The formation of cooperatives doesn’t by itself eliminate competition

More people are becoming interested in cooperative enterprises as an alternative to the capitalist top-down corporation. In reading about and discussing the topic, I have found an interesting pattern: An assumption that competition will continue but that it will become benign.

It would be unrealistic to forecast that a cooperative economy would be without competition. But competition in what, and in what form? When we think of competition, often the visualization is of two or more companies competing to make a better consumer product. That is visible — the company that produces a shoddy product when another company produces a quality product puts itself at risk of going out of business (at least in theory).

Less visible, because it is abstract unless it is your job that is shipped overseas or eliminated, are the marco-economic results of competition. Among these are increasing downward pressure on wages; the creation of rust belts as industrialists move production to locations with ever cheaper wages; the relentless pressure (most often applied by the financial industry) to reduce costs, often by workforce reductions; the drive to produce ever higher profits, regardless of human cost; and environmental destruction. All these developments arise not because of this or that greedy banker or the personality of this or that industrialist. They arise because they are the inevitable product of market forces.

Market forces are not a “natural” phenomenon, they are the aggregate interests of the most powerful capitalists. The concentration of production in most industries into a handful of giant corporations — an oligopoly — is also the result of capitalist competition. Expand or die is the inexorable law a capitalist lives by: If you don’t get bigger and stronger, your competitor will and put you out of business. As the winners from this ruthless competition grow bigger and more powerful, they have more weight to throw around the political arena, and can (and do) exert decisive influence over the political process. It is in their interest for them to do so — and we shouldn’t expect them to act otherwise.

I have often been struck by a belief I often encounter that presumes that we need only convert business enterprises into cooperatives and capitalist competition will cease. Underlying that assumption, in my opinion, is locating the cause of greed, injustice, inequality and other social ills in the authoritarian, hierarchical structure of the capitalist enterprise. That structure is surely a significant contributing factor. But that shouldn’t obscure the cut-throat nature of unfettered, market-driven competition: The relentless pressure to increase profits, maximize market shares and eliminate competition — on pain of enterprise death for those who don’t do this sufficiently — makes unethical or anti-social business decisions inevitable.

It is not only the direct competition that compels such behavior, it is also the financial industry: Billionaire speculators, institutional investors, hedge funds, investment banks and other financiers are ever ready to apply the whip if profits falter — and can move gigantic sums of money through stock, bond and foreign-exchange markets at the click of a button to punish those who don’t deliver. During periods of economic upswing, wages may rise for a time as unemployment falls. But wage increases eventually eat into profits; falling profits are intolerable and will be punished by financiers. Cuts to wages, whether in givebacks or in the form of layoffs, and the destruction of productive capacity ensues.

Wages — and thus the human beings who work for the wages — are commodities in capitalism, or any system in which distribution is monopolized or largely controlled by capitalist-style market relations. If all enterprises were converted into cooperatives, collectively owned and managed by the full workforce, but capitalist market relations were left intact, the same competitive pressures would exist. There would be much less inequality because, presumably, all workers within a given enterprise would receive the same wage or would have small differentials, and the workers would be sharing in the profits they create rather than have them confiscated by top executives and financiers.

But their own wages would remain a commodity if everything else is a commodity priced by markets. The collective workers would face market pressure to reduce their own wages in order to compete better against their competitors. Some enterprises would become much bigger than others; smaller enterprises would be compelled to sell themselves to larger competitors, consolidating production until an oligarchal situation arose. Some industries would be much bigger than others. As market competition intensified, survival would require more ruthless behavior. In somewhat different form and with somewhat less intensity, the instability and social ills of capitalism would be reproduced.

A cooperative economy, therefore, has to not only be based on enterprises run on cooperative lines, but the cooperatives must cooperate with each other as well. An economy would have to be based on democratic control, with commodity prices negotiated in fair and open talks, and with a rational system of distribution that would be supple enough to respond to changes in consumer demand while not over-producing.

Part of the waste of capitalist production lies in its chaotic, unplanned nature: Production is increased until too much product is produced that can’t be sold; productive capacity is then destroyed (such as shuttering factories) until a shortage arises and a new cycle begins. This is done through uncoordinated, individual decisions based on guesswork. The pressure of competition compels decision-making to be done in secrecy and, additionally, no mechanism exists to judge composite demand. The result is alternating booms and busts, with accompanying human costs.

Democratic planning, from the bottom up, would be necessary to determine need and enable proper distribution. Ideally, there would be many enterprises for most products. Enterprises might work best as small or midsized production units. Here is where competition would still exist and provide a positive, rather than a destructive, role. If there are dozens of cooperatives producing shoes, the consumer would have many choices, and the enterprise that made a poor-quality shoe would have to do better — a producer that makes a product that people don’t want to buy won’t stay in business.

If one cooperative makes an innovation that gives it a higher-quality product, then other cooperatives would naturally copy the innovation. If democratic planning, to throw out a hypothetical example, determines that 1.2 million shoes need to be made because 1.1 million shoes were produced last year and the supply fell a bit short, and there are several shoe makers who make a quality shoe, that increased target can be distributed among them. If limits to capacity are being approached, one or more cooperatives can go to the local community-run and -controlled bank for a loan to expand capacity by making a case that more shoes should be made.

Production in unfettered markets will become production for private profit, not social need, even if that private profit is collective rather than concentrated at the top. Production needs to be oriented toward human need — that is the other half of the equation of cooperative enterprises.

Chicago pushes back against the war on teachers — and neoliberalism

The Chicago teachers returning to work today earned a victory — not for themselves, but for two important ideas. The first is that dignity and security are not unreasonable for those of us who have to go to work every day. The second is that the job of schools is to build the citizens of tomorrow, not line the pockets of corporate executives and investors.

