Self-directed workers as a “cure for capitalism”

The economy of the future will not be a tabula rasa. Today’s bricks will form part of tomorrow’s edifice and, assuming that humanity’s zig-zagging and often circular course toward greater freedom continues, pieces of a better world exist scattered around us.

Cooperative enterprises are surely part of that (hoped for) better tomorrow. If tomorrow’s better world is one of economic democracy, environmental sensitivity, rationality in production and distribution, equality and meaningful community involvement, than cooperatives will form some of the backbone. Some of these bricks are already here: Successful cooperatives exist today, although they are as yet small islands of democracy in the vast sea of authoritarian capitalist enterprises.

No one model could ever be universal. Differentiated internal operations and cultures are bound to develop. But certain bedrock principals can, and should, be in place for cooperative enterprises operating in an economy that increasingly includes them. The economist Richard Wolff, in his latest book, Democracy at Work: A Cure for Capitalism,* argues that the ability of the workers of an enterprise to be involved in all its strategic decisions is the most important principal to bring about economic democracy, without which political democracy is a formal, empty shell. He introduces the term “workers’ self-directed enterprises” to encompass such enterprises.

During the last structural crisis of capitalism, the Great Depression of the 1930s, massive movements from the Left, including unions, socialist parties and communist parties, forced widespread reforms to be instituted. Eventually, however, Keynesianism and social democratic programs developed new sets of instability and capitalists were able to at first slowly and then more vigorously roll back one reform after another. Professor Wolff argues that even if a suite of reforms could be enacted, the fix would be temporary — capitalists would intervene to take back the reforms, plunging us back into crisis.

But the problem is not simply that the wealthy, through their concentration of accumulated capital, can so readily bend political systems to their ends. The problem is the instability of capitalism itself — capitalists are induced to do everything they can to increase profits due to the relentless nature of competition. That can be achieved through taking a larger share of a market or through cutting costs — the latter can include the introduction of machinery or moving facilities to somewhere else where the workers can be paid far less. These decisions are made by a small number of people at the top of the company, ultimately by the board of directors, a body that almost always includes top executives.

A similar process of alienation happened in countries that used the system of the former Soviet Union, in which the government owned all enterprises. Professor Wolff uses the term “state capitalism” to describe that model because, in place of a private board of directors, state officials made all the decisions, again excluding workers. Those officials controlled all the production of the workers, appropriating the surplus by paying the workers a small fraction of the value of what they produced, the same as in a traditional private capitalist enterprise. A many-sided argument among Bolsheviks and others on how to organize production raged after the October Revolution, but, within a year of assuming power, the Bolsheviks nationalized large enterprises under the impact of the multiple deep crises of World War I and the threat of the advancing German army.

We make our own decisions under socialism

Such a system became synonymous with “socialism.” Along with many others, Professor Wolff argues that “socialism” has to be a much different system, one in which the workers themselves make the decisions of their enterprises, in conjunction with the community of which they are a part. A central part of the ongoing furious campaign against “socialism” is the supposed efficiency of capitalism in comparison to anything else. The inherent instability of capitalism (euphemistically called “business cycles” in orthodox economics) is itself inefficient, nor is it possible to measure all the wins and losses across a society.

“In short, the notion of measuring the efficiency of economic events or processes or of an economic system is a mirage. It is not possible to identify or measure all of the effects of any social factor, nor is it possible to separate and weigh all the influences that combine to produce each effect. The very concept of efficiency would have been banished from discourse, let alone science, long ago had it not proven so ideologically useful. Efficiency discourses resemble capitalist notions of efficiency, which in turn resemble the medieval doctrines and debates concerning how many angels can dance on the head of a pin: they too will one day strike people looking back as bizarre and absurd.” [pages 29-30]

Moreover, Professor Wolff continues:

“The efficiency argument for capitalism rings hollow in the face of high and enduring unemployment affecting jobless millions and their relatives, friends, and neighbors. Watching the growing absurdity of foreclosures creating both homeless people and empty homes throws into serious question the standard defense of capitalist efficiency. … Socialists and communists during the Cold War often simply inverted the standard argument by insisting that is was [their version of] socialism or communism that was efficient (or more efficient than capitalism) and thus represented progress. They, too, often ignored the impossibilities of identifying and measuring all costs and benefits and of separating and evaluating each of the myriad influences that produced them.” [pages 30-31]

Having set the stage, Democracy at Work provides a concise summary of the lead-up to the present crisis, from the Great Depression through the explosion of debt incurred as a result of stagnant or declining wages, and summarizes in clear, accessible language the basic problems of advanced capitalist and Soviet-style systems. The book then gets to its heart, sketching out the concept of “workers’ self-directed enterprises.” WSDEs are a distinct form of cooperative enterprise — this is an enterprise in which the workers themselves are the directors, making all decisions on what to produce, where to produce, how to distribute, determining wages and other compensation, and hiring management.

