inefficient. Large frame barns with stone 
 stabling underneath, such as are seen one nearly every farm in 
 large sections of Ontario, are seldom or never found. On the 
 whole, we must conclude that the French Canadians are far 
 from making the best possible use • of their agricultural re- 
 sources. 
 
 But what about the other resources of the province? The 
 most important among these are undoubtedly the products of 
 the forest. The lumbering of the great valley of the Ottawa 
 has for a couple of generations spread far and wide the fame 
 of the French Canadian as a lumberman and river-driver. Thus 
 far, however, this industry has been largely an exploitation, 
 rather than a development of resources. The Frenchman has 
 been the useful and generally poorly paid tool by means of 
 which the outsider has been enabled to devastate the natural 
 wealth of his native province. He has done the work. Others 
 have pocketed the spoils. The winter work of the lumberman 
 is being pushed farther and farther back, leaving vast stretches 
 of territory covered with dry brush, a prey to forest fires. Land 
 which is unfit for anything but forest culture, and which, with 
 proper care, could be made a permanent source of wealth, is 
 laid barren at one stroke by individual and corporate greed ; and 
 but seldom do we find the man with insight enough and suffi- 
 cient spirit to raise a cry of protest. Where an exceptional 
 individual or two have been aroused and have voiced a message 
 of indignation and warning, it has sounded as one crying in 
 the wilderness, with none to go out and hearken. 
 
 Where, let us now enquire, are the industries for which this 
 wholesale spoHation of the forest would lead us to look? In 
 Ottawa, Montreal, Hull, and a few other places there are the 
 lumber mill sections of the city, squalid and uninviting, where 
 poorly paid workmen eke out a miserable existence. At Hull 
 are the Eddy Pulp Works, which point to the possibilities which 
 lie within the resources of the province. But Quebec herself 
 has, up to the present, received but small benefit as compared 
 with the depletion of her natural wealth. The export of raw 
 
Economic and Social Effects. 53 
 
 or half -finished materials has conferred on the foreigner the 
 bounty of her splendid resources, while Quebec has been content 
 with the paltry toll collected as they passed beyond her grasp. 
 
 The same process is going on yet. The province still has the 
 finest areas of spruce pulp-wood in existence. The industrial 
 possibilities latent in these vast forests of small spruce are 
 almost beyond comprehension. The subject has been admirably 
 treated by Mr. Errol Bouchette in his book, " LTndeependance 
 ficonomique du Canada Frangais," 1905. He goes into the 
 modern development of the pulp and fiber ware industry in all 
 its phases ; and shows that the French Canadians, owing to their 
 artistic temperament, are eminently fitted to carry it to the 
 highest degree of perfection. But high industrial efficiency in 
 any line presupposes a thorough system of general and technical 
 education. This, he maintains, is what Quebec stands most in 
 need of, if she is ever to take the unique place in the industrial 
 world for which she is fitted, both by her natural resources and 
 the potential skill of her population. ^ . But up to the present 
 the pulp wood resources of the province seem to be suffering 
 the same fate as befel her forests of large timber. The best of 
 the pulp wood areas are being slashed through, leaving the re- 
 fuse as tinder for forest fires. The fire destroys all seeds and 
 young trees; and nothing remains but a barren stony waste, 
 which once supported what might have been a perennial source 
 of wealth and industrial prosperity. 
 
 Moreover, this material is largely exported in a raw or only 
 partly finished state; which means, again, that the province 
 receives but a small share of the benefit possible from the de- 
 pletion of her resources. In 1908, there were exported from 
 Canada to the United States 901,861 cords of rough pulp wood 
 blocks, valued at $4,655,371. In the same year there were ex- 
 ported 4,811,163 cwt. of ground pulp, valued at $4,037,852, of 
 which all but 6,664 cwt. went to the United States. The exact 
 figures for the provinces are not available, but it is estimated 
 
 2Errol Bouchette, L'Independance ficonomique du Canada Frangais, 
 Chapter v, especially page 98. 
 
54 Co-operative Banking in Quebec. 
 
 that nearly all of this material came from the province of 
 Quebec. 
 
 Besides, the province has splendid mineral resources. These 
 remain for the most pj^rt undeveloped, and even largely unex- 
 plored. But it is to be noticed again that where they are being^ 
 worked, the products are being sent in the rough state to create 
 industries elsewhere. Let one example suffice. Quebec seems 
 to have a practical monopoly of the asbestos deposits of Canada. 
 During the year 1908 she exported 59,033 tons of asbestos,, 
 valued at $1,703,575. Of this 46,846 tons was received by the 
 United States. We have only to think of the different articles 
 which are manufactured from this mineral to get some idea of 
 the loss represented by its export in the crude form. 
 
 The people are following their resources. They have flocked 
 by the tens of thousands to the eastern states, where they are 
 developing an individuality and initiative, and achieving a pros- 
 perity which was impossible at home. This helps to refute the 
 arguments of some who believe that the unprogressiveness of 
 French Canada is due to the inherent character of the people. 
 It is held that they are naturally lacking in self-reliance, in 
 initiative and in the persistence which compels success ; that 
 they are more fitted to be the docile instruments of exploiting 
 leaders than for the individualism of democracy. 
 
 This view would seem to be justified by a consideration of 
 the masses in French Canada as they appear to-day. We have 
 only to look around, however, among the leaders in the political 
 and intellectual life of Canada, to be assured that the French 
 race has not yet lost its virility. There are men who are worthy 
 of their ancestors who stubbornly contested the possession of 
 the continent with England's bravest sons. We believe that if 
 every French Canadian could have a training and experience 
 such as has brought these men to the fore, the race would take 
 its place among the most progressive elements in the population 
 of the new world. 
 
 The French Canadians have had a longer uncontaminated 
 descent upon American soil than any other white race. . Mr 
 Benjamin Suite, who has made a very careful study of the 
 
Economic and Social Effects. 55 
 
 origin of the French Canadian, estimates that the original emi- 
 grants, men, women and children, did not greatly exceed five 
 thousand souls. His conclusion is that the type is either pure 
 Norman or mixed Saxon and Norman, and that there has been 
 comparatively little admixture of new elements since. Of this 
 stock, there are now over three million descendants in Canada 
 and the United States. On the strictly materialistic interpreta- 
 tion of history we would expect to find them the most American 
 of Americans. Other nationalities are thansformed in a gen- 
 eration, physically, mentally and spiritually. The children of 
 Russian Jews, Poles, Swedes, Norwegians, Germans and other 
 northern races begin at once to take their places in the indus- 
 trial and intellectual life of America. 
 
 How is it, we are compelled to ask, that the influx of French 
 Canadians into the New England states is regarded in about the 
 same light as the invasion of Hindoos, Japs and Chinamen in 
 the West? Physically, they are in no way inferior. They may 
 average a little shorter in stature than other Americans and 
 Canadians ; but the student of eugenics will be delighted by the 
 high percentage of well-knit, agile young men, and beautiful, 
 bright-looking young women to be found in both the urban and 
 rural districts of Quebec. It cannot be on the ground of physi- 
 cal inferiority that they are among the most unwelcome of 
 immigrants to the United States It is on other grounds that 
 objections are raised. They are charged with being unenter- 
 prising and unaggressive, with accepting lower wages than 
 other American workmen, thus bringing down the standard of 
 living. 
 
 Why such charges should be preferred against a race with 
 the glorious antecedents of the French Canadians can be under- 
 stood only in the light of their history since French political 
 supremacy received its death blow on the Plains of Abraham. 
 A people is largely molded in accordance with the standards set 
 by its great men and its national traditions. French idealism, 
 in all its most vital aspects, ceased to dominate Canada with 
 the lowering of Montcalm's colors upon the citadel of Quebec. 
 But English heroes and historic traditions did not supplant the 
 
56 Co-operative Banking in Quebec. 
 
 long list of achievements by French discoverers, explorers, war- 
 riors and statesmen whose lives had been given to the early 
 development of America. In so far as the province of Quebec 
 is concerned, what really occurred was not the fa]l of French 
 before English political supremacy. It was the transfer of the 
 reins of government from French civil authority to the control 
 of the clergy of the Roman Catholic church. We need find 
 little difficulty in believing that, had France remained in political 
 control, the intellectual life of the province would have kept 
 pace with the rapid development in the motherland; and it is- 
 difficult to estimate how such an intellectual evolution might 
 have reacted upon the industrial development. But as it was, 
 England relieved herself of responsibility and, at the same time, 
 of the danger of revolt, by what practically amounted to a 
 recognition of the supremacy of the church in things temporal 
 and spiritual. For what there exists of good in the province 
 we must give the church the credit. The blame for any lagging 
 behind in the march of progress must rest at her door as well.^ 
 In his admirable discussion of this subject, Andre Siegfried 
 says : " Let us make haste to acknowledge that upon the banks 
 of the Saint Lawrence the Catholic church has achieved a place 
 apart, that it has always proved a loyal and powerful protection 
 to its disciples, and that our race and tongue owe to it, perhaps,. 
 
 ^Note : To the many Catholic friends who have so generously aided 
 him in making this investigation, the v^riter must here offer a word of 
 explanation. He probably seems to be making a malicious attack upon 
 all that they hold most sacred. The only apology he can offer is to 
 state honestly that he regards all churches and all creeds as but inci- 
 dents in the development of the race. Religion is something deeper and 
 continues to live by ever finding new forms to clothe itself in. Organi- 
 zations and creeds never provide for their own revision. They make 
 no provision for progress. Their prevailing attitude toward investiga- 
 tion is repressive. Their chief concern is to quench all truth and all 
 progress which would endanger their cherished dogmas. The recent 
 controversy raised by the expulsion of Dr. Workman from the Method- 
 ist College in Montreal, and a multitude of similar incidents which could 
 be gathered from the activity of contemporary Protestant denomina- 
 tions, all go to show that there is not one of these sects but would take 
 advantage of a situation such as has favored the Catholic Church in 
 Quebec. For a discussion of the principles underlying this point of 
 view, the reader is referred to an article entitled " Religion and the 
 Mores," by Prof. Wm. Graham Sumner of Yale, in the American Jour- 
 nal of Sociology for March, 1910. 
 
Economic and Social Effects. 57 
 
 their survival in America."* Again, speaking of the French 
 and EngHsh-speaking populations in Canada, he writes : "After 
 a hundred and fifty years of life in common, as neighbors under 
 the same laws and the same flag, they remain foreigners and, in 
 most cases, adversaries."^ The survival of his race anl language 
 evidently affords considerable gratification to a Frenchman, 
 loyal to his national traditions. But this loyalty does not blind 
 the scientific student of society to the other side of the question. 
 He goes into the matter and lays bare the cost at which the 
 racial integrity has been preserved. 
 
