Since they evolved, cooperatives can arise in four sorts of situation:
 Isolated individual enterprises, such coffee shops or book stores
- As part of a wider social movement. For instance, the Catalonia collectives during the Spanish civil war or the kibbutzim in the early settler phase of Israel.
- When the owners abandon their factories as they did in Russia in February Revolution of 1917, in Algeria when independence from France was achieved and the Pied Noirs fled the country and in Argentina that arose from the economy collapsing, leaving employees with little choice but to assume charge of their workplaces.
 The case of a whole national economy organized into a cooperative structure as was the case of Yugoslavia.
This brief essay is concerned with a fifth cooperative model, Workers Self-Directed Enterprises (WSDEs) as proposed by the highly regarded, Professor Richard Wolff, being a means to permanent social change and a step towards socialism.
Wolff seeks to create a different kind of production system which he calls “economic democracy” where workers themselves collectively run their businesses and direct its profits with very different social consequences.
According to the Bureau of Labor statistics, during 2010, the pay for average workers rose 2% while the pay for CEOs rose 23%. Workers who collectively control their own work place would distribute pay increases very differently and far more equitably. Also, self-directing workers in allocating some of their profits to the government (taxes) would demand in return social programs that the current capitalist class wish to cut.
Wolff’s reformist program is one where:
“Majorities might, for example, vote to transition enterprises’ internal organizations from capitalist hierarchies to democratic cooperatives. Enterprises’ net revenues would then be distributed not by the minorities atop capitalist hierarchies but instead by democratic decisions of all employees, each with one vote. The multiple levels of inequality typical of capitalism would disappear.”
Workers can organize themselves and operate production without bosses telling them what to do. Wolff, however, is advocating a self-managed market economy, an unrealistic blueprint that could never work. He envisages that in a given factory, the workers would elect a council which would decide on the level of wages, the price of the product, the number of profits to be re-invested, etc., a completely impractical idea of direct workers’ control of a capitalist economy.
He insists that the concept of WSDEs challenges capitalism by presenting a viable alternative to capitalism, but in the end, isn’t simply presenting a palliative prescription for the ills of capitalism re-introducing once again a mythical “market-socialism”.
Cooperatives remain capitalist institutions even if it’s “collective” or “democratic” or “social” capital which is invested to make more capital. What Wolff seeks is a variation of profit-sharing. The only difference is that under his scheme the profits go to the workers, of which much has to re-invested to stay in business, just like any other business producing for the market. Cooperatives that exist under a market economy inevitably replicate the problems of capitalism due to market pressures.
When socialists criticize co-ops they are not indulging in abstract theory or hypothetical predictions. The first cooperatives arose in the early 1800s so have been subject to scrutiny for 200 years. It is not conjecture but simply looking at the available empirical evidence.
Wolff creates more confusion than clarification with his vision of WSDEs.
“…converting workplaces from their current capitalist organization (i.e., hierarchical divisions into employers—public or private—and employees) into worker cooperatives…”
“…Worker co-ops alongside conventional private and state capitalist workplaces.”
“…Worker co-ops are socialism’s new vision and goal…”
Wolff depicts them as something innovative that if combined with social activism can transform society.
There is no doubting that cooperatives are useful to working people and it is not surprising the idea of forming co-ops is seductive, so to outwit the capitalists and build a socialist society behind their backs. The cooperative movement has indeed met with moderate success (Mondragon, for example) but they cannot beat capitalism at its own game. It is unrealistic to expect that cooperatives can expand until they displace capitalism. Proponents of co-ops have never made it clear how a business run on capitalist lines can evolve into something that is the contrary of capitalism.
Cooperatives bear little relation to socialism and are no likelier to lead to socialism than nationalization. It is clear that they are just another form of capitalism. Many who come across the writings of Wolff are struck by his proposals. However, they are engaged in the re-invention of the wheel, resurrecting ideas from the history of the labor movement, coining new terminology, dressing them up in new clothes and presenting those past ideas as something new.
