Studies show free companies more productive than capitalist ones

[cyu]

Excerpts from http://trustcurrency.blogspot.com/2009/12/worker-cooperative-productivity.html

surveying their empirical studies, Derek Jones and Jan Svenjnar report, “There is apparently consistent support for the view that worker participation in management causes higher productivity. This result is supported by a variety of methodological approaches, using diverse data and for disparate time periods.” In 1990, a collection of research papers edited by Princeton economist Alan Blinder extends the data set much further and reached the same conclusion: worker participation usually enhances productivity in the short run, sometimes in the long run, and rarely has a negative effect. Moreover, participation is most conducive to enhancing productivity when combined with profit sharing, guaranteed long-range employment, relatively narrow wage differentials , and guaranteed worker rights (such as protection from dismissal except for just cause)- precisely the conditions that will prevail under Economic Democracy.

As to the viability of complete workplace democracy, we note that workers in the plywood cooperatives in the Pacific Northwest have been electing their managers since the 1940s, workers in the Mondragon cooperatives in Spain since the 1950s. There are some twenty thousand producer-cooperatives in Italy, comprising one of the most vibrant sectors of the economy. The Swedish cooperative movement is also large and impressive. Needless to say, not all self-management ventures are successful, but I know of no empirical study that even purports to demonstrate that worker-elected managers are less competent than their capitalist counterparts. Most comparisons suggest the opposite; most find worker self-managed firms more productive than similarly situated capitalist firms.

"Productivity and profitability are higher for cooperatives than for capitalist firms. It make little difference whether the Mondragon group is compared with the largest 500 companies, or with small- or medium-scale industries; in both comparison the Mondragon group is more productive and more profitable."

[RadioRaheem84]

Reply from one, Tim Kern:


The author shows a basic misunderstanding of the word, "capitalist." Multiple-person ownership (whether stockholders, partners, or workers) is a trademark of capitalist enterprise. The management-decision style and processes are not determinants of whether the firm is "capitalist" or "socialist." The ownership (and profit) dimensions are.

OK, so the man cannot tell the difference between "multiple partner" ownership or as an example stockholders and a worker run co-op?

I swear if we don't get on the ball and let people know that worker run and managed private enterprises are socialist in nature and scope, then we can expect some idiot cappies like Mr. Kern to usurp this movement as a "trademark" of capitalist enterprise.

[Agnapostate]

What's ironic is that the Austrian critique of central planning (http://en.wikipedia.org/wiki/Economic_calculation_problem) has been turned on its head in the case of the labor cooperative. The orthodox capitalist firm is rigidly hierarchical, meaning that there will be impediments to the acquisition and transmission of distributed knowledge (http://en.wikipedia.org/wiki/Distributed_knowledge) and tacit knowledge (http://en.wikipedia.org/wiki/Tacit_knowledge). The far more horizontal structure of the labor cooperative largely minimizes this problem, and eliminates principal-agent problems (http://en.wikipedia.org/wiki/Principal-agent_problem) caused by asymmetric information (http://en.wikipedia.org/wiki/Asymmetric_information) by unifying ownership and management. Since workers are both owners and managers, there is no longer a divergence of interests between the two.

It's for this reason that workers' ownership and management (though not its implementation through expropriation of productive resources) is supported by Austrian economists such as David Prychitko (http://en.wikipedia.org/wiki/David_Prychitko), and why market socialist Theodore Burczak's (http://en.wikipedia.org/wiki/Theodore_Burczak) book, Socialism After Hayek (http://www.amazon.com/Socialism-after-Advances-Heterodox-Economics/dp/0472069519), garnered Austrian praise for its serious consideration of Hayekian criticisms of central planning. Since adherents of the Austrian school foolishly reject all empirical research that contradicts their opinions and therefore ignore the vast empirical literature that illustrates the superiority of workers' control (with their Internet adherents doing this particularly fervently), pure theory might be a sufficiently "praxeological" (http://en.wikipedia.org/wiki/Praxeology) basis for advocacy of workers' ownership and management.

