Producer Cooperatives as a New Mode of Production

Bruno Jossa

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317963158
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

The notion that there is no alternative to capitalism emerged after the fall of the Berlin Wall and made rapid headway due to increasing economic globalisation. More recently, this belief that there is no viable alternative has held firm despite the financial crisis, high unemployment levels and an ever-increasing gap between rich and poor.

However, since the appearance of Benjamin Ward's seminal 1958 article, economic theorists have been developing a workable alternative: a system of self-managed firms. The core argument outlined in this book is that a well-organised system of producer cooperatives would give rise to a new mode of production and, ultimately, a genuinely socialist society.

This argument is developed through three key steps. First, following on from Jaroslav Vanek's definition, it is argued that a 'Labour-Managed Firm', a firm which strictly segregates capital incomes from labour incomes, would implement a new production mode because it would reverse the pre-existing relation between capital and labour. Second, given that a system of these 'Labour-Managed Firm' cooperatives would reverse the capital-labour relationship, it is suggested that this would constitute a form of market socialism. Third, it is argued that compared to capitalism a system of producer cooperatives offers a wealth of advantages, including the potential for efficiency gains, the eradication of unemployment and the end of exploitation. Ultimately, this book concludes that self-management could take the place of central planning in Marxist visions for the future.

1 Marx, Lenin and the cooperative movement

1 Introduction

On several occasions, Marx praised cooperation as a movement whose generalised growth would give rise to a new mode of production. At different times in his life, he even seems to have been confident that cooperatives would ultimately supplant capitalist firms altogether. In a 1923 article entirely concerned with this subject, Lenin described cooperation as a major organisational step in the transition to socialism and went so far as to equate it with socialism at large. ‘Cooperation is socialism’, he declared (Lenin 1923a). In L’Ordine Nuovo (1919–1920), Gramsci described workers’ councils as milestones on the road to socialism.

Despite these authoritative endorsements, ever since the days of the Paris Commune the cooperative movement has received little attention from Marxists. In point of fact, this should come as no surprise, since the type of cooperative that has made headway in history is a firm where workers are ‘their own capitalists’ (Marx 1894a: 571) and is consequently at odds with the claim that producer cooperatives give rise to a genuine form of socialism.

Meanwhile, modern economic theory has provided evidence that the pure cooperative is Vanek’s LMF — a firm that self-finances its investments entirely with loan capital and strictly segregates labour incomes from capital incomes. And as the workers of such a firm can hardly be described as ‘their own capitalists’, this disproves the view of most Marxists that cooperatives are an intermediate form between capitalism and socialism.

What are the implications of these reflections? Considering that Marx, Lenin and Gramsci looked upon cooperation as a new mode of production that supplants capitalism, Marxists can be divided into two distinct groups: those who identify socialism with a state-planned command economy and those who equate it with a system of self-managed firms — although neither group has been able to provide conclusive evidence that Marx actually accepted one or the other of these systems.

Furthermore, there is general agreement that Marx’s concern was mainly with methodology (as argued in Chapter 1) and that his fragmentary writings about the economic system of the future do not constitute a fully-fledged doctrinal system (see Balibar 1993: 169).¹

With all the caution required by these considerations, I do think it possible to argue that an efficient system of producer cooperatives would give rise to a socialist order capable of superseding capitalism in full harmony with Marxist thought. In this chapter, quotes from Marx and from Lenin’s 1923 article on cooperation will be utilised, in order to refute the widely shared, yet incorrect assumption that Marx and Lenin rejected cooperation, even as a mode of production for the transitional period.

The argument, in this chapter, is that the late emergence of an economic theory of producer cooperatives is one of the reasons why Marxists continued to neglect not only cooperation as such, but even the passages from Marx and Engels, in which a system of producer cooperatives is described as a new mode of production.

