Cooperative realism

Once again the media carries a story that capitalism can be made humane. It claims "Employee ownership puts a business in the hands of those that work for it, making them the direct beneficiaries of the company’s successes."

Our job in the Socialist Party is not to tell fellow-workers the way to live, but to demonstrate that non-capitalist society is actually possible to achieve. Many on the Left engage in a lot of loose talk about "worker-owned enterprises and cooperatives. Capitalism cannot “become” a socialist society; it cannot gradually cease to exist as the socialist society gradually comes into being. 

For sure, in some cases, for some workers in some businesses, there are some advantages. But they are not the basis for system change or can be turned to the benefit of the majority of employees. As Marx put it in his discussion of the fetishism of the commodity, “the process of production has mastery over [human beings], instead of the opposite.” (Capital, Vol. I)

As long as capitalism exists, the world market will exist, and thus the law of value will exist.  In other words, what will exist is the need to compete effectively, to produce as much as possible as cheaply as possible.   There cannot be socialism in one country, much less in a single cooperative or network of cooperatives. Even if the members of a cooperative or network of cooperatives are nominally their own bosses, it follows from the continued existence of the exchange economy. A cooperative must still buy its inputs and sell its outputs on the world market, competing with every other producer of the same product. The economic laws of the larger system will not allow it. If you buy from the capitalist world “outside,” you also have to sell to it in order to get the money you need to buy from it, and you will not sell anything if your prices are high because your costs of production are high. And if you have debts, you have to repay them.  It cannot decide to pay much more nor to greatly change conditions of work to implement more humane ones, without putting itself out of business.  Society remains under the despotic direction of capital – even if it is the workers’ rather than CEOs who serve as the new personifications of capital.  Enlarging the space of the commons or whatever, unfortunately, cannot be done.  If you are in a capitalist system, you cannot just issue a mission statement to produce for need, or a policy promise to refrain from laying off workers. Cutting costs and maximizing output are the keys to enterprise survival. Cooperatives cannot break the laws of capitalist production. The most important law compels an enterprise, whoever owns or “controls” it, to minimize costs in order to remain competitive, and therefore to lay off inefficient or unnecessary workers, speed up production, have unsafe working conditions, produce for profit instead of producing for need, etc.

Microfinance is built on a false belief that credit is the most vital need of the marginalised. One of those who has thoroughly studied the phenomenon, Thomas Dichter, says the idea that microfinance allows its recipients to graduate from poverty to entrepreneurship is inflated. He sketches out the dynamics of microcredit: “It emerges that the clients with the most experience started using their own resources, and though they have not progressed very far—they cannot because the market is just too limited, they have enough turnover to keep buying and selling, and probably would have it with or without the microcredit. For them, the loans are often diverted to consumption since they can use the relatively large lump sum of the loan, a luxury they do not come by in their daily turnover.” He concludes that, “Definitely, microfinance has not done what the majority of microfinance enthusiasts claim it can do—function as capital aimed at increasing the returns to a business activity.”

The biggest problem is that people who get these small loans usually start or expand a very simple business. The most common business for microfinance is simple retail—selling groceries, where there are often too many people, fierce competition, and where they don’t really earn enough money to get out of poverty.

 Many forget that the Bank of America actually started out as a community bank in San Jose, California—then a small agricultural town—providing banking services to poor, mostly Italian immigrants, who in those days experienced racist discrimination and were denied banking services by other commercial banks of the time. Others forget that Walmart began a mom and pop store. The evolution of those into the corrupt corporate monsters that they are today was no accident, nor did it simply reflect ill will on the part of its owners. Rather, it reflects the objective laws of capitalist production that Marx analysed in “Capital”  Marx hailed workers’ cooperatives as harbingers of the new society, but he was also acutely aware of this problem. So in volume 3 of Capital, he cautioned that, as long as they exist within capitalism, the cooperatives “naturally reproduce in all cases … all the defects of the existing system, and must reproduce them … the opposition between capital and labour is abolished here … only in the form that the workers in association become their own capitalist.” In other words, the workers end up exploiting themselves.

 Cooperative proponents are looking backward to the supposed idealised Golden Age of handicraft capitalism and not forward to a socialist society. The Socialist Party has not been the only ones to indicate the limits of cooperatives. Janet Biehl writes of Murray Bookchin's attitude and observations. 

“In the 1970s, many American radicals formed cooperatives, which they hoped could constitute an alternative to large corporations and ultimately replace them. Bookchin welcomed this development, but as the decade wore on, he noticed that more and more those once-radical economic units were absorbed into the capitalist economy. While cooperatives’ internal structures remained admirable, he thought that in the marketplace they could become simply another kind of small enterprise with their own particularistic interests, competing with other enterprises, even with other cooperatives.

Indeed, for two centuries, cooperatives have too often been obliged to conform to marketplace dictates, regardless of the intentions of their advocates and founders. First, a cooperative becomes entangled in the web of exchanges and contracts typical. Then it finds that its strictly commercial rivals are offering the same goods it offers, but at lower prices. Like any enterprise, it finds that if it is to stay in business, it must compete by lowering its prices in order to win customers. One way to lower prices is to grow in size, in order to benefit from economies of scale. Thus growth becomes necessary for the cooperative—that is, it too must “grow or die.” Even the most idealistically motivated cooperative will have to absorb or undersell its competitors or close down. That is, it will have to seek profits at the expense of humane values. The imperatives of competition gradually refashion the cooperative into a capitalistic enterprise, albeit a collectively owned and managed one. Although cooperation is a necessary part of an alternative economy, cooperatives by themselves are insufficient to challenge the capitalist system.

Indeed, Bookchin argued, any privately owned economic unit, whether it is managed cooperatively or by executives, whether it is owned by workers or by shareholders, is susceptible to assimilation, whether its members like it or not. As long as capitalism exists, competition will always require the enterprises within it to look for lower costs (including the cost of labor), greater markets, and advantages over their rivals, in order to maximize their profits. They will tend ever more to value human beings by their levels of productivity and consumption rather than by any other criteria.”