Socialism, Democracy, and the Division of Labor

Professor Richard Wolff is a prominent, influential intellectual, with a big following on the left. He is an erudite, clear, and passionate speaker and writer. He is well-regarded for his exposition of Marx’s ideas-- a “go to” when the media tolerates a conversation critical of capitalism, one even advocating “socialism.”

For all of that, he does not represent Marx’s thought well, nor does he offer a viable, serious alternative to capitalism.

It is not a question of Wolff’s scholarship or his commitment to justice. It is, instead, a deep-seated, unwavering hostility to the real existing socialism of the twentieth century and the century’s leading Marxist exponents, the Communists. Of course, Wolff is not alone in this prejudice-- and it is a prejudice and not a reasoned conclusion. Since the intense US Red Scare of the 1950s, since the demonization of everything even vaguely linked to Soviet power or Communist and Workers’ Parties, this prejudice has contaminated social, cultural, and political life in this country. Every radical upsurge was forced to or willingly submitted to ABC: Anything But Communism. 

In its place, US leftists embraced a kind of radical democracy: the view that bringing the furniture of formal democracy-- “one person, one vote, full participation, and majority rule,” quoting Wolff-- into every institution, every practice, every activity-- would in due time sweep away the exploitation, the inequalities, the indignities of capitalism. Radical, comprehensive democratic practices would be necessary and substantially sufficient to trigger the march to socialism.

There is evidence that Marx and Engels once also believed that universal suffrage alone (as advocated by the Chartist movement in England) would be an adequate measure on the road to overcoming capitalism. Their practical experience in the 1848 revolutions and the lessons of the Paris Commune dispelled that illusion. They concluded that a revolutionary defeat of the existing order and the replacement of that order with a democracy in the service of the working class would be necessary for moving beyond capitalism. The furniture of formal democracy was sometimes useful, but often unreliable elements in that endeavor. Marx and Engels did not presume that bourgeois democracy would advance those interests or protect them.

But with anti-Communism established as the national religion of the US, generations of US leftists, from the sixties’ SDS to Occupy and DSA, were hostile to Soviet socialism and repelled by Communist ideology. As a result, a “rethought” Marxism became the nourishment for young activists and the sustenance of veteran Cold War radicals. The expansion of certain democratic practices served and serves as the lodestar of these movements.

Professor Wolff rose to prominence in this milieu and it is reflected in his thought. 

A recent brief and commendably clear statement of Wolff’s views on the presumed shortcomings of real, existing twentieth-century socialism appears in the article, Socialism’s Self Criticism and Real Democracy. Originally appearing in City Watch, the piece has achieved wide currency: Economy for All, CounterPunch, LA Progressive, NewsClick, Countercurrents, Eurasia Review, and many others.

Because he takes it as a settled truth that the socialist countries lacked “real democracy,” Wolff poses the following challenge:

A certain irony of history made the absence of real democracy in socialist countries an ongoing target of many socialists in those countries…

Because this time it is many socialists who make the encounter, they ask why modern socialism, a social movement critical of capitalism’s lack of real democracy, would itself merit a parallel criticism. Why have socialist experiments to date produced a self-criticism focused on their inability to create and maintain authentic democratic systems??

Wolff searches for an explanation for this presumed lack of democracy in “socialist experiments.” The search takes him to a common feature of capitalism and socialism (and he sometimes seems to suggest in previous social formations): “The answer lies in the employer-employee relationship.”

The employer-employee relation is indeed often a feature of capitalist and socialist enterprises. Soviet enterprises had managers who presumably hired individuals at state-owned enterprises. No doubt, it could have reflected a hierarchical relationship; it could have reflected a relation of dominance; and, further, it could have reflected the exploitation relationship. But it need not do so simply because of the existence of an employer/employee relationship. That can easily be shown with a simple, mundane hypothetical example:

Faced with a plumbing catastrophe, Jones engages the Smith Plumbing Company. Jones hires Smith’s firm to fix the kitchen sink. Jones employs Smith and company; Smith sends a worker, an employee (but not an employee of Jones), to make the repair. Jones is the employer and Smith’s company is his/her employee. Yet there is no hierarchy, no dominance, nor any exploitation by Jones.

