Self Insurance and Response to Industrial Downturns: Co-operative Societies and Able-bodied Assistance of the Non-able-bodied in Victorian Britain

Lynne Kiesling, College of William and Mary


Cotton workers in Victorian Lancashire have earned a reputation for the "Victorian virtues" of thrift, diligence and self-help. During industrial downturns these workers used a variety of income assistance institutions, such as individual saving, short-time work relationships with employers, intrafamily transfers, and informal assistance from charity and from neighbors. Public poor relief generally served only as a last resort. Unfortunately for modern students of their self-help activities, though, evidence on the depth and pervasiveness of these institutions has either not survived or was never kept, meaning that we must take a more indirect approach to exploring these institutional options.

Newly-unearthed information on co-operative society membership allows a more direct focus in this paper on self-help's prevalence during downturns. Co-operative societies were some of the most visible manifestations of self-help in the mid-19th century, and their influence persists to this day. Organized extensively after the creation of the Rochdale Equitable Pioneers Co-operative Society in 1844, co-operative societies enabled members to buy food, fuel and clothing of a consistently higher quality than before, with the profits distributed as dividends to the members in proportion to their purchases. Dividends that were not withdrawn and the members' capital investments earned interest rates comparable to those available in savings banks, and could be used as support during industrial downturns. As the co-operative movement grew it encompassed production, including textile manufacturing firms where the workers owned shares in the firm and split the profits. In this movement we can see the origins of modern corporations and employee stock ownership plans, although initially the members did not enjoy limited liability.

This paper serves two purposes. First, it explores the role of co-operative societies in providing income assistance during the Lancashire cotton famine, a severe downturn affecting the cotton manufacturing district of England as a result of the Union blockade of Confederate ports during the American Civil War. The only extensive source of information on non-employment income during the cotton famine is that on public relief provided in the Parliamentary Papers. This source leaves a large gap in our understanding by omitting recourse to institutions other than public relief. The newly-unearthed data that can help to close that gap is information on co-operative society membership on the eve of the cotton famine from The Co-Operator, a periodical published for co-operative society members. The publisher used both questionnaires and society records to determine the numbers, and "the list of Co-operative societies given in the present 'Co-Operator' is the longest and most correct that has yet been published." (Co-Operator 1862-3, 68)

In addition to analyzing new data on co-operative society membership in Lancashire, this paper augments previous research on the extensive use of income assistance institutions other than the poor law (Kiesling 1995). The previous paper examined only six poor law unions in the cotton manufacturing district and demonstrated the use of public relief only as a last resort; the current paper analyzes data from all 28, and is therefore expanding upon and generalizing the results of the previous paper. The indirect test of alternate institution use is the joint lag in the movement of able-bodied (able to work) and non-able-bodied (elderly, infirm, unable to work) individuals to public relief. In this paper I demonstrate that the results of the previous paper still hold when looking at the entire region, and that while co-operative society membership provided an important source of income for some workers and their families, the use of co-operatives as insurance during industrial downturns was not widespread in Lancashire.

Worker Insurance during Downturns and the Co-operative Society Movement

Cotton workers, generally well-paid enough to smooth income intertemporally, resorted to a wide range of assistance alternatives when faced with a trade cycle downturn. In addition to public poor relief these alternatives included short-time work arrangements with employers, intrafamily transfers such as the condensation of housing to save on rent, pawning of assets, store credit, informal charity, and individual savings through savings banks and co-operative societies.

