Social and Economic Aspects of Co-Operative Amalgamation: A Case StudyAuthor(s): L. KennedySource: Irish Journal of Agricultural Economics and Rural Sociology, Vol. 6, No. 2 (1976), pp.103-114Published by: TEAGASC-Agriculture and Food Development AuthorityStable URL: http://www.jstor.org/stable/25556421 .
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SOCIAL AND ECONOMIC ASPECTS OF CO-OPERATIVE AMALGAMATION: A CASE STUDY
L. Kennedy1
Department of Economics and Related Studies, University of York
ABSTRACT
Farmers' perceptions of the impact of co-operative amalgamation are examined in this case study. In terms of the distribution of economic benefits, large farmers are seen to benefit disproportionately.
Only a small minority of farmers, however, felt that they were worse off in an absolute sense as a
result of the amalgamation, while the bulk of farmers felt their economic position was either
unchanged or had improved. Over the study area as a whole a considerable number of farmers noted a loss in the spheres of local prestige, control, and social interaction. Significantly though, only a tiny
minority of farmers was prepared to accept lower incomes to regain independent status for their old
co-operative societies. The extension of farm services and lowered operating costs emerged as the two most frequently
cited advantages of amalgamation.
INTRODUCTION
Most of the major reports on Irish agriculture have emphasised the role of the co-operative movement in rural and agricultural development. Thus in 'Agriculture in the Second
Programme for Economic Expansion' it is stated that "the Government regard the re
organisation and development of the co-operative system ... as of paramount importance
in furthering their policies of rural development" (1, p. 190). Over the last two decades
particular attention has focused on the problem of rationalising the co-operative sector,
especially the dairy processing area. The Dairy Products Industry (D.P.I.) Survey Team
Report, 1963 (2), the Knapp Report, January, 1964 (3), the Second (4) and Third (5) Programmes for Economic Expansion, the Cook-Sprague Report (6) in 1968 and various I.A.O.S. publications share a common theme. This is the need to rationalize the dairy
processing industry through amalgamation of co-operative dairy societies. In 1963 the
1 Present address: Department of Economic and Social HisU ry, The Queen's University of Belfast.
103
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104 IR. J. AGRIC. ECON. RUR. SOCIOL., VOL. 6, NO. 2,1976
D.P.I. Survey Team maintained that the dairy industry was supporting too many weak,
inefficient co-operative creameries and recommended that a programme should be
worked out to consolidate them into about 30 strong, well-diversified organisations. Just
under a decade later the I.A.O.S. had reduced the estimated optimum figure still further,
proposing that nine major groups service the country (7). Restructuring of the dairy
processing industry tended to lag behind officially prescribed rates of change, but in the
last few years the process of consolidation (including the absorption of state owned creameries into the co-operative sector) has accelerated. Given this dynamic context,
information on the impact of amalgamation in economic and social terms as perceived by
farmers, seems to be especially desirable.
METHODOLOGY
The study area chosen was that serviced by South Tipperary Farmers (S.T.F.) Co-operative
Ltd. This society was formed in 1967 as a result of the amalgamation of seven formerly
independent co-operative societies. Since the fieldwork for the present study was under
taken S.T.F. Co-operative has in turn been absorbed into a larger co-operative grouping, in itself indicative of the pace of change in some dairying areas. Information relevant to
the objectives of this study was collected by interviewing a representative sample of farmers in the South Tipperary area. A formal questionnaire was used, and interviewing
took place towards the end of 1971. The sampling frame used consisted of the lists of milk suppliers to the original seven societies at the time of the merger. This contained
1,277 farmers of whom 292 were drawn in the sample. In all, successful interviews were
arranged with 217 farmers. As has been explained in a separate paper (8) a two-stage stratification procedure was employed to ensure that important sub-groups were
adequately represented in the final sample. As a consequence the raw data had to be
adjusted to allow for these modifications when preparing the various tables in this paper.
