This Occasional Paper by editor/activists at Grassroots Economic Organizing is meant to stimulate dialogue on the future of the grassroots economic democracy movement. This is a fully re-written update of an essay available since 1994 to GEO readers.

*Betsy Bowman is an independent scholar affiliated with the Radical Philosophy Association (USA). Bob Stone is Professor Emeritus of Philosophy at Long Island University. They are co-authors of SartreÍs ïMorality and HistoryÍ:An Introduction to the Unpublished Writings of the Mid-1960s (forthcoming).

by Betsy Bowman & Bob Stone

Can we construct a better world than that of globalizing capitalism? Yes! Through cooperativization. We claim that first-world networks of worker co-ops -- like the one around Mondrag"n, Spain -- if re-oriented so as to solidarize with the alter-globalization movement, could almost fully replace capitalism by a democratic economy. These leading edge worker co-ops would need to restore their deteriorating internal democracy and form a new vanguard with third-world "communities in resistance" and the "social and solidarity economy" in a joint non-violent but liberatory transformation of the global economy.

Since the mid-1970s, both public and social property, especially communal land on which much of humanityÍs rural half depends, has been under attack. But cooperativization -- democratizing production, distribution, and investment -- can stop this, reversing capitalismÍs worst advances. Runaway shops will cease as capital is anchored by workersÍ homes. Exploitation will yield to profit-sharing. Grow-or-die imperatives that threaten global war and environmental ruin will implode as competition is reduced overall. To stay abreast of the greater productivity of co-ops, capitalist firms will be compelled to democratize.

Cooperativization cannot end capitalism itself. But the autonomy gained as workersÍ control replaces labor markets will be lost unless remaining markets are in turn replaced by: restored public goods and control of distribution, minimum universal incomes, democratic planning among co-op networks, and direct user-producer communication in place of commodity production.

Objections derived from Marx, Luxemburg, and others are answered.

The paper is divided into four sections titled: 1. The Degeneration Problem; 2. How Alter-Globalization Movements Can Unravel Capitalism; 3. Paradigm Shifting Beyond Corporate Globalization; 4. Objections and Replies.

This essay, intended especially for subscribers to Grassroots Economics Organizing, originated in our visit to the Mondrag"n worker co-op network in Spain in July, 1989. Soviet Communism had just collapsed, a "solution" that was worse than the problem. Yet we felt capitalist exploitation was intolerable for a free people. The worldÍs leading co-op networks offered hope for an alternative both to capitalism and to authoritarian socialism, we held in an early version of this essay. Since 1989 the Mondrag"n network has degenerated while alter-globalization movements have declared "another world is possible." This new version argues that a rectification of the networks, joining them to todayÍs alter-globalization movements, can take us far toward a workable improvement on the economy we have now. But cooperativization calls for a new kind of movement centered on economic rather than political action and a new kind of organizer.

"The Mondrag"n model," the network associated with the town of Mondrag"n in the Basque country of Northern Spain, is widely thought of as the flagship of the worker co-op movement. "Model" for us primarily refers to its framersÍ principles, which have made the network worth emulating. As it happens, deviations from some of these principles have also long been underway. Thus while the workability of a cooperativized global economy derives largely from its working now in various forms, we shall not defend all aspects of Mondrag"n. Cooperativism of its kind can be sustainably generalized, weÍll hold, only if the network is restored to its principles.

Were this rectified model part of the vanguard of todayÍs movements for economic democracy, weÍll hold that these cooperativizing movements could together transform for the better the production relations underpinning globalization. To proceed to liberate co-operative labor from capitalism itself, some options opened by cooperativization must be engaged in a second stage of "de-marketization." After sketching this second stage we'll answer objections to our proposals that we have encountered in years of setting them forth. Our aims are to trace out and validate the vision of workers in democratic enterprises and to show the power of coordinating with allied movements.

1. The Degeneration Problem

Since capitalismÍs start, worker co-ops have haunted it as its own built-in opposite, bearing hopes for a non-capitalist future. Relative to such hopes, most have "degenerated" by failing or by becoming capitalist. Mondrag"n is on the latter trajectory. The model Rochdale co-operative founded in England in 1844 degenerated when, to finance purchase of a new mill in 1859, it took on investor members. They outvoted worker members and in three years converted the co-op to a conventional firm.

Carefully avoiding that form of degeneration, a more recent co-op fell into yet another. In 1921, 125 dedicated Scandinavian cooperativists put up $1,000 for equal numbers of stock shares and started Olympia Veneer Company, the first of many plywood co-ops in the Pacific northwest. (Berman; Lutz & Lux, Ch. 8; Pencavel) Thanks to the efficiency of co-operative labor, share values skyrocketed. But instead of taking in new owner-members wage workers were hired to work individual shares. In 1954 the 23 remaining members voted to sell out, at around $625,000 gain each, to the U.S. Plywood Corporation, a conventional firm. A capitalist success, Olympia failed as a co-op, because of wage labor (violating the one-worker-one-vote rule) and because ownership was of individually sellable stock shares. Thus, despite its egalitarian impulse, the seed of OlympiaÍs demise was present at the start.

The Mondrag"n co-ops avoid this degeneration by separating ownership, which varies in value, from voting, which is strictly equal. Instead of buying stock, new applicants advance labor to pay the membership fee. Roughly a year's salary, this loan by members starts an "individual capital account" (ICA) to which monthly and year-end profits and losses are credited or debited. (Thomas & Logan 1982, p. 136) Unlike stock shares, ICAs are neither accumulable nor sellable and carry only one vote. Being individually recoupable upon leaving, yet available meanwhile for collective investment, they constitute a sort of bank inside each co-op. Rights attach solely to membership and terminate when members retire or leave. There being no non-worker owners, co-ops remain whole solely in the hands of their active workforces, avoiding the Rochdale error. A co-op could be sold, but only by a hard-to-muster two-thirds of a general assembly vote, and this has never happened.

The "salary" spread from lowest to highest, currently 1 to 6, is based on an agreed job rating index. "Salary" is in scare quotes since members, not being employees, receive no wages or salaries. Rather, they have the following rights of owners and managers: 1) monthly and annual profit distributions; 2) 6% annual interest on their loans to the co-op; 3) a vote on undistributed funds; 4) access to all records; and 5) a vote on policy and managers.

