Workers’ Cooperatives as an alternative to capitalism – 1

420389_494371703955556_1654331871_nIn October I was invited to speak at a meeting organised by the Glasgow South branch of Left Unity on the subject of workers’ cooperatives.  The post below is the first part of the text on which the speech delivered was based.  I would like to thank the comrades for the invitation and for the couple of pints in the pub afterwards.


The first thing I want to do is look at two problems to which I think workers’ cooperatives can play an important role in providing an answer.

In 2008 the Irish banking system was on the verge of complete collapse.  It had lent exorbitant amounts of money to commercial property development and for the construction of houses.  Not only finance but employment and state revenue became overly dependent on construction.  When the price of houses rose beyond a certain point, and when the commercial property market became saturated, the over-extension of property developers became evident in bad loans that bankrupted the banks.

This was an international problem because much of the financing of Irish banks came from Britain, the US and Germany for example.  The bankruptcy of the Irish banks would thus have had severe repercussions for investors in these and other countries, including the financial institutions in these countries.

To save the Irish banking system, to bail out the native bankers and foreign investors, the Irish Government launched a bailout of the banks through a state guarantee of all their liabilities, worth around €440 billion in an economy nominally producing €154 billion a year.  It was declared ‘the cheapest (bailout) in the world’ by the Irish Finance Minister.  This could not possibly be afforded and has so far cost an estimated €64 billion, although the exact figure is still a matter for development.

This bill and the huge budget deficit caused by the collapse of construction resulted in a series of attacks on working class living standards involving seven austerity budgets consisting of a variety of tax increases, cuts in public services and investment, the robbery of workers’ pension funds, massive unemployment, emigration and lots of praise from around the world at how well the Irish swallowed the austerity medicine.  From poster boy for the boom the Irish have become poster child for austerity.

In the following election the ruling Fianna Fail party was badly mauled and a coalition of Fine Gael and Labour Party was elected on the promise of a ‘democratic revolution’ and by Labour the promise it would reign in Fine Gael.  The vote was a choice between ‘Labour’s way or Frankfurt’s way.’

In truth however no one could really be surprised that this coalition continued and intensified the policies of austerity began by Fianna Fail.  That anyone thought differently demonstrated only a very low political awareness.

On the ‘left’ 5 United Left Alliance candidates were also elected and 14 Sinn Fein TDs out of a total of 166, although Sinn Fein had also voted for the bail-out.

In 2012 the Irish State was compelled to hold a referendum on the new EU Fiscal Compact that limited state deficits and debt.  It basically required signing up to continued austerity which is why it was called the ‘austerity treaty’.  Despite the unpopularity of austerity it was approved by 60% to 40%.  In my view a crucial reason for this was the complete lack of a convincing alternative.

What was the alternative proposed?

This consisted of a number of elements – repudiating the debt, opposing austerity, taxing the rich, and increasing public expenditure in order to improve public services, boost employment and further economic growth.

There are two points to note about this alternative – first it doesn’t change the nature of the economic system, it is what is called Keynesianism.  This does not mean that socialists should not support some of these measures, or point out the hypocrisy in their not being implemented.  But the question is, if the problem is capitalism and this alternative doesn’t threaten the system then quite obviously it cannot be a solution.

The second flows from this, because if it isn’t a solution would it actually work?  I’ll just take two examples from this programme – why on earth would the rich allow their wealth and income to be taken off them?  And how then could the state increase public sector investment when it was heading towards budget deficits of over 13%?

This illustrates a deeper problem with looking to the state as a solution.  This is because the burden placed on Irish workers was not simply, or even mainly, carried out by the banks and property developers.  It was the State that made their debts the debts of the Irish people and it has been the State that has increased taxes and cut services, making their own particular contribution to cutting wages and increasing unemployment.

Since the state is a capitalist state, funded and staffed at the highest levels by the propertied classes this can really be no surprise.  The actions of the capitalist state are not therefore the answer.  Not only does it not have any interest in providing a solution but it is incapable of being the solution.  State ownership, bureaucratic ownership, is not democratic and is totally unsuited to running productive activities the civil servants that staff it have no knowledge of.

There is no point calling for the state to nationalise the banks – they did and that was precisely the problem!

At bottom this is the root of the failure of resistance to austerity and is why it has not only failed in Ireland but in every other country affected by the financial crash.

The second point is connected to all this.  If the Keynesian alternative is not a road to socialism what is the road to it?

The alternative to the view that the capitalist state will reform society is that the state is actually the mechanism for enforcing oppression and exploitation and should therefore be smashed.  In this scenario of revolution the oppression of capitalist society breeds resistance which develops into a revolutionary seizure of power by the working class that then proceeds to build a new socialist society.  In this society the market is replaced by planning and capitalist economic crises become history.

