Monday, December 14, 2009

Worker Cooperative Productivity

(transcribed from After Capitalism, pp 60-61, by David Schweikart)

As to the efficiency effects of greater worker participation, the HEW study of 1973 concludes, “In no instance of which we have evidence has a major effort to increase employee participation resulted in a long-term decline in productivity.” Nine years later, 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. 8

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. For Berman, on the plywood cooperatives, states:

“The major basis for cooperative success, and for survival of capitalistcally unprofitable plants, has been superior labor productivity. Studies comparing square-foot output have repeatedly shown higher physical volume of output per hour, and others…show higher quality of product and also economy of material use.” 9

And Thomas on Mondragon:

“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.” 10

There is also the example of Weirton Steel. In 1982, following a mediocre year and facing bleaker prospects, National Steel offered to sell its Weirton, West Virginia plant to its 7,000 workers. The deal was completed in 1984. Weirton proceeded to post eighteen consecutive profitable quarters- at a time when many steel firms suffered steep losses, including two of Weirton’s competitors, who were forced into bankruptcy. 11 United Airlines, now majority owned by its pilots and technicians, has survived the intense competition that has brought down so many conventionally owned carriers.

8. Citations in this paragraph are from US Dept of Health, Ed, and Welfare, Work in America(Cambridge, Mass: MIT Press, 1973), 112; and Derek Jones and Jan Svenjar, eds., Participatory and Self-Managed Firms: Evaluating Economic Performance (Lexington, Mass: Lexington Books, 1982), 11. See also Alan blinder, ed., Paying for Productivity: A Look at the Evidence (D.C.: Brookings, 1990), especially the contribution by David Levine and Laura Tyson.
9. Katrina Berman, “A Cooperative Model for Worker Management,” in the Performance of Labour-Managed Firms, ed. Frank Stephens (New York: St. Martin’s Press, 1982), 80.
10. Hendrik Thomas, “The Performance of the Mondragon Cooperatives in Spain,” in Participatory and Self-Managed Firms, ed. Jones and Svenjar, 149.
11. For more on Weirton, see James Lieber, Friendly Takeover: How an Employee Buyout Saved a Steel Town (New York: Viking, 1995).


  1. 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.

  2. Believe me, Mr. Kern, some of the enterprises listed above are not capitalist in the ridiculous sense you described. "Multiple person ownership" like stockholders is not the same as worker run co-ops like Mondragon. I swear, capitalists will twist anything around to make their viewpoint sound appealing.

  3. Such a nasty response. Mr. Kern is right - if a co-op is motivated by profit it could be a very captialist business - but with the proceeds more evenly spread. Most aren't, so we can say they have a socialist leaning bent, but that doesn't have to be the case - some can be decided unethical for example.

    I'm not capitalist, but it seems neogenesisXXI is the one tring to beat down alternative views not Mr Kern.e

  4. I agree anonymous. You're right that if the business is just geared toward evenly spreading the profits it could be seen as capitalist. But the premise of most socialists to begin with is to take the profits, as well as the means of production, away from the owner and give it to the workers, so it's closer to socialism than to capitalism. It's just that people like Mr. Kern want to make these enterprises look as capitalist as possible. The same thing happened in the 19th century when many industrialists opted to turn their enterprises into co-ops to appease the growing socialist sentiment.
    Sometimes the co-ops end up mirroring the capitalist enterprises because of the competition involved with capitalist enterprises.
    Mr. Kern probably thinks that it's only socialist when the state is involved. A private co-op to him is just a private business, it doesn't matter to him that the workers run it democratically. He sees it as a credit to capitalism, rather than a response to it (which was the intention the entire time).

  5. 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.

  6. You have a ridiculous definition of socialism, James. Capitalism is simply just a system of private property? That denies the entire dynamic of the system itself as a system of private ownership by one or a few individuals at the top and commands an entire hierarchy of social relations. It doesn't take into account worker ownership. Worker ownership of the means of production is the essence of socialism. The concept most capitalists such as yourself think of when talking about socialism is the state-capitalist concept of Marxist-Leninism, where the state owns the means of production. That is but one variant of socialist ideology and quite sadly the one that has been given the most attention due to the former USSR. But companies like Mondragon have a syndicalist tradition that dates back all the way to the Spanish Civil War. This tradition was firmly anti-capitalist. Where are you people getting the idea that these co-ops are somehow capitalist in nature and scope? The founders of these enterprises would surely laugh at such an assertion. You guys need to read what capitalist hero Von Mises said about syndicalism and the co-op tradition. He thought it was a silly idea. So I implore you guys to stop with the utterly laughable assertions that syndicalist co-op enterprises are a credit to free market capitalism, because they were originally and still are a response to capitalism all over the world!