Result? Mondrag"n has outlasted Olympia as a co-op by 20 years, due partly to separating voting rights from ownership rights.

The network started in 1956 with a small stove factory built by five former students of a vocational teacher, a priest named JosŽ MarÕa Arizmendiarrieta. Unions were banned but agricultural co-op laws allowed workers to own their workplaces. Basque solidarity facilitated capitalization by door-to-door fund-raising. A crisis hit in 1958 when Madrid declared members to be self-employed, hence ineligible for state health and unemployment benefits. Turning this adversity around, the network created its own cheaper system. (Huet) In 1959, with this systemÍs reserves, founders started the Caja Laboral Popular to give banking, entrepreneurial and health services to the four then-existing co-ops. Post-Franco Madrid has since offered state health coverage, so the network has elected no longer to provide its own health services. Focusing on domestic appliances and machine tools for the protected Spanish market, the network steadily expanded. The network as such has repeatedly proved its value. In the 1980-83 recession, the Basque country lost 20% of its jobs. Nearby firms laid off massively or closed. Many co-ops cut pay up to 11%, and five co-ops closed. Yet, thanks to job transfers in the network, virtually no layoffs were made in the co-ops, stabilizing the whole regionÍs economy. (Clamp) And costly re-tooling paid for by the network would have been far beyond individual co-ops.

Then a one-two punch hit when SpainÍs market opened first to Europe in 1986 and then to the world in 1989. We visited in 1989, a decisive period. Network appliances were suddenly up against major German and French brands. This presented a fateful choice: directly compete with multinationals or follow the Italian co-ops into niche markets? This time re-tooling was judged too costly so in 1991 over 100 co-ops, organized up to then by geographic regions and linked through the Caja, re-organized in three business sectors as Mondrag"n Co-operative Corporation. This allowed speedy, centralized decisions typical of the multinational competition.

Flash forward: as of 2003, MCC had over 66,000 employees operating over 160 co-ops in three sectors: 135 industrial, 6 financial, and 14 distribution. In both sales and workforce, MCC is the Basque countryÍs largest business corporation and SpainÍs seventh largest. The three sectors are backed by the Caja, and by housing, service, research, education and training co-ops, also in MCC. Mondrag"n University, founded in 1997, integrates technology with cooperativism in a multi-lingual environment for over 4,000 students. As a "second degree" co-op like the Caja, its board is partly nominated by its own students and faculty, partly by the co-ops it serves. Other second degree co-ops include technology and management schools and research institutes. Core industrial co-ops bring an array of high-tech and durable goods to world markets, including robots, machine-tools, appliances, auto parts, buses, and elevators. The networkÍs supermarket, Eroski, partnering with a French chain, has become SpainÍs third largest grocery retailer and largest domestically-owned one. A hybrid equity structure joins EroskiÍs employees with customers as co-investors. (MCC 2002) Typical of worker co-ops, and unlike most capitalist firms, all Mondrag"n co-ops devote 10% of all profits to community needs. With a few exceptions -- the Fagor group with some 5,000 members -- most successful co-ops "hive off" related progeny after reaching 500 or so members. Beyond that number economies of scale do not make up for weakening of face-to-face production. New progeny take their own collective risk. However, infra-network competition is ruled out by contracts with MCC that commit all new co-ops to uniform principles of job creation, shared capital, and democratic structure.

Usually "profit" is income after all costs, including labor costs. But in a worker co-op, profit is income after all non-labor costs. Labor is not a "cost" in a co-op but a mutual sharing of each memberÍs capital. Labor time is neither bought nor sold. Rather, a co-opÍs workers together share all profits and losses. Not more than 30% of losses may be debited to a co-op's undivided account; the rest must be born by individual capital accounts, a risk of ownership. Democracy is central and turns on membership. Ultimate control of production, income spread, and board seats lies in the yearly general assembly. It elects the board of directors (consejo rectoral) which appoints management. The assembly elects a watchdog council (consejo de vigilencia) to monitor management and a social council (consejo social). Subject to board and management approval, the social council indexes jobs within the 1 to 6 spread, based on demands for experience, training, responsibility, and hardship. In individual grievances over pay scale and social welfare the social councilÍs decisions are binding.

A Mondrag"n-like co-op re-unites in one person the functions of worker, manager and owner. Capitalism consigns these functions to three separate persons. To personify these functions is to impose on the three groups that are thereby constituted an imperative that pits each of them against the other two. To then re-unite these functions in each member -- as happens in true worker cooperatives -- necessarily abolishes the conflict among the three groups. In this re-combination, however, one typical "function" does not re-appear when a firm becomes a co-operative: that of capitalist itself. The only unavoidable function of capitalists is to "furnish capital." But this is not a distinct contribution to production. Workers can hire capital or capitalize a Mondrag"n-like co-op with their own labor. They can also exercise collective entrepreneurship and do at Mondrag"n. Thus capitalists as such make no irreplaceable contribution, as Schweickart notes. (2002, p. 33) A surprising conclusion follows: if, on capitalismÍs own ethic, profits should go only to those who make a distinct contribution to production, capitalists as such deserve no profits. When a capitalist firm cooperativizes, workers assume manager, entrepreneur and owner functions; but the capitalist side of the owner function -- vestigial under capitalism -- drops out altogether in the transition.

To top it off, Mondrag"n works better at the capitalistsÍ own game than do capitalist firms! Concluding his two-factor comparative study, Henk Thomas writes: "Productivity and profitability are higher for co-operatives than for capitalist firms. It makes little difference whether the Mondrag"n group is compared with the largest 500 companies, or with small-and medium-scale industries; in both comparisons the Mondrag"n group is more productive and more profitable." (Thomas 1982, p. 149) Studies of job creation, worker compensation, and job security yield similar results. (Thomas & Logan; Bradley & Gelb)

Indeed, central to our argument for cooperativization, is the persistent indication in available research that the more closely workplaces resemble Mondrag"n-like co-operative labor that is liberated, the more productive and profitable they are. Summarizing forty-three studies of self-management, Levine and Tyson conclude worker participation in management usually boosts productivity, especially when combined with other elements of self-managed cooperative labor. These include: 1) profit-sharing; 2) long-term job security; 3) small wage spread; and 4) guaranteed worker rights. (pp. 205-214) To these Mondrag"n adds the potent element of worker ownership. Instead of lightly tapping the enormous power of liberated co-operative labor with one or two such elements, Mondrag"n unites all of them at once and gets the full benefit of such labor. It seems then that Mondrag"n-like co-ops outstrip all types of capitalist firms in productivity not in spite of being democratic but to the extent that they are.