[ZeroNowhere]

So worker-run capitalist companies are more productive than others?


The author shows a basic misunderstanding of the word, "capitalist." Multiple-person ownership (whether stockholders, partners, or workers) is a trademark of capitalist enterprise.This guy's right.

[Agnapostate]

Workers' ownership is a trademark of socialist organization, with workers' competition being a trademark of socialist enterprise. I don't know of anyone who would claim that firms utilizing employee stock ownership plans or even full-blown labor cooperatives are "socialist" in nature, but they do provide insights into the nature of the cornerstone of a socialist economic model.

[RadioRaheem84]

This guy's right.

How so?


I don't know of anyone who would claim that firms utilizing employee stock ownership plans or even full-blown labor cooperatives are "socialist" in nature, but they do provide insights into the nature of the cornerstone of a socialist economic model.

If they're not socialist? Then what is?

[cyu]

So worker-run capitalist companies are more productive than others?



Capitalism has many different definitions to many different people.

If capitalism means the people who own the means of production are not the same as those who use it, then this is not capitalism.

If capitalism means economic inequality, then this may or may not be capitalism, depending on how much equality the employees vote for.

If capitalism means any economic acitivty that is not state-run, then this is capitalism (unless you consider the employees to be a mini-state unto themselves).

If you want to boil it down to basics, then this shows that more democratic and egalitarian companies are more productive than more authoritarian / less egalitarian companies.

[Agnapostate]

If they're not socialist? Then what is?

The public ownership and management of the means of production. Individual worker-owned firms aren't any more "socialist" than individual collectives are; less so, in fact.


Capitalism has many different definitions to many different people.

If capitalism means the people who own the means of production are not the same as those who use it, then this is not capitalism.

If capitalism means economic inequality, then this may or may not be capitalism, depending on how much equality the employees vote for.

If capitalism means any economic acitivty that is not state-run, then this is capitalism (unless you consider the employees to be a mini-state unto themselves).

If you want to boil it down to basics, then this shows that more democratic and egalitarian companies are more productive than more authoritarian / less egalitarian companies.

Capitalism is characterized by the private ownership of the means of production, market exchange as the primary means of resource allocation, and the existence of wage labor. The presence of individual worker-owned firms does not alter the fundamental nature of the wider economy, in keeping with the micro/macro division.

[RadioRaheem84]

The public ownership and management of the means of production. Individual worker-owned firms aren't any more "socialist" than individual collectives are; less so, in fact.
Public ownership, as in for all? As in not just the workers of X enterprise?

I was under the assumption that worker owned and managed co-op firms were socialist in the syndicalist, anarchist sense.

[ls]

Public ownership, as in for all? As in not just the workers of X enterprise?

I was under the assumption that worker owned and managed co-op firms were socialist in the syndicalist, anarchist sense.

Not to most syndicalists I would have thought.

[Agnapostate]

Public ownership, as in for all? As in not just the workers of X enterprise?

I was under the assumption that worker owned and managed co-op firms were socialist in the syndicalist, anarchist sense.

I was speaking of individual firms. Workers' ownership and management of individual firms in the context of the capitalist economy is not "socialist" any more than a single collective is...less so, in fact, considering their lesser stature and often more "capitalistic" nature.

[RadioRaheem84]

So what would a socialist enterprise look like?

What about the cooperative hotels in Argentina? Is that an example? I am just confused as to what you mean by socialist enterprise if socialism is the workers owning the means of production. Apparently, it's an entire system of worker run firms not just one individual firm. One single firm operating as a co-op, worker owned and managed, in a capitalist country does not count as socialism?

[cyu]

Workers' ownership and management of individual firms in the context of the capitalist economy is not "socialist" any more than a single collective is...less so, in fact, considering their lesser stature and often more "capitalistic" nature.

