Can Co-operatives Work - Part 4

Explanation of the Attitude of “Marxists” to Co-operatives – statism

The real reason for “Marxists” opposition to Co-operatives is the statist nature of the Marxism that developed after Marx’s death. As Draper has set out in his “The Two Souls of Socialism” the origins of this statism reside with the influence of Lassalleanism in the main Workers party, the German SPD.

“That very model of a modern social-democracy, the German Social-Democratic Party, is often represented as having arisen on a Marxist basis. This is a myth, like so much else in extant histories of socialism. The impact of Marx was strong, including on some of the top leaders for a while, but the politics which permeated and finally pervaded the party came mainly from two other sources. One was Lassalle, who founded German socialism as an organized movement (1863); and the other was the British Fabians, who inspired Eduard Bernstein’s “revisionism.””

See:Lasalle and State Socialism

And although, Marxism has come to mean more and more over the last 100 years that variant represented by the revolutionary split from the Second International that statist root within the old International remained as much for the revolutionary stem that shot up alongside the withering Social Democratic one.

“These two self-styled socialisms are very different, but they have more in common than they think. The social democracy has typically dreamed of “socializing” capitalism from above. Its principle has always been that increased state intervention in society and economy is per se socialistic. It bears a fatal family resemblance to the Stalinist conception of imposing something called socialism from the top down, and of equating statification with socialism. Both have their roots in the ambiguous history of the socialist idea.”

Of course, Draper, fights shy as do all who have their roots in the Trotskyist lineage, of admitting that this Stalinist top down Socialism was in fact, implicit in the top down conception of socialist construction developed by Lenin. Its true, as the quotes above from Lenin himself on Co-operatives demonstrate, that he had a far more hospitable attitude to them, both before and after the Capitalist overturn, than do today’s Marxists, but his vision, at least for Russia, remained one, of first a Political Revolution, then a social transformation from above by the State, with the Co-operatives simply being a mechanism within that process, a means by which the workers are socialised, facilitated by the State. Its not, of course, that Lenin acted out of bad faith, which is the case with Stalin, who increasingly acts to defend the interests of the elite, but that the model he developed was flawed, and could not achieve the results he wanted. But, it is that flawed model that today’s Marxists continue to advocate – just as they continue to mindlessly advocate many of Lenin’s other ideas without any questioning of their relevance to the world of today, something Lenin himself would never have been guilty of.

It is that statism that determines the attitude of the Marxists to the development of Co-operatives. Only, the big bang Political Revolution that seizes state power will do, everything else as Luxemburg argued above is Reformism. And to prove that the same arguments used by Luxemburg and others are marshalled to demonstrate why it is pointless workers engaging in such ventures. But, in reality these arguments when they base themselves on Marx either misrepresent him, or else as Luxemburg does, they apply his ideas mechanically. They rely on arguments based on a high level of abstraction rather than a concrete analysis of reality, and a conscious application of dialectical thought. Again, something Lenin, himself, would not have been guilty of, and nor to would Luxemburg were she not writing in conditions of an intense factional debate against people who were trying to present a case for a gradual growing over Capitalist society into socialism by such means.

The Arguments Against Co-operatives

The arguments mobilised against Co-operatives are basically these. That they:

a. Are Utopian
b. Unable to Compete
c. Impose Capitalist Conditions on Workers

So, let me respond to these arguments in turn.

Utopianism

The charge of Utopianism stems from a number of sources. Primarily, it comes from Marx’s comments in the Communist Manifesto in respect of the Utopian Socialists, but additionally, it comes from Marx’s criticisms of the Anarchists, of Proudhon in particular. Indeed, the commonest charge against the advocates of Co-operatives by Leninists is that of Anarchism. Yet, as I have already shown in Part 1 these charges have no foundation in Marx whatsoever. Marx’s charge of “Utopianism” against the Owen, Fourier, and Saint Simon was not that they advocated the establishment of Co-operatives, but that they did not – and given the time they were writing could not – locate the working class as the social force, which would carry through such a transformation, rather they thought that it could be done, simply by persuading the bourgeoisie of the rationality of such a course of action, in the same way that Owen himself had arrived at that rationality, and acted upon it.

“The founders of these systems see, indeed, the class antagonisms, as well as the action of the decomposing elements in the prevailing form of society. But the proletariat, as yet in its infancy, offers to them the spectacle of a class without any historical initiative or any independent political movement.

Since the development of class antagonism keeps even pace with the development of industry, the economic situation, as they find it, does not as yet offer to them the material conditions for the emancipation of the proletariat. They therefore search after a new social science, after new social laws, that are to create these conditions.”

