Economic Update: Socialism & Worker Co-ops


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20th century socialism is now behind us. Socialists continued to evaluate both its achievements and failures via extensive self-criticism. A changed socialism has emerged, focused on a transition of workplaces from top-down hierarchical capitalist structures into democratic worker cooperatives. The powerful appeal of worker co-ops as grounding a new 21st century socialism is presented.


Transcript has been edited for clarity

Welcome, friends, to another editor of Economic Update, a weekly program devoted to the economic dimensions of our lives: jobs, incomes, debts—our own, our children’s. I’m your host, Richard Wolff.

I’m going to continue today with a program that we have been developing over the last several months in which basic issues that you’re concerned about, that you write to us about, become the subject for an entire program. Today that subject is the relationship between modern socialism, on the one hand, and the movement to create worker co-ops, on the other. The relationship between these two has become very intimate, let’s call it—very close. I want to explain why and what the implications of that are.

First, socialism has been going through—particularly over the last thirty to forty years—an intense period of self-criticism and transformation. And that’s as it should be. A healthy movement, a healthy system is one that questions itself and changes itself when it finds flaws, failures and so forth. Every system has strengths and weaknesses. It is healthy to identify the latter, for sure, and do something about them. And that’s what socialism has been doing. And socialism identified one of its weaknesses as being an over-concentration of power in the hands of a state apparatus. It has asked itself—this movement of socialism—what went wrong there. How do you deal with that problem? Are there forms of socialism that can make sure, in some basic way, not to produce too much power in the hands of too few people in a state apparatus. And worker co-ops, as I will show, are a way to do that.

But before I go on, I want to contrast a socialism that is going through self-criticism with a global capitalism that is not doing that. And therein lies a big story. When capitalism is in a declining phase, which I believe it currently is, it is perhaps not surprising that its chief spokesmen and women are afraid to confront their failures and flaws. Afraid of self-criticism because their system—they hope—will somehow last longer if they pretend it doesn’t have flaws and failures. Let me give you an example. The Trump administration, the Republican Party—and a good bit of the Democratic Party too—currently act as though capitalism is the greatest thing since sliced bread. And if you are going to admit that it has problem, you locate them elsewhere. You know, immigrants are somehow causing whatever difficulties we have or unfair trading partners in China or elsewhere are causing all the trouble. If only we became more nationalistic, if we had a pure American capitalism—well, then, there would be no problem. Because the capitalist system is always left uncriticized, not found wanting and hence no exhaustive self-examination is really allowed. It’s celebration time, not criticism time. Socialism, for a whole host of historical reasons, does not have that luxury and that’s a good thing for the development of socialism.


So where does the critique go? It goes as follows. Socialism focused on what we might call the macro level of society—the big picture. And in that process it decided that the problems of capitalism that socialism would remedy were the following two basic ones. Number one, by leaving factories, stores, farms, offices in the hands of a few people—the owners of businesses, the boards of directors of big corporations, a tiny minority of our people—what would happen is that the economic system would be controlled by them, for their own benefit, so that the people at the top would become the most wealthy—which they kind of have—and the most powerful—which they kind of have. And so the socialists reasoned that the way to deal with this problem was to take the property in means of production—factories, offices and all of that—and transfer it from private individuals, enriching themselves because of their positions, and give it instead to the state to manage these properties, these productive properties, in the interests of the whole society, hence the very name: socialism. And the second thing socialism would do would stop using markets as the way to distribute things, and the reasoning of socialists there was always very simple. Market allocate things that are produced or resources to the people with the most money. And for socialists this made no sense at all, since the rich at the top who own everything are the ones with most money, so once again the system benefits them because they’re in a position in markets to dominate, just like they’re in a position everywhere else—because they own the means of production—once again to dominate. So the socialist said let’s not have markets, let’s have the government distribute goods and services and resources in a democratic way, rather than using the market which favors the rich. And socialists therefore focused this way. We’re going to take the property in means of production from the private owners and make them state property and we’re going to stop markets from distributing things and have government planning do it—that was their idea. The problem turned out to be not that this didn’t help economic development. As I like to remind viewers and readers, the economic development of the two societies that went the furthest in this way—the Soviet Union in the 20th century and the People’s Republic of China in the 21st century—were able to achieve rates of economic growth far faster than societies who did not do this including the United States, Western Europe and so on. So if that was the goal of this kind of socialism it succeeded, even though it put way too much power in the hands of the government and that had bad consequences as socialists are the first to understand and agree, having lived through it.