We can’t understand the reasons behind the “war on teachers” without examining both of these ideas.

An additional message from the Chicago Public Schools teachers’ strike is that democracy and community involvement are indispensable. At almost every demonstration the chant “the people united will never be defeated” is heard, and here we have an example where a significant majority at least were united. The corporate executives salivating over their potential profits, the funders of the charter-school movement seeking more takeovers and, most of all, the willful mayor who expected to steamroll over the teachers each had their agenda stalled.

Not that those powerful people were defeated, nor that the teachers won a total victory. The new contract is a negotiated settlement, with both sides getting something. That is what a “negotiation” is — a compromise by two parties. A “negotiation” is not a dictation imposed by the more powerful party, which seems to be a point of confusion for Chicago Mayor Rahm Emanuel. But the very concept of democracy seems to be not well understood by Mayor Emanuel.

Undoubtedly, there was much disappointment on the part of parents that teachers did not call off their strike and return to work on September 17, as was widely anticipated. There was considerable disappointment on the part of the teachers. The principal of democracy was deemed too important to dispense with, and the Chicago teachers’ union deserves praise on this point. The union delegates entrusted with ending the strike believed they should actually read the proposed contract before voting, and that they should discuss the contract with the rank-and-file teachers who will have to live with it. Quelle horreur!

A Chicago teacher, Rita Stephanie, who has contributed daily strike updates to the Kasama Project web site, stressed the democracy of the union:

“In a televised news conference at 6:05 p.m. [union leader Karen] Lewis said that the House of Delegates wanted to exercise their right to review the contract. She said that the union is a democratic organization and that she supported the right of members to review the language of the contract. Schools will not open Monday and members have overwhelmingly decided to continue the strike. When questioned by reporters she said that a key issue was TRUST. Union members do not trust the school board or the mayor to have their interests at heart. This would be an understatement! Union delegates say that their strength lies in the strike.”

The teachers’ union would not have been able to exercise this democratic process if they had not worked with the community ahead of time to explain the stakes, and to prepare parents for the possibility that they would be forced to go on strike. When the inevitable attacks came in the predictable form — “the teachers are greedy” “the teachers only care about getting more of your tax money” — they did not have the usual impact. Mayor Emanuel had clearly expected the community to be on his side; instead the people have been with the teachers. The mayor’s response? Stamp his feet, attack, go to court to force an end to the strike. His reaction says much about the mayor and his complete adoption of corporate ideology. When you give an order, it is to be obeyed!

It wasn’t obeyed — schools are not corporations. Professional educators believe they should have a hand in shaping the education system. Imagine that. Teachers just might know something about education that the hedge-fund managers running television commercials in Chicago don’t. What if people in other professions start getting the idea that they, too, should have a hand in decision-making in the workplace?

Let’s back up here a moment. What do hedge-fund managers have to do with schools? Two hedge-fund managers (who have way more money than the teachers, or you, but likely pay a lower tax rate) run an outfit called “Education Reform Now.” This group, an advocate for charter schools, paid for a series of automated telephone calls to parents during the three-day period in June when the teachers were voting to authorize a strike, and for television commercials attacking the teachers.

Charter schools are the key here. An increasingly stressed component of the neoliberal agenda is privatization of public schools. Public schools are shuttered, and replaced by private charter schools. Sometimes the charter schools are given part of the facilities of a still-existing public school, which is given second-class treatment in its own building. Unionized teachers are fired, and nonunion teachers paid much less are hired in the charter schools. The charter schools are given money diverted from the public schools but without the accountability or requirement to follow existing contracts. Some of the money goes to pay huge salaries to the executives of the charter-school companies and for profits.

The movement for charter schools is not a movement for reforming education, as promoters claim, but rather is naked union-busting. It is a bold attempt to force down wages, parallel with the decline of wages in the private sector.

The hedge-fund managers attacking Chicago teachers used the standard neoliberal line of attack: Those people have something you don’t! That’s unfair! Let’s take it away from them! Chicago teachers are mostly African-American and mostly women. Perhaps Mayor Emanuel and his millionaire backers thought they would be likely to fold. Surely the mayor and his backers, believing their own propaganda, believed they would be easy targets. Down to the similarity of the tactics, their agenda is a straight continuation of the Wisconsin Governor Scott Walker’s offensive to take away collective-bargaining rights from government workers and to demonize them.

If some workers earn a good wage and can look forward to a reasonable pension, shouldn’t the question to be asked be “Why shouldn’t I have that, too?” Shouldn’t the answer be to organize to gain it rather than seek to take something away from somebody else?

The charter-school movement has its eyes set on many cities other than Chicago. In New York, where a billionaire from the financial industry stepped directly into the mayor’s office thanks to his lavish spending, charter schools are heavily promoted. These are promoted as alternatives that spend less and get better results, but that is not so.

Brooke Parker, writing in the Brooklyn community newspaper WG, reports:

“While charter schools receive slightly less per pupil from the city than public schools, the city’s Independent Budget Office concluded that when you factor in that they don’t pay for their use of space, utilities, janitorial services, or school safety agents, charter schools generally spend over $700 more per pupil in public funds each year, and that’s not including the substantial private money they receive. And all those public dollars are spent while charter schools, in general, don’t perform any better than public schools. So much for the idea that charter schools are less wasteful.”

Kicking out experienced teachers and replacing them with freshly minted teachers also doesn’t seem the best strategy for improving classroom performance. But often this is what charter schools do — because they can pay new teachers less than experienced teachers. This is one of the “innovations” adopted from the private sector.

