Working collectively beats working for a boss

Cooperative enterprises are more stable than conventional capitalist enterprises, are more productive and create jobs that are more sustainable. And although the temptation to see coops as a magical solution to the ills of capitalism should be resisted, that they are better for workers than top-down enterprises shouldn’t be any surprise.

The better performance of cooperative enterprises, and the better results for workers, than that of traditionally run capitalist enterprises was recently summarized by the organization Co-operatives UK in its report, “What do we really know about worker co-operatives?” Written by Virginie Pérotin, the report analyzed international data on worker-owned and -run businesses in Europe, the U.S. and Latin America and compared the results with conventional businesses.

Moreover, the report said, conventional enterprises have something to learn from cooperatives: “in several industries, conventional companies would produce more with their current levels of employment and capital if they behaved like employee-owned firms.” Setting aside the unlikelihood of capitalists suddenly deciding to cede control and/or share profits, the preceding quote only makes sense. Why wouldn’t we be more productive if we were working for ourselves and had a say in the running of the business rather than toiling within the traditional concept of having to accept orders from above by people who have no interest other than squeezing as much out of you as possible?

Les Mees Cereal Food Cooperative PAD in France (photo by JPS68)

Les Mees Cereal Food Cooperative PAD in France (photo by JPS68)

The Co-operatives UK report defined a worker co-operative as an enterprise in which all or most of the capital is owned by employees (members) whether individually and/or collectively; all categories of employees can become members; most employees are members; in accordance with international co-operative principles, members each have one vote, regardless of the amount of capital they have invested in the business; and members vote on strategic issues in annual general meetings and elect the chief executive officer. Law firms were excluded because only some lawyers can be partners nor can any support staff.

The main findings of the report are:

  • Worker co-operatives are larger than conventional businesses and not necessarily less capital-intensive.
  • Worker co-operatives survive at least as long as other businesses and have more stable employment.
  • Worker cooperatives are more productive than conventional businesses, with staff working “better and smarter” and production organized more efficiently.
  • Worker co-operatives retain a larger share of their profits than other business models.
  • Executive and non-executive pay differentials are much narrower in worker co-operatives than in other firms.

More productive and more stable

There are benefits not only for the workers of the cooperative, but also for the local community:

“Labour-managed firms are probably more productive and may preserve jobs better in recessions than conventional firms, creating more sustainable jobs. Promoting worker co-operatives could therefore improve local communities’ employment, and therefore health and social expenditure and tax revenue. …

Employee control is thought to increase productivity, and in a labour-managed firm adjusting pay to preserve jobs makes sense for the employee-owners. Worker-members make the decision to adjust pay and they get the future profits (whereas it is more difficult for a conventional firm to elicit employees’ agreement for pay cuts in exchange for job preservation, since the firm’s owners have an incentive not to increase pay when business recovers).”

And certainly no cooperative is going to vote to ship itself thousands of miles away to a low-wage haven!

Interestingly, perhaps because the example of the factory takeovers in Argentina come readily to mind, cooperatives are more commonly formed from scratch, rather than as rescues of failing enterprises. In France, for example, 84 percent of worker cooperatives started from scratch with only seven percent a rescue of a failing conventional firm during the years 1997 to 2001, whereas in the same period, 64 percent of all firms started from scratch and 20 percent as a rescue of a failing conventional firm.

A significant reason for that is undoubtedly government support. The French and Italian governments provide support for cooperatives and this accounts for the relatively higher number of coops in those two countries. The Co-operatives UK report estimates Italy has at least 25,000 coops, France has 2,600 and Spain has 17,000, compared to only 500 to 600 in Britain.

Government support for coops in France and Italy

During the last years of the 2000s, about 200 new enterprises joined France’s national federation of cooperatives (Société coopérative et participative, or SCOP) annually, and the numbers continue to grow. According to Co-operative News, three-quarters of French coops remain in business after three years, while only two-thirds of French businesses overall last that long. The French government directly provides assistance:

“[W]orker co-operatives receive tax benefits from the French government. SCOPs do not have to pay the professional tax, which is 1.5% to 2.5% of revenues and income on worker shares is exempt from income taxes. There are also financial mechanisms for workers to use redundancy payments as part of wider financing package to buy-out and provide cash-flow for the business once they take it over.”

The federation also provides financing for capital needs through its own financial institution. Financing is also available for cooperatives in Italy.

