<div dir="ltr">A new posting - <br><h3 class="" itemprop="name"><a href="http://zzs-blg.blogspot.com/2014/01/cooperatives-cure-for-capitalism.html">Cooperatives: A Cure for Capitalism?</a></h3><h3 style="color:rgb(0,102,0)">
</h3> - from Zoltan Zigedy is available at:<br><span><a href="http://zzs-blg.blogspot.com/" target="_blank">http://zzs-blg.blogspot.com/</a></span><br>
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<span style="font-size:medium">Co-ops-- cooperative
economic enterprises-- have been embraced by significant groups of
people at different times and places. Their attraction precedes the
heyday of industrial capitalism by offering a means to consolidate small
producers and take advantage of economies of scale, shared
risk, and common gain. </span>
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<span style="font-size:medium">At the advent of the
industrial era, cooperatives were one of many competing solutions offered to
ameliorate the plight of the emerging proletariat. Social engineers
like Robert Owen experimented with cooperative enterprises and
communities.</span></div>
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<span style="font-size:medium">In the era of mass
socialist parties and socialist construction, cooperatives were
considered as intermediate steps to make the transition from feudal
agrarian production towards socialist relations of production. </span>
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<span style="font-size:medium">Under the capitalist mode
of production, co-ops have filled both employment and consumption
niches deferred by large scale capitalist production. Economic
activities offering insufficient profitability or growth have become
targets for cooperative enterprise. </span>
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<span style="font-size:medium">In theory, cooperatives
may 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 (less the present and anticipated
operating expenses and investments, of course). Many argue as well that the working
conditions are necessarily improved since workplace decisions are
arrived at democratically absent the lash associated with the
profit-mania of alienated ownership (though little attention is paid
to the consequences for productivity and competitiveness against
capitalist enterprises).</span></div>
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<span style="font-size:medium">Consumers are said to
benefit when they collectively appropriate the retail functions
normally assumed by privately owned, profit-driven outlets. Benefit
comes, on this view, by purchasing from wholesale suppliers,
collectively meeting the labor requirements of distribution, and
enjoying the cost-savings from avoiding a product markup (little
attention is paid to limitations on participation dictated by class,
race, or gender; the wholesale quantity discounts enjoyed by
capitalist chains are also conveniently overlooked).</span></div>
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<span style="font-size:medium">A case can also be made
for the cooperator's dedication to quality, safety, and health-
promotion.</span></div>
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<span style="font-size:medium">In reality, cooperatives
in the US 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, US cooperatives operate on the periphery of the US
economy, apart from the huge monopoly capitalist firms in
manufacturing, service, and finance.</span></div>
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<span style="font-size:medium"><b>Cooperatives
as a Political Program</b></span></div>
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<span style="font-size:medium">Since
the demise of the Soviet Union and Eastern European socialism, many
on the US Left have rummaged for a new approach to the inequalities
and injustices that accompany capitalism. Where more than a decade
of anti-Communist purges had wrung nearly all vestiges of socialist
sympathy from the US psyche, the fall of the ludicrously-named “Iron
Curtain” found Leftists further distancing themselves from Marxian
socialism. Hastily interning the idea of socialism, they reached for
other answers. </span>
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<span style="font-size:medium">It is unclear whether this retreat was actually a search
for a different anti-capitalist path or, in reality, grasping an opportunity to
say farewell to socialism. </span>
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<span style="font-size:medium">In
recent years, several Leftists, “neo-Marxists”, or fallen
Marxists have advocated cooperatives as an anti-capitalist program.
Leading advocates include the <b>Dollars and Sense</b>
collective centered around the University of Massachusetts, Amherst,
GEO (Grassroots Economic Organizing), Professor Gar Alperovitz, <b>Labor
Notes</b>, United Steel Workers of America, and media
Marxist-du-jour, Professor Richard Wolff. Some are organizing around
the idea of a “New Economy” or a “Solidarity Economy”, with
cooperative enterprises as a centerpiece.</span></div>
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<span style="font-size:medium">Now
coops are not foreign to Marxist theory. After World War I, the
Italian government sought to transfer ownership of unused land from
big estates, <i>latifondi</i>, on to peasants, especially veterans.
As much as 800,000 hectares were thus passed on to poor peasants.
