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Marx, Co-operatives and Capitalism

The recent failure of the co-operative bank and its rescue by hedge funds seems an apt time to review Richard Wolff's latest book, Democracy at Work: A Cure for Capitalism(Haymarket Books), which advocates co-operatives as the way towards economic democracy for the working class.   Wolff rejects the label 'co-operative', perhaps because of its historical baggage, and chooses another term, 'workers self-directed enterprises' (WSDEs), to describe what he advocates.  In practice, though, what Wolff advocates is indistinguishable from the historical aims of the co-operative movement to re-distribute profit amongst its members.  Wolff is also an open advocate for long-established co-operative projects such as Mondragon in Spain.  Wolff's aims, though, run deeper than support for extending the popularity of co-operatives as presently understood.  What Wolff seeks to do in Democracy at Work is to redefine working-class co-operative production as socialism in action:

‘ a socialist economy, workers – who produce the surplus – themselves appropriate and distribute the surplus … socialism and communism are differentiated from capitalism in terms of being non-exploitative, since the producers of surpluses also appropriate and distribute them.’ (p.105)

The case against regarding co-operatives as a definition of, or even a route to, socialism is best dealt with by quoting from Wolff's recent book where he sets out how his workers self-directed firms may co-exist with other capitalist firms:

‘WSDEs and capitalist enterprises will ... manage their challenges and disappointments differently. Consider a WSDE troubled by the problem of falling revenues (because of lack of demand, technological backwardness, or shortage of inputs). That WSDE could well decide to lower individual wages and salaries and thereby enlarge the surplus available to solve the problem (via advertising, installing advanced equipment, securing new input sources, and so on). The workers who collectively lowered their individual wages would be the same workers who received and the used the enlarged surplus to solve the problem.  In contrast, workers in a capitalist enterprise would more likely resist such a solution since other people – the capitalists who exploit them – would receive and decide what to do with any extra surplus realized by lowering individual wages.  Distrust accumulated from conflicts and struggles between capitalists and workers would contribute to such a result.  Thus WSDEs and capitalist enterprises would likely find and implement different responses to similar enterprise problems.’

Wolff is, of course, describing the actions not of two different types of social organisation (one allegedly socialist and one capitalist) but of two models of capitalist firm.  The solutions to the problems faced by the different types of firm are not different solutions but the same solution.  The difference is that one in scenario the solution (cutting wages, increasing intensity of labour and mechanisation) is enforced by the workers as a collective employer on themselves and in the other scenario enforced by a single employer owner or board of directors.  

Wolff's incredible suggestion is that capitalism run by the workers would avoid the conflict between an employing class and an employed class – the problem is cured, the conflict resolved, by the workers becoming their own employer.  It will be quite clear to anyone with a cursory acquaintance with the with the work of Karl Marx that Wolff's cure for capitalism is quite different from anything that Marx worked for or that could reasonably be derived from his writings.  However, this is precisely what Wolff claims for his WSDEs – that they are derived from Marxian economic theory:

‘“The alternative economic system that begins to emerge in Marx's writings differs from capitalism in how it organises the production and distribution of the surplus. … [In WSDEs] it is the workers –and not a separate, small group of persons, as in capitalism – who play the key roles of appropriating and distributing the surpluses they generate in production. The producers and appropriators of the surplus are then identical...’ (p.105)

Here we must beware of  a Wolff in Marxian clothing as Wolff's 'surplus theory' supplants Marxian analysis.  To prove the point let's take a quick look at what Marx actually said about co-operatives in his own lifetime.  Marx was enthusiastic about the emergence of co-operatives and what they portended for capitalism.  Writing for the International Working Men's Association (IWMA) in 1864, he wrote:

‘The value of these great social experiments cannot be overrated. By deed instead of by argument, they have shown that production on a large scale, and in accord with the behests of modern science, may be carried on without the existence of a class of masters employing a class of hands...’

Again for the IWMA in 1866 s:

’We acknowledge the co-operative movement as one of the transforming forces of the present society based upon class antagonism. Its great merit is to practically show, that the present pauperising, and despotic system of the subordination of labour to capital can be superseded by the republican and beneficent system of the association of free and equal producers.’ 

In Volume 3 of Capital Marx argued of co-operatives that ‘the antithesis between capital and labour is overcome within them, if at first only by way of making the associated labourers into their own capitalist, i.e., by enabling them to use the means of production for the employment of their own labour.’

However, in each case Marx also described the limitations of co-operatives:

‘...however... excellent in principle and however useful in practice, co-operative labour, if kept within the narrow circle of the casual efforts of private workmen, will never be able to arrest the growth in geometrical progression of monopoly, to free the masses, nor even to perceptibly lighten the burden of their miseries. … To save the industrious masses, co-operative labour ought to be developed to national dimensions, and, consequently, to be fostered by national means. Yet the lords of the land and the lords of capital will always use their political privileges for the defence and perpetuation of their economic monopolies. So far from promoting, they will continue to lay every possible impediment in the way of the emancipation of labour. …To conquer political power has, therefore, become the great duty of the working classes.’ (IWMA 1864)

‘Restricted, however, to the dwarfish forms into which individual wages slaves can elaborate it by their private efforts, the co-operative system will never transform capitalist society. To convert social production into one large and harmonious system of free and co-operative labour, general social changes are wanted, changes of the general conditions of society, never to be realised save by the transfer of the organised forces of society, viz., the state power, from capitalists and landlords to the producers themselves.’ (IWMA 1866)

‘The co-operative factories of the labourers themselves represent within the old form the first sprouts of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system’ (Capital, Vol.3)

So Marx was saying that workers taking control of their own productive work processes, of organising co-operatively in firms, appeared to be a positive reaction on the part of workers to private capitalism.  As such it was a source of growing confidence for the working class, proof that the historically progressive role of private capitalists had come to an end:

‘Co-operative factories furnish proof that the capitalist has become no less redundant as a functionary in production as he himself, looking down from his high perch, finds the big landowner redundant.’ (Capital, Vol. 3)

Of itself, though, co-operatives represented an accommodation of workers to capitalism and not a social transformation.  Through the experience of engaging in co-operative enterprises Marx believed that workers would come to realise their limitations as a force for social change and grasp the need for political action in order to socialise production generally.  From Marx's viewpoint in the middle of the second half of the nineteenth-century this was probably a reasonable, if optimistic, assessment.  By the early twentieth-century, however, it was far clearer that co-operatives were not evolving into a revolutionary response to capitalism.  Instead they were being seen by some ex-Marxian socialists such as Eduard Bernstein as proof that capitalism was slowly evolving towards socialism from within, that revolutionary political action was not required. 

A hundred years ago these arguments took place around the debate in the labour movement as to whether reform or revolution was the way towards socialism.  Today we face similar arguments from Richard Wolff but from a different direction.  Between the early Marxian socialist movement and today occurred the state capitalist revolutions in Russia, China, Cuba and so on.  In rightly rejecting these state capitalist political models, radicals such as Wolff (influenced by postmodernism) have unfortunately felt the need to dispense with the materialist conception of history, arguing it to be irrevocably determinist.  However, rather than leaving Marx behind Wolff engages in the mystifying process of appropriating Marxian clothing for his co-operative strategy for social change.  If there is little enough merit in Wolff's arguments in Democracy at Work for co-operatives as a route to meaningful economic democracy, they also lacks integrity in attempting to associate WSDEs with Marxian economics.