The Socialist Entrepreneur

One of the benefits of worker-owned businesses is that they tend to pay people more equally; the lowest wages and the highest wages in a typical worker-owned business are nearer to each other than the lowest and highest wages in a typical capitalist firm. Income and wealth inequality are poisonous, tearing apart the very fabric of our democratic societies, and globally, these problems are only getting worse, so a more egalitarian wage structure is one of the most important reasons to support the development and expansion of the cooperative economy.

But do worker cooperatives pay any price (in productivity or longevity) for having a more equal wage structure? Recent research by Gabriel Burdín on worker-managed firms in Uruguay suggests that they might.

When we think of democracy, we usually think of either consensus and direct democracy on the one hand, or elections and representative democracy on the other, but in a recent article in the Journal of Management Inquiry, Simon Pek argues that we are neglecting a third option: sortition, a way of doing democracy that bridges direct democracy and representative democracy, and a form of democracy that may be better for worker-owned firms, particularly as a way of running a coop that may be less likely to lead to degeneration over time.

Why are coops so rare? If worker-owned businesses are so much better than traditional businesses, why aren’t they more common? Worker-owners face a number of external barriers that make it harder to start and run a cooperative business, a lack of ready access to capital being perhaps the biggest barrier, and as advocates of worker-ownership we usually assume that it is these external barriers, built into the structure of the capitalist economy, that account for the rarity of worker-ownership, both now and in the past.

But looking back over the history of worker-ownership, we see repeated cycles of growth and decline: in different times and places, worker-ownership growing, spreading and then fading away. Why doesn’t worker-ownership ever just catch on as a movement and continue growing? Are the external factors enough to explain these cycles? Are there perhaps some internal factors that also make worker-ownership more difficult? Is there something specific about worker ownership itself that makes worker coops less successful over time?

Imanol Basterretxea, Iñaki Heras-Saizarbitoria and Aitziber Lertxundi from the University of the Basque Country recently published an important paper about the failure of Fagor Electrodomésticos, the flagship cooperative in the Mondragon Corporation that went bankrupt in 2013, and last March, I reviewed a section of that paper that showed how difficult it can be to build real workplace democracy in a cooperative when much of the  membership is involved in fixed, repetitive labour.

Here I want to look at another section of this paper and discuss one of the authors’ main conclusions, that Fagor Electrodomésticos failed, in large part, as a result of a series of bad human resource management decisions made over the years.

How US cities are beginning to take an active role in promoting worker-ownership.

There are certain places in the world, like the Basque Autonomous Community in Spain for instance, or the Emilia-Romagna region in Italy, where worker-ownership is much more common than usual, and one naturally wonders why this might be? Some of the difference is clearly historical and bottom-up. These regions often have a long socialist or collectivist tradition, and so folk living in these areas are more likely to think of worker-ownership when they start a business. But some of the difference is also top-down. Governments in these regions are often more supportive of worker-ownership in general and put policies in place designed to support local cooperatives.

When Fagor Electrodomésticos, the flagship cooperative in the Mondragon Corporation, went bankrupt in 2013, cooperative economists began studying the failure hoping to learn more about why it went bankrupt, and also perhaps, to learn how other cooperatives might avoid the same fate in the future. To that end, Imanol Basterretxea, Iñaki Heras-Saizarbitoria and Aitziber Lertxundi from the University of the Basque Country have just published a really interesting paper reporting on their research into Fagor Electrodomésticos: Can employee ownership and human resource management policies clash in worker cooperatives? Lessons from a defunct cooperative.

There is a lot in this paper, so I think I will deal with it in several posts. Here, I would like to start with some interesting observations the authors make about worker-cooperatives in the manufacturing sector, and about the special challenges companies in this sector face in promoting workplace democracy.

The Mondragon cooperatives are interesting in that many are relatively large businesses involved in manufacturing both commercial and consumer products, and they demonstrate that worker-ownership can be successful in this sector, but the authors of this study found that repetitive, assembly-line labour often does not present workers with many natural opportunities to make decisions and control their own work-day, and that this ‘clash’ between employee ownership on the one hand and assembly-line labour on the other may have contributed to Fagor Electrodomésticos’ problems. Here is how one former manager described the clash:

I think it’s counterproductive to have members on the assembly line performing a repetitive job eight hours a day. In those circumstances, however much ownership they have, the reality of their day-to-day existence is a “nightmare”. (p. 12)

Probably one of the most important research articles on worker ownership was published by Tal Simons and Paul Ingram: “Organization and Ideology: Kibbutzim and Hired Labor, 1951-1965”. It is both an important practical article and a key theoretical article. In it, the authors present real-world research on the link between ideology and degeneration in worker-owned businesses, but first, to serve as context for their analysis, they set out a detailed and valuable theoretical model of the fundamental role of ideology in organizations and in society as a whole.

This is one of my all-time favourite articles and I reference it frequently in my day job as a sociolinguist. Simons and Ingram’s thoughts on how ideology works in society have deeply influenced how I understand the sociology of language use and language revival, but their article has also profoundly influenced how I understand the world in general, how I understand organisations and their place in society, how I understand social change and social movements, and in relation to the subject of this blog, how I understand what makes a successful worker-owned business.