There has been a reawakening of the labour movement which is to be welcomed. The workers' movement has been in a state of suspended animation, however, it never begins again exactly where it stopped. The men and women who take it up afresh are like children repeating their lessons: they must go back to the beginning and run rapidly through the stages already traveled. Many return to the early promise of cooperatives or as some re-label them “workers self-directed enterprises. The socialist movement sprung forth from the proponents of co-operatives but some currently view that the economic emancipation of the workers can only be brought about when the workers themselves become owners of the elements of production – raw materials and the instruments of labour. This is simply a version of a different capitalism. The early cooperators represented the benevolent notions of the philanthropists, who attempt to lull the awakening spirit of the working class by measures of a very compromising nature. For workers, there is an urgent need to understand the limitations of the co-operatives before the revolution. The fact that co-operative ideas are demonstrably utopian does not prevent them having a wide following. The ideas are influential because they correspond to certain tendencies in the development of capitalism. To pretend that you can go in for anything but capitalism in a capitalist society is really folly. Our argument is that cooperatives are a capitalist enterprise in which its workers become their own collective capitalist (just as nationalisation makes the State a collective capitalist.) Coops are subject to the same economic and political subordination of the broader capitalist economy and its tool, the State.
Some accuse us of dogmatism and argue that unless workers gain experience of management before the socialist revolution, they will not be able to learn from one day to the next, upon the transfer of power. The experience of small-scale self-management under capitalism, they explain, is useful education and preparation. Many examples are quoted yet here have been many examples of workers’ cooperatives that went wrong, and where they have ‘succeeded’ – it has been in capitalist terms, transforming themselves into profitable capitalist enterprises, operating in the same way as any other capitalist business. None of the successes could have been achieved without the acquiescence of the banks, of all the economic institutions and above all, the State. Cooperatives can only exist to the extent that it is tolerated by the capitalist regime as a whole. For this reason, there is no way in which it can pose any solutions for the working class as a whole.
Many radicals truly believe co-operatives are the way forward for the people. The advocates of cooperatives envisage them as little oases in the desert of capitalism and anticipated that the movement will grow until eventually outcompeting capitalist industries in the marketplace and thus the workers have achieved their emancipation. Essentially society each community would own its own means and instruments of production and each member of a community would work to produce what had been agreed was needed. With cooperatives, workers would own and run everything. It would be the end of capitalism. However, general laws, born out of the form of property, impose themselves, and those people who want to build oases in the desert cannot escape those laws. And the oasis, in this case, is the cooperative, forced to bow before commercial or mercantile necessities. Whatever you do as a cooperative, you cannot help being governed by all the laws which determine and regulate production and exchange in the society of profit of to-day. There is a widespread feeling that co-operatives are enough, that there is no need for strikes, for conflict. Cooperatives are totally incapable of transforming the capitalist mode of production. Just imagine if tomorrow every place was a coop, we'd still all be competing with each other, just without bosses. There is the continuation of finance, prices, and incomes. We know what happens. It only takes a brief look through the history of the labour movement. Even with bosses eliminated from the equation, the logic of capitalism remains. It would be left to us, the workers, to inflict the consequences of capitalism upon ourselves. In unprofitable years, if things got bad, we would be forced to fire ourselves, reduce our health benefits, or cut down on our own wages or lessen or increase our working hours. Certainly we would have more say making those tough calls than if a manager were deciding those things for us and about us. But an increased voice in the operations of capitalism is all that workers cooperatives can offer the working-class. Worker cooperatives are a re-arrangement of the roles that capitalism casts us in, and short-circuits the building of working-class confidence that comes when we confront capital together. Cooperatives in no way challenge capitalist markets, the drive for valorisation, or the need to work for wages. Proponents of worker cooperatives who believe they can end capitalism, have never satisfactorily explained how acting as a boss and a worker will challenge capitalist relations, except superficially (i.e. co-ops can end hierarchies in the workplace and show that workers can run things, too). A trade union cannot strive to turn workplaces into worker cooperatives and also maintain its function as protector of the worker.
To set up any business and expect it to profitable means obeying the logic of competition. This applies whether you set up your business by yourself or whether you create a cooperative. If a business is not competitive, it dies. Co-ops have to compete with ordinary capitalist businesses on the same terms as them and so are subject to the same competitive pressures, to keep costs down and to maximise the difference between sales revenue and costs. History of commerce show that it was the cooperative movement which was outcompeted with those surviving, existing on the margin as a niche and leaving the great bulk of production, distribution and banking in the hands of ordinary profit-seeking businesses. Where co-ops proved a success it was merely the success of essentially capitalist undertakings.