The surpluses produced would never be appropriated and distributed by anybody else. In a capitalist corporation, the board of directors are legally required to maximize the profits of the corporation going to the shareholders, regardless of the cost to the workers or the local community, and only the shareholders vote on who the directors are. The profits of the company, the bloated pay of the top executives and the huge piles of cash diverted into speculation are the product of the surpluses produced by the workers — and the competitive pressures of capitalism ensure that this process continually deepens.

WSDEs would operate in a far more humane manner. The workers themselves will make the decisions on technological innovation, which is only proper since they, and the surrounding community of which they are a part, will have to live with such decisions. (This is unlike a capitalist enterprise, in which those who bear the cost have no say in the decision.) The self-directed workers can consider a far wider set of issues and concerns about adopting new technology, or any other strategic decision, thereby fully weighing the effects on themselves, their families and their communities.

Professor Wolff proposes that a specialized agency be created that would monitor technological innovations, what enterprises need more workers, which enterprises have registered a desire to commence new production, and other social needs, to be funded with enterprise profits.

“Rather like a matchmaking service, this agency’s task would be to match employees willing to change jobs with job availability and to arrange for appropriate training and inducements to facilitate the reallocation of personnel. No loss of income would attend the transition period for workers who left one job for another. To run this agency would cost a small portion of all the surpluses distributed by WSDEs to sustain its staff and activities. This agency’s reports and services would form one basis for the decision by all workers about whether to make the technical change in question.” [page 132]

Jobs can be rotated (easing boredom), pay differentials minimized (drastically reducing inequality), environmental concerns would be taken seriously (otherwise you’d be polluting your own home) and communities would be stabilized (who would move their jobs to another country for a cut in pay?). And by being involved in your workplace’s decisions — and rewarded for your efforts in making the enterprise a success — alienation is drastically reduced. Without the need to work a crushing number of hours to compensate for low pay, you would have the time to be more of a participant in your community.

Workers as their own board of directors

Professor Wolff’s concept of WSDEs rests on the workers being their own directors; that is, making all the strategic business decisions themselves. He stresses this aspect, and sees ownership of the enterprise as less important, arguing that different ownership models can co-exist with WSDEs. Local, regional and national governments could own them but allow them to be run by the workers; the workers themselves could own the enterprise individually or collectively; or ownership could take the form of shares traded on a market. The author also prefers not to pre-judge whether a system based on WSDEs would take place under market conditions or in which planning predominates; he believes that they can be compatible with either.

“How WSDEs will come to exist with private versus socialized productive property and to coexist with markets versus planning will not be determined by spurious claims about their comparative efficiencies. It will be determined through the construction of particular, specific postcapitalist economic systems as they emerge in transitions from both private and state capitalist systems.” [page 144]

Fair enough. But here I believe caution is warranted. Leaving a full market system in place would inevitably re-introduce some of the problems of capitalism, albeit in different and milder forms. As I have previously discussed, 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 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. 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.”

Some amount of planning — democratic, bottom-up planning based on aggregate demand as a guide and not top-down planning imposed as an order — would seem to have a significant role in an economy dominated by cooperatives; moreover, the cooperatives would have to have some cooperation with each other, particularly in negotiating prices up and down the supply chain. Ultimately, these are questions that won’t begin to be solved until there is more practice, although a “matchmaking” agency of the type proposed above implies some amount of planning.

Much more immediate is the question of how WSDEs would co-exist with capitalist enterprises. WSDEs would handle competitive problems and grapple with issues of size and other issues differently than a capitalist enterprise. For instance, Professor Wolff argues, if WSDEs organized mutual support and pooled political strength, or prove to be more productive, they could prevail against capitalist enterprises. Not extracting large amounts of money for bloated executive pay could free extra funds for developing innovations, or differentiating their products as made under democratic conditions could be a marketing advantage.

Early on, WSDEs would need state assistance. Professor Wolff advocates adapting the model of Italy’s “Marcora Law,” which enabled workers to take over troubled enterprises. The author suggests offering the unemployed a choice: Either the traditional weekly benefits, or taking it as a lump sum, pooling their resources with others taking the lump sum, and forming a WSDE. These new enterprises would likely need to rely on technical assistance, subsidized credit, tax breaks and other assistance; such aid can be looked upon as an extension of existing programs to assist small businesses or for women- or minority-owned businesses.