2 Marx’s approach to producer cooperatives

In the Inaugural Address (1864), Marx wrote:

But there was in store a still greater victory of the political economy of labour over the political economy of property. We speak of the co-operative movement, especially of the co-operative factories raised by the unassisted efforts of a few bold ‘hands’. The value of these great social experiments cannot be over-rated. 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; that to bear fruit, the means of labour need not be monopolised as a means of dominion over, and of extortion against, the labouring man himself; and that, like slave labour, like serf labour, hired labour is but a transitory and inferior form, destined to disappear before associated labour plying its toil with a willing hand, a ready mind, and a joyous heart.

(Marx 1864: 11)²

In the third volume of Capital, he also argued:

With the development of co-operatives on the workers’ part, and joint-stock companies on the part of the bourgeoisie, the last pretext for confusing profit of enterprise with the wages of management was removed, and profit came to appear in practice as what is undeniably was in theory, mere surplus-value, value for which no equivalent was paid.

(Marx 1894a: 513–514)

Both these quotes leave no doubt that Marx looked upon an all-cooperative system not only as feasible, but as bound to assert itself in history, as a new mode of production that would wipe out hired labour and a system where privately owned means of production — capital — would cease being used to enslave workers. In such a system, he claimed, workers would no longer be exploited and, even more importantly, would be freely and willingly working for firms owned by them.

The system of producer cooperatives envisaged by Marx was a market system that makes workers ‘their own masters’ (Mill 1871: 739) and deprives capital owners of the power to make decisions in matters of production.³ In Marx’s opinion, this system is ‘in accord with the behest of modern science’ and, inasmuch as it is a new mode of production arising within the older mode of production and supplanting it, it is even more efficient than capitalism.⁴

Both the equation of an all-cooperatives system with a new mode of production and its assumed potential for outperforming and superseding capitalism are underscored in numerous often-quoted passages from Capital. On pages 570–571, for instance, Marx describes joint-stock companies as firms that will lead to the abolition of the capitalist mode of production ‘within the capitalist mode of production itself’. Further on, he also argues:

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. But the opposition between capital and labour is abolished there, even if at first only in the form that the workers in association become their own capitalists, i.e. they use the means of production to valorise their labour. These factories show how, at a certain stage of development of the material forces of production, and of the social forms of production corresponding to them, a new mode of production develops and is formed naturally out of the old […]. Capitalist joint-stock companies as much as cooperative factories should be viewed as transition forms from the capitalist mode of production to the associated one, simply that in one case the opposition is abolished in a negative way, and in the other in a positive way.

(Marx 1894a: 571–572)

One of the reasons why Marx forcefully endorsed the introduction of cooperatives and the abolition of hired labour even in a system remaining purely mercantile in nature is that (from the perspective of a critic of capitalism) producer cooperatives realise such a basic component of political democracy as economic democracy. Indeed, Marx, Marxists and other critics of the existing social order concordantly rate political democracy as merely formal when power remains firmly in the hands of capitalists — i.e. when capital is still the economic power holding everything in its sway.

3 Cooperatives as starting points for state planning and the role of the state

In Marxian terms, cooperative production is not an end in itself, but ‘a lever for uprooting the economic foundations upon which rests the existence of classes’ (Marx 1871: 334) and a means of organising the domestic production system in line with an all-inclusive plan. This can be clearly inferred from Marx’s comments on the experience of the Paris ‘Commune’:

The Commune, they exclaim, intends to abolish property, the basis of civilization! Yes, gentlemen, the Commune intended to abolish that class-property which makes the labour of the many the wealth of the few. It aimed at the expropriation of the expropriators. It wanted to make individual property a truth by transforming the means of production, land and capital, now chiefly the means of enslaving and exploiting labour, into mere instruments of free and associated labour […]. But this is Communism, ‘impossible’ Communism! Why, those members of the ruling class who are intelligent enough to perceive the impossibility of continuing the present system — and they are many — have become the obtrusive and full-mouthed apostles of cooperative production. 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 1871: 335)

In Marx’s view, inasmuch as the Paris Commune ‘supplied the Republic with the basis of really democratic institutions’, it could be looked upon as ‘the political form, at last discovered, under which to work out the economical emancipation of Labour’ (Marx 1871: 334) and bring about ‘the expropriation of the expropriators’. And Engels made it clear that ‘the Paris Commune demanded that the workers should manage cooperatively the factories closed down by manufacturers’ (Engels 1886: 389).