It is this failure to locate the workers as the means of bringing about the necessary change, not the form of the change that Marx identifies as being Utopian.
And, the same is true of Marx’s Critique of Proudhon, and the other Anarchists. It is not the establishment of Co-operatives within their schema that Marx challenges, but the fundamental economic and political concepts that they use in doing so, and which flow from their essentially Ricardian economic theory. It is the failure to understand the nature of Surplus Value, and the Value of Labour Power, the fallacies that spring up from that in relation to the workers enjoying the “full fruits of their Labour”, and so on that Marx attacks as being Utopian, and correctly so. But, nothing in that fundamentally challenges the idea of the development of Co-operatives as a valid means by which workers here and now can realistically answer their immediate problems without either the need for a complete overthrow of the Capitalist system (Maximalism), or else settling for appeals to the bourgeois state for a few concessions (Reformism).

And, indeed again, as I have shown this has to be the case, because Marx himself in his mature writings, and Engels even after Marx’s death put forward the establishment of Co-operatives as being precisely that form in which this social revolution manifests itself. As Engels put it,

“And Marx and I never doubted that in the transition to the full communist economy we will have to use the cooperative system as an intermediate stage on a large scale.”

It is certainly the case that if Co-operatives are viewed as an ALTERNATIVE to class struggle then such a development would be as Marx described the followers of Owen, reactionary, certainly, if as in their case it increasingly meant arguing against workers engaged in such class struggle. And certainly, if such Co-operatives simply operated as individual Capitalist enterprises then they would have little progressive content, the normal laws of Capitalist economy would ultimately tend to lead to their dissolution, and re-conversion to straightforward private Capitalist property, just as a state which attempted to create Socialism in One Country would ultimately suffer such a degeneration. But, the ultimate fate of such a state, is as Lenin and his comrades argued correctly, not a reason for not carrying through a revolution instead waiting for the conditions for a simultaneous global revolution to arise – which, of course they never would. Rather, it was an argument for utilising the ground gained, to demonstrate in practice what is possible, to take advantage of the superiority of co-operative, worker-owned property in the competition with private capitalist property, to utilise such an advance as a bulwark for workers economic and social power from which to advance support for workers outside in their continuing struggle against Capital. And that is precisely the basis on which Marx advanced the idea of building Co-operatives, it is precisely hat he meant about the need to develop them on a national basis, its what Ernest Jones meant when he more specifically described how it was necessary to develop a national Co-operative framework, in which the funds could be centralised, so that competition could be overcome etc. And, today we have seen in practice that method applied in Argentina, for example, in the way the recent wave of Co-operatives have linked up with their local communities to address themselves to their needs, and the way they have keyed into the wider class struggle.

There is no fundamental reason why a Co-operative should be a progressive institution, anymore than that a Trade Union or any other organisational form should be progressive. But, as organisational forms in which the working class as the revolutionary class can organise, and thereby represent THEIR class interest in opposition to the interests of Capital, they have the POTENTIAL, to be such progressive organisations. Whether they are or not is a function of the role of Marxists within them.

Unable to Compete

This is in fact, a mechanistic argument. It is based on a literal interpretation of some of the basic economic laws uncovered by Marx, for example in relation to the concentration of Capital. But, although those laws are perfectly valid when looking at Capital at a high level of abstraction they are not at all true when looked at in terms of specific concrete cases. It is certainly true that in the case of some large industrial production, say the production of motor cars, the general laws in relation to the economies of scale etc. will apply, which will mean that some small producer will always tend to be at a competitive disadvantage to a large producer. The scale of production will set high levels of Minimum Capital requirement even to enter production at an efficient level.

Yet, casual observation will show that even in this arena there are a number of small car companies that not only exist but prosper on the basis of producing for a niche market. In other words their selling point tends to be precisely the fact that the product is NOT mass produced, but is a quality hand-made product. In fact, the smaller scale of production, the labour-intensive nature of such production makes such firms ideal for Co-operative production. I have made similar points in relation to such production, or to production of commodities that have a high proportion of complex labour to Capital – and which tend to have the opposite laws to the Falling Rate of profit – elsewhere. See: thinking Outside the Box , Tendency of the Rate of profit to Rise , and Porn Free

There are a whole series of areas of production where the economies of scale do not really apply. Take, for example, the issue of Co-operative Housing. Not only is it almost certainly the case that such a Co-operative would work best on a local level in terms of managing its properties and controlling its estate, but the associated maintenance Co-op would also have no obvious huge advantages from large scale operation. On the contrary the nature of Co-operative production, and the tying together of its function in working with the Housing Co-operative to maintain the housing stock, to liaise with tenants etc. and thereby to undermine the conditions for the alienation of labour, would almost certainly be most effectively operated on a smaller scale, a fact, which many local Councils discovered in the move to return to estate based DLO units. Of course, that may not be the case in respect of a much larger construction Co-operative geared to large scale house building, or even the construction of roads, schools, hospitals etc., where such economies may be important. But, I will deal with that later.

A look at the examples taken from Marx’s analysis itself gives the answer to this objection. The Lancashire textile Co-operatives and the Ralahine Agricultural Co-operative both showed that Worker Co-operatives are often more competitive than comparable privately owned and managed firms. More recent examples, also prove the point.