So what happened in the self-criticism of socialism was to ask the question was there something missing, was there something wrong in how that kind of socialism, which was successful in economic development but was unsuccessful in the larger social questions of civil liberties, civil rights, cultural freedom and so on. And they came up with an answer. Yes, the problem—these self-critical socialists have said to themselves and others—is this: that socialism addressed who owned the property and socialism addressed how things got distributed. But what socialism didn’t address in the twentieth century, at least not in any systematic way—neither in Russia nor in China nor in the other societies that have experimented with socialism—what they didn’t do was transform the workplace. The little workshop, the factory, the office, the store, the farm. They didn’t understand that if socialism is going to be established you don’t just transform who owns the property and you don’t just transform markets into planning, for all the reasons socialists give, but you also have to transform the workplace, that place where people spend all of their creative time, or at least a large part of it, for their entire adult lives. Five days a week, all the rest of it. The workplace. And if you don’t transform the workplace—wow… You may set in motion a conflict, a contradiction between the big changes you’ve made in property and markets and the unchanged workplace and it may allow for that workplace, unchanged, to undo the changes you made at the higher level and there’s evidence in Russia and China that precisely that happened.

Well, what then is the difference between a socialized workplace and the capitalist workplace we inherit? Well, I can begin by telling you the funny story—or I hope you’ll find it funny. In many cities in the United States, and I’m sure the same exist elsewhere, there’s a remarkable place a lot of workers visit when they’re done with their day at the factory or the office or the store in capitalism. They pass by a local drinking establishment. You know, a bar. And in the window of the bar in big letters they read the following words: happy hour. Why would they call it that? Well, my guess it is it has a lot to do with underscoring that what you just finished, your work time, was unhappy hours and here’s a chance with a little alcohol to offset the unhappiness with some happiness. People in capitalism feel oppressed, exhausted, abused, misunderstood, mistreated, exploited and that language we have for that experience is immense because the experience is virtually universal. The whole idea of worker co-ops is to change that. To make the workplace democratic—that’s right. To install democracy in the workplace where it has been excluded for the entire history of capitalism. It’s as if the idea of being a place where the decisions that impact you are decisions you have the right to participate in—that’s what democracy means—it is as if that right, that commitment, which applies to where we live somehow shouldn’t apply to where we work. The whole notion of worker co-ops runs against that. Yes, it should apply. In fact, if you don’t have democracy in the workplace, you don’t have it where most adults spend most of their lives and therefore you are not a democratic society unless and until you include the workplace where democracy ought to be installed. And indeed it’s an old dream of working people—the majority—to have democracy in the workplace. That’s why slogans like freedom and democracy and liberty got going, because people wanted something—not just outside of the workplace. They wanted liberty and freedom and democracy in it, because they spend so much time there. That’s partly why they are unhappy and need a happy hour after work. And people have been organizing worker co-ops for centuries. It’s all over history if you know to look for it.

Today let me give you an example that many of you have heard of: the Mondragon Corporation in Spain. Started out over fifty years ago as a little worker co-op of six workers put together by a Roman Catholic priest, Father [Arizmendiarrieta] in the north of Spain. Fast forward to now, Mondragon is a family of about 250 worker co-ops, all run democratically within each co-op. It’s the seventh largest corporation within all of Spain. It is a democracy of working people and it’s not the only one, but it’s the biggest and most successful that has grown real well over the last fifty years.

