A Marxist Critique of Worker’s Cooperatives

All socialists-and increasingly many who do not identify as such-are aware that capitalism, a crisis-prone and exploitative system, requires an alternative. Many socialists, such as the economist Richard Wolff, hold that worker cooperatives are just such an alternative [1]. These are firms in which workers directly elect managers and have a say in the day-to-day management of production. To quote Wolff, “In each enterprise, the co-op members . . . collectively own and direct the enterprise. Through an annual general assembly the workers choose and employ a managing director and retain the power to make all the basic decisions of the enterprise” [2]. Certainly, many of these elements, such as the election of managers, are important aspects of socialism. Workplaces in the Soviet Union, for example, were generally organized along very similar principles [3]. What differentiates socialist workplaces from worker cooperatives, however, is ownership. Cooperatives are owned directly by the workers in them, whereas socialist workplaces are owned by the state-which is itself controlled by workers. In this essay, I want to argue against Wolff’s conception of cooperatives as an already-existing alternative to capitalism.

I should begin by saying that I think cooperatives are a useful tool in struggle, and they have many benefits. However, I reject the notion that they are a pathway out of capitalism in and of themselves. Marx himself praised the cooperative movement in 1864, writing,

“The value of these great social experiments cannot be overrated. By deed instead of by argument, they have shown that production on a large scale, and in accord with the behests of modern science, may be carried on without the existence of a class of masters employing a class of hands; that to bear fruit, the means of labor need not be monopolized as a means of dominion over, and of extortion against, the laboring man himself; and that, like slave labor, like serf labor, hired labor is but a transitory and inferior form, destined to disappear before associated labor plying its toil with a willing hand, a ready mind, and a joyous heart . . .” [4].

Marx was right in asserting that cooperatives play an important role in capitalism. They show that workers are in fact capable of managing production without the “carrot and stick” imposed upon them by the capitalist. Workers can take control of production and, by extension, of society.  Further, the fact that workers control their own immediate work, in a cooperative fashion, is itself a contribution to enhancing their well-being. It decreases their alienation from their work, and permits them to flex their intellectual as well as their physical muscles. There is cause to establish cooperatives within capitalism, but treating them as if they are themselves a road out of capitalism can only harm our movement.

Marx understood that cooperatives showed the possibility and desirability of socialism, but he did not think that cooperatives were socialism in and of themselves. Marx rejected the idea that we could get out of capitalism simply by establishing one cooperative after another. He held that the only real way out of capitalism was the complete destruction of it, rather than a gradual “changing from within.”

It should be noted that from the very beginning the co–op saw itself as providing an alternative to struggle against the system. The Mondragón cooperative-which Wolff upholds as a prime example and which we will return to later-was originally the idea of a Catholic priest named José Maria Arizmendiarrieta who regarded class struggle as destructive and who hoped to overcome it not by directly challenging the power of the exploiting capitalist class, but by creating a small corner of the economy in which class differences supposedly did not exist [5]. Cooperatives establish a form of worker’s power in a single workplace, but they leave the normal capitalist order in place elsewhere. Cooperatives on their own do not fundamentally alter the system. For this reason, a reliance on cooperatives in the socialist movement may divert energy from real anti-capitalist struggle. Marx noted this in the aforementioned speech. He also noticed that a variety of establishment figures had come to support the cooperative movement. In his words,

“[P]lausible noblemen, philanthropic middle-class spouters, and even kept political economists have all at once turned nauseously complementary to the very co-operative labor system they had vainly tried to nip in the bud by deriding it as the utopia of the dreamer, or stigmatizing it as the sacrilege of the socialist” [6].

Even fascists have sometimes praised co–ops. In the 1960s, the labor minister of Spain’s fascist dictator General Franco awarded the Gold Medal for Merit in Work to Mondragón’s Arizmendiarrieta. [7]. Decades earlier, in fascist Italy, Benito Mussolini established the National Fascist Cooperative Agency (Ente Nazionale Fascista della Cooperazione) and encouraged the expansion of cooperatives in the farming and food processing sectors as a way to downplay class differences [8].