How could Wolff who studied Marx fall into the trap of co-ops to believe them to be stepping stones towards socialism? For his scenario to succeed requires a leap of consciousness in workers that if taken, there would be no reason to stop short at the workplace for cooperative industrial democracy. We could, instead, transform the whole of society into a social democracy.
Where workers have owned their factories and it has been a success, it was the success of essentially capitalist undertakings where worker co-ops adopt more and more the conventional business model.
Wolff’s ideas resembles that of Eduard Bernstein who suggested that worker’s cooperatives were transforming capitalism from within, obviating the need for social revolution.
Whereas, Rosa Luxemburg argued that workers forming a cooperative, “are obliged to take toward themselves the role of capitalist entrepreneur – a contradiction that accounts for the usual failure of production co-operatives which either become pure capitalist enterprises or, if the workers’ interests continue to predominate, end by dissolving.”
Events has proved her right.
To achieve meaningful change through WSDEs would require massive social and political struggle with the end being a form of capitalism in which workers collectively exploit themselves.
Socialists should not be supporting capitalism regardless of how appealing and attractive it is portrayed but rather calling for its abolition. Co-ops are compatible with capitalism and operate under the same law of value just like any other institution which extracts surplus-value and produces for exchange. WSDEs, as nice as they sound, are in the end capitalist enterprises and it is vital that we recognize this fact, because if we don’t go after the heart of capitalist production then all we end up with is a capitalism-without-capitalists (e.g worker cooperatives or nationalized production). Socialism has never been simply about the nominal ownership of the means of production. We can recall the “non-ownership” model of the Catholic Church’s monastery system.
Wolff’s understanding of the State’s role is non-Marxist.
“An economy based on worker co-ops would revolutionize the relationship between the state and the people. In their capacity as a self-employed collectivity, workers would occupy the spot traditionally held by the workplace in state-workplace relations and interactions. The former go-between in the state-workplace relationship — the employers — would be subsumed by the collective of worker-owners. The workers would collectively and democratically hold the purse strings to which the state would have to appeal. The state would thus depend on citizens and workers rather than the other way around. The state would depend on citizens in the usual residence-based public arena of elections and voting (or their equivalents). The state would also depend on workers in the other social arena: state-workplace interactions. In both arenas, real democracy would have taken giant steps forward. The state would no longer pretend to occupy the role of neutral arbiter in struggles between master and slave, lord and serf, employer and employee. The state would have fewer ways and means to impose its own momentum and goals upon citizens or workplaces. To that extent, the state’s “withering away” would become more immediately achievable than in any other variety of socialism known thus far.”
Truthout – https://tinyurl.com/2s3my698
“When workers democratize their workplaces, they collectively control the state — in numbers and economic power. That control can secure the social welfare gains they win…A socialist state would serve that objective and be governed by its democratic base in ways capitalism never imagined, let alone allowed.”
The Marxist conception of the State is that it is a class relationship of control and dominance, yet, Wolff expects the State can be made neutral to serve the interests of the co-ops and the class struggle mysteriously vanishes, forthwith. The state is financed with surplus-value. Working people are not the taxpayers, it is ultimately the capitalist class. The State represents and protects the interests of the privileged minority. Wolff’s WSDEs requires the intervention of a worker-friendly government to prop them up, which goes against the Marxist analysis of the role of the State as the executive committee of the capitalist class. The plutocracy has bought politicians and it owns them.
Sections of workers cannot claim ownership and control of the factories because these are huge production processes, integrated into a far wider interlinked network and cannot be divided into separate individual units. Democratic enterprises would have to work out collaboration and coordination with cities, states, etc where their decisions affect one another.
Collective labor requires that property be collective. The big issues are not decided on the shop floor but by wider society.
Why are there are so many small retail co-ops and so few large producer co-ops?