Through this process and land seizures, the number of smallholders
increased dramatically. Socialists and Communists urged the
consolidation of these holdings into collectives, agricultural
cooperatives. Certainly more than 150,000 hectares ended up in
cooperatives. In those circumstances, the rationale was to increase
the productivity, to save the costs, to enhance the efficiency of
peasant agriculture in order to compete with the large private
estates. Cooperatives were not seen as an alternative to socialism,
but a rational step away from near feudal production relations toward
socialism, a transitional stage.</span></div>
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<span style="font-size:medium">Likewise,
in the early years of the Soviet Union, Communists sought to improve
small-scale peasant production by organizing the countryside into
collective farms, producers' cooperatives. They saw cooperative
arrangements as rationalizing production and, therefore, freeing
millions from the tedium and grind of subsistence farming and
integrating them into industrial production. Through mechanization
and division of labor, they expected efficiency and productivity to
grow dramatically, speeding development and paving the way for
socialism. </span>
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<span style="font-size:medium">Again,
cooperative enterprises counted as an intermediary for moving towards
socialist relations of production. Thus, Marxists see the
organization of cooperatives as a historically useful bridge between
rural backwardness and socialism.</span></div>
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<span style="font-size:medium">But
modern day proponents of cooperatives see them differently. </span>
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“<span style="font-size:medium">The
'evolutionary reconstructive' approach is a form of change different
not only from traditional reform, but different, too, from
traditional theories of 'revolution'” says Gar Alperovitz of
cooperatives and other elements of the “Solidarity Economy” (</span><span style="font-size:medium"><span style="font-size:medium"><i>America beyond Capitalism,</i><b> Dollars and Sense</b>, Nov/Dec, 2011)</span>.
Like most proponents, Alperovitz sees cooperatives as pioneering a
“third way” between liberal reformism and socialist revolution.
However, a minority of advocates (Bowman and Stone, “<i>How Coops
can Change the World</i>”, <b>D&S</b>, Sept/Oct, 1998, for
example) see cooperatives as the “best first step towards that goal
[of a planned, democratic world economy]. They suggest that the
correct road is through “spreading workplace democracy” and on to
socialism.</span></div>
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<span style="font-size:medium">Whether
postured as a “third way” or a step towards socialism, it is
difficult to get a clear picture of the extent and success of the
cooperative movement; it is equally challenging to gather a sense of
how it is suppose to function in a capitalist economy. </span>
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<span style="font-size:medium">As
for numbers, Alperovitz (“<i>America beyond Capitalism”</i>, <b>D&S</b>,
Nov/Dec, 2011) muddies the waters by citing the numbers of
“community development corporations” and “non-profits”
(Alperovitz, 2011) as somehow strengthening the case for
cooperatives. The fact that community development corporations have
wrested control of neighborhoods from old-guard community and
neighborhood groups and embraced developers and gentrification causes
him no distress. Of course “non-profits” count as an even more
dubious expression of a solidarity economy. In a city like
Pittsburgh, PA, mega-non-profits remove 40% of the assessed property from
the tax rolls. These non-profits not only evade taxes, but divide enormous
“surpluses” among super-salaried executives. They beggar funding
from tax shelter trusts and endowment funds, completing the circle of
wink-and-a-nod tax evasion. Of course there are, as well, thousands
of “non-profits” that pursue noble goals and operate on a
shoestring.</span></div>
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<span style="font-size:medium">Alperovitz
alludes to credit unions as perhaps sharing the spirit of cooperation
without noting the steady evolution of these once “third way”
institutions towards a capitalist business model. Insurance companies
also share this evolution, but they are too far down this path of
transition to capitalist enterprise to be credibly cited by
Alperovitz.</span></div>
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<span style="font-size:medium">Alperovitz
leaves us with “...11,000 other businesses that are owned in whole
or part by their employees.” In this slippery total of whole or
partial worker ownership are included ESOPs-- Employee Stock
Ownership Programs, a touted solution to the plant closing surge that
ripped through the Midwest in the 1980s. Alperovitz pressed
vigorously for ESOPs in the steel industry in the 1980s as he does
cooperatives today. When asked to sum up their track record, one
sympathetic consultant, when pressed, said: “I don't think its been
a real good record of success. Some have actually failed...” (Mike
Locker, <i>“Democracy in Steel?”</i>, <b>D&S</b>, Sept/Oct,
1998). But we get no firm number for cooperatives in the US.</span></div>
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<span style="font-size:medium">Another
advocacy group for cooperatives gave a more candid picture of the
cooperative movement in the Sept/Oct, 1998 issue of <b>Dollars and
Sense</b> (<i>“ESOPS and Coops”</i>). A study by the Southern
Appalachian Cooperative Organization claimed that there were 154
worker-owned cooperatives employing 6,545 members in the US. In sixty
percent of the 154, all workers were owners. Median annual sales were
$500,000 and 75 percent had 50 or fewer workers. Twenty-nine percent
of the coops were retail, twenty-eight percent were small
manufacturing, and twenty-three per cent food related businesses.</span></div>
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<span style="font-size:medium">Interestingly,
the same article claims that there were approximately 11,000 ESOPs in
1988 (source: National Center of Employee Ownership). If we take
Alperovitz's 2011 claim seriously, there has been little growth in
the ensuing thirteen years of “...businesses that are owned in
whole or part by their employees...”.</span></div>
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<span style="font-size:medium">From
this profile, we can conclude that cooperatives in the US are
essentially small businesses accounting for a tiny portion of the
tens of millions of firms employing less than 50 employees. As such,
they compete against the small service sector and niche manufacturing
businesses that operate on the periphery of monopoly capitalism.
Insofar as they pose a threat to capitalism, they only threaten the
other small-scale and family owned businesses that struggle against
the tide of price cutting, media marketing, and heavy promotion
generated by monopoly chains and low-wage production. They share the
lack of capital and leverage with their private sector counterparts.