Individual co–ops do not threaten the system and can absorb time and resources that could be used for other kinds of organizing. Yet, as Marx put it in his speech, “To save the industrious masses, cooperative labor ought to be developed to national dimensions, and, consequently, to be fostered by national means” [9]. Cooperatives can be an important starting point for establishing socialism, but they can never do so on their own. The advocacy of cooperatives by forces objectively hostile to socialism should be evidence enough of this. In order to effectively be an alternative to capitalism, worker-managed organizations must receive support from a state that represents the interests of the working class. If this is not the case, the cooperatives will crumble under market mechanisms.

Worker’s cooperatives, in addition to diverting energy from socialist organizing, are not in and of themselves powerful enough to challenge capitalism from within. Capitalism, as its name suggests, is a system organized for the perpetuation of the supremacy of capitalism. The economic, political, and legal systems are organized to prevent forces antagonistic to capital-such as the workers-from taking power. James Madison, the fourth President of the United States, admitted as much in a 1787 debate on the constitution. He wrote:

The man who is possessed of wealth, who lolls on his sofa or rolls in his carriage, cannot judge the wants or feelings of the day-laborer. The government we mean to erect is intended to last for ages. The landed interest, at present, is prevalent; but in process of time, when we approximate to the states and kingdoms of Europe, — when the number of landholders shall be comparatively small, through the various means of trade and manufactures, will not the landed interest be overbalanced in future elections, and unless wisely provided against, what will become of your government? In England, at this day, if elections were open to all classes of people, the property of landed proprietors would be insecure. An agrarian law would soon take place. If these observations be just, our government ought to secure the permanent interests of the country against innovation. Landholders ought to have a share in the government, to support these invaluable interests, and to balance and check the other. They ought to be so constituted as to protect the minority of the opulent against the majority. The senate, therefore, ought to be this body; and to answer these purposes, they ought to have permanency and stability” [10].

In other words, wealth (“landed interests”) will be increasingly concentrated into fewer and fewer hands through markets (“various means of trade and manufactures”).  The wealthy, therefore, would be outvoted in a democratic system and government would be overrun by the majority of working people.  To prevent the working class from attaining political power and expropriating the property and wealth of the rich (“an agrarian law”), we have to “wisely” ensure that government “protect the minority” of the rich against the majority of the poor.

What does this mean for worker’s cooperatives? In short, it means that the system is set up to discourage and crush these firms. Since worker’s cooperatives represent a kind of worker’s power, they do in some sense threaten the capitalist order. While they do not change the system as a whole, they do make workers aware of the fact that they are capable of running things by themselves, without capitalists. This, obviously, is very bad for the capitalists. Therefore, the very market mechanisms that allow capital to exercise control over labor also discourage attempts by labor to threaten capital. Worker’s cooperatives will always be at a disadvantage under capitalism, and will therefore never be able to do away with it unaided.

German Marxist Rosa Luxemburg, in her pamphlet “Reform of Revolution,” expanded upon this idea. “Co-operatives,” wrote Luxemburg, “especially co-operatives in the field of production, constitute a hybrid form in the midst of capitalism. They can be described as small units of socialized production within capitalist exchange” [11]. The problem is that cooperatives that are established in the context of the capitalist market must compete in order to survive, and if the rate of exploitation is high among your competitors, then you must match it. Cooperatives must always “self-exploit” in order to keep up with capitalist enterprises, and thus compromise their own egalitarian ideas.

As Luxemburg put it, 

“in capitalist economy exchanges dominate production. As a result of competition, the complete domination of the process of production by the interests of capital—that is, pitiless exploitation—becomes a condition for the survival of each enterprise” [12]. 

She continues:

“The domination of capital over the process of production expresses itself in the following ways. Labor is intensified. The workday is lengthened or shortened, according to the situation of the market. And, depending on the requirements of the market, labor is either employed or thrown back into the street. In other words, use is made of all methods that enable an enterprise to stand up against its competitors in the market” [13].