Tower Colliery in South Wales was closed as part of the mine closure programme and taken on by a private company, who also proposed to close the mine on the basis that it was unprofitable. The miners at the colliery took it over and not only ran it profitably until it finally became exhausted recently, but were able to increase the number of people employed at the pit.

See: Tower Colliery

In “Self-Management – Economic liberation of Man” Edited by Jaroslav Vanek other examples can be found of similar success. One such is the US Plywood Co-ops See: Plywood Co-ops for example, which account ofr 20% of softwood production in the US. Other examples, quoted are the Scott Bader companies.

See: Scott Bader

But, of course, one of the most successful and best known Co-operatives is that based in the Basque country in Spain the Mondragon Co-operative.

See: Mondragon , which has not only managed to compete over the last 50 plus years of its existence, but has flourished and expanded into new areas of production and distribution, as well as into other parts of Spain and Europe. It not only engages in Co-operative production but combines it, and has done so from the beginning with educating and training its workers through its own University etc.







In fact, throughout Europe Co-operatives of one form or another are quite commonplace. Indeed, they are more commonplace throughout the world than you would think. One in four people in the US are a member of a Co-operative of some kind. Even millionaire Ponzi scheme operator Bernie Madoff lived in a housing Co-op!

See: Euro Co-op



In Britain the Co-op has not only managed to compete since its creation in the 19th century, but has expanded from its roots in Rochdale throughout Britain, and into a wide variety of businesses. It is, the largest farmer in Britain See: Coop Farms . And a whole range of other businesses See: here .

Although, Marxists would have criticisms of some of these Co-operatives, and as I have said above they really require a root and branch democratisation that can only come about as a result of socialists and trade unionists taking an active part in them, and which can probably only come about as a result of a conscious effort by Marxists to develop an overall Co-operative strategy that begins by developing worker owned and controlled production Co-operatives as part of an (initially) national Co-op organisation, the fact remains that these Co-ops have not only survived, and therefore, competed against Capitalist businesses, but often thrived, and expanded their operations.

Horvats in his essay in “Self-Management” discusses the role of statistical techniques in replacing the market pp 130-1. Although he is talking about this in relation to a planned economy it is related to this. There is a difference between planned economy and Co-ops. In a planned economy the State has to ensure proportionality. The problem of ensuring that planned supply is available e.g. a new steel mill. A Co-operative under Capitalism largely does not have to consider this, it buys on the market with no consideration for the Capitalist Economy as a whole. However, insofar as it can link to other Co-op producers it can begin to develop proportionality in the Co-op sector, and more importantly, Co-op producers should supply their retailers as a priority and given fixed long term favourable prices compared to sales to private retailers.

The other objection to Co-operatives raised, however, is that they impose Capitalist conditions on the workers. This criticism is particularly true of Consumer Co-ops, which by their nature place control in the hands not of the Co-ops workers, but of its consumers, who as stated above, often do not take an active part in the management of the business, and so such Co-ops can often become little different from a private Capitalist enterprise in terms of the relation between management and workers. That, of course, is not an insurmountable problem, given a Labour Movement that sought to address that problem, that sought to ensure such Workers Control of these Co-ops and so on. It is not a problem of the Co-op as such, but a problem of the lack of adequate class consciousness, and of Labour Movement organisation to ensure that such Co-ops operate in the workers interest.

It is inevitably true that a Workers Co-op to an extent imposes Capitalist conditions on its workers. The firm remains bound after all by the constraints of a Capitalist economy. Marx, himself was well aware of that. As he said in Capital,

““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. But 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.”

So, although this criticism is to some extent true, it was not sufficient to persuade Marx to argue against workers creating Co-ops, on the contrary, as we have seen, he argued that workers SHOULD create Co-ops. And, after all, Capitalist firms impose Capitalist conditions upon their workers, but we do not tell workers not to work for them. The advantage of the Co-op is that unlike in the private Capitalist firm the worker does have some control over those conditions etc.

In fact, the greater efficiency of the Co-op, and the fact that workers do have control over those conditions, means that workers in such Co-ops DO have the potential to improve their position, in a way that workers in a private company do not. The main reason that workers are forced even within their own company to accept Capitalist conditions upon themselves is the fact of capitalist competition, but it is the very nature of the Co-operative which provides the means for overcoming this constraint. For one thing, the more such Co-operatives work together to co-ordinate their activities, to integrate their activities one with each other, the more they replace market relations between themselves with planned, co-operative relations, thereby undermining those very laws of Capitalist competition that exert that pressure upon them.

Finally, there is the question of size and Capitalisation. This is undoubtedly a problem as Marx recognised. There is little possibility at the present time of workers, for example, establishing a Co-operative, mass production car company, even if that was desirable. The minimum size for such a company is too large to mobilise the kind of Capital required. But, even in smaller scale ventures one of the main problems for worker Co-operatives has been not any lack of competitiveness, but inadequate capitalisation, so that the workers begin at a disadvantage. They lack adequate Capital to buy the latest most effective machines in sufficient quantity, they lack the Capital reserves for working Capital in the event of some unexpected event, reduction in business, late payments or bad debts etc. Such a fate befell for example the Rowen Engineering Co-op in South Wales. Yet, even here such problems should not be overstated. Many start-up companies face these problems without the potential solutions to them that Co-operatives could enjoy.