Three sets of billionaires are the primary forces behind charter schools: Microsoft founder Bill Gates, businessman Eli Broad and Wal-Mart heirs the Walton family. Gates become fabulously wealthy through exploiting something he had no hand in creating, the computer, which took off thanks to the government invention of the Internet. Broad first became rich building suburban houses, taking advantage of the many government subsidies that enabled the suburbs. The Waltons benefit from Wal-Mart’s leading role in forcing manufacturers to re-locate to China to meet the company’s standards for low costs.

A Dissent article by Joanne Barkan explained who funds the charter-school movement, then exploded the myth that they perform better:

“Stanford University’s 2009 study of charter schools—the most comprehensive ever done—concluded that 83 percent of them perform either worse or no better than traditional public schools; a 2010 Vanderbilt University study showed definitively that merit pay for teachers does not produce higher test scores for students; a National Research Council report confirmed multiple studies that show standardized test scores do not measure student learning adequately. Gates and Broad helped to shape and fund two of the nation’s most extensive and aggressive school reform programs—in Chicago and New York City—but neither has produced credible improvement in student performance after years of experimentation.”

The rate of poverty, as numerous studies have shown, is the leading indicator of student performance. Gaps in social development and cognitive functions begin before children are old enough to go to school. But to confront the vast inequalities of capitalist societies is verboten — better to blame everything on teachers. And so we come to another component of the corporate charter-school agenda: Judging teachers almost exclusively on standardized tests. Doing so deflects attention from underlying social issues (issues that are much bigger than schools by themselves) and enforces a specific agenda in education: To mold children to be proficient in narrow technical skills without the ability to think originally.

A world of corporate drones. Such a world might be fine for corporate elites wishing for a compliant future workforce, but is no benefit to the students themselves. Teachers in Chicago and elsewhere who push back against heavy reliance on test scores are reasonably protecting themselves against a rigid system that takes no account of social and other issues that are intertwined with student performance, but they are also striking a blow for a more complete, more rounded education — one in which the liberal arts and other topics are employed to teach students how to think rather than imposing a narrow education in which pre-selected answers are simply regurgitated.

It is unconscionable to claim that teachers, or teacher unions, don’t care about students or education. Surely there are scattered individuals who should not be in the classroom — but there is no profession or human endeavor without some people who are poor performers. Such people can be weeded out without tarring entire groups. As Rita Stephanie, the Chicago teacher quoted above, wrote:

“The interests are complex and if the problems of education were easily solved it would have been done already. All morning on the picket line we talked about the problems of poverty. The teachers on my picket line wanted to talk about the big problem of poverty. We still need to teach our babies, but society needs to take responsibility for the problem of poverty.”

Chicago teachers were on the front lines this month: Holding the line against the attacks on public education and the need for a holistic approach on the one hand, and holding the line against the attacks on working people and their ability to earn a good wage and pension on the other hand. A strike, particularly one that is defensive as this one, can’t succeed without significant community support. Even then the odds are often long: industrialists, financiers and the governments over which they have decisive influence possess huge power and a willingness to use it.

There is no choice but to struggle, for there is no other route to a better world. Wars on teachers, wars on women or wars on working people promoted by elite interests should no longer be tolerated. Instead, let’s learn from the experience of the Chicago teachers’ strike to build communities. Democracy is hard work but it is better than bowing and scraping.

Cooperation is not only a good idea, it already works in practice

Cooperation is a fundamental human trait. You may find it bizarre to read a post that begins with such a sentence, but sometimes we do have to point out the obvious.

Competition, we are continually lectured, is the primary driving force animating human beings. It is rarely, if ever, put quite so explicitly, but the prevailing ideology does tell us exactly that. Competition is the fuel of economic growth and progress in a system based on never-ending life-and-death fights to gain dominance at pain of going out of business — so we are told. Competition, conveniently, can be won by only a few heroic figures, who must be given control over other peoples’ lives and rewarded with stratospheric pay.

We lowly employees, who can not comprehend the divine will of the market (which is governed by an invisible hand that only the chosen few of the business elite can see because they possess the magic glasses that see what is otherwise invisible), must sit in awe and gratitude of our capitalist masters. In fact, we should turn over the workings of our entire government to them, and be grateful for their selfless attitude in leaving the business world behind so that they can change the laws to benefit the businesses to which they will return.

Yes, I am going to commit sacrilege here. The world of the preceding two paragraphs, despite their continual propagation, does not have to be so. Places where they aren’t so already exist. Human beings can cooperate with one another (and routinely do — how would a product or service exist if employees did not work together?). The following is by no means a comprehensive list of successful cooperative enterprises, but represent building blocks toward a different way of organization.

Cooperative enterprises, in which all employees share in all the decision-making and manage themselves, are not pie in the sky. They already exist. Cooperatives are distinguished by higher pay than received by employees in traditional businesses, and studies have shown greater levels of job satisfaction — neither is a surprise when large sums of money are not funneled upward and workers have control and decision-making power over their jobs.

The recovered factories of Argentina

Practical experience in Argentina, where cooperatives have existed in a variety of industries since 2001, has provided a demonstration of worker-run enterprises forging strong links with their communities, with mutual benefit to the enterprise and the community that supports the enterprise.*

Solidarity and community instincts have not disappeared under the stress of competition from the capitalism surrounding Argentine cooperatives. A high level of idealism was necessary to initiate the process and in turn the experience has raised consciousness to new levels. After an upsurge in new occupations in 2009 (the latest year for which I can find a reliable figure), the Argentine movement of worker recovery of factories encompassed about 250 enterprises with more than 13,000 workers. The factory takeovers came in the wake of economic collapse a decade ago.