 In these two quotations we have the key to the moral, social 
 and industrial situation in Quebec. Here " the Catholic church 
 has achieved a place apart," and this position has been won by 
 looking on the rest of the world as " foreigners and iij most 
 cases adversaries." For over one hundred and fifty years this 
 seclusion has persisted. The church has controlled to a large 
 extent the political situation, and has dominated absolutely the 
 educational system of the province, — the teachers who taught, 
 the books studied, the lectures heard, the newspapers read. 
 This has had some good results. The people, as a whole, are 
 hospitable, happy and content; in their home life and simple 
 -economic relations, they are highly moral; the training which 
 the young girls receive in the convents fits them to become the 
 most faithful of wives and the fondest of mothers. 
 
 But here our praise must call a halt. Happiness and content- 
 ment are dearly bought if purchased at the expense of progress. 
 The large number of French Canadian girls who find their way 
 as prostitutes into the brothels of Canadian and American 
 cities would indicate that the morality at home is based upon 
 tutelage rather than upon strength of individual character. The 
 high infant mortality among French Canadian families shows 
 that the training for motherhood breaks down before the all- 
 important test of its efficiency. 
 
 As emphasized throughout Siegfried's work, the policy of the 
 Catholic church has been one of isolation. The influence of 
 
 ^Andre Siegfried, The Race Question in Canada, 11-12. 
 sibid., 100. 
 
58 Co-operative Banking in Quebec. 
 
 Old France, where the church has been forced to abandon 
 trench aftef trench before the onslaughts of triumphant ration- 
 alism, has been tabooed as the direst pestilence. Contact with 
 the rest of America was equally feared. Here even liberal 
 Protestant churches are making themselves ridiculous in their 
 attempts to justify their long-cherished dogmas in the eyes of 
 modern culture. If her " place apart " were to be preserved, 
 the church must control every avenue through which mental 
 stimuli could reach her people. She has succeeded in a way 
 which almost passes comprehension. The press has been sub- 
 jected to a rigid censorship; the public platform has also been 
 kept well under control ; the education of Catholics, who form 
 almost ninety per cent, of the population, has been entirely in 
 the hands of the church. Consequently, almost every influence 
 which has stimulated modern thought, leading to creative acti- 
 vity and progress, has been rigorously debarred from the 
 educational system of Quebec. The instruction imparted to the 
 young was strong in catechism and the stories of the saints, the 
 higher education was classical and admitted the less stimulating 
 phases of mathematics and natural science. The philosophy 
 taught was the logic of the scholastics, the history that of the 
 church. 
 
 But such Arcadian simplicity could not be maintained for- 
 ever, even in the province of Quebec. Intellects felt the glow 
 of the brightening flame of the world's culture in spite of 
 priestly vigilance. In the light of that glow they saw their dear 
 old native province as she was, fast asleep amid the turmoil of 
 the world's onward rush. It was time that she, like Rip Van 
 Winkle, should awake, rub the cobwebs of one hundred and 
 fifty years' accumulation out of her eyes, and see where the 
 world was at. To make a long story short, a strong progressive 
 element has arisen in the legislature which is making the church 
 and the clerical political party quake, lest in its zeal for educa- 
 tional reform the dominance of the priesthood may be under- 
 mined at its foundation. The situation is admirably illustrated 
 by the following extract from an editorial in the chief organ of 
 the Conservative opposition, " L' Action Sociale," of July 5,. 
 1909: 
 
Economic and Social Effects. 59 
 
 ♦_ 
 
 L'ENSEIGNEMENT LIBRE. 
 
 Au banquet Tellier, a Joliette, le chef de I'opposition a pro- 
 noncee, a propos d'instruction publique, des paroles qui valent 
 la peine qu'on les cite ; les voici : 
 
 " En matiere d'instruction publique, nous croyons qu'il y a 
 place pour des reformes et qu'il reste encore du chemin a faire 
 avant de toucher a la. perfection. Mais nous sommes loin 
 d'admettre que notre condition soit aussi alarmante que se 
 plaisent a le proclamer certains organes du gouvernement. 
 
 Nos ecoles primaires laissent sans doute a desirer sous cer- 
 tains rapports, dans bien des cas, et c'est de ce cote que I'atten- 
 tion du pouvoir public doit surtout se tourner. 
 
 II ne peut etre question de contrainte a I'egard des parents, 
 il ne s'agit que de les aider, de les encourager, de les assister. 
 
 Quant a nos maisons d'education superieure, grace au zele 
 admirable et au devouement sans borne de notre clerge, elles 
 realisent assez parfaitement I'objet et le but de leur fondation, 
 et nous avons raison d'en etre fiers. 
 
 S'est le devoir du gouvernement de venir au secours de 
 I'initiative privee, de la seconder, de faciliter la tache de tous 
 les bons educateurs de la jeunesse, et d'entourer de toute sortes 
 de soins et de protection ceux qui nous preparent les hommes 
 de demain. 
 
 Ce qui importe surtout, c'est de conserver toujours la reli- 
 gion a la base de I'enseignement et de ne jamais rien faire 
 qui soit de nature a violenter la conscience des peres de 
 famille." 
 
 M, Tellier a raison de dire qeu la religion doit demeurer a 
 la base de notre enseignement, quelles que soient les reformes 
 qu'on y fasse par ailleurs. 
 
 On a longtemps clame dans une certaine presse canadienne, — 
 qui a mis une sourdine a ses reclamations mais ne perd encore 
 aucune occasion de les faire valoir, — que la provmce de Quebec 
 est une province d'arrieres, de toutes fagons, 
 
 A-t-on jamais tenu compte qu^ peine apres soixtante-quinze 
 ans d'organisation scolaire, nous ne pouvons encore atteindre 
 ici au haut degre d'enseignement et de culture intellectuelle ou 
 sont parvenues certaines nations d'Europe, qui comptent des 
 universites, des institutions et des methodes d'enseignement 
 etablies depuis cinq ou six siecles? 
 
 Apres tout, notre systeme educationnel vaut bien celui des 
 autres provinces canadiennes. 
 
60 Co-operative Banking in Quebec. 
 
 Tous sont susceptibles de perfectionnement : mais tous ne 
 donnent pas, comme le notre, liberte absolue a renseignement 
 religieux. 
 
 A quelque secte qu'ils appartiennent, nos concitoyens pro- 
 testants peuvent avoir ici leurs ecoles distinctes, maintenues a 
 meme les fonds preleves par I'etat pour I'instruction publique; 
 et il ne leur en coute pas plus qu'il n'en coute aux catholiques. 
 
 En peut-on dire autant du systeme scolaire d'Ontario, de la 
 Nouvelle-Ecosse, du Nouveau-Brunswick? 
 
 Peut-on comparer au notre celui du Manitoba et des pro- 
 vinces de rOuest, oil des exigences politiques pitoyables, des 
 inuences nefastes ont cause qu'on enlevat aux catholiques des 
 droits certains a des ecoles separees? 
 
 Sur ce point, notre organisation scolaire est en avant, et bien 
 au-dessus des autres : elle reconnait a chaque citoyen le droit 
 de faire enseigner a ses enfants, dans des ecoles de son choix, 
 les principes de la religion qu'il pratique. L'etat no contrecarre 
 pas la volonte du citoyen, il lui rend justice. 
 
 Sans doute, — nul n'y contredit, — il y a place, dans notre sys- 
 teme educationnel, pour des reformes importantes : ameliora- 
 tion du programme scolaire, augmentation des salaires d'in- 
 stituteurs, creation d'ecoles techniques, sont au tout premier 
 rang de ces reformes. Et l'etat tache a les accomplir. 
 
 Mais le principe fondamental de I'instruction, I'enseignement 
 religieux, doit y subsister, sans qu'on y porte la plus legere 
 atteinte. 
 
 M. Tellier I'a reconnu, de meme que nos gouvernants actuels, 
 a Quebec. 
 
 C'est une garantie pour I'avenir, il importe qu'on la mette en 
 relief, et qu'on se garde de I'oublier. 
 
 Here we have a suggestion of the reforms for which the lib- 
 eral leaders are contending. They have pointed out the defects 
 of the existing educational system ; and have implied that these 
 shortcomings are in some sense due to clerical control. They 
 are advocating the establishment of provincial scientifically con- 
 ducted technical schools; and, as tactfully as possible, have 
 pointed out that the present elementary educational education 
 affords no preparation for the instruction to be given in these 
 institutions. We also see the sort of arguments which are used 
 against the reformers. They are, in an indirect way, accused 
 of attempting to undermine religion, of interfering with the 
 
Economic and Social Effects. 61 
 
 rights of parents, of making inroads on the individual Hberties 
 permitted under the present school system, and of unjustly- 
 maligning the admirable system of primary and secondary edu- 
 cation of the province. 
 
 In a letter dated Ottawa, April 25, 1910, Mr. Errol Bouchette, 
 who has done for the educational movement all that Mr. Des- 
 jardins has for co-operative credit, writes to the effect that the 
 system of technical schools is almost completely organized. 
 There is, over the whole system, giving it unity and setting the 
 standards, " L'ficol des Hants fitudes Industrielles et Commer- 
 cials." " These schools," says Mr. Bouchette, " are costing 
 millions, but they will mean billions to the future of Quebec." 
 
 From this sketch we get a general view of the natural re- 
 sources, and the social, industrial, and educational conditions of 
 the province, which has become the field of operation for co- 
 operative credit associations. We have been introduced to a 
 simple, genial, unenterprising people. They are stable in resi- 
 dence and occupation, and homogeneous in religion, intellectual 
 standards, and racial descent. They have a heritage of splendid 
 natural resources, which, in so far as they have been utilized, 
 have contributed about the least possible to the general well- 
 being of the people. This wastefulness and general backward- 
 ness we attribute to isolation from the thought and activity of 
 the outside world. While it might be some exaggeration to say 
 that " There the richest was poor and the poorest lived in 
 abundance," the people are, on the whole, thrifty, and distress- 
 ing poverty is seldom met with. In the light of the history of 
 the European movement, we would judge that Quebec should 
 afford an ideal field of operation for co-operative credit. Our 
 task is now to determine wherein the situation is being altered 
 in any respect through these societies. 
 
 In the first place, let us enquire into the influence upon the 
 church. She may be making some concessions, but still reigns 
 in her " place apart." Any attempt at reform in open defiance 
 of her wishes would have small chance of success; while a 
 movement which could in any way reform. the church herself 
 would affect the whole social organism. Now this is just what 
 
62 Co-operative Banking in Quebec. 
 
 co-operative credit is helping to do. The French Canadian 
 clergy are becoming aware of what is being done by the church 
 in the different countries of Europe. We shall have occasion 
 in the next chapter to refer to the leadership of the priests in 
 promoting the social and economic welfare of their people. We 
 shall see how they have become the champions of technical 
 education on a scale so practical and far-reaching as to influence 
 the humblest peasant farmer. They have everywhere identified 
 themselves with the co-operative movement, and especially with 
 the organization and management of the credit associations. 
 