Some cooperatives find small niche markets in which to survive, but the majority will either be driven out of business or be forced to copy the practices used by other employers. In Luxemburg’s words:

“The workers forming a co-operative in the field of production are thus faced with the contradictory necessity of governing themselves with the utmost absolutism. They are obliged to take toward themselves the role of capitalist entrepreneur—a contradiction that accounts for the usual failure of production co-operatives which either become pure capitalist enterprises or, if the workers’ interests continue to predominate, end by dissolving” [14].

The history of the world’s biggest co–op, the Mondragón Cooperative Corporation in Spain, is a perfect illustration of Luxemburg’s argument. Mondragón was set up with the ideals of worker participation, solidarity and equality, but as the business has grown bigger and bigger, and become more and more integrated into global capitalism, its founding principles have applied only to a shrinking percentage of its workforce.

In 1993, Britain’s Guardian newspaper reported that Mondragón was restructuring to get ready to compete in the European single market. It noted that “increased salary differentials, advertising campaigns in Fortune and cooperative alliances with companies like Hotpoint have had many co–op workers wondering whether in the new Mondragón Cooperative Corporation [MCC] some members are more equal than others” [15].

By this time daily life for most Mondragón workers was not noticeably different from working for a more traditional capitalist employer, although with greater job security. Decision-making had become highly centralized, with most co–op members having no say in the company’s day-to-day operations. Perhaps not surprisingly, in a survey comparing job satisfaction of Mondragón manual workers with workers in a similarly sized privately-owned company, there was little difference between the two groups, with the Mondragón workers slightly less satisfied [16].

A few years later the Guardian reported, “MCC members have learned to think like the shareholders of any other global business. In order to protect their own jobs from fluctuations in demand, 20% of the workforce are on part-time or short-term contracts and can easily be shed.” The corporation president, Antonio Cancelo explained: “Our clients cannot guarantee us steady workloads, so we have to have a number of people on temporary contracts. We live in a market economy. That we cannot change” [17].

Meanwhile, most workers employed by Mondragón outside of the Basque region are not members of the co–op. By the late 1990s Mondragón was setting up joint ventures with capitalist firms in other parts of Spain, and operating plants employing low-wage labor in countries such as Morocco, Egypt, Thailand, and China [18].

MCC adopted an ethical code for its foreign employees and promised that their treatment would reflect the cooperative’s “core values.” But in early 2011, Mondragón was accused of employing sweatshop labor in an appliance manufacturing company it owns in Poland, where low-paid workers started a work-to-rule. According to one commentator sympathetic to Mondragón:

“The Polish struggle represents the dark underside of worker co-operation. Our movement can’t engage in the exploitation of workers even to protect other members of the co-operative or, worse, a nostalgic legacy. I don’t think that this means that Mondragón should simply accept worker demands; however, when the situation gets to the point of a work slow-down, work-to-rule, or all-out strike, it seems to me that a worker cooperative is no longer acting according to the principles of co-operatives or worker rights” [19].

MCC’s image as an egalitarian paradise suffered a further blow in November of 2013 when one of its largest components, the domestic appliances manufacturer Fagor Electrodomésticos, was forced to declare bankruptcy. Fagor had run up debts of over one billion dollars during Spain’s severe and continuing economic crisis, and the Mondragón Group General Council decided it could not risk lending the company any more money. Attempts by Fagor’s management to persuade US hedge funds to invest in the co–op also fell through.

Almost 2,000 workers lost their jobs in the Basque region and another 3,500 were laid off from Fagor factories in France, China, Poland, and Morocco. MCC’s Corporate Employment Office offered the Basque workers help with finding work, but hundreds of them occupied one of the affected plants in Edesa and workers later formed a human chain outside MCC’s main office in Mondragón [20]. Even the world’s largest cooperative has been forced to bend to the market in order to survive. It has proven incapable of challenging capitalism by itself.

In addition to the totalizing nature of market mechanisms analyzed above, worker’s cooperatives do not alter the material basis of capitalist production to the degree necessary for the establishment of socialism. They are useful for showing workers that they have power, but they do not actually allow them to exercise that power across the whole of society.

