There are critics of capitalism who argue that the way out is for workers to form co-operatives. For many, the cooperative movement as it exists today is associated with socialism and the struggle to overthrow the capitalist system of society. Co-operatives have in fact a long association with attempts by workers to improve their lot under capitalism. The Socialist Party has no problem with workers forming cooperatives if that’s the best way they can survive under capitalism. However, we disagree with the sometimes-made claim that they can be a route to socialism because, aside from any political consideration, unless they are in a small market niche with no competition, they tend to be out-competed by the brutal cost and wage-cutting tactics of conventional businesses.
While we can sympathise albeit with a critical mind those cooperatives aimed at abolishing the wages systems, private ownership and profit-making we acknowledge the vast majority of the others merely wishes to redirect the flow of profits from the private owner or investor to the cooperative members. It has not and cannot solve the poverty problem either of its members or of its employees. The basic fallacy in the co-operative idea is a wrong explanation of rent, interest and profit. Because the means of production—land, factories, steamships, etc.—are privately owned, the workers who wish to operate these instruments must first enter into a one-sided bargain; one-sided because the goad of semi-starvation forces their hand. They bargain to produce wealth for the owners of capital and receive as the price of the energies they sell wages or salaries which, over the whole field of Capitalism, are only a small proportion of the values they produce. What the capitalists get is a property-income, something which arises from their monopoly and not from their services, and which varies according to the size of their capital. Rent, interest and profit, if the terms are cleared of some looseness which surrounds their common use, are merely names for this income that goes to the owners of property because they are owners.
Proponents of co-operatives want to eliminate the middleman and redirect the flow of profit—but what is profit? Profit is the child of private ownership and is obtained by the exploitation of the workers. Co-operative "divi" is derived from the exploitation of cooperative employees. The relation between the latter and the societies is precisely the same as that between other workers and their employers. The co-operative movement has all the trappings but none of the substance of success. Its members are still wage-earners, still exploited by the capitalist class and still, therefore, poor; its employees are in the same condition. If the societies as at present constituted extend until they cover the whole working-class that will still be true. It has made no inroads into the capitalist system.
Co-operatives have not and cannot emancipate the working class. Only socialism will do that. The workers cannot escape from the effects of capitalism by joining cooperative societies. They must obtain for society as a whole the ownership of the means of production and distribution which are now the property of the capitalist class. For this, they must organise in the Socialist Party for the purpose of controlling the machinery of government. Once possessed of power they can then reorganise society on a socialist basis of common ownership. The cooperative commonwealth can only be achieved by socialist methods.
Evicting the bosses from their directors' board rooms and organising production from the shop-floor without them is one thing; escaping from the economic laws of the market is another – as, within capitalism, it is not just a question of organising production, but also of selling what is produced. The cooperative model tends to operate within the capitalist logic of productivity and profitability … the pressure on them to adopt a capitalist business logic is immense. Cooperatives are embedded in the framework of the capitalist economy and compete on the capitalist market following the logic of profit-making.
Cooperatives do not provide a real solution to the workers’ situation. It is incapable of providing an answer in the interests of all workers. At no time does it question the capitalist production relationships – it questions only superficial features (management structures, for instance). Even less can a network of cooperatives create a parallel system to capitalism? The more coop members have to discipline and pressurise themselves in the way the old bosses did – what we call “self-managed exploitation.” Workers in cooperatives have in effect to organise their own exploitation for profit to be accumulated as more capital. They are not the way out. As Marx pointed out, co-operatives ‘must reproduce everywhere in their actual organisation all the shortcomings of the prevailing system.’ And they do. Although Marx mentioned workers’ cooperatives as possible harbingers of the new society, 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.’ On their own, there is nothing intrinsically socialist about cooperatives.
A co-op does not cease being a capitalist enterprise simply because votes are taken on how its assets are used within a society of generalised commodity production and wage labour. The imperative to accumulate with all the drive to minimise the labour time taken to do a task this requires remains even in a co-op. Thus cooperatives are under the same pressure to seek to maximise profit as a condition for surviving as an economic institution embodying capital. It is just that in their case the trustees – the functionaries of capital – are different: worker-elected boards.
Socialism takes over the means of production, by abolishing all sectional property rights over them and that includes members of worker-owned businesses and uses them to directly produce, without the intervention of buying and selling, what people need, both as individuals and as communities.