 On the basis of the work being done by the church in Europe, 
 an appeal was made to the clergy in Quebec. The response is 
 seen in the large number of priests who are studying the move- 
 ment, and who are taking the lead in the establishment of socie- 
 ties throughout the province. Nor has the good work ended 
 here. The interest aroused in these associations, whose ultimate 
 aim is the promotion of industrial enterprise, has called atten- 
 tion to the crying need for technical education ; and this has not 
 been without its influence in making possible the present reor- 
 ganization of the school system. Thus, we see how the work 
 of Mr. Desjardins has converged toward the same goal as that 
 of Mr. Bouchette with his programme of educational reform. 
 
 The revival of interest in provincial welfare has extended 
 even to a slight participation in the conservation movement 
 which has been sweeping over America. During its last ses- 
 sion, the Quebec Legislature enacted that "All timbers cut on 
 crown lands shall be manufactured in Canada, that is, converted 
 into pulp or paper, deals or boards, or into any other article of 
 trade or merchandise of which such timber is only the raw 
 material." Ineffective as this clause is reported to be, it does 
 mark the beginning of an effort to stay the ravage which has 
 been depleting the natural resources of the province. 
 
 So much for the general effects of co-operative credit upon 
 the province. Let us now turn to those results which are only 
 to be discovered from a study of the working of the individual 
 societies. 
 
 In our historical survey, we have dealt with the hoarding 
 
Economic and Social Effects. 63 
 
 tendency of the French Canadians, and have suggested that its 
 persistence might prove an impediment to the estabhshment of 
 co-operative banking in Quebec (page 11 above). The old 
 habit of hoarding specie has become a thing of the past, partly 
 on account of the difficulty of obtaining coin, and partly be- 
 cause the people have become convinced of the reliability of the 
 Canadian bank notes under the system established since confed- 
 eration. Besides, the time came when the old French coins 
 would no longer pass at their over-rated valuation. But the 
 hoarding habit is by no means a thing of the past. Evidence 
 of this fact comes cropping up in the most unexpected ways. 
 Just as these words are being written, a Montreal paper comes 
 to hand containing the following item of news: 
 
 St. George, Beauce, March 28. — A body was cremated and a 
 house and all its contents were destroyed by a fire which 
 broke out here yesterday. The house belonged to Jean Du lac, 
 and a wake was being held over the body of his dead son 
 when the fire, which was caused by wax tapers igniting the 
 mourning drapings of the death chamber, broke out. Attempts 
 to save the corpse proved futile, and the members of the 
 family, who were at dinner at the time, barely escaped with 
 their lives. The house and the furniture as well as several 
 hundred dollars which were in a bureau drawer were de- 
 stroyed. 
 
 From such evidence we see that bank notes are taking the place 
 of the hoarded coin. 
 
 But it is remarkable to see the way in which this long- 
 established custom is yielding before the establishment of the 
 co-operative credit associations. The men who are in control 
 of these societies are the choice of the membership. The dif- 
 ferent departments of the administration check each other up; 
 and besides, the parish priest, in whom the people trust, has 
 usually some position of responsibility among the officers. The 
 profitable use of the funds is going on right under their eyes. 
 The fact that withdrawal is so easy begets further confidence. 
 So m.any families are represented in the membership that it 
 becomes quite the fashion to belong to '' La Caisse Populaire." 
 Consequently, we find people seeking out the office of the 
 
64 Co-operative Banking in Quebec. 
 
 society who would never have entered the door .of a regular 
 bank, with its polished gratings and strange men behind the 
 wickets. An illustration will help to make this clear. 
 
 In talking over the difficulties arising out of the hoarding 
 tendency, Mr. Desjardins says: "The fact that hoarding has 
 been so common explains in part the way in which funds often 
 come pouring into the people's banks from all sorts of unex- 
 pected sources. For example, an old, plainly dressed woman 
 came into the office one day and asked how much stock one 
 person could hold in the bank. I told her that the present limit 
 set by the last general meeting was one thousand dollars. She 
 took out of her clothing a large roll of bills, and said that she 
 would like to take shares for the entire amount. I asked her 
 how much she had, and she replied that she was not sure. She 
 had been adding to the roll for seventeen years, and thought 
 that there must be close on one thousand dollars. I counted the 
 money, carefully examining each note lest there should be some 
 worthless ones in the hoard. They were all good, however, and 
 amounted to nine hundred and some seventy odd dollars. When 
 I asked her why she had never put her money in the bank, she 
 answered : * I do not like the banks. They are only for rich 
 folks, and besides, they are run by strangers. But I know you 
 men in La Caisse, and can trust you.' " Again, in a letter of 
 April 4, 1910, Mr. Desjardins writes: "To-day I received a 
 letter telling me of a bank started a month ago in a compara- 
 tively poor rural parish, St. Cajetan d'Armah, county of Belle- 
 chasse. In the one month it had accumulated funds to the 
 amount of ten thousand dollars. I fancy it must be hoarded 
 money in part, but genuine savings for the rest; as the young 
 shantymen are just coming home with their winter's earnings. 
 Is it not a splendid result ? " Other illustrations might be given 
 of the fact that the old habit of hoarding, which has played 
 such a part in the history of French Canadian banking and 
 currency, is breaking down readily before the advance of co- 
 operative credit associations. 
 
 We come now to the evidence as to the promotion of saving. 
 The first point which naturally occurs to us is that afforded 
 
Economic and Social Effects. 65 
 
 by the assets accumulated in the thirty- four banks now in 
 operation. The statistics have been a Httle hard to get, but 
 this table compiled by Mr. Desjardins, giving statistics for 
 twenty-six of the leading societies down to April 1, 1910, will 
 serve to illustrate the influence on saving, and at the same time 
 show the use made of the funds as loans : 
 
 Name of Society. operation. paid in. of loans. 
 
 Time in Amount Amount 
 
 Time in Amount Amount 
 
 Name of Society. operation. paid in. of loans. 
 
 La Caisse Populaire de Levis.. .9 yrs. 7 mos. $301,662 33 $536,224 92 
 
 St. Joseph 8 yrs. 14,930 55 19,172 13 
 
 St. Malo 7 yrs. 40,964 06 143,995 91 
 
 St. Suveur 15 mos. 9,637 00 8,662 00 
 
 St. Victor 12 mos. 7,247 10 10,272 50 
 
 LAncienne Lorette 16 mos. 23,710 76 10,955 52 
 
 St. Charles 13 mos. 24,586 10 13,689 34 
 
 Maria 18 mos. 9,117 35 7,982 85 
 
 Danville 9 mos. 3,88171 5,195 00 
 
 St. Maurice 8 mos. 54,255 41 25,394 12 
 
 Montreal 20 mos. 1,583 57 1,867 03 
 
 Quebec 23 mos. 18,413 62 22,272 70 
 
 Rimouski 17 mos. 2,729 26 1,389 00 
 
 St. Ulric 6 mos. 8,742 49 9,854 23 
 
 Sayabec 9 mos. 1,709 66 2,363 00 
 
 St. Ephrem 6 mos. 2,579 60 2,420 54 
 
 St. Gregoire 18 mos. 3,073 50 2,300 00 
 
 St. Theophile 7 mos. 7,718 43 4,370 47 
 
 St. Gervais VA mos. 9,247 21 595 00 
 
 St. Narcisse 9 mos. 11,830 18 6,308 99 
 
 Black Lake 10 mos. 1,653 75 2,099 00 
 
 Beauport 22 mos. 1,773 68 1,070 00 
 
 Bonaventure 28 mos. 14,196 61 18,758 84 
 
 Thedford Mines 7 mos. 12,012 39 10,140 16 
 
 Enfant Jesus 6 mos. 2,337 62 2,077 18 
 
 St. Cajetan 4 mos. 48,082 92 4,242 00 
 
 Totals $637,676 86 $873,672 43 
 
 Mr. Desjardins estimates that complete statistics up to June, 
 1910, would show a membership of about 15,000, with a paid 
 in capital of three-quarters of a million, and loans amounting 
 
66 Co-operative Banking in Quebec. 
 
 to fully a million dollars. This must be considered a remark- 
 able development when we take into consideration the short 
 periods for which most of the societies have been in operation, 
 and also that the propaganda is the work of one man giving 
 his services without a cent of remuneration. 
 
 The question which next arises is as to how much of this 
 accinnulation represents savings. Would most of it have been 
 conserved in private hoards had there been no people's banks? 
 or would much of it have found its way into the regular banks 
 or savings banks? On the latter question there would seem to 
 be a general concensus of opinion. The judgment of Mr. 
 Desjardins, that but a very small percentage of the funds col- 
 lected by the associations would ever have been available for 
 credit through the other savings banks, seems hardly open to 
 controversy. As to how much would have been saved up in 
 hoards, there is much more room for difference of opinion. In 
 respect to thrift, there is much difference between urban and 
 rural populations, also between older and younger members of 
 the community in both city and country. The farming popula- 
 tion, like the peasantry of old France, is more careful in spend- 
 ing its earnings, and more given to hoarding than those who 
 live in towns and cities. All but two or three of the societies 
 cater almost exclusively to agricultural communities. This 
 would lead to the conclusion that much of the funds represented 
 by the assets of Les Caisses might have been saved anyway as 
 private hoards. 
 
 But even in rural communities there is reason to believe that 
 the banks are having an influence in promoting thrift. Most of 
 the young men from the farms " go off to the shanties for the 
 winter." For about five months of the year they have but little 
 opportunity to spend money, except by a little gambling among 
 themselves. On coming home in the spring, a considerable por- 
 tion of their earnings is apt to be spent rather recklessly; so that 
 Mr. Desjardins is probably right in his opinion that a large part 
 of the ten thousand dollars accumulated the first month at St. 
 Cajetan d'Armah represented " genuine savings." Besides, 
 even in the country, there is a great deal in having a definite 
 
Economic and Social Effects. (y/ 
 
 plan for saving, such as is inculcated through the people's banks. 
 The habit, once it has been started in a neighborhood, spreads 
 by imitative rivalry, like any other fashion. 
 
 But it is when we come to an urban community like Levis 
 that we most clearly see the effects of the society in promoting 
 thrift. Out of a total population of 7,000, we have a member- 
 ship of 1,000 in La Caisse. This means that the families of 
 the town are pretty generally represented. As we look through 
 the books of the bank, we see the strongest evidence of thrift. 
 Most of the entries are for amounts of 10 cents, 25 cents, 50 
 cents, 75 cents, etc., a week, representing a regular portion of 
 the weekly earnings. These contributions to the common fund 
 come from all classes. About seventy farmers are represented, 
 whose payments are more irregular and for larger amounts. 
 There are business men who lend to the association the dignity 
 of their prestige. Many heads of families from among the 
 working classes manage to make a regular addition to " the 
 nest ^gg they are laying up for a rainy day." But more import- 
 ant still, there are a great many young people whose earnings 
 would have all been spent from week to week had they not 
 become members of La Caisse. Among them are quite a num- 
 ber of working girls, whose savings amount to several thousands 
 of dollars. There are over one hundred and fifty young unmar- 
 ried men who have close on $15,000 to their credit on the books 
 of the bank. One of them, who rather indifferently entered 
 the association just because his friends were joining, has now 
 $780 in shares. 
 