A real workers control over the financial resources of the Co-op Bank, and other Mutual financial institutions could overcome the problem of financing for smaller scale requirements, and the very laws of Capital accumulation can be turned to the worker’s advantage in a Co-operative system, provided that the basis of developing Co-ops is done on the basis set out by Marx, and more particularly by Ernest Jones. Furthermore, I have outlined the way a struggle for the democratic right of workers to control their own pension funds rather than that control being in the hands of the same overpaid financial geniuses that brought about the current financial crisis, would make available around £500 billion, that would be more than enough to capitalise a large number of strategic Co-operative ventures.

Its important not to overstress the problems a Co-operative can face as Luxemburg does, which is to take Marxist economic principles and apply them mechanically. For example, Co-operatives have to exist within the anarchy of the Capitalist Market, which is susceptible to economic downturns. But, the point about Co-operative production is to establish means of subverting those downturns, by gearing production to consumption in a planned way, and by making long term as opposed to short-term decisions that can even out fluctuations – rather like the advice to store up food for the lean years given by Joseph to the Pharaoh. A Workers Co-operative, because its objectives – for example to maximise long term job stability rather than profit – are different from those of a Capitalist business, is in a better position to take those long term planning and investment decisions that avoid the danger of overtrading, and overexpansion which are the most common cause of private firms going bust.

As Hobsbawm points out one of the main factors affecting workers is fear. Yet, what is the reality? Even in the worst period to have affected workers – the Great Depression and War years – there was in reality little basis to such fears. Hobsbawm says quite rightly, there was little chance for any civilian being killed during the War, and, on average, workers were only out of work for a few months. See “Industry and Empire” p.209, and 221. It is not the situation facing workers as a whole that is the problem, but the effects on individual workers that has a generalised effect, through fear etc. The whole point about a Co-operative is that it can smooth out those individual effects, and, by taking a longer-term view than private Capitalist firms do, can smooth out the consequences over a period of rise and decline. Why? How? A Capitalist firm is concerned with maximising profit. In good times they expand to take advantage, knowing that when things slow down they can simply lay workers off. A Co-operative looking forward to that time when things may slack-off, will not want to lay workers off, but will want to be able to keep those workers in employment. A Co-operative during the good times will then ensure like Pharaoh that it puts resources aside precisely for such periods. By keeping workers in employment and maintaining their incomes it acts counter-cyclically. Of course, as Ernest Jones pointed out on an individual Co-operative basis that is pretty meaningless, but as part of a generalised Co-operative framework and strategy it is not. Imagine, a local Housing Co-operative, for example, that worked on this basis, and co-ordinated its requirements for the building of new homes, and the maintenance of existing homes with a local Construction and Building Maintenance Co-op, and preferably with a Co-operative Bank, Credit Union etc. Because each could engage in long-term planning based on meeting the reciprocal needs of each, all could build resources and reserves. Rather than expanding headlong during a boom as private Capitalist firms do a more measured expansion could take place, leaving room for the accumulation of funds. When a downturn occurred, the Housing Co-operative could draw on the funds built up, and held by the Co-op Bank, to ensure that even if the rate of expansion was slowed, resources would be available to keep the construction Co-op busy with maintenance work, the building Co-op would have resources to ensure that even with a slower pace of work it could keep its workers on its books, perhaps using the slower period for them to be re-trained or further trained and so on. The more a Co-operative sector developed on this basis the more it could insulate itself from the fluctuations of the Capitalist market.

In Capitalist firms competition leads to uptake of new technology and technique in a perfect competition model. However, in reality oligopolistic production means this is not the case. Oligopolies protect their innovations by patents, business secrecy etc. Co-operative production has an incentive to share best practice and knowledge throughout the sector, the more workers co-operate not just in their own factory but across the sector. Introduction of new labour-saving machines and techniques can be planned and anticipated so that new employment for workers saved can be developed where they cannot be simply absorbed through higher output levels.

There is a contradiction between the desire to maximise current income and Capital accumulation, and longer-term planning. This is true, but it assumes that workers cannot understand and deal with this contradiction. The advantages of Co-op production means that workers can both have higher current incomes than would be the case if they were employees of a private firm, and have higher levels of Capital accumulation/and/or creation of a reserve fund. But, workers may fail to appreciate that, and instead choose to go in for high current income. They will learn through experience the folly of such an approach. The job of Marxists is to try to minimise the pain of learning those lessons, by acting as the memory of the class. Moreover, in this sphere too the idea of the Co-op being a part of some national – preferably international – Co-operative federation can be important. Marx and Engels argued for a model for the transition period in which the workers would organise production through their Co-operatives, whilst the actual property of the Co-op was held in trust by the State, so that there was avoided the problem of the Co-op simply reconverting into a capitalist enterprise. The same idea was put forward by Lenin in one of the quotes above on his views on Co-operatives. Essentially, prior to the transition period this function of the State could be carried out by the Co-op holding Company, which would fulfil the function of the Bank as described by Michael Barratt Brown in his discussion of the Multinational Corporation in his book “The Economics of Imperialism”. That is it becomes the allocator of Capital within the Co-op sector. Indeed, as I will come to later there are arguments within economic theory as to why this model in which Capital is rented by the individual Co-op is preferable to self-financing.