Toad Lane, Rochdale, was the site of the official opening of the Rochdale Equitable Pioneers Co-operative Society on 21 December 1844 (Holyoake 1871, 13), funded by the three pence per week contributions of the 28 founding members and 12 other subscribers since August (Birchall 1994, 43). Opening with only four grocery items to sell to its members, the store was fully stocked and included a butcher shop by 1846. The society's founders wanted to procure wholesome food of a more consistently higher quality than they had been accustomed to buying in the local grocery stores, and they believed that using member contributions to buy goods at wholesale volume prices would enable them to achieve this goal. Following from their basis in the Christian socialist movement and the philosophies of Robert Owen and William King, the Rochdale Pioneers set forth what became known as the "Rochdale Principles" and progressed steadily during the 1840s, attracting more members and accumulating more capital that allowed them to expand their offerings of goods in the store. By the time of the downturn of 1847 the Society was well enough established that when the Rochdale Savings Bank collapsed, depositors hurriedly joined the Co-op, perceived as a safe repository for their funds (Cole 1944, 79).

The following decade saw tremendous growth for the Society. Repeal of the Corn Laws in 1846 meant that members could enjoy falling food prices, and in 1850 the Rochdale Society started providing wholesale goods for the other, newer societies in the area that were still too small to take advantage of volume discounts. After clearing away some legal obstacles in 1852, most notably the unlimited liability of members, the Rochdale Society traded more extensively with other organizations, leading to increased trade and profits for the members. They also established a co-operative cotton mill in 1855 (Fawcett 1862, 339). By 1860 the Society had 3,450 members and a trading surplus approaching [[sterling]]16,000 (Cole 1944, 79).

Co-operative societies grew and spread beyond Rochdale within Lancashire, and beyond Lancashire, throughout the 1850s; this growth was spurred partly by increased wages in many trades (Cole 1944, 82). By 1851, seven years after the Rochdale Pioneers, at least 130 small societies existed in northwest England and in Scotland (Birchall 1994, 77). The industrial towns in Lancashire, Cheshire and Yorkshire, as well as in the west of Scotland, provided the most fertile ground for the growth of co-operatives. The Leeds Industrial Co-operative Society had been founded in 1847, for example (Holyoake 1897), and the Oldham Equitable Co-operative Society in 1850 (Walters 1900). By 1860 the Oldham Society had grown and delved into the education aspect of the "Rochdale Principles" by organizing joint conferences and lecture series with the members the Oldham Industrial Co-operative Society (Walters 1900, 38).

During this time co-operatives also began exploring vertical integration, opening co-operative manufacturing concerns and wholesale societies. Several members of the Oldham Industrial Co-operative Society founded the long-running Sun Mill Company in 1858 (Anon. 1958, 7). "Oldham Limiteds", as limited liability textile firms came to be known in the following decades, thus find their origins in the co-operative movement. Moving in another vertical direction, the Co-operative Wholesale Society was founded in 1863 in Manchester to provide co-operatives with goods to sell in their stores. They created an importing and distribution network for their member societies, enabling them to acquire a consistent supply of such goods as butter, bacon, tea and wheat from abroad. By 1894 the CWS had grown into a large manufacturing and wholesaling corporation with its own bank, and it was one of the largest investors and users of the Manchester Ship Canal opened in 1894 (Birchall 1994, 65).

By the time of the cotton famine, then, co-operative societies had become a significant retailing force, particularly in the industrial towns of Lancashire, and they were poised to delve further into manufacturing and wholesale distribution. Members could purchase quality goods and receive any profit earned from the purchase, and the dividends and interest earned by the members clearly augmented their incomes. How useful was this augmentation in a downturn as severe as the cotton famine?

The Cotton Famine and Co-operative Societies in Lancashire

No assistance institution was equipped to insure away the income loss from the cotton famine fully. Observers in Britain believed that the American Civil War would be short-lived, lasting only four months, meaning that the unanticipated and unprecedented depth and duration of the downturn could not have factored into the expectations formation of the workers when making their intertemporal income smoothing decisions. Distress ensued quickly after the Union blockade strengthened during the summer of 1861; by October many factories in the cotton manufacturing district had started putting workers on short time (Kiesling 1995, 3-4). Over the course of the 14 subsequent months, workers and their families dissipated much or all of the savings they had accumulated by withdrawing funds from co-operatives and savings banks, condensing housing with extended family members, using store credit, and pawning assets such as books, Sunday clothing, furniture and pianos. They also received informal charity, which became more formal and increased in magnitude as the distress persisted and deepened through 1862 and into 1863. Only as a last response did many, but not all, of the distressed cotton workers request public relief in their communities (Kiesling 1995).

