One of the main proposals advocated by the New Economic economists and many others is worker-owned and controlled co-operatives. It has never been argued by the Socialist Party that co-operatives are a means to-wards socialism but rather it is the aim of the people - the Co-operative Commonwealth.
The idea of the workers’ co-operative originated in the early days of the labour movement. It is based on the simple attractive idea: “Get rid of the bosses who make a profit from our work and instead work for ourselves so we can enjoy the full fruits of our work.” Capitalism is not to be overthrown by class war but undermined by the cooperative movement until it crumbles is the theory But how does the ownership of the factory by the employees differ from ownership by a capitalist? A cooperative has to buy its raw materials on the market, just the same as every other company. A cooperative has to sell its finished products on the market, just the same as every other company. A cooperative has to invest in new plant and equipment, just the same as every other company. Thus, they have to buy goods at the same price as any other capitalist concerns. They have to sell goods at the same price as any other capitalist firms. They have to compete for extra capital or borrowing as any other capitalist firms. To succeed the worker in a cooperative is obliged to attacked their own living standards by taking less pay, or intensifying his work-rate or laying off some of his colleagues. Workers’ co-operatives face all the problems of capitalist competition and require to resort to all the capitalist cost-cutting strategies. The cooperative means the workers are landed with the responsibility of making the business a going concern which will involve workers on lower wages and in higher productivity. Those proposing cooperatives are advocating self-imposed sacrifice.
When people endeavour to ease their life by shopping for their families by purchasing collectively with others at wholesale prices so as to benefit by the difference with retail prices, this is not to be condemned. We understand very well that in our present state of society the workers will try to alleviate as much of their misery as they can, and to give their families as much comfort and satisfaction as they can. We do not condemn those food co-ops. But as Marxists we must observe that if these means of tackling their poverty and making their life more bearable were the general rule, instead of being the exception to the present state of affairs, the consequence would be that the cost of living having become cheaper, wages would not increase and would even decrease.
Employers would simply refuse to increase the wages of their employees with the explanation that they can now live very well, with their cost of living thus reduced so why should we pay more. We witness the proof of that everyday. Pay in London is higher because the costs of living there is more expensive than in the provincial cities and towns. [SEE APPENDIX]
The concept of co-operatives also suffers from the same problem that the market domination of the conglomorates such as Walmart have on local communities. The success of co-operatives would close down the small local corner-shop (the “mom and pop” stores as they are called in the US) as much as the opening of a giant supermarket does and place tens of thousands shop-keepers out of work.
There is still another reason why co-operatives can have no socialist value. The proponents of co-operatives insist that in the co-operatives for consumption, the antagonism between seller and buyer who henceforth are one and the same is done away with, just as with profit of one at the expense of the other. Yet nearly all of them are obliged by the commercial pressures of the capitalist milieu, to go in for capitalism themselves. Therefore just instead of selling only to their members at the price of cost, they are more and more obliged to sell to outsiders for the sake of profits. The antagonism between seller and buyer, which it is the role of co-operation to abolish, is still in existence. They are more and more compelled by competition to look for means of existence and development outside the distribution of products and are compelled to sell to the public. In attempts to realise and accumulate profits commercially co-ops become only a new sort of department store, constituted by small workingmen share-holders instead of department stores constituted by large capitalist share-holders. Co-operatives cannot help being governed by all the laws which determine and regulate production and exchange in the society of profit of to-day.
Despite their glowing recommendation co-operatives do not even prepare the elements of the new society. Capitalism itself has already prepared us for a long time, both materially and as organisationally to administer socialist society. It is precisely because of capitalism, that all the work of administration, direction, execution, the most scientific sort of work as well as the most manual, is carried out by members of the working class hired for the task. We can change the present way of running industry into a new one without any shock or disruption or upheaval. Everything is ready for this transformation or revolution, because the role of the capitalists to-day, does not represent any sort of work, even of directing, and they may disappear to-morrow without anything being touched or destroyed in the operating of the different sorts of industries.
“However, the capitalist character of our worker has still another side. Let us assume that in a given industrial area it has become the rule that each worker owns his own little house. In this case the working class of that area lives rent free; expenses for rent no longer enter into the value of its labor power. Every reduction in the cost of production of labor power, that is to say, every permanent price reduction in the worker’s necessities of life is equivalent “on the basis of the iron laws of political economy” to a reduction in the value of labor power and will therefore finally result in a corresponding fall in wages. Wages would fall on an average corresponding to the average sum saved on rent, that is, the worker would pay rent for his own house, but not, as formerly, in money to the house owner, but in unpaid labor to the factory owner for whom he works. In this way the savings of the worker invested in his little house would certainly become capital to some extent, but not capital for him, but for the capitalist employing him...Incidentally, what has been said above applies to all so-called social reforms which aim at saving or cheapening the means of subsistence of the worker. Either they become general and then they are followed by a corresponding reduction of wages, or they remain quite isolated experiments, and- then their very existence as isolated exceptions proves that their realization on a general scale is incompatible with the existing capitalist mode of production. Let us assume that in a certain area a general introduction of consumers’ co-operatives succeeds in reducing the cost of foodstuffs for the workers by 20 per cent; in the long run wages would fall in that area by approximately 20 per cent, that is to say, in the same proportion as the foodstuffs in question enter into the means of subsistence of the workers. If the worker, for example, spends three-quarters of his weekly wage on these foodstuffs, then wages would finally fall by three-quarters of 20 = 15 per cent. In short, as soon as any such savings reform has become general, the worker receives in the same proportion less wages, as his savings permit him to live cheaper.” Engels in the Housing Question