Cooperatives did not provide a real solution to the workers' situation. The more they are integrated into the capitalist economy and its profit-seeking, the more their members had to discipline and pressurise themselves in the ways the old bosses - what can be called "self-managed exploitation". The fact is that there is no exit for workers within the capitalist system. At most, cooperatives can only make the situation a little less unbearable.
Few proponents of cooperatives ever question the capitalist production relationships, limiting their criticisms to only its superficial features (like CEO bonuses and monopolies.) Once again, we should focus on the real world of today. Goods and services are socially produced and result from a world-wide division of labour. Production today is a complex social process. Even the simplest item like a pencil requires the direct and indirect labour of thousands of workers. Production today is a complicated social process: the production of any one item is intricately bound up with the production of all other items. An autonomous production unit is impossible. Together with the working-up of materials and final products throughout the world-wide network of productive links, given capitalism, what also takes place throughout this structure is the circulation of capital, its expansion through the exploitation of workers and the realisation of surplus value in the markets. The structure of useful production can only be activated by the deployment of capital with the object of its accumulation. This accumulation depends on each and every part of production and distribution being regulated by buying and selling and it is impossible for any unit to be exempted from this economic process. This means that the mining of raw materials cannot take place unless in the final sequence of production and distribution goods are being sold at a profit. The sale price of any final product must include the profits made in every sequence of production, and without this production and distribution breaks down throughout the structure. In combination, these factors operate as a constant pressure of economic selection through which the structure of production is maintained as an exclusively capitalist structure.
The pressure of economic selection determining the existence and operation of all production units exerts itself as this matter of daily book-keeping. Regardless of their make-up, production or service units can only continue their existence whilst they are economically viable; that is, where income exceeds expenditure. If expenditure exceeds income, then inevitably they disappear, as the constant number of bankruptcies well attests. This is how the structure of production is maintained as an exclusively capitalist structure. These pressures of economic selection cannot be set aside within the capitalist framework, even if circumstances where there may be a substantial growth of the socialist movement. Whether or not a production unit or distribution unit or service takes the form of a workers’ cooperative can have no bearing whatsoever on the pressures which compel it to meet the economic conditions for its existence. Nor do the details of how a unit runs its affairs matter. It can be a kibbutz or a cooperative taking decisions collectively; it can be a monastery producing honey or herbs; it can be a conventional business; in whatever way they are internally structured, authoritarian or democratic, and in whatever scale they may operate, as a part of social production they are a link in the economic circuits of capitalism and can only operate within the pattern of buying and selling.
In buying in its machinery, equipment, materials, premises, transport etc., and in paying its city taxes etc, any unit, including any workers’ cooperative, must pay all these costs. How could any imagined “socialistic cooperative” operate without a power supply? In its application of socialist principles in production and consumption, is it going to persuade the utility company to provide electricity or gas free? It should be noted that the running costs of any unit include the profits made by all the other units previously involved in the production of the materials, machinery, power supplies, etc, which are being bought in. If it fails to meet these costs, which include these profits, then the unit will not be supplied, and the funds for these costs must be derived from its own sales income. In addition to this income, the individuals working in the unit must have income to cover personal living costs such as rent or mortgage repayments, food, clothes, leisure activities, and so on and on. This is inescapable. The opportunities for the viable existence of any production or service unit are uniquely determined under capitalism by the sales opportunities presented by the market. This was outlined by Marx in Chapter 51, Volume 3 of Capital, under the heading “Distribution Relations and Production Relations”, and in other places. “They [distribution relations] determine the entire character and the entire movement of production.” This involves the fact that sales in the market determine the distribution of necessary income in the form of profits, rent, wages, etc, and thereby the conditions of production. The idea that a production unit can be set up in accordance with “socialistic cooperative” principles, as an act of free choice against the economic forces of what Marx called distribution relations, is pure nonsense.
Marx established a little principle - that price and value don't necessarily coincide. Where conditions are correct, value can be transferred from one hand to another at a price below it. We can see this in an industry where one firm may have better access to transport, to natural resources, etc. which can produce goods below the market price but still sell at or just below the going market price of their good, to make an excess profit.
