Employee ownership and socialism

coop-klBeyond the Corporation: Humanity Working, David Erdal, The Bodley Head, London, 2011.

The author of this book is clearly not a Marxist and he approves of arguments for workers’ cooperatives that encapsulate ‘good, basic, capitalist thinking.’  He puts forward the view that what he is proposing is, far from being woolly and utopian, not only immensely practical but has been implemented many, many times in many, many places.  It’s sheer practicality is one of its attractions and let’s be clear – the practicality of something is an attraction.  It is a clear advantage for any option that it can actually be implemented.

Much of the Left however recoils in horror at the ideas proposed in this book.  Nevertheless the impulse and development as well as the ideological case for workers’ ownership are forceful reflections of the analysis of Marx, which posits the growing contradiction between the socialisation of production and the private appropriation of this production by capital.

Ironically the author gives an illustration of this contradiction.  He compares the electronics industry in Silicon Valley favourably to that of Boston and accounts for the relative success of the former as a result of the fluidity of the movement of people involved in the industry, lack of proprietorial authority in many of the industries’ firms  and the inability of owners and managers to contain the flow of information within individual companies; all contributing to creative development of products and production.

It is notable, he says, that there is less of a top-down culture in Silicon Valley and that employee ownership has been a major driver in business development.  Companies could not attract good people simply by cash so instead used share options, a form of ownership, to get them to come, work for them and stay in the firm.  This together with the excitement of the work itself became the greatest motivating factors for employees.

The socialisation of production is evidenced by the increasing division of labour in which thousands, if not millions, of products are separately produced across the globe in order to come together as one combined product.  The necessity for this production to take place in a balanced and proportionate way, so that the final product can be efficiently produced, requires co-ordination and planning within and across hundreds and thousands of companies.

In April two years ago the BBC reported that a fire in a factory in the small town of Marl in western Germany had killed two people and affected the production of a resin called P-12, used in car braking and fuel  systems. This threatened car production across the world so that “Earlier this week, more than 200 executives from companies including General Motors, Volkswagen, Toyota and Ford met in Michigan. -. . . The group said that it was clear that “a significant portion of the global production capacity” had been compromised.  After the meeting, the big car companies were saying nothing on the record.  But some sources now say there is a real worry that the potential impact could be serious, including a slow-down in production.”

Such cooperation is planned but insufficiently so.  The inevitable disproportions in production lead not to conscious alterations in levels of production in order to seek balance in the myriad locations but to individual crises of cash-flow or profitability in individual firms and production units, leading to crises and disruption.  Economic and production efficiency is calculated at the individual firm level without regard to the overall system of production, the cooperative system of labour, which is in place.

We saw this through the recent dispute at the Grangemouth refinery and petro-chemical works, on which much of the British chemical industry was apparently dependent.  The economic calculation that was carried out rested solely on the relative profitability of the Grangemouth plant and not on an assessment of the industry as a whole.

Both examples illustrate the contradiction between private ownership of the means of production and the increasingly socialised system of production on which it is based.

An even more dramatic illustration of this contradiction is shown by the following two graphs.  They show the falls in world trade and industrial production following the credit crunch in 2008 compared to the impact of the great Depression of 1929:

World Trade

eo fig 2 eichengreen_2ndupdate_fig1

World Industrial Production

What these show is the dramatic falls in economic activity consequent on the decisions of individual banks and financial institutions not to lend because they did not trust each other to be in a position to pay the loans back.  The huge socialisation of resources that is carried out through the credit system became a prisoner of the private ownership of these credit institutions.  Each feared that the other might be fatally insolvent due to speculation in sub-prime mortgages or old-fashioned overproduction of houses and offices as in the case of Ireland.