So modern socialism, the one that emerges from the self-criticism of 20th century, is a 21st century socialism that puts first and foremost the transformation of the workplace finally to bring democracy to that central part of our modern life.

We’ve come to the end of the first half of today’s program. We will continue, but before that I’d like to remind you—please, subscribe to our YouTube channel. YouTube is a very important support for us, Democracy at Work is our name. Please visit our websites: democracyatwork.info and rdwolff.com. Through that you can communicate to us, you can follow us on Facebook, Twitter and Instagram and you can see the realm of work that we put up on our websites on a continuing basis. And finally, as always, our thanks and special appreciation to the Patreon community that is such an important source of support and encouragement. We will be right back.

Welcome back, friends, to the second half of today’s Economic Update. This is a program devoted to the relationship between socialism and worker co-ops. In the first half we talked briefly about the worker co-ops as the democratization of the workplace and now I want to focus on what that means, what that implies and what that enables so that people can understand why a socialism would move in that direction.

Let’s begin with the practicality, the immediacy, the local nature of worker co-ops as a central feature of socialism. Transforming your workplace from a place where you did the work somebody else told you to do and lived with the results of what somebody else decided, but transforming it into a place where are part of the decision making apparatus, where you participate in designing and directing and not just performing like a train seal. This is something that will transform people’s lives, they will understand that. It will be a socialism that’s immediate about our lives on a daily basis, not something done far away in some government office that’s abstract in terms of how it functions. You—the working person, the majority—will be at the core of such a concept of socialism. It also makes socialism something that is democratic at the base. The power of the people will be focused on, embodied in the fact that the people own the wealth—the productive wealth of society. That’s what’s hampered democracies so far. You can have all the voting and everybody voting that you want, but the power of money is concentrated in a tiny minority, they corrupt that. They will have influence based on their wealth and economic position that undermines the whole point and purpose of political democracy. What the worker co-op does is democratize the power and the wealth by putting it in the hands of working people. If you want the economy to work for the people you’ve gotta put them in charge. If you want democracy to be genuine and not just a formality of voting, you’ve gotta put the people in charge and they have to be in charge of the economy, otherwise the minority that in capitalism controls the economy will also pervert the democracy and I present the United States and other countries like it as prime examples.

The second benefit, if you like, of a socialism that includes and focuses on worker co-ops has to do with undermining the critiques of socialism that have been developed over the last century by people who want to protect capitalism—and are afraid of socialism—by denouncing socialism for its statism. That is, for the socialisms that were powerful states, like Russia and China and others. By saying that socialism is inherently and necessarily statist, which clearly is not the case, but which has been a very effective critique of socialism by arguing that it’s a big powerful state that we don’t need or want. One of the reasons you get interested in worker co-ops is it’s a way of defining socialism that has to do with people’s immediate work lives and has nothing to do with the state.