Néstor Kirchner, upon taking office as president early in 2002, suspended Argentina’s foreign-debt payments before agreeing to pay only 30 percent of the crippling debt, an unusual example of a country standing up to the capitalist world’s multi-national financial institutions. But Kirchner and his wife and successor as president, Cristina Fernández, did almost nothing internally to disturb the workings of capitalism — Argentina’s worker-run factories have contended with hostility from domestic political authorities and from corporate power inside and outside the country.

Most of the cooperatives formed in the worker-run factories began with similar stories — owners failing to pay employees, owners stripping the enterprises of assets, owners shutting down plants with no notice and of police using force to expel workers who had occupied plants for the purpose of getting some of the back pay owed to them after production was halted. The cooperatives were formed when workers maintaining their occupations realized that their factory owner did not intend to restart production, and decided to restart production themselves. The employees doing so first had to overcome their own doubts about themselves, but were able to draw on the experience of those who went first and created national organizations to represent the cooperatives and enable coordination among them.

The president of the national coordinating body National Movement of Reclaimed Companies, Eduardo Murúa, explained this process in an interview published in the book Sin Patrón:

“Since the restoration of democracy [after the 1976-1983 military dictatorship], all the laws that have been passed are against workers’ rights. The laws, enacted first by the dictatorship and then by the formal democracy, served to consolidate a global economic model organized according to the [existing capitalist] international division of labor. The changes to the bankruptcy law, for example, had left us without the possibility of severance pay. The reformed law also requires the judge to liquidate a bankrupt company’s assets in 120 days. The only way to reclaim the company is to occupy it and show, first the judge, and then the political class, that we’re not going to leave the factory. … Certainly, if there weren’t so many doubts and fears among the entire working class, there would be many more reclaimed factories. Because of these uncertainties, this process only works in places where there is some level of organization and capable leadership.” [pages 214-215]

The largest of these reclaimed factories is the Zanón factory producing ceramic tiles, which is now known as FaSinPat, a contraction of the Spanish-language words meaning “Factory Without a Boss.” The process started when the original owner, Luis Zanón, stopped paying his employees, who went on strike in response. Zanón received loans from the provincial government to pay back wages, but pocketed the money instead. Finally, the employees went back in, occupied the silent factory, sought and received community support, and decided to restart production themselves in March 2002.

Despite legal obstacles and police harassment, the collective works. In the first four years of worker self-management, the number of employees increased from 300 to 470, wages and factory output increased, and without the speedups and insensitivity to safety imposed by bosses, accident rates were reduced 90 percent. New workers are not hired hands, but become part of the collective. The collective allies itself with the struggle of local Indigenous peoples, who have donated clay from their lands to the factory. The collective also donates tiles to community centers and hospitals and, in return, the nurses’ union donates the services of a nurse during each shift.

The path of the FaSinPat collective was not an easy one — the workers had to physically defend their occupation, with community assistance, more than once and they had to wait eight years before the provincial government passed a law granting the collective legal control of the factory in August 2009. The government also paid off part of the debt incurred by Luis Zanón — much of it owed to the World Bank, which gave a loan of 20 million dollars to Zanón for the construction of the plant, a loan he never paid back. Zanón’s creditors had pushed for the eviction of the collective and foreclosure of the plant during the months leading up to the legislative vote.

The cooperatives operate in a myriad of Argentine industries, including “white collar” businesses. One example is a speciality newspaper covering economic and judicial issues in Córdoba. The newspaper, Comercio y Justcia, was sold by its long-time family owners to a conglomerate during the 1990s wave of corporate consolidation of Argentine media. The new corporate owners hired managers at enormous salaries, stopped paying employee salaries and staged a fake robbery that emptied the office of most of its equipment. The workers brought in their own computers so the newspaper could continue to publish, then went on strike when the new owners failed to pay them for five months.

Finally, the workers went back in to restart the newspaper themselves, making it a going concern after a great struggle. In contrast to other media outlets cutting staff and quality, the Comercio y Justcia collective maintained the size of its staff and its quality, more than doubling circulation in its first year.

In almost all of the Argentine cooperatives everybody earns the same amount, and none hires outside managers — the cooperatives are governed by assemblies of the entire workforce with their decisions carried out by managers who are elected from their own ranks and who serve limited, specified terms. In a separate interview in Sin Patrón, one of the Comercio y Justcia collective members said of the new way of working:

“Inside, we have a setup that goes against the logic of capitalism. A humanized work régime, a production arrangement decided by workers themselves. In relationships outside the institution, we can’t detach ourselves from the economy’s logic, but we give ourselves the luxury of doing work for free and doing what we decide as workers. On the inside the revolution has already happened. And looking externally, our biggest contribution is demonstrating that workers can efficiently run an enterprise.” [page 208]

Not all the Argentines who recovered their abandoned companies initially wanted to form cooperatives — there were those who wished for nationalization. There was no interest on the part of the federal or provincial governments to take over factories, so those workforces that initially sought nationalization had no choice but to adopt the cooperative form. Proponents of nationalization argued that cooperatives would be at the mercy of an intact capitalist system and that the cooperatives would eventually be forced to pay the old owner for the recovered factory, an expense they would be unable to meet. Proponents of cooperatives argued that direct worker takeovers would be faster and more practical — the jobs would be saved faster this way, the aim of the takeovers.

