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)

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 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.

Nonetheless, 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.

Austerity or Keynesianism: Can’t we do better than this?

Austerity. Keynesianism. Voting for the Center-Right. Voting for the Center-Left. Let’s call the whole thing off.

Five years of the economic crisis has yet to shake the stubborn idea that, if only the right policy were implemented, prosperity would be here again. And so this week’s two turns of the electoral wheel — agreement on a “grand coalition” government in Italy and the return to power in Iceland of the two parties that presided over that country’s collapse — demonstrate that traveling in a circle leads you to where you just were.

(Photo by Jim Champion)

The outgoing Icelandic government earned a reputation for “standing up” to banks and the International Monetary Fund, and refusing to saddle its citizenry with the massive debts of Iceland’s swollen banks. At first glance, it seems curious that Icelanders would vote out such a government and return to office the same government coalition that presided over the country’s meltdown. But a closer look reveals a much different story. So different, in fact, that the IMF praised the outgoing Social Democrat/Left Green coalition government of Jóhanna Sigurđardóttir. Here is an excerpt from an IMF report on November 19, 2012:

“Directors commended the progress made in fiscal consolidation, noting that it is broadly on track.”

That doesn’t mean that Iceland’s dose of austerity is coming to an end. The IMF report goes on to say:

“While welcoming the recent monetary tightening bias, Directors viewed the policy stance as still accommodative. They agreed that further monetary tightening is needed to bring inflation back to target and to normalize monetary conditions in advance of capital account liberalization.”

Iceland’s banks are too big to fail

Iceland didn’t tell the IMF, or the world’s bankers, to take a hike. Iceland, until recently, was unlikely to be at the center of any financial controversy — a country of 300,000 people with an economy traditionally based on fishing. Somewhere along the way, it was decided to convert the Icelandic economy into one based on financial speculation, with the result that the country’s banking sector grew to nine times the size of its gross domestic product. Iceland’s banks offered interest rates well above that of other countries, drawing in foreign depositors (much like Cyprus). Big pots of money led to the irresistible temptation to speculate, with bank-officer compensation tied to the volume of loans made. The usual result followed.

Not that regulators, or parliament, were zealous in checking the financial sector. An official report by an Icelandic parliament committee states:

“It appears that both the parliament and the government lacked both the power and the courage to set reasonable limits to the financial system. All the energy seems to have been directed at keeping the financial system going. It had grown so large, that it was impossible to risk that even one part of it would collapse.”

Iceland took over its three big banks, but quickly sold two of them to creditors, who in turn sold most of their interests to foreign hedge funds. The Icelandic government did agree to all conditions demanded by foreign creditors, the IMF and the British government, but had to somewhat back off only because the package was voted down in a national referendum. So it’s not accurate to say that the outgoing government stood up to anybody. As the Icelandic blog Studio Tendra pungently put it:

“Iceland didn’t bail out the collapsed banks, but that wasn’t for the want of trying. … [T]he Icelandic government tried everything it could to save the banks, including asking for insane loans to pay off the banks’ debts. … So the true story is that Iceland tried and tried and tried and tried as hard as we could to save the creditors. The only reason why we didn’t is that the Icelandic government, then and now, is completely incompetent.”

The outgoing Icelandic government did follow two Keynesian prescriptions in imposing capital controls and currency devaluation, but these did not do much to ameliorate the pain — Iceland can’t detach itself form global capitalism.

For the years 2009 and 2010, Iceland’s gross domestic product declined more than ten percent and its household consumption fell nearly 23 percent. Recovery has since been at a snail’s pace. Making matter worse, Icelandic personal debt is mostly pegged to the country’s inflation rate. As Iceland continues to suffer from inflation, the amount a debtor owes grows as his or her wages decrease. (Wages since 2008 have lagged the consumer price index, according to IMF statistics.)

The suicide mission of Italy’s “Left”

So much for the “Icelandic miracle.” Icelanders have yet to question the economic system that brought them misery, instead opting to swap one set of mainstream parties for another set. That has been the pattern in advanced capital countries. Italy is not yet an exception, although the dramatic rise of the Five Star Movement — sort of an electoral Occupy movement — as a third force in the Italian parliament may be the start of a pushback. Or it could be a brief protest vote without lasting effect. For now, however, Italy’s Center-Left standard-bearer, the Democratic Party, has apparently chosen to complete its suicide mission by forming a “grand coalition” with the main Right party, the wildly misnamed People of Freedom Party.