Cooperatives swim against the tide of monopolization and acquisition
that have virtually destroyed the mom and pop store and the
neighborhood business.</span></div>
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<span style="font-size:medium">Some
of the more clear-headed advocates acknowledge this reality. Betsy
Bowman and Bob Stone concede the point: “...Marx argued in 1864
that capitalists' political power would counteract any gains that
coops might make. This has proven true! When capitalists have felt
threatened by cooperatives, they have conducted economic war against
coops by smear campaigns, supplier boycotts, sabotage, and,
especially, denying credit to them.” (Bowman and Stone, <b>D&S</b>,
Sept/Oct, 1998).</span></div>
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<span style="font-size:medium"><b>Mondragon</b></span></div>
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<span style="font-size:medium">Until
recently, cooperators and their advocates had one very large arrow in
their quiver. </span>
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<span style="font-size:medium">When
pressed on the apparent weakness of cooperatives as an
anti-capitalist strategy, they would counter loudly: “Mondragon!”.</span></div>
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<span style="font-size:medium">This
large-scale network of over 100 cooperative enterprises based in
Spain seemed to defy the criticisms of the cooperative alternative.
With 80,000 or more worker-owners, billions of Euros in assets and 14
billion Euros in revenue last year, Mondragon was the shining star of
the cooperative movement, the lodestone for the advocates of the global cooperative
program.</span></div>
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<span style="font-size:medium"><span style="font-weight:normal">But
then in October, appliance maker Fagor Electrodomesticos, one of
Mondragon's key cooperatives, closed with over a billion dollars of
debt and putting 5500 people out of work. Worker-employees lost their
savings invested in the firm. Mondragon's largest cooperative, the
supermarket group Eroski, also owes creditors 2.5 billion Euros.
Because the network is so interlocked, these setbacks pose long term
threats to the entire system. As one worker, Juan Antonio Talledo, is
quoted in </span><b>The Wall Street Journal </b><span style="font-weight:normal">(</span><i><span style="font-weight:normal">“Recession
Frays Ties at Spain's Co-ops”</span></i><span style="font-style:normal"><span style="font-weight:normal">,
December 26, 2013)</span></span><span style="font-weight:normal">:
“This is our Lehman moment.”</span></span></div>
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<span style="font-size:medium">It
is indeed a “Lehman moment”. And like the Lehman Bros banking
meltdown in September of 2008, it makes a Lehman-like point. Large
scale enterprises, even of the size of Mondragon and organized on a
cooperative basis, are susceptible to the high winds of global
capitalist crisis. Cooperative organization offers no immunity to the
systemic problems that face all enterprises in a capitalist
environment. That is why a cooperative solution cannot constitute a
viable alternative to capitalism. That is why an island of
worker-ownership surrounded by a violent sea of capitalism is
unsustainable.</span></div>
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<span style="font-size:medium"><span style="font-weight:normal">The
failures at Mondragon have sent advocates to the wood shed (see
<a href="http://www.geonewsletter.org/">www.geonewsletter.org</a>).
Leading theoretical light, Gar Alperovitz, has written in response to
the Mondragon blues: “Mondragón's primary emphasis has been on
effective and efficient competition. But what do you do when you are
up against a global economic recession, on the one hand, or radical
cost challenges from Chinese and other low-cost producers, on the
other?” </span></span>
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<span style="font-size:medium">What
do you do? Shouldn't someone have thought of that before they offered
a road map towards a “third way”? Are “global economic
recessions” uncommon? Is low cost production new? And blaming the
Chinese is simply unprincipled scapegoating.</span></div>
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<span style="font-size:medium"><span style="font-weight:normal">Alperovitz
goes on: “The question of interest, however - and especially to the
degree we begin to face the question of what to do about larger
industry - is whether trusting in open market competition is a
sufficient answer to the problem of longer-term systemic design.”
Clear away the verbal foliage and Alperovitz is admitting that he
never anticipated that open market competition would snag Mondragon.
Did he think that Fagor sold appliances <i>outside</i> of the market? Did he
think that Mondragon somehow got a free pass in global competition? </span></span>
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<span style="font-size:medium">Of
course the big losers are the workers who have lost their jobs and
savings. It would be mistaken to blame the earnest organizers or
idealistic cooperators who sincerely sought to make a better, more
socially just workplace. They gambled on a project and lost. Of
course social justice should not be a gamble.</span></div>
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<span style="font-size:medium">The
same sympathy cannot be shown for those continuing to tout
cooperatives as an alternative to capitalism. If you want to open
small businesses (organized as cooperatives), be my guest! But please
don't tell me and others that it's somehow a path beyond capitalism.</span></div>
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<span style="font-size:medium">Comrades
and friends: It's impossible to be anti-capitalist without being
pro-socialist! </span>
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<span style="font-size:medium">Zoltan
Zigedy</span></div>
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<span style="font-size:medium"><a href="mailto:zoltanzigedy@gmail.com"><span style="font-weight:normal">zoltanzigedy@gmail.com</span></a></span></div>
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