As I said above, the laws of Capital accumulation can themselves work to the interest of the Co-op. Take the effect on the Rate of Profit of higher Labour productivity. If we assume a given quantity of Fixed Capital then the higher Labour productivity of a Co-op – arising from those factors which orthodox economics does not account ofr because it treats Labour as just another factor of production - will mean more C used up in production – because more raw materials will be consumed and machines will wear out faster- but S/V will be higher. Because R is calculated on Total Capital (K) i.e. including C that is not used up in production, but which has to be present then S/(K) will tend to be higher. This means higher wages, and or higher rate of accumulation, or the creation of a reserve fund is made easier/possible. Secondly, the consequence over fairly short time period of not paying out for unproductive consumption of Capitalist shareholders can be significant. Suppose only 10% of S goes to unproductive consumption. In just 7 years this will mean that double the accumulation of Capital can take place. The combination of these two factors means Co-operatives from a standpoint of Marxist economics are at a considerable advantage to private Capitalist industry.

There are some orthodox economics analyses of Co-operatives that are interesting. For example, Domar, in “Self-management”, that builds on the work done by Ward, and as Domar says some of his conclusions were also arrived at by Tugan-Baranovsky. The main weakness of these analyses, though, it seems to me, is that they simply treat Labour in a Co-op as in the way that orthodox economics always treats Labour, simply as a “factor of production”. But, as Mandel, for example, says in “Marxist Economics” this assumption is clearly untenable. So, for example, the assumptions made by Domar I think although they advance from those used by Ward, still do not take into account the real nature of a Co-operative, and certainly not of a Co-operative as part of some larger Co-operative organisation of the kind conceived of by Marx and elaborated by Jones. Surely, it is as likely that workers in a Co-op will have as their objective neither profit maximisation, nor income maximisation, but maximisation of long-term employment stability. That is, they are likely to trade off current income for the security of longer-term employment. That may be achieved by greater accumulation of Capital to generate greater efficiency and thereby protection in times of economic downturn, or else of the creation of a sufficient reserve fund to help get through such periods, or a combination of both. They may forsake profit maximisation, in order to achieve wider social goals, relating to the connection of the Co-op to the needs of the community of which it is a part, or else of its part within the wider class struggle. For example, an agricultural Co-op may provide free or cheap food to local striking workers, knowing that in return once the strike is over its actions will win it the loyalty and custom of those same workers. Additionally, a Co-op which exists as part of a wider national or international Co-operative Federation will agree to a part of its profits being transferred to that Federation, the better to provide greater Capital resources and strength in bargaining with private Capitalists, and the Funds built up here will provide the basis for extending Co-operative production into other areas, thereby further enhancing the stability of employment of workers in the Co-operative sector. Such funds would also provide the basis for developing an Insurance Fund for workers to provide for retirement, ill-health etc. in the same way that Workers Friendly Societies were intended to do. It would form the basis of creating the conditions in which existing Workers Pension Funds controlled by private Capital could be absorbed under such a scheme and democratically controlled by workers, thereby massively enhancing the amount of Capital available for workers to employ in expanding Co-operative production, and indeed, of arguing for the funds currently handed over to the Capitalist State in taxes and National Insurance payments to be transferred into the Workers Fund. Finally, the assumption made by Domar about the production function of the Co-operative firm is clearly false, because for all the reasons outlined there is a strong likelihood that Labour productivity in the Co-op will be much higher than in the private capitalist firm. Consequently, the comparison of the Marginal Product of Labour, and its concomitant the Marginal Revenue Product of that Labour cannot be compared between the two. Ken Coates, for example, makes an interesting point in his essay in “Self-Management”. Talking of suggestion schemes he says, workers are not likely in private firms to put forward suggestions, which will put them out of a job. This does not apply in a Co-op where workers themselves benefit directly from any such improvements either in higher incomes, or easier work.