In order to explain why that is, I want to turn to the Spanish Civil War of 1936. In Spain, just before the bourgeoisie’s attack led by Franco, anarchists were leading the most important mass trade union (the CNT had more than one million members) and had a political apparatus, despite what they claim, with the Federación Anarquiste Ibérica (FAI). In a dominating position, anarchists had the organizational capacity and the possibility to lead the proletarian and peasant masses in the abolition of capitalism [21]. It was partly their reliance on decentralized worker-owned cooperatives that resulted in their defeat by fascist and capitalist forces.

Spanish anarchists believed, much like those of today, that a system of autonomous self-managed communes, with the weakest links between each other, was the alternative to capitalism. They thought that as soon as they had collectivized villages in the countryside and cooperative factories in the city, they would also have socialism.

But, as Lenin argued, “small production engenders capitalism” [22]. This is true whether the small companies are owned by a single owner or by the entire workforce.  Despite the  heroism of anarchist activists, their Spanish project failed because the material basis which gave birth to capitalism, namely social classes and the resulting inequality is compatible with cooperative production. Anarchism failed because it saw small production units, organized along cooperative principles, the solution to capitalism.

The market forces of capitalism quickly reasserted themselves within communes led by anarchists. These forces were not mainly linked to difficulties of the civil war, but by economical relationships between communes. The communes’ incapacity to overcome inequalities, as with other problems, was noticed by all serious civil war commentators, from various tendencies, and even by some leaders of the CNT [23].

This inability to overcome inequality does not mean that the communes were a failure. Some functioned well, others not. Again, despite their faults, they demonstrated that workers could continue production without bosses. But cooperatives were not enough to stave off the return of capitalism.

This was precisely because of the  worker cooperative method of ownership. In Anarchist Spain, cooperatives were owned by the workers who directly made use of them, not by a state managed by the entire proletariat. This caused workers to consider their factory as the possession of those who worked in it rather than property of the whole proletariat. While unemployment was high, workers in collectivized shops tended more often than not to proceed to improve their own working conditions through better wages and social programs than to distribute their advantages with other workers. As with agricultural communes, great disparities lasted between laboring workers and unemployed ones, between workers from better-paid strategic sectors and those from secondary sectors [24]. This does not reflect the egalitarian, cooperative values of proletarian socialism, but is rather reminiscent of the bourgeois doctrine “every man for himself.” This bares a striking resemblance to the all-too-common phenomenon of settler workers betraying immigrant workers within unions, in that both prioritize the individual over the collective [25]. Small ownership caused this mentality to flourish, which is why it was incapable of staving off the return of capitalism.

The Marxist theory of historical materialism holds that ideas are the result of the ways in which humans change the world, that is, the ways in which they engage in labor [26]. Therefore, we can conclude that the commune’s decision to look out for one’s own workplace rather than the working class as a whole is a result of fundamentally bourgeois relations of production. Cooperatives in ‘non-capitalist societies’ such as anarchist Spain, therefore, failed to prevent the inequalities of capitalism from resurfacing, because they did not sufficiently change the material basis of capitalism.

In Anarchist Spain, evidence of difficulties in the union-controlled economy soon came in abundance. The Republican Minister of Industry reported that by January 1937 he had received petition asking for state intervention in no less than 11,000 enterprises [27]. This is nothing less than proof of Marx’s assertion that cooperatives require a state to function on the market. Cooperatives are simply not designed to function on the market. As such, they cannot possibly represent an exit strategy from capitalism.

This method of small collective ownership, which led to inequalities, also led to a lack of independence for many workers in rural cooperatives. The poorest collectivized workplaces did not have the necessary funds to pay wages. They were forced to acquire these funds by mortgaging their workplace’s equipment, as well as their warehoused material with the bourgeois Catalan government. One by one, workplaces passed from proletarian hands to those of the bourgeoisie. Eventually, capitalism returned entirely. In this sense, the direct ownership of workplaces by those employed there meant a lack of freedom for the working class as a class. Direct ownership would seem to be more conducive to freedom than state ownership, but the case of Anarchist Spain shows this to be far from the truth.