The cooperatives — although many successfully bought their factories from the old owners at discounted prices thanks to strong community support and their perseverance through long legal battles and repeated attempts at physical expulsion — remain small islands in a vast sea of capitalism. They are merely tolerated by an Argentine establishment loath to appear too openly to challenge continuing community support, and they represent an example that capitalists everywhere wish to stamp out. These cooperatives must survive in an economic environment that operates on a very different basis than they do and are at the mercy of the powerful forces unleashed by that environment, including boom/bust economic cycles. But they have survived.

Mondragon, the world’s biggest cooperative

Based in the Basque Country of northern Spain, Mondragon has more than 83,000 jobs among its many businesses. Mondragon produces industrial components and consumer goods, provides construction services, and operates a supermarket chain, a bank and a university. These are not small operations — the cooperative reports annual revenue of nearly 15 billion euros.

New workers become full members after a trial period of six to twelve months. All ownership is in the hands of Mondragon workers; each buys one non-transferable share upon become a member and sells it back to the collective upon leaving or retiring. In addition to the regular wage, members also share in the profits, with a dividend being paid to each out of the surplus the members’ business earns. Thirty to seventy percent of the profits are distributed as dividends, depending on the health of a given business. Profits are also distributed among the individual businesses, set aside for investment and to replenish reserves, and distributed into the overall organization’s internal support fund.

Mondragon’s English-language web site explains the basis of its workers’ renumeration, which are on a very different principle than a capitalist corporation:

“Labour is granted full sovereignty in the organisation of the co-operative enterprise, the wealth created is distributed in terms of the labour provided and there is a firm commitment to the creation of new jobs. As far as the wealth generated by the co-operative is concerned, this is distributed among the members in proportion to their labour and not on the basis of their holding in Share Capital. The pay policy of Mondragon’s co-operatives takes its inspiration from principles of Solidarity, which are expressed through sufficient remuneration for labour on the basis of solidarity.”

All decisions on working hours, pay, allowable pay differentials, strategic decisions and management are made by a collective vote off all members. The supreme body of Mondragon is the general assembly, in which all members participate and vote on the basis of “one member, one vote.” The general assembly elects the governing council, which represents and governs the cooperative — and is accountable to the general assembly. The governing council in turn appoints the executive management team. Management does not act independently, however — a separate cooperative congress, consisting of 650 members delegated by individual businesses, is tasked with “establish[ing] the strategic criteria by which the Corporation is to be administered.”

Members are also represented in all internal bodies by the social council, and an elected monitoring commission ensures compliance with accounting principles.

Decision-making power, however, resides with the full membership. According to Mondragon:

“The first and foremost body of participation is the General Assembly, in which rests the full sovereignty of the co-operative. Its most important powers include: appointing and revoking members of the Governing Council and Accounts Auditors by means of a secret vote; examining company management, approving the annual accounts and the distribution of surplus and apportioning of losses; approving the general policies and strategies of the co-operative; approving increases in share capital, the rate of interest to be accrued by capital contributions and the joining fees for new members; modifying the Company Statutes and approving everything implied by a substantial modification in the economic, organisational or functional structure of the co-operative.”

Management comes from within; it is not hired from outside. And there are no layoffs — if a business experiences a slowdown, some of its members are transferred to another business that has need of more workers. Mondragon, however egalitarian its internal structure, does have to compete in a capitalist environment against capitalist enterprises, and so continues to expand into new ventures and to, outside of Spain, buy companies. The latter are bought with an eye toward converting them into cooperatives and making the bought companies’ personnel worker/owners equal to those in established businesses, but has not succeeded in converting all.

Nonetheless, Mondragon’s workers don’t face the continual prospect of being laid off every time there is a slight dip in profits. Georgia Kelly and Shaula Massena, writing in Yes magazine, reported on what happened when one of the Mondragon businesses experienced difficult times:

“The worker/owners and the managers met to review their options. After three days of meetings, the worker/owners agreed that 20 percent of the workforce would leave their jobs for a year, during which they would continue to receive 80 percent of their pay and, if they wished, free training for other work. This group would be chosen by lottery, and if the company was still in trouble a year later, the first group would return to work and a second would take a year off. The result? The solution worked and the company thrives to this day.”

Nobody votes to send their jobs to a low-wage haven in another country.

The “Cleveland model” starts with anchors

The Evergreen Cooperative Initiative — often referred to as the “Cleveland model” — seeks to strengthen a local community from the ground up through the creation of cooperative enterprises anchored to large institutions. Based on the east side of Cleveland, Ohio – a city that has lost half of its population since 1960 — Evergreen creates worker-owned small businesses that provide products and services to established “anchor” institutions in the immediate area (such as hospitals and universities) and other customers.

The Evergreen Cooperative Corporation, which describes itself as a holding company “leading this initiative,” says on its web site:

“The Evergreen Cooperative Initiative is based on a vision of ‘community wealth building.’ Community wealth strategies aim at improving the ability of communities and individuals to increase asset ownership, anchor jobs locally, strengthen the municipal tax base, prevent financial resources from ‘leaking out’ of the area, and ensure local economic stability.

The strategic pillars on which the Initiative is built are: (1) leveraging a portion of the multi-billion dollar annual business expenditures of anchor institutions into the surrounding neighborhoods; (2) establishing a robust network of Evergreen Cooperative enterprises based on community wealth building and ownership models designed to service these institutional needs; (3) building on the growing momentum to create environmentally sustainable energy and green collar jobs (and, concurrently, support area anchor institutions in achieving their own environmental goals to shrink their carbon footprints); (4) linking the entire effort to expanding sectors of the economy (e.g., health care, our aging population, local food, and sustainable energy), many of which are recipients of large-scale public investment; and (5) developing the financing and management capacities that can take this effort to scale (that is, to move beyond a few boutique projects or models to have significant municipal impact).”

