Worker Co-operatives and Democracy (Part 2)

The popular slogan “People before Profit” adopted by worker co-operatives begs the question how people, in this case members of worker co-operatives, can trump profit in a profit-driven economy. The predictable response is that the democratic organization of co-operatives, where decisions are guided by the interests of the members and not exclusively by the imperatives of capital, amply validates the truth of the slogan. But is this so? If the members of a worker co-operative democratically vote to cut their wages during an economic downturn, are they demonstrating their supremacy over capital? How does this decision, albeit arrived at democratically, significantly differ from a boss telling his staff that he regretfully needs to cut their salaries due to a lack of sales? Does collective decision-making become farcical because it is unable to challenge the ultimate power of capital?

The market-based society limits our life choices and we should find ways to subvert its power, for we don’t deserve its manacles. Contrary to the belief that the political arena is primary, I would say that collective projects to achieve egalitarian participation in the economic field are more relevant. Such struggles, which, in reality, are a defense of our humanity, need to be more like sustained and sophisticated guerrilla operations and not like the often employed, isolated and desperate, hit and run tactics we see, for example, in a traditional (capitalist) workplace. The skilled industrial workers in the 19th Century used the knowledge that they acquired running production in capitalist enterprises to organize the work themselves and so gain a degree of workers’ control that threatened the bosses. David Montgomery documents this history in Workers’ Control in America, where he also analyzes employers’ assertion of their power through scientific management techniques, a ruthless division of labor and anti-union practices.

The worker co-operatives of today carry on that legacy of shop-floor control of work. For me, therefore, to put people before profit in the every day operations of the co-operative is more important than contending with capital on the macro-level where it holds all the cards. On the micro-level, people before profit means good communication, operational transparency and cross-training and skills-building, among other things. This daily life practice of the co-operative makes relevant the vision of another way of “doing business.” The intention then is not simply to develop “good team-building skills” like those promoted by corporations, but to develop individual capacity to take charge of the workplace. The deeper relationships with our fellow workers that may ensue, and which make work life more tolerable, are a pleasant consequence of developing the skills needed to function in a democratic work place. Self-management demands this concentration on the minutia of daily practices, where we fine-tune the work we do together so that the collaboration we seek invites spontaneity.

I plan to return to this theme of collective process and the more elusive and subjective side of collective enterprise (where the retrieval of time pits us against capital) in a future installment, but first, the larger context that encompasses these micro-processes of cooperation and resistance in worker co-operatives needs clarification.

Another way to approach my topic – and let me be clear here that the topic is utopianism – would be to think of our popular slogan, “people before profit”, as a vision before economic pragmatism. This returns us to the binary of the previous installment in this series, “Worker Co-operatives and Democracy,” where we discussed the complex meaning of workers’ control in a capitalist society, but this time we’ll explore it from another angle — the angle of language and meaning.

How we define our role in society and what “story” we tell others and ourselves depends on the shared meanings of the words we use. So too, in an endeavor as unusual as a worker co-operative, the story we tell defines our situation in opposition to the larger society. And to carry our analogy further, in telling our story, as we stray from the mainstream conception of “normal,” we become very sensitive in our choice of words. That is, like the feminists forty years ago who came up against the unbearable restrictions of social expectations, we become conscious of language as they did with their radical declaration that the personal is political. Our choice of words to describe our condition can be confrontational or compromising, or all stops in between – no matter – we need to use language meticulously.

In the same way, to recognize the distinctive characteristics of worker co-ops, as a business, requires an acute sense of the meanings of commercial jargon. Anyone who has had the unfortunate experience of trying to secure a commercial bank loan knows what I mean. The banker speaks one language and we speak another even when we use the same words! There are, of course, obvious similarities in the language that both traditional businesses and worker co-ops share – an accountant could quickly determine them, so too would a marketing person; however, there are some unbridgeable differences. “What, you all vote?” – the befuddled question all co-operators have heard uttered by businessmen who can’t grok whether we are members of a cult or just insane.

When we attempt to describe worker co-operatives we, of necessity, begin with the vision, an ideal, that sets apart the co-op from other enterprises and only afterwards do we embellish that description with the more mundane business aspects of our venture. Again that distinction appears – the vision and the pragmatism of the so-called economic imperative. But this is not a binary in balance, one aspect finely tuned to the other, weighing equally in significance. The pragmatic always tries to seize ground from vision. There is a tension here.