But Mondrag"n has not been true to its impetus. Is it a model? Three sets of degenerative practices make it less worth emulating and endanger its economic superiority. The practices, and remedies, are:

(1) When demand increases, the co-ops often hire non-member wage labor. MCC recently persuaded local legislators to raise the ceiling on "contract" labor to 30%. (Kšhler) Moreover, if a co-op applies, MCC may allow it up to 40% non-member workers. (Huet) Illegal "eventuales" or temporaries -- mostly female -- are not counted in the 30% quota for "contract" labor, and make up a substantial percent of workforces. Thus in some co-ops over 40% of work may be done by non-members. The overall percentage is unknown since MCC no longer gives out membership figures. Not only does collective exploitation of wage labor violate the ethic of cooperativism, it encourages more such exploitation, limits on membership, and sell-outs. Ruling out the false benefits of wage labor will in the long run be a benefit.

(2) MCC is using women as a reserve army of labor. True, on the gender division of labor women do slightly better at MCC than in capitalist firms (Hacker & Elcorobairutia) and have a major presence in management. But blue collar work remains largely male. Another significant percent of illegal hired labor, one informant told us, is home assembly work, mostly by female relatives. Use of such second-class labor pools also violates the cooperative ethic. Solutions include: observing the one-worker-one-vote rule, gender integration of all co-ops and jobs; and child-care in workplaces. (Ferguson, pp. 94-99) Fully engaging womenÍs talents would boost productivity.

(3) There are unnecessary sacrifices of cooperativism. In 1999 external non-voting capital stakes were 13% of MCC equity. (Kšhler) This was due to joint ventures and acquisition (or start-up) of many straight capitalist enterprises abroad, many in Latin America. Vague assurances that cooperativization is "on the agenda" are extended to such workers. (Logue) And as the Rochdale case shows, such mixtures of co-op and external investor capital contravene co-op principles and introduce instability. (Ognedal)

Worker alienation is rampant. (Kasmir) Social councils are underutilized. (Clamp) Unionization is under discussion. (Huet) Work-floor democracy is a complex issue. In the mid-1960s the network studied Scandinavian work groups with a view to replacing TaylorÍs "scientific management" -- up to then dominant on the work-floor. Ironically Ulgor workers voted down the Swedish innovation in favor of the assembly line! (Thomas & Logan) In 1989 Total Quality Management was introduced along with other disempowering practices such as just-in-time inventorying, work-movement monitors, and swing shifts. Studying the effects, George Cheney concluded that the changes were threatening Mondrag"nÍs "organizational integrity" as a "value-based" rather than "market-based" firm. Cheney warned that this "neo-cooperativism" trend "privileges an externally driven form of participation, in marked contrast with [one]ƒin which workplace democracy is justified primarily or significantly in terms of the benefits for the employees and the organization as a whole."

Schweickart emphasizes that while members may not often exercise their powers over their work-lives and managers, they do have them. But unused, such powers atrophy. In 2001, although the social council at Fagor -- the largest and oldest co-op -- issued a blistering critique of MCCÍs degeneration, it continued unabated. Centralized decision-making has made meaningful consideration of alternatives harder. A recent observer sadly concluded that the Fagor dissidents were "not confident [they] can provide an alternative -- they worry MCC may be correct that survival in the global market requires compromises of critical co-operative principles." (Huet)

Even under threat of degeneration or outright economic attacks, a determined cooperativization movement will still have enough time to construct "a better world." Worker co-ops survive as such "longer than comparable capitalist firms," and Mondrag"nÍs innovations have vastly lengthened their life-expectancy. The Mondrag"n model is itself for now salvageable. But it faces a moral dilemma: only if the network, rectifying itself internally, also rededicates itself to intercooperation with the alternative cooperative economy at the global level, can it avoid sinking back into capitalism. For worker co-ops like Mondrag"n usually become capitalist not because they are co-operative, but because, in isolation, they are not co-operative enough.

2. How Alter-Globalization Movements Can Unravel Capitalism

As it happens, Mondrag"n is not alone. Globally, three tiers of movements are already building various aspects of a new democratic economy -- although they are under siege and lack coordination.

The lead tier is itself made up of three vanguards, one each from the "first" and "third" worlds, and one in between, as it were, that is more visibly part of the alter-globalization movement.

In the third-world vanguard are "communities in resistance" that complement cooperative production with other democratic economic activities, constituting small but relatively autonomous counter-forces to globalization. MexicoÍs Zapatista movement produces cooperatively for local democratized consumption, but it also brings large cash crops to the world market -- all coordinated by a grassroots democratic network, parallel to MexicoÍs government, which controls much of Chiapas state. (Barkin) ArgentinaÍs recuperated factories, restarted democratically by their workers after capital fled, have so far been able to resist seizures by those who abandoned them due to massive support by surrounding neighborhood assemblies in control of the local economy. (Zibechi; Klein 2003) BrazilÍs Sem Terra movement or MST has since 1984 helped 350,000 landless families force government expropriation of unused land -- as required by law -- by occupying it under cover of night and confronting landowners at daybreak with functioning encampments. (Stedile) These mass-based social movements avoid party affiliation. Aimed first at survival, they have locally replaced globalizing capitalism with prefigurations of a global democratic economy, making them natural allies of the first-world vanguard.

As fully developed forms of cooperativism these three movements are not just means to a world of economic democracy but partial realizations of it. Their poignancy is their parallelism, that is, their difficulty in perceiving in each other allies in a single cooperative movement, comrades in struggle with whom there are countless opportunities for intercooperation and mutual aid in advancing the same goals.

Should the parts of this triple vanguard choose to work together, they would have potentially large resources behind them. For, in the wake of this triple vanguard is a second tier, a much larger set of movements that engage some but not all elements of liberated co-operative labor. A growing number of trade unions demand worker participation in decision-making; GermanyÍs mitbestimmung laws require board representation of workforces. (Melman, Ch. 9 & 11) The vigorous ESOP movement, though U.S.-based, is now international. Since 1974, tax breaks go to U.S. firms that loan workers money to buy company stock, re-paying with earnings. Participants in ESOPs or other employer stock plans number 20.3 million or 15.8% of private-sector employees. (Kruse) There are related movements to open books and share profits, equity, and decision-making with workers.