Further, Smith has five employees, who Smith lords over, dominates, and exploits. Here, the employer-employee relationship generates entirely different, negative socially-significant outcomes. 

We have one innocuous, one exploitative employer/employee relationship. 

Why does the employer/employee distinction fail to reveal anything relevant regarding real democracy or the struggle for socialism?

The character of employment, the nominal expression for the employer/employee relationship, is historically determined by the division of labor. Under capitalism, its character is tied to the exploitation relationship. That is, given that ownership of enterprises resides with private individuals or groups, owners establish employer/employee relations as hierarchical, dominating, and exploitative to secure surplus value. Capitalists engage this particular division of labor to secure their ends.

But, presumably, under socialism, with social ownership of enterprises, a non-antagonistic, non-exploitative employer/employee relationship could be established strictly based on the division of labor. The “employer”/manager could be determined by credentials, test-results, past experience, past performance, seniority, or a host of other relevant, merit-based terms. 

Formal democratic procedure is, thus, no unique, magic elixir. In these circumstances, Wolff’s democratic procedure-- election of “employer” -- might well clash with merit and/or efficiency.

That is surely why Marx and Engels placed exploitation and the relations between capitalists (owners of enterprises) and the proletariat (the workers) at the center of their analysis. They attend little specifically to the employer/employee relationship, except when it is shorthand for this exploitation nexus. 

Moreover, Marx and Engels (and many of their successors) believed that a revolution was the most democratic expression of the popular will-- what Wolff might want to call “real democracy.” While they would undoubtedly find setbacks to democracy in the historical trajectory of twentieth-century socialism, they would also have seen the removal of the power of the capitalist class and the end of labor exploitation as marking the most broadly democratic advance since the French revolution. 

Where Wolff sees a surfeit of democracy (“socialism’s self-criticism”), others see a harbinger of a far more democratic future. Wolff says correctly: “Democracy is incompatible with class-divided economic systems.” I would add that democracy is only possible with the elimination of class-divided economic systems. 

Fixated on democratic form, Professor Wolff is led away from the democratic content of Marxist socialism and its realization in real, existing socialism. Further, he fixates on a particular democratic form associated with the capitalist republic that may or may not be the best mechanism for exercising the will or interests of the working class. Every revolutionary generation is faced with a different set of challenges. Nation-states typically suffer or gain from uneven development, as Lenin always stressed. The advance of industrialization, the degree of poverty, the levels of education, external and internal opposition, complex social strata, national conflict, and a host of other factors make the choice of democratic form a test for the first and later generations of revolutionaries.

Western Marxists, often quick to measure all by the democratic forms established by the bourgeois revolutions of past centuries, just as often fail to grasp these complexities. They are willing to forgo pressing the socialist project for the “purity” of so-called “real democracy.”

In Wolff’s case, he chooses to secure this purity by basing his anti-capitalism around the idea of worker-owned cooperatives. To be sure, they could meet the cherished standards of “one person, one vote, full participation, and majority rule” in ways that the ultimate class conflict-- the overthrow of capitalism-- might not. It is possible that cooperatives can and do establish and survive on the margins of the capitalist system, but only a dreamer believes that these worker utopias will ever seriously challenge the behemoth of monopoly capitalism. 

Wolff is not alone in retailing a polite version of Marxism rather than the radical ideas that the working class so desperately needs.

Greg Godels

zzsblogml@gmail.com

Cooperatives: A Cure for Capitalism?

Co-ops-- cooperative economic enterprises-- have been embraced by significant groups of people at different times and places. Their attraction precedes the heyday of industrial capitalism by offering a means to consolidate small producers and take advantage of economies of scale, shared risk, and common gain.