Let’s return to the early feminist story. In opposition to the mainstream, the feminist story began with a predictable single form as a reaction to the dominant script, and then, after establishing their autonomy, the feminists’ various life-stories followed. The point is that the narrative begins as a statement of identity-in-opposition. For instance, to use a banal (but all too real) example: “My family wanted me to pursue a nursing career in hopes that I would marry a doctor, but I preferred art.” What is happening here is that the definition of who we are – in opposition – is emphasized because it defines what follows. The mainstream, simply because it defines expectations, needs to be put in its place. It needs, in other words, to be actively opposed in the narrative.

Using this analogy I think it becomes clearer that when we talk about worker co-operatives, we conscientiously choose our words to describe an economic arrangement outside the traditional economic paradigm, because we understand, at least in part, that the “normal” has an arm lock on language. Common places, clichés, the quotidian definitions employed unconsciously are, in fact, constraints on language since clarity must be confined within the parameters that power deems necessary. So when we discuss worker co-operatives as democratic enterprises we are subverting the sequestered language of capital by juxtaposing “democratic” and “enterprise”. In the same way, when we talk about workers’ control, we are joining two words that have no combined meaning in the popular lexicon (unless it’s control over the workers!).

The above serves as a somewhat long introduction to a discussion of ownership and worker co-operatives. In the early 80s the term “worker-owned co-operative” began circulating at the same time that Employee Stock Ownership Plans (ESOP) became federal law. Those advocating adoption of the ESOP scheme used the term “employee-owned” as a shorthand description of this new corporate entity. The intent of the ESOPs was to establish “peoples capitalism”, with employees as owners of stock in their companies. This isn’t the place to delve into the nature of ESOPs, but the use of the term “employee-owned” is odd since the employees typically do not have voting rights attached to their stock like regular stockholders; those voting rights are held by a trust set up to manage their funds, ostensibly to safeguard the employees’ interests.

In any case, before the 80s the term “worker-owned” didn’t appear in the literature on worker co-operatives. It was simply assumed that co-operatives were controlled democratically by their members, unlike corporations, where outsiders who control a majority of the stock can displace local control.

What we are saddled with today is a term, worker-owned co-operative, that seems both redundant and wrong. Redundant because we should assume that when someone refers to a worker co-operative it means that the workers run the co-op as opposed to, say, a consumer co-op, organized to benefit consumers (I haven’t heard the term consumer-owned co-op, yet). And wrong because ownership popularly means the right to sell ownership, or shares, and that is not possible given the vast majority of co-op statutes. So why is the term used? Those who defend its use say that it helps to clarify the nature of co-operatives and that it has “marketing appeal”. I don’t know about the latter, but the notion that it adds any content in the way of clarification about worker co-operatives is dubious given the usual definition of ownership. Of course, there is a secondary way in which ownership expresses responsibility, as in “ I own my opinions.” I hardly see how this sense of the word has any applicability.

Ownership isn’t the main tenet of worker co-operatives. What is? I think we can define worker co-operatives this way: an economic institution founded on democratic control as an inherent and equal right of all members (membership based on qualifying a standard probationary period), despite job role, years of service or any other hindrance to full participation. This is our story. So then wouldn’t it be better, but still redundant, to say “worker-controlled co-operatives”?

It is true that if a worker co-operative dissolves, the members may be treated as owners and the assets could be divided up between the workers, depending on how the bylaws stipulate dissolution. Still, for me, this is a weak argument for continued use of the term. This notion of ownership of the corpse of a co-op opens up another, more radical, layer to the vision behind the slogan “people before profit”.

In the US the 60s and 70s proliferation of communal enterprises displayed the characteristic generic to that period: an enthusiastic devotion to idealism. The infectious excitement of building new institutions, mediated by little experience in the practicalities of the endeavors undertaken, collapsed when the old society’s viral excrescences regained their presence, internally in the projects as recurrent psychological maladies, and externally as legal repression. The social/psychological resources for strengthening solidarity to maintain the highest ideals could not be mustered and most of the social experiments failed miserably. We had here a case of vision defeated, not so much by a lack of economic pragmatism, as by a lack of concern for the human relational skills needed to defend against the micro-level display of power.