What is missing from the strategy of establishing cooperatives is any way of achieving this bigger goal, because “the lords of the land and the lords of capital will always use their political privileges for the defense and perpetuation of their economic monopolies. So far from promoting, they will continue to lay every possible impediment in the way of the emancipation of labor” [28].

Economic democracy is an important element of of socialist society, but this can only be permanently established by adopting a strategy aimed at dismantling the power of the capitalist state and expropriating the expropriators. The working class must create its own state which can organize production for the benefit of everyone, rather than a small minority (or groups of minorities) who owns the factories, land, and so on. In other words, what is needed is  a political strategy, not one focused primarily on attempting to create alternative economic models within existing capitalist society. We must become, in a word, revolutionary.

  1. “Yes, there is an alternative to capitalism: Mondragon shows the way,” The Guardian, Sunday, 24 June 2012 (http://www.theguardian.com/commentisfree…).
  2. Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It, 2nd ed. (Northampton, MA: Interlink Books, 2013).
  3. See my blog post “Socialism and Democracy in the USSR”
  4. https://www.marxists.org/archive/marx/works/1864/10/27.htm
  5. Kasmir, The Myth of Mondragón, p. 86
  6. https://www.marxists.org/archive/marx/works/1864/10/27.htm Op. Cit.
  7. Vera Zamagn, “Italy’s cooperatives from marginality to success,” paper presented at XIV International Economic History Congress, Helsinki, Finland, August 2006 (http://www.helsinki.fi/iehc2006/papers2/…).
  8. Ibid.
  9. https://www.marxists.org/archive/marx/works/1864/10/27.htm Op. Cit.
  10. https://founders.archives.gov/documents/Madison/01-10-02-0044
  11. http://www.marxists.org/archive/luxembur….
  12. Ibid.
  13. Ibid.
  14. Ibid.
  15. Andy Robinson, “Co–ops face an unequal fight,” January 2, 1993.
  16. Sharryn Kasmir, The Myth of Mondragón: Cooperatives, Politics, and Working Class Life in a Basque Town (Albany, NY: SUNY Press, 1996), chapters 5 and 6. See especially pp.162–4.
  17. Giles Tremlett, “Basque co-op protects itself with buffer of foreign workers,” October 23, 2001 (http://www.theguardian.com/business/2001…).
  18. John McNamara, “Contradictions in Paradise: When the Workers Become Bosses,” January 31, 2011, http://www.cooperativeconsult.com/blog/?….
  19. “Trouble in workers’ paradise,” The Economist, November 9, 2013 (http://www.economist.com/news/business/2…); Andrew Bibby, “Workers occupy plant as Spanish co-operative goes under,” The Guardian, November 15, 2013 (http://www.theguardian.com/social-enterprise-network/2013/nov/15/spanish-co-op-workers-occupy-plant)
  20. Christopher Bjork, “Recession Frays Ties at Spain’s Co-ops,” Wall Street Journal, December 26, 2013 (http://online.wsj.com/news/articles/SB10…).
  21. Pierre Broué and Émile Témime, The Revolution and the Civil War in Spain, London: Faber & Faver Limited, 1972.
  22. https://www.marxists.org/subject/economy/authors/pe/pe-ch04.htm
  23. Joseph Green, “Anarchism and the marketplace”, in Communist Voice, No. 4, Sept. 15, 1996.
  24. Ibid.
  25. Jacobson, Robin and Geron, Kim (2008)’Unions and the Politics of Immigration’,Socialism and Democracy,22:3,105—122, Page 112
  26. See my blog post, “Marxist Dialectical and Historical Materialism.”
  27. Juan Peiró, De la fábrica de vidrio de Mataro al Ministerio de Industria – Valencia 1937
  28. https://www.marxists.org/archive/marx/works/1864/10/27.htm Op. Cit.

 

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