Back in 2013, Wolff argued that Detroit’s decline could have been averted if workers had converted the car industry into worker cooperatives:
“Detroit would have evolved very differently. Worker co-operatives would not have moved production, thereby undermining their jobs, families and communities, including especially Detroit. Workers would not have destroyed themselves and their communities that way…
Workers co-operatives would also have searched and likely found alternatives to moving that might have saved Detroit…Workers co-operatives, for example, would likely have paid less in dividends to owners and salaries to managers than was typical at Ford, General Motors and Chrysler. Those savings, if passed on in lower automobile prices, would have enabled better competition with European and Japanese car makers than Detroit’s Big Three managed…We can guess that workers have greater incentives to improve technology in co-operatives they own and operate than as employees in capitalist enterprises. Finally, worker co-operatives would likely have switched to producing (and helped to promote) mass-transit vehicles or other alternatives to the automobile to retain jobs and well-being once they saw that continued automobile production could not secure those priorities for worker co-operatives…”
There cannot be socialism in one country, much less in one industrial sector that is still deeply embedded in the global capitalist economy. Its investment decisions cannot be based on what would advance workers’ well-being or enhance public interest objectives. If workers’ well-being or public policy objectives would significantly reduce its profitability in relation to the profitability of other car producers which it competes, if Detroit car-workers had dared to pursue these goals, they would find that lenders would not supply it with the credit it needed in order to compete successfully, or even to remain solvent. In order to survive, a worker-run business must pursue the goal of profit maximization, just like every other.
What would have happened if, for example, Detroit’s car factories had been taken over by the workers who worked in them and if we assume a situation where theoretically, the wage labor/capital relationship operating were altered to become workers’ cooperative, with all the affairs of car production under the control of the workers.
The rules of the market would still be operating and these workers would be selling the cars which they put together to give them an income to provide for their families. They would have to pay a lot of other costs as well. Vehicles, for instance, are not simply manufactured at one location. In fact, Detroit factories are only the places of final assembly. Of all the labour involved for the production of a automobile, only a small proportion is supplied in Detroit factories. Car production has hundreds of sub-contractors supplying components and the different kinds of labor required for the production of a car are dispersed throughout the world in a network of supply-chain links. You’ve got copper mining in Zambia, the mining of iron ore in Australia, then the plastics, the paints, the rubber, plus the supply of energy and global transportation. Car production is social production and by that, we mean production organized on a world-scale.
Capitalism had created such an elaborate relationship of production and distribution that the working class cannot master it without having at its disposal an equally
effective administrative machinery, extending over the entire economic sphere embraced by capital. Only by ignoring the whole magnitude of the social transformation could Wolff imagine WSDEs based on self-sufficient “autonomous” productive units as the lever of such a transformation.
The workers in Detroit who have taken over the assembly-line factories are part of a massive market, a market for all the worked-up materials and components which they have to buy. A Detroit worker-owned car factory has to sell its products on the market, along with every other company. It does not get higher prices for its goods because it is owned by its employees. It has to compete with every other manufacturer in terms of price, delivery dates, quality etc. The worker-owned car factory has to buy its raw materials on the market, along with every other company. It does not get steel, oil, copper, electricity any cheaper because it is owned by its employees. In addition to this required income to keep the WSDE afloat, car-workers in their worker-owned factory must have the income to cover individual living costs such as housing, food, clothes, leisure activities, and so on and on.
These workers will be in competition with other car manufacturers from Italy, France, Germany, Japan, Sweden, and the British, the Koreans, and others. So in order to maintain their livelihoods, they will be in intense competition with all these other companies, trying to sell as many cars as possible and trying to capture a bigger share of the market at the expense of the capitalists and workers in the world car industry. They would have to maintain rigorous efficiency to compete with the productivity of these other companies. In any situation where their costs were disproportionately high resulting in relatively higher prices, they would lose sales and there would have to economize. Where there was overproduction in relation to market demand again there would have to be cutbacks. They could not go on incurring the accumulating costs of producing cars that they could not sell. It would then be a matter of “democratically” deciding which of them is going to be out of a job.
In order to compete over any length of time, it will have to invest in new technology and equipment. To do this requires large amounts of capital. If this is obtained by borrowing, then they will have to convince the banks that it is a viable and profitable concern, run along good business lines. It will be under even greater pressure to prove that it is viable just because it is a different sort of enterprise. Of course, it may decide to raise the capital needed for investment out of the profits. Inside the factory, there are no owners other than the workers. But they buy goods at the same price as other capitalist concerns. They sell goods at the same price as other capitalist firms. They compete with other capitalist firms. If they are to make enough surplus to re-invest or to convince the banks they are good for a big loan, how are they to do it?