What has this to do with the growth of workers cooperatives?  Well, if we  understand that capitalism is characterised by the separation of workers from the ownership of the means of production (including credit) and the ownership and control of these means in a separate class, the class of capitalists, we can see that such a system can exist only by workers gaining their livelihoods by selling their capacity to work on the labour market and using the money received to purchase the means of subsistence that they have just produced (but which are owned by the capitalists for whom they work).  The sale and purchase of these two types of commodities, labour power and means of subsistence, takes place in the market and the economics profession attempts to analyse how the economy works by focusing on how these markets work – without previously understanding or analysing why there is a need for these markets in the first place.

The explanation for this is that workers do not own the means of production and therefore cannot allocate these means or the output derived from them directly, through conscious planning, to satisfy the needs and wants that they have themselves previously identified.  They do not set the priorities for what has to be produced, how and where it is to be produced or consciously regulate the effects of what they produce so that any relative over-production does not lead to a closure of workplaces but to a planned decrease in capacity and switch to other desirable production.

The creation of workers cooperatives is a step in overcoming the separation of workers from the ownership of the means of production and therefore of overcoming capitalism.

Many on the left advance fears that workers will become their own capitalists and because the author of this book is not a socialist he quotes approvingly the view that while capitalism is good at creating capital it is not good at creating capitalists. The fear is that the competition involved in the Market will lead workers, even those owning their own businesses, to compete with each other in a way that simply replicates the exploitation involved in private capitalist ownership.  The drive to produce cheapest will lower wages and increase work effort.  In effect workers will exploit themselves.

What this view does in effect is give priority to the Market in analysing capitalism in just the same way as do the mainstream economists.  What they don’t see is the potential of workers cooperatives to overcome the separation of workers from ownership of the means of production and through ending this separation threaten the monopoly of the capitalist class, in doing so undermining the existence of the market as a regulator of economic life.

This can be done through the simple expedient of individual workers’ cooperatives cooperating!  The immediate objection to workers cooperatives is that they will have to compete with each other, or at least with private capital, and while the latter may be true the former is not.  Workers cooperatives can cooperate with each other.

Will workers cooperatives still exist within a society that is capitalist?  Yes, which is why books like the one reviewed see no contradiction between capitalism as a system and workers ownership.  Will this involve competition and will this not involve unwanted and unpleasant features and decisions? Yes, but Marx explained that the new society would not be born except on the basis of the old one and not on one that we could choose.

The sometimes contradictory arguments of this book reflect this contradiction existing in real life.  No more so than the argument about how the transition to workers cooperatives can come about.  Here it is argued, obviously on the basis that there is no contradiction between cooperative production and capitalism, that the capitalists themselves should simply transform their companies into cooperatives.  ‘The powerful need a change of heart’; senior managers will have to ‘make do with a smaller proportion of the wealth’; managers will ‘certainly have to learn how to exercise their power differently’ and ‘advisors will need a change of outlook’.  The book has explained why this should happen but not why it is in the interests of these people that it should happen.

The author calls on Government to prefer cooperatives and points out that this will increase prosperity, boost tax receipts, reduce social problems, increase citizen welfare and reduce social expenditure.  This makes sense only if you think the State is there for all citizens and not just for a few.

It calls on trade union leaders to realise the importance of workers gaining ownership rights and the potential it has for higher earnings, enhancing workers’ rights to information and their power to influence company decisions.  On this score it might appear that the author is on more secure ground since trade unions claim to represent workers and their interests.  Unfortunately it is just for this reason that many do not support worker ownership since such ownership would undermine claims that they exclusively represent workers in a particular workplace.  Normally union leaders prefer state ownership because the state will often guarantee union recognition, and therefore the dues income that pays the salaries of the union officials, while it allows these same officials the ability and right to claim exclusive representation rights.

The alternative perspective of some of the Left – of a once and for all take-over of all capitalist production by a workers’ state – has its own problems.  It leaves no role for the accumulation of prior social power and experience by the working class or of the potential radicalising effect of prior widespread workers ownership.  Such ownership would allow a ready reply to the accurate critique we now hear – where is your workers’ and socialist alternative?