Meade in “Self-Management makes a good point. Risk Capital that hires Labour, spreads the risk by Capital being invested in a range of production. Risk Labour that hires Capital cannot really do that. The worker would not normally share his Labour out amongst several Co-ops. So, it makes sense for the workers income to also be made up of wages, plus a share of profits from his own business, plus a share of over all profits of the Co-op Federation. This opens a number of possibilities. A number of questions arise from Meade and other orthodox analysis. One point of a Co-op is to give workers ownership as an incentive. As Lenin says, “We have to work with the real workers as they exist not the Socialist Man of tomorrow.” The workers that exist are motivated by the need for economic gain so a Co-op is only attractive if it provides this. This is why orthodox models frame assumptions in terms of individual gain per worker. This assumption is basically false, because the worker will take other things such as security, working conditions into consideration as part of a wider concept of economic gain. But, we cannot underestimate the need to provide real economic benefits. However, if that is taken to its logical conclusion the Co-op becomes just a Capitalist business owned by workers. This is one reason Marx and Jones proposed a National Federation with the Capital owned by that Federation. But, this runs the risk of perpetuating alienation, of Capital still standing over the worker as an alien power. The Co-op must own the Capital and buy it/rent it from the federation. Workers in each Co-op need an incentive for innovation, efficiency etc. There needs to be some formula by which Co-op workers are paid higher wages than the equivalent in private industry, OR receive equal wages, but some share of profits. HOWEVER, a full share of profits again makes them just worker capitalists. So, there should be some share of profits, but with the rest, after payment of interest to federation on Capital, divided into a reserve, and into a payment to the federation. Why would workers agree to this?

The Co-op Federation could maintain several reserves. One reserve could act to smooth out workers wages, maintaining employment levels during economic downturns – effectively an unemployment reserve. Another reserve could act as Sickness reserve or Pension Reserve. In other words workers pensions savings really could be deferred wages to retirement. It would be necessary to manage these reserves such that they could fulfil these functions. But, there is another function of the reserves held by the Federation. The Federation acts like the Bank of a multinational corporation as described by Michael Barratt Brown. It acts to allocate Capital amongst the various Co-ops according to agreed investment criteria. It would make sense for the functions of the Co-op Bank and Financial Services Co-op to fulfil this function.

The following scenario becomes possible. This central Bank is able to offer Capital to affiliated Co-ops at a fixed rate of interest – effectively fixed for all time. The interest accrued accumulates in order to finance expanded reproduction in the Co-op sector. When interest rates in the economy are higher than this standard rate Co-ops paying this rate obtain a competitive advantage over private Capital paying the higher market rate. When general interest rates are lower, they continue to pay this rate, but the Co-op Bank borrows in the market at the lower rate making a profit that can be utilised to finance expansion and or the building of reserves. Individual Co-ops suffer a competitive disadvantage during this period, but the Co-op sector as a whole does not, because it – the workers employed - gain both from being able to plan investment over the long term on the basis of a fixed rate, and because the workers funds for retirement etc. grow. Of course, if market rates remained much lower than the fixed rate for a long period it might be necessary to review this rate, but as the aim would be to fix this rate at a low but stable rate to begin with – which would help finance Co-op development, but would through stability provide the basis of long term security better than current investment of workers pension funds achieves, this would be unlikely to be a frequent occurrence. On this basis a beginning is made in replacing market relations in the Capital Market with longer term planned relations, and also the motivation is provided for workers to agree to the accumulation of the profits of their individual Co-operative into the Central Fund – after their profit share has been deducted. Those centralised funds then perform for the workers the function of spreading risk that the employment of Capital in a number of enterprises fulfils for Capital.

Questions do remain. A Trade Union acts as a counter to Management, but if workers ARE management then it cannot be effective. There are some arguments against this proposition put forward in Self-Management in relation to the experience of Workers Representation in Germany, that argue that the question of Trade Union representation and workers representation on the Board can be kept separate, but I remain unconvinced. See, for example, Blumberg in “Self-Management” p80 responding to Hugh Clegg. If the co-op operates a true democracy then management decisions are majority decisions of the workers. In that case if the union is also those workers then that majority decision would just be replicated within the union! Yet, the fact that a decision is democratic does not make it fair. In fact, as political science has long since elaborated, democracy, as merely rule by the majority can be more oppressive than rule by a benevolent despot – the tyranny of democracy. It becomes necessary to create some checks and balances outside the democratic structure of the workplace. What? It depends on the nature of the Co-operatives. Ideally, Co-operatives as part of a national federation or structure would agree to some constitution under which individual workers or groups of workers would have right of appeal or redress against decisions they felt unfairly affected them – obviously this doesn’t mean that if some worker or group of workers disagreed with some production decision they could challenge it, that would undermine self-management itself, but only those decisions which affected them personally – for example, discrimination, etc. But, initially, some Co-ops may not be a part of such a federation. In that case, workers could only seek redress through the wider Trade Union structure, and through the existing bourgeois framework of employment law – redress through Industrial Tribunals, the Courts etc. This is obviously undesirable. It introduces aspects of bourgeois control into the workers property. But, outside the formal structures of a Co-operative federation, and the acceptance of the condition thereby of the arbitration and settling of disputes through a system of workers arbitration panels, and courts there is no real alternative. It should be one of the factors encouraging all Co-operatives to bring themselves under such auspices, and protection. These issues have arisen within the Mondragon Co-op, for example, and particularly its large retail chain – Eroski. Of course, given what has been said about the opposition to Co-operatives by the statist Lassallean Left, it is no wonder that Co-operatives might be sceptical at the motives of some who might wish to foster antagonism within the structure for sectarian ends.