 This habit of saving is beginning to tell on the social life of 
 the community. The French Canadians are naturally artistic in 
 temperament, and passionately fond of finery, especially in 
 dress. Shop girls, sewing girls, and factory girls may be 
 plainly enough clad while at their work, but when they go out 
 in the evening, though they usually appear in fairly good taste, 
 they give one the impression of being dressed much beyond 
 their means. They often stint themselves in other things, it is 
 said, in order to have the latest styles in clothing. Mr. Des- 
 jardins notes a great many instances among both young men 
 
68 Co-operative Banking in Quebec. 
 
 and young women in which extravagance in dress has been very 
 much modified through membership in the society. We have 
 one case in particular of a large family of sewing girls who, 
 within the past nine years, have laid aside over two thousand 
 dollars out of their earnings. Up to the time they entered the 
 society they had never saved a cent. They became interested in 
 the scheme and began to lead a much more moderate social life. 
 Most of their saving has resulted from a curtailment in ex- 
 penditure for finery which was out of keeping with the pocket- 
 book of a working girl. Then, too, the young men who have 
 gotten into the habit of saving have in many cases shown 
 shown changes of habits which are certainly for the better. The 
 $15,000 representing the savings of the hundred and fifty young 
 men in the Levis association would otherwise have been spent, 
 for the most part, in wasteful consumption, and much of it, 
 doubtlessly, in ways that would have been harmful as well. 
 Moreover, there arises a self-respect in connection with econo- 
 mic independence which shows itself in the whole life of the 
 community. 
 
 Each of the banks also runs a penny savings department for 
 school children. Here we find the most striking results from 
 very small savings. At Levis, for example, according to the 
 annual report of November 30, 1909, the savings of the children 
 amounted to $3,787.67. The parish of I'Ancienne Lorette re- 
 ports $811.06 on hand in the children's department, as a result 
 of ten months' operation; while the children of Thedford 
 Mines have saved $501.27 in two months. At the time of this 
 report, the thirty-two societies were reaching nearly three hun- 
 dred schools within the province. 
 
 This brings us to the use made of these funds, and a con- 
 sideration of the question as to whether enterprise is being 
 stimulated or not. At the outset we must acknowledge that it 
 is altogether too early in the history of the movement to accom- 
 plish a satisfactory discussion of this part of the problem. In 
 the next chapter, under a treatment of the possible usefulness 
 of these societies in America, we will touch upon the stimula- 
 tion of enterprise in Europe and India. But such results have 
 
Economic and Social Effects. 69 
 
 been attained only through years of education, and through 
 special study along economic and technical lines by the leaders 
 of the communities. The Levis society is the only one which 
 has as yet had an opportunity to accomplish what has over and 
 over again been achieved in Europe. The future of the move- 
 ment in Quebec depends upon her priests and other prominent 
 citizens. These leaders are face to face with a great oppor- 
 tunity. Should they seize it and make the most of it, the agri- 
 cultural and general industrial situation may be revolutionized 
 within a decade. The example of Denmark shows what might 
 be done under careful education and able leadership. There is 
 the possibility that Quebec, instead of turning loose upon the 
 rest of America throngs of " cheap " unwelcome immigrants, 
 may become the home of an industrial democracy which shall 
 recall her exiled children by the assurance of better times than 
 they can find anywhere else. Her fields may blossom under 
 scientific culture. Her forests may flourish so as to be a source 
 of industry and wealth for generations of " habitants " yet 
 unborn. Her wheels may turn on and on to the music of her 
 exhaustless water-power. 
 
 But we must turn from what might be to a consideration of 
 what is. A majority of the associations are finding a demand 
 for their funds in local enterprise. Some two or three, of which 
 the Levis society is one, have occasionally had a greater call for 
 loans than they could meet. A reference to the table of loans 
 on page 15 shows that the Levis membership have not been 
 backward in taking advantage of its opportunities in the use of 
 credit. Nor has the demand for loans been confined to any one 
 class. Of the seventy farmers, about twenty freely make use 
 of credit. Their loans, varying in amount from $25 to $500, 
 have been applied in draining and otherwise improving "their 
 land, in buying machinery, in extending their equipment of 
 buildings, and in securing a better grade of farm stock. The 
 small business men frequently use credit to secure the advan- 
 tage of cash discounts on their supplies of merchandise. There 
 are, moreover, several instances in which members of the labor- 
 ing class have become independent proprietors in a small way 
 
70 Co-operative Banking in Quebec. 
 
 through the use of the funds of the association. Take this 
 ilkistration, which seems worthy of special notice : 
 
 On February 7, 1907, Mr. Desjardins gave this incident as 
 part of his evidence before the Parhamentary Committee: 
 '' Last spring two young men, brothers, one an employee in a 
 shoe factory, the other a carpenter, came to me and said : ' We 
 are offered a great advantage. We are considering buying a 
 house at very easy conditions. We hope one day or another 
 to marry and settle down ; we would like to live alongside of 
 one another, and this house is divided into two lodgings that 
 would suit us. The only difficulty in the whole situation is 
 that we have not the $200 that the vendor asks us as a cash 
 payment on the purchase price. So we come to you and ask 
 if the society will be ready to loan us those $200. We have 
 no real security to give, the house standing as security for the 
 seller. We cannot offer anything but our good reputation, and 
 perhaps our mother will come in and give her signature as 
 well.' ' Well,' I said, ' I will submit the question to the board 
 of credit ; come to-morrow and I will let you know the answer.' 
 The next day the question was submitted to the board and 
 agreed to unanimously. I said to the young men, ' Here are 
 the $200,' the conditions of reimbursement fixed being $20 a 
 month, or ten months in all. The loan was made, the house 
 was bought. The house is now paying for itself by the rent, 
 and the $200 were reimbursed in less than eight months. The 
 two young men were so completely pleased and so hopeful that 
 they worked almost night and day to clear that off." 
 
 While in Levis last summer the writer enquired about these 
 two young men. President Desjardins replied: ''That is one 
 of the best examples of the benefit resulting from our Caisse. 
 They have had a good many loans since then ; and have always 
 "been very punctual in their repayments. They are rapidly win- 
 ning a place among the well-to-do citizens of our community." 
 Then we went around to where the brothers, with two or three 
 hired hands, were at work in their own little planing-mill, and 
 heard from their own lips, in a mixture of French and English, 
 
Economic and Social Effects. 71 
 
 the story of their success. They gave La Caisse almost all the 
 credit for their prosperity. 
 
 Besides such cases of greatly stimulated individual enter- 
 prise, we find as a result of the introduction of these societies a 
 general improvement in business methods. Many families have 
 adopted the plan of paying cash instead of running accounts. 
 For example, the Reverend M. Ducharme writes that for years 
 shop credit had been the curse of his parish. Some time after 
 the establishment of " La Caisse Populaire de Contrecoeur" he 
 proposed that the community adopt the " spot cash " basis of 
 doing business. After some deliberation, and not a little oppo- 
 sition, the plan was agreed to by most of the members of the 
 association. Those who needed assistance secured a loan from 
 the society and paid their bills. Before long others followed 
 suit, until the people of the entire parish were converted to the 
 plan of living within their income, and paying cash. This in 
 turn led to much greater care in expenditure, which has really 
 raised the standard of living, and added greatly to the general 
 prosperity of the community. Under the old method prices 
 were higher, and, before they knew it, people were often so 
 badly in debt as to be almost bankrupt. 
 
 The general looseness of business methods in the country dis- 
 tricts of Quebec results in a good deal of usury. The real rates 
 of interest are frequently disguised by some device or secret 
 agreement between the borrower and lender. Mr. Desjardins 
 gives the illustration of a country money-lender who had an 
 old caleche which he had sold at least twenty-five times for 
 thirty dollars each time, as a condition of granting a loan. The 
 nominal rate on these loans was six per cent. But to this must 
 be added the price of the caleche, which had never left the 
 premises of the usurer. •^ 
 
 Another common occurrence, which in the end amounts to 
 the same thing as usury, is the buying of implements and 
 machinery on the '* easy payment plan." This is a common 
 plague, inflicted through agents, upon industrial communities. 
 Organs, pianos, sewing machines, books, pictures, etc., are 
 
 ^Report of the Special Committee on Bill No. 2, 1907, page 14. 
 
72 Co-operative Banking in Quebec. 
 
 pressed upon wage-earners on the easy payment plan of so 
 much per week or month. But the method of payment which 
 sounds so " easy " as the agent ghbly repeats his well-learned 
 rhyme, is difficult enough when we consider the prices paid. 
 To take one illustration : A sewing girl in Levis was in need 
 of a machine. An agent called and proposed to sell her one to 
 be paid for in small weekly instalments. She was a member 
 of La Caisse, and it occurred to her to find out the cash price 
 of the machine at a regular dealer's. She found it to be twenty 
 dollars less than she would have to pay on the easy payment 
 plan. So she put in her application for a loan from her society. 
 She got her machine, and by the end of nine months had repaid 
 her indebtedness to the association. The interest on the loan 
 cost her $2.35, which left a clear saving of $17.65." Less ex- 
 treme instances might be given of the savings made by farmers, 
 who borrowed from the society and paid cash for implements 
 and machinery, instead of buying them on the instalment plan 
 from the local agent. But we simply wish to illustrate the fact 
 that economic waste of the usury type is being eliminated wher- 
 ever co-operative credit is established. The old-time money- 
 lender, who preyed upon all cases of extreme need and business 
 ignorance, has disappeared from Levis ; and the indications are 
 that the experience of Europe in this respect will repeat itself 
 throughout the province. The habit of counting the cost is a 
 most valuable result of the business education arising from 
 these societies. 
 
 Such institutions are a powerful factor in inculcating a sense 
 of the social solidarity and economic interdependence which 
 pervades modern society. Even the pennies of the infants in 
 the kindergarten play their part in promoting the general wel- 
 fare of the community. Nowhere can we find more strongly 
 emphasized the paramount importance of business integrity to 
 the welfare of our social fabric. Each society is a little world 
 in itself, from which selfish aggrandizement must be rigorously 
 excluded in the interest of all the members. Speculative in- 
 vestments and foolish expenditures must also be guarded 
 against if the association is to avoid a financial crisis. Constant 
 
Economic and Social Effects. 73 
 
 vigilance is the price of safety. Social '' surveillance " must be 
 exercised over the activity of every member of the group, not 
 with the purpose of suppressing any legitimate individual 
 initiative, but in order to encourage it, and make its inspiration 
 a force in the life of the society. Long experience has dictated 
 to these little .social groups certain conditions of success which 
 might be advantageously studied by the modern state. 
 