Much larger still, a third tier of democratic economics embraces much of humanityÍs rural half. Village-based agricultural and light-industrial production uses social property. (Bayat) In a sample of Indian villages, which share much with other third world villages, 14 to 23 percent of all income came from use of common property resources, rising to 84 to 100 percent of the income of the poor. (Jodha) Also in this tier are: consumer, marketing, agricultural, electrical and housing, co-ops; community economic development initiatives; the community banking movement; and the non-governmental organization sector and global civil society generally.

The deep affinity of these three tiers of movements can translate into joint action for fundamental but non-violent social change. By "cooperativization" we mean not only intercooperation within and among these three tiers of the cooperative labor movement, nor only restoration of social property, but everywhere deliberately replacing the hierarchical and coercive relations typical of capitalist production and consumption by voluntary cooperative associations.

We have so far emphasized production but cooperativization also advances from the consumer side. Conscientious consumers are drawn to "buy co-op." The "fair trade" movementÍs demand for democratically produced goods will in time elicit profitable production of them. Naomi Klein cautions, however, that unless the fair trade movement demands improved labor conditions, it merely sanitizes the existing system. Masses of conscientious consumers "buying co-op," banking in credit unions and investing through a much-strengthened "socially conscious" investment movement, could help democratic firms displace capitalist ones. As workers come to see that their labor, not capital, creates profit, subjection to capital will no longer seem a necessary condition for making a living. By directly meeting needs, the new production relations will undo capitalismÍs worst aspects.

The productivity advantage of democratic production stimulates cooperativization. This advantage is likely due to harmonizing of conflicting imperatives. Absent rewards, workers in capitalist firms withhold their skills. By contrast workers in democratic firms, no longer pitted against each other, have strong incentives to share skills. And since effectively exercising collective creativity is pleasurable (Graeber p. 260), management supervision is less necessary, a big savings. (Fitzroy & Kraft) Also lifted is the even greater burden of supporting absentee shareholders. Co-ops thus have a flexibility, financial buoyancy and re-investment potential lacking capitalist firms. (Jones & Svejnar, pp. 449-465) Members are not resentfully slow, care for equipment, avoid waste, and minimize downtime and absenteeism. Large-scale production still needs skilled managers, but direct market feedback, freed of "noise" from managers with inimical interests, allows faster remedy of management errors. (Estrin, Jones, Svejnar, pp. 40-61; Levin, p. 28)

As the triple vanguard indicates, cooperativization has enormous potential momentum. If productivity increases along with greater workplace democracy, an important corollary follows: firms tapping more of the power of liberated co-operative labor will have advantage over those tapping less. The more elements of the rectified Mondrag"n model in workers' hands, relative to non-co-ops, the greater their advantage, other factors equal. Less democratic firms will be compelled to democratize. Thus, just by pursuing profit, capitalist relations of production will tend to unravel. And capitalists may be powerless to end such threats to their hegemony.

This self-undermining is afoot. Managements are doling out ESOPs, TQM, profit-sharing and other tokens of self-management. More U.S. workers participate in ESOPs than do in trade unions. Yet ESOPs in which most stock is held by their workforces are a small minority and those allowing votes on boards much smaller. ESOPs make cheap benefit plans (Rosen & Young, pp. 5-14) and wed a worker-elite to new "flexible" technologies, replacing union with corporate loyalties. (Gorz, pp. 65-68) ESOPs, in short, are bait to raise profits and pacify militancy while yielding zero control. (Melman, Ch. 8) But eliciting co-operative laborÍs power with phony self-management is inciting workers to demand votes for their shares. (Melman, Ch. 9) A Southwest Airlines female flight attendant told an interviewer: "Southwest is profitable because employees have given up wage and benefit increases to keep the airline competitive. I'm even willing to make further sacrifices. But I won't do it without some equity and a say in how the airline is run in exchange." This worker questions exclusive appropriation of profits by non-workers. This signals a paradigm shift within capitalism away from capitalism.

Co-operative labor was born with capitalism. Under private capital the labor of strangers who had been pushed off the land was combined. Due to this subsumption, the great productive power of such labor at first appeared as that of capital itself. But as high-skill, capital-intensive production took over, capital lost its magic. Today capital restrains co-operative laborÍs power to meet needs. Self-management has been shown to make best use of the new digital technologies. (Melman p. 245) Yet since the mid-1990s U.S. managements have undone worker participation regimes, accepting productivity losses just to re-take control of workfloors. (Melman, p. 245; Edwards, Ch. 7) The self-defeating result has been a ceding, by U.S. automakers, of a quality edge to Japanese brands produced with somewhat greater workplace democracy. (Hardt & Negri, p. 290; Estey) It is clear that while accumulation of capital by non-workers used to foster optimal productivity growth, as new technologies spread, workplaces liberated from domination by managers of capital are demonstrating that this is no longer the case.

A perennial problem for cooperatives is finding enough capital.

External start-up capital runs afoul of the Rochdale problem. And workers with limited equity for investment or collateral will avoid risking it, especially by putting their eggs in the one basket of their own firm. And if they borrow they may face a higher interest than those with more liquid assets to loose, due to lendersÍ moral hazard, which rises in proportion as debt rises relative to equity. Because co-ops are capital-starved, Rosa Luxemburg concluded they cannot take over the capital-intensive centers of modern economies. (Ch. 7)

ItÍs a powerful point and MCCs existence only partly refutes it. Where, Luxemburg might ask, are GE or Microsoft workforces to find the huge liquid capital needed for a buy-out? Until such workforces prove their productivity, banks will shy away from funding firms whose mere workers can vote out the boards and managements who usually pay debts. We offer three possible solutions.

First, movement self-financing. MCCs Caja could alone back a major buy-out offer. And Mondrag"nÍs 10% self-tax ought as a community priority to first fund co-op start-ups and buy-outs before serving other needs. Other models are CanadaÍs union-sponsored capital funds such as QuŽbecÍs Solidarity Fund. (Krimerman)

Second, local government financing. Bologna and other northern Italian municipalities offer worker co-ops revolving loans, market research and other services. Krimerman -- in his contribution to this volume -- cites newer precedents of "participatory budgeting" in Brazil and Argentina in which the social economy is recognized as having a claim on public tax support.

