Economic Update: Larger Social Changes to Support Worker Co-Ops

[S10 E08]

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This week on Economic Update, Professor Wolff responds to a criticism aimed at how d@w focuses too much on the transition from capitalist firms to worker co-op firms with too little attention paid to the larger social changes needed to move towards a worker-owned economy and thusly, beyond capitalism. Professor Wolf answers this criticism by discussing the broader social changes necessary to sustain a worker co-op based economy including the economic tools our government could use to sustain an economy-wide sharing of profits and resources as deemed necessary by the people participating in, working and creating in, the industries they as employees could and would control.

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Transcript has been edited for clarity.


Welcome, friends, to another edition of Economic Update. I’m glad to be here. I’m your host, Richard Wolff.

I want to respond today to a criticism sent in to us, which I think is well taken. The critic said, “Look. You make a good case,” and thank you for that, by the way, “you make a good case for the transition from hierarchical undemocratic capitalist enterprises, where a tiny group of people make all the decisions and the rest of us have to live with the results without being able to control those decision makers. You make a good case that we need to transition to democratic worker co-ops. But in your focus on that, you tend to shortchange a discussion of what the larger social changes have to be that go with a transition to worker co-ops. So that sometimes it sounds from the way you talk,” says this critic, “as though the transition in the enterprise will solve all the problems, will take care of itself, will produce the context it needs to survive.”

I think there’s a good point to that criticism. So I want to use today to talk about what some of the larger social changes have to be if a transition from capitalist enterprises to a worker co-op based economy is going to have the results we want and to be able to survive over time to become the dominant economic system. The way capitalism became dominant through the passing away of slavery, feudalism, and other precapitalist systems.

So let’s discuss what the larger context beyond the capitalism would need to be, it might look like, if we want to have it be democratic in the way we won’t want to democratize enterprises. The first thing to begin with is to notice that there has to be an inclusion, if you mean to be democratic, as we do, there has to be an inclusion in the decision-making operation of people other than the workers in an enterprise. Because they’re not the only ones affected by what an enterprise does or doesn’t do. Here are two other groups that are affected and that have to be brought in. One is the community, where this workplace exists—the factory, the office, the store—is located somewhere. It is surrounded by people who live and work elsewhere in this society or who maybe live, but don’t work—not everybody is a working person. All kinds of people are doing other things. They’re children, they’re elderly, they’re incapacitated, one way or another, or they’re devoted to things we don’t normally call work although, if you look closely at them, they are, perhaps not paid, but just as important in society. So there has to be a way for the community, for the environment, for the people affected by what an enterprise does to have some input. Otherwise, it isn’t democratic. And it’s not just the people who live in the communities where workplaces are located. There’s another group—the customers—the people for whom the work is done. The goods, the services produced are consumed either by another enterprise or by the general public, And they too, are affected by the price, by the quality, by everything about that. And they, too, have to be in on it. So one of the things that has to happen for worker co-ops to be successful, to be welcomed as a new form of social life, the way capitalism was two or three centuries ago, as we emerged from feudalism, at least in Europe. So I would argue that the new society has to have a context in which there are instruments, ways, organizations that allow the citizens in the surrounding community and customers also to participate with the workers in making the decisions. That would be a democratic reorganization of society to facilitate and to make it acceptable for the workers to democratically run their enterprise. Because they bring in as co-determinators the others affected by the decisions of an enterprise, which is not only the workers, but also the residents of the community and the customers.

Then we have another problem that the larger society has to solve. And we’ve talked about that in other contexts on this program in the past. Let’s imagine worker co-ops. Well, one worker co-op does real well and grows and does able to pay its workers better and all of the good things that can happen. But next door or down the street or across town, there’s another worker co-op, which, for all kinds of reasons, isn’t doing so well. Maybe people there got sick, maybe the environment was not successful, maybe people stopped wanting to get the output that that other work co-opted. All kinds of reasons explain why one enterprise is successful and another one isn’t. That’s true in slavery. That’s true in feudalism. It’s true in capitalism. And it will be true in a worker co-op economy. The question is not whether some do better and some do worse. The question is how do you handle that? In capitalism, those who are successful outcompete those who aren’t and, eventually, destroy them in competition and then eventually absorb them, hiring the workers, who lost their job in the capitalist enterprise that went down, who move over to the one that went up, thereby, continuing the uneven development that capitalism is always noted for.