 To recapitulate briefly the argument of this chapter : The 
 province of Quebec has abundant natural resources, and a 
 population peculiarly adapted by nature to develop them. These 
 resources are being depelted in the most wasteful fashion. All 
 industry is in a backward condition. This is mainly due, we 
 believe, to the policy of educational and social isolation pursued 
 by the Catholic clergy. Into this general inertia a disturbing 
 element has entered through a party bent on educational and 
 industrial progress. The co-operative credit movement appears 
 at an opportune time, calling attention to the work of the 
 church in Europe, and the need of general and technical educa- 
 tion at home. The result is the establishment of a system of 
 technical schools. Locally, individual societies are overcoming^ 
 hoarding, stimulating enterprise, modifying personal character 
 through the inculcation of habits of thrift, industry, and a sense 
 of social solidarity; and as a corollary phenomenon, the usurer 
 and " easy payment " men are forced to seek other fields of 
 operation. 
 
CHAPTER IV. 
 
 THE POSSIBILITIES OF CO-OPERATIVE CREDIT IN AMERICA. 
 
 In entering upon a discussion of this problem, the writer is 
 very well aware of the difficulty of his task, and of the impos- 
 sibility of reaching very definite conclusions. In fact, the 
 person who would start into a consideration of this question 
 with the expectation of arriving at general rules and universal 
 judgments applicable to America, would show at the outset his 
 imperfect grasp, both of the co-operative movement and of the 
 complexity of American conditions. The most he can hope for 
 is to point out " possibilities." On the basis of the evidence 
 presented by the whole development of the movement, he may 
 conclude that there are still many situations in America into 
 which these associations might be advantageously introduced. 
 Or, on the other hand, he may decide that the functions per- 
 formed by co-operative banks abroad are for the most part 
 taken care of in America by other institutions; and that co- 
 operative credit, therefore, can never attain .a very extended 
 field of activity. Let us examine the general movement in 
 some of its more typical aspects, and proceed to enquire in how 
 far the American situation would seem to warrant an extension 
 of such institutions in Canada and the United States. 
 
 That these associations have achieved a large measure of 
 success, no one at all acquainted with the facts could possibly 
 deny. Moreover, it is a success which has been attained under 
 the most diverse social and economic conditions. At the one 
 extreme, among the poverty-stricken millions of India, there 
 have been organized within the short period of the past five 
 years, over 2000 societies, with 185,000 members, and a work- 
 ing capital of two and a half million dollars. A correspondent 
 to the London Times of December, 1909, writing of the im- 
 proved facilities for credit, and the consequent increasing pros- 
 perity, says : " In many villages the members already find their 
 
Possibilities in America. 75 
 
 wants supplied wholly by the society, and the face of the money- 
 lender is not seen. Old debts are paid off and lands redeemed 
 from mortgage. Now that they have recovered their land, 
 members are purchasing more cattle and sowing crops of a 
 higher class. Litigation is diminishing, as disputes between the 
 members are decided by the common sense of the society. Thus 
 the movement promises not only to supply the small peasant 
 proprietor with capital on easy terms, but to foster the growth 
 of thrift, good will and co-operation in many directions ; and 
 there seems reasonable hope that it will continue to spread rap- 
 idly among the millions of the Indian peasantry, and confer on 
 them benefits as marvellous as those it has bestowed on the 
 indebted landowners and farmers of several European coun- 
 tries."^ These societies are the humble Raiffeisen type of vil- 
 lage bank with fifty to one hundred members each. 
 
 At the other extreme, we have the system of strong, pros- 
 perous People's Banks which has spread over Europe catering 
 to the well-to-do commercial and industrial classes of the towns 
 and cities. These institutions are, in many instances, doing a 
 much more up-to-date banking business than the regular banks 
 of the country. Between these extremes, we find societies 
 operating in all sorts of intermediate combinations of circum- 
 stances, and in every case adapting themselves to the needs of 
 the situation. 
 
 A thing that strikes one in the study of the whole movement 
 is that in those countries where co-operative banking has made 
 most progress, its greatest achievement has been the populariz- 
 ing of banking methods, and the consequent socializing of 
 capital through a wider use of credit. Professor Shortt, who 
 has made a fairly careful study of banking conditions in 
 Europe, says that, outside of Great Britain, " the note issue is 
 the great feature. The deposit business is comparatively small ; 
 the discount business is not on the same basis as ours ; but the 
 loaning of capital in the shape of bank notes is a feature." 
 The people do their business in actual currency ; and when they 
 
 iFrom a Times clipping sent by Earl Grey, Governor-General of 
 Canada. 
 
7(y Co-operative Banking in Quebec. 
 
 get a little surplus, they hoard it up rather than place it on 
 deposit in the banks. Consequently, it is chiefly the business 
 men of the middle classes who have dealings with the banks. ^ 
 When poor people are compelled to borrow, they seek the near- 
 est money-lender and submit to his terms. These transactions 
 are usually kept as much in the dark as possible, because it is 
 considered a disgrace to get into the clutches of the usurer. 
 This secrecy prevents the formation of public opinion on the 
 subject such as might in time mitigate the evil.^ Even where 
 the small borrower could offer sufficient security to obtain a 
 loan from a regular bank, he is forced to pay rates of interest 
 which the establishment of co-operative credit associations has 
 proven to be unnecessarily high.* 
 
 That this situation has been changed wherever co-operative 
 credit associations have gained a foothold, is the testimony of 
 all authorities. True, there does not spring up at once the 
 system of checks and drafts which plays such an enormous role 
 in American business; but the members begin to place their 
 savings on deposit, various forms of discounts come into use, 
 the usurer disappears from the scene, and the use of credit 
 arises from the category of things to be ashamed of.^ 
 
 Then, too, the making of supervised credit available on such 
 easy terms has everywhere in Europe been a great stimulus to 
 the use of capital by the poorer classes in enterprises which 
 would otherwise never have suggested themselves. The funds 
 are at the command of the man who knows how to use them 
 profitably. One secures a loan and puts in a drain reclaiming 
 a waste piece of land. Another invests in artificial manure, 
 supplying elements in which his soil is deficient. His neighbor 
 begins to look about for a profitable investment, and so there 
 is started a movement in which the spirit of enterprise becomes 
 contagious, infecting the whole community. 
 
 2Professor Shortt, Report of Committee on Bill No. 2, 1907, page 39. 
 
 3E. A. Pratt, op. cit., 141-153. 
 
 ^Edward T. Peters, Co-operative Credit Associations, U.S. Depart- 
 ment of Agriculture, Division of Statistics, Miscellaneous Series, Report 
 No. 3, page 15. 
 
 5E. A. Pratt, op. cit., 141-153. 
 
Possibilities in America. 77 
 
 In this connection it must be noted that, in those European 
 countries where the banking institutions are most democratic, 
 it is hardest to get co-operative credit started. In England and 
 Scotland, we find distributive co-operation very strongly de- 
 veloped, and also considerable progress in productive co-opera- 
 tion. But in spite of the fact that such an able apostle of 
 co-operative banking as Mr. Henry W. Wolflf has been ex- 
 pounding his principles to his fellow-countrymen for almost 
 twenty years, the movement has as yet achieved but an insigni- 
 ficant development in Great Britain* In Ireland, to be sure, 
 under the enthusiastic ministrations of Sir Horace Plunkett 
 and the Irish Agricultural Organization Society, a vigorous 
 system of associations is being organized. But there we have 
 conditions very similar to those under which the Raiffeisen 
 societies have achieved such success among the peasantry of 
 Europe.^ 
 
 The slow development of co-operative credit in Great Britain 
 is due to a variety of causes. In the first place, we may account 
 for it by the natural conservatism of the Britisher, and his 
 inherent distrust of "new-fangled " ideas. He has a sturdy 
 self-reliance, which, however admirable in itself, makes the 
 average Englishman appear rather unsociable. He is " a poor 
 mixer," to use one of our expressive slang phrases, and rather 
 unprogressive, where progress depends, as it is coming more 
 and more to depend upon social co-operation and interdepend- 
 ence. The mutual criticism, the supervision of the use of loans, 
 and the knowledge of each other's afifairs upon which co-opera- 
 tive credit associations rely so much, is very distasteful to most 
 Englishmen. Moreover, we find that agricultural conditions 
 differ widely from those prevailing on the continent. There are 
 very few of thie small independent farming peasantry among 
 whom the Raiffeisen societies have accomplished so much in 
 France, Italy and parts of Germany. The land in England is 
 
 '^Note : In August, 1910, Earl Carrington, President of the Board of 
 Agriculture, announced the intention of the British Government to assist 
 in establishing a system of rural credit banks. 
 
 ^'On England and Ireland, see C. R. Fay, op. cit, 74-75. 
 
7^ Co-operative Banking in Quebec. 
 
 almost entirely in the hands of large estate holders, who lease 
 it in improved farms to their tenants. These tenants are better 
 ofif on the average than the continental freeholders. They have 
 at their command a more highly developed system of regular 
 bank credit, and experience less difficulty in taking advantage 
 of it. 
 
 But all this does not prove that there is no field for co-opera- 
 tive credit in Great Britain. Mr. E. A. Pratt goes into this 
 matter fully in his book, " The Organization of Agriculture." 
 On the basis of a review of the development of agricultural 
 organization in Europe and America, he arrives at the conclu- 
 sion that the establishment of better credit facilities is a funda- 
 mental need of the British farmer. He says : ''Another factor 
 in the situation is the necessity that agricultural credit should 
 go hand in hand with agricultural organization. The necessity 
 for this dual arrangement has been proved over and over again 
 on the continent of Europe, and though the financial position 
 of the British agriculturists in general may be more favorable 
 than that of the peasantry in various other countries where an 
 easy agricultural credit has been established years ago, the ex- 
 treme desirability of such credit being available in Britain also 
 is beyond any possible doubt."'' Again: " But experience has 
 already shown that no really eflfective scheme of agricultural 
 organization on a widespread basis can be carried out even in 
 Britain unless supplemented by some practical system of co- 
 operative agricultural credit banks, arranged on so comprehen- 
 sive a scale as to meet the varying wants of all our agricultural 
 classes."^ Finally, he concludes : " Whether the British farmer 
 acts individually or collectively, the financial question calls, 
 indeed, for serious consideration. It might even be argued that 
 until the financial problems which arise have been satisfactorily 
 disposed of, no great progress can be made.® 
 
 Again, take the Kingdom of Denmark. This small agricul- 
 tural country has become the veritable paradise of co-operation. 
 Within the past forty years the movement has spread until, at 
 
 7E. A. Pratt, op. cit., 310-311. 
 sibid., 375. »Ibid., 377. 
 