A further problem is raised by Horvatson p141 of Self-Management in relation to the. role of specialists. This is a question which applies equally to questions of management under socialism. He discusses the idea of specialists having a weighted vote in questions that require specific technical expertise. Clearly, I disagree with specialists having a weighted vote. Specialists should advise, workers decide. Workers need to become themselves specialists. Workers should take responsibility for decisions not specialists, or else there is a danger specialists will be conservative in their advice, and avoid risks for fear of blame. But, specialists have to be accountable for advice. It is a thin line.

Meade also raises questions about the optimum size of firm, which leads to other important questions. What about the need to reduce the workforce? This involves questions about democracy, and constitution of the Co-op. Should workers pay to join the Co-op? Should they be paid to leave?

Vanek’s sets out a list of what is the basic requirements. For workers Co-ops, which I think forms a useful basis for discussion. “Self-Management” p 34-6

1. All control, management and income (after payment of all costs and taxes) should always remain in the hands of those who work in a given enterprise, whatever their number. My objection to this would be in line with what has been said above that in line with Marx’ and Jones’ proposition that all Co-ops should be part of a national Co-op Federation surpluses should be fed into that Federation to spread Co-operative production in general, and to prevent the individual firm simply being a capitalist enterprise owned by workers.

2. Whenever, on grounds of static or dynamic economies of scale, division of labour and co-operation among two or more men in an enterprise are necessary, funding of capital assets other than through collective retained earnings must be brought about. Funding should preferably be based on national ownership, administered by a shelter agency. Funding should not imply control.

3. While Capital or more precisely the source of financial capital does not command any right of control, it is entitled to adequate remuneration at a rate reflecting the relative scarcity of that factor in the economy. Again I have dealt with that above, and would suggest that in the interests of replacing the market in Capital the Co-op “Bank” provides Capital on the basis of a long term low fixed rate.

4. Conditions 1,2, and 3 are equally applicable to productive land, which for all practical purposes can be treated as Capital.

5. The returns of Capital and Land should in their entirety or at least predominantly be earmarked for accumulation.

6. In principle the returns charged on Capital should be the same for all users, guaranteeing an optimal allocation of capital resources.

7. It is imperative to establish a shelter organisation or institution on the national level, (which can be decentralised according to need), whose express function would be to fund and promote the self-managed sector of the economy.

8. To minimise he need for the services of the sheltering institution it is advisable that existing firms be given the priority of using funds which they paying as interest on Capital for the purpose of their own expansion or creation of new firms. The projects must pass accepted criteria of viability, and the funds reinvested must yield the same rate of return as other investments.

9. In general, but especially in young countries interested in rapid accumulation and the efficient flow of resources, the depreciation allowances of the self-managed firms should also be collected and added to the national investment fund and allocated according to optimality criteria.

10. The optimal form of the self-managed economy or sector is one based on the market mechanism. I would accept this in the context of what I have said above. That is that in its natural operation Co-operative production necessarily should – even within the capitalist context – begin to systematically replace market relations with planned relations, based on increasing co-operation between enterprises and enterprises and communities. The very operation of modern large scale capitalist enterprise, which proceeds on the basis of long-term business planning as opposed to the classical notion of price signals facilitates such a transition. The very operation of the Co-operative sector in working with open books, the sharing of best practice and the increasing integration of production plans between enterprises gives the sector a powerful advantage over the private competitive sector.

11. At all times, but especially in its early stages, the effort of introducing self-management must be accompanied by an educational effort focussing on the basic philosophy of economic self-determination and the specifics of self-management. This effort should be co-operative to the greatest possible degree as much as self-management itself.

12. On the political plane, especially in countries having or aspiring to political democracy, it is most constructive, honest and effective to place the struggle for self-management on the philosophico-ideological base of fundamental rights of the working man. I disagree with Vanek here, especially in his rejection of the idea of struggling for such forms on the basis of a socialist platform. Whilst, some of these ideas can be argued for on the democratic plane, such a perspective has the danger of reducing such a plan to the same Utopianism of the Owenites. Only by combining this struggle with the class struggle as a whole can it be progressive, only on that basis can the inevitable obstruction of Capital to workers co-operatives encroaching on their profits, power and influence be overcome. As Marx said, Co-operative production can never simply expand to replace Capitalist production, neither economically nor politically. The function of Co-operative production is to provide workers both with a bastion of economic and social power, and to demonstrate in practical terms – thereby changing the material conditions – the desirability of the new society. But, only class struggle, and ultimately a political struggle for proletarian power can overcome the resistance of Capital, and create the conditions under which that new society can develop.