To help comprehend farmers' estimation of the amalgamation impact it is useful to
outline changes in the study area which were directly attributable to the amalgamation
process. The anticipated pattern of events was set out in a special booklet entitled
"Amalgamation Proposals" (9). The primary objective underlying the new proposals was
to improve the living standards of farmers in the area by using the new co-operative to
reduce production costs on the farm and maximise returns for farm products handled by
the co-operative. It was recommended that the number of milk intake points be gradually
reduced to four by 1970. It was further proposed that the remaining premises be used as
collecting depots, from which milk would be collected and transported to one of the four centres and the cost borne by the amalgamated society. Other proposals included
provision for centralised churning, bulk milk collection, mechanical can washing facilities and an expanded range of farm services. These proposals were found acceptable by the
shareholders of the seven co-operatives involved and as a result South Tipperary Farmers
Co-operative Ltd. was formed (1st January, 1967).
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KENNEDY: CO-OPERATIVE AMALGAMATION 105
Three branch creameries were closed immediately. Churning, which prior to the
amalgamation was carried on at seven centres, was now concentrated in two centres.
Substantial shareholdings were taken in two dairy processing federations. In 1968 two (former) central creameries were closed. Later in that year another branch creamery
was closed.
By 1970 the rationalization programme originally outlined had been completed. In
addition, services available only in some of the original co-operative areas prior to
amalgamation had been extended to all areas. Bulk collection of milk was in operation for the larger size dairy farmers. Milk processing for the group was carried out mainly by the two processing federations referred to previously.
PERCEPTION OF AMALGAMATION IMPACT
In order to form a basis for evaluating the impact of the amalgamation each farmer was
asked to give his estimation of how his old co-operative would have performed if it had remained out of the amalgamation and had continued to function as an independent unit.
It is noteworthy that 17% of farmers felt their old co-operative could now be paying a
higher price for milk in such a situation (see Table 1). This group of farmers was found to
belong, in the main, to those former co-operatives which appeared most viable prior to
amalgamation.
TABLE 1: Estimated ability of the old co-operative to pay milk prices similar to the
amalgamated co-operative
Pay the same Pay more Pay less Don't know N.I./N.A. Total
40.6 17.0 28.1 8.3 6.0 100%
N.I./N.A. = no information/not applicable.
Just over 20% of farmers expressed dissatisfaction with the price of milk paid by their old co-operatives, although only 7.6% expressed outright dissatisfaction with these
co-operatives and their general performance. Apart from dissatisfaction with milk price level, the other main areas of criticism were debts incurred by the old co-operative,
unsatisfactory business dealings and lack of farm services, in that order.1
Valuation of non-economic factors
If the old co-operative was able to pay as much for milk as the amalgamated group, would
a farmer prefer to have the independent unit back again? The response pattern was as
follows:
58.5% - yes; 34.1% - no; 7.4% - didn't know
1The significance of a farmer's relationship with his old co-operative and the type of attitude
developed in relation to amalgamation has been previously demonstrated (8, 10).
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106 IR. 3. AGRIC. ECON. RUR. SOCIOL., VOL. 6, NO. 2,1976
Thus, a majority of farmers favoured the old as opposed to the new structure. This,
however, is a very insensitive measure of farmers' preferences on the issue. To gain some
estimate of the intensity of these preferences, farmers were asked if they were prepared
to accept a lower price for milk to achieve independent status again.2 Only 6.2% were
prepared to take such a cut; these claimed they would be prepared to take from %p to
lp less per gallon. Thus for this latter group of farmers, this is the quantitive value they set on the non-economic factors associated with their old co-operatives. This is the price
tag this minority places on losses of a non-economic nature resulting from the amalgama
tion.
Thus, while few are prepared to suffer a cut in milk price, it is necessary to remember
that 57% believed their old co-operatives, if they had remained independent, could pay as
much as the amalgamated co-operative.
Advantages of the amalgamation
The main advantages associated with the amalgamation, as perceived by farmers, are listed
in Table 2.
TABLE 2: Main advantages of the amalgamation
% of farmers
Farm services 19.8 Milk price 7.0
Lowered costs 16.0 Milk assembly system 8.8
Co-operative viability 5.1 Miscellaneous 2.3 No advantages 41.0
Total 100.00
The most significant feature of this table is the very large group of farmers (41%) who
have indicated that they saw no advantages stemming from amalgamation. This group is
composed of farmers who are unfavourable to the amalgamation, and also farmers who
see neither advantages nor disadvantages in it, and of course farmers who are largely
indifferent to or are incapable of making an assessment of its positive features. Also a
number of farmers remarked that while they could see no advantages as yet, they were
optimistic that once the group was better established definite advantages would ensue.