The taken-over Zanón ceramics factory, now known as FaSinPat, or Factory Without a Boss (photo by Guglielmo Celata)

The taken-over Zanón ceramics factory, now known as FaSinPat, or Factory Without a Boss (photo by Guglielmo Celata)

The formation and sustainability of cooperatives in Italy are facilitated by the country’s Marcora Law. One aspect of this law is that laid-off workers can elect to have their unemployment paid in a lump sum to be used toward the formation of a cooperative, in conjunction with a minimum number of similarly situated workers. Cooperative members have technical assistance and financing available to them through a mutual fund run by cooperatives, to which all coops in turn contribute 3 percent of their net income. There are also banks that specialize in servicing cooperatives on advantageous terms.

The stability of coops in turn provides stability to the communities in which they operate, notes Co-operative News in a report on Italy’s Marcora Law:

“But beyond the economic and employment policies, the social dimension should not be underestimated: co-operation, by nature, is inextricably linked to geographical territory and, therefore, the re-launch of a business is almost always the re-launch of an important contribution to the economic regeneration of the area in which the enterprise operates; the assets of the business continues to be indivisible and inter-generational, which helps link the co-operative with its social reality.”

Continued survival in Uruguay

In Uruguay, mutual aid cooperatives have a long history — housing cooperatives began to be formed in 1966, with a rapid increase in them after the passage of the National Housing Act in 1968. These were suppressed during the years of military dictatorship in the 1970s and 1980s.

Worker-run cooperative enterprises constitute a tiny percentage of the economy in Uruguay. There was, however, a significant expansion in their numbers following a deep economic downturn there in 2002 and they have since gained some government support from the Frente Amplio government. These are often successful. A study finds that cooperatives have survival rates one-third above other enterprises. The study’s author, Gabriel Burdín, writes:

“[S]urvey evidence … in Uruguay indicates that [worker-managed firms] employ less supervisors compared with [conventional firms], rely more on mutual monitoring among co-workers and are more likely to introduce organizational innovations such as team work, quality groups, job rotation and consultation mechanisms.”

In Argentina, workers’ cooperatives were formed as acts of survival.

An organizer at the Zanón factory that is often seen as an exemplary model, Raúl Godoy, speaking at a Left Forum panel organized by Left Voice, told the audience of the long years of organizing necessary to have made the takeover possible. Even after the fall of Argentina’s military dictatorship, blacklists were maintained by employers during the era of formal democracy, and the Zanón factory had a “very harsh regime” for workers. Mr. Godoy reported that organizing had to be done “in almost conspiratorial fashion” outside the factory.

The Zanón activists built relationships with workers fighting in other places; sought to defend the rights of workers; built relationships with “picateros” (organized unemployed people who frequently use direct-action tactics), Mapuches, women and other workers; and did “important militant work that involved building confidence.” Thus when the factory was to be closed and the workers had to occupy it, and physically defend themselves from expulsion, they were able to be cohesive and to count on the assistance of the surrounding community.

The limits of the possible in Argentina

Although forming a cooperative was not necessarily their desired outcome, it represented what was possible at the time. Mr. Godoy told the Left Voice panel:

“There is no individual escape from the capitalist situation. We did not have the power to go beyond the cooperative form. It was the way we could maintain what we had accomplished.”

Argentine authorities have never been supportive of the recovered factories, and the new neoliberal government of Mauricio Macri has quickly slowed itself openly hostile to them. Thus Argentina’s cooperatives face a challenging future. “There is no solution within the capitalist system,” Mr. Godoy said.

Co-op symbolNonetheless, Argentine cooperatives have 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. 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.

It is no so simple matter for working people to acquire the confidence to run businesses themselves; pervasive capitalist ideology insists the businesses can only be run by a small elite, who are therefore entitled to collect hundreds or even thousands of times more in compensation than their employees. Yet how could any business function without the know-how and cooperation of its workforce?

That the working conditions within cooperatives are superior to traditional top-down enterprises is simply common sense. But cooperatives are small islands in a vast sea of capitalism, and can’t escape the pull of capitalist markets, no matter how humane an internal culture might be. Cooperatives in themselves don’t necessarily herald a coming socialist dawn; they are quite compatible with capitalism.

Cooperating with cooperatives

Even if cooperatives were to become the dominant enterprise model, that by itself would not eliminate competition. To create a truly new, better system, in an economy based on cooperatives, the cooperatives would have to cooperate with each other in a system with democratic accountability. (This does not preclude that certain key industries, such as banking, would be in state hands under democratic control.)

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.

