Many left activists propose a radical movement to establish an economy organised on the basis of worker-owned and operated industries, peoples’ banks, consumer and producer cooperatives, anarcho-syndicalist labor unions, individual and family enterprises, small farms and crafts workers associations engaged in local production for local use, voluntary charitable institutions, land trusts, or voluntary collectives, kibbutzim-style communes.
Such a cooperative project is viewed as useful for providing much needed services for working class communities. Cooperatives are also seen to be a means to self-manage some asset gained through struggle. Consider the Landless Workers Movement in Brazil. This is a million member organization that has seized thousands of acres of land and resettled 250,000 families on the land. Their methods of land expropriation through collective action are certainly the sort of thing any syndicalist could applaud. Once they have control of the land, they set up a residents’ assembly and build a cooperative organisation to run the land and the community, and they provide various services such as schools and radio stations.
This scenario is very similar to the early utopian movements, believing that socialism can develop separately inside a capitalist society. Cooperatives are a very tiny part of the existing economy. They are so for a variety of reasons, including especially lack of capital, discrimination against them by banks, etc. But simply building cooperatives and other alternative institutions will never enable the mass of workers to confront and defeat the power of the corporations and the state. Very little is going to happen until the working class has political power.
Modern society cannot exist only on the basis of autarkic communes, because they cannot feed 7 billion people. The latter require metallurgical plants, power plants, modern medicine, universities, etc. That’s why a big society will be a giant circle of kibbutzim. Like the individual kibbutz members, they will share a common property of all major projects (created by the collective work of many individual communities), the overall distribution of the results of work of these enterprises, the common planning of the economy and life. The central councils of delegates of the kibbutzim will manage major objects, and the solutions about certain fundamental transformations in a large society will be taken at referendums.
For Marx and Engels, capitalist society could only be abolished as an entity, not factory by factory, town by town or farm by farm. Its abolition therefore required the active participation of the majority of the population. Although Marx and Engels never challenged the demonstrative value of these communist experiments – which confirmed that a society without bosses, without commodity production and without money was possible – they contended that they were doomed to failure to being reabsorbed by the dominant prevailing capitalist system society as long as they remained isolated.
Marx's critique of political economy in a cooperative the associated laborers remain their own capitalist, and “self-exploit”. Cooperatives represent a paradoxical relationship between labour and capital, in which labour formally dominates capital, but has to meet the demands of capital by voluntarily perpetuating its own subjugation. Cooperative members are not simply petty bourgeoisie, but what you might call "self-exploiting workers" While cooperatives may grant the workers inside them greater freedoms and rights, so long as they operate within a capitalistic system they will continue indulging in the same cycle of competition. They may be more desirable at the moment given they represent an alternative inside the current economic structure, but they still work as a capitalistic-oriented company. In practice, especially over time, there would be a re-imposition of capitalist relations to the extent that it is, at best, a kind of radical reformist iteration of the capitalist mode of production.
Even if it was possible to maintain a 'pure' worker-cooperative on a purely ideological basis there is no socialism here - commodities are produced for profit to meet the demands of the value system, instead of planning production for meeting human needs. It doesn't matter who is in charge of a capitalistic business, the point is that it is capitalistic. Cooperatives transfer the ownership of an enterprise from an individual capitalist to a collective ownership by workers. This only recreates capitalism in a different form. It has little to do with socialism, which is the free association of producers in a planned economy.
Cooperatives have existed as long as capitalism existed. It doesn't reform capitalism towards a more cooperative driven type of capitalism, instead, these worker co-ops tend to go bust after being out-competed with a more efficient traditional business.
Competing against capitalist corporations on their own terms is a bit of a David and Goliath situation in which the weaker will go against the wall or more likely be swallowed up wholesale by the stronger. On the other hand, to effectively compete you have to ruthless in subordinating the interests of wage labour to those of capital - in fact become more and like the very conventional capitalist enterprises you are supposed to have moved away from. This is precisely what has been happening in the case of the large Mondragon cooperative in Northern Spain with its recent decision to lay off a whole lot of workers etc.
