Can workers own the means of production?

The Marxist economist Richard D. Wolff thinks that a new form of economic organization, the worker self-directed enterprise, can gradually replace the for-profit corporation.

Richard D. Wolff

I hope he is right because the world needs something better than predatory corporations or oppressive government bureaucracies, which are the main choices on offer now.

But successful worker-owned enterprises have been around for a long time, and yet have never reached the critical mass that would enable them to become an important part of the economy.

Advocates of worker-owned businesses cite the example of the Mondragon Corporation, which originated in the Basque country in Spain in 1956 with a half dozen people and now is a federation of 257 businesses and co-ops employing 76,000 people in 31 countries.  But why is there only one Mondragon Corporation?  Why hasn’t it become a template for other successful efforts?

One of the things that limit worker-owned businesses, as I see it, is precisely this lack of critical mass.  There is a societal infrastructure of business schools, business services and business finance to serve the new for-profit business.  Worker-owners would have to learn as they go.  This takes a level of commitment of which many people aren’t capable, unless they are in dire straits.

One of Wolff’s ideas is to provide seed money for WSDEs by giving the unemployed their compensation in a lump sum rather than weekly checks.  This shows how he underestimates the difficulty of implementing his program.

To begin with, starting a successful small business is not something everybody can do, although many people think they can.  If you wanted a pool of people with the ability to succeed in business, you probably wouldn’t choose them from among the unemployed.  You’d be more likely to find them among people who have good jobs and money in the bank.

Then again, the American Dream is to own your own business.  Generally speaking, it is not to be part of a community of comrades who share and share alike.   We Americans think of ourselves as individualists, no matter how subservient to authority we may be in practice, and we only abandon the dream of self-sufficiency for compelling reasons.

Farmers’ marketing co-ops came into existence because farmers thought they were being cheated by middle-men.  Electric power co-ops came into existence because the investor-owned utilities weren’t interested in serving them.  Savings and loan associations, and later credit unions, were formed because people were dissatisfied with banks.

Workers have been known to take over factories from bankrupt employers and restart the businesses.  Some co-ops are formed around political and social movements, such as selling organic food.  But worker-owned and cooperative businesses are not the norm.  There has to be a compelling reason to commit to starting one.

The commitment tends to fade when the compelling reason fades.  Even the successful cooperatives tend to wither away, or be bought out, or to incorporate.  Even the successful utopian communities, the Oneida community in New York state and the Amana community in Iowa, wound up as corporations.

Is there a better way than capitalism?

Marxists say that the trouble with the capitalist economy is that workers don’t get the full value of what they produce.  Whether or not that’s true as a general principle, it is a good description of the current direction of the U.S. economy.

The Marxist solution is that the workers themselves should own the means of production.  A Marxist economist, Richard D. Wolff, said that where socialists and Communists have gone wrong is in promoting government ownership rather than worker ownership.

I recently read Wolff’s three latest books.  His view of the current economic crisis is the same as mine.   In the 1970s, overall American wages stopped growing.  Working people tried to maintain their material standard of living by putting in longer hours and having more family members in the work force.   When that reached a limit, they kept up their spending levels by borrowing.

Now the spending power of ordinary Americans has reached a limit.  Most Americans are either broke, nearby broke or paying down their debts.  That’s why the government has failed to stimulate the economy through spending or lower interest rates.

The solution, according to Wolff, is the creation of WSDEs – worker self-directed enterprises – in which the workers themselves are the ultimate deciders of what is done with the profits (in Marxist lingo, the “surplus”).

A WSDE would be more than worker participation in management, where corporate ownership remains the same.  And it would be more than a worker-owned business, where board of directors and the rest of the corporate management structure remains in place.   And it would be more than just a co-operative, which can be organized to serve the interests of any group, not just employees.

This would not necessarily solve all problems, Wolff wrote, but it would make other problems easier to solve.  A WSDE wouldn’t lay off workers or reduce wages merely to increase the income of managers and stockholders.  Employees wouldn’t feel alienated from their work.  A worker-owned business would be less likely to be willing to pollute the community in which they live than would a board of directors responsible to stockholders who live far away.

I am in favor of more worker-owned businesses, but I think Wolff greatly underestimates the opposition to his proposed program.   Does he think the interests that engineered the sale of the Postal Service’s assets to private businesses (such as Nancy Pelosi’s husband) or advocate replacing public schools with for-profit businesses (aka charters)—does he think these interests are going to sit still and allow Wolff’s WSDEs to push them aside?

Back in the New Deal era, the federal government fostered electric power co-operatives, which provided electricity at lower rates than the for-profit corporations.  But they did not displace the for-profit corporations, nor become a model for how to operate electric utilities.

Instead the electric power industry successfully pushed for deregulation of the industry, in which competition between electric power providers was supposed to keep rates low.  Deregulation also abolished a requirement that an electric utility have enough reserve generating capacity to prevent future blackouts and brownouts.  Nobody is responsible for keeping the lights on now.

 The fact that something is economically feasible and socially desirable does not mean that it will be politically successful.   There is no substitute for political power.

Mondragon and the future of worker co-ops

Gar Alperovitz gave an interesting interview on the Real News Network on Spain’s worker-owned Mondragon Corp. and the future of worker-owned co-op businesses in a capitalist economy.

