The Co-Op Cop Out

“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

Many regard the co-operative movement as being in some way linked up with socialism. Socialists have come to realise that co-operatives cannot be used as a means for establishing socialism and that they only flourish to the extent that they can be successfully accommodated within capitalism.

The idea of the workers’ co-operative has flourished since the early days of the labour movement and has been seen by many as a possible alternative to nationalisation. The originators of the co-operative movement saw it as a movement that would eventually out-compete and replace ordinary capitalist businesses, leading to the coming of “the Co-operative Commonwealth” (which is an alternative name for socialism occasionally used by both Karl Marx and the Socialist Party). The co-ops would constitute, as it were, little oases in the desert of capitalism. They anticipated that the movement would grow until finally the workers would have achieved their emancipation. Essentially, each community would own its own means and instruments of production and each member of a community would work to produce what had been agreed was needed and in return would be issued with a note certifying for how many hours he had worked; he could then use this note to obtain from the community's stock of consumer goods any product or products which had taken the same number of hours to produce. (G.D.H. Cole was another who proposed a variant, that he called “Guild Socialism”. Although Cole’s blueprint did provide for close links between consumers and producers which could be interpreted as “production directly for use”, it still envisaged the continuation of finance, prices and incomes. It was to come into being through the guilds eventually out-competing capitalist industries in the marketplace)

Because co-operatives 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 (called “profits” in ordinary businesses, but “surplus” by the co-op). The co-operative movement was out-competed and is now trying to survive on the margins as a niche for “ethical” consumers and savers, leaving the great bulk of production, distribution and banking in the hands of ordinary profit-seeking businesses. Co-operatives did not provide a real solution to the workers' situation as it was incapable of providing an answer in the interests of all workers. At no time did it question the capitalist production relationships - it questions only superficial features (monopolies, competition, etc.).
Whether or not a place of work takes the form of a workers’ co-operative can have no bearing whatsoever on the pressures which compel it to meet the economic conditions for its existence. Nor do the details of how it run its affairs matter. It can be a kibbutz or a co-operative taking decisions collectively; it can be a monastery producing fortified wine; it can be a conventional business; in whatever way they are internally structured, authoritarian or democratic, and in whatever scale they may operate, as a part of social production they can only operate within the pattern of capitalist buying and selling.

In what way does the ownership of the factory by the employees differ from ownership by a capitalist? A co-op has to buy its raw materials on the market, along with every other company. It does not get steel, oil, copper, coal, 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 individuals working in the 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 co-op 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, a co-op 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 the co-op 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. Co-ops exhibit the exact same vices as capitalist firms.
The logic of capitalism dooms the efforts of those who seek co-operatives. The co-operative movement cannot solve the basic economic problems of the workers as a whole, or even of the co-operative societies' own members. Where it was a success 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.

Co-operatives can only ever involve a minority of workers, and 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 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.