So what would a context be that would help this not happen in a worker co-op? How would it handle it? Well, the answer is you’ve got to deal with it directly. You’ve got to make a commitment socially not to allow one co-op’s success to be connected to and, in an effect, worsen another co-op’s lack of success. You’ve got to deal with that. Not imagine that it doesn’t matter. Not imagine that it doesn’t have terrible social effects. It always has. Capitalism pretends you don’t have to worry about that. We know better. We want to worry about it, because we know that the success of a society, sooner or later, will depend on its internal cohesion, its sense of community. And if you destroy that by having extreme different experiences in the workplace, you will come to regret it.

So we need a context that handles that situation. Well, how would you do that? This is an old idea of people who have been critical of capitalism, because capitalism not only makes some people rich and large numbers of people poor, as we well know, but it allows the rich to use their wealth to get richer still and, thereby, forces the poor to suffer the consequences of the rising inequality, which we certainly know much about here in the United States since the last half-century has been a historical horror show of rising inequality.

So what are we going to do? I think we need, first of all, to understand that this is a real problem. That it has affected society for a long time. It isn’t unique to a worker co-op society. The difference is in a worker co-op society the very logic of democratizing the enterprise, creating equality where all the people, who work in an enterprise, together—one person, one vote—make the decision. That, hopefully, will inspire, will inform, will give an idea about how to do that in the larger society, because it’s good for us that way and doing it in the larger society reinforces the support for doing it inside the workplace that they can help each other.

So what would it mean? It would mean to learn a lesson. And the lesson is that you’re better off if you solve a problem collectively, if you share the suffering and the difficulties we all have in life, and if you share the victories and the successes we have. We will become a stronger family, a stronger neighborhood, a stronger town, a stronger country if we learn how to do that to help one another. You might even call it a kind of loving one another if you use the term broadly enough. And so there ought to be a context for worker co-ops. And then I shouldn’t change there “ought to be” I don’t think worker co-ops can survive without what I’m about to say. 

There has to be a larger social context that reinforces the whole logic of democratic egalitarian workplaces and enterprises. And the first step in that is to understand a role for—let’s call it “the government” or “the state” or whatever you want to call it—something we agree to establish in our community to help our community deal with the reality that we have to figure out how to cope with unequal growth rates, unequal experiences in the workplace. One way to do that very very important and, perhaps, in the largest scheme of things, the most important at least at our phase of history. We have to finally understand that there has to be a separation between a job and an income, on the one hand, and the decisions at a workplace, on the other. We now have a situation in which human beings are in terror all the time of losing their job, of losing their income. And they are asked to make decisions about what happens at the workplace, not in terms of what’s good for the community as a whole, not in terms of the society as a whole—of which they are a part, of which they are a product—but instead, out of terror, to hold on to the job, to hold on to the income, or maybe to get a better job or maybe they get a better income.

Suppose we handle that as follows. We want everyone to decide what’s best in their workplace in terms of the society’s well-being. And the way we’re going to do that is we’re going to say, “A job is a human right. By virtue of having been born, you’re going to have a job and an income.” And if the particular job you have right now is not useful society-wise, we don’t want it anymore—for whatever reason—we don’t need that product or we want to preserve nature, or whatever is our reasoning, if we decide a particular kind of work isn’t needed to be done, that has no impact on your job and your income. We will find you another job. And we will maintain you with your income in the transition. And we’ll work out ways of doing that. But you don’t have to worry when you make a decision about a workplace based on your membership in the larger community that it’s going to risk your job and your income. That is not necessary anymore. We have more than enough wealth and income to do that for everybody. And it would take our society an enormous step forward. And I’m talking not only about what’s good for our society, but what’s good for the mental health of every single person who spends so much of their mental energy, their anxiety, their worry on the job, “Can I keep it?” The income, “Can I count on it?” And all that flows from that.

