15: Cooperation: Getting Rid of the Employing Class
Given that the employing class merely serves to organize and direct labor, can it be gotten rid of in a situation in which laborers organize and direct themselves? It seems to some to be a reflection of democracy in labor, in which those who participate in an organization also participate in its governance on equal terms.
Cooperative systems have been proposed, even by serious economists, as a method to alleviate the ills of the industrial arrangement - namely the subordination of the working class to the employing class - but on closer examination the system does not seem to change anything at all.
It would be highly unproductive, Walker reasons, for everyone to participate in every decision, which is the reason democracy itself is not practiced among large groups, but instead becomes a republic in which those who "represent" a group of people who have chosen them for leadership are the only participants in the decision-making process. It does not seem that this arrangement would eliminate the employing class, as organizations would still have a hierarchy, management, and supervision and the only difference is that the workers, rather than the owners, selected those who would be in positions of authority.
There is also the notion of worker-owned businesses, which is entirely possible even under the present system. A group of workers may pool their savings or borrow as needed to fund a productive operation. This is in fact already possible, as workers may invest their own savings in shares of the firm for which they work, and thereby become part-owners of their organization. Whether the shareholders of a firm are its own employees or others seems incidental.
Cooperative arrangements between employees are little more than an extension of a proprietorship to a large number of participants, who furnish capital and labor to an enterprise and share the profits among themselves. This may seem enticing to workers who suspect that they are receiving less than their fair share of the profit of their efforts, but comes with a number of disadvantages:
- Whereas the wage-earner's income is dependable and steady, the profit of a business fluctuate. Income varies with the seasons and the competition between suppliers.
- Whereas wages are paid as an expense before product is sold, the revenue of a business occurs when finished goods are sold. The owner of a business must maintain himself until that time.
- Whereas wages are guaranteed by an employer, the revenue of a business is not guaranteed by the customer. If the product is damaged, lost, or if customers simply are uninterested, the owner of a business receives nothing.
The choice to work for a wage is, for many, a compromise in favor of a steady income - which they can have with minimal risk because the business owner ensures their income regardless of whether product is sold, and often advances them income before any profit is earned. Some laborers are ignorant, and some consciously ignore the nature of this arrangement: it is because they are unwilling to accept risk that they seek wages instead of going into business for themselves.
The necessity of start-up capital is also a barrier to a worker going into business for himself, and one that is claimed more often than it is valid. Those few workers who have the discipline to save some portion of their wages to fund and independent venture are dismissed as anomalies by those who lack discipline. Those whose proposals are sound enough to attract investors are dismissed by others whose proposals are unsound. But the fact that such men do exist, and have become quite successful in their ventures, testifies that it is not lack of opportunity, but lack of character, that keeps some men in the service of others rather than striking out on their own.
Cooperative arrangements are attractive because they conceal the risk. Each man entering into a cooperative imagines his fellows will bear it for him, or that the group has some power (or more specifically, some capital) that its members do not contribute - just as each man who joins a commune imagines that others will do the unpleasant and burdensome tasks, and in the end, none do.
The cooperative arrangement does not solve the problem of labor - the same amount of work must be done to produce a product. Neither does it solve the problem of risk, and as previously discussed it places greater risk upon the participants. Neither does it solve the problem of equality, as men whose quality or manner of work command a higher wage will not work for less. All things considered, it would be difficult to discover what, exactly, cooperative labor does solve.
It can perhaps be said that a cooperative arrangements takes the profit of the entrepreneur - though the consequences of "taking" is to drain the motivation from the act of doing. Where a business has been founded, the work has been defined and can perpetuate without further invention. But if this is to be the customary arrangement, what incentive or reward is provided for the inventor to do his work?
There is also the notion that cooperatives will eliminate the profit of the owners, who sit idle and capitalize upon work done by others. This may be so, but it does not mean a business is not owned, and that the owners do not expect a return on their investment - merely that the owners are also workers in the business. As mentioned, this is no different than the worker who invests in shares in the corporation for which he works - there will always be a division of profit between labor and ownership, even when the worker and owner are the same person. And there will always be dissatisfaction, as each worker may have a different idea about the amount of profit he wishes to take home as a reward for his labor and the amount he wishes to receive by virtue of his ownership.
There is also the grudge that workers bear to anyone who supervises or directs their work, though in large organizations this is inevitable. Whether the supervisor is appointed by an owner or selected by a committee of workers, his responsibilities remain the same (to ensure productive use of time) and failure to attend to the needs of production will lead inexorably to an unprofitable and unproductive venture.
