originally posted on Medium
Every society is held together by a common core of shared ideas. These are the things that simply “go without saying”, the taken-for-granted which form the glue of our institutions and the coherence of our daily practices. I don’t mean political ideologies exactly — issues of whether we should raise taxes a bit or cut them a bit. Those disagreements are merely the froth and swirl on the surface of much deeper shared understandings. I mean the deep core of a shared worldview that allows us to understand each other even when we dislike or disagree with each other.
From time to time it happens that various individuals, sometimes a lot of them, as in the 60’s, come to doubt one or other of the core pillars of their culture. Such people are usually cast as heretics or radicals. If the zeitgeist turns out to have been on their side, we usually look back at them and call them visionaries; if it wasn’t, they’re usually called crazies — the trouble of course is that such labels are applied retrospectively; it’s impossible to know which is which in advance.
A rupture from conventionality is usually experienced not so much as a moving slightly left or right on the