Possibilities in America. 79 
 
 the close of 1906, two hundred thousand, or over forty per 
 cent., of its five hundred thousand famihes were members of 
 co-operative societies. The whole agricultural industry has 
 been practically revolutionized through these associations, and 
 the general standard of well-being immensely improved. ^^. But 
 singular as it may seem, co-operative banking has gained no 
 foothold in Denmark. Mr. Fay, in commenting on this fact, 
 attributes it to the democratic level of the ordinary banks, 
 together with the fact that other forms of co-operation have 
 made the farmers so prosperous as to be in little need of credit ; 
 and hence, when they do require it, they find on difficulty in 
 satisfying their need through the regular banking institutions.^^ 
 The experience of Denmark, then, does. not form for any other 
 country, under existing conditions, an argument against the 
 adoption of co-operative credit. It simply means that, in Den- 
 mark, the organization of agriculture has been carried to such 
 a degree of perfection through other co-operative agencies that 
 credit unions are unnecessary. 
 
 As we study the movement in India, and in the different 
 countries of Europe, the evidence points almost invariably to 
 the conclusion that co-operative credit has been one of the most 
 effective agencies in promoting thrift, enterprise and general 
 prosperity. The People's Banks have everywhere been a great 
 boon to the industrial and mercantile classes of the cities. Im- 
 poverished and inert rural communities have awakened into 
 new life, as if by magic, where the Raiffeisen societies have 
 gained a foothold. Buildings have been renovated, live-stock 
 improved, new machinery purchased, soil fertility restored by 
 the use of fertilizers, and the people themselves transformed, 
 socially, morally and intellectually, by these associations. 
 
 .Let us now turn from this evidence of the success of co- 
 operative credit abroad to a further consideration of American' 
 conditions. Let us enquire what our credit facilities are and 
 how they are utilized by the different elements of our popula- 
 
 I'^C. R. Fay, op. cit., Chaoter on Denmark. Report on Bill oN. 2, 
 1907, pages 93-95. 
 
 11 C. R. Fay, op. cit., 75. 
 
80 Co-operative Banking in Quebec. 
 
 tion. Let us also ask if there are not some fundamental gaps 
 in our social and economic structure which might be filled in 
 by more democratic credit facilities than we now possess. 
 
 At once we are struck by a decided difference between our 
 general situation and that of Europe. But we are almost 
 equally surprised by the contrast presented between different 
 sections of the United States and Canada. In the first place, 
 we find that our regular banking institutions are much more 
 commonly used than they are anywhere in Europe. Our work- 
 ing classes, small tradesmen and prosperous farmers usually 
 keep a bank account; and, with the exception of our French 
 sections, in other foreign sections and in backward rural dis- 
 tricts, there is far less hoarding of notes and coin than we find 
 in Europe. 
 
 Moreover, at the time when the rural need is greatest, espe- 
 cially in our western states and provinces, the regular banking 
 institutions perform splendid service in supplying the farmer 
 with the credit necessary for the harvesting and marketing of 
 his crops. We find the evidence of this in the periodic move- 
 ment of money from New York to the South and West which 
 begins in August of each year -^^ and in the much larger de- 
 mands upon the western branches of the Canadian banks,, 
 beginning usually about the first of September. But even in 
 this rural periodic demand we find much that reminds us of the 
 European conditions in the great demand for currency. The 
 farmer gets credit on the security of his crops, but he demands 
 those loans in actual cash. When his crops are sold he also 
 demands currency, not bank credit, in payment. ^^ 
 
 The writer was brought up on a farm in the centre of the 
 western Ontario peninsula, in one of the most progressive and 
 prosperous communities of small farmers he has come across 
 in either America or Europe. In the market towns of that 
 section the banks were forced to provide for a tremendous de- 
 mand for currency during the last four months of the year. In 
 " hauling out his grain " the farmer was paid by a check for 
 
 i2Ely, Outlines of Economics, 259. 
 i-'*Ely, op. cit., 259. 
 
Possibilities in America. 81 
 
 each load he took to market. But very seldom were these 
 checks deposited at once in one of the local banks. Usually 
 they accumulated in the family pocketbook in a bureau drawer 
 for a week or two, and were then presented at the bank on 
 which they were drawn for cash payment. As the farmer paid 
 his store bills, blacksmith's accounts, instalmnets on machinery 
 to the local implement agent, temporary loans which he had 
 made, etc., the currency gradually found its way back into the 
 bank. After these various demands had been met, any balance 
 remaining was usually, though not invariably, placed on deposit, 
 and drawn on in small amounts of cash as the farmer needed 
 the money. 
 
 To one accustomed from childhood to such conditions, in a 
 country so largely devoted to agriculture, and who also knows 
 the joy of '' pay day " among the indu3trial classes of our cities, 
 when each man receives his check and hastens to have it con- 
 verted into the " long green," it has always seemed that the 
 differences between the banking habits of the masses in this 
 country and in Europe have been somewhat exaggerated. That 
 there are differences, we have admitted at the outset. But we 
 are far from convinced that the contrast is so great as the 
 tremendous volume of deposit currency passing through Ameri- 
 can clearing houses would indicate. Reliable statistics are not 
 available, but it is undoubtedly true that large quantities o£ 
 these credit instruments represent stock exchange transactions 
 of a purely speculative character. Then, too, making all due 
 allowance for the wide divergence of opinion as to actual con- 
 ditions, it is certain that a very large proportion of the national 
 income of the United States goes to a very small proportion of 
 the citizens. If we subtract the business transactions of a very 
 small percentage of our total population from the mass of the 
 business done, things would look very differently ; and we would 
 have less reason to glory in our vaunted American superiority.* 
 
 *Note : Since the above was written, there has come to hand the 
 report of the National Monetary Commission on " The Use of Credit 
 Instruments in Payments in the United States," compiled by Professor 
 Kinley, of the University of Illinois. While admitting the very limited 
 use of checks by the laboring classes, it is estimated that 50 or 60 per 
 
82 Co-operative Banking in Quebec. 
 
 On the other hand, it must be admitted that the average 
 American workman and small farmer is better acquainted with 
 business methods than his brother in Europe. If he does save, 
 the readier transfer of property, and the better credit facilities, 
 make it much easier for him to acquire a home of his own. The 
 abundance of rich free land in the Canadian Northwest is still 
 attracting the most enterprising from among the working classes 
 by the opportunities it affords to become independent property 
 owners. Insurance companies, with their various forms of en- 
 dowment and other policies, are stimulating and compelling 
 thrift. The postal savings bank of Canada, and the corporate 
 savings banks of the Uinted States, are collecting every year 
 large amounts of money among the wage earners. 
 
 But in spite of all this, we are far from satisfied that there 
 is no field in America for some form of co-operative credit 
 associations. The great variety of industrial and other securi- 
 ties, it has been suggested, present the opportunity whereby 
 every citizen may have his share in the profits of our industries, 
 and his voice in their management. Theoretically this is true. 
 In actual practice, however, what an ironical caricature of the 
 reality such a suggestion contains ! This very system of se- 
 curities with its plan of " stock voting " has served to concen- 
 trate the industrial, commercial, financial, and political power 
 of America in the hands of a more or less selfish plutocracy 
 in a way which is without a parallel in the history of the world. 
 Moreover, it is pretty largely through the accumulations of the 
 small saver that these captains of industry and manipulators of 
 
 cent, of the retail trade, and 90 per cent, of the wholesale business, or 
 an average of 80 to 85 per cent, of the total business of the country, is 
 done by check. 
 
 This is not the place to attempt an examination of the findings of 
 the commission. There is brought to light a rapid expansion of the 
 use of credit instruments. Business leaders everywhere use checks in 
 their dealings with each other, and with the masses. Wages are paid by 
 check, and in the same way the farmer is paid for the produce of agri- 
 culture. The cashing of these checks swells the proportion of retail 
 business settled by credit instruments. But the enormous currency re- 
 quirements of the United States seem ;o point to business habits in the 
 masses which have hardly received sufficient emphasis from the com- 
 mission. 
 
Possibilities in America. S3 
 
 finance get their power. The branch bank system of Canada, 
 and the national and savings bank sqstems of the United 
 States, with the secondary and central reserve cities, esrve to 
 concentrate capital just where the comparatively small number 
 of financial leaders can most effectually use it in their own 
 interests. With it they manipulate the stock market in such a 
 way as to render the average securities unsafe from the stand- 
 point of the small investor. They use it to form monopolies 
 which control prices, import cheap foreign workmen, and break 
 the back of American organized labor. Through their contri- 
 butions to political campaign funds, through their control of 
 political bosses who deal in voters in bulk and in members by 
 the piece, and through their thoroughly organized system of 
 lobbying, they manipulate the small savers' earnings to make 
 and unmake laws, to regulate the tariff, to fight legislation 
 favorable to labor, to suppress public ownership in every form, 
 to secure franchises which will enable them to further mulct the 
 public, and to monopolize the natural resources of the country. 
 A timely illustration of this last point is seen in the buying up 
 of the water-power which is coming to be such an important 
 national asset. In these, and many other ways, our present 
 system of saving is made subsidiary to forces which are not 
 working for the general social welfare, as any unbiassed student 
 of the situation must admit. 
 
 Against this whole system of concentrated financial power, 
 with all that follows in its train, co-operative credit associations 
 work most effectively by stimulating local enterprise, and a 
 local demand for funds. In concluding his splendid review of 
 the effect of the co-operative banking movement in the five 
 countries where it was then chiefly operative, Mr. T. Peters, 
 writing in 1892, says : 
 
 " That there should, on the whole, be a large overflow of 
 capital from one district, one region, or even one country to 
 another is no doubt inevitable, and as far as it occurs under 
 normal conditions there is nothing in it to deprecate ; but it is a 
 thing to be deprecated when capital, sorely wanted for the 
 supply of local needs, is sent half the world's circumference 
 
84 Co-operative Banking in Quebec. 
 
 away in search of an investment merely for the want of a 
 channel of communication between its owners and their near 
 neighbors. Such a channel is, to a great extent, supplied by 
 institutions like the people's banks of Europe and the building 
 and loan associations of the United States; and the more these 
 institutions are perfected, adapted to varying wants, and dis- 
 seminated among the people, the more will the present top-heavy 
 fabric of modern credit be broadened in its foundation and 
 narrowed in its overhanging superstructure. In fact, few 
 things could do so much to guard the business world against 
 the financial crises, which so frequently paralyze its industries, 
 as the general existence of institutions which tend to retain 
 within the neighborhood of its origin all the capital for which 
 there is a potential local demand, and thus keep it as fully as 
 possible under the continued oversight of its owners."^* 
 
 Moreover, from the standpoint of investment, the regular 
 endowment policy, as well as most other forms of old age and 
 accident insurance provided by the regular companies, is not 
 very profitable for the working man. Too large a percentage 
 of what he must pay is spent for advertising, and for the pay- 
 ment of agents and high-salaried officials. Dr. Henderson says : 
 " The colossal sums poured annually from slender incomes into 
 the coffers of the ' industrial insurance ' companies are witness 
 of the spirit of sacrifice which is inspired by the sentiment of 
 repugnance to burial at public expense. "^^ Yes, but these same 
 colossal sums also bear witness of what might be done in the 
 way of stimulating saving, even among the poorest, by an effi- 
 cient system of co-operative credit. 
 