But I want to stress that socialism has a history, particularly here in the United States, that also suggests that if you define it in a way that touches and means something to the mass of working people, you can get very far indeed. It’s not a hypothetical, it’s the American history that teaches that lesson and I want to make that really clear. To do that, I’m going to go back a hundred years ago to the beginning of the twentieth century when there were three successive efforts by socialists to run for president of the United States. Bernie is not the first one. And I want you to follow me in looking at how they did to learn a basic lesson. The first time the socialists ran a candidate—a man named Allan Benson—was in 1916. He ran for president, he got 600,000 votes in the United States, which was approximately 3% of the total. Four years later, the next presidential election 1920, the candidate for the socialists was Eugene Victor Debs. He got 900,000 votes—that’s a 50% increase over those four years—and that amounted to 4% of the total vote cast. Four years later, in 1924, the socialists ran again but because of the beginning of an anti-socialist crush from the government they didn’t call themselves socialists—they called themselves progressives, but it was the same program basically. And the candidate in 1924 was Robert La Follette of Wisconsin. He got—ready? Five million votes, a five time increase in four years and that worked out to a whopping 17% of the total vote. In other words, across those years socialism showed that it could and it would excite and engage the American people. The notion that socialism is somehow unable to find footing in the United States is false. It has in the past and indeed the reaction to the fast-growing power of socialism brought down the entire apparatus of repression in this society, as businesses and capitalists were terrified and used the power of government—which their position as the wealthiest and the most powerful business interests gave them—to crush it. Indeed, the last century has been an unremitting attack on everything having to do with socialism because if you hadn’t done that, what those elections at the beginning of the twentieth century showed is that socialism finds indeed a fertile soil in the United States. And a new self-critical socialism, allied with the movement for worker co-ops, for the democratization of the workplace, is in a position to repeat that history this time around and perhaps with less vulnerability to what is now a tired old repression focused on the state, the power of the state, which is associated with socialism but will have a much harder time associating with a socialism that’s focused on worker co-ops that have nothing to do with the state.

By the way, associating socialism with a big state is a conceptual mistake, as well. One of the most famous arguments in favor of a diminution of the role of the state, of getting rid of the state, was made—it may surprise you—by Vladimir Lenin, the original leader of the Soviet Union, who coined the phrase “the withering away of the state” which he advocated. Had he been leader longer—you know, he had a brain aneurysm four, five years into the Revolution and died, leaving the economy to others and the society to others who didn’t have that attitude—but the notion that in socialism there’s some celebration of the state misunderstands that movement in a way that is not exactly innocent.

The next implication of worker co-ops in socialism that I want to stress for you is to explain to you how they could be a very powerful, mutually reinforcing alliance. Imagine a political party, a socialist party in the United States, that advocated a transition from capitalist enterprises to worker co-ops. Here’s how that party would work. It would be the contradiction of—the difference from, the opposition to Republicans and Democrats alike, because those are parties that depend on capitalists for their donations by and large, do capitalists want, support the capitalist system—I know that, because they both say so, over and over again. So the socialist party would be—no, no, here’s where we’re different: we are for the democratization of the workplace. And they would, indeed, push for laws, regulations enabling worker co-ops to grow and expand, and in turn the worker co-ops would be the local basis for support for the socialist party, just the way the corporations across America—capitalist corporations—are the supports for Republican and Democratic parties. We would begin to see a real political debate in the United States. It would be remarkable and the symbiosis, the relationship between a socialist party that did advocate something really difference and the worker co-ops that would be in a sense its political base across the country is a winning formula for changing this society.

In office, here’s some of the things a socialist party could do, and indeed the way is being shown by the Labour Party in England. One of the first things the Labour Party is committed to do—and a socialist party in America would do the same—is to make a law called the right of first refusal. No company can leave the country, sell itself to another one, go public with stocks or simply cease to exist without first giving its own workers the right of first refusal. That is, the workers can buy the company from whoever owns it now and convert it into a worker co-op. And if you’re wondering where the workers would get the money to do that, the government with a socialist leadership would lend them the money, which is exactly what Mr. Corbyn and the Labour Party in England are proposing to do.