But how are workers to become aware that their own ownership and control is the alternative?  How does it not only come to consciousness of this but is actually trained, ready and able to play this role?  How in the middle of crisis is a workers’ economy supposed to rise from the ashes more or less fully formed and present itself as a qualitative advance on what has went before?

Of course in some ways capitalism itself anticipates this planning through the growth of big business with advanced forms of planning within it, increased cooperation between companies that ostensibly are in competition and increased interdependency of different firms and different countries, encapsulated in the term globalisation.  This has all been demonstrated negatively through the simultaneous near collapse of the financial system, world trade and economic growth through the credit crunch plus the increased role of the state despite privatisation.

There is however one thing missing from this anticipation of the new society in the existing one and one thing missing from the scenario of revolutionary overthrow.

The missing factor is what the new society, the harbinger of socialism, actually is – the rule of the working class and its allies; the rule of the majority of society in place of the capitalist class and its managers, bureaucrats and politicians who all currently administer its rule.

Where in the anticipation of socialism within existing capitalist society is the growth of workers participation in running the economy, in preparation for taking over complete control?  Where are the grounds for workers to build a new society before, during and after revolution?  Where is the alternative that would avoid a new version of Stalinism where the State rules society rather than a society ruled by workers subordinating the state? Where even arises the motivation for workers to see that their own rule is the only valid unfolding of their resistance to the exploitation, oppression and iniquity of current society?

How are workers to come to see that it is they that not only can but must take control of society and its productive powers if they do not first take initial steps now through workers’ cooperatives?  Are we to believe they will suddenly come to realise through a revolution – an episode of at most a few years – that they must take over the economy?  How will they come to seek this as their solution unless many of them have already tried to do it and become committed to it?


3 thoughts on “Workers’ Cooperatives as an alternative to capitalism – 1

  1. It does not sound as if you are as convinced about the alternative co-operative road to socialism strategy as Boffy is. Why pose the question without the answer? There is a consideration and refutation of the strategy to be found in the 1998 book called Market Socialism the Debate among socialists’ by Bertell Ollman. Here is a few passages ‘What we have in Marx’s comments on workers’ co-operatives is an alternative scenario to the one he usually presented for late capitalism….To the extent co-ops were established they would provide important evidence that workers are capable of the running the economy on their own and that the capitalist,as a class of owners, are not essential to the production process. Not only could industry be run without them, but this being so,capitalists deserve none of the wealth and power that now go to them for doing what they insist only they can do. In this way workers co-ops help bolster arguments to the effect that socialism is both possible and just..’

    Now for the refutation. He quotes Marx ‘co-operative enterprises make the associated labourers into their own capitalists.’

    ‘Marx’s worry was that in placing workers in the same relation to capital as capitalists, workers co-ops provide workers with many of the same experiences as capitalists and thus with many of the same ideas and emotions, however modified by their other experiences and interests as workers. The resulting mix-except on those occasions when as collective capitalists they go bankrupt and as workers they lose their jobs-is not conducive to their engaging in revolutionary activity. Our overall experience with the political activity of workers in workers’co-ops over the last hundred years suggests that Marx’s fear was not unjustified. For all the progressive qualities Marx saw in workers ‘ co-ops and for all the the support this economic arrangement gives to some important arguments for socialism, Marx did not believe it provides us with either a model for socialism or a useful strategy to pursue in the the class struggle against capitalism.’ p115. This is not really a refutation as such because Ollman did not provide an account of the historic record as such but you have looked at the record yourself and found it a very subscribed success.

    I don’t agree with Ollman when he rules down workers co-operatives as being a possible model for socialism if he means by this even after a workers revolution. It is a democratic alternative to State ownership that mat be the only rational one to hand. But I do agree with him when he argues that it is not a useful strategy to pursue in the class struggle against capitalism. It is a model based on the idea of a peaceful and piecemeal transition to socialism that seems unlikely to succeed. I am afraid we a stuck with the classic revolutionary model of aiming at the creation of a workers state. What we have to do is change the political culture of socialism that favours this kind of strategy because it it puts Lenninist vanguards in control of everything, especially the managing of the workers state.

  2. I should also have commented on this.

    “This illustrates a deeper problem with looking to the state as a solution. This is because the burden placed on Irish workers was not simply, or even mainly, carried out by the banks and property developers. It was the State that made their debts the debts of the Irish people and it has been the State that has increased taxes and cut services, making their own particular contribution to cutting wages and increasing unemployment.”

    This is the real nub. Even in conditions where these Keynesian solutions can work in their own terms, as capitalist solutions, they are not solutions for workers. For example, after WWII, UK debt to GDP stood at 250%. The high level of debt did not prevent capital from investing in the creation of the welfare state. Nor did it prevent large scale investment in recapitalising the decayed industries of coal, steel and so on. But, the basis of that restructuring and recapitalisation was a massive loss of jobs in those nationalised industries.

