On this week's show, Prof. Richard Wolff discusses Australian government taxes, big banks funding of Dakota Access Pipeline, meaning of French elections, Trump/GOP's plan to end estate taxes, and rising role of monopoly in US economy.
Prof. Jessica Gordon Nembhard, historian of worker coops and African-American community, joins Prof. Wolff in the second half to talk about "why worker coops" make sense.
Support the show! Become one of the first to become a, EU patron on Patreon: https://www.patreon.com/economicupdate
Be sure to follow us on social media:
Showing 5 comments
With this note, I want to:
1) thank you for the inspiring interview this week, especially regarding the self-financing of worker-cooperative enterprise,
2) ask, plead, BEG you to research and discuss this idea further in future broadcasts, and
3) give you a head start by adding the following commentary:
A Postcapitalist Politics
By J.K. Gibson-Graham
Early on, the [Mondragon] cooperatives distributed 20 percent of their disposable surplus to a permanent reserve fund of retained earnings to be used for machinery replacement and upgrade. The remaining 70 percent of the profit was distributed on a yearly basis directly as dividends to the cooperators, “who could spend or save it as they chose” (Morrison 1991, 159). It soon became evident that this arrangement would not allow for long-term expansion of the individual enterprise or the wider cooperative system. The decision was thus made to establish internal capital accounts whereby 70 percent (or less) “is distributed to the worker-owners’ personal internal capital accounts, apportioned according to number of hours worked and salary grade” (Morrison 1991, 50). The individual worker’s capital account earns interest at an agreed upon rate and “(m)embers may draw on the interest accumulated in their accounts, or use the accounts as collateral for personal loans, but the principal cannot normally be touched until they resign or retire” (Mathews 1997, 11). This means that effectively 90 percent of the profit or disposable surplus generated is saved to be reinvested in enterprise development.
In effect, this allocation of funds to “forced savings” has been a crucial enactment of strategic power on the part of the cooperators that has subordinated personal economic gain to the goal of strengthening and diversifying the cooperative system. The individual producers cede their right to directly determine many of the distributions out of appropriated surplus by depositing their individual capital accounts with the Caja Laboral Popular (the Working People’s Bank). This institution is a second-degree cooperative (a cooperative of cooperatives) that is controlled by its worker-owners and its members (other cooperative enterprises). The foundation of the Caja Laboral was a key intervention that enabled the economic power of cooperatively produced surplus to be marshaled within the cooperative system as a whole and dispersed in a manner that proliferated the intentional economy of Mondragon:
The slogan used by the Caja in the early stages of its development was “savings or suitcases,” indicating that local savings were necessary in order for there to be local jobs. The Caja also provided a means for the cooperatives to manage the capital held in their permanent reserves and individual capital accounts, so enabling them to retain within the group all of their surpluses other than the 10 percent allocated by law to community projects (Mathews 1997, 13).
The Caja operates as both a bank and a business development agency. Its Empresarial Division engages in a second-order redistribution of the worker-owners’ surplus, deciding where and how to allocate its investments so as to protect and advance the cooperativist vision. It offers low-interest loans to cooperatives and provides business and financial support to new start-up cooperatives (Cheney 1999, 56). The surpluses deposited with the Caja Laboral have also been used to establish a network of other second-degree cooperatives and groups that have provided ongoing support to the “primary” producer cooperatives: Lagun Aro, the social insurance cooperative that provides health care, life insurance, and social security to cooperative members and their families; the education and training cooperatives providing education from preschool to the university level; and Ikerlan and Ideko, the research and development cooperatives that undertake scientific and technical research both for the cooperative businesses and on contract for the noncooperative sector.
The generation of cooperative profit and its deployment into job growth in additional first-degree and second-degree cooperatives and in the provision of social services has, in Mondragon, become a way of sharing the dividends, connecting cooperative members to the wider community, and expanding and strengthening the cooperative community economy.