Well, we’ve come to the end of the first half of this discussion of the larger context we need for worker co-ops to survive and grow. And so I want to make a couple of announcements before we make the break.

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Welcome back, friends, to the second half of today’s Economic Update. We were talking about a response I want to make to a criticism that, by focusing on the transition from capitalist enterprises to worker co-ops, too much attention, an excessive amount of attention is focused on that micro-level without talking about the larger social context that has to go with it if these transitions are to survive and if they are to have the social impact, which is why we support them in large part.

I want to make the point now that we need a government, we need a government to help us—locally, regionally, nationally—create that context. I ended the first half by talking about one function for that government is to manage the guarantee of a job and income, so that people are freer to make decisions about what’s good for the environment, for our community, for their families and so on at the workplace without that anxiety and fear of losing my job and losing my income, which, of course, has to be primary, if it’s not guaranteed. It’s like having to worry about where your next drink of water comes from, because you could die from poison rather than living in a community, which makes sure that all the water coming out of all the faucets is safe to drink. We want that, because we don’t want to have to worry about our next drink of water, do we? Well, we don’t want to worry about our income and our jobs either. And they’re just as available as is clean water. Problems? Sure. Costs? For sure. But we can manage it. It’s only the capitalist system that blocks us from solving this kind of problem.

Well, what would the government do? Some of you think and, particularly, if you’re sensitive to the old socialist tradition, that the government should come in and redistribute wealth from the poor to the rich or the other way around, right? If you’re a socialist it would be more from the rich to the poor. But you think of the government as a redistribution agency. I want to argue very strongly that that’s not what I’m talking about. Let me explain. It’s not that I don’t object to the imbalances—poverty and wealth existing side-by-side, of course, I do—but I don’t think redistribution is the solution. And the best way I can teach that—I’ll get it across—is by using a simple example, which I have done before. But since a number of you wrote to me about it, I’m going to do it again.

Imagine, you and your child going to the park on a lovely Sunday afternoon and your child informs you—none too subtly—that they would like an ice-cream cone. And now, imagine, that you have two children and you take them to the park, and both of them, at the same moment, happened to say, “Wow. I would like an ice-cream cone.” So you go to the little vendor down the road and he or she is selling ice cream cones. And you ordered two and you give the two of them to one of your two children. And then you see the face on that one and you see the face on the other one. And you realize, “This is going to cause major trouble. Not only in the immediate moment, but, who knows, for how long.” You already got problems, we call “sibling rivalry”. They’re going to get a lot worse, if you behave like this, and you figure that out. So you say, “Okay. I am now going to redistribute the wealth. I’m going to take one of the two ice cream cones away from the child I gave the two two, and give it to the child who had none. I’m going to redistribute.” And then you’re going to see a level of rage on the part of the child who’s deprived of one. And you’re going to wonder, “Wow. Did I make the situation better by my redistribution or did I make it worse?” If you’re honest, you will ask that question, because it has to be asked. Redistribution produces bitter anger division conflict. The logical inference from the story I’ve told is—and you already know it—it would have been much smarter never to have given one child two cones than it is to give one and then we distribute. The same is true everywhere else in economics. It’s much better to distribute from the get-go equally than to do so unequally and then impose a redistribution. Much of modern society is torn apart over these redistribution efforts. Those who got it, in the first place, feel embittered that they are being deprived. Suppose, you had not done it that way. Suppose you had said, “There’s a reason why we distribute much more equally. It’s precisely to avoid the difficulties and the tensions and the bitterness that come from not doing it.” Learn the lesson. Like the parent of those two kids sorted it out. We can learn that lesson socially. What would that mean? Here’s what it would mean very practically.