  7. I think you're confusing the system itself with what you think the effects of that system are. Capitalism has nothing to do with "ownership by one or a few individuals at the top." That's what you think happens as its result.

    "Worker ownership of the means of production is the essence of socialism."
    Absolutely, and this is what I was trying to convey - in capitalism, the means of production are owned by whoever owns them. That could be the "workers" or someone that pays a worker a wage to use it for him. Neither is anti-capitalist.

    Capitalism does not mean a hierarchical power structure, or wage labor, or multinational corporations - those are things that may or may not happen because of capitalism. It's important to make the distinction.|en&hl=en&q=capitalism

  8. In capitalism the means of production are owned by the few who own capital. That is different from having the means of production owned by the laborers themselves. They all collect the surplus value, i.e. profits when before it went to just one or a few people (stockholders). I can see how you can conflate this with capitalism as you believe the essence must somehow lie with private property or something but there is an obvious difference between the Coca Cola corporation and the recovered factories movement in Argentina. They're both not capitalism, one is, guess which one is it. The other is closer to socialism and the workers know this. They didn't expropriate the factory thinking they were going to exploit anyone's labor by pocketing the surplus. They all wanted to share in the profits. Please do not obfuscate the terms to suit capitalism or have it look like the ingenuity of capitalism has breathed life into another creative venture; the syndicalist co-op. It's BS. These enterprises were formed as a response to capitalism and ever since then they've been an inspiration to people seeking an alternative to that system. Saying otherwise would be an insult to their struggle. The shifty re-defining of capitalism to include these ventures comes from a shoddy misrepresentation of socialism just being something state owned. Mr. Kern included stock holder enterprises with worker self managed firms! I mean how ridiculous can one be? It's a cheap attempt to show the "changing face of capitalism" and the "creativeness" embedded in it. Syndicalists and socialists will not let people like him usurp what is an obvious anti-capitalist movement.

  9. Do not get me wrong. I know Mr. Kern and yourself see these enterprises as capitalist because they're "private". But that ignores a whole host of issues socialists and syndicalists have had with the capitalist enterprise to begin with. These syndicalist co-ops are an obvious response to capitalism, there is no denying that and if you do, you're obviously not reading into their initial motives. Secondly, they're socialist institutions operating within a capitalist mode of exchange. Some of them have to abide by that unless they trade with other co-ops which is what the recovered factories in Argentina are doing by setting up a federation of recovered factories to help trade. I implore you to read about the Syndicalist movements during the Spanish Civil War and their attempts to establish a cooperative society. It was fundamentally an anti-capitalist movement and has since then inspired the majority of syndicalist co-ops around the world for most of the 20th century. I am just curious, how do you figure these enterprises to be a credit to capitalism?

  10. I understand that the drivers of these movements state their intentions as anti-capitalist. What I'm trying to point out is that they're mistaking capitalism for the various qualities of capitalist and state enterprises that they don't like. What they're in turn doing is setting up capitalist enterprises that are structured more equitably.

    If I understand them correctly, the Argentinian recovered factories are an especially good example of this - The factories were bankrupt and unused. Groups of people then essentially homesteaded them and instituted production under a different business model and management structure. This is all peaceful and respectful of property rights.

    I'm not trying to usurp socialism under the banner of capitalism - I'm trying to point out that the popular perception of capitalism is different from what it is at its core, and that such socialistic enterprises as those mentioned in this article aren't at all mutually exclusive with a capitalist society, regardless of what the owners of these cooperatives insist on calling them.

    As an aspiring anarcho-capitalist, I'm very interested in anarcho-socialism so I'd be very interested in reading something about the Spanish syndicalist movement. Do you have a book recommendation? Thanks!

  11. I think the main issue we're having here james is the central issue of private property and how you define socialism and capitalism through this spectrum. Capitalism is not solely defined by its notion of being private vs being state owned. There are a host of social relations you are denying here. Capitalist firms have a hierarchy that strictly defines them. You're obfuscating the central focal point here because as an anarcho-capitalist you adhere to the private/state dichotomy. You think that just because a syndicalist co-op is "private" and not state owned, that it's somehow by default capitalist? That ignores so many points that its difficult to start explaining to you where you're wrong. For one, capitalism is defined by a capitalist or a capital owning class that owns the means of production, i.e. a few. These owners extract surplus labor from the workers which turns into profit for the capitalist. If the workers were to run it democratically then it ceases to be capitalist; it's socially run. They share the surplus labor and the profits. They have eliminated the capitalist therefore eliminating capitalism. These co-ops are step toward socialism not de-facto capitalism. I can see how you and Mr. Kern see it as such because you guys for some weird reason only separate industries into private and state camps and thus erroneously describe state owned enterprises as "socialist". But I can assure you that the workers do not own the post office and state extracts their surplus labor.
    I recommend you read the Anarchist FAQ section on Myths of the Capitalist Economy. Excellent read. The book cited here; After Capitalism is good. Noam Chomsky's book on Anarchism is also quite good.