When a resurgence of the US co-operative movement occurred in the 80s, the legal parameters of traditional co-op structures were adapted by the newly forming worker co-operatives, providing thereby, at least, a legal structure in response to the failures of the hippies’ collectives. In the UK another path was chosen. There an upsurge of co-operatives took place in the 70s, but unlike the US movement it gained significant political support. The British Labour Party endorsed the co-operatives with legal and financial support from Parliament. Across the UK dozens of co-operative development agencies were financed to support and facilitate the spreading movement with expertise and funds. And at that time a new conception of co-operative ownership took shape – common ownership.

With common ownership the assets of an enterprise are held by the entire enterprise as a trust, and not by individual shareowners. In practice this means that the assets are passed on in perpetuity to new members. If the enterprise fails, then the assets are sold to pay off liens and any remaining funds are transferred to another similar enterprise. Americans will recognize this formulation as the typical non-profit legal dissolution.

In the UK, the notion of common ownership has a long socialist pedigree and, in fact, was adopted by the Labour Party as Clause IV in its program. With Tony Blair’s right wing coup and rise of New Labour that clause got scuttled in a rush to abandon, for electoral purposes, the central tenants of democratic socialism for a woolly set of non-ideas that for all intents and purposes endorsed neo-liberalism. Blair’s government, following the policies of Thatcher’s Conservative reign, failed to re-fund the co-operative development agencies that she eviscerated.

Common ownership is significant because it puts a check on the influence of capital investments; it is the legal form that best puts people before profit and establishes the co-operative as clearly in service to the community. It is, in other words, the modern form of the traditional commons and as such it reinforces the ethic of a shared economy, not a proprietary one. In the light of this ethic stewardship emerges to supplant individual member ownership. For those who think that these ideas are too radical to promote and that they fly in the face of social conditioning about the financial rewards of ownership, I can only refer to the many research studies that record the sentiments of those who work for rewards other than the monetary ones. David Erdal, a British CEO who transformed his family’s business into a wholly employee-owned company, has written a superb book (Beyond the Corporation: Humanity Working,) about his experiences with his former company and many other worker controlled firms, and thoroughly documents studies that demonstrate salaries take a back seat in firms controlled by the employees. He writes that sometimes he thinks that the pleasures of work have been reserved for those who have an advanced science degree, or a craft skill, or those who have been able to scale up a hobby into a small business, while the rest of us must toil away with only money as our reward. I believe he would agree with me that an impoverished life awaits those who have no other goal but to make a buck.

Of course, it goes without saying that no one should sacrifice basic necessities in order to squeeze a little bit of personal satisfaction from their work. With adequate reimbursements and a workplace where income differentials are modest, most people focus on the subjective aspects of their work environment, aspects that are absent from the calculations of the economics profession. Those who work at jobs that they like tend to rate highly the following attributes of the experience: trust, recognition, reciprocity, justice and equality; and it turns out that the more control workers have in their workplaces, the higher they score these qualities. Along with control, which leads to greater participation in the workplace, the mission of the firm, as it expresses the employees’ ideals, motivates and sustains productivity. This phenomenon has not been lost to corporations, which is why they have expanded their HR departments to create the illusion of a “mission-driven” firm to entice loyalty and reap profits for the bloated bottom-line.

Of course, members of co-operatives have the real thing, not a phony, condescending substitute, which is why they can’t imagine returning to a situation where they submit to the arbitrariness of a boss. Again, given a fair wage, the humane work environment becomes the main reason behind employment longevity in the co-operatives. To diminish the importance of these aspects of worker co-operatives by emphasizing proprietary rights with a focus on ownership tends to give value to a capitalist perspective, when the point of collective enterprise revolves around creating an alternative enterprise where people have control. Worker co-operatives practicing democracy in the workplace and responsibility in the community, another popular slogan of the co-ops, legitimately put people before profit.

•  Read Part 1.

Bernard Marszalek was a member of Inkworks, a worker-managed, union-affiliated firm in Berkeley, for two decades. He is a co-founder of that promotes the grassroots economy and the editor of The Right to be Lazy: Essays by Paul Lafargue (AK Press/Kerr CO., 2011). Read other articles by Bernard.