The Farmer's Benevolent Trust: Law and Agricultural Cooperation in Industrial America, 1865-1945.
In 1914, Loraine Collett was photographed wearing a red bonnet and holding a tray of raisins (p. 120). This fifteen-year-old's portrait has since adorned each box of Sun-Maid raisins. (Sun-Maid was a twist on "sun-made" or sun-dried raisins.) Collett earned $5 for her pretty face. The farm cooperative acquired what became, as Victoria Saker Woeste explains, "one of the most valuable" trademarks in the business of marketing food (p. 120).
Buying farm produce in a grocery store, consumers might confuse Sun-Maid and other farm cooperatives--Land O'Lakes, Ocean Spray Cranberries, and Sunkist to name a few--with agribusiness. Their size and market power perhaps explains this confusion. But farmers established cooperatives to protect themselves against corporations. Woeste writes, "cooperatives sought to do for farmers what labor unions were attempting to do for wage workers: provide the economic and organizational benefits of collective bargaining to individuals otherwise left on their own (p. 5)." Woeste also invokes the term "monopoly" to characterize farmers' actions. Like corporations, farmers' marketing cooperatives wanted control over prices. Yet, unlike nonfarm sectors where one company could constitute a monopoly, farmers could only control prices if nearly all producers agreed to coordinate their output. In addition, farmers needed to raise sufficient capital to store, process, and distribute their goods. Ironically, in trying to satisfy these dual goals, farmers restructured their cooperatives along corporate lines. And, despite their potential to restrain trade, Woeste details how farmers ultimately sidestepped antitrust law.
Early cooperatives had little in common with corporations. Based on the "promise" of the cooperative in Rochdale, England, they were intended to follow democratic ideals: to serve members on a nonprofit basis where ownership was restricted to those who used the cooperative (p. 20). Rochdale workers had wanted to purchase goods collectively, and farmers often wanted to do so as well. Farmers, however, also wanted to sell goods collectively, and as they tried to coordinate growers and raise capital they deviated from the Rochdale model (pp. 21, 35).
The most important challenge came in 1912 when raisin growers organized the California Associated Raisin Company (CARC). This operative, Woeste explains, was noteworthy for its corporate elements: "The CARC was organized under the state's general incorporation statute with a capital stock of $1 million. Membership was not limited to growers." To maintain tight control, "a voting trust arrangement was established under which twenty-five trustees held and voted the stock on behalf of all share-holders" (p. 113). Many of the trustees were not farmers but bankers and community leaders. And growers could sign contracts without buying stock. The growers were by no means large operators. Many small farms were operated by immigrants; although clearly wary of the CARC, these farmers were terrorized by "night riders" to stop dealing with packers and to start signing CARC contracts (pp. 113-37).
The CARC's bold tactics proved important for new laws about farm cooperatives. Its corporate innovations and illegal tactics had enabled it initially to gain market share as farm prices rose sharply in the 1910s. Packers responded by prodding the Justice Department to sue the CARC (for which a consent decree was reached in 1922). At the same time, members of Congress drafted the Capper-Volstead Act that provided for the "recognition of the legality of collective action in the market" (p. 196). Here, Woeste writes, the CARC had served as a model of what farm cooperatives had to do in order to operate in an industrial economy (pp. 161-2). The cooperative also influenced state laws. During the 1920s, 38 states passed "the model cooperative marketing act (CMA)" (p. 203). The CMAs explicitly exempted farmers from antitrust laws under the logic that they "served an important public purpose" and provided specific privileges for controlling output (pp. 203-4). When faced with court challenges, the CMAs benefited fro m the popularity of associationalism and politicians' concern about the farm crisis (pp. 205-215). On the question of antitrust, state courts hesitated to find CMAs' effect on prices "unreasonable." On the question of equal protection--were other parties, namely competitors, unfairly affected--the courts evaded the problem (pp. 69-72, 209-212). As equal protection was recognized in Connolly v. Union Sewer Pipe Co. (1902), this case "prohibited separate classification of farmers," but states could legally distinguish persons through "organizations in order to dispense privileges to individuals" (p. 210).
The CARC's experience was noteworthy in a different regard: it indicated that legal options were not all-powerful. The CARC, renamed Sun-Maid in 1922, failed to control growers so as to limit output (or remove surpluses). As prices slipped, so did CARC's fortunes and it declared bankruptcy in 1928 (p. 189). Only in the 1930s as cooperatives accepted the state's intervention in markets did they gain a measure of control over prices.
For business historians, Woeste's study reminds us of the importance of farmers in the modern economy. She has carefully reviewed the legal debates about cooperatives as a business institution, treating important themes of monopoly and associationalism. Still, Woeste leaves unanswered ambiguities about the business of running cooperatives. One wonders how Sun-Maid was able to get back on its feet, or more generally, one wonders why for some crops marketing cooperatives proved more powerful than others; and one wonders as well how cooperatives in adopting corporate structures concentrated capital and power. We have no sense, for example, of whether other cooperatives used night riders to create "loyal" members. The CARC was critical to legal developments; what is left unexplored is how its business experience, including its relations with growers, use of trustees for voting, and its market failure in the 1920s, compared to other cooperatives.
Sally Clarke is associate professor of history at the University of Texas at Austin. She is author of Regulation and the Revolution in United States Farm Productivity (1994), and is currently working on a project about the relationship between consumers and producers in the automobile market. In 1999, she published "Managing Design: The Art and Colour Section at General Motors, 1927-1941" in the Journal of Design History.
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|Publication:||Business History Review|
|Article Type:||Book Review|
|Date:||Mar 22, 2000|
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