Evergreen hopes to create as many as ten more cooperatives in the next three to five years, and ultimately create 5,000 cooperative jobs during the next decade. In a city the size of Cleveland, that is a small number, but it represents a model that others can replicate. Success in this initiative would also demonstrate a different, more humane model than that of modern-day capitalism, with its authoritarian top-down structures and vastly unequal levels of compensation and power.

Successful local businesses such as these would also stabilize neighborhoods that suffer when jobs in manufacturing and older industries are moved away.

Cooperative businesses include Evergreen Laundry, which provides industrial-scale laundry services; Evergreen Energy Solutions, which designs and installs solar panels and provides energy-efficiency services; and Green City Growers Cooperative, which operates a hydroponic food-producing greenhouse covering more than three acres (more than one hectare). Local institutions that contract for services from the cooperatives include Case Western Reserve University, the University Hospitals system and the Cleveland Clinic (a local medical center and research facility).

By using local institutions that will not be moving as anchors, the Cleveland model seeks to create worker-owned enterprises that will also stay in the community:

“Rather than a trickle down strategy, it focuses on economic inclusion and building a local economy from the ground up; rather than offering public subsidy to induce corporations to bring what are often low-wage jobs into the city, the Evergreen strategy is catalyzing new businesses that are owned by their employees; rather than concentrate on workforce training for employment opportunities that are largely unavailable to low-skill and low-income workers, the Evergreen Initiative first creates the jobs, and then recruits and trains local residents to take them.”

The Cleveland Foundation, a local funding organization, provided capital, guaranteed a bank loan and conducted talks with executives of the anchor institutions to start the initiative. Each individual business received a loan that was subsidized with federal tax credits, and low-interest funding was also provided by the U.S. Department of Housing and Urban Development. Using its seed capital, Evergreen provides long-term financing to start cooperative businesses and to provide them with technical support and training.

Similar to Mondragon, on which Evergreen is modeled, employees work a six-month probationary period, then begin to buy into the company through payroll deductions over three years. Evergreen estimates that its worker-owners will build an equity stake of $65,000 after eight years of working at an Evergreen cooperative in a section of Cleveland in which the median annual income is $18,500. When worker-owners retire or leave the company, they relinquish their ownership share and the value of their capital account is returned to them, as their equity stake in the company. Workers also share in the profits generated.

Cooperatives as yet are too small to represent anything other than the smallest crack in the edifice of capitalism. But the bricks of today will be used to build the world of tomorrow. These models could spark similar enterprises or cooperatives on different models — and demonstrate that cooperation can become the standard in a better world.

* This discussion of Argentina is based on an excerpt from my forthcoming book It’s Not Over: Lessons from the Socialist Experiment. Among the sources used here are lavaca collective, Sin Patrón [Haymarket, 2007]; Peter Elliot, “Zanon Workers in Argentina Still Waiting for Security,” posted June 27, 2006, on the Upside Down World web site, upsidedownworld.org; Ginger S. Gentile, “Argentine Lessons,” posted March 8, 2004, on the ZNet web site, http://www.zmag.org; Marie Trigona, “Argentine Factory Wins Legal Battle: FaSinPat Zanon Belongs to the People,” posted August 14, 2009, on the Upside Down World web site

There is no democracy without economic democracy

By Pete Dolack

When we talk about “democracy,” inevitably, it seems, the discussion is about political democracy. Rarely is there discussion about economic democracy. Democracy stops at the entrance to the workplace.

At the workplace, you have no say in what is produced, how it is produced or much of anything beyond what you will be eating for lunch. You surely did not get a vote when the corporation decided to drop a large sum of money on a candidate for public office whose positions you detest even though that donation came out of the profits created by the work you and your co-workers performed. As large businesses become ever larger and accumulate ever more money — and fewer survive as competition causes some of the previous winners in competition to go under or merge — their power grows ever stronger.

That power enables decisive influence over the political process. So we have formal democracy — political office-holders submit to elections and abide by the results. But choosing between two bad candidates, and selecting the one not quite as bad as the other — both completely beholden to corporate interests and unable to compete without truckloads of their money — could qualify as a living democratic system only under the most sterile and narrowly formulaic definition.

Inseparable from a vigorous and real political democracy is economic democracy. Economic democracy is impossible without production being oriented toward human, community and social need rather than private accumulation of capital. And economic democracy, in turn, requires an economy that is based on, and rewards, cooperation rather than competition. An economy in which enterprises are cooperative ventures rather than top-down authoritarian institutions.

Economic democracy means that everybody who contributes to production earns a share of the proceeds — in wages and whatever other form is appropriate — and everybody is entitled to have a say in what is produced, how it is produced and how it is distributed, and that these collective decisions are made in the context of the broader community and in quantities sufficient to meet needs, and that pricing and other decisions are not made outside the community or without input from suppliers, distributors and buyers.

Nobody is entitled to take disproportionately large shares off the top because they are in a power position. Every person who reaches retirement age is entitled to a pension that can be lived on in dignity. Disabled people who are unable to work are treated with dignity and supported with state assistance; disabled people who are able to work can do so. Quality health care, food, shelter and education are human rights. Artistic expression and all other human endeavors are encouraged, and — because nobody will have to work excessive hours except those who freely volunteer for the extra pay — everybody will have sufficient time and rest to pursue their interests and hobbies.

In such a world, there would not be extreme wealth and the power that wealth concentrates — political opinion-making would not be dominated by numerically tiny but dominant capitalists perpetrating their rule. Without extreme wealth, there would be no widespread poverty — large groups of people would not have their living standard driven as low as possible to support the accumulation of a few.