Through many posts we have pointed out the fact that this has disarmed workers in fighting austerity, debt bondage and workplace closures.  Keynesianism – increases in state expenditure – is usually put forward as the only alternative to austerity but it is not an alternative that belongs to the working class.  The perspective of a workers’ economy can take root as a concrete alternative, at least in part to the degree that workers already own and control production.

Instead the ideal of a revolution, that in one blow achieves the requirements of decades of class struggle and experience, slides into the view that this comprehensive creation of socialised property becomes a single task of a country wide mechanism, usually the state.  So the State which is the protector of private ownership is wrongly held up as the means of overcoming it, through nationalisation etc.

Even those who see the creation of workers’ ownership as a task only for a workers’ state do not appreciate that this workers’ state itself must be based on workers ownership of production and of society.  How else do we prevent the bureaucratic degeneration experienced after the Russian revolution or expect the state to ‘wither away’ after revolution, which is the goal of Marxists and which was proclaimed by Lenin after the revolution?

The fight for workers cooperatives is a transitional one in that it contains the seeds of future society within the old.  It therefore contains elements of the old and those of the new but to condemn it for the former while ignoring the latter is a mistake.  In the next post I will look at criticisms of the idea of workers cooperatives as a means of achieving working class liberation and socialism.

One thought on “Employee ownership and socialism

  1. Spot on again. I look forward to your next instalment. Could I recommend also having a look at my posts from several years ago setting out the Marxist argument for Co-ops “Can Co-operatives Work” and “The Economics of Co-operation”.

    One point I would make, though, is in relation to the link between competition and co-operation. I don’t think we should denigrate the role of competition, which has tended to be a dirty word on the Left. Marx makes clear that it is competition which plays a revolutionary role in breaking down the rigidities and monopolies that hold back development. We should not be afraid of or oppose competition between co-operatives as a means of driving their greater efficiency. We cannot get away from the fact that for worker owned property to be superior to capitalist property, if has to be more efficient, and a driving force for that is competition. But, as Marx describes in relation to the production of relative surplus value, greater efficiency does not mean greater “exploitation” of the workers, other than in the restricted sense of a higher rate of exploitation/surplus value.

    A higher rate of surplus value becomes meaningless as a measure of “exploitation” when workers own their means of production, because they appropriate the realised surplus value. As Marx describes in relation to the Lancashire co-ops, and as Connolly describes in relation to Ralahine, its precisely on this basis of extraction of relative surplus value, more efficient use of constant capital, that the greater efficiency of the Co-ops was achieved, and that as Connolly shows is compatible with the burden of the workers being lessened rather than heightened.

    Until such time as we have Socialism, and the relations between workers as consumers, and workers as producers is eliminated, and we have simply human relations abolishing commodity fetishism, we will probably require some form of competition to ensure the interests of both are met, and to avoid “rent-seeking behaviour” by any form of monopoly. But, it does not have to be the same kind of competition.

    Capitalist monopolies as you suggest both compete and co-operate. Global car companies, for example, co-operate to produce and share engines, gearboxes and so on. I have suggested that if all Co-ops were part of a single Co-op Federation, the bulk of their profits, as Marx suggested could be transferred to it. These profits would not only cover investment, but would cover social insurance for the workers – pensions, unemployment, sickness – which would be a massive attraction for workers in co-ops in poor countries affiliated to it. It would mean co-operation benefited all workers affiliated to the federation. But, a negotiated portion of profit could be retained by each individual co-op to incentivise efficiency, as the workers in that co-op would directly appropriate this portion of profit themselves.

    Competition to drive greater efficiency could not only bring about the same kind of concentration and centralisation of capital as occurs with “private” capital, but co-operation between workers could ensure that via benchmarking, best practice etc., the lessons of how to be more efficient was spread to other co-ops.

    If we want to convince workers of the practicality of socialism, then as you say, and as Marx said in his Inaugural Address to the FI, there is no better way than the practical example of efficient worker owned property.

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