Improved farm services and lowered costs emerge as the two most important advan
tages associated with amalgamation. The first mainly embraces references to the develop
ment of new or improved farm services by S.T.F. Co-operative; the second contains
assertions of reduced unit operating costs in the amalgamated group, and cheaper farm
supplies due to increased bargaining power and bulk buying. 2 An alternative formulation might have been: what price increase would a farmer be prepared to for
feit to achieve independent status etc. again? The formulation used is a more severe test if one assumes
diminishing marginal utility of income.
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KENNEDY: CO-OPERATIVE AMALGAMATION 107
As regards price of milk and skim, 7% of the farmers felt amalgamation had helped to maintain the existing price levels. Few felt it had produced an increase in prices. Those farmers who saw the new assembly system as the main advantage were almost all farmers
on the bulk milk assembly system. Five per cent of farmers felt the amalgamation was
essential for long-term viability in dairy processing, although they did not identify any
specific advantage since the amalgamation.
Disadvantages of the amalgamation
There was considerably more diversity in the range of disadvantages mentioned by farmers. The distribution of respondents by the main disadvantage mentioned is shown in Table 3.
TABLE 3: Main disadvantages of the amalgamation
% of farmers
Quality milk basis difficulty 5.0 Skim milk situation 9.6 Farm services 4.5 Milk price 5.5
Creamery closures 4.5 Loss of personal contact 9.6 Increased costs 6.4
Staffing 10.5 Business dealings 4.1 Other disadvantages 7.8 No disadvantages 32.5
Total 100.0
The first group of farmers was dissatisfied because it felt it had become more difficult to qualify for the quality milk bonus. This they attributed to the change in the system of milk assembly that occurred in some areas. The second group of farmers was
concerned that no skim milk was returned to them over the winter period. This affected
small pig producers and others relying on skim milk as an animal feed. The next group of farmers felt that farm services were being less efficiently organised
and some of these claimed certain farm services had been phased out. The fourth group felt the price of milk was at a very low level and had not risen as expected. The fifth
group was concerned that there had been a number of closures of creamery premises since
the amalgamation. This also has a bearing on the next group who noted a loss of personal
contact with co-operative staff. In some cases local creamery managers were transferred
to the central offices and farmers who were accustomed to carrying their problems and
complaints to the local manager were now deprived of this service. Also it is probably more difficult for farmers to identify with a greatly enlarged co-operative, which by virtue of its very size excludes the possibility of intimate relationships and reinforces the farmer's sense of remoteness and powerlessness.
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108 IR. J. AGRIC. ECON. RUR. SOCIOL., VOL. 6, NO. 2, 1976
Some farmers (6.4%) reckoned amalgamation had meant increased costs and over
heads. Those who mentioned staffing disadvantages felt that there were either too many workers and management staff, or else that these were overpaid. There appeared to be a
fairly strong feeling that since amalgamation all grades of co-operative staff had received
considerable pay increases, while the farmer's income from milk had remained more or
less static. A few, however, were disturbed by the loss of employment at local creameries.
A small number saw other disadvantages in the amalgamation ? some found business
dealings unsatisfactory; and some others thought that some poor co-operatives had been
incorporated in the amalgamated group, to the detriment of the better co-operatives. This
latter feeling is more extensive than the table indicates, and while difficult to quantify, it should be noted that farmers drew attention to it on quite a number of occasions
although not explicitly in the context of 'disadvantages of the amalgamation'.
By far the largest group in the table is composed of farmers who saw no disadvantages with the amalgamation. About one in every three farmers falls into this group.
Social inequality Following Max Weber (11) some writers have adopted a tripartite classification of social
inequality, distinguishing between its economic ('class'), social ('status') and political ('power') dimensions. An examination of the impact of amalgamation on only one dimen
sion of social inequality ?
the economic ? is undertaken here.
Each farmer was asked to give his impression of the impact the amalgamation had had on his general economic position. Respondents were asked to indicate whether they had
been made better off or worse off.