If there’s a worker co-op that is doing really well—generating profits, growing—and then the other part of town or the other part of the country, there are worker co-ops that are having problems. Let’s leave a small portion of the profits of the worker co-op that is doing well in their hands to distribute to their communities, to their workers, but the lion’s share of their profit that goes into the general fund. And that is made available in part to those that are not doing so well, but even more generally is used for everybody’s benefit. For example, everybody gets a benefit, because a part of the profits produced by the successful co-ops is used to start new co-ops, to provide a higher social welfare in the form of better parks for people to enjoy, more beaches, more free time. Let everybody learn that we’re in whatever worker co-op you work you’re being benefited by the good performance of other worker co-ops. Just as they will be benefited when it’s your turn in your co-op, which gets help to become successful.

You will always be helping yourself a little and helping the larger community. And you won’t mind having the bulk of your profits taxed away, because you’re getting benefits all the time from the profits tucked away from the other co-op you’re participating. And, you know, people know that already, because that’s the principle of taxation. We all pay taxes and then things are done that we all benefit from—the public highway, the public park, the networks of support that we get, the social benefits that flow to us, the state parks we enjoy in the summer—you name it. We kind of understand the collective resources so that we understand, hopefully, that the taxes we pay are not just a drag on us, because they perform good services for other people just like the taxes on other people produce the social services we all use and rely on.

That can be done in and for enterprises. It makes us all cohere as members of a community and a government apparatus—the same kind of apparatus that will allow for the end of terrorization of people, because you can take away their income and jobs. The end of that administered by a state should be accompanied by a state that uses its powers of taxation—of the profits of worker co-ops—to balance them out, to help those that are having a hard time, to carry out the adjustment if some co-op is doing stuff that we just don’t need anymore. And the help has to be moving those people to things that we do need to have and so on. This kind of management of the relationship among worker co-ops will allow them to be more of a community and less of a cutthroat set of competitors than we are used to in capitalism.

And then again, a rough equality among co-ops so that the strong helped those that are less strong knowing that what’s strong this decade will not be so strong next decade. We once were an economy in which the car industry was number one. It isn’t anymore. We were once an economy in which coal was the name of the game in mining. It isn’t anymore. These things go up and down with technology, with tastes. The co-op that’s in a good place one day will not be in a good place the next. We will help each other, and the state will do that. Performing that kind of collective democratic mutual support in the larger society will reinforce doing the same inside a workplace with the workers, the customers, and the community members around the workplace. In other words, “Yes, we need larger social institutions alongside the workplace institution.” And the democratization of one facilitates the democratization of the other. It’s the transition from a capitalist economy to a worker co-op economy that will help bring the social changes we need. They don’t guarantee it. That’s why we’re talking about it. Those big social changes have to become themselves targets, objects, goals for what we’re trying to achieve.

Let me explain to the critic who wrote and who suggested this program, let me explain one more reason why I have focused so much of my life work and my work on these programs to the transition to worker co-op enterprises. It’s because we have a long tradition of thinking about what the state should or shouldn’t do and having debates over it. We’ve had a tradition of socialism that focused on what the state could and should do to make capitalism less harsh and more humane. But what we haven’t done, what we have neglected is to look inside the corporation, inside the workplace for the changes that have to happen there. That’s why I focus on it. Not because it’s more important than anything, but because it has been neglected. That’s the focus. But it was never intended to suggest that we don’t have the big changes, the big social changes in front of us that have to be dealt with. And I hope that the conversation today is, at least, a beginning of showing the kinds and directions of larger social changes that need to go along with the transition to a democratic workplace both as a condition for that transition that happened and as an objective for the people, involved in that democratic workplace, to participate in a productive way in the largest society and in ways that will reinforce the very worker co-ops that they have established.