At the advent of the industrial era, cooperatives were one of many competing solutions offered to ameliorate the plight of the emerging proletariat. Social engineers like Robert Owen experimented with cooperative enterprises and communities.

In the era of mass socialist parties and socialist construction, cooperatives were considered as intermediate steps to make the transition from feudal agrarian production towards socialist relations of production.

Under the capitalist mode of production, co-ops have filled both employment and consumption niches deferred by large scale capitalist production. Economic activities offering insufficient profitability or growth have become targets for cooperative enterprise.

In theory, cooperatives may offer advantages to both workers and consumers. Workers are thought to benefit because the profits that are expropriated by non-workers in the capitalist mode of production are shared by the workforce in a cooperative enterprise (less the present and anticipated operating expenses and investments, of course). Many argue as well that the working conditions are necessarily improved since workplace decisions are arrived at democratically absent the lash associated with the profit-mania of alienated ownership (though little attention is paid to the consequences for productivity and competitiveness against capitalist enterprises).

Consumers are said to benefit when they collectively appropriate the retail functions normally assumed by privately owned, profit-driven outlets. Benefit comes, on this view, by purchasing from wholesale suppliers, collectively meeting the labor requirements of distribution, and enjoying the cost-savings from avoiding a product markup (little attention is paid to limitations on participation dictated by class, race, or gender; the wholesale quantity discounts enjoyed by capitalist chains are also conveniently overlooked).

A case can also be made for the cooperator's dedication to quality, safety, and health- promotion.

In reality, cooperatives in the US are largely indistinguishable from small businesses. Like small private businesses, they employ few people and rely heavily upon “sweat equity” for capitalization. Like other small businesses, US cooperatives operate on the periphery of the US economy, apart from the huge monopoly capitalist firms in manufacturing, service, and finance.

Cooperatives as a Political Program

Since the demise of the Soviet Union and Eastern European socialism, many on the US Left have rummaged for a new approach to the inequalities and injustices that accompany capitalism. Where more than a decade of anti-Communist purges had wrung nearly all vestiges of socialist sympathy from the US psyche, the fall of the ludicrously-named “Iron Curtain” found Leftists further distancing themselves from Marxian socialism. Hastily interning the idea of socialism, they reached for other answers.

It is unclear whether this retreat was actually a search for a different anti-capitalist path or, in reality, grasping an opportunity to say farewell to socialism.

In recent years, several Leftists, “neo-Marxists”, or fallen Marxists have advocated cooperatives as an anti-capitalist program. Leading advocates include the Dollars and Sense collective centered around the University of Massachusetts, Amherst, GEO (Grassroots Economic Organizing), Professor Gar Alperovitz, Labor Notes, United Steel Workers of America, and media Marxist-du-jour, Professor Richard Wolff. Some are organizing around the idea of a “New Economy” or a “Solidarity Economy”, with cooperative enterprises as a centerpiece.

Now coops are not foreign to Marxist theory. After World War I, the Italian government sought to transfer ownership of unused land from big estates, latifondi, on to peasants, especially veterans. As much as 800,000 hectares were thus passed on to poor peasants. Through this process and land seizures, the number of smallholders increased dramatically. Socialists and Communists urged the consolidation of these holdings into collectives, agricultural cooperatives. Certainly more than 150,000 hectares ended up in cooperatives. In those circumstances, the rationale was to increase the productivity, to save the costs, to enhance the efficiency of peasant agriculture in order to compete with the large private estates. Cooperatives were not seen as an alternative to socialism, but a rational step away from near feudal production relations toward socialism, a transitional stage.

Likewise, in the early years of the Soviet Union, Communists sought to improve small-scale peasant production by organizing the countryside into collective farms, producers' cooperatives. They saw cooperative arrangements as rationalizing production and, therefore, freeing millions from the tedium and grind of subsistence farming and integrating them into industrial production. Through mechanization and division of labor, they expected efficiency and productivity to grow dramatically, speeding development and paving the way for socialism.