TABLE 4: Economic impact
Better off Same Worse off Don't know Total
31.8_4L0_1^6_1U6_100%
The proportion who feel they are actually worse off is relatively small while the centre
group ? those who feel they have neither gained nor lost as a result of the amalgamation
? is the single largest group of farmers (Table 4). Of those farmers who believed they were better off as a result of the amalgamation
the three main reasons given for this were confidence and a sense of stability for the
future, the benefits of membership of a large enterprise and, finally, bulk assembly of
milk. Other farmers felt they were worse off because of what they regarded as a low price
paid for milk and reduced efficiency in the operation of farm services.
Spread of the amalgamation impact
Amalgamation may have had a varying impact on different categories of farmers. An
effort was made to discover if there was an awareness of this in the study area, and if so,
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KENNEDY: CO-OPERATIVE AMALGAMATION 109
to identify the categories of farmers generally believed to have benefited dispropor tionately.
30.0% of farmers thought the amalgamation had affected all farmers equally; 62.5% of
farmers felt some farmers had benefited to a greater extent than others; 7.5% of farmers were unable to say.
A breakdown of responses of the middle category indicates the frequency (%) with
which different categories of farmers are believed to have benefited disproportionately.
TABLE 5: The farmer categories believed to have benefited disproportionately
Farmer category % farmers
Small farmers 1.1
Big farmers 41.2
Progressive farmers 3.6
Members of weaker co-operatives prior to amalgamation 7.5
Others 7.6
Don't know _L5
Sub-total 62.5
Not applicable 37.5
_Total 100.0_
The most striking feature of Table 5 is the very high proportion who felt that big fanners have benefited from the amalgamation to a greater extent than others. Indeed,
the frequency with which the big farmer category is cited is more than double that of all other categories put together.
Big farmers are believed to have benefited disproportionately because of (a) their
greater ability to exploit farm services to the full and (b) the introduction of bulk milk
assembly which is only economical for large scale producers. This area of the study indicates a fairly widespread feeling that there has not been an even flow of benefits from the amalgamation. However, no relationship has been shown to exist between farm size
(or dairy herd size) and attitudes to the amalgamation (9). This leads one to the con clusion that although many farmers believe big farmers have benefited disproportionately, yet there is little show of resentment of this on the part of, for instance, small farmers.
Runciman (12) in his study of attitudes to social inequality in England uses the social
psychological concepts "relative deprivation" and "comparative reference group" in
pursuing his study of the relationship between the inequalities in a society and the feel
ings of resentment to which they give rise. It is worth emphasising that relative depriva tion means a sense of deprivation; thus feelings of relative deprivation may bear little relation to the objective situation. The group (or person) with whom the comparison is
being made is known as the comparative reference group. Our findings seem to suggest
that such comparisons between groups within the farming population are not common;
thus, for instance, big farmers do not emerge as a comparative reference group for smaller
farmers. It is noteworthy that just over 10% of farmers expressed their dissatisfaction
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110 IR. J. AGRIC. ECON. RUR. SOCIOL., VOL. 6, NO. 2,1976
with the level of remuneration of co-operative staff and/or the numbers employed, believing the level to be too high in both instances. Future studies on inequality in rural Ireland might explore further the hypothesis that industrial workers (especially those in
agri-business enterprises) constitute comparative reference groups for farmers
experiencing relative deprivation.
These tentative findings are lent some support by Stinchcombe who, using data from a
number of different countries, explores the relationship between different types of
agricultural enterprise and types of social stratification (13). For rural economies charac terised by family small-holding, as in Ireland, he finds that rural communities are highly unified and not usually organised in opposition to more prosperous groups within the rural community itself.
Impact of the amalgamation on social variables
For particular groups of farmers the amalgamation generated, over time, a flow of bene
fits and disbeneflts. In addition to the effect on the economic position of farmers, the
impact of these flows on such variables as prestige, power and social intercourse was
examined. Such considerations are relevant to many of the debates concerning rural
Ireland. The disappearance of local community symbols and meeting places is a familiar feature of the changing social landscape. The phasing out of small creameries, small
schools, isolated police barracks, small farms and shops appear as related phenomena.
