Reasonable, Radical Worker-Ownership
Over 12 million small businesses are owned by Baby Boomers, many nearing retirement age and seeking an exit plan. These retiring business owners are increasingly opting to sell their mom-and-pops to their employees, converting their businesses to collectively-owned worker cooperatives (co-ops). This is often favorable to shutting down or selling to an outside investor likely to outsource jobs. But worker co-ops are more than just an exit strategy. From employee-owned mom-and-pops to large-scale enterprises, worker co-ops offer a compelling, sustainable, and democratic alternative to the traditional top-down business model.
In conventional capitalist firms, there is a hierarchical chain of command and policies are dictated by a board of directors representing shareholders. On the other hand, worker-cooperatives are collectively owned by the workers who decide how to allocate surplus and make business decisions democratically. In some co-ops, decisions, such as how to allocate surplus, are made entirely democratically, with each worker getting a vote. In others, the workers elect representatives to serve on a board of directors. The very nature of the “worker-owner” title situates employees and owners as equals and co-contributors, flattening the hierarchical system often encouraged by capitalistic corporate culture.
With worker-owners having an obvious stake in their work, co-ops see increased productivity compared to other firms. In a broad study of worker co-ops in Europe, the United States, and Latin America, University of Leeds Professor Virginie Perotin found that co-ops are often more efficient than conventional businesses due to staff cohesion and improved organization. Also, co-ops can benefit the local economy as many workers employed in worker co-ops reside near the community.
From a labor standpoint, advantages of a democratized decision-making process include a more equitable pay ratio, more employee benefits, and increased resilience during times of economic crises (as co-ops often choose pay cuts rather than layoffs). We can look to Basque, Spain’s Mondragon Corporation, composed of 96 cooperatives, as an example of such benefits. Mondragon is one of the country’s largest employers; in 2019 it boasted 81,000 employees and 12.2 billion euros in revenue. Executives’ salaries are capped at six times the lowest wage and most workers earn at least two times Spain’s minimum wage. Moreover, the co-op covers employee healthcare and offers annual profit sharing and pensions. Notably, in 2008, Mondragon weathered the financial crisis with “wage cuts and advance payments on future hours” which ensured that “unemployment barely budged.” At times when Spain’s national unemployment rate reached 24.4 percent, Mondragon helped keep Basque’s at 13.55 percent.
Worker cooperatives, however, don’t exist without their contradictions. And while support for the worker cooperative model comes largely from the left, some socialists are skeptical. One objection was raised by Karl Marx in Capital, in which he described co-ops as promisingly “represent[ing] within the old form [capitalism] the first sprouts of the new [socialism],” but nonetheless “reproduc[ing]…all the shortcomings of the prevailing system.” Essentially, while worker co-ops are harbingers of a worker-owned mode of production, they still operate within the confines of capitalism and are thus bound to replicate the flaws of the current system. Citing this, some contemporary leftists, such as Phil Gasper of the International Socialist Review, argue that energy spent on co-ops could be better allocated elsewhere.
These are valid concerns for the left. While co-ops can be a preferable alternative, they still must compete against, and therefore bear resemblance to, capitalist firms. They are not a post-capitalist panacea for all of the ills of our current system. Nevertheless, the co-op model is worthy of our defense and energy. The co-op model represents, at the very least, a glimpse of how businesses can be reorganized to reflect humanism and worker-ownership. It is radical—representing the “first sprouts” of the worker-owned system leftists strive for—yet reasonable—which is why businesses and start-ups are increasingly turning to the co-op model. Over the last decade, the number of U.S. co-ops is estimated to have increased from 350 to nearly 600. Mainstreaming the idea of worker co-ops as a viable, reasonable alternative is a promising start to destigmatizing leftist ideas, getting more people on board with fertilizing these “first sprouts.”
While worker co-ops are not easy to start up, the government can help. In 2015, the New York City Department of Small Business Services created the Worker Cooperative Business Development Initiative. Since then, the New York City Council has allocated millions to supporting worker co-ops and 49 new worker cooperatives have been created. Another way to support co-ops is to grant workers the “right of first refusal,” meaning that, if a business is going to be sold or shut down, the workers are given the first opportunity to buy it. In Italy, a country which houses around 25,000 worker co-ops, the Marcora Law guarantees the right of first refusal to workers. The Marcora Law can be a model for policies conducive to a cooperative future in the United States. While such an idea may seem radical, the progressive Democracy Collaborative reports that 69 percent of Americans would support a policy granting workers the right of first refusal.
Worker co-ops are entirely achievable, appealing to Americanisms embraced across the political spectrum: celebration of the working class and democracy. Even Ronald Reagan, far from a hero for labor and never having advocated for worker co-ops, regarded the idea of “employee ownership” as “the next logical step” on “a path that befits a free people.” Although not without their contradictions, worker co-ops—a paragon of employee ownership—are certainly another logical step on such a path. Whether you are looking to present an alternative to our current system or are sympathetic at all to the working class, worker co-ops are worthy of our consideration and support.