But even combined such sources could not now underwrite buy-out of a major multi-national. Hence our third solution: workersÍ pension funds. They own one third of U.S. stocks. Yet law forbids workers collective management of them. (Guinan) Rather privatization into individual accounts is envisioned. Typically, managers of such funds harm their own employers when they finance export of jobs, buy-outs that entail layoffs, and short-run profits over job-creating options. Democratic oversight could ensure they benefit the people and not just financiers. (Blackburn, p. 458) And workforces of multi-nationals would find in them ample leverage to buy out and cooperativize their firms.

Still, such reform presumes support by a major co-operative sector to counter expected public relations blasts from multi-nationals. Lesser reforms, like those in Europe, would build such a sector. Tax credits could go to Mondrag"n-type co-ops. (Ellerman 1984, p. 258) ESOP shares could carry voting rights. Tax benefits could be proportioned to an ESOP's worker control. Workforces could be given first refusal when their firm is sold. Democratic firms could be given preferential bidding on public contracts. Grants of $4 to every $1 could help the unemployed join or start co-ops. The co-op sector would flourish.

Until a strong co-op sector can finance the political clout to build and hold a cooperativist majority, such measures risk reversal. This is why building economic strength takes a slight precedence. Workers in regular firms, observing co-op members with similar lifestyles but enjoying much more control of their work and usually more leisure, may demand similar control, endangering capital accumulation. When economic hegemony threatens to pass to the co-op sector there will surely be illegal economic attacks: denial of credit, boycotts, supplier "problems", sabotage, etc. But such methods will undermine the attackersÍ own legitimacy. This is why cooperativizers should let the system collapse without responding in kind, taking care to meanwhile build their own banking system.

Such a collapse need not bring chaos. As co-ops "short-circuit" multinationals with local markets and currencies, skill banks, and land trusts, cooperativization will accelerate and with it the capacity to meet needs. (Douthewaite) Consider: since the two-income family is the "first world" norm, all working parents need quality child care. But such care involves too great an intensity of labor to be both universal and profitable under capitalism. (Holmstrom 1981, p.171) In this situation a cooperative firm, one whose workforce's own needs have first claims on profits or time, could more easily respond. It might set up an on-site day care co-op, for example. In an economy with a co-op sector, as workers become parents, they will have strong incentives to switch to worker co-ops, thus advancing the unraveling.

But why do cooperatives have such social change potential?

3. Paradigm Shifting Beyond Corporate Globalization

Cooperativization shifts the basic priority of societyÍs productive infrastructure from profits to needs. Making profits is a quantitative and infinite goal, meeting needs a qualitative and inherently finite one. The gigantic fortunes of the worldÍs elite far exceed any conceivable needs on which they might spend such sums. Initially the needs a co-op serves are those of its own worker-members. But this already sets it radically apart. In capitalist firms worker needs figure marginally if at all and only if backed by tacit or explicit threats of strike. In shifting to need, the heart of an enterprise shifts from an amoral to a moral bond. For in creating a co-op, each member gives their labor power to the others with a view to meeting the needs of all members, including oneself. Each memberÍs very economic life is given to the others in the expectation that the community thus constituted will in turn guarantee it. One aims to serve the co-op and thereby oneself in it. Notice that this reverses capitalist dogma by which pursuit of oneÍs own anti-social interest somehow magically yields the common good -- given the marketÍs "unseen hand." Co-op formation, instead of aiming first at oneÍs own good and secondarily at that of the collectivity, aims first at the good of the collectivity and secondarily at oneÍs own. Magical faith that selfishness will somehow benefit the collectivity, is replaced by the grounded experience of personally benefiting as a result of benefits to oneÍs group (i.e. oneÍs church, block association, trade group, or service organization).

One paradox of worker cooperatives is that although their first aim is meeting their own membersÍ needs, they regularly outstrip capitalist firms in community giving. A momentÍs thought will resolve the paradox. Once membersÍ needs are met, any surplus, having already been given to the co-op by each member severally, has been destined partly for otherÍs needs, and hence is in principle available for needs beyond the co-op. Giving to others beyond the co-op is a simple extension of membersÍ gift to each other that founded the co-op. This is why co-ops evince the economic rationality of what anthropologists call "the gift economy." This names, we contend, not only a practice of the Trobriand and Papuan clans studied by Boaz and Malinowski in the late 1800s, but a dimension of life today.

To outline this hypothesis weÍll need to explore what might be called existential or lived economics. We move daily between a gift economy and a money economy. Athough the latter loudly claims to be the only one, we are in fact born into the former. Mothers give their children milk solely because they need it and without expecting recompense. Dying, we seek to re-enter the gift economy so we can release our hold on life in the arms of loved ones. And beyond families we give without recompense to friends, churches, and institutions of civil society that engage us morally. Profit is often secondary. An example is Diane ElsonÍs case of a left journalÍs newsstand price: aimed only incidentally at making money, much less profit, this price does not reflect supply and demand but functions as an agreement among persons seeking social change. (p. 77) And artists give their works to humanity, considering their usually paltry income. Schools and hospitals aim only secondarily at making a surplus and indeed could not survive in the money economy if the teachers and nurses in them did not give "without counting" for other-than-monetary rewards. Even hard-nosed corporations would be unprofitable, Gibson-Graham notes, if the value-based relations in them of trust, care, and reciprocity -- which allow them to function at all -- did not let "the bottom line" come first. And this sufferance can be withdrawn by workforces or by society. Demands to rescind charters of corporations that fail to serve the public good testify to this. (POCLAD) Yet, parading its false dominance, the money economy holds the gift economy in subjection and parasitizes it, often masking its exploitation in gender and racial divisions. Worker co-ops are resistant assertions of the gift economy within and against the money economy. That the solidarity of the former exists beside the suspicion of the latter testifies to our conflicting memberships. This is why it is a struggle to expand the gift economy beyond the filial and affectional relations in which the dominant money economy artificially confines it.

