In seeking to develop countervailing power it was natural that farmers would at some stage seek to imitate the market organization and strategy of those with whom they did business. For purchase or sale as individuals, they would seek to substitute purchase and sale as a group. Livestock or milk producers would combine in the sale of their livestock or milk. The market power of large meat packers and milk distributors would be matched by the market power of a large selling organization of livestock producers and dairymen. Similarly, if purchases of fertilizers, feed and oil were pooled, the prices of these products, hitherto named by the seller to the individual farmer, would become subject to negotiation.
The necessary instrument of organization was also available to the farmer in the form of the co-operative. The membership of the co-operative could include any number of farmers and it could be democratically controlled. All in all, the co-operative seemed an ideal device for exercising countervailing power. For a period in the twenties and early thirties there was a widespread belief among American farmers that marketing co-operatives were indeed the answer to their needs. Following the depression of 1921, a remarkable propagandist from California, Aaron Sapiro, pictured for the co-operative member precisely the kind of bargaining position enjoyed by the processor or manufacturer. ". . . We have stopped dumping in the State of California and have substituted the merchandising of agricultural products. That means centralized control of these crops so that they move to such markets of the world, and at such times, as the markets can absorb the crops at fair prices." Sapirotype co-operatives, as they came to be called, were formed to market potatoes, tobacco, wheat, fruit and other products. Few survived, as bargaining instruments, for more than a year or two.
As a device for getting economies of larger-scale operations in the handling of farm products or for providing and capitalizing such facilities as elevators, grain terminals, warehouses and creameries, co-operatives have enjoyed a considerable measure of success. For exercising market power they have fatal structural weaknesses. The co-operative is a loose association of individuals. It rarely includes all producers of a product. It cannot control the production of its members and, in practice, it has less than absolute control over their decision to sell. All these powers
over its own production are possessed, as a matter of course, by the corporation. A strong bargaining position requires ability to wait—to hold some or all of the product. The co-operative cannot make the nonmembers wait; they are at liberty to sell when they please and, unlike the members, they have the advantage of selling all they please. In practice, the co-operative cannot fully control even its own members. They are under the constant temptation to break away and sell their full production. This they do, in effect, at the expense of those who stand by the cooperative. These weaknesses destroyed the Sapiro co-operatives.
The farmer's purchasing co-operative is free from the organic weaknesses of the marketing or bargaining co-operative. In the marketing cooperative the non-co-operator, or recusant, gets a premium for his nonconformance. In the buying co-operative he can be denied the patronage dividends which reflect the economies of effective buying and bargaining. In the purchase of feed, chemicals for fertilizers, petroleum products and other farm supplies and insurance these co-operatives have enjoyed major success. As earlier noted, they have come to rank with the mass retailers as instruments for the effective expression of countervailing power. However, they redress the weakness of his position only as a buyer and only for part of his purchases. Their success in nowise compensated for the failure of the marketing co-operative as a bargaining instrument.
The failure of the voluntary co-operative as a device for expressing market power is important, for out of it, by remarkably direct steps, grew the agricultural programs of the thirties. After the farmer had failed to organize market power by himself, it was wholly in the tradition of the development of countervailing power that he should turn to the government for assistance. And it was equally natural that the government should first think of helping the farmer to establish the kind of co-operatives which, by his unaided efforts, he had been unable to build. This was done in the Agricultural Marketing Act of 1929. The Federal Farm Board established under this legislation undertook to sponsor and capitalize a system of national co-operatives. The bargaining powers of the latter were, in turn, to be supplemented by government Stabilization Corporations.