Social solidarity with and by existing cooperatives, unions and activist groups would be another form of support. A strong cooperative movement would provide an alternative to traditional authoritarian capitalist employment, eroding capitalists’ ability to impose harsher working conditions.

Should all workers be involved in all decisions?

Democracy at Work does formulate one difference from traditional concepts of cooperative enterprises that will likely be seen as controversial: A differentiation between “surplus-producing” workers and “enabling” workers. The first group are those who directly produce the outputs that are sold. The second group include accountants, managers, secretaries, clerks and many other job functions that provide the conditions that enable the “surplus-producing” workers to do their work. Professor Wolff is careful to stress that both categories are equally crucial to the success of an enterprise.

Nonetheless, he advocates that only the “surplus producers” be allowed to make the decisions regarding the appropriation and distribution of the surplus. All other decisions would be voted on collectively by all workers. The rationale is that such an arrangement “secures the absence of any exploitation within the WSDE” [page 166]. But leaving such major decisions to only a portion of the workforce risks engendering a division within the workforce, the opposite of the goal, and arguably applies too narrowly the laudable goal of ending exploitation.

Moreover, this formulation presupposes that management will form a group distinct from line workers. But there should not be such a distinction: Managers should be elected by the workers a whole, to specific terms and be recallable. There is no reason why management and supervisory positions should not be rotated — workers can become managers, and then go back to being workers. More people would become familiar with more roles, be able to assume greater responsibility and be better equipped to participate in strategic decision-making.

Nor is there any reason why people can’t change roles from a direct production job to a support job, which, to be fair, is tacitly acknowledged in the author’s stress on the ability of workers to change job functions within WSDEs. Having two categories of jobs with a crucial decision-making function reserved for one category would seem to defeat the purpose of cooperation — equality. If everybody is necessary to the enterprise, then everybody should be eligible to vote on everything.

Decision-making, however, will not be confined to the walls of the enterprise. Residents and workers should participate in each other’s decisions to the extent that they are affected, Professor Wolff writes. Community representatives should participate in WSDE decision-making, and vice versa, as WSDE members are part of the community.

“In societies where WSDEs are the prevailing organization of production, capitalists will no longer occupy a crucial political position. Capitalists’ use of the surpluses they appropriate will no longer dominate politics. We will no longer have capitalists making political use of the resources typically at their disposal — the surpluses they appropriate. Instead, the community of workers who direct WSDEs will be the prevailing political partner of residence-based governing bodies. …They might finally realize democracy, which under capitalism was never allowed to go beyond very limited electoral functions.” [pages 167-168]

A much higher level of democracy does not mean that a society with an economy based on WSDEs would be a utopia. Professor Wolff is forthright in noting that there will be new problems and contradictions. But with vastly less inequality distorting all areas of society, problems would be more easily tackled. And just as the transcending of earlier systems eliminated many but not all social ills, transcending capitalism will put many problems behind us.

“The slave and feudal systems that proceeded capitalism fostered forms of crime rooted in their mixes of economic risks and rewards. But those systems never displayed the recurring boom-and-bust cycles common to all forms of capitalism. These cycles are the products of capitalism — not of this or that group (the state, criminals, others) functioning within that system and in response to its upswings and downswings. … Overcoming the systemic roots and nature of capitalist crises requires a change in the economic system.” [pages 51-52]

Professor Wolff’s Democracy at Work offers us a well-written practical guide to alternatives to capitalism, one that we can begin to build today with the tools at our disposal. Whatever disagreements a reader may have with this or that detail, Democracy at Work is recommended to anyone seeking a concise study of why we need to bring a better world into being and how we might get there.

* Richard Wolff, Democracy at Work: A Cure for Capitalism [Haymarket Books, Chicago, 2012]

13 comments on “Self-directed workers as a “cure for capitalism”

  1. Alcuin says:

    Nothing will change until each individual person looks inside themselves and recognizes the pernicious effects of hierarchy. In the absence of a strong union movement, the capitalists will remain firmly in the saddle. Jill Stein got .3% of the national vote! In the far-more tumultuous era of the so-called “Progressive Era”, Eugene Debs got 6% of the vote in 1912. It took an additional 21 years before FDR, who saved the capitalist’s asses from their own greed, gave his famous inauguration speech in which he said that “all we have to fear is fear itself – nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” Ever since, the capitalist class, with accelerating success, has sought to roll back the achievements that FDR succeeded, over great opposition, in enacting. I wish that I could live in the universe that Richard Wolff lives in – a universe where people are well-educated, aware, and committed to social justice. The results of the election just held shows the dire straits that this country is in. Perhaps when Greek-style austerity hits this country, things will change. It is just so disheartening to know that things have to get that bad before things change. I spoke to a non-union technician for AT&T the other day and she was unconvinced of the need for unions. We have a very, very long road ahead of us and it isn’t going to be a smooth one.