Typically, economic development dictates a pattern of consolidation of small units and
greater specialisation of functions. In the course of such adjustment social costs as well as
benefits are almost inevitably incurred. These merit attention, particularly in the context
of a rural economy where the economic and social spheres are less rigidly differentiated.
In considering the social implications of the amalgamation attention was focused on three main areas: the effect on local pride, local power and control, and social inter
course.
TABLE 6: Considerations of local pride (L.P.)
LossofL.P. Increase in L.P. Unchanged Don't know
40.5 5.4 47.3 6.8
While the biggest category is composed of farmers who feel local pride has not been affected by the amalgamation, nevertheless a very considerable proportion of farmers
feel there has been some loss. (Table 6). However, a farmer may feel there has been a loss of local pride and yet consider this
quite unimportant. We therefore attempted to gain a more precise impression by further
TABLE 7: Importance of local pride considerations
Very important Fairly important Unimportant Sub-total
13.4 12.9 14.2 40.5%
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KENNEDY: CO-OPERATIVE AMALGAMATION 111
analysing the group who felt there had been a loss of local pride. How important a
consideration was local pride to them? Table 7 shows that roughly one out of every four
farmers from the total population felt that there had been a loss of local pride and that
this was, at the very least, fairly important. It may be recalled that Arensberg in an early study in the West of Ireland, noted the strong local pride associated with groups of
townslands, parishes and larger geographical entities and how this often expressed itself in terms of partisanship and local rivalry (14).
TABLE 8: Considerations of power and local control (L.C.)
No loss of L.C. Loss of L.C. Don't know Total
39.4 57.5 3.1 100%
TABLE 9: Importance of power and local control considerations
Very important Fairly important Unimportant Sub-total
21.3 25.5 10.7 57.5%
The majority of farmers believed that there was a loss of power and local control
because of the amalgamation (Table 8). Furthermore the great majority of those who
perceived this loss believed power and control considerations to be important (Table 9). Problems of power and control are also related to the problem of depersonalisation in a
large unit, previously discussed under the heading of amalgamation disadvantages.
Legally, farmer-shareholders own and control the co-operative enterprise. In a unit of any
size power must be delegated to farmer-representatives. In an amalgamated grouping the
process of delegation must be taken at least one stage further. Research by Warner
suggests that there is an inverse relationship between size of organisation and membership
participation in it (15). Asked if they felt amalgamation and the closing down of branch creameries was detri
mental to social life in the countryside, farmers responded as follows:?
No-48.4% Yes-40.1%
11.5% of farmers were unable to say
Thus it appears that a very substantial proportion of farmers (40%) felt the amalgama tion had adversely affected social life. While this gives a measure of the frequency with
which this affect was perceived, some measure of its intensity would be necessary to
evaluate it fully. One can, however, report a fairly widespread consciousness that social
life had suffered as a result of amalgamation.
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112 IR. J. AGRIC. ECON. RUR. SOCIOL., VOL. 6, NO. 2,1976
Effect of the amalgamation on farming systems The extent to which the amalgamation had a direct effect on the farming system used by individual farmers is now considered.
80.5% of farmers perceived no effects.
19.5% of farmers noted direct effects The pattern of this effect, for the latter group, is examined in Table 10. Expansion
of cow numbers was the single strongest effect on farming systems resulting from the
amalgamation.
TABLE 10: Direct effects on farming systems
Increased Decreased Increased Bulk milk no. of cows no. of cows no. of pigs assembly Others_Sub-total
12.2 2.8 1.0 1.0 2.5 19.5%
Business dealings with the amalgamated co-operative
Farmers were grouped into three categories according to their experience as regards
business dealings with the amalgamated co-operative: (a) those who found such dealings very satisfactory, (b) those who found dealings satisfactory, (c) those who found dealings unsatisfactory. The importance of the association between experience of business dealings
and farmers' attitudes has been referred to earlier.
TABLE 11: Business dealings with the amalgamated co-operative
Very satisfactory Satisfactory Unsatisfactory Total
25^9 64^5 9^6 100%
The main criticism regarding business dealings was that of errors in the accounts
(A/C) received by farmers. Others criticised the cost of farm services, while a smaller number objected to credit charges imposed by the co-operative. Before examining Table 12 it should be borne in mind that criticisms of business dealings were sought only from those who found business dealings unsatisfactory. It is quite possible that other farmers
who found business dealings in general satisfactory might have had specific criticisms to make.