In this connection, Easton has rightly argued (1994: 162) that Marx ‘sees cooperatives as the economic corollary of the “really democratic institution” of the Commune’ and that ‘in his view of the state he sees cooperative production not as a matter of simple negation of the existing capitalist system, but rather as a dialectical transcendence that negates as it preserves’.

In his critique of Bakunin’s Statehood and Anarchy, Marx provided the following explanation of the phrase ‘organisation of the proletariat as the dominant class’:

It means that the proletariat, instead of fighting individual instances against the economically privileged classes, has gained sufficient strength and organization to use general means of coercion in its struggle against them; but it can only make use of such economic means as abolish its own character as wage labourer and hence as a class; when its victory is complete, its rule too is therefore at an end, since its class character will have [disappeared].

(see Marx 1875b: 519)

Today, when the interests of workers are endorsed by political parties capable of securing the support of the majority of the people, the ‘general means of coercion’ required to combat the economically privileged classes and abolish hired labour could well be a single act of Parliament prohibiting wage labour altogether. When asked if private property could be abolished by peaceful means, Engels replied that ‘it is to be desired that this could happen, and Communists certainly would be the last to resist it’ (Engels 1847a: 349), but he added that where the dominant class should halt such progress through the use of violence, the proletariat would be pressed into fighting a revolution (Engels 1847a: 349–350).

The work from which these passages have been taken, the Principles of Communism, was written at roughly the same time as the Manifesto. To explain the differences between these two texts, Engels said that on writing the Manifesto, they had resolved to expound their shared ideas about the road towards communism only to the extent they had thought it expedient to make them public (see Engels 1847a: 114, as quoted in Lawler 1994).

The role of democracy in fostering the advent of socialism is also described in the following excerpt from Engels (1895a: 515–516):

The Communist Manifesto had already proclaimed the winning of universal suffrage, of democracy, as one of the first and most important tasks of the militant proletariat, and Lassalle had again taken up this point. Now that Bismarck found himself compelled to introduce this franchise as the only means of interesting the mass of the people to his plans, our workers immediately took it in earnest and sent August Bebel to the first, constituent Reichstag. And from that day on they have used the franchise in a way which has paid them a thousand-fold and has served as a model to the workers of all countries.

Marx’s praise of cooperation is to be viewed in light of his belief that legal relationships and political organisation systems have their roots in material production relationships. As discussed in the previous chapter, a ‘civil society’ that is organised as a system of producer cooperatives is one where capital is no longer the economic power holding everything in its sway and where those owning substantial property are prevented from imposing their will upon the rest of the population. The commodities manufactured by democratically managed cooperatives cease to be, in the first place, an external object unrelated to our work and turn into the product of free choices made by workers in association.

4 Lenin’s 1923 article

At this point, I will try to establish what Lenin thought of a system of producer cooperatives.

In Life of Lenin, Fischer (1964, vol. II: 957) reports that after ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Introduction
• 1 Marx, Lenin and the cooperative movement
• 2 Is Marxism compatible with modern economic theory?
• 3 The problem of investment funding in labour-managed firms
• 4 Under-investment in labour-managed firms
• 5 Alchian and Demsetz’s critique of labour-managed firms
• 6 On the rational organisation of labour-managed firms
• 7 An in-depth analysis of the advantages of democratic firms
• 8 Labour-managed firms and unemployment
• 9 Alienation in a self-managed firm system
• 10 The democratic firm as a merit good
• 11 The democratic road to socialism and Marxist thought
• 12 Gramsci and the transition to socialism
• 13 The key contradiction of capitalist systems
• 14 A democratic firms’ system as the true socialism
• 15 A system of self-managed firms as a new perspective on Marxism
• Conclusion
• References
• Index