For now, however, cooperatives must compete with capitalist enterprises with all the rigors of capitalist markets. Not even the world’s most successful cooperative, Mondragon, is exempt from this. That cooperatives tend to cut wages rather or dip into reserves rather than lay off workers, with an eye toward future better times in which pay cuts can be made up, may be more humane, but it also reflects that a cooperative enterprise that must compete is eventually forced to treat its own wages as a commodity.

If an economy is based on cooperatives, but those cooperatives compete against each other, the cooperative members will become their own capitalists and be forced to cut their wages to survive competition.

The intention here isn’t to pour cold water on the idea of cooperatives — they have tremendous value in demonstrating that working people don’t need bosses and that it is not necessary to work long hours for little pay so that a few people at the top can amass fortunes. The profits divided between industrialists and financiers derive from the difference in the value of what you produce from what you are paid.

Shouldn’t the people who do the work earn the benefits? Shouldn’t communities have stability instead of being subjected to the whims of far-off corporate bosses? In a better world, they would be.

13 comments on “Working collectively beats working for a boss

  1. newtonfinn says:

    Since Schumacher’s “Small Is Beautiful” popularized the anarchist/distributist tradition back in the 1970s–a tradition with a long and distinguished history including luminaries like Paine, Tolstoy, Thoreau, Kropotkin, Wilde, Gandhi, Goldman, Bookchin, Chomsky, etc.–there has been little argument that I know of on the left that would oppose or even seriously question the cooperative model as an attractive and practical option to capitalism. Yet as a prior post in Systemic Disorder pointed out, in discussing the economic failure of one of the Mondragon companies, cooperatives must still struggle to exist in a capitalist economy and thus conform, in certain respects, to a dominant system with antithetical values.

    Thus, it is doubtful that cooperatives, even if proliferating, would be able to undermine capitalism, which is the necessary precondition to the liberation of the human economy and, even more importantly, the human spirit, malnourished and stunted by the all-commodifying, consumerist environment in which it struggles to breathe. Although being pushed by the right for the wrong reasons, the upcoming Brexit vote may well be much more of a threat to global capitalism than co-ops like Mondragon could ever hope to pose. Frankly, I’m ashamed of those on the left who have shied away from supporting Brexit simply because of the necessity to temporarily join forces with the right. There are pivot points in history when one’s enemy must become one’s ally in order to defeat a monster, one that has become powerful enough to feed on both of them.

    • Thanks again, Newton, for giving us much to think about.

      As to Brexit, I confess to not quite being able to take a position (although let me add as I would find it inappropriate for me to tell Britons what do as I am not one of them). The best scenario would be for all countries to exit the EU, not just one.

      The EU is undemocratic for a reason — it exists as a mechanism to impose U.S.-style economics on Europeans that could never be passed democratically. This is why it is the EU bureaucracy, not individual country governments, is negotiating so-called “free trade” agreements like the Trade In Services Agreement.

      The EU carries out similar functions to NAFTA on the other side of the Atlantic, and NAFTA should be disbanded, too.

      • I’ve read good arguments on the Brexit on both sides, however given I know very little on the subject (or on the Euro in general) and that I’m not British and such a move would have zero effect on me, I must profess I don’t care too much about it, I don’t think I can as an American.

    • Tiny little cooperatives, or even big ones like Mondragon not being able to challenge capitalism is a good example of why small isn’t “beautiful”

  2. newtonfinn says:

    It was in Greece that the EU reared its open-jawed capitalist head for the entire world to see, but Greece proved too weak to seriously wound the monster. May Britain strike the first of the many mortal blows it will take to dispatch the EU and sever the other heads of the neoliberal Hydra.

  3. Very interesting article, thanks for reporting on this. As for a mass “cooperativization” or socialization or whatever, the only times I’m aware of it being attempted on a mass, national level is the Prague Spring and the Meidner Plan in Sweden, or maybe Hungary in the 50s? Yugoslavia I don’t think truly counts as it was highly limited and subordinated by an undemocratic government by design. Paints a different picture of the history of socialism than most think. In my opinion, true socialization or coopervatization is the issue of this century.

    IMO as such, regardless of intent, most “socialist” governments haven’t truly attempted a transition to socialism, whether it was the USSR or Venezuela or China or whatever.

    • There have been some attempts at true workers’ control, beginning with the Paris Commune. Hungarians in 1956 had begun to work toward a system of workers’ control but had no worked-out plans or a chance to work it out before Khrushchev sent in the tanks. In the case of Yugoslavia, it wasn’t necessarily “highly limited,” but I haven’t studied it enough to reach an opinion. There was more self-activity going on there than you might be giving credit for.

