Are Cooperatives the Way?

“If cooperative production is not to remain a sham and a mare; if it is to supersede the capitalist system; if the united co-operative societies are to regulate national production upon a common plan, thus taking it under their control, and putting an end to the constant anarchy and periodical convulsions which are the fatality of Capitalist production—what else, gentlemen, would it be but Communism, ‘possible’ Communism?” – Marx

“My proposal envisages the introduction of cooperatives into existing production ... just as the Paris Commune demanded that the workers should manage cooperatively the factories closed down by the manufacturers’… [neither Marx nor he himself had] ‘ever doubted that, in the course of the transition to a wholly communist economy, widespread use would have to be made of cooperative management as an intermediate stage’ – Engels

Co-ops have been embraced by significant groups of people at different times and places. Their attraction is offering a means to consolidate small producers and take advantage of economies of scale, shared risk, and common gain. At the advent of the capitalist era, cooperatives were one of many competing solutions offered to ameliorate the plight of the emerging working class. Cooperatives were considered as intermediate steps towards socialist relations of production. Cooperatives offer advantages to both workers and consumers. Workers are thought to benefit because the profits that are expropriated by non-workers in the capitalist mode of production are shared by the workforce in a cooperative enterprise. Working conditions are necessarily improved since workplace decisions are arrived at democratically without the lash associated with the profit-mania of alienated ownership. In reality, cooperatives are largely indistinguishable from small businesses. Like small private businesses, they employ few people and rely heavily upon sweat equity for capitalization. Like other small businesses, cooperatives mostly operate on the periphery of the economy.  Most present day advocates proponents, see cooperatives as a “third way” between reformism and revolution yet without noting the steady evolution of these once “third way” institutions towards a conventional capitalist business model.

Economic democracy and workers’ self-management is absolutely central to any genuine socialist society, but they can only be permanently established by adopting a strategy aimed at dismantling the power of the capitalist state and expropriating the expropriators. In other words a political strategy, not one focused primarily on attempting to create alternative economic models within existing capitalist society. The concept of cooperatives as an alternative to both private and state ownership resurfaces over and over again.

The questions we must ask in regard to cooperatives are co-ops models of socialism within a capitalist society, possible islands of socialism in the ocean of capitalism and are they politically practical steps along the road socialism, laying down the foundations of such a society? Cooperatives certainly show that workers can run factories themselves, that democracy in the workplace is possible, and capitalists are not necessary for the organization of production but can they bring about fundamental social transformation.

Worker co-ops replace the capitalist with the democratic association of the workers - the workers become their own capitalists, they can thus arrange operations amongst themselves to the extent they wish. “By deed, instead of by argument, they have shown that production on a large scale, and in accord with the behest of modern science, may be carried on without the existence of a class of masters employing a class of hands.” And again Marx explains, “Cooperative factories provide the proof that the capitalist has become just as superfluous as a functionary in production…”

The workers’ welfare can be materially enhanced, since the profits that the capitalist would have made as a result of ownership of the firm become incomes of the 99%, which are proportionately increased as that of the share of the returns to the 1% disappears. The fact that workers control their own immediate work, itself a contribution also enhances their well-being, reducing alienation from their work. Yet these advantages have their limitations, because the pressures of competition and requirements of marketing in a private profit-driven market economy restrict their options. Co-ops operating within a capitalist, profit-driven market economy cannot operate independently of that economy. As Marx has it:

“The co-operative factories run by workers themselves are, within the old form, the first examples of the emergence of a new form, even though they naturally reproduce in all cases, in their present organization, all the defects of the existing system, and must reproduce them.”

The pressures of day-to-day competition, pressure to cut costs, trim quality, and hold wages and the number of jobs down, is relentless. Efforts involved to run the business and compete successfully enough to at least stay afloat are daunting. Running an enterprise is time consuming, energy consuming, and beset by commercial problems. It weakens more than it strengthens political aspiration for system change. Most cooperatives seek only individualistic economic gains for workers through the market system, and do not work to mobilise workers into radical class consciousness nor revolutionary class struggle. Cooperative movements from this perspective were simply an individualistic capitalist enterprise that could not bring about fundamental social change due to the absence of political mobilisation

Marx rejected Lassalle’s belief that workers’ emancipation should be brought about by a system of state-aided producer cooperatives. Based on the Gotha programme, one means of solving social problems was to demand State aid to fund the establishment of producer cooperatives under the democratic control of the mass of the working people. Marx disagreed on this point by objecting ‘that the workers’ desire to establish the conditions for cooperative production on a social scale, and first of all on a national scale, in their own country, only means that they are working to transform the present conditions of production, and it has nothing in common with the foundation of co-operative societies with state aid’. Otherwise—Marx argued— socialism would be established through State action—in stark contrast with the central idea that workers will only achieve emancipation through their own efforts. If workers were to require the support of the State for their revolutionary movement, they would thereby only reveal their ‘full consciousness that they neither rule nor are ripe for rule!’ Marx concludes that ‘as far as the present co-operative societies are concerned, they are of value only insofar as they are the independent creations of workers and not protege´s either of the governments or of the bourgeoisie’

But socialists don’t take what Marx or Engels as canon. Rosa Luxemburg subjected cooperatives to criticism in her pamphlet Reform or Revolution.

