The Role of Cooperatives in Societal Transition

Butterfly emerging from its chrysalis

Excerpted from Gavin Mendel-Gleason and James O’Brien:

“The question of which system is desirable, in detail, is quite important. Unfortunately we cannot determine in abstract which system will work best and what problems will develop, though we can make guesses. To fully understand the consequences of an economic system can only be decided experimentally. This leads us to the chicken and the egg problem. How can we promote a new system without knowing what it will look like and if we don’t have a new system to promote, how can we convince the broad masses that we should remove the presently existing system – however deformed our present system becomes.

The most viable solution to this Gordian knot is to attempt to create the new modes of production experimentally…… now. It is the corporation which gives us the best experimental laboratory currently within reach and it is the democratically controlled corporation, or cooperative, which gives us the form most likely to succeed in a radically egalitarian programme of transformation.

This idea is not new at all. In fact, it was believed to be a necessary component of the struggle for socialism by both Marx and the Anarchists during the first international. The instructions given to delegates of the first international in 1866 which we put here gives a flavour of just how accurately the early socialists were thinking about this component:

– “Co-operative labour

It is the business of the International Working Men’s Association to combine and generalise the spontaneous movements of the working classes, but not to dictate or impose any doctrinaire system whatever. The Congress should, therefore, proclaim no special system of co-operation, but limit itself to the enunciation of a few general principles.

(a) We acknowledge the co-operative movement as one of the transforming forces of the present society based upon class antagonism. Its great merit is to practically show, that the present pauperising, and despotic system of the subordination of labour to capital can be superseded by the republican and beneficent system of the association of free and equal producers.

(b) Restricted, however, to the dwarfish forms into which individual wages slaves can elaborate it by their private efforts, the co-operative system will never transform capitalist society. to convert social production into one large and harmonious system of free and co-operative labour, general social changes are wanted, changes of the general conditions of society, never to be realised save by the transfer of the organised forces of society, viz., the state power, from capitalists and landlords to the producers themselves.

(c) We recommend working men embark in co-operative production rather than in co-operative stores. The latter touch but the surface of the present economical system, the former attacks its groundwork.

(d) We recommend to all co-operative societies to convert one part of their joint income into a fund for propagating their principles by example as well as by precept, in other words, by promoting the establishment by teaching and preaching.

(e) In order to prevent co-operative societies from degenerating into ordinary middle-class joint stock companies (societes par actions), all workmen employed, whether shareholders or not, ought to share alike. As a mere temporary expedient, we are willing to allow shareholders a low rate of interest.” (Instructions to Delegates, First International, 1866)

Lest Marxists attempt to claim this is some concession to deviations from the correct programme required for pragmatic purposes we should also quote Capital:

“The co-operative factories of the labourers themselves represent within the old form the first sprouts of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system. But the antithesis between capital and labour is overcome within them, if at first only by way of making the associated labourers into their own capitalist, i.e., by enabling them to use the means of production for the employment of their own labour. They show how a new mode of production naturally grows out of an old one, when the development of the material forces of production and of the corresponding forms of social production have reached a particular stage. Without the factory system arising out of the capitalist mode of production there could have been no co-operative factories. Nor could these have developed without the credit system arising out of the same mode of production. The credit system is not only the principal basis for the gradual transformation of capitalist private enterprises into capitalist stock companies, but equally offers the means for the gradual extension of co-operative enterprises on a more or less national scale. The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.” (Karl Marx, Capital, Volume III, Chapter 27)

In both of these quotes we see some very clear thinking regards cooperatives. Neither quotes give the view that cooperatives are unproblematic. However, both try to find ways to work with an imperfect form to maximise its capacity as a vehicle of socialist transformation.

There are at least two basic problems with cooperatives. The first is that the working class already has tremendous trouble accessing capital. This means that it is very difficult to find ways of funding the initial start-up cooperative which one might wish to create. In addition capitalism is ruthless at extinguishing those firms which are not productive and consequently, cooperative or not, the majority of firms will be bankrupt within the first five years. This presents a major pragmatic stumbling block.

However even after the cooperative starts there are dangers which are spelled out by Marx and the First International. Within capitalist society each constituent firm must attempt to sell at or below the price that other competing capitalist firms set on the market. The increase in the number of cooperative firms as a movement would not mitigate against this fact; it would simply increase the number of stars in the constellation of the capitalist system which are under worker self-management. This would not be a worthless undertaking in itself, but neither would it in itself be a threat to capitalism.

There are, however, some reasons to be hopeful. Firstly the need to form profit is not immediate for the worker-controlled firm. There are other opportunities present for the firm in terms of the use of surplus gained from production. It is always possible for workers to either make use of this surplus for new investment into their own capital or into expansion of the cooperative system. Workers can also suppress their own wages to weather periodic fluctuations in the market in a way that other small businesses generally can not.

In order to be a successful movement, however, the cooperative movement requires a very big vision: a vision of a transformed society and the attendant actions which could create it. In order to do this the cooperatives will have to attempt to make real the Association of Producers. The association of producers was a broad vision of the integration of productive efforts of the workers on a cooperative, rather than a competitive basis. It would be production under the purposive direction of the workers themselves on a basis not driven by the profit motive.

It was a long standing problem of various cooperative movements and the Kibbutzim that whatever cooperative organisations or federations they made, they rarely found systematic ways of moving goods amongst themselves excepting for the sale of goods to each other through the market. A proper transformational movement would have to seriously experiment with a new system of internal exchange.

This is not an unthinkable idea. Indeed when a capitalist firm finds that it requires the services of another capitalist firm it has two choices. It can either pay a premium on the service which includes the profit margin required of capitalist firms to stay in business or it can acquire it outright and take the services at the cost of their production. In the latter case we see that the capitalist firm has moved the boundary at which surplus takes place from between the firms to between the two firms and the rest of the capitalist world.

Cooperatives can also avail of this fact. There is no need to charge other cooperatives surplus. The goods and services of an ever-larger association of producers should start bringing down the cost of goods within the entire network to within margins which would make capitalists jealous.

However, it is possible for cooperatives to go even further in this vertical integration to attempt to deteriorate the necessity of the wage itself. The greater number of useful goods and services that cooperatives in such a conglomeration produce, the greater number of potential goods could be given to employees “in kind”. This would certainly provide a “reduced cost” to the worker in the cooperative system, but it could also potentially be used to avoid taxation. The lower the wages the less tax, and corporate tax is incredibly low. This tactic is already used widely by corporate executives. The production for production and the production for worker consumption would form a sort of “inside-outside” system in which profits were only necessary at the boundary. All other surplus would be under collective and democratic administration.

The founding principles of many cooperatives state that they should favour business with other cooperatives. This principle should be realised to its fullest extent. Much as in the United States, tariffs between states are illegal and all tariffs must take place at the outer-boundary of the state, so too should cooperatives look to eliminate surplus amongst themselves.”

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