      Countries like the Soviet Union certainly were attempting a transition to socialism. That the Soviet Union didn’t make it, had deformed structures, a lack of democracy and congealed into a form that failed due to over-centralization doesn’t alter that the October Revolution was made to achieve socialism. Nor does the fact that the Soviet Communist Party’s idea of socialism was not what your or I or most others would consider socialism alter the fact they party and state bureaucrats believed they were building socialism.

      Rather than making blanket statements of condemnation, it is better to analyze those states in all their complexity, the good with the bad. Nor should we forget the struggle for survival all these states had to conduct as the capitalist world never ceased to strangle them. That’s not an excuse for authoritarianism, but it is an acknowledgment of the distortions that are inevitable when one is under constant attack by more powerful forces. We can, and should, critique, and never lose sight of the fact that there is no socialism without democracy, but nonetheless analyze carefully rather than apply labels.

      • Well the Paris Commune wasn’t on a national level, and was a brief blip in history, so I didn’t include that, but you’re right that it was an experiment in “democratic socialism”. Ironically it was used as an inspirational image by the Soviets and Red China, etc despite having a multi party system and extensive democratic checks and balances. Oh well 😛

        As for Yugoslavia, it was highly limited, it didn’t feature any change in ownership, for one, and its internal “worker self management” was highly limited to what the government (an unaccountable dictatorship) said and did, so I don’t think it’s a great model to follow, interesting to study though: I don’t claim to be an expert, but talking to ex-Yugoslavians and their children here in California and reading what I can, seems to paint the picture I have. It’s nasty, violent break-up doesn’t speak well of the system either. I don’t think a simple focus on “workers self management” is the solution to the crisis of capital, in any case.

        What people think they’re doing and what they’re really doing are often two very different things. Sure, the “October Revolution” was done in the name of socialism and communism, but what came about wasn’t socialism and by the time Josef Stalin rides in and takes power, you certainly don’t have “socialism” or a government fighting for it, as opposed to fighting to preserve its power and the status-quo. I think the time they mummified Lenin and put him on display is the time you can throw away any notions of the USSR fighting for socialism (a move opposed by Lenin’s family, as Lenin was no personality cult dictator I might add).

        I’m sure there were plenty of true believers in the entirety of the USSR, Gorbachev after all started off as trying to save Soviet “Socialism”, as you illustrate in your book. Think of the USSR and the Chinese and the Cuban Communist Parties, etc like the Catholic Church. True believers, total frauds, people just looking for work and career advancement, it has it all. I’ll give the USSR this, they don’t totally fit the “stuffy, dull bureaucrat” image people tend to give them, they certainly were bigger dreamers than the “capitalist world” , case in point they practically led all efforts into manned space exploration, which practically ended after they fell, and their plans for worldwide solar energy were ambitious and have never attempted since. But still, I don’t think they were moving toward socialism.

        A “struggle for survival” is often just an excuse to be murderous and cruel, it seems if you look at history.

      • It depends on your definition of socialism of course. My definition and approach to socialism much more admires the advanced social democracies as a stepping stone than the violent revolutionaries of the developing world so I admit I’m biased.

        • It is possible to conceptualize the Soviet model, deformed and badly overdue for massive reforms as it was, as a stepping stone. The working people, trade union officials and grassroots communists who began to create a system of workers’ control and economic democracy during the Prague Spring could do so because the means of production were already taken out of private hands.

          In other words, enterprises were already in a position, because of state ownership, to be placed under the management of those who worked in them and the greater community, linked together in a national federation. To those Czech and Slovak activist-workers, they were simply taking the next logical step; indeed they said in their public statements they had now begun to take the first steps toward a truly socialist economy.

          Memories of the brief period of a “Czechoslovak road to socialism” and a nascent system of workers’ control in the late 1940s, before the Stalinist clampdown imposed a Soviet system unsuited for what was already a developed country, were still alive; the economic, political and culture bottlenecks imposed by the inappropriate Soviet model imposed on them created the space for the Prague Spring.

          Think of how immensely more difficult the task of building a democratic economy is when the means of production are in private hands, held by massive corporations with the might of the state at their disposal. Scandinavian social democracy merely ameliorates the conditions of capitalism; it is not something that will lead to socialism.

          Deformed as they were, Soviet-style countries were far closer to being able to achieve socialism than is any capitalist country. They did not get there, and therein lies the tragedy.

  4. With growing youth unemployment in most parts of the world, frequently a young person’s only chance for a permanent full time job is working for a cooperative.

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