A critical component of the capitalist ideology that is so pervasive is that only a tiny handful of entrepreneurial geniuses can master business, and so must make all decisions and therefore reap massively disproportionate rewards. That is heavily stressed because it contradicts our everyday experience at the workplace.

In the modern capitalist enterprise, most of us complain about management, who so often have no experience in the lower levels and don’t really understand the nuts and bolts of how the business works. Top managers collect salaries tens or hundreds or thousands of times larger than yours while making decisions that make no sense and without consulting the employees who actually do the work and who could provide insight if only they were asked. Most of us have been in at least one job like this; for many of us it might even be the norm.

Why wouldn’t we want to take some responsibility for making decisions? Line workers could develop into managers, or perhaps different people would rotate in management positions for set periods, enabling many people to gain administrative experience. Management could be promoted from within, elected from the ranks of the full workforce by the workforce. The cooperative enterprise’s workforce would retain the right to remove managers who deviate from carrying out decisions made by the collective. (Just as managers today are answerable to owners and boards of directors.) Different enterprises would surely develop different cultures.

With no more rigid hierarchy, no more capitalists to rake in massive amounts of money, a business enterprise can be run on a democratic basis, without internal exploitation of any of its staff. Yet this is not the whole story: In what sort of economic system would such enterprises operate?

In a cooperative model, all strategic enterprise decisions would be made by a vote of all the workers. Meetings to discuss, and vote on, the enterprise’s business would be a part of the regular workweek. All ownership would stay within the workforce — each would own one share and relinquish it upon leaving or retiring. Shares could not be transferred or sold, except to the collective.

Without stratospheric executive pay or financiers getting fat by skimming off a large share of the pie, less profits would be necessary, leading to reduced work hours, higher pay and more left over for investment and taxes paid to the community to support schools and social services.

The internal workings of capitalism inevitably result in the cut-throat competition and inequalities that are so familiar. If collective enterprises, no matter how democratically they are run internally, compete with each other in unfettered markets, market forces would require the collectives to become more “efficient” — they would have to ruthlessly reduce costs (including their own wages) and aggressively expand the market for their products.*

Failure to do so would mean not surviving in competition with the enterprises who do adapt themselves to market conditions. The accumulation of capital becomes paramount under unfettered market forces due to the need to expand — failing to expand risks being driven out of business. Because all materials and finished products would remain commodities subject to price volatility in this scenario, the cooperative workers’ own labor would also become a commodity — in essence, they would “become their own capitalists.”

Cooperation and self-management within an enterprise — without owners, executives or speculators grabbing the profits for themselves — would mean that material gains would be distributed fairly among the workforce, certainly a far better result and itself a harbinger of a much more rational societal distribution of income. Although the hypothetical example of cooperatives competing fiercely against one another would be an odd hybrid because it would be based simultaneously on cooperation and competition, the distortions of capitalism would nonetheless be reproduced, albeit less severely.

Uncontrolled competition would lead to large disparities of income and power. An aggressive collectively run enterprise theoretically could gain control of the market for a particular product in high demand, resulting in the enterprise wresting for itself a commanding position. Perhaps several aggressive enterprises would do this, and we would once again find ourselves in a society with a power imbalance — not nearly the towering imbalance of present-day capitalism, but nonetheless the goal of creating a fully democratic society with no permanent sources of power would have been thwarted. In this hypothetical society, there would still be a market that operated on a capitalist basis and therefore capital would tip the balance of power to those who accumulated it.

In any country in which a model of worker cooperation or self-management (in which enterprises are run collectively and with an eye on benefitting the community) is the predominant model, there would need to be regulations to augment good will. Constitutional guarantees would be necessary as well. Some industries are simply much larger than others. In a complex, industrialized society, some enterprises are going to be much larger than others. Minimizing the problems that would derive from size imbalances would be a constant concern.

Furthermore, if enterprises are run on a cooperative basis, then it is only logical that relations among enterprises should also be run on a cooperative basis. An alternative to capitalist markets would have to be devised — such an alternative would have to be based on local input with all interested parties involved. Such an alternative would have to be able to determine demand, ensure sufficient supply, allow for fair pricing throughout the supply chain and be flexible enough to enable changes in the conditions of any factor, or multiple factors, to be accounted for in a reasonably timely and appropriate fashion.

Central planning in a hierarchal command structure with little or no local input proved to not be a long-term viable alternative system. Nor is tight regulation a solution on its own. Regulators, similar to central planners, can never possess sufficient knowledge to adequately perform their job and local enterprises can use their special knowledge to give themselves an advantage rather than share that knowledge with regulators.

Responsibility, then, would have to be tied to overall society. Negotiations among suppliers and buyers to determine prices, to determine distribution and a host of other issues would be necessary. Such negotiations are already common in certain industries; for example in the chemical industry, where companies negotiate commodity prices on a monthly or quarterly basis. Those are competitive negotiations in which the dominant position oscillates between buyer and supplier, resulting in dramatic price changes.

In a cooperative economy, negotiations would be done in a far more cooperative manner, with a wider group participating in the discussions. In this model, prices of raw materials, component parts, semifinished goods, finished goods, consumer products and producer products such as machinery would be negotiated up and down the supply chain, leading to an rationalization of prices — markups to create artificially high profits or pricing below cost to undercut competitors would be unsustainable in a system where prices are negotiated, pricing information is widely available and all enterprise financial information is public.