What differences are there between a so-called "worker-owned firm" and a so-called "single collective"? Is it possible for two such things to be identical?



private ownership of the means of production


What's the definition of "private"? Non-government? To anarchists, there would be no government, so everything would be "private". Or to look at it another way, to anarchists, anarchists ARE the government - each unto themselves, so nothing is "private" - so the semantic distinction is not very helpful.

> market exchange as the primary means of resource allocation

Would you say this is a contradiction in terms? http://en.wikipedia.org/wiki/Market_socialism

> the existence of wage labor.

If employees own and control their own company, is that considered wage labor? If so, what would it look like if it wage labor didn't exist?

[Agnapostate]

So what would a socialist enterprise look like?

What about the cooperative hotels in Argentina? Is that an example? I am just confused as to what you mean by socialist enterprise if socialism is the workers owning the means of production. Apparently, it's an entire system of worker run firms not just one individual firm. One single firm operating as a co-op, worker owned and managed, in a capitalist country does not count as socialism?

Yes, that's my point, since socialism requires collective ownership and management of the means of production.


What differences are there between a so-called "worker-owned firm" and a so-called "single collective"? Is it possible for two such things to be identical?

To be honest, I use the term "collective" as being akin to the term "commune," a structure somewhat like a kibbutz or a small Freetown Christiania-like settlement. That implies active residence and maintenance not associated with the worker-owned firm. My point, however, is merely that workers' ownership within the context of the capitalist economy is not "socialist"; it illustrates some aspects of a critical cornerstone of socialism, but is not itself socialist.


What's the definition of "private"? Non-government? To anarchists, there would be no government, so everything would be "private". Or to look at it another way, to anarchists, anarchists ARE the government - each unto themselves, so nothing is "private" - so the semantic distinction is not very helpful.

Private ownership is ownership by an individual or firm rather than the public at large. Public ownership is manifested in anarchist economic structure through horizontal confederations of decentralized collectives and communes. As for your other point, it's actually an interesting issue within market socialism, since the means of production are both "privately" and "publicly" owned. This is ensured through egalitarian distribution of "private" property rights to democratically managed firms, often with provisions that prevented the consolidation of private ownership so as to prevent the re-emergence of capitalism.


Would you say this is a contradiction in terms? http://en.wikipedia.org/wiki/Market_socialism

No, market socialism has a noble tradition, with the mutualist Proudhon being a market socialist by definition. Along with decentrally planned socialism, it's one of the two forms that I'd regard as being viable and not subject to the dispersed knowledge problems identified by Kropotkin, though identification is attributed to Ludwig von Mises and Friedrich Hayek and their economic calculation problem. Market exchange as the primary means of resource allocation is a necessary criterion of capitalism, but not a sufficient one, just as abolition of the state is a necessary criterion of anarchism, but not a sufficient one.


If employees own and control their own company, is that considered wage labor? If so, what would it look like if it wage labor didn't exist?

Participatory direct democratic control would not be objectionable, but there are forms of "employee ownership" that effectively still entail an extraction of surplus value from laborers in that there are share ownership plans characterized by inequality and a bureaucracy of upper management, etc.

[RadioRaheem84]

How do some co-ops differ, say Mondragon vs. the Hotel Co-op in Argentina?

How would worker ownership but not management effect the co-op as in the case of Mondragon?

What caused them to operate as capitalist enterprises?

[cyu]

That implies active residence and maintenance not associated with the worker-owned firm

If the employees lived near the company they owned and maintained it themselves, would that count as a "worker-owned firm" and "single collective" at the same time?


Private ownership is ownership by an individual or firm rather than the public at large.

