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.

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

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.

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.

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?.

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.

Thanks for this article - which shows there is an alternative to greed, plutocracy and exploitation. Co-operatives could definately be part of a 'democratic mixed economy'. Hoping to hear more from you here...

sincerely

Tristan

“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.”
No you wouldn't, Wing. You only welcome people who agree with you.
The blind faithful of Mises all share his terror of totalitarianism, and rightly so. But please explain to me how working for a socialist government is any worse than working for a global corporation, larger than most governments?
You have never bothered to refute my argument that even socialist or communist governments *can* be democratic, but corporations will never be.
Do you really want to live in a world where the rule is 1 share one vote, instead of one person, one vote?
30 odd years ago, the median wage was around 10 grand. An average new home (in the Blue Mountains) was about 50 grand, or five years wages.
Today, the median wage is about 35k, and the new house is more like 400k, or more than 10 years wages.
In another thirty years, following the same trend, wages will be around $122k, and a house will be 3.2 million. About 26 years wages. In other words, the banks will own all the houses, and our children will be back to being serfs.
If you really believe in private ownership -for everyone- you cannot defend extreme, unregulated capitalism. Instead of asking why banks loaned money for houses to people who cannot afford them, why not ask: in the richest country on the planet why can so many people *not* afford so basic a necessity as a roof over their heads?

All this Coop talk reminds me of Gough's time , Remember the getup organized by Lawsie , Caine's , Morosi , etc a lot of people got ripped off in that experiment and Lawsie lost his cool at his gig in a big way , I have forgotten the name of the experiment I guess it's on the net somewhere ?

For me there won't be any Coop , I know how many Co's will turn up when there's some work to be done or the power's to be paid
Better to do it for yourself , the harder you work the more you make providing your Business plan is not a colander .

Co-operatives are a good idea as are limited companies as are government controlled entities like the Police Force. What is more important is how these entities are governed and run - not who owns them.

When people talk about capitalism they seem to be talking about ownership and investment.

The current system of ownership favours those who already have assets. It is very difficult to raise money to build a new productive enterprise unless you already have an asset. I do not think who owns something has much to do with how well it is run in the same way that I do not think it makes any difference to the productivity of a CEO if you give him 1,000 as much as a worker instead of 15 times as much.

The important things are the structures of the organisations that we build. It is my opinion that it matters little who owns something as to how efficient it is. Essentially restricting ownership of new enterprises to those who already own a lot is if anything likely to be less efficient than opening up ownership to those who have little.