Co-operative society dividends and interest on them provided additional resources to offset the income loss during the cotton famine, but contemporary observers worried that co-operation would not survive the cotton famine:

. . . the mills of Lancashire and Yorkshire would stop, hundreds of thousands of families would be without work - and that meant being without food - John Bull would be short of calico, and manufacturers short of profits. Then it was predicted that co-operation would stop spinning like a top, when the momentum of working-class prosperity was withdrawn. (Holyoake 1871, 98)

Holyoake then proceeds to discuss the ensuing events in Rochdale, where many workers had savings in the co-operative society (recall the fall of the Rochdale Savings Bank a decade earlier), alluding to their measured withdrawal of accumulated dividends during the cotton famine. Using figures provided by the Society to the London Times correspondent in Lancashire, distressed members withdrew at least [[sterling]]16,000, most of which returned to the store through provisions purchases, but the actual loss of capital for the Society was only 2.5%. The Rochdale Society and its manufacturing arm both survived the cotton famine no worse off than other savings institutions, shops or manufacturers in Rochdale; indeed, Holyoake reports that the co-operative cotton mills in Rochdale maintained an average work load of three days per week during the cotton famine, while other cotton mills only averaged one day per week of work (1871, 104). Similar success in staving off distress among co-operative society members occurred in other towns, notably Oldham (Walters 1900, 45-49).

Did Co-operative Membership Provide Insurance? Empirical Analysis

The hypothesis put forth in this paper is that co-operative society membership served as an important source of income during industrial downturns, especially during the more common, less severe trade cycles than the cotton famine. Data on co-operative membership augments previous indirect tests of the diversity of assistance institutions used by distressed workers to forestall recourse to public relief (Kiesling 1995). In this previous paper the indirect test relied on the timing of public relief decisions of workers, especially the timing of non-able-bodied recipients relative to the able-bodied. Although the reporting of these poor relief data does not include family relationships, the co-movement of able- and non-able-bodied people to public relief can proxy family relationships because the non-able-bodied had only three assistance alternatives: family, public relief and private charity. Any lag in the non-able-bodied movement to public relief relative to the onset of distress (October 1861) suggests that the non-able-bodied were relying on other resources, including support from able-bodied relatives. Data on co-operative society membership supplements this indirect test by suggesting whether recourse to public relief was lower in towns with more extensive co-operative membership.


Figure 1 suggests both that able- and non-able-bodied public relief recipients coordinated their movement to public relief, and that they did so with a considerable lag relative to the onset of distress. This lag was due to the widespread use of savings, short-time work, pawning and charity.

In my attempt to ascertain the role of co-operatives in providing insurance during downturns, I am using data on the extent of co-operative society membership from The Co-Operator, a widely-read periodical for members founded in 1860 in Manchester. On the eve of the cotton famine The Co-Operator reported:

The total number of members here recorded is about 77,000, with a capital of [[sterling]]349,000; doing business to the amount of [[sterling]]629,000 quarterly, and realising a profit of [[sterling]]21,035 quarterly; allowing 5 per cent. annually upon capital, and giving an average of 1s. 6d. in the [[sterling]] [10.83%] quarterly as dividend upon purchases. (The Co-Operator, 1862-3, p. 48)

The report then lists each society, its membership, capital, sales, profit and dividend. To make the data comparable to the poor relief data from the Parliamentary Papers I aggregated the individual societies to the poor law union level. The empirical analysis below (abridged for this summary, but available in full from the author) uses these data to replicate and supplement the random effects generalized least-squares analysis presented in Kiesling (1995). The data used below include an expanded panel covering all 28 poor law unions in the cotton manufacturing district, not just the six used in the earlier paper.

