68 IOWA DEPARTMENT OF AGRICULTURE. 



condition of 125 companies now doing business in Iowa, 100 of them 

 having been organized within the past two years. 



Among otlier things they learned that if they were to succeed they 

 must be loyal to their organizations as individuals; that they must con- 

 duct their business on business principles, that in order to preserve 

 their organization, and, the consequent benefits, there were certain meas- 

 ures they must adopt, such as limiting the number of shares held by one 

 person, confining the ownership of stock as far as possible to prac- 

 tical farmers, voting as members and not as owner^ of stock, and the pro- 

 tection clause commonly called the penalty clause by the enemies of co-op- 

 eration. 



This clause provides that a member, in consideration of having an 

 open market, unhampered by pools or price arrangements, where his 

 grain may be handled at the minimum of cost, shall guarantee the 

 maintenance of tne institution by paj'^ing into its treasury a fraction of 

 a cent for each bushel sold to a competitor. 



In the organization of a co-operative company the probable amount of 

 grain to be sold by the members is the first thing considered, and is the 

 only basis on which they may figure for the maintenance of the eleva- 

 tor which is proposed to do the work and the inevitable expense con- 

 nected with doing the proposed work; it would then appear that the mem- 

 bers who took part in the organization should be held responsible for 

 its success on the same basis that they are figured as members. 



So far removed is this plan from being in restraint of trade, that it 

 is exactly the opposite in effect, it guarantees to the member a free and 

 open market where his grain shall be handled at the minimum of cost and 

 performs the same service for the man, who like a sponge, is ready to 

 soak up everything good, but who is always unwilling to become 

 responsible. 



It would seem, in the light of recent investigations, and knowledge 

 gained from them, unnecessary to attempt to explain the necessity of thi3 

 clause. It must be patent to all that there was railway discrimination, 

 special privileges enjoyed by certain interests, calculated to drive all 

 independent shippers out of business, or into the ranks of the combine. 



In speaking of the independent shippers, I speak from actual experi- 

 ence. That I refused to surrender, or that I was driven out of busi- 

 ness is of little consequence in dealing with the present as affecting the 

 vast interests of Iowa agricultlre. 



In taking up the fight that the few independent dealers had waged 

 and lost in the interests of fair play to the producer, the co-operatives 

 found that they were as greatly handicapped as the independent; that 

 branch of the combine extending into the local markets, masquerading 

 under the cloak of a trade organization, attempted a system of boycotting 

 which at one time threatened the co-operative companies with destruction. 

 Failing in this they did not hesitate to increase their margins at points 

 where it was possible and use it to fight the co-operative companies. 



To meet this kind of opposition the protection clause came into gen- 

 eral use. That it has been effective need not be asserted by me; ask the 

 representatives of the grain trust what its effect is. 



