A SURVEY OF TYPICAL COOPERATIVE STORES. 29 



sion of credit, too great overhead expense, overexpansion, failure to 

 provide a surplus, no allowance for depreciation, inefficient business 

 practice and accounting methods, lack of proper auditing, and failure 

 to secure the support of wholesale houses because of scattered buying. 



(3) Unfavorable environment. — Where a cooperative association 

 has been thrust into a community which is naturally divided against 

 itself through racial prejudice, interdenominational strife, excessive 

 individualism, or where there is insufficient business to pay the ex- 

 penses of a store, there can be little hope of success for the associa- 

 tion. 



(4) Lack of prober legal safeguards. — One cause of the failure 

 of many different types of cooperative associations is the lack of 

 proper legislation. Some of the stores organized in the early days 

 under corporation laws have had their stock centered in the hands 

 of a small body of members who have controlled the association in 

 their own interests, and have distributed among themselves whatever 

 surplus accrued as dividends upon capital stock. This means the 

 entire failure of the association from the cooperative standpoint. 

 On the other hand, cooperative laws have been passed by many States 

 that offer no adequate safeguards in the form of preliminary inves- 

 tigation and subsequent inspection. On account of the semipublic 

 nature of the cooperative business, it is believed that both of these 

 safegaiards are essential to success. 