These would have to be fair negotiations — prices throughout the supply chain would have to be set with an eye on rational economics. Industry facilitators to assist negotiations and/or a government arbitration board to make decisions when parties are unable to agree to terms might be necessary. Community input would also be desirable, in the industries in which a given community is directly involved and for retail prices of consumer goods. It may be desirable to include these community interests in pricing negotiations directly.

As more people take on more responsibility, more will gain the experience of fair negotiations, enabling more to peer over the shoulders of those involved in these decisions. In turn, more experience means more people within the community who can shoulder responsibility.

Although regulation, as noted above, is not in itself a solution, that is not a suggestion that regulation should be done away with. One method of using regulation to ensure socially positive economic activity might be a system of certification. Enterprises would be responsible for investment, production and financial decisions, but might be required to demonstrate full compliance with a range of standards on issues such as equal opportunity, workers’ rights, health and safety, environmental protection and consumer protection. Enterprises could be required to be certified on all relevant issues before conducting business, and perhaps be re-certified at specified intervals.**

In a cooperative economy, it is possible — and perhaps likely — that certain critical industries and services would remain in state hands (but fully subject to public accountability). Public transportation systems and water supply might be two examples of these types. Employees in large enterprises of these types would have the same dual role of managing the enterprise collectively at the same time they remain workers. It is not impossible that biases or favoritism could slowly arise in such enterprises; a union would provide another source of protection that could defend a worker as an individual when necessary.

Workers in enterprises that are collectively owned, since they would be owners and not simply managers, might find less ambiguity between their two roles, as long as strategic decisions are made collectively. Still, it may be that there remains a place for trade unions even in these types of enterprises, or it could be that unionization is simply a social value and all members of the enterprise join or form a union for reasons of social solidarity or to provide another check against any centralizing tendencies emerging within the enterprise or within government.

A system of democratic control and social accountability would require open information. Records and accounts of all enterprises and major production units of enterprises would have to be made available to all other parties to negotiations in order for the fairest deals to be reached and to prevent attempts to unfairly benefit at the expense of suppliers or customers. Social-justice organizations — such as those upholding civil rights, consumer rights or the environment — should also have a role, perhaps in enterprise negotiations when appropriate, but more likely in helping to set social goals, in monitoring compliance with standards and possibly being the bodies that issue certifications.***

Some amount of planning and coordination would be necessary as part of the process of determining raw materials needs and ensuring that those needs are met. Any planning committee would have to be democratically controlled and have wide social representation to oversee production and to assist in the determination of investment needs. Planning would be bottom-up and democratic, based on the best estimates of aggregate demand, and not top-down and authoritarian. Planning would provide a guide, not a hard numerical total.

Investment would need to go to where it is needed, a determination made with as many inputs as possible, but because of its importance finance and banking is one area that would have to be in state (or local community) hands (subject to full public accountability) and not in collectives. Financial speculation must be definitively ended. Enterprises seeking loans to finance expansions or other projects will have to prove their case, but should have access to investment funds if a body of decision-makers, which like all other bodies would be as inclusive as possible, agrees that the project is socially useful or necessary.

Government infrastructure projects should be subject to the same parameters as enterprises, with the added proviso that the people in the affected area have the right to make their voices heard in meaningful ways on local political bodies and on any other appropriate public committees. No private developer wielding power through vast accumulations of money will be able to destroy forests or neighborhoods to build a project designed for the developer to reap profits while the community is degraded. Development would be controlled through democratic processes at local levels, and regional or national infrastructure projects should require input from local bodies representing all affected areas.

An unprecedented level of democracy would be possible in a cooperative economy because the power of capital would be ­broken. Social constraints ensuring responsibility to the larger community would be required to prevent the accumulation of capital that translates into power, although such tendencies would be countered by a system that rewards cooperation rather than greed.

The society that has been sketched out in these very broad strokes is a society in which working people — the overwhelming majority of society — have taken control over their lives. The (ex-)capitalists are just as free to go to work as everybody else. Surely some, those with expertise and an ability to work well with others, would be among those cooperative members elected into administrative positions; regardless, they would have to become regular cooperative workers, contributing to the production of a quality product or service and having their say equal to all others who do the work.

Society as a whole benefits when everybody is entitled to contribute, and the more who do so the more likely it is that the right solution to a problem will be found. Someone who would not have been able to make a social or artistic contribution will be able to do so, enriching society. That does not mean that all ideas are equal, or good, or that all ideas are entitled to equal time. It does mean that ideas intended to better society or to advance the greater social good can receive a hearing, rather than the privileged so permeating society with an ideology that benefits themselves that other ideas are dismissed at the start.

These are not steps that capitalists would willingly take. Bringing about such a world would mean an enormous amount of organization and struggle, regardless of the methodology used to bringing a end to capitalist rule. It would be necessary to write new constitutions codifying the new society’s changes, locking advances and rights into formal law while preventing centralization of power; nonetheless, without the assumption of responsibility and participation, democracy will inevitably erode.

Freedom and democracy are not gifts handed down from above, and never have been — they are goals that are won through struggle and determination, through a synthesis of theory and practice.

* This and the following paragraph draws upon David McNally, Against the Market [Verso, 1993]; Bertell Ollman, “Market Mystification in Capitalist and Market Socialist Societies,” Socialism and Democracy, Fall 1997
** This paragraph draws upon Diane Elson, “Socializing Markets, Not Market Socialism,” The Socialist Register, 2000
*** This and the following paragraph draws upon “Socializing Markets, Not Market Socialism”; Pat Devine, “Self-Governing Socialism,” anthologized in William K. Tabb (ed.), The Future of Socialism: Perspectives from the Left [Monthly Review Press, 1990]

  • Next week, an examination of the workings of real-life cooperative enterprises.