Again, cooperative enterprises counted as an intermediary for moving towards socialist relations of production. Thus, Marxists see the organization of cooperatives as a historically useful bridge between rural backwardness and socialism.

But modern day proponents of cooperatives see them differently.

“The 'evolutionary reconstructive' approach is a form of change different not only from traditional reform, but different, too, from traditional theories of 'revolution'” says Gar Alperovitz of cooperatives and other elements of the “Solidarity Economy” (America beyond Capitalism, Dollars and Sense, Nov/Dec, 2011). Like most proponents, Alperovitz sees cooperatives as pioneering a “third way” between liberal reformism and socialist revolution. However, a minority of advocates (Bowman and Stone, “How Coops can Change the World”, D&S, Sept/Oct, 1998, for example) see cooperatives as the “best first step towards that goal [of a planned, democratic world economy]. They suggest that the correct road is through “spreading workplace democracy” and on to socialism.

Whether postured as a “third way” or a step towards socialism, it is difficult to get a clear picture of the extent and success of the cooperative movement; it is equally challenging to gather a sense of how it is suppose to function in a capitalist economy.

As for numbers, Alperovitz (“America beyond Capitalism”, D&S, Nov/Dec, 2011) muddies the waters by citing the numbers of “community development corporations” and “non-profits” (Alperovitz, 2011) as somehow strengthening the case for cooperatives. The fact that community development corporations have wrested control of neighborhoods from old-guard community and neighborhood groups and embraced developers and gentrification causes him no distress. Of course “non-profits” count as an even more dubious expression of a solidarity economy. In a city like Pittsburgh, PA, mega-non-profits remove 40% of the assessed property from the tax rolls. These non-profits not only evade taxes, but divide enormous “surpluses” among super-salaried executives. They beggar funding from tax shelter trusts and endowment funds, completing the circle of wink-and-a-nod tax evasion. Of course there are, as well, thousands of “non-profits” that pursue noble goals and operate on a shoestring.

Alperovitz alludes to credit unions as perhaps sharing the spirit of cooperation without noting the steady evolution of these once “third way” institutions towards a capitalist business model. Insurance companies also share this evolution, but they are too far down this path of transition to capitalist enterprise to be credibly cited by Alperovitz.

Alperovitz leaves us with “...11,000 other businesses that are owned in whole or part by their employees.” In this slippery total of whole or partial worker ownership are included ESOPs-- Employee Stock Ownership Programs, a touted solution to the plant closing surge that ripped through the Midwest in the 1980s. Alperovitz pressed vigorously for ESOPs in the steel industry in the 1980s as he does cooperatives today. When asked to sum up their track record, one sympathetic consultant, when pressed, said: “I don't think its been a real good record of success. Some have actually failed...” (Mike Locker, “Democracy in Steel?”, D&S, Sept/Oct, 1998). But we get no firm number for cooperatives in the US.

Another advocacy group for cooperatives gave a more candid picture of the cooperative movement in the Sept/Oct, 1998 issue of Dollars and Sense (“ESOPS and Coops”). A study by the Southern Appalachian Cooperative Organization claimed that there were 154 worker-owned cooperatives employing 6,545 members in the US. In sixty percent of the 154, all workers were owners. Median annual sales were $500,000 and 75 percent had 50 or fewer workers. Twenty-nine percent of the coops were retail, twenty-eight percent were small manufacturing, and twenty-three per cent food related businesses.

Interestingly, the same article claims that there were approximately 11,000 ESOPs in 1988 (source: National Center of Employee Ownership). If we take Alperovitz's 2011 claim seriously, there has been little growth in the ensuing thirteen years of “...businesses that are owned in whole or part by their employees...”.