    • It often seems as if conditions have to become dire before a society is willing to uproot the decay. I do hope that we in the advanced capitalist countries won’t wait for total collapse before attempting to build a better world; doing so under such conditions would be more onerous than any of us would wish to contemplate. The earlier we begin the process, the better — we surely need as many tools as we can get our hands on, including books.

      I have no argument against your assessment of the election; we have a vast distance to travel. But the good news is that, already, many more people are open to these kinds of arguments than in the past. I have attended many of Professor Wolff’s talks at the Brecht Forum in New York City, and he regularly speaks about the dramatic difference in the reception he receives to his ideas than in the past. I’d also point to the rapid blossoming of the Occupy movement – there is a widespread latent understanding that we can’t go on as we have.

      Nonetheless, your example of your talk with a non-unionized technician remains typical and we do indeed face “a very, very long road ahead of us and it isn’t going to be a smooth one.” All the more critical that we embark on the road. And the road surely includes education combating hierarchy, along with new organizational models.

      • Nathanael says:

        “I do hope that we in the advanced capitalist countries won’t wait for total collapse before attempting to build a better world; ”

        Thanks to global warming, we’re probably already too late.

    • Paul Gilman says:

      One comment on one point for now. Capitalism is not necessarily more efficient than socialism. Most capitalist enterprises fail, and leave all sorts of waste. Another example of capitalist waste is cost over runs in government contracts. The Soviet Union did prove that socialism can be efficient at times. They certainly knew how to make weapons! And that was the big issue. Soviet efficiency was geared toward weapons and the military, and not towards other aspects of society. Certainly the Cuban health care system is an example of successful socialist production. Czechoslovakia could have been an example of successful socialist efficiency, if the large Soviet bureaucracy wouldn’t have interfered. Socialist efficiency, as the lessons of the Chinese commune system shows, is based on mid-sized enterprises. Ones where there is no alienation between leadership and actual production.


      • Alcuin says:

        To my way of thinking, there isn’t that much difference between the state-socialist model of the Soviet Union and the state-capitalist model of the United States. Both were/are enormously efficient in terms of weapons production and environmental degradation. I whole-heartedly agree with you on your point of the alienation between production and leadership – another term for that is hierarchy.

      • The workers’ movement from below in Czechoslovakia during the 1968 Prague Spring would have been an incredible experiment in what socialism is supposed to be — democratic control of the economy and politics. What Communist Party grassroots members, new union leaders and activist-workers were attempting to build was an economy in which the workers would make the decisions for the enterprises they worked for (“self-directed” in a manner quite similar to what Professor Wolff talks about in Democracy at Work).

        The system that was in the process of creation would have enabled the workers themselves to make decisions through workers’ councils, elect their own management, hire the director (the equivalent of a CEO who would have been the only person not eligible to participate in the councils) and send delegates to national councils at which broader decisions on production necessary to be made at a national level would be made. They wrote draft statutes, and did conduct one national council before the Soviets put a stop to it. About 190 enterprises were represented at this national meeting, including 101 fully formed and elected workers’ councils.

        The level of organization and the quality of the debates was very high — putting the lie to the line that workers can’t run enterprises themselves. They, via the Dubček government, had to force out the old trade union leadership that was a holdover from the pre-1968 era before they could begin the process. The new union leaderships at the enterprise levels played a major role in the formation of the councils.

        There is a long out-of-print book that collects essays and documents from this called Workers’ Councils in Czechoslovakia: Documents and essays 1968-69 edited by Vladimir Fišera. I think I got my hands on the last copy of it when I began researching this era — almost completely unknown in the West — a few years ago. Crushing it was an unforgivable crime.

  2. Alcuin says:

    A friend sent me a quote, which I followed up on:

    “If 99% were really opposed to the 1% seizing the wealth, then this could not possibly continue; but in fact a much larger percentile than 1% actually support it and just want to get in on the action. There are a lot more shameless predators out there than just 1%. To grossly underestimate the strength of the opposition seriously weakens you.”

    It’s from an interview of John Curl, published in the Grassroots Economic Organization’s fall, 2012 e-Newsletter.

    I’m reading it now – fascinating!