    The majority of jobs lost in the UK coal mining industry occurred in the 1940’s and 50’s, when that restructuring was being undertaken, as part of nationalisation, not under Maggie Thatcher. The solutions provided by the capitalists state, whether they be the solutions provided by the welfare state, that seeks to resolve the problems of capital on the backs of workers, in conditions of growth, or those based upon a more direct repression of the working-class using the state’s mailed fist, under conditions of crisis and stagnation, are both ultimately capitalist solutions, not workers solutions. Neither advance the social and economic position of workers, which is a fundamental requirement for their political advance.

  3. We seem to share an incredible amount of political common ground. It would probably be a bad idea for us to form some new organisation based upon it, however, because both coming from a similar Trotskyist background, it would almost certainly mean we would begin to disagree!

    Once again, I agree with pretty much everything you have said here, and its my intention in the near future to publish books on Co-operative Socialism, outlining these positions. I also agree with your position in respect of Keynesian solutions, i.e. we do not recommend such solutions, because they are not socialist solutions, but nor should we necessarily oppose them when they are adopted.

    The only thing I would pick up on, however, is this comment.

    “The second flows from this, because if it isn’t a solution would it actually work? I’ll just take two examples from this programme – why on earth would the rich allow their wealth and income to be taken off them? And how then could the state increase public sector investment when it was heading towards budget deficits of over 13%?”

    This assumes that such solutions would indeed take wealth and income from the rich. Moreover, we know that at various times, capital has advanced such solutions. For example, Marx points out that the Public Debt in the 18th and 19th century, was a major lever for primary capital accumulation, and he sets out that the debt had to be repaid from future taxation; Roosevelt’s New Deal required extensive borrowing, which again could only be repaid from taxation; and that was also the case with the creation of welfare states, and restructuring and recapitalisation of many staple industries under a regime of state capital nationalisation.

    The point is that, at certain points, capital is quite prepared to allow the state to engage in such borrowing to be paid back out of future taxation, where this is seen as a means of overcoming temporary blockages within the functioning of the system. They do so, because future growth, i.e. accumulation of capital, more than compensates for the surplus value that is siphoned off as taxation.

    It is not that Keynesianism cannot work. It can, as I have set out in my book Marx and Engels’ Theories of Crisis:Understanding The Coming Storm. Mandel in “The Second Slump” demonstrated that in the five recessions that occurred after WWII, Keynesian fiscal stimulus had managed to cut them all short. The point is that it can only work under certain conditions. It can only work under conditions of Long Wave Boom, when such blockages in the functioning of the system, having been overcome enable a more rapid accumulation to continue, and thereby compensate for the use of surplus value by the state for the development of state capital. That is all the more the case where that state capital is used as part of an accumulation and rationalisation of the total social capital, which facilitates the growth of surplus value.

    Unfortunately for capital, the time it most requires these solutions to work, during periods of long wave downturn, of crises and stagnation, are the very periods when they cannot work. As in the 1970’s, those solutions lead capital to simply raise prices rather than to invest additional capital. They lead, therefore, to stagflation, under those conditions, basically because at that stage of the conjuncture, the conditions do not exist for the development of new vibrant industries on a wide scale, that produce high rates of growth and profit, and which can absorb surplus value, in such accumulation without depressing market prices below costs of production.

    Given the ridiculously low rates of interest that currently exist, and which are a function of the extent to which the rate and mass of profit expanded over the last 30 years – they are NOT the result of QE as bourgeois economists propose – it is criminal that states are NOT borrowing at these rates. After all, companies like Apple that have tens of billions of dollars of cash sitting on their balance sheet are borrowing as much as they can get their hands on, at these once in a lifetime rates. Those companies are doing so often in order to buy back the company shares, because this provides them with a higher real rate of return.

    A state like Ireland or the UK has 30 year bonds that were issued in 1984, at much higher rates of interest than exist today. They have bonds of shorter durations issued in the intervening period that again were issued with much higher rates than exist today. No one seems to have asked the question why if these states want to reduce their spending, they do not simply issue as many bonds as they possibly can at long duration – 30, 50 or more years – to take advantage of these historically low rates, and simply use the proceeds to buy back the outstanding older bonds, that are currently paying interest of up to 10% p.a., as opposed to the 2% that would be payable on the new bonds! In other words, to simply follow the example of Apple and other large corporations.

    The real reason is that continuing to pay out the higher interest on those older bonds, is another means by which the profits of the banks are being rebuilt at the expense of the taxpayer.

    I look forward with interest to your further posts on this topic.

    Unfortunately, for

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.