Obviously, unless these advantages can be monopolised, other firms would note the excess profits, and invest in the advantaged firm (or in their own to increasse their efficiency and thus draw level again). The same is true across branches of industry. The net effect is that less labour intensive industries will tend to suck up value from more labour intensive industries. Typically, farming (hugely labour intensive) transfers a great deal of value to high-tech industry. Profit rates are equalised across the economy. This would still happen under cooperativism, more productive/efficient co-ops would soak up value, would have transfers from competitors, who would then be faced with having to decide whether to let people go (voluntarily, of course) in order to compete.
What this means, is that you can have a capitalism without capitalists. You can have all the profit seeking behaviours, without the personal gains for any real sensuous human being. Paul Mattick conceived the central dialectical contradiction of capitalism as between use and exchange value. Put another way, between investment and consumption. Capitalism exists to create more exchange value and more capital. If we remove the share going to the luxury life-styles of the capitalists, we could still find ourselves being squeezed to the bone as we deliver up the value to King Capital itself. So, co-ops are not an alternative to capitalism, it is capitalism without the capitalists. That may be an improvement, but I wouldn't prefer it over socialism.
Marx's great discovery was that, in fact, we do get the full value of our product. Our product, though, is not the thing we make, but our labour power, our skill, our ability to work. We are paid that full market price for that. We are not paid at all for the things we produce, and our wages do not relate to the things we produce. when one person could produce a good from inputs and there was no doubt as to their contribution, they could receive the full value - the mythical table-maker that people always bring up in conversations about abolishing money. However, once you reach social production, this isn't the case.
Let us remind ourselves that socialism aims not to establish "workers power" but the abolition of all classes including the working class. In socialist society, there would simply be people, free and equal men and women forming a classless community. That is the goal and co-ops are not a step on the path towards it. While the co-operative form might provide an example of how production ought to be run in a socialist society, this cannot make a meaningful and sustained contribution to the emancipation of the popular classes now. Once we realise socialism, we can call it the cooperative commonwealth, because cooperation is not a means, but the aim of the workers. It will then triumph and gather into the hands of the whole of society all capital and labour, so that there shall be no more exploitation, sale, nor profits. And we are bound to say that cooperatives, as they are operated to-day, have nothing in common with socialism. Co-ops brings nothing to the socialist movement but the fruits it can contribute when it is a socialist cooperative. Otherwise, it becomes a diversion if not an obstacle to the recruiting and developing of the socialist movement. Workers concentrate upon co-operative, carrying inside their heads nothing but commercial schemes, how to create a market for it, how to secure its prosperity and development, and thus there is no room left in their brains for the socialist idea, no more time for the socialist education, to whom we cannot repeat enough that there is only one means of emancipation, viz., the capturing of the political power, and by the help of it, of the capitalist property, industrial and commercial. The socialist idea, the idea of a society owning its means of production, utilising them socially, and distributing among all its members the products of a common labour. Socialism is social ownership and democratic control of the means of production and distribution and production being for use to meet the needs of the community and not for exchange on the market to make profits. Nor should what is commonly used for socialism in short-hand, "workers control", be confused with sectional ownership and control, that excludes wider society from the decision making of what, where and how production takes place. Co-ops are critiqued in much the same way as traditional syndicalism was. Work-place does not equate with community.
Our goal is what some have called the “community of goods”; everything is to be made common property, everything will be everybody’s. “The association of free men who work with the means of production and who employ, following a concerted plan, their numerous individual forces as a single force of social labor … the work of freely associated men who act consciously and are masters of their own social activity”; “free and equal association of the producers”; such was for Marx and Engels the form of socialism. Association—this is the key-word of socialism: individuals, instead of acting, as in capitalism, each for himself, associate with one another for the purposes of common labour. This simple definition of socialism already allows it to be distinguished from certain false socialisms. The variety of “self-management socialism” making the workers the owners of the enterprise has no trace in the Marxist conception of any kind of “communitarian social order.” It has changed nothing: the enterprise is still autonomous, and therefore competes with other enterprises in the same sector; for this reason, it is the market rather than a “concerted plan” that regulates production, and is, therefore, subject to all the fluctuations of the market; finally, as in capitalism, there will be enterprises that will be “winners” (the workers in the competitive enterprises) and “losers” (the workers in the less profitable enterprises who will be laid off). This is not socialism: there is no real association of producers that supersedes the limits of the enterprise. If socialism corresponds to management of production by the workers themselves, this “self-management”, if one wants to preserve this phrase at all costs, is utterly without semblance to a truncated vision of this idea that consists in managing “their” enterprise, which would not amount to much and would only reproduce a system of private appropriation.