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The Forum > Article Comments > Give co-operatives a go > Comments

Give co-operatives a go : Comments

By Harry Throssell, published 7/5/2009

With the recent failures of the free market, the surprise is the lack of attention paid to an alternative business model, the co-operative.

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Employee-owner businesses where the employees have a stake are nothing new, nor are they in any way a contradiction of capitalism. In fact that is capitalism. Someone plus a few mates starts a business. In fact during Mararet Thatcher's time - the author mentions Thatcher a few time - it was arch-capitalism as she was noted for kick-starting management buy-outs in the UK (managers also count as employees).
As for co-operatives, again, if people want to start this and make it work then good on them. There is certainly nothing to stop them. They may have trouble raising capital, but that may not matter, depending on what they want to do.
As for the markets generally failing.. they seem to be recovering. Markets boom and bust. Its what they do. The real differnce with the latest crisis is that all the markets did it together. .. and where did this stuff on Milton Friedman come from? No-one's seriously quoted the man for decades. Leave it with you.
Posted by Curmudgeon, Thursday, 7 May 2009 11:34:51 AM
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Workers in control scare the capitalists.

"After considerable conflict, GE introduced a quality of work life program . . . which gave workers much more control over the machines and the production process and eliminated foremen. Before long, by all indicators, the program was succeeding -- machine use, output and product quality went up; scrap rate, machine downtime, worker absenteeism and turnover when down, and conflict on the floor dropped off considerably. Yet, little more than a year into the program -- following a union demand that it be extended throughout the shop and into other GE locations -- top management abolished the program out of fear of losing control over the workforce. Clearly, the company was willing to sacrifice gains in technical and economic efficiency in order to regain and insure management control." [Progress Without People, p. 65f]

Workers' control basically leads to a usurpation of capitalist prerogatives -- including their share of revenues and their ability to extract more unpaid labour during the working day. While in the short run workers' control may lead to higher productivity (and so may be toyed with), in the long run, it leads to difficulties for capitalists to maximise their profits. So, "given that profits depend on the integrity of the labour exchange, a strongly centralised structure of control not only serves the interests of the employer, but dictates a minute division of labour irrespective of considerations of productivity. For this reason, the evidence for the superior productivity of 'workers control' represents the most dramatic of anomalies to the neo-classical theory of the firm: worker control increases the effective amount of work elicited from each worker and improves the co-ordination of work activities, while increasing the solidarity and delegitimising the hierarchical structure of ultimate authority at its root; hence it threatens to increase the power of workers in the struggle over the share of total value." [Hebert Gintz, Op. Cit., p. 264
Posted by mikk, Thursday, 7 May 2009 12:16:16 PM
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The author displays a confusion over the distinction between public and private ownership and control, that invalidates his argument.

Poverty is the original and universal condition of mankind. It is absurd to blame it on capitalism. It is precisely modern capitalism – mass production for the masses – that has done more than anything in history to relieve the poverty of the masses, to enable hundreds of millions more people to live, at a higher standard, enjoying goods and services that even kings could not dream of only a couple of hundred years ago.

Profit is a direct result of the behaviour of the masses in *voluntarily* preferring to buy the goods that businesses sell.

It is easy to avoid profits: just waste more, as all socialists are in effect suggesting!

The whole point economic activity is to waste as little as necessary to achieve a certain satisfaction. This economising leaves resources over to go to achieving other satisfactions. Profits are proof positive of economising behaviour, and are the raw resource that goes towards the savings and capital for satisfying still other human needs and wants instead of being wasted.

The author adopts the fallacies of Naomi Klein. She just baldly labels anything she doesn’t like as ‘capitalism’, no matter how much it is a result of states, government, central planning, armies, police, regulators, and the interventionist mindset. Her entire argument assumes what is in issue, thus putting forward one big circular argument.

For example the invasion of Iraq was an aggressive imperial military adventure, a war of conquest, by a state for reasons of state.

It is true that private corporations benefited, but how could that ever *not* be the case, unless private property were abolished altogether? The question is not whether private corporations benefit, it is *how could they benefit in the absence of the state’s intervention?* Answer: they couldn’t. They would produce what the mass of people *really* wanted, not being wars of aggression.

“government should keep out of running the economy and leave it to private business”. Pure Friedmanism…

Incorrect. You obviously haven’t read Friedman.
Posted by Wing Ah Ling, Thursday, 7 May 2009 12:39:06 PM
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Friedman believed that government has a duty to control and endlessly increase the money supply, in other words, to centrally plan the very nerve centre of a modern capitalist economy. The current depression is the result of policies based on these theories, justifying government intervention.

Harry, you seem to believe that governments are in fact *able* to ‘run the economy’. No-one has ever been able to show how they could do this. But perhaps you can.

How? Your mission - should you choose to accept it - is this: You have billions of people involved in billions of transactions, all according to local knowledge and subjective valuations which are not knowable to you or the state. You assume that a central planning authority *can* run the economy *without recourse to signals of profit and loss*. So, how are they going to do it? Answer please? Just a simple admission that you were wrong will do.

No political action is necessary to ‘give co-operatives a go.’ All you’ve got to do is buy stuff from co-operatives! So why aren’t you, and why aren’t hundreds of millions of people, already doing this? Because you and they aren’t prepared to pay the price, that’s why!

“In USA at present many houses are standing empty because the owners could not sustain mortgage payments.”

And why might that be? Anything to do with government lowering interest rates to ‘stimulate’ economic activity? Government corporations like Freddie and Fannie with no other purpose than to lend money to people who can’t afford to repay it? Government backing lending corporations that would otherwise go broke? Laws to compel banks to lend money to people specifically *because* they can’t repay it? Think about it.

I would welcome a critical analysis that was able to refute the theories of freedom which show capitalism to be the only ethical, as well as the only practical way possible for a modern society. But unfortunately all its critics seem to be able to come up with are simple ignorance, misrepresentations, circular argument, and mystic appeals to absent authority.
Posted by Wing Ah Ling, Thursday, 7 May 2009 12:41:09 PM
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The problem with a true cooperative is that there is often little advantage in making the business larger. If a cooperative of 10 people expanded to 20, it would only be advantageous if the profit was more than doubled because all profits are divided between the members. Expanding a business involves risk which is usually balanced by a higher return but in a cooperative the return is diluted by the introduction of new members who share in the profits.

The cooperative you describe in Spain doesn't sound like a true cooperative because it owns a bus plant in China. It is unlikely that the Chinese members are receiving the same pay and share of profits as those in Spain. Secondly, why would you invest in a plant in China if you can't repatriate any of the profits?.
Posted by Wattle, Thursday, 7 May 2009 2:28:22 PM
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Milton Friedman produced a mathematical model of economic systems which showed how the availability of capital influenced the economy. It rose to prominence as it exposed the weaknesses in the Keynesian model, which was the basis of socialist economics, and has been the subject of vilification by the left ever since.

The quotes being bandied around were never made by Friedmann, however, the implications of his model are clear; Government intervention is warranted under conditions of high unemployment, but is a serious brake on the economy as it approaches full employment.

This does not mean total laize faire, but control through regulation rather than direct involvement.

Thabo Mbeki was not voted out of office, but pushed out through internal politics. The growth in SA as a result of free market principles has been in the order of 9% p.a. and the huge tax revenues have enabled the increase of services to the poor incl the construction of nearly 2 million homes.

I don't see any political or legal impediment to co operatives. The reason most co operatives fail is that the high performing individuals leave to earn more in the free market.
Posted by Shadow Minister, Friday, 8 May 2009 8:55:06 AM
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