From this profile, we can conclude that cooperatives in the US are essentially small businesses accounting for a tiny portion of the tens of millions of firms employing less than 50 employees. As such, they compete against the small service sector and niche manufacturing businesses that operate on the periphery of monopoly capitalism. Insofar as they pose a threat to capitalism, they only threaten the other small-scale and family owned businesses that struggle against the tide of price cutting, media marketing, and heavy promotion generated by monopoly chains and low-wage production. They share the lack of capital and leverage with their private sector counterparts. Cooperatives swim against the tide of monopolization and acquisition that have virtually destroyed the mom and pop store and the neighborhood business.

Some of the more clear-headed advocates acknowledge this reality. Betsy Bowman and Bob Stone concede the point: “...Marx argued in 1864 that capitalists' political power would counteract any gains that coops might make. This has proven true! When capitalists have felt threatened by cooperatives, they have conducted economic war against coops by smear campaigns, supplier boycotts, sabotage, and, especially, denying credit to them.” (Bowman and Stone, D&S, Sept/Oct, 1998).

Mondragon

Until recently, cooperators and their advocates had one very large arrow in their quiver.

When pressed on the apparent weakness of cooperatives as an anti-capitalist strategy, they would counter loudly: “Mondragon!”.

This large-scale network of over 100 cooperative enterprises based in Spain seemed to defy the criticisms of the cooperative alternative. With 80,000 or more worker-owners, billions of Euros in assets and 14 billion Euros in revenue last year, Mondragon was the shining star of the cooperative movement, the lodestone for the advocates of the global cooperative program.

But then in October, appliance maker Fagor Electrodomesticos, one of Mondragon's key cooperatives, closed with over a billion dollars of debt and putting 5500 people out of work. Worker-employees lost their savings invested in the firm. Mondragon's largest cooperative, the supermarket group Eroski, also owes creditors 2.5 billion Euros. Because the network is so interlocked, these setbacks pose long term threats to the entire system. As one worker, Juan Antonio Talledo, is quoted in The Wall Street Journal (“Recession Frays Ties at Spain's Co-ops”, December 26, 2013): “This is our Lehman moment.”

It is indeed a “Lehman moment”. And like the Lehman Bros banking meltdown in September of 2008, it makes a Lehman-like point. Large scale enterprises, even of the size of Mondragon and organized on a cooperative basis, are susceptible to the high winds of global capitalist crisis. Cooperative organization offers no immunity to the systemic problems that face all enterprises in a capitalist environment. That is why a cooperative solution cannot constitute a viable alternative to capitalism. That is why an island of worker-ownership surrounded by a violent sea of capitalism is unsustainable.

The failures at Mondragon have sent advocates to the wood shed (see www.geonewsletter.org). Leading theoretical light, Gar Alperovitz, has written in response to the Mondragon blues: “Mondragón's primary emphasis has been on effective and efficient competition. But what do you do when you are up against a global economic recession, on the one hand, or radical cost challenges from Chinese and other low-cost producers, on the other?”

What do you do? Shouldn't someone have thought of that before they offered a road map towards a “third way”? Are “global economic recessions” uncommon? Is low cost production new? And blaming the Chinese is simply unprincipled scapegoating.

Alperovitz goes on: “The question of interest, however - and especially to the degree we begin to face the question of what to do about larger industry - is whether trusting in open market competition is a sufficient answer to the problem of longer-term systemic design.” Clear away the verbal foliage and Alperovitz is admitting that he never anticipated that open market competition would snag Mondragon. Did he think that Fagor sold appliances outside of the market? Did he think that Mondragon somehow got a free pass in global competition?

Of course the big losers are the workers who have lost their jobs and savings. It would be mistaken to blame the earnest organizers or idealistic cooperators who sincerely sought to make a better, more socially just workplace. They gambled on a project and lost. Of course social justice should not be a gamble.

The same sympathy cannot be shown for those continuing to tout cooperatives as an alternative to capitalism. If you want to open small businesses (organized as cooperatives), be my guest! But please don't tell me and others that it's somehow a path beyond capitalism.

Comrades and friends: It's impossible to be anti-capitalist without being pro-socialist!

Zoltan Zigedy

zoltanzigedy@gmail.com