When you say "public" do you say it in the scope of a world communist government? What if it was only controlled by the local community, would that still count as public? What if one individual declares himself as his own community / nation, would that still count as public?


it's one of the two forms that I'd regard as being viable and not subject to the dispersed knowledge problems identified by Kropotkin

Sounds good to me =]


Market exchange as the primary means of resource allocation is a necessary criterion of capitalism, but not a sufficient one

Agreed, I'd say another necessary criterion is economic equality: http://everything2.com/title/Demand+is+not+measured+in+units+of+people%252C+it+ is+measured+in+units+of+money


there are forms of "employee ownership" that effectively still entail an extraction of surplus value from laborers in that there are share ownership plans characterized by inequality and a bureaucracy of upper management, etc.

Agreed. Even the United Steelworkers said as much while developing their alliance with Mondragon: http://www.dollarsandsense.org/blog/2009/10/steelworkers-form-collaboration-with.html

Highlighting the differences between Employee Stock Ownership Plans (ESOPs) and union co-ops, Gerard said, "We have lots of experience with ESOPs, but have found that it doesn't take long for the Wall Street types to push workers aside and take back control. We see Mondragon's cooperative model with 'one worker, one vote' ownership as a means to re-empower workers and make business accountable to Main Street instead of Wall Street."

Mondragon has its own problems with inequality of course, but personally I'd say that's due more to a problem with being forced to operate within a capitalist and consumerist society.

[RadioRaheem84]

Proof that the argument between socialists and capitalists has been philosophical the entire time and never economical:


As I understand it, at its simplest level, capitalism is simply a system of private property. The main difference from (most) socialism is the assertion that the means of production are also private property.

If workers enter into an agreement to own the means of production in common, then that is not anti-capitalist. It would only be anti-capitalist if they seized the means of production from their former owners by force.

Furthermore, in whatever fields co-op firms are more productive, then in a free market those types of firms will come to dominate those markets over time, as that fact is discovered. That's free market economic theory, not incompatible with co-ops at all.


Responses to the article.

It seems like the argument boils down to some philosophical spat about private property and the use of force (i.e. the state). This canard is tiresome and irritating to keep going in circles around each time some idiot right-libertarian spills his guts about the wonders of capitalism. So that means that their whole ideology is based on a serious misconception of socialism and they have absolutely NO understanding of what socialism really means.

I can understand how they can conflate a private co-op and with a private capitalist enterprise but how can they not see them as a response people have taken to capitalism? How do they just see it as another changing face of capitalism? How do they ignore the social relations and the hierarchy within a capitalist enterprise and then transfer that same definition of a capitalist enterprise to one that is democratically run by workers?

[CartCollector]

How do they just see it as another changing face of capitalism?

I think it's because the businesses are owned collectively by its workers and compete on the free market, which is legal and philosophically justified in free market capitalism, while certain other things (state ownership, planned economies) aren't. Also, innovation is encouraged on the free market, and this gives capitalists more ammo to say "see what the free market can do? You darn big government socialists wouldn't even allow innovations like this to happen because you're so concerned with regulating everything!"

On the subject of cooperatives in capitalism, there's a few problems with them. One is that their 'democracy' (which is more often like republicanism, since it involves the election of rulers) can just end up being a way for the company's heads to coerce workers into working more for them, while limiting their struggle against the company heads. The company heads can claim that they're all nice and wonderful, since the workers elected them, and they have nothing more to push for now that they have 'democracy' in the company. This illusion of control already happens in 'democratic' countries and some labor unions. There's no reason that it couldn't reemerge within cooperatives.

The other thing, that the capitalists don't think of, is that, if a business is more productive when it's democratically controlled, then why not the whole economy? Why is competition bad within a company, yet good outside of it? I suspect most socialists here know the limitations that cooperatives face since they have to compete on the market- competition encourages businesses to screw their workers more to stay competitive, which will lead to either the cooperatives becoming more private in order to stay profitable or the cooperatives being out competed and becoming taken over by privately owned businesses. Since cooperatives are more productive than privately owned businesses, this also proves that using a market system to control production creates inefficiency. This proves the necessity of creating a democratically planned economy to keep the productive gains of cooperatively run businesses- in other words, socialism.