Capitalism is a mode of production defined by the private ownership of the means of production - note that private ownership is not necessarily individual ownership. Most corporations are owned jointly by their stockholders, after all. What defines private ownership is not the number of owners, but the relation whereby one section of society - an individual, the stockholders, or workers in a cooperative - has exclusive control over a particular portion of the means of production. This results in wage labor, market distribution etc. etc. Therefore, cooperatives are not an alternative to capitalism - they are capitalist entities.
Let us say you and several friends start a coffee-shop cooperative but then capitalist coffee-shop chain opens up in the same street. Your coffee-shop coop will have to compete with it in terms of prices if it is to attract customers. But this commercial rival only pays minimum wage, with no sick pay, paid holidays or any other benefits etc. Being a large chain, they can use their purchasing power to drive down suppliers' prices to get cheaper coffee beans. So they sell their products much cheaper than your cooperative. Facing going out of business, you and your fellow co-op members must become your own capitalist boss, and cut your own wages, reduce your conditions and lay-off some coop members. Or you go bust. In a capitalist economy, we cannot extract ourselves from the market. We cannot self-manage capitalism in our own interests as it is automatically weighted against workers. The only way we can really live without exploitation and bosses is by abolishing capitalism.
Having argued against any raised expectations for cooperative and despite the fact that self-management is not the alternative to capitalism, it could, nevertheless, be said that they may help us to find a way to abolish capitalism, since the struggle for the collective management of the producers can make us see the concordance of our interests as exploited workers, it can help us to break out of the isolation and the individualism of “every man for himself” and, which is even more important, the experience of self-management of our own space of exploitation can permit us to become aware of that fact that this is no solution for exploitation in and of itself. It is not necessary to individually experience these processes in order to become conscious of this counterrevolutionary trap, but certainly at a collective level some people will opt for the formula of self-management as long as they do not realize that the satisfaction of the needs of all of society will not be achieved by changing the forms of those who manage it but by way of a profound transformation of the totality of social relations. Co-ops facing competition do have one option which is to go more into the life-style niche market: make the co-op part of their brand and market themselves to people for whom that would be a selling point, a campaign based on "Give us your custom because although we are still alienated and self-exploiting but it's lit better than working in Walmart stacking shelves.” If your aspiration is to find a comfortable niche within capitalism to live out your days, then various coops are indeed going to be a benefit. But if you are determined to engage in social revolution then pursuing coops will be a dead-end. The capitalist system is composed of owner who sell for profit. The fact that an owner is a group of individuals rather than a single person makes no essential difference. This has long been recognised for joint-stock companies. It must now also be recognised for cooperatives. A co-op which collectively owns all the means of production is merely a collective capitalist firm as long as it remains—as all such states are, in fact, presently compelled to remain—a participant in the market of the capitalist world-economy. No doubt such a "firm" may have different models of management and differences in the division of profit, but this does not change its essential role operating in the world-market.
Every cooperative must work exactly like a capitalist stock company. The only difference is that the cooperative company will always be at a disadvantage, when compared to the capitalist business enterprise, even when the former has as much capital as the latter. The cooperative undertaking, because it is cooperative, cannot press any surplus value out of its members, and therefore its capital will not grow. On the other hand, it has to spend its main strength fighting strong capitalist concerns, while it is just that fight of competition that fixes the prices of the products. Competition has to disappear were a general lowering of the cost of production and a general uplifting of the standard of life is possible. But one co-op cannot accomplish that. And one thousand coops could not accomplish it. In order to accomplish that we must necessarily have control over the entire population. Under such conditions it is clear that all cooperative schemes have only the effect of leading people astray from the road to our goal. They only have the effect of getting the minds of the people confused as to our aims. They hinder the progress of our idea. Cooperative schemers have a habit of hiding and denying the class struggle, for they by necessity live in the spirit of capitalism. Co-ops simply "prettify" capitalism, and would simply reproduce all the faults of capitalist society, from the anarchy of the market to periodic crises.