Utopian Capitalism

Richard D Wolff , professor of economics emeritus at the University of Massachusetts, argues that Detroit’s decline could have been averted if workers had converted the car industry into worker co-operatives,

“Detroit would have evolved very differently. Worker co-operatives would not have moved production, thereby undermining their jobs, families and communities, including especially Detroit. Workers would not have destroyed themselves and their communities that way...
Workers co-operatives would also have searched and likely found alternatives to moving that might have saved Detroit... Workers co-operatives, for example, would likely have paid less in dividends to owners and salaries to managers than was typical at Ford, General Motors and Chrysler. Those savings, if passed on in lower automobile prices, would have enabled better completion[competition] with European and Japanese car makers than Detroit's Big Three managed....We can guess that workers have greater incentives to improve technology in co-operatives they own and operate than as employees in capitalist enterprises. Finally, worker co-operatives would likely have switched to producing (and helped to promote) mass-transit vehicles or other alternatives to the automobile to retain jobs and well-being once they saw that continued automobile production could not secure those priorities for worker co-operatives...”

 There cannot be socialism in one country much less in one enterprise that is still embedded in the global capitalist economy.  Its investment decisions cannot be based on what would enhance workers’ well-being or on public policy objectives. If enhancement of workers’ well-being or fulfillment of public policy objectives would significantly reduce its profitability in relationship to the profitability of other car producers which it competes if Detroit car-workers had dare to pursue these goals they would find that lenders would not supply it with the funds it needs in order to compete successfully, or even to remain solvent. In order to survive, a s worker-run business must pursue the goal of profit maximization, just like every other. Because a worker-owned car factory would  have to compete with ordinary capitalist businesses on the same terms as them, so they are subject to the same competitive pressures, to keep costs down and to to maximise the difference between sales revenue and costs.

The worker-owned car factory  has to buy its raw materials on the market, along with every other company. It does not get steel, oil, copper, electricity  any cheaper because it is owned by its employees. In buying in its machinery, equipment, materials, premises, transport etc., and in paying its rates etc, any unit, including any workers’ co-operative, must pay all these costs. How could any imagined “socialistic” unit operate without power supplies? In its application of socialist principles in production and consumption, is it going to persuade the utility companies to provide supplies free?

In addition to this income, the the car- workers in their worker-owned 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. Regardless of their make-up, production or service co-ops can only continue their existence whilst they are economically viable; that is, where income exceeds expenditure. If expenditure exceeds income, then inevitably they disappear.

A Detroit worker-owned car-factory has to sell its products on the market, along with every other company. It does not get higher prices for its goods because it is owned by its employees. It has to compete with every other manufacturer in terms of price, delivery dates, quality etc. In order to compete over any length of time, it will have to invest in new plant and equipment. To do this it will require a large amount of capital. If this is obtained by borrowing, then they will have to convince the banks that it is a viable and profitable concern, run along good business lines. It will be under even greater pressure to prove that it is viable just because it is a different sort of enterprise. Of course, it may decide to raise the capital needed for investment out of the profits. Inside the factory, there are no owners other than the workers. But they buy goods at the same price as other capitalist concerns. They sell goods at the same price as other capitalist firms. They compete flat out with other capitalist firms. If they are to make enough surplus to re-invest, or to convince the banks they are good for a big loan, how are they to do it? They are in a trap. Either they sack some of their fellows; or they increase their own intensity of work; or they take a wage cut. Elected workers’ councils would be in exactly the same position of having to lay off staff, if there is no market for the goods they produce.

Whichever avenue they choose, their decision has two effects. Firstly they have attacked their own living standards. Secondly, they are acting as an unconscious argument in the hands of other bosses against their work-forces. If an employer in another factory is faced with a demand for, say, a wage rise, he will immediately reply that he can’t afford it and point to a worker co-operative and say: ‘they work for less than you are demanding. It seems a perfectly reasonable wage to them, with no boss, why are you demanding from me more?’ The capitalist has been provided with an excellent propaganda weapon against his own employee demands as a way of mitigating the class struggle and persuading workers that they have an interest in accepting ‘realistic’ (i.e. lower) wages. Worker-owned enterprises exhibit the exact same vices as capitalist firms.

Where workers owned their factories and it has been  a success it was because it was merely the success of essentially capitalist undertakings. There is a tendency for worker co-ops to resemble more and more over time the conventional capitalist business model and the case of Mondragon - the largest worker co-op conglomerate in the world - would seem to bear this out. It has grown and has departed more and more from its original egalitarian principles and Mondragon has been noted for employing heavy hand tactics against its own two-tier workforce.

The more they are integrated into the capitalist economy and its profit- seeking, the more their members will have to discipline and pressurise themselves in the way the old bosses did - what is known as "self-managed exploitation". The fact is that there is no way out for workers within the capitalist system. At most co-operatives can only make their situation a little less unbearable. We cannot self-manage capitalism in our own interests and the only way we can really live without exploitation is by abolishing capitalism.

The Marxist economist Andrew Kliman has also done a demolition job on Wolff’s misunderstanding of how capitalist mode of production operates.

“ It seems that most people want to see another world, but think it can come about, if at all, by voting it in, or by workers becoming their own bosses...Despite the new priorities, new forms of organization, new forms of ownership, new laws, and the new name... it remains capitalist. It remains capitalist because the economic laws that govern capitalism continue to govern... ... And they continue to govern your society because new priorities, new forms of organization, new forms of ownership and so forth are not enough––by themselves––to overcome the economic laws of capitalism...[These well-intentioned changes] would merely be capitalism in a different form or they would be unviable and lead back to capitalism.  And the reason why they wouldn’t work, Marx argued, is that these supposed alternatives to capitalism all try to get rid of capitalism without getting rid of its mode of production...Marx’s point is firstly, changes in political and legal forms, and changes in consciousness, are not themselves changes in the relations of production. Secondly, if only they are changed, not the relations of production, the changes will not succeed in changing the character of the society.”

According to Kliman’s reading of Marx “in order for the means of production to be the co-operative property of the workers themselves, exchange of products must be eliminated, which requires the elimination of value and value production, which in turn requires that labor become directly social, in the sense that a hour of one worker’s labor is equal to an hour of every other worker’s labor. And this equality of labors, again, is not the result of a legal decree, but of changes in the economic foundation of society.”

“We are private companies that work in the same market as everybody else. We are exposed to the same conditions as our competitors.” - Mondragón’s human-resources chief

The creation of worker-owned enterprises as proposed by Wolff and others may very well offer an example of self-management but they simply cannot compete with the economic might of modern capitalism. We cannot self-manage capitalism in our own interests and the only way we can really live without exploitation is by abolishing capitalism. The state can be counted on to represent and protect the interests of the privileged minority. A "non-capitalist" sector just do not have the same resources at its disposal and therefore cannot beat the capitalist sector at its own game.  History is littered with the experience of failed co-operatives or corrupted co-operatives. Either the co-operatives "sell-out" or they are "put-out" by market-forces. We know what happened. This was because they had to compete with ordinary capitalist businesses on the same terms as them and so were subject to the same competitive pressures, to keep costs down and to to maximise the difference between sales revenue and costs.The co-operative movement was out-competed.

The worker cannot claim ownership and control of the mine or the factory because these are huge production organisations, part of a wider interlinked network and cannot be divided into separate pieces. This is the reason why socialists demand common ownership of the means of production – the land, factories, railway, etc. To suit collective work, collective property. The big issues are not decided “on the shop floor”, to use a militant phrase much loved by advocates of “self management”. There should be collective ownership and collective control of what is collectively produced.

AJJ