 The experience which America has already had with co- 
 operative credit is amply sufficient to justify its extension. I 
 refer not to the Quebec associations, but to the Building and 
 I.jDan associations of the United States and Canada. The first 
 of these associations of which we have any record was estab- 
 lished at Frankford, a suburb of Philadelphia, January 3, 1831, 
 and was known as the Oxford Provident Building Association. 
 
 i*E. T. Peters, op. cit., 116-117. 
 ^''American Journal of Sociology, xiv, 464. 
 
Possibilities in America. 85 
 
 But the real commencement dates from the decade 1840 to 
 1850; so that this movement was well under way when Schulze 
 organized his first loan society at Delitzsch-Eilenberg in 1850.^® 
 These societies have accomplished more in the United States 
 than all other forms of co-operation put together. According 
 to the last annual report of the United States League of Local 
 Building and Loan Associations, for the year 1908-9, there 
 were 5,599 affiliated associations, with a membership of 1,920,- 
 257, and total assets amounting to $784,175,753. Besides the 
 Local Associations, there are thirty-five National Societies, 
 with $14,500,000 assets. 
 
 In these societies, as in the European and Quebec associa- 
 tions, the objects are the promotion of thrift and the granting 
 of credit on reasonable terms to those who can use it. They 
 differ in the fact that the granting of credit is restricted to the 
 purpose of building and improving homes. Savings are forced, 
 as in the town banks of Europe, by regular payments on large 
 shares of stock. These payments, together with the "premium" 
 and and interest on loans, constitute the working funds of the 
 society from which members receive advances. 
 
 Suppose a man has a lot and wishes a loan of $1000 to build 
 a house. He joins the association and subscribes for one share 
 of stock, which is usually listed at $200, and among other mem- 
 bers bids for a loan of $1000. The member bidding the highest 
 premium gets the loan. The " premium " is defined as the 
 margin between the sum which is actually turned over to the 
 borrower and the amount which he bids.^'' In the report of 
 1893 there were found to be sixty-eight different premium plans 
 existing in the United States.^® When the member secures his 
 loan, he must subscribe stock sufficient to cover its face value. 
 He enters into a contract to pay for his stock, plus the interest 
 on the loan he has received, in a stated number of regular in- 
 stalments. In computing the instalments, allowance is made 
 for the dividends falling annually to his shares. By turning 
 
 A^Ninth Annual Report of the Commissioner of Labor, 1893, p. 11. 
 i^Adams and Sumner, Labor Problems, 392. 
 isibid., 388. 
 
86 Co-operative Banking in Quebec. 
 
 over the paid up shares, he receives a clear deed of his property, 
 which has in the meantime been pledged as security for the 
 loan. 
 
 Thus, in a narrower sphere, the Building and Loan Associa- 
 tions, combining the savings and credit features with the in- 
 stalment plan of payment, bear a marked similarity to the 
 co-operative credit associations of Europe. Their great weak- 
 ness, as compared with those societies, lies in the fact that they 
 have failed utterly to reach the great masses of laborers, who 
 need help the worst.^** They have enabled many workmen to 
 obtain homes, it is true, but have been of most benefit to the 
 salaried members of the middle classes and small business and 
 professional men.^*^ Besides, the prevailing opinion here in 
 Michigan, at least, seems to be that the scheme is more attrac- 
 tive from the point of view of the investor seeking profit- 
 bearing securities than from that of the person seeking credit 
 on reasonable terms. This would seem to bear out the state- 
 ment of Professor Hadley, who says : " The chief commercial 
 profit of such societies goes to the outside investors who do not 
 intend to borrow."-^ If we take this into consideration, to- 
 gether with the fact that a man has one vote for each of his 
 paid up shares, we have the fundamental weakness of these 
 societies from the standpoint of co-operative credit. The 
 members who never intend to borrow, with their paid up shares, 
 are able to control the policy of the association. They exer- 
 cise their power in their own interest, rather than in that of 
 the non-capitalist laboring class. So the policy tends to become 
 that of a small capitalist investment association much more 
 than that of a workingman's credit union. 
 
 This, to whatever extent it is true, is a fatal weakness in 
 Building and Loan Associations as organizations calculated to 
 extend the use of credit among the laboring classes. But, 
 nevertheless, the success and expansion of these societies in 
 
 i»Ninth Annual Report, etc., 1893, 321-23. 
 20Aclams and Sumner, op. cit., 393. 
 
 2iHadley, Economics, 398, quoted by Adams and Sumner, op. cit.,. 
 393. 
 
Possibilities in America. 87 
 
 America points to a deep-seated need among the industrial 
 classes, which we believe could be met by the co-operative credit 
 association, with its smaller shares, easier terms, and more 
 economical and democratic management. 
 
 Now, let us look again at our American agricultural situation, 
 and ask if there is not here a need which properly organized co- 
 operative credit might meet better than anything which exists at 
 present. We have already referred to the bank credit supplied 
 on the security of the crops in order to meet the expense of 
 harvesting, threshing, and marketing the grain. This credit is 
 mainly required by the prosperous agriculturists of the South 
 and West. Besides, on good real estate, mortgage credit may 
 be had on fairly reasonable terms all over America. Credit for 
 farm implements and machinery is usually supplied, at a rather 
 high cost, by the local implement agent. We have already 
 noticed, in the third chapter, the advantage of co-operative 
 credit in paying for farm machinery. The ordinary stores of 
 the country towns bear the burden of '' shop credit " for the 
 farming community, at considerable inconvenience to them- 
 selves and expense to those who get their goods on account. 
 We have also seen the revolution effected by a co-operative 
 association in bringing a whole community round to a cash 
 basis of shopping. 
 
 But nowhere in America have we adequate credit facilities 
 for small improvements, which, however necessary and profit- 
 able in the long run, do not offer immediate returns upon the 
 investment. Among the necessary outlays in every progressive 
 farming community are improvements in stock, repairing and 
 extension of buildings and mechanical equipment, and, above 
 all, the maintenance of the fertility of the soil. This last is of 
 prime importance, and it is a factor which has little more than 
 begun to enter into our American system of agriculture. Ameri- 
 can agriculture started on the Atlantic seaboard, and has 
 gradually extended westward. The policy has been to get all 
 that was possible out of the soil without restoring its fertility; 
 after which the adventurous and progressive moved out West 
 
88 Co-operative Banking in Quebec. 
 
 where there were illimitable fields of virgin soil awaiting their 
 plunder. The shiftless and poverty-stricken were left in pos- 
 session of the old worn-out homesteads. But even an America 
 could not stand this pace forever. Already the western plains 
 of the United States are occupied and throbbing with life, while 
 those of Canada are rapidly following suit. Large districts in 
 the eastern provinces of Canada and in the Atlantic states are 
 already sounding a warning note of possible national bank- 
 ruptcy. 
 
 In a very suggestive paper on the " Conservation and Preser- 
 vation of Soil Fertility," Mr. Cyril G. Hopkins, chief of Agro- 
 nomy and Chemistry in the University of Illinois Agricultural 
 Experiment Station, writes : " Within a hundred miles of the 
 spot where the first permanent English settlement was made in 
 our country one can to-day buy hundreds of thousands of acres 
 of arable land for less than ten dollars an acre, — land which 
 was once valued at fifty dollars an acre, and would now be 
 worth more than one hundred dollars an acre if its fertility had 
 been maintained. This statement does not include any reference 
 to lands that have seriously suffered from soil erosion, but only 
 to the great areas of nearly level or gently undulating farm 
 lands whose productive power has been almost destroyed by a 
 hundred years or more of common cultivation by American 
 farmers." . . . . " The greatest problem of the United 
 States," he says, . . . . " is to bring about the adoption of 
 systems of farming that will maintain or increase the produc- 
 tive power of American soils. "^^ 
 
 This disastrous exhaustion of the soil, under present methods 
 of farming, is creeping slowly but surely westward. There is 
 but one remedy : the supplementing of farm manure by mixing 
 with it the necessary elements of soil fertility as contained in 
 artificial fertilizers. Professor Hopkins goes into the problem 
 and shows how the natural richness of the soil may profitably 
 be restored and maintained, and even increased beyond its virgin 
 fertility. 
 
 But this process of soil restoration, as well as the improve- 
 '»22Annals of the American Academy, xxxiii, 631. 
 
Possibilities in America. 
 
 ment of live stock and mechanical appliances, necessitates the 
 expenditure of capital; and especially for the man on a run- 
 down farm this capital must be obtained on credit of some kind. 
 The returns on such an investment are sure, but they are only 
 slowly and gradually realized. It is a form of investment which 
 the ordinary banker does not care to handle, and indeed cannot 
 make with safety. The amounts required each year are not 
 large enough to be profitably obtained on mortgage credit. Be- 
 sides, under either of these forms of credit the lender's interest 
 is paramount in making the loans and in fixing the terms of 
 repayment. 
 
 Just here, European co-operative credit comes in and identi- 
 fies the interest of the borrower with the lender. It makes the 
 loans in such amounts, and at such times, as are most profitable 
 to the farmer, and arranges the repayment on such a plan as 
 will be least burdensome to the borrower. The aim is to make 
 the investment repay the loan out of its own natural increase. 
 For the holders of large estates, we have co-operative mortgage 
 credit supplied on a large scale by institutions on the order of 
 the Prussian Landschaften.^^ Then, in various European coun- 
 tries, are organized societies dealing in credit on mortgages for 
 smaller land owners. Such are the Bavarian society and similar 
 associations, some of which are independent, and others sub- 
 sidized by the state.^* But by far the most useful to the small 
 landholder are the various co-operative banks. Writers who 
 have made a personal study of the workings of these societies 
 in Europe are unanimous in their enthusiasm for the good re- 
 sults they have accomplished. In many districts the whole 
 agricultural situation has been revolutionized. Not only have 
 loans been supplied in such amounts and on such terms as are 
 in the best interests of the small farmer, but the leaders in 
 every community have been stimulated to a study of scientific 
 methods of agriculture so as to lead to the most profitable use 
 of the loans granted. Under the system of loan supervision 
 
 23Henry W. Wolff, op. cit., 225 et seq. 
 24Ibid., 202. 
 
90 Co-operative Banking in Quebec. 
 
 the peasant farmers have vied with each other in getting 
 results. ^^ 
 
 Now, if our run-down and half-dead eastern provinces of 
 Canada, and the impoverished agricultural areas of the Atlantic 
 states, could come under the influence of such a movement as 
 that, there is every reason to believe that similar results could 
 be achieved. The question is, could such a movement be started 
 with reasonable prospects of success in these districts? The 
 answer to this question necessitates a brief examination of the 
 conditions and forces which have been responsible for the suc- 
 cess of the European movemnet, and an inquiry as to how far 
 they could be relied upon in America. 
 
