Would a Cooperative Economy Be Capitalism?

People like to see things in black and white. It allows one to abstract from complexities and nuances, and thus sort real-world phenomena into neatly demarcated categories that make those phenomena more comprehensible or more consonant with preconceptions. Nowhere is this tendency more apparent than the Cold-War dichotomy between capitalism and communism. While the dichotomy is obviously useful, it clearly doesn’t tell the whole story – there are elements of central planning and socialism even in capitalist economies, just as there are elements of private enterprise and market competition even in communist economies. In other words, economic systems do not conform to pure ideal-types in reality.

An interesting way to see this is to ask where cooperatives fit in the schema – are they a form of capitalism or communism, or do they instead represent some sort of ‘third way’ such as market socialism? All three of the possible responses can be found. Because capitalism is today the dominant economic system, however, the question is usually formulated as: do cooperatives represent an alternative to capitalism (be it communism or a ‘third way’) or merely a certain type of capitalism? I have found that the first option is the most commonly held – most people instinctively associate cooperatives with a non-capitalist, even communist, mode of production. This makes sense if one defines capitalism as an economic system in which capital hires labour (or owns it, if slavery is not abolished), given that in a cooperative labour owns capital (or hires it, as in a usufruct arrangement). After all, how can there be capitalism without capitalists?

This very logic is evident in the political economy of Karl Marx, who stated that cooperatives “have shown that production on a large scale, and in accord with the behests of modern science, may be carried on without the existence of a class of masters employing a class of hands…and that, like slave labor, like serf labor, hired labor is but a transitory and inferior form, destined to disappear before associated labour…” (Marx 1864, para. 13). Engels (1989 [1880]: 43) likewise opined that cooperatives have “given practical proof that the merchant and the manufacturer are socially quite unnecessary”. In other words, cooperatives “represent within the old form the first sprouts of the new” (Marx 1959 [1894], Chapter 27, para. 17). Indeed, in his ‘New Economy Policy’, Lenin envisaged cooperatives as a bridge to communism.

In the same breath as praising cooperatives, however, Marx (1867, Section 5, para. 3; 1970 [1875]) – along with his adherents and other radicals – not only belittled, but also severely scorned them. The concern is that cooperatives, far from representing a “transforming force” (Marx 1867, Section 5, para. 2), may amount to a sort of ‘false dawn’ that actually ends up impeding the revolution. By replacing class identity with organisational loyalty and even eliminating class distinction within the enterprise altogether, cooperatives may perpetuate “false consciousness” and obviate the role of trade unions, even while their members voluntarily endure alienating work conditions and exploitative management systems (see Paranque and Willmott 2014). In short, the criticism is that cooperatives represent a palliative sugar-coating to capitalism rather than a radical alternative; and in response to the question of ‘how can there be capitalism without capitalists?’, radical critics of cooperatives contend that worker-members essentially act as “their own capitalists” (Jossa 2005: 14).

Alas, I am not a (out-and-out) Marxist. In my view, the objective should not be to eradicate capitalism, but rather to harness its organisational power, competitive drive, and technological dynamism while avoiding its tendency towards financialisation and crisis, exacerbation of inequality, preservation of unemployment, stimulation of anomie/alienation, environmental degradation, and so on [1]. That is to say, we need to reap the productive benefits of capitalism, which Marx himself extolled, while moderating its adverse socio-economic effects, which Marx predicted would cause it to self-destruct. In this sense, I see cooperatives as conservative, or at least reformative, and even anti-revolutionary.

There is an important question, however, as to whether capitalism’s benefits can be enjoyed, and its adverse effects avoided, in a situation where capital does not hire labour – can cooperatives have their cake and eat it too? According to many radicals, islands of cooperative labour in a sea of capitalist relations - "small units of socialised production within capitalist exchange", as Rosa Luxemburg (1986 [1900]), para. 3) put it - will tend to do just the opposite; by struggling to survive and eventually ‘degenerating’ into capitalist firms (see Egan 1990), while in the meantime “reproduc[ing]…all the shortcomings of the prevailing system” (Marx 1959 [1894], Chapter 27, para. 17), they will instead combine 'the worst of both worlds'.

What would happen, though, if cooperatives were scaled up to the entire (or a significant proportion of) the economy? The answer to this question brings us full circle to the question of whether a cooperative economy would/could be capitalism. As I implied earlier, this is largely a matter of semantics: if by ‘capitalism’ you mean ‘a system in which capital hires labour’, then the answer is no – qualified, of course, by the ‘self-exploitation’ critique. Marx (1864, para. 14) believed that “co-operative labor…fostered by national means” and “developed to national dimensions” could bring about true and lasting “emancipation of labor”. In an earlier blog, however, I argued that a cooperative economy would not necessarily be communism. In fact, as per Lenin’s New Economic Policy, Marx seems to have had in mind some sort of transitional mode of production that would eventually herald full-blown communism. Conversely, cooperatives have often proliferated in countries ‘opening up’ to the internal and external markets, such as today’s Cuba under Raul Castro. So it seems that a cooperative economy would indeed be some sort of 'third way', defying the crude dichotomy between capitalism and communism.  For me, the really interesting question is therefore whether such an alternative economy is an inherently transitory one, or whether it can represent a more permanent socio-economic system.

Notes

[1] It might be (validly) argued that economic growth is no longer necessary, desirable, or even feasible in advanced economies, and that we are currently suffering from all of capitalism’s ills while its benefits either fail to materialise or fail to improve actual living standards. Be that as it may, economic growth is certainly still required in most countries, and even in advanced economies, innovations and increases in efficiency will still be required in order to maintain current standards of living, for instance due to the eventual depletion of natural resources.

References

• Egan, D. (1990). Toward a Marxist Theory of Labor-Managed Firms: Breaking the Degeneration Thesis. Review of Radical Political Economics, 22(4), 67–86.
• Engels, F. (1989 [1880]) Socialism: Utopian and Scientific. In Marx-Engels Collected Works (Vol. 24, pp. 281–325). New York: International.
• Jossa, B. (2005). Marx, Marxism and the Cooperative Movement. Cambridge Journal of Economics, 29(1), 3–18.
• Luxemburg, R. (1986 [1900]). Reform or Revolution (London: Militant Publishers), Chapter 7, accessed at https://www.marxists.org/archive/luxemburg/1900/reform-revolution/index.htm
• Marx, K. (1864). Inaugural Address and Provisional Rules of the International Working Men’s Association, along with the “General Rules.” London: International Working Men’s Association. Retrieved from https://www.marxists.org/archive/marx/works/1864/10/27.htm
• Marx, K. (1867). Instructions for the Delegates of the Provisional General Council. The International Courier, 6/7. Retrieved from https://www.marxists.org/archive/marx/works/1866/08/instructions.htm#05
• Marx, K. (1959 [1894]). Capital, Volume III. (Marx, K. & Engels, F., Eds.). New York: International. Retrieved from http://www.marxists.org/archive/marx/works/1894-c3/
• Marx, K. (1970 [1875]). Critique of the Gotha Programme. Moscow, Russia: Progress. Retrieved from https://www.marxists.org/archive/marx/works/1875/gotha/index.htm
• Paranque, B., & Willmott, H. C. (2014). Cooperatives - Saviors or Gravediggers of Capitalism? Critical Performativity and the John Lewis Partnership. Organization, 21(5), 604–625.