The idea of paying workers according to their contribution is often seen in businesses that can measure productivity in pieces. A mine may pay workers based on the amount of ore they provide each day, or a manufacturing operation may pay by piece-work. This is true regardless of whether it is owned by a capitalist or workers, and their incentive for setting pay is the same: to encourage and reward productivity. However, in a cooperative arrangement this would need to be facilitated by some capital resources held in reserve, as paying workers daily or weekly for work produced (but not yet sold) is an advance on profits.
It is also asserted that cooperative arrangements would eliminate conflicts between management and labor. Specifically, workers would not strike because they are harming only their own incomes. However, it is inevitable that any group of people who agree to do something will have dissenters in their ranks, to whom the arrangement is unacceptable, and who would not be satisfied with the arrangements that were supported by the majority.
It is also suggested that workers would be mindful of the quality and quantity of work, because they profit directly from the operation. This seems entirely plausible, but it is again no different to the situation of a worker whose employer offers bonuses or profit-sharing. And again, people are just as likely to be dissatisfied with the arrangements made by a committee whom they elected as they are in the arrangements made by any other individual.
It is also suggested that workers would take care of their workplace and tools and be frugal in the use of materials, recognizing that any waste deducts from his profit. This is essentially the same as the previous point.
There are other benefits to this arrangement, which are largely psychological: the feeling of ownership and participation in an operation. But these concerns being outside the realm of economics, Walker leaves them to "the statesman and the moralist."
He mentions a proponent of cooperatives, who mentions the markets of Europe, in which independent vendors operate stalls or booths to sell their product. This arrangement is not at all analogous to cooperative manufacturing, nor is it even cooperative retailing. The collocation of merchants in a market square is essentially no different than the existence of different shops along a street - there is collective attraction to buyers, but no cooperation among independent vendors.
He also notes the example of a flour mill as a cooperative operation, and concedes that it is a good example of cooperative investment in a shared resource (each farmer need not build his own mill), but this too is not analogous to a cooperative manufacturing operation. The farmers are again independent businessmen who merely share the use of a common resource.
He briefly mentions agriculture cooperatives, which have been tried on many occasions and have failed miserably. The main problem is the long delay between work and remuneration: workers must sustain themselves through the planting and growing seasons until the harvest is brought in and sold, and only they do they receive the profits. And squabbling among workers of such communes is incessant, with each man feeling that he is not getting fair compensation for his hard work and laggards claiming a share. To divide out the spoils with absolute justice is "simply impossible" and no method thus far has been satisfactory.
Corporations founded by employees would seem to be a close example, but few such operations exist and none seems to maintain itself for long. Employees sell their shares, or leave their work, and new workers are not automatically granted ownership. As a result, these turn into normal corporations, some of whose stock happens to be held by employees - but the way they function in their roles as workers and investors are well separated.
There are very few cooperative societies that have maintained themselves for an extended period of time. Some of them are merely bartering arrangements in which people share their products with one another, and consume what they produce. Various case-studies are presented, all of which come invariably to the same end: the more productive members of the cooperative become resentful of the less productive ones and are either motivated to leave the cooperative or decrease their production to match the others. The cooperative becomes unprofitable or simply dissolves. Others simply falter in the face of a market catastrophe - the participants are unable to provide for themselves through a period of decreased demand, and drift off to find work that produces a reliable income.
Walker then turns to the suggestion of workers forming cooperatives and hiring managers and entrepreneurs, rather than the other way around. There's rather a long ramble about this, but it is again no different to workers who pool their capital and become stockholders in a corporation themselves. Which is to say that it is entirely possible to do this, but it is seldom done - and when done ownership becomes dispersed.
He also mentions the "consumptive cooperatives," which are entirely different to productive ones, and have in some instances been entirely successful. People who pool their resources and purchase goods in bulk often do negotiate much lower prices, and the division of purchased goods is more equitable because it derives from the amount of money contributed to the purchase, which is easily measured and recorded. In essence, participants in a buying cooperative eliminate the work of retailers and distributors and the related expense.
Some such operations have become a kind of retail cooperative - in that the buyers of merchandise become co-owners of an inventory of goods that may be sold to anyone (not just members of the group) and the profits divided among the owners. But this seems little different in its nature than a store operated by a corporation.
(EN: A point Walker does not make, and one which has made since, is that a capitalistic system does not prohibit the voluntary formation of cooperatives - workers are, and always have been, free to organize themselves and found operations. The fact that past experiments have failed does not mean that a successful arrangement could not be discovered - but it would be a point that is better proven by demonstration rather than speculation.)