Under such circumstances where workers control a company to self-manage for their own benefit as distinct from a share-holders interests, they would respond to the same economic pressures faced by a capitalist board of directors. They would be acting as the functionaries of capital, with different faces maybe but exactly the same economic role.
Because a WSDE car factory would have to compete with ordinary capitalist businesses on the same terms as them, they are subject to the same competitive pressures, to keep costs down and to maximize the difference between sales revenue and costs. A “non-capitalist” sector just do not have the same resources at its disposal and therefore cannot beat the capitalist sector at its own game.
This is inescapable. WSDEs can only continue their existence whilst they are economically viable, that is, where income exceeds expenditure. If expenditure exceeds income, then inevitably they disappear.
They are in a dilemma. Either to sack some of their fellow workers or increase their own intensity of work or they take a wage reduction. Elected workers’ councils would be in exactly the same position of having to lay-off staff if there is no market for the goods they produce.
Whichever route they choose, their decision has two effects.
Firstly they have attacked their own living standards and quality of life.
Secondly, they are acting like any other bosses against the workforce.
Worker-owned enterprises exhibit the exact same vices as capitalist firms. The further WSDEs are integrated into the capitalist economy and its profit-motive, the more their members will have to discipline and regulate themselves in the way the old bosses did in what is known as “self-managed exploitation”.
Nor will the downward pressures be limited to the WSDE.
If employers in another workplace are faced with a demand for a pay rise, they will immediately reply that they can’t afford it and point to a WSDE and say: “they work for less than you demand. It seems an acceptable pay to them. So why are you demanding more?”
The capitalists have been provided with an excellent propaganda weapon against their own employee demands as a way of mitigating the class struggle and persuading workers that they have an interest in accepting “realistic” (i.e. lower) wages.
The fact is that there is no way out for workers within the capitalist system. At most, working in a cooperative can only make working conditions a little more bearable. We do acknowledge that despite having to compete over the long term, the absence of shareholders protects workers in a cooperative from some of the immediate pressures normally impacting a joint-stock company from the demands of share-holders (and in this respect they resemble family-owned firms.)
We cannot self-manage capitalism in our own interests and the only way we can really live without exploitation is by abolishing capitalism.
The mechanism by which the capitalist structure of production maintains itself as an exclusive capitalist structure is that goods are produced throughout a worldwide division of labor organized in different production units. The process through which this structure maintains itself as an exclusively capitalist structure is a process of constant economic selection. Whether or not a particular workplace can continue to exist as part of the structure is constantly tested and is determined by the economic viability of the workplace. The particular ways in which a workplace is organized makes no difference whatsoever to this process of economic selection. It can be the usual capitalist company, it can be a so-called workers’ cooperative under workers’ control. The decision-making procedures can be authoritarian or “democratic” as Wolff would prefer, but it makes no difference.
A Sheep in Wolff’s clothes?
The political will to really transform society is diverted by such illusory projects as WSDEs. Theoretical speculations such as Wolff’s which relate to wages, prices, profits and taxes are now absurdly outdated. We are not alone in our criticizm that workers self-management of a market economy in the real world means workers self-exploitation.
Another Marxist economist, Andrew Kliman, removes the misunderstanding of how capitalism operates.
“It seems that most people want to see another world, but think it can come about, if at all, by voting it in, or by workers becoming their own bosses…Despite the new priorities, new forms of organization, new forms of ownership, new laws, and the new name…it remains capitalist. It remains capitalist because the economic laws that govern capitalism continue to govern…And they continue to govern your society because new priorities, new forms of organization, new forms of ownership and so forth are not enough––by themselves––to overcome the economic laws of capitalism…These well-intentioned changes would merely be capitalism in a different form or they would not be viable and lead back to capitalism. And the reason why they wouldn’t work, Marx argued, is that these supposed alternatives to capitalism all try to get rid of capitalism without getting rid of its mode of production…Marx’s point is firstly, changes in political and legal forms, and changes in consciousness, are not themselves changes in the relations of production. Secondly, if only they are changed, not the relations of production, the changes will not succeed in changing the character of the society.”