Finally, there’s this old argument of people who love capitalism and fear socialism—that somehow capitalism is innovative. They like to point to high-tech companies and say, “See? Capitalism is developing these big companies.” I like to answer that with a story. Years ago I was approached by engineers from Silicon Valley in California and they asked me to come out there and talk, which I did. And here’s what happened. I had meetings and I learned the following, that some of the most important breakthroughs in modern, high-tech technology—telecommunications, computers, hardware, software and so on—were not made in big capitalist corporations. On the contrary, it turns out that every year in Silicon Valley, high-paid engineers working in big companies—you know, Cisco and Apple and IBM and all of them—quit. They can’t stand it anymore. That’s what they say. They don’t want to come to work in a tie and a jacket. They don’t want to come to work to be told by some sales person what they should be studying or not on their software platforms and so forth and so on. They want to be creative—that’s their word—they want to be innovative—that’s their word, and they can’t be in a capitalist corporation. So here’s what they do. They take their laptops and they leave, often leaving $200-, $300,000 a year jobs and they get together in a group of twenty and twenty-five in somebody’s garage and they have a little rule: here we come to work in Bermuda shirts and a Hawaiian shirt. Here we come to work feeling good about ourselves—no bosses. Everybody’s an equal here, we all make our decisions together. Monday through Thursday, we work on our software programs and we work on our computers, and Friday we sit around making the decisions of what to produce, how to produce, where to produce and what to do with the revenue our creative efforts realize. It’s a democratic workplace. Wow! That’s where the creativity blossoms. That’s where many of the great breakthroughs were achieved. Even some of those companies went back into being capitalist companies—that can happen. But my point is the innovation credited to capitalism is misunderstood. It often comes precisely from people who have walked away from capitalism to create a worker co-op even if they don’t know the phrase “worker co-op” to describe what they have done. A new socialism, connected to and embracing worker co-ops as the transition from capitalism to a better system is a socialism that you’re going to be hearing more and more about in the months and years to come.

I hope you have found this conversation of interest. The movement in the direction of socialism is underway in the United States in a way it hasn’t been for a century and this time it is going to do better. I look forward to speaking with you again next week.


Transcript by Christian Lewis

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Showing 3 comments

  • Costas Mavroidis
    commented 2021-10-01 07:05:05 -0400
    The fallacy in this criticism of capitalism, is that you first define capitalism is a convenient way and manner and then mount a critique of it. Well the western societies we live in have ceased long ago being capitalist (catallactic) and are in fact mainly collectivist (statist, socialist or crypto communist). In most western societies, state-government controls and spends 40-60% of a countries GNP and hence the consumer has long ceased to be king (the decisive economic agent) and state-government is. In short capitalism is half dead and struggling to survive in the shackles of state-government’s acute positive intervention and regulation and the stranglehold of its legalized counterfeit legalized fiat money monopoly. It follows that your critique of capitalism is irrelevant and beside the point.
  • Alex Hales
    commented 2021-10-01 06:45:47 -0400
    We are committed to providing these videos to you free of https://vidmate.bet/ ads. Please consider supporting us on Patreon.com/economicupdate.
  • Don Rimmer
    commented 2021-09-27 20:17:51 -0400
    The content of today’s presentation is inspiring, but I’m a bit confused by the terminology.
    You describe the new “Socialism” as the state control of factories, farms and offices with the control of products and services—not by markets—by state planning. This sounds more like Communism to me. Not to argue semantics, but could you explain the difference between Communism and Socialism as you described it?
    Your analysis rings to me of a Social Democracy (wouldn’t that be nice). Worker Co-ops fit nicely within that structure. The focus or purpose of this and Capitalism differ completely, as I understand it, and create much different societies.
    Mondragon provides a perfect example, as you referenced in your talk. In the US, capitalism has but one legal obligation—to favor shareholders outcome in all decisions. In Spain, the object of the Mondragon initiative is to service the community. That different directive, and putting workers in charge, yields a very different outcome. One I’m sure most of your listeners would prefer (including me). And that, I believe, is the nature of your message, if I understood correctly.
    Two quick comments: I found using the contraction (Worker Co-op) for those unfamiliar with the term, doesn’t have the same impact as the unabbreviated version: Worker Cooperative. It seems to convey a better understanding of the concept to the uninitiated, at lerast that’s what I’ve found.
    Secondly, you have some very valuable materials on your website concerning how to begin forming a Worker Cooperative. Perhaps you should mention them during shows like today’s. It can help provide some direction on how to proceed through the process.
    Thank you Dr. Wolff for all you do to inform us every week.

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