“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.”

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.

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.”

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.”

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.”

Socialists have long argued that socialism in one country is not possible because a socialist revolution that does not spread will either be crushed from the outside or survive by being transformed from within. Socialism in one work-place is even more of a non-starter. 

And despite his sympathies for cooperatives Marx also realised that:

“the experience of the period from 1848 to 1864 has proved beyond doubt that, however excellent in principle and however useful in practice, co-operative labor, if kept within the narrow circle of the casual efforts of private workmen, will never be able to arrest the growth in geometrical progression of monopoly, to free the masses, nor even to perceptibly lighten the burden of their miseries.”

Co–ops by themselves do not challenge the system and actually may divert energy away from doing so.  Individual co–ops do not threaten the system, are likely to degenerate, and can absorb time and resources that could be used for other kinds of organizing. Marx also noted that a variety of establishment figures had become supporters of co–ops:

“It is perhaps for this very reason that plausible noblemen, philanthropic middle-class spouters, and even kept political economists have all at once turned nauseously complimentary 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.”

Marx understood that the capitalist class would not stand idly by and allow themselves to pass into history. They had the power of the State behind them:

“To save the industrious masses, cooperative labour ought to be developed to national dimensions, and, consequently, to be fostered by national means. Yet the lords of the land and the lords of capital will always use their political privileges for the defence 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 labour. … To conquer political power has, therefore, become the great duty of the working classes.”

To liberate humanity from the misery of capitalist exploitation and make full use of society’s scientific and technical achievements to overcome material and cultural inequality cannot be done by an uncoordinated set of cooperatives – it will require the pooling and coordination of all society’s productive capacities according to a common plan of production to meet all our individual and collective needs and desires.

On their own a cooperative can easily be a capitalist enterprise owned by its workers in which, as Marx says, the workers become their own capitalist. Nor can they “out compete” capitalism. Corporations will always have larger capital to invest in research, technology, machinery and their willingness to cut costs through lower wages, less environmentally sounds practices, outsourcing, etc, will give conventional capitalist enterprises an advantage. Worker cooperatives generally are in industries which generate lower profit margins and because they are smaller and do not have the advantages of scale which larger companies do, workers are often are forced to work long hours at lower wages to stay afloat. This can be called “self-managed exploitation.”  The pitfalls of workers cooperatives are often missing from its proponents’ discussion. Their proposals for getting rid of capitalism would actually lead to a entrenchment of capitalism

As Chomsky explains it:

 “Worker ownership within a state capitalist, semi-market system is better than private ownership but it has inherent problems. Markets have well-known inherent inefficiencies. They’re very destructive. … [what is needed is to] dismantle the system of production for profit rather than production for use…If you’re in a system where you must make profit in order to survive. You are compelled to ignore negative externalities, effects on others.”

There is no real or meaningful self -management insofar as it is limited to single companies operating within the market. As cooperatives exist within a market system, their interests are to compete with other companies and expand their market share. This is a key and important difference between workers cooperatives, where the means of producing goods and services are owned by a specific group of workers competing with other cooperatives and capitalist companies through a market system and the deeper and post-capitalist goal of a socialized economy whereby all the means of producing goods and services (or at least the vast majority) are seen as belonging to society as a whole and while directly operated and run by the workers at each entity would be federated and coordinated in a horizontal manner to produce products and services based on need. An analogy to the problem is that a strategy of advocating worker cooperatives is akin to allowing small groups of slaves on a small number of plantations to self-manage themselves. It makes life better for some, but it doesn’t end the system of exploitation. While worker cooperatives can have some uses, the perspective cannot be described as anti-capitalist in a meaningful sense.

 The Socialist Party supports the idea that workers should run the economy, but we think it needs to go way beyond what advocates of cooperatives put forward. Our aspiration is the socialist cooperative commonwealth described thus by Marx:

“Within the co-operative society based on common ownership of the means of production, the producers do not exchange their products; just as little does the labour employed on the products appear here as the value of these products, as a material quality possessed by them, since now, in contrast to capitalist society, individual labour no longer exists in an indirect fashion but directly as a component part of total labor.”

If you want to open small businesses organized as cooperatives, as a strategy for survival, by all means do so but please do not declare that it's somehow a path beyond capitalism. Workers coops have persisted throughout the history of capitalist development, although today, with a few notable exceptions, they are mostly relatively small, local operations. When they are successful, they often tend to evolve in the direction of more conventional capitalist firms, hiring non-member employees as a way of expanding production rather than enlarging the full membership of the producer coop itself. While many, perhaps most, people who work as members in cooperatives continue to see them as an alternative way of life to working in a conventional capitalist firm, for most participants they are no longer part of a broad strategy for building an alternative to capitalism and are certainly not part of an organized anti-system strategy as was the case in the 19th Century cooperative movement.

The big question that has to be answered is, although, worker-owned cooperatives remain one of the central expressions a democratic egalitarian vision of an alternative way of organising economic activity , can worker coops cooperate with each other through a kind of voluntary federated structure which would facilitate coordination and joint action as suggested by mutualism that would form the basis of a new society, initially within capitalism itself and eventually replacing capitalism? The conclusion in not one of conjecture but a matter of historic record – No.