    • The concept of “1% vs. 99%” is a metaphor, not a statistical measurement; I disagree that using the concept constitutes “underestimating” the opposition. What made the metaphor so potent is that it crystallized what most people understand instinctively — a small elite hoards the wealth all of us create. In other words, it got people to think about class without using class terminology.

      If we were to scientifically analyze the breakdown of the U.S., for example, on a class basis, the capitalist ruling class and its most important lieutenants (the “comprador”) probably constitute in the neighborhood of 5%. That still leaves the overwhelming majority of society as being oppressed by a tiny minority. But, obviously many more than 5% support the system that promotes such drastic inequality or it could not continue, which is why the propaganda to justify it is conducted so relentlessly.

      I did read the article you linked to above. Here is a key quote from it:

      “I agree that oppressed majorities are enablers of ruling elites. That is the role they have been educated to play. When large numbers of ordinary people refuse to accept the submissive role, societies change. But people need to believe that social change is possible. If they think their only option is to exchange one oppressor for another, they will usually choose to accept their victimization and try to make the best of it. That is why counter institutions are so important, because they are living demonstrations that better social relationships are possible and within our grasp. They are possible because, besides the seeds of the oppressor within us, we also have the seeds of mutual liberation within us, the instincts of cooperation, of sharing, democracy, equality, extended family.”

      I think that sums it up beautifully. When the only alternative to our present-day capitalist decay is Soviet-style centralization, people become dispirited and more ready to accept the line of “there is no alternative” — and this is why, two decades after the fall of the Soviet bloc, that collapsed system is still furiously attacked and, crucially, presented as the only possible form of socialism.

      “Only when radical visionaries convince large numbers that another economic system is possible, can a constructive rebellion be set in motion.”

      And that, in my mind, is the key to a better world. Demonstrations that another economic system is possible, and better, changes minds on a large scale. Thanks for sharing the article, and I recommend it, too.

      • Nathanael says:

        The actual ruling class composes something like 0.1% of the population, and their really loyal lieutenants — the professional propaganda pushers — are an even smaller group.

        The rest of the 5% are mostly just enablers who got lucky. I think that this was Marx’s biggest analytical mistake: he encouraged attacks on professionals, small businessmen (“petty bourgeoisie”), professors, and other people who really are not the source of the problem, and who have more in common with the 99% than with the 0.1% inhabitants of Richistan. This demonization made it really easy to eliminate exactly the people who had the best rhetorical tools and practical training to prevent the emergence of a new military ruling class. Hence, the USSR promptly acquired a new military ruling class.

        • The actual size of the ruling class is a matter of debate. Whether or not Marx encouraged attacks on the petit bourgeoisie, his 20th century followers certainly did, with relish. And I agree that was/is a huge mistake. The small businessperson does indeed have more in common with working people than with the big industrialists and financiers. Often that small businessperson, particularly if he/she operates a retail business, might work 12 or more hours a day, while being at the mercy of a landlord that is a national-scale developer or real estate company, and also at the mercy of chain stores controlled by institutional investors and big speculators.

          Such a person of course is capable of exploiting their employees and surely some do, but the tiny scale of this is not, as you wrote, the source of the problem. And even those small businesspersons who do lord it over their minimum-wage employees are completely at the mercy of big capitalists and “market forces” that are well outside their control. Professionals, other than top executives, are working people. And even those professionals who are independent, such as doctors and dentists, are subordinate to pharmaceutical and insurance companies, and sometimes to the companies that are swallowing up hospitals on a mass scale.

          Still, the merchant who owns a mom-and-pop store or a doctor are not precisely working class, even if their interests ultimately lie with the working mass of society. A serious movement for social transformation needs to welcome such people and demonstrate to them that their interests are with the great majority, not with the numerically minuscule ruling class of capitalist society. Reversing the demonization of professionals is an absolutely crucial to a successful movement. A capitalist extracts surplus value from all employees, regardless of the color of the worker’s collar.

  3. Alcuin says:

    I found an interesting article about Leland Stanford, the great railroad robber baron, that claims that Stanford was a proponent of cooperatives! Read it and ponder … talk about a challenge to the status quo on the Left!

  4. Alcuin says:

    Another interesting article about cooperatives and possibilities for change in mature capitalism …

    • Arguments in favor of cooperative enterprises and economic democracy from a robber baron (Leland Stanford) and from two advocates of cooperation, Gar Alperovitz and Steve Dubb, one from a century ago and one from today. Your latter link recapitulates Professor Alperovitz’s writings in America Beyond Capitalism, and is worthwhile hearing again. The more arguments from more sources, the better.

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