He advocated a 30-year effort to build up worker co-ops to the point where they can become a dominant force in the economy.  I think his ideas are good, but I don’t think that either the United States or the rest of the world can afford to wait 30 years before changing direction.

Is there a path to economic democracy?

If you, like me, think our present corporate capitalist system is not working, and if you, like me, thinks state socialism and central planned economies are proven failures, what is the alternative?

Economist Gar Alperovitz, in a flawed but thought-provoking new book, What Then Must We Do? says the answer is economic democracy – worker-owned businesses and cooperatives.  Unlike the giant for-profit corporation, the worker co-op would operate for the benefit of the employees instead absentee stockholders.  Unlike with nationalized industry under central planning, the worker-owners would be deciding for themselves and not trying to rule over other people.

I think so, too, and so do other people, whose books I’ve reviewed on this web log.  Alperovitz’s book represents an advance over David Graeber’s The Democracy Project in that he suggests some practical ways in which this ideal can be advanced.   Alperovitz’s blind spot, compared to Graeber, is his failure to see the magnitude of the opposition that would have to be overcome.

Alperovitz pointed out that there already are quite a number of worker-owned businesses and cooperatives.  In Cleveland, there’s a worker-owned Evergreen Cooperative Laundry, which is powered by solar panels bought from the worker-owned Evergreen Energy Solutions.  In Madison, Wisconsin, there is the worker-owned Isthmus Engineering and Manufacturing Co., which makes precision machines and robots.  He has a long list covering much of the country.

Local governments spend a lot of money subsidizing private businesses.   Instead of providing economic incentives to bring in a big box retail store, which is likely to put established retail merchants out of business, or a manufacturing plant, which is likely to relocated in 10 or 15 years in search of low wages and new economic incentives, why not help the worker-owned businesses in your own community?

Executives of big corporations (except for family-run companies such as Corning Inc. or Wegmans Food Markets) have no tie to any community or, indeed, to any country.  Workers, along with small-business owners, are the ones who are committed to living in a community and building it up.

Along with worker-owned businesses, there are credit unions, electric power co-operatives, businesses with employee stock ownership plans – all with more democratic forms of organization than corporations listed on the New York Stock Exchange.  There is something called a “B” corporation, whose charter says it is organized for public benefit rather than maximizing shareholder value.  All these provide something to build on and expand.  One simple reform, Alperovitz noted, is to allow owners of stock under ESOP plans to vote their own shares rather than giving their proxies to a trustee.

He advocated public banks, such as the Bank of North Dakota, as a way of serving local communities and providing a safe haven for depositors.  He said states such as Vermont. which is working on a single-payer, universal health insurance plan, could show the way for health care reform.  In the next financial crash, the federal government is likely to take over some failed corporations, as it did AIG and General Motors, and the next time around it should ask for reforms to make these companies serve workers and the community.

In time, over a period of decades, Alperovitz thinks that worker-owned and public enterprises could gain constituencies and crowd out the dysfunctional corporate system that we have down.  Such an approach offers more hope, he wrote, than supporting the declining labor movement or progressive political action.  In this I think he is naive.  The corporatist elite that have worked for decades to crush organized labor and thwart progressive politics is not going to stand idly by and let themselves be threatened by worker co-operatives.

The passing scene: Links & comments 11/12/13

Mondragon and the System Problem by Gar Alperovitz and Thomas M. Hanna for Truthout.

The Mondragon Corporation, based in Spain’s Basque country, is a federation of worker-owned cooperatives employing 80,000 people, which is often held up as an example of a successful alternative to the investor-owned corporation.

But recently one of its biggest units, Fagor Electrodomesticos, a manufacturer of dishwashers, cookers and other appliances, had to file for production from creditors under Spain’s bankruptcy laws.  Alperovitz and Hanna say that this is no reflection on Mondragon’s effective internal model, but that this model does not shield it from a bad Spanish and world economy.

Socialism in One Village by Belen Fernandez for Jacobin magazine.

The village of Marinadela in Andalusia calls itself a “utopia towards peace.”  It has full employment, affordable housing, no crime and free Wi Fi, thanks to a local economy based on a worker-owned farm cooperative.

Fernandez said it is not really a utopia.  It has not escaped the effects of Spain’s recession and its politics are dominated by its charismatic mayor and his clique.  But it sets an example to the rest of Spain and of the world as to what is possible.

All Can Be Lost: The Risk of Putting Our Knowledge in the Hands of Machines by Nicholas Carr for The Atlantic Monthly.

Computers on average are more reliable than human judgment, so we rely on them to fly airplanes, diagnose illness, design buildings and a whole lot of other things.  The problem is that for any human capacity, you lose it if you don’t use it, and that creates big problems when computers fail.

How Republicans Rig the Game by Tim Dickinson for Rolling Stone.

The Republicans are becoming a minority party, but they hold on to power by means of gerrymandering, voter suppression and abuse of the filibuster.  Why don’t the Democrats make an issue of this?

The unemployment rate for veterans remains incredibly high by Brad Plumer for the Washington Post’s Wonkblog.

The job market is tough for everybody, but tougher for veterans because of service-connected disabilities, lack of civilian work experience, and employers’ failure to recognize relevant military work experience.