This is an hypothesis only; sociology and economics have yet to fully investigate it. We invoke it meanwhile because it helps so well to explain co-op formation as well as: why conscientious consumers prefer worker co-ops; why inter-cooperation among co-ops comes so easily; and why, among for-profits, co-ops are so exceptional in community service. (Logue) It may also help explain the anguish of workers in capitalist firms who, deeply intending to serve humanity, must watch as the system diverts that aim into merely enriching capitalists. And the two-economy hypothesis helps us understand why, since co-ops aim first at their own membersÍ needs, they are at risk of turning inward, placing co-op above community, and behaving like "collective capitalists." (Ollman, 1998, pp. 102, 113-117) Never fully absent so long as markets endure, this risk rises with market pressures, which can provoke doubts about the economic power of co-operative labor. Such behavior appears as a money-economy deviation of the cooperative impulse. For self-interest as motive of production is built into the very structure of a capitalist enterprise, while it is imposed on a cooperative.

Liberals typically claim self-interest is "human nature" that determines history. But explanations of its origins in history make such extra-historical speculations unnecessary. At capitalismÍs sixteenth century beginnings, common lands were enclosed. This forcibly separated workers from the means of production by which they had cooperatively met their needs. (Perelman) Instead, these means became private property. To meet needs made urgent by dispossession, workers could get at those means only if they contracted individually with their new private owners. Now such a contract -- not "human nature" -- requires workers to pursue their own good exclusively. But this contract was hardly "free." Since unemployment tacitly threatened death, one had to sell oneÍs labor. By separating workers from cooperative production and replacing it by such one-on-one market extortion, the self-interest motive was thus constructed and imposed. And because this motive was widely imposed, the myth arose that humans "naturally" work on greed.

Made to seek this new self-interest and hence pitted against other workers, the human needs driving workers into the labor contract are falsely re-inscribed in the system as quantifiable "interests" reflecting our greedy nature. WorkersÍ "interests" could then be balanced against capitalistsÍ in a global market of "free" and "equal" exchangers. (Gorz) But capitalist and worker are not equals exchanging equal things they own. For "interests" cannot be balanced against human needs. The two are not commensurate. Nor is a personÍs whole capacity to work, to make a living, commensurate with the wage received. Laws securing education and welfare recognize the principle that when bosses extort all fruits of a workerÍs labor power -- her life-force and all its product -- the community at large also benefits and hence owes recompense. A mere wage is not only insufficient, it misses the point. As David Graeber remarks: "If one gives oneÍs life, oneÍs life should be at least guaranteed." (p. 162)

Those who form a co-op hold at bay this compulsion to individually sell labor power, thus also holding at bay self-interest. In this protected social space, membersÍ own free association gives rise to cooperative labor. Such labor no longer automatically benefits capitalists alone but serves whatever human ends these members choose. No longer separated from the means of production, they enjoy an autonomy created by their own collective action.

We expose here the radically non-capitalist roots of cooperatives. This allows us to see how cooperativization undoes globalizing capitalism and at the same time replaces and improves on its processes in a non-violent manner.

First, capital -- the labor power of a co-opÍs workforce and the plant it owns -- is tied down to commuting distance of workersÍ homes. Since the co-op is for them a reliable source of livelihood, the "runaway" shop where capital seeks distant, cheaper labor is all but ruled out. In this, cooperativization will aid and be aided by measures such as canceling third world debt, closing off-shore tax havens, and converting free trade into fair trade with long-term contracts.

Secondly, and more important, as it proceeds, cooperativization ends the very accumulation of capital as social power. The upward metamorphosis of labor time into value and thence into profit and capital is blocked, like a crimp in a water-hose. Profit goes no further up the scale of social power than the workforce whose labor time created it. This control allows members to "take" earnings either as money or as free time. Accumulation blocked, Wall Street withers away, for want both of capital inflows and investment opportunities.

Thirdly, cooperativization restricts spread of exploitation to new arenas. Exploitation-free social space is expanded with each new democratic work-site. The single group of worker-owners thus created cannot be said to exploit itself in the capitalist sense. The systemÍs main pillar and main evil, is thus dismantled.

Yet the drive to exploit, make war, and externalize costs remains. It lies in the systemÍs grow-or-die imperative. Unable to rest content with a market share, capitalists must expand or loose to competitors. However, as cooperativization advances, an axiom of co-operative accounting quiets this imperative. For consider: a capitalist employing 20 persons at a hamburger stand that earns $20,000 in annual profit, may, assuming double the demand, double that profit with a second stand, even if it means driving the competition out of business and taking over their assets. No such incentive exists for a co-op. Per worker profit of two stands with 40 workers would be exactly the same as one with 20. Cancerous growth thus gives way to moderated competition. Co-operative workers, fearing loss of market share, will still be constrained to please customers, introduce new technologies, and produce efficiently. But such an economy will necessarily be less competitive. (Schweickart 2002, p. 129, 157) As for militarism, Schweickart says of his similar model: investment funds donÍt flow abroad in search of greater profits "so there is no need to make the world safe for foreign investment." (Schweickart 2002, p. 155) Yet while "first" world co-ops have no imperialist motive for starting co-ops abroad -- third-world co-ops retain profits locally -- they will have a defensive motive, for capitalist competitors will use cheap labor to undersell them.

In these respects, then, cooperativization goes over half way in transforming the worst of capitalism. It may be said that cooperativismÍs final goal is to build an inclusive human collectivity that freely reproduces itself. It fails of this goal so long as it produces commodities that are subject to the vagaries of markets. Market prices are indirect, coded, false unities of the guesses that exchangers make regarding countless transactions taking place elsewhere. Prices mediate discussions between producers and users regarding resources, production capacities, and needs. What, then, would direct, true communication and agreement on these matters be like? Albert and Hahnel bring the internet into the center of their post-market society. It affords virtual input by the multitudes of economic agents whose needs are only indirectly and symbolically guessed at in pricing. An iterated participatory planning, using the internet, would be an easy second and natural step after cooperativization. Having abolished the market in labor by asserting their power of collective autonomy, co-operative workforces will almost certainly not tolerate loss of this autonomy in remaining forms of market exchange. The same logic by which the solidarity economy was built will lead on to replacing market distribution with production decisions based on communication and ever-wider intercooperation.