And my final point. What I’m saying is what capitalism did to the transition from the feudal manor—lord and serf—to the capitalist enterprise—employer–employee—also needed to adjust the larger society. And boy, they were bold. They got rid of kings and queens. That’s what you had in feudalism. They set up parliaments and they had rules about what the parliaments could do and not do, things that were done to facilitate what capitalists wanted. To this day, capitalists spent a lot of time and a lot of money shaping the politics to make the society work in such a way that they can become richer and more successful. All that I’m suggesting is some of the ways in which a worker co-op-based economy will change the larger society to reinforce its ability to serve the people that the democratization of workplaces is intended to rescue from the condition they suffer in capitalism.

I hope you have found this extended discussion useful particularly those of you who wanted to hear some more about the larger context. The focus on worker co-ops is a response to the fact that the old criticisms of capitalism, the older socialisms talked about all kinds of important interesting things. But they tended to neglect the transformations inside the workplace that were needed to make a transition from capitalism to something better happen. That’s why we focus on it, but it’s an addition to the issues of the larger society, not a substitute.

Thank you very much for your attention. We’ve come to the end. Appreciate your being interested and I look forward to speaking with you again next week.


Transcript by Aleh Haiko
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Showing 3 comments

  • Andrew Bove
    commented 2021-05-16 17:42:23 -0400
    Nice John.
  • Mike M
    commented 2020-03-04 12:43:35 -0500
    Hi Richard, great show. I do not understand one thing with your co-op explanation.

    How do you prevent people from purchasing from just one co-op?

    If one service or product is superior, wouldn’t people overwhelmingly spend their money on it, and as a result, not support similar co-ops?

    And just thinking this through, the defunct co-ops will work for the dominant one who will gain more and more unearned goodwill until they are the Apple, Microsoft, Amazon of co-ops. Great that wealth will not be concentrated in the hands of very few in the co-op, but now those lucky enough to work there are buying up nice pads on 5th Ave. and shore houses while the majority of the working class is on the outside looking in.
  • John Puma
    commented 2020-02-27 15:28:19 -0500
    Prof Wolff,

    The notion and ultimate widespread reality of worker ownership of the means of economic production is more pivotal/critical than you have presented it in the above EU episode. It is a quintessentially democratic institution.

    However, current day America is a democracy (or, accurately, a republic) in name and propaganda only.

    In my 7-decade lifetime there has been a persistent, meticulous, nihilistic and very effective campaign to make Americans not only mortally fear but also viscerally HATE actual democracy. This is seen from the still fresh rage over “the dirty hippies” to Julian Assange whose incontrovertible truths are reviled by the vast majority of Americans and whose 1st Amendment-destroying, slow death in prison is of no “media” value.

    To many Americans, a moderately useful $100 billion food stamp program (a corporate farm subsidy) is “tyranny” while > ten times that much spent for a perpetual war machine AND a rapidly growing domestic surveillance system is of no real concern.

    That “the world’s richest country” is, clearly, more than $100 billion short on feeding its population is a profound abomination. But the combination of the (aggressive?) ignorance of some, and pride of others, about the policy of perpetual mass murder for corporate profit does, at least, define the ONLY aspect in which the US is truly exceptional. That is the abysmal DIFFERENCE between the way it portrays itself as opposed to its supremely hypocritical reality.

    America is proud to claim it is dominated by religion, the military and transnational corporations … all essentially totalitarian institutions

    I suggest that only the establishment of worker-owned means of production has any hope of restoring (?bringing for the first time?) the democracy about which the propaganda so cynically sings … while vigorously suppressing.

    It will NOT be “democracy” that supports worker-owned means of production but the inverse … because there is currently NO democracy. My point is that worker-ownership already exists. It does not need to be introduced but rather to be vastly expanded. If it does, a true understanding of and appreciation for democracy will finally be realized among Americans.

    Thank you for your valiant, unceasing and much needed work.

    John Puma

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