In previous posts discussing the relationship between
cooperatives and archetypal economic systems (viz. communism and capitalism), I
drew what I believe to be an important distinction between ownership of enterprises and coordination between them. I argued,
moreover, that it is primarily the former criterion that defines these archetypal systems – capitalism consists of ownership (of the means of production,
property rights, or whatever) by capital, whereas communism entails ownership
by the community (broadly conceived). Cooperative ownership, I suggested, can
be conceived as a variant of either of these ideal-types, or perhaps as a ‘third way’ between them - workers may be their own/each other’s capitalists, and/or they may circumscribe ‘the community’ to the level of the enterprise. I also
proposed that the coordination criterion, while significant (especially given its
interaction with the ownership criterion), is less consequential, because, crucially, it
would be theoretically possible for common ownership to be coupled with market
coordination in a sort of ‘market socialism'.
This point is made all the more clear when we consider that ‘actually
existing capitalism’ is a far cry from the free-market utopia eulogised by
neoliberal ideologues and the perfect-competition model depicted in economics textbooks. In fact, the market is not
the primary means of coordination in modern capitalist economies; rather,
most allocative decisions are made within organisations (such as firms, governments, and universities), or between them through non-market means (such as
long-term agreements, joint ventures, and implicit collusion). As Herbert Simon
once remarked, real-world capitalist economies are more accurately described as
‘organisation economies’ than ‘market economies’.
With this in mind, it is a moot point as to whether or not cooperatives can
thrive in a purely market-based economy – the question that commentators on the subject
usually pose – because such an economy is a fiction. Indeed, there are
compelling reasons to believe that even capitalist
firms would not be able to function effectively, or at all, in such an economy. For one thing, as Ronald Coase famously postulated in 1937, firms themselves represent ways to circumvent market transactions, the costs of which (owing to asymmetric
information and whatnot) would prohibit economic activity. Coase actually understated his case, because firms intentionally
avoid (and manipulate) the market even to coordinate with each other. At any rate, without firms
– that is, in a situation characterised by sole entrepreneurs buying inputs and
selling outputs – there would be nothing for capital to own; indeed, the
distinction between capitalist and labourer would disappear. After all, from a
Marxian perspective, it is precisely through the employment and agglomeration of workers
that capitalists extract surplus value. From a Schumpeterian perspective,
meanwhile, it is precisely the pursuit of monopolistic rents – which, by
definition, cannot exist in a state of perfect competition – that propels innovation
in a capitalist system.
How, then, would cooperatives fare in an organisation
economy? To answer this question, we should first remember that, although both
Marx and Schumpeter extolled (organisational) capitalism for its unparalleled
ability to create wealth, they also bemoaned its tendency to stimulate
individualistic behaviour, induce unemployment, and prevent workers from attaining
their intellectual and moral potentials. Cooperatives, by contrast, have been
repeatedly shown to generate employment, foster trust, and develop workers’
skills. Rent-seeking is also associated with other undesirable activities –
such as extortionate pricing, regulatory corruption, and wasteful advertising –
which cooperatives are supposed to eschew thanks to the principle of ‘concern
for the community’ enshrined by the International Co-operative Alliance.
Indeed, cooperatives have been widely lauded for integrating marginalised
social groups, revitalising declining regions, and otherwise contributing to
their local communities.
These positive spillovers would be magnified in an
organisational economy dominated by cooperative ownership. For starters, the
complementary principle of ‘inter-cooperation’ – that is, cooperation between
cooperatives – would ensure that relations between firms are productively
cooperative rather than wastefully competitive or collusive (although some
degree of competition would undoubtedly be required) (Gregory 2013: 62; Bruni and Zamagni 2004; Zamagni and Zamagni 2008). This would essentially be what is often referred to as a 'solidarity economy' - a notion that is not as far-fetched as it would first appear when the organisational nature of economic coordination in existing economies is considered. Crucially, in such an economy, the rents that drive innovation would not vanish, but would rather be pursued in a more socially-beneficial manner. They would, moreover, accrue to cooperative worker-members, which would have
far-reaching consequences given the relative immobility of labour: rents will tend to be reinvested within firms
rather than siphoned off into private accounts, and will not be concentrated
within the small section of society that happens to own capital.
References
Gregory, D. (2013) 'Towards a New Economy Based on Co-operation' in Harrison, R. (ed) People Over Capital: the Co-operative Alternative to Capitalism (Oxford: New Internationalist Publications)
Bruni, L. and Zamagni, S. (2004) Economia Civile (Bologna: il Mulino)
Zamagni, S. and Zamagni, V. (2008) La Cooperazione (Blogna: il Mulino)