  12. "In capitalist society, the transformation of certain industries into municipal or national services is the last form of capitalist exploitation. It is because that form presents multiple and incontestable advantages for the bourgeoisie that in every capitalist country the same industries are becoming nationalised (Army, Police, Post Office, Telegraphs, the Mint, etc.).

    ....only a 'possibilist' professor, ignorant of social conditions and steeped in bourgeois prejudices, could offer the nationalisation of public services as the Socialist ideal."

    - Paul LaFargue (Karl Marx's son in law), Socialism and Nationalisation

  13. I don't mean to strain this further, but I like the discussion and I think I can clarify the point -

    I don't mean to talk about capitalism vs socialism in terms of individual vs the state. You can have state capitalism (what most countries in fact have) just as surely as you can have state socialism. I'm sympathetic towards anarcho-socialism, and I've read a fair amount about it - I recognize that socialism does not mean state ownership.

    What in my view distinguishes them at their core is the conception of what property rights are. Anarcho-socialists have a wide range of views on property rights, but let me put forward a scenario to clarify the difference with capitalism:

    Let's say I own a building - forget how I built it for a second, but let's say I live in it. I build a loom in one of the rooms and buy a bunch of thread. I then go out on the street and find someone - anyone - that can operate the machine. I offer to pay them $4.00 per hour to weave cloth using it and my thread, and they agree. Who owns the resulting cloth? Who owns the loom?

    A capitalist says that I still do - nothing has changed simply because I'm paying someone else a wage to operate the machine. The agreement with the worker beforehand keeps it in my possession.

    A socialist, at least many of them as I understand it, would say that I somehow lose my claim on the loom and the cloth when I pay someone a wage to work on it - or that at the very least I now own it with him jointly. Moreover, many would say that I've exploited him by paying him a wage.

    As I understand it, It's that fundamental conception of what property is that distinguishes a capitalist from a socialist - not private vs state ownership.

    All other talk - hierarchies, living wages, monopolies, etc - all spin out of one or the other enforcement of property rights.

    I hope that clarifies my point.

    Thanks for the recommendations, Chomsky's always a good read, though sometimes puzzling to me.

  14. Btw, thanks for the article! I've been searching for a while for more unbiased evidence that worker co-ops are more productive than capitalist firms even in capitalist economies for a while and I finally found it! The best evidence I had before was Gaston Leval's potentially biased account and minor unofficial accounts of Argentina's workers' self-management movement in which firms had increased productivity three-fold after being taken over by their workers.

    Much appreciated!

  15. Hi Erik,

    Would you mind posting links to the works you listed? Thanks

  16. Mr. Kern,
    You talk as if "capitalism" were a rock studied by a hard science, like physics. But capitalism is a delusion spread up by economists, whose predictive success rivals witch doctors, not physicists. You may have a privately owned company, like America's "too big to fail" banks, whose profits go to private investors, that are not capitalist because their risks are socialized. If your definition of capitalism explains this, I'd like to read it. As for the coops, my hunch is that most do not have, like corporations, a legal obligation to the owners to put profits first, making them less ruthless when it comes to layoffs or worker safety.

  17. Audrey, apologies for the VERY late response. i hope you come back to read this. here's a link to "Collectives in the Spanish Revolution" by Gaston Leval which, as the title suggests, gives a detailed account of operations of collectives throughout Spain during the 1936 anarchist revolution that lasted until 1939:

    as for the information on Argentina, just go to google and look up "Workers' Self-Management in Argentina" or something of that nature and surely plenty of info will come up. in case you are unfamiliar with the Workers' Self-Management Movement, in 2001 the Argentinian economy collapsed much like it did in the US in 2007. instead of bailing out the big businesses, however, the country did not take the usual IMF bailout and rather let the businesses fail. when they failed the owners intended to shut the businesses down but instead of shutting down the workers occupied the factories and continued working in them under cooperative principles. over 250 businesses run on this model today in Argentina alone and some of the most well known of them, such as Fasinpat (short for Fabrica Sin Patrones, formerly known as Zanon -- a textile company), have more than tripled productivity since switching to a horizontal structure.