Italy’s post-war political parties may have collapsed two decades ago, but the same personalities and the same policies and the same interests nonetheless continue to dominate the political sphere. The Democratic Party is the main remnant of the Communist Party of Italy, and is also is a receptacle for the late Christian Democratic Party, a centrist formation that once dominated Italian politics. The new Democratic prime minister hails has roots in the Christian Democrats, but is the nephew of an important aide to Silvio Berlusconi, Italy’s morbid combination of Rupert Murdoch, George W. Bush and the U.S. right-wing corporate “populist” Ross Perot.

Mr. Berlusconi is one of Italy’s richest persons, owns most of Italy’s mass media and is continually mired in multiple legal entanglements; he dealt with the last of these by forming his own political party, the recently renamed People of Freedom, which catapulted him into the prime ministership. “Freedom of Capital” Party or “Silvio’s Get Out of Jail Card” Party would be more accurate, but nonetheless Italians voted this personal vehicle into office three times.

Italy’s Democratic Party is as eager to implement austerity as the Italian Right — voting for it changes nothing. Italy’s outgoing “technocratic” prime minster, Mario Monti — appointed without the tiresome pretense of elections — and the head of the European Central Bank, Mario Draghi, both enjoy Democratic Party support, and the new finance minister has worked closely with Mr. Draghi.

The main potential fracturing point in the grand coalition is personality, which might make for interesting reading but is nothing more than a diversion from a serious discussion of alternatives.

The Five Star Movement’s leader, Beppe Grillo, now the main opposition in the Italian parliament, characteristically didn’t mince words in his blog this week:

“In the last few decades many sides have admitted that this political class lacks credibility, this same class that for the umpteenth time is asking for your vote of confidence. It’s as though this governing team had come down from the moon, as though they are not the ones directly responsible or jointly responsible for what has happened up until now.”

Alternating parties but the same austerity

There’s nothing unique about Italy here. With the exception of Greece, where Syriza (the Coalition of the Radical Left) missed winning the last Greek election by two percentage points, voters in all advanced capitalist countries have been content to alternate the main capitalist parties in office while beginning to voice displeasure through social movements and in polls. One important reason is that the dominant alternatives to the Right — Socialist, Social Democrat, Labour, Democratic & etc. — offer no alternatives to the Right; at best they offer “austerity lite.”

Various reasons, each with some measure of validity, can be assigned as the cause: dependence on corporate money, corruption, domination of the mass media by the Right, philosophical and economic myopia, cowardliness. Although these factors form a significant portion of the answer to the puzzle, an underlying cause has to be found in the exhaustion of social democracy in Europe and liberalism (as the term is used there) in North America. These political formations are trapped by their fervent wishes to stabilize an unstable capitalist system.

They wish to discover the magic reforms that will make it all work again. They do have criticisms, even if they are afraid of saying them too loud, but are hamstrung by their belief in the capitalist system, which means, today, a belief in neoliberalism and austerity, no matter what nice speeches they may make.

The Right, on the other hand, loudly advocates policies that are anathema to the working people who form the overwhelming majority but have the mass media, an array of institutions and the money to saturate society with their preferred policies. But, perhaps most importantly, they have something they believe in strongly — people who are animated by an ideal, however perverted, are motivated to push for it with all their energy.

In contrast, those who are conflicted between their belief in something and their acknowledgment that the something needs reform, and are unable to articulate a reform, won’t and can’t stand for anything concrete, and ultimately will capitulate. When that something can’t be fundamentally changed through reforms, what reforms are made are ultimately taken back, and society’s dominant ideas are of those who can promote the hardest line thanks to the power their wealth gives them, it is no surprise that the so-called reformers are unable to articulate any alternative. With no clear ideas to fall back on, they meekly bleat “me, too” when the world’s industrialists and financiers, acting through their corporations and the “market,” pronounce their verdict on what it to be done.

The reformers can call themselves Socialist, Social Democrat, Labour, Democratic or Liberal, but the label makes no difference. The are dancing to the same tune as their legislative rivals. All dancers will back reforms when there is concentrated public pressure; when the pressure subsides, the reforms are taken back and austerity attacks are relentlessly pushed forward. Major reforms in the United States came in the 1930s and in Europe following World War II thanks to rulers’ fears of being swept away; when the movements responsible for forcing these major reforms became content with reform, the rollback began.

Keynesian reforms would be better than austerity, but would be no more permanent than those of last century; moreover, Keynesianism keeps the capitalists in the saddle, allows them to regain their confidence and gives them the breathing space necessary for them to methodically take back the reforms.

The working peoples of the world’s advanced capitalist countries are living through a structural crisis of capitalism, not simply a rather nasty downturn similar to the repeated recessions of the past. Reforms, not even those on the scale of the mid-20th century, are a panacea. The solution is to be found not on a ballot but rather in organized mass action working for a more humane system not content to settle for reforms that will be taken away. If not today, when?