TABLE 12: Unsatisfactory business dealings
% of farmers
Credit charges 0.9
A/C Errors 3.4
Faulty milk weights 0.5
Faulty milk-fat tests 0.5
Services 2.4 Other 1.9
Sub-total 9.6 Not applicable 90.4
Total 100.0
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KENNEDY: CO-OPERATIVE AMALGAMATION 113
FUTURE PROSPECTS
TABLE 13: Farmers' estimation of the future prospects of S.T.F. co-operative
Good Fair Poor Unpredictable Don't know Total
49.8 28.7 10.6 8.1 2.8 100%
TABLE 14: Farmers' estimation of their own future in farming
Good Fair Poor Unpredictable Indifferent Don't know Total
43.9 29.2 14.3 8.6 2.1 1.9 100%
Most fanners were optimistic about their co-operative's future (Table 13) and also about
their own future prospects in farming (Table 14). An examination of the responses of individual farmers indicates that the two are interrelated to some extent, which is hardly surprising as the co-operative may be viewed in some respects as an extension of the farm
activity. It is noteworthy that at least one in every seven farmers saw his own future
prospects in farming as distinctly unfavourable.
CONCLUSION
The extension of farm services and lowered operating costs emerged as the two most
frequently cited advantages of the amalgamation. A broad range of disadvantages was
cited; no one disadvantage tended to predominate. While 41% of farmers saw no
advantage in the amalgamation, roughly 32% saw no disadvantages.
Just under one-third of the farmers felt their general economic position had been
improved as a result of the amalgamation. One in every six farmers felt his position had
worsened while the bulk of farmers believed their position to be largely unchanged. A considerable proportion of farmers felt there had been a general loss in the social
spheres of local prestige, local power and control, and social intercourse. However, it is
worth recalling here that only 6.2% were prepared to take a lower price for milk to
achieve independent status for their old co-operative again. The vast majority of farmers
were confident about the future of the amalgamated co-operative while a slightly smaller
number were confident about their own future in farming.
REFERENCES
1. Agriculture in the Second Programme for Economic Expansion. Stationery Office, Dublin, pp. 190, 1964.
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114 IR. J. AGRIC. ECON. RUR. SOCIOL., VOL. 6, NO. 2,1976
2. Report of the Survey Team on the Dairy Products Industry. Stationery Office, Dublin, 61-70pp., 1963.
3. Knapp, J. K. 'An appraisement of agricultural co-operation in Ireland.' Stationery Office, Dublin, 1964.
4. Second Programme for Economic Expansion. Part II. Stationery Office, Dublin, 1964. 5. Third Programme: Economic and Social Development 1969-1972. Stationery Office, Dublin,
1969. 6. Cook, L. H. and Sprague, G. W., Irish dairy industry organisation.* Stationery Office, Dublin,
1969. 7. Irish Agricultural Organisation Society, 'Proposals for creamery rationalisation.* Dublin, 1972. 8. Kennedy, LM Lucey, D. and Raftery, T. F., 'Factors influencing farmers* attitudes to co-operative
amalgamation in an Irish dairying area\/r. /. agric. Econ. rur. Sociol 5: 253,1974-75. 9. Report of the Committees of the Eight Co-operatives and the LA.O.S. (Amalgamation Proposals),
1966. 10. Frawiey, J., 'Social aspects of creamery rationalisation'. Paper presented to the Society of Dairy
Technology, Southern Ireland Section, Oct. 1973. 11. Gerth, H. H. and Wright, C. W. (eds.), 'Max Weber: essays in sociology.' Routledge & Kegan Paul,
London, 1967. 12. Runciman, W. G., 'Relative deprivation and social justice: a study of attitudes to social inequality
in 20th century England.' Pelican, 1972. 13. Stinchcombe, A. L., 'Agricultural enterprise and rural class relations', Am. J. Sociol. 67: 165,
1961. 14. Arensberg, C. M., 'The Irish Countryman', New York, 1950. 15. Warner, W. K. and Hilander, J. S., The relationship between size of organisation and membership
participation', Rur. Sociol. 29: 30,1964.
Received November 1976
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