 In the first place, it has been maintained that where co-opera- 
 tive banking has flourished in Europe, we find a marked uni- 
 formity of population, and a stability of occupation and 
 residence which are almost entirely wanting in America; and, 
 since successful co-operative credit depends so much on mutual 
 knowledge of each other's character and financial standing, this 
 instability is said to form an insurmountable barrier to the 
 extended usefulness of these associations in the United States 
 and Canada. The fixity of population is undoubtedly a great 
 advantage in the formation and operation of co-operative socie- 
 ties in Europe. This stability could not be found to such an 
 extent in America ; and especially is this true of the newer sec- 
 tions. But as Mr. Peters, in his consideration of this difficulty,, 
 concludes : " There is, however, a vast field in our own country 
 in which a sufficiently large part of the population has all the 
 fixity necessary for co-operative purposes. "^^ We think we 
 might go farther even than this, and say, that with a careful 
 selection of members, and something of the Building and Loan 
 Association plan of securing advances, there is no part of 
 America to which some form of co-operative credit could not 
 be adapted. It might not be an exact repetition of any type of 
 
 2"H. W. Wolff, op. cit., 375 et seq. ; Co-operative Credit Banks, 47-8. 
 E. A. Pratt, op. cit., 123 and 310. E. T. Peters, op. cit., 15, See also 
 various papers and resolutions of the International Congress at Paris, 
 1900.. 
 
 26E. T. Peters, op. cit, 113. 
 
Possibilities in America. 91 
 
 society existing at present; but the type is not the important 
 consideration. The great thing is to secure some plan to en- 
 courage saving, and the democratic use of the accumulated 
 funds in promoting local enterprise. 
 
 For eastern Ontario, Quebec, the Maritime Provinces, and a 
 large part of the eastern states, with their stable, slow -going 
 populations, the type of society established by Mr. Desjardins 
 would probably prove admirably adapted. For the more busy 
 progressive regions of the west, we believe another type would 
 have to the worked out. The Quebec type might do for many 
 country regions. But in other rural communities, and in the 
 cities and towns, societies would have to be run on a scale large 
 enough to afford adequately paid management and help, some- 
 what after the plan of the Schulze-Delitzsch banks of Europe. 
 In the organization and management of co-operative credit for 
 the busier communities, the Building and Loan Associations 
 afford valuable suggestions. 
 
 Then comes the question of government aid. In the majority 
 of European countries, as we have seen, government assistance 
 has been a feature in the development of the movement. Little 
 wonder, for example, that the membership of the " Caisses 
 Regionales " in France increases rapidly ! From their state 
 supplied funds, the affiliated societies are able to make loans at 
 from one to four per cent, interest. This is probably the most 
 extreme case ; but in many others the state bounty has been a 
 big factor in swelling the yearly transactions into top-heavy 
 proportions, as compared with the small effort at self-help put 
 forth by the societies. On the other hand, we have the develop- 
 ment of co-operative savings in Italy, where the associations 
 not only receive no state aid, but contribute their full share of 
 taxes for the support of the government. 
 
 Mr. Desjardins is strongly opposed to any form of state or 
 other philanthropic pampering. He holds that the only secure 
 basis is self-reliance and individual thrift. Considerable evi- 
 dence might be adduced from European experience in support 
 of this position, which has the approval of the eminent special- 
 
92 Co-operative Banking in Quebec. 
 
 ist, Henry W. Wolff. On the basis of the widest study of 
 co-operative savings which has probably yet been made by any 
 authority, he concludes that any help given should be tem- 
 porary, that local help is better than central help, and that state 
 help is never desirable.^'' 
 
 Besides, there is a greater margin for savings among the 
 working classes in America than among those of any other 
 country. The extravagance of our working classes is notorious. 
 If co-operative credit has been able to make such progress inde- 
 pendently of state aid in a country like Italy, we may safely 
 dismiss any such proposition as the necessity of government 
 assistance in Canada and the United States. 
 
 But there is a way in which the state can assist co-operative 
 credit, which experience would indicate to be almost necessary 
 to its progress and success. That is, by passing legislation 
 recognizing such societies, placing them upon a legal basis, and 
 setting forth such general principles as have been expedient in 
 securing safety and a measure of uniformity. In his study of 
 co-operative credit made in 1892, Mr. Peters found that the 
 multiplication and prosperity of these associations was to a 
 large extent dependent upon the existence of appropriate laws. 
 He refers especially to Italy, where co-operative credit associa- 
 tions had been in existence for eighteen years before they re- 
 ceived legal recognition by the code of 1882. Up to that time 
 there were but 171 societies in existence. Under a recognized 
 legal status the number of associations had increased by 1889 
 to 692.2« 
 
 In Canada the Province of Quebec has led the way with the 
 Quebec Syndicates Act of 1906 ; and a hard fight is being made 
 for Dominion legislation. In the United States, Massachusetts, 
 which has proverbially been the social and intellectual leader of 
 the union, has given the weight of its prestige to the movement 
 
 27H. W. Wolff, Co-operative Banking, 298, cf. Peoples' Banks, 20, 
 21, 26, etc. 
 
 28E. T. Peters, op. cit., 113. 
 
Possibilities in America. 93 
 
 by the act of 1909. Its influence is not likely to be lost upon 
 the other states; so that the future of co-operative credit is 
 beginning to look hopeful in so far as the necessary legal status 
 is concerned. 
 
 Another important factor in the European movement has 
 been the encouragement given by religious denominations, and 
 especially by the Roman Catholic Church. In intellectual lead- 
 ership, as well as in the recognition of her infallibility in matters 
 spiritual, this wonderful organization is surely losing ground 
 on the continent of Europe. It would seem as if, instinctively 
 feeling this, she were beginning to reassert her perennial vitality 
 through a determination to excel her adversaries in the leader- 
 ship in the practical affairs which form the basis for all that 
 is higher in life. Among other things she has been quick to 
 recognize the value of co-operative credit. 
 
 In Belgium, for instance, the great foe of the church is so- 
 cialism. To offset the socialistic tendency, the priests have been 
 compelled to become technical students and leaders in social 
 reform. They constitute the practical leaders of their parishes, 
 and in this way they have been able to stem the tide of social- 
 ism in all but the large cities. They are everywhere found 
 leading in agricultural associations and in co-operative societies ; 
 and to their assistance is certainly due much of the success 
 which has been attained. ^^ In Italy, too, in 1894, out of 904 
 banks then in existence, 779 had been organized by priests. ^^ 
 We might give numerous other illustrations of the influence of 
 the clergy in European movement, but these are sufficient for 
 our purpose. 
 
 In America, the Province of Quebec presents the sole exam- 
 ple of a uniform population under the dominance of the Catho- 
 lic church. A reference to the list of associations above will 
 show at a glance that in the mtater of co-operative leadership 
 the French clergy in Canada are rising to the occasion and 
 emulating their brother clergymen in Europe. If the move- 
 ment continues to bear out its present promise of success, we 
 
 2»E. A. Pratt, op. cit., 93-102. 
 3"lbid., 119. 
 
94 Co-operative Banking in Quebec. 
 
 see no reason why the Catholic clergy all over America should 
 not assist in organizing societies in their parishes. 
 
 As for the Protestant clergy of America, little can be ex- 
 pected in the way of practical social leadership outside of their 
 general support of all good works. Only a very few of the 
 theological schools are thus far giving their men any adequate 
 training for social or intellectual leadership. It is to be hoped 
 that the time will come when the church will in some way 
 readjust herself to changed social and intellectual conditions. 
 This ought to come through the theological schools. At present 
 the overwhelming majority of these schools are entirely out of 
 touch with the world of truth as modern scientific scholarship 
 counts truth. Hence, the clergy cannot command intellectual 
 respect. Nor are they given any basis on which to grapple with 
 the practical problems that confront modern society. When the 
 present theological studies shall have found their perspective in 
 the general religious evolution of the race, and when two-thirds 
 of the time now devoted to mental gymnastics in the culture of 
 one short epoch of the past shall have come to be devoted to 
 the problems of the Hving present, we may expect to hear from 
 the church to-day the voice of authority as the prophets spoke 
 of old. Their bible was the society in which they lived. Their 
 " voice of Javeh " was the crying social and political need of 
 the day. Using the language of their time, they gave expres- 
 sion to their message ; and that old message has been reiterated 
 ever since. When social and individual psychology shall have 
 supplanted dogma, when the social sciences shall be taught 
 instead of apologetics, this parrot mimicry will cease and the 
 voice of prophecy will be heard again. Until then, secular 
 leaders who are wrestling with the practical problems which 
 confront our society must continue to lament the inefficiency of 
 the church leaders. 
 
 But co-operation, if it is going to succeed, must have leader- 
 ship. If the history of the movement proves anything, it cer- 
 tainly demonstrates the high value of capable, enthusiastic indi- 
 vidual leaders. ^^ We have seen the movement at its inception 
 
 •■^iCf. E. T. Peters, op. cit, 114. 
 
Possibilities in America. 95 
 
 championed by Schulze and Raiileisen, men of great ability and 
 recognized social and political standing. We have also had 
 occasion to refer to the leadership of the Italian movement by 
 Luigi Luzzatti. His enthusiastic support of the movement, and 
 his genius in adapting the institution to Italian conditions, have 
 given his name a place in the history of co-operative credit 
 almost on a par with those of Schulze and Raiffeisen. He was 
 a man of splendid ability, and subsequently became Italian Min- 
 ister of Finance. Among other great leaders we might mention 
 Herr Schenk in Germany, Dr. Ziller in Austria, WoUenborg in 
 Italy, Longuimine in Russia, and Sir Horace Plunkett in Ire- 
 land. These are all men of great ability, combining in their 
 personality a high type of character along with an enthusiasm 
 which refused to be balked by difficulty. 
 
 Most new departures from long-established custom must, in 
 the first instance, find their chief support in such individuals. 
 If the idea contains the germs of vitality, it will in time be taken 
 into the social fabric and propagate itself. Many a Jesus has 
 come to his Gethsemane in doubt as to whether or not his life 
 work had been in vain. The promoters of co-operative credit 
 associations have come in for their share of discouragement; 
 but the great leaders have all lived to see their ideals in a large 
 measure realized. Their example and their reward should give 
 encouragement to those whose life's task takes a similar form. 
 
 In America there has never been any lack of leadership to 
 champion a worthy cause. Let the need be sufficiently pressing, 
 and there will be found men and women in plenty with the 
 ability and courage to face the problem. The most momentous 
 issue which confronts America to-day is that presented by the 
 unequal distribution of wealth. Upon the solution of this prob- 
 lem hinges, to a great extent, the settlement of most of the 
 burning questions which confront our industrial, social, politi- 
 cal and intellectual life. We trust that we have made clear that 
 co-operative credit associations, as Mr. Desjardins is bringing 
 them before the people of Canada and the United States, sug- 
 gest at least the possibility of ameliorating some of the econo- 
 
96 Co-operative Banking in Quebec. 
 
 mic anomalies. The need at present is for other leaders, with 
 something of his enthusiasm and unselfishness, to work out 
 adaptations of the co-operative principle which will meet the 
 varied conditions of all our agricultural and industrial com- 
 munities. 
 
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