Horvats sets the question in a wider context in his essay in particular discussing. equality in Production, Consumption and Civic Society pp127-8. Again this is a useful framework within which to discuss the issues but missing from this perspective is the necessity of locating the struggle for these various forms of equality within the context of class struggle. Equality may be a bourgeois concept, but the bourgeoisie will only grant workers formal equality, and only that in so far as it does not challenge their rule.

It is, in fact, impossible to divorce the questions that arise in relation to Co-operative production and self-management outside the discussion of the problems that the construction of a socialist society will face, a point which those who denigrate the idea of co-operatives should themselves contemplate. The problems set out by Luxemburg et al apply to socialist production too. Unless we are to assume some simultaneous revolution, taking place in a number of advanced countries, then the problems of development in an isolated economy will be no different than those of a Co-operative. Indeed, they may be worse. Workers as part of a Co-operative may recognise their own ownership and control of their means of production. They may be prepared to accept constraints on their income, insofar as they retain control over them. But, where the means of production are owned by the State that may not be the case. The same restrictions, the same need to keep incomes at a level that enable Capital reproduction and accumulation to occur will still be present, but insofar as those restrictions are communicated to the workers by the State they may create the conditions for inevitable conflict. It is one thing as an owner and producer to recognise the need to adjust your wages, and another to be told that you have to by someone else. That may be possible for a short period, as revolutionary enthusiasm persists, but as many instances showed in the Russian Revolution, revolutionaries tend to underestimate the consequences of time. Ten years may not be a long time period viewed from the perspective of an unfolding international revolution, but ten years from the perspective of workers being told they have to constrain their wages etc. could seem a lifetime. Such a situation undoubtedly explains some of the conflict that quickly broke out between workers as workers, and the Bolsheviks as controllers of a State trying to manage such economic problems.

Conclusion

Co-operatives, as Marx said, cannot act as an alternative to class struggle. Workers continue to need Trade Unions to fight for their immediate needs within the context of a continuing Capitalist economy. They need a Workers Party to act both as a memory of the class, an educator, and an organiser of the class’s activity, and as its political representative to wage the ideological and political struggle on its behalf against the inevitable attempts of the bourgeoisie to frustrate the economic and social progress of the class. Co-operative forms within Communities can build alternative democratic structures, which will form a part of an emerging alternative workers state, but so long as the bourgeois state remains in place, the Workers Party will have to take the strength built up in these alternative structures into the political forums of that bourgeois state, into the Council Chamber, and into Parliament, because it is there that bourgeois law will continue to be written, and workers can only counterpose their own law to bourgeois law when they are in a position to counterpose their state to that of the bourgeoisie.
But, the development of Co-operatives is not an either or option for workers. We would have to believe that the working class in its majority is able to arrive at a fully worked out socialist class consciousness, in its head, that enables it by one means or another to undertake a revolution whereby it seizes the means of production from the bosses and begins to manage those means of production for itself. We have no reason to believe that such a transformation is possible. Marx and Engels did not believe it was possible, it flies in the face of their whole theory of Historical Materialism. Lenin didn’t believe it was possible, for the same reason, which is why he argued that the revolution would have to be carried through by a Vanguard, and why the Party would in fact, be only the Vanguard of the Vanguard. Nothing in our present society shows us the possibility of workers arriving at such a consciousness purely on the basis of argument. They need to see in practice that what is being advocated is possible. The experience they have so far of Socialism coming from such beginnings gives them every reason to disbelieve those arguments.
We would also have to believe that from Day One, and for every subsequent day, the vast majority of workers would play an active role in the management of the means of production. Lenin, and Buchez, in the quotes above, tell us why that would not happen. Nothing in what we have seen of any working class indicates that this would happen. The most revolutionary working class in history so far, that in Russia in 1917, certainly didn’t. If it had then no bureaucracy in the factories, or in the State could ever have arisen. Nothing we see in the actual working class, rather than in a romanticised and mythical working class that exists in the heads of petit-bourgeois romantics indicates that would be the case. How many workers attend their union meetings, how many attend political meetings, how many utilise the right to vote in the Co-op even? The likely scenario would be that workers would do what they do now. They would leave those things up to the activists, the party men – and they would likely in the majority be men – while they got on with doing what they prioritise now, making a living, trying to enjoy what leisure time they had, looking after their families. Like now, the only time they would play any part would be when they were unhappy with something, and as in Russia the response would likely be the same; to dismiss such rebellions as reactionary, the response of backward elements that didn’t understand etc. In short, what had been the revolutionary vanguard would become an ossified elite with its own interests.

Only worker owned Co-operatives can act as the necessary training ground to prevent that. The worker as direct owner of the means of production has an immediate need to take an active part in managing his/her means of production, which can never be the case when those means of production are seen as being owned by some State, and thereby alienated from them. Co-operative production, especially when it is initially disciplined by production for the market, forces the individual worker under such conditions to play such an active part, because their immediate livelihood depends upon it. It is this function of the change in the productive relations that Co-operatives bring about that transforms the worker himself, and brings about that necessary change in his ideas and culture without which socialist production is impossible

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