According to Kliman’s reading of Marx:
“in order for the means of production to be the co-operative property of the workers themselves, exchange of products must be eliminated, which requires the elimination of value and value production, which in turn requires that labor become directly social, in the sense that a hour of one worker’s labor is equal to an hour of every other worker’s labor. And this equality of labors, again, is not the result of a legal decree, but of changes in the economic foundation of society.”
History is littered with the experience of failed or corrupted cooperatives. Either the cooperatives “sell-out” or they are “put-out” by market forces. We know that over the decades the cooperative movement was out-performed.
Wolff rightly talks about alternative socially-useful production, based on the needs of society (thus the needs of the employees and ordinary people) and alternative production is, not only what is to be produced, but also how it is to be produced.
With socialism, work is to be organized so that it’s not just fair but also pleasant. Within these new models of cooperative production goods shall be designed and manufactured for the needs it fulfils than for the profit it might make and sit will not waste energy or resources, neither in its manufacture nor in its applications. The product will not harm the environment nor deprive workers of their initiative, creativity or job satisfaction.
Prosperity isn’t only higher living standards, but also access to a meaningful job built upon the ability of workers to bring an endless wealth of ideas, knowledge and imagination. The main lines of “new” economic thinking emerge quite clearly.
Wolff presents together two quite different things. At one level, he is properly concerned about the superiority of life in socialism. This is nothing new and has always formed a crucial part of the socialist case.
The other thing that he has accomplished is to suggest an alternative for production under capitalism. But Wolff’s model will not and cannot insulate the working class from the consequences of the compelling drive of capitalism to make profits and to increase profits. Capitalists, nation-states, even worker-directors, cannot break free from the necessity of speed-up, sackings, automation, taking risks with health and safety, for these are the logic of the capitalist mode of production itself.
Wolff understands that socialism is the voluntary and free association of the producers, a conception of the decentralized, self-governing society, federated from the bottom-upwards. He shares the vision of communal ownership and social control against the coercive alienated control of the State and of capital. This is a principle of self-emancipation where the working class will educate itself and develop its capacities for self-management through its own organizations.
Having said that, Wolff lacks confidence in Marxist economic thought and proposes a more reasonable feasible version of “socialism” that incorporates markets and private ownership of the means of production, in other words, a “mixed” economy with basic utilities run by public-owned corporations, medium and small-scale production undertaken by workers’ cooperatives, and private or family concerns operating in many service industries and in the retail sector.
WSDE enthusiasts have it all backside-forwards. Co-ops are not the means towards socialism as argued by Wolff but they are the end. Only in socialism can we really achieve cooperative values and have the work-places for production and distribution organized cooperatively. It is why the socialist society aimed for was so often described as the cooperative commonwealth.
Capitalism is a system of production, value accumulation and can as easily be managed by workers as by private capitalists or state bureaucrats.
Socialism is not just concerned with emancipating workers as wealth-producers but as human beings. Socialism aims not to establish “workers control” but to abolish all classes including the working class. In a socialist society, there would simply be people, free and equal men and women forming a class-free community based on the common ownership and collective control of the means of production by and in the interest of the whole people. Democratic decision-making to permit every member of society the chance to have an equal say in the way things are run is not simply at the workplace but in neighbourhoods and regions. A society where the means of production belong to everybody and is run by delegate and appointees to committees, councils and congresses that’s socialism.
Libertarian Communism 15
Libertarian Communism 16
ARGENTINA’S WORKER-RUN FACTORIES: WHAT NEXT?
Self-Management: Economic Theory and Yugoslav Practice, Saul Estrin.
Democratizing the Workplace through “Worker Self-Directed Enterprises”
You can’t win without a fight: Why worker cooperatives are a bad idea
Co-ops or Workers’ Revolution
The Narrow Horizon of Richard Wolff’s “Socialism”
Self-Managed Capitalism: Criticism of Richard Wolff and Workers Cooperatives
Workers’ Control – Paul Mattick