Meanwhile, what about unemployment? Cooperativization is a powerful job-creating engine. But it cannot alone keep up with todayÍs record and climbing global rates of structural unemployment and marginal employment. (ILO) The very computerization of industry that demands workplace democracy for optimal use also brings layoffs. (Rifkin, Ch. 1)

As finance capital withers, cooperativization will make possible democratic control of investment. As it advances SchweickartÍs tax on capital assets would become pertinent, diverting revenues to areas of unemployment. Similarly, but at globalizationÍs own global level, a Tobin tax on capital flows and a tax on multinational profits could foster local job creation. The current United Nations lacks the necessary taxing and enforcement powers. But forging regional and global bodies with such powers would be a natural extension of a global economy already under workersÍ control.

A basic guaranteed income, with work-sharing due to reducing the workday, would help cooperativization resolve unemployment. An income floor would allow movement between co-ops without income loss, erasing coercion to form co-ops. Flexibility in work-sharing and job-creation, would allow valuable work in political parties, neighborhood associations, child and eldercare co-ops, and the like. (Howard) It assure all workers full membership in societyÍs material reproduction -- in short, a job -- shorter hours will be needed in order to spread useful work. Since capital flight or strike in a given country could end such initiatives, global cooperativization will need to be well advanced.

Cooperativization empowers workers from the start. Waiting for capitalism's final collapse to abolish all markets at once has failed and -- absent grassroots democracy -- may invite chaos or fascism. (Schweickart 2002, p. 177) Co-op networks cannot guarantee a global democracy but without them there is slim hope of replacing markets with communication among workers and farmers -- the world's vast majority. Cooperativization, then, is first on the agenda.

4. Objections and Replies

We have already treated some objections. WeÍll look at seven more: first, objections on principle, then, objections on strategy.

1. WonÍt the best rise to the top, upsetting co-op egalitarianism? A new version of this complaint holds that, since managerial talent is unequally distributed among workers, co-operatives, instead of forcing capitalist firms to co-operativize, will themselves be compelled to re-introduce hierarchy and to reward scarce talent with unequal political and ownership rights -- enough to make co-ops indistinguishable from capitalist firms. (Arnold, pp. 23-48)

This competitive pressure is real. It has been met at Mondrag"n by collectively widening income spread to 1 to 6 from 1 to 3, with incentive bonuses raising one CEO to 10 to 1. However, even after major accomplishments, such as surviving the 1980-83 recession whole, managers have in fact neither asked for nor received greater political rights. Since, as co-ops come to dominate whole sectors, an economy will be less competitive, the risk of competition will decline. "With risk lessened," Schweickart remarks, "managers would be less able to demand increased authority and income, even if...their talents are seriously in short supply." (Schweickart 1987, pp. 311-312) Pressure to increase wage spreads will become pressure to narrow them, since need, not profit, will be the dominant theme.

2. Reversing the above complaint: wonÍt the egalitarian commitment of worker co-ops dull effort incentives? A majority of workers in democratic firms will benefit by making differences in pay smaller than differences in productivity, Kremer holds, even if this transfers some returns from the most productive to the least productive. Ability and effort are hard to distinguish, so the resulting tax will dull efforts in high-ability members. They will move to shareholder-owned firms that reward their marginal product. This explains why co-ops are "rare," Kremer opines.

Were Kremer right, most co-ops would routinely be more plagued by weaker work incentives and lower productivity than are shareholder-owned firms. But on the contrary, matching studies show co-ops to be more productive. (Pencavel) Totally flat pay may have raised problems in Israeli kibbutzim, but some compression of earnings can boost morale. (Dow & Putterman) Retaining capable managers is a problem at Mondrag"n, addressed by widening the pay scale. But high-producing workers do not go elsewhere for such rewards, perhaps because of workmatesÍ non-monetary recognition. What seems more important at Mondrag"n than exact monetary recognition is effective collective control of pay scales.

3. If overproduction is a problem of globalizing capitalism, wonÍt an even more productive form make things worse? Worker co-opsÍ productivity will hasten the unemployment of their workers.

This objection misses the dynamics both of overproduction and of worker co-ops. Capitalism enters a crisis of "overproduction" not just by adding capacity, but by simultaneously depressing incomes of workers who otherwise could buy what they are producing. But cooperativization clearly narrows income gaps. The full range of products is thus placed in reach of a new, single class of worker-owners. Needs being met, overall pressure to add capacity will decline. A cooperativized global economy will thus tend to clear markets of its own products, solving the problem of overproduction.

4. But can a cooperativized market economy expand to displace capitalist forms, as claimed? Frank Thompson argues that co-ops, slow both to hire and to fire, will loose out because less responsive to changes in demand. Given increased demand, Thompson holds, the desire to individually capture super-profits will create pressure either against adding members who might boost output, but who will dilute per-worker profit, or for hiring wage labor with whom profits need not be shared, or both. Increased demand, unmatched by output, will either create a wealthy co-op sector amidst unemployment, or, if wage labor is used, one that is not egalitarian. Co-ops either risk being undersold by capitalist firms who profitably hire the cheap labor they had excluded, or reverting to capitalism. Either way the co-op sector, less nimble in responding to changes in demand, wonÍt displace capitalist firms over time.

Thompson is at best half-right. If higher prices, reflecting greater demand, are not met by higher output, resulting super-profits will indeed be captured by those presently employed. But in fact, the risk of loosing market share deflates temptations at Mondrag"n to respond by freezing production or membership. Wage labor has been overused, and Thompson may have identified why. But rather than hire wage labor MCC as often increases production by borrowing members from other co-ops and by adding new members as would be indicated by stable increases in real demand.

As for the slowness with which, given reduced demand, co-op networks actually lay members off, this "fault" stabilizes both employment and demand itself. If layoffs and the reduced demand they create cannot be so freely used for a firm's survival, the broader downward spiral of reduced demand at the macro level will be slow to start its first down-turn. The speed of a capitalist labor market response to changes in demand exaggerates such cycles, actually a sign of inefficient overall resource allocation. As this market withers so does the cause of this problem -- the boom and bust cycle itself -- thanks to stabilized demand. This is obviously a better solution.

5. Will co-op workers, any more than those in capitalist firms, feel enough solidarity to make the sacrifices needed to provide the public goods any healthy society demands, like universal health care?

Milton Fisk holds that co-ops, like capitalist firms, have powerful tendencies toward market dominance and oligopoly pricing and away from regulation. "There is nothing inherent in workplace reform that leads to expanding the net of solidarityƒ. As a reform, co-operatizing is incomplete since it doesnÍt address the class-wide, the society-wide, and the global issues that public goods address." Co-ops want health care, and wealthy ones can get it, "but how will that provide health care for all?ƒnothing in the structure of producer co-operatives calls for such an insurance scheme."

On the contrary, such a call is inherent in their structure. To fund public goods, MCC co-ops have always tithed 10%. This has been recognized by post-Franco SpainÍs 10% reduction of taxes on co-ops. Incapable of capital flight, co-ops are significantly more responsive to community needs than normal firms. More to the point, being constituted by sacrifice for the collectivity, solidarity is not, as Fisk implies, incidental to co-ops; they are founded on it.

We have shown that the tendancy of worker co-ops to dominate markets is moderated, not "powerful." And if MCC co-ops inherently resist regulation they would not both accept heavy network regulation of pay differentials, tithing, etc. and bear individual economic risk. Rather, they would constantly defect to compete with their parent. Were MCC as self-concerned as Fisk contends, when Spain offered state health coverage the network would have declined in favor of its own cheaper system. Instead, it joined in the state system due to the fact, discounted by Fisk, that those who sacrifice to create a co-op are ready for "inter-cooperation" -- mutual giving and regulation -- among co-ops. The sacrifices that Fisk rightly says are needed to constitute a nation-wide or global public good are in fact simple extensions of this tendency, which is reflected in cooperative principles. We need rather to ask Fisk where the solidarity behind public goods might come from outside of the mutual giving typical of co-ops and similar groupings?

Fisk seems to assume that if property is not public it must be a private, exclusive resource for making profit. Nancy Holmstrom (2004), another defender of the public goods perspective, inadvertently makes this error when she writes that "goods like education or health care are public -- if they are -- only because people have struggled to take them out of the private for-profit sector and make them available for all." Beyond public goods and private property for profit there is a third possibility: non-exclusive social property used for the public good. Since Rochdale, cooperatives, unlike private clubs, offer open membership and aim primarily at public goods (meeting needs) and only secondarily at profit. Socialists and economic liberals both elide social property to the extent they both offer an either/or choice between socialism (as public goods) and capitalism.

In fact cooperativist and public goods perspectives complement each other. The public goods perspective is itself society-wide cooperativism. In turn, cooperativism is a necessary concretization of the public goods perspective in the large and small enterprises of an economy. Uprooted from their common origins in the gift economy, the sacrifices needed to constitute either co-ops or public goods appear as anomalous and irrational supererogations. The public goods perspective tends to regard workplace democracy as optional and, uncorrected by cooperativism, often denies it in practice. For its part, cooperativism, especially under market pressure, can lose its self-confidence and overlook nation-wide and humanity-wide needs -- which actually call for a broader cooperativism, not inwardness. Neither perspective can afford to loose sight of the other in their convergent struggles.

6. Socialists might contend that the incrementalism of cooperativization, joined to its overt social change agenda, make it vulnerable to political and economic attacks. There is no substitute for working for a socialist government that can expropriate capital all at once, give the means of production to workers, and start democratic planning.

Cooperativization is above all a struggle to rejoin economics to morality, from which it has too long been divorced, as Ruskin remarked. (pp. 203-228) There is a conjoint political struggle at every stage. But if focus is on socialist political victory alone and victims of racism, sexism and the new imperialism have not been supported in daily economic struggles, the resulting inevitably bureaucratic socialism that will be bestowed on them will be taken (or given) back -- as in Russia in 1917, China in 1949, Algeria in 1962. And which strategy is slower? Waiting for top-down socialism without asserting the collective autonomy of cooperativization is more dispiriting than risking failure by asserting it now. And absent preparation by grassroots economic struggle, new failures of top-down socialism are likely. We are not "market socialists" -- a contradiction. Rather, we advocate socializing daily economic life a less reversible attainment than gaining "the commanding heights" of government. Socialists might thus consider reinventing themselves as cooperativists. If socialism is humanity directly producing itself by democratizing economic life globally, then cooperativization, though not the easiest, is the surest way.

7. This idea has no clear origins in indigenous or oppressed communities, examples are more first world than third (or fourth). It may be another presumptuous emanation from the privileged Western sources of capitalism and authoritarian socialism.

We give ourselves this test. To envision alternatives to an oppressive order demands some relief from it. Fault enters if instead of easing transformation to a world without oppression, this relief is enjoyed as an entitlement. Co-op forms are trusted in both first-world factories and third-world villages. Concretized in struggles for liberation from one or another system, this way to meet needs uses systems to produce itself. While we believe cooperativization allows this we solicit any correction that gets us closer to the truth. Where then has our relative relief from oppression clouded our vision? As it stands this objection is incomplete. What have we overlooked in indigenous or oppressed communities that shows the alternative we propose to be mistaken or useless? Shown our mistakes we will alter our faith. But not before.

Conclusion

A mere two-thirds majority of any Mondrag"n workforce could sell out, perhaps with a prospect of a life of comfort. Why havenÍt any majorities formed to this end? We got some surprising answers. Some of our informants saw their co-op as patrimony to pass on. Others felt themselves to be the vanguard of a movement. Nobody said there had been no good offers.

In short, cynicism was absent. We came to believe our question missed the point. We had not yet ourselves made the paradigm shift discussed above. We had assumed such decisions issue only from self-interest. But this overlooks Mondrag"nÍs moral basis. In fact, many workers transfer between co-ops, but virtually none return to capitalist firms. We heard many complaints but none were to the advantage of capitalist firms left behind. Appealed to instead was what the co-ops could themselves be, were they true to their principles. Mondrag"n workers seemed to have crossed some inner rubicon. At last finding a measure of collective autonomy in their work, they want to go forward, not back. For such autonomy seems to be the goal of economic democracy.

Yet as we see, this moral basis is at risk. In competing with multinationals Mondrag"n has come to resemble one. It is salvageable, but only if its isolation is ended by joining vanguard third-world and solidarity economics movements. Another world is possible. Globalizing capitalism can be made to peacefully yield to control of production "from below," i.e. by workers and farmers. As we see the task is not easy. New grassroots economic organizers are needed, leading a new movement with a new and morally rigorous basis.

Cooperativization, then, by avoiding old errors, re-opens an historical future beyond our impasse that allows renewed forward motion. No utopia is before us and no reversal of gains is ruled out. But, pursued with vigilant focus on the end in view, it offers at least a clear first step toward a better world.

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