The Continuing Relevance of Social Ownership and Equality:
A Reply to David Ellerman

by Michael W. Howard

Editors’ note: These remarks refer to the article by David Ellerman published in GEO #47.

Without a doubt David Ellerman is one of the most important figures in the movement for worker ownership in the U.S. One of the founders of the Industrial Cooperative Association, he has worked for decades promoting the virtues of the Mondragon model, exposing undemocratic ESOPs (and designing ways to make them more democratic), developing not only cooperative firms but much needed support organizations, and articulating arguments in support of worker ownership. Thus it is out of considerable respect that I offer some criticisms of his property-theoretic defense of worker ownership. While practical working models are the most important thing we need to advance self-management, what is at stake in this theoretical debate is how best to frame our arguments philosophically and in the public policy arena.

In Property and Contract in Economics, Ellerman offers a defense of worker cooperatives as an alternative to both capitalist and state socialist enterprises.1 While I share his commitment to a cooperative society, I disagree with the philosophical justification offered, and with his claim that the “great debate” between capitalism and socialism is now over, displaced by the question of the employment contract (common to capitalism and state socialism) versus self-employment and self-management. His argument against the wage labor employment contract is an extension of natural rights arguments against slavery. Slavery is treating a person as property, as a thing without responsibility for its actions. Although the slave acts and produces, his actions and products are the property of his master because the slave himself is property. The institution is inherently unethical, and further deprives the slave of the fruits of his labor.

Paul Samuelson has noted that wage labor differs from slavery as rental differs from ownership. The employer does not own the employee, he rents her, and she rents herself out. Under the employment contract her labor and its products are appropriated by the owner. Ellerman maintains that such a de jure contract rests on a de facto impossibility, the alienation of one’s responsibility as an agent. This is acknowledged in criminal law, where a worker hired to rob a bank is nonetheless held responsible for taking part in the robbery despite the fact that his labor was rented out at the time. In contract law, however, the legal fiction of alienation of responsibility is upheld, and thereby is the worker deprived of the fruits of her labor.

The ethical alternative is self-employment, or, in enterprises involving multiple workers, self-managed cooperatives. In self-employment and self-management the workers do not engage in the legal fiction of alienation of responsibility, and will appropriate the positive and negative fruits of their labor. The institution of self-management thus follows from the moral requirement of respect for persons as responsible agents.

The critique of wage labor as “wage slavery” is almost as old as capitalism itself, and the analogies with slavery should be central to any thoroughgoing critique of capitalism (or state socialism). However, the core problem in both slavery and wage labor is the unequal power the employer has over the worker, and the exploitation the employer is able to achieve in virtue of that power. The legal forms partly constitute but mainly express this social relation of domination and exploitation that is the antithesis of mutual respect. Ellerman’s critique, by focusing solely on the legal form of the contract, fails to establish worker cooperatives as either morally necessary or morally sufficient.

They are not morally sufficient because in an economy of worker cooperatives, where it is still possible to own capital wealth and where inequalities of ownership could be substantial (remember that Ellerman thinks that the great debate over private and unequal ownership of capital is over), lenders of capital (money, plant, materials) can still control nominally self-managing workers as a condition of access to capital. In the extreme case, a lender could stipulate as a condition of the loan that “self-managing” workers appoint a manager supporting the interests of the lender.

Self-management is not morally necessary because there may be other complexes of institutions, not including cooperatives, that on the whole do a better job of guaranteeing the combination of equal liberties, equal opportunities, and roughly equal life prospects that justice requires. For example, suppose—what I consider to be contrary to fact—that some version of Swedish-style social democracy is much more efficient than any feasible worker cooperative society. In the imagined model the employment contract survives, but unions are pervasive and so strong that they can halt production for reasons of health and safety, have some board representation, and other powers that make being a wage worker less de-humanizing. They receive extensive social benefits, including an unconditional guaranteed income at a level sufficient to ensure that no one is economically coerced into a wage labor contract. Assume that the best feasible worker ownership alternative entails such a loss of productivity that the minimum income falls below subsistence, forcing workers into some cooperative or another, and that the power of financial capital renders self-management a mere facade of worker power. Thus contrasted, the social democratic alternative appears to me to be a greater advance in human liberation beyond slavery than worker ownership. The same could be said for some variety of socialism (without self-management) that similarly succeeded in approximating the requirements of justice.

Now in fact I believe that cooperatives have many efficiency advantages over capitalist (or state) managed firms. The point is that this is not irrelevant to the moral case for cooperatives. That case has to assess whether the whole complex of political, economic, and social institutions is just. A large drop in efficiency is not just a matter of fewer consumer goods, it also can entail a decline in power, absolute or relative, of workers and others, that underpins servitude as fully as the legal form of the employment contract. The natural rights anti-slavery argument involves too thin an account of self-determination to bear the weight of an absolute case against capitalism, in much the same way that, on the right, libertarian arguments for laissez-faire capitalism (or against any state intervention) rest on too thin an account of human freedom.

What is needed is a theory of justice, such as that of John Rawls or some more egalitarian variant, on the basis of which I believe a case for self-management can be made. The case will be more contingent on facts, such as the economic performance of cooperatives, but more compelling in taking into account the relevance of self-management for liberty, equality, and community.

Michael W. Howard is Professor of Philosophy at the Univ. of Maine. Email:


1. Property and Contract in Economics: The Case for Economic Democracy (Oxford: Blackwell, 1992). I have written a review essay of this book which does greater justice to the subtleties of the arguments: “Libertarianism, Worker Ownership, and Wage Slavery: A Critique of Ellerman’s Labor Theory of Property,” The Journal of Social Philosophy, forthcoming. See also David Ellerman, The Democratic Worker-Owned Firm: A New Model for the East and West (Boston: Unwin Hyman, 1990). My own arguments for a form of worker-managed market socialism, framed in terms of an egalitarian theory of justice, is in Self-Management and the Crisis of Socialism: The Rose in the Fist of the Present (Lanham, Maryland: Rowman & Littlefield, 2000); for a review by Ken Estey, see Issue 45 of GEO.

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