Without even including the co-operative society data, the full panel confirms the results of Kiesling (1995). Using only raw cotton consumption as a proxy for the trade cycle, a 1% decrease in cotton consumption led to a 0.54% increase in the number of non-able-bodied receiving public relief. Including the able-bodied number on relief as an explanatory variable to test the co-movement both decreases the coefficient on raw cotton consumption and makes it statistically insignificant; a 1% increase in able-bodied relief recipients was accompanied by a 0.326% increase in non-able-bodied recipients. This result, consistent with Figure 1 above, implies that workers and their non-able-bodied dependents relied on private, often informal, assistance for an extended period before requesting public relief.

The co-operative data provide mixed results on the paper's hypothesis that there was a negative relationship between the number of co-operative members and the number receiving public relief in each location. First, I included an additional variable to control for the fact that most co-operatives were located in cotton towns; a positive relation between co-operative membership and number receiving public relief could indicate that regional concentration instead of focusing on the above hypothesis. This additional variable is a measure of the degree of specialization in cotton textile manufacturing in the poor law union, defined at the proportion of all industrial workers over age 16 who worked in cotton textile manufacturing. Including membership data and the cotton specialization variable yields the following results:


In none of the specified relationships is COOP large, and when looking at the able-bodied behavior the COOP coefficient is actually positive, not negative, as the paper's hypothesis suggests. Note that although COOP does not play a significant role in decreasing the number receiving public relief, the previous relationship seen between the able-bodied and the non-able-bodied persists.

Several factors may explain why such an active saving institution for workers does not have a more widespread effect in forestalling recourse to public relief. First, co-operative society membership may only have provided significant income in a few of the larger towns, such as Rochdale, Oldham, Manchester and Salford. Second, note that the data used here is not dynamic; it only captures membership on the eve of the cotton famine. Thus the statistical results may reflect the extreme nature of the cotton famine - co-operative resources, even where used, were insufficient insurance against this dramatic depression and were exhausted in many cases by 1863.


The data on co-operative society membership on the eve of the cotton famine do provide some insight into the role of non-poor law institutions in providing insurance against downturns. Society membership, though, does not appear to have provided widespread insurance against this income loss throughout the cotton manufacturing district. This result suggests the need for further research into the timing of member dividend withdrawal during the cotton famine.

REFERENCES I. Primary sources

Cassell's Gazetteer of Great Britain and Ireland (1898). London: Cassell & Co.

Fawcett, Henry (1862). "On the Present Prospects of Co-operative Societies." Macmillan's 5 335-342. Fawcett, Henry (1860). "Co-operative Societies; Their Social and Economic Aspects." Macmillan's 2 434-441.

Holyoake, George J. (1897) The Jubilee History of the Leeds Industrial Co-operative Society, from 1847 to 1897. Manchester: Co-operative Printing Society.

Holyoake, George J. (1871) The History of the Rochdale Pioneers. London: Swan Sonnenschein & Co.

St. AndrŽ, Jules L. (1854) Five Years in the Land of Refuge: A Letter on the Prospects of Co-operative Associations in England, Addressed to the Members of Council of the Late Society for Promoting Working Men's Associations. London: Pelham Richardson.

Walters, Charles (1900). History of the Oldham Equitable Co-operative Society Limited, from 1850 to 1900. Manchester: The Co-operative Wholesale Society's Printing Works.

II. Parliamentary Papers

Comparative Statement of the Number of Paupers in receipt of Relief: 1857 Session 2 XXXII; 1857-58 XLIX Part II; 1859 XXIV; 1860 LVIII; 1861 LII; 1862 XLVIII; 1863 LI; 1864 LI; 1865 XLVIII; 1866 LXIII.

III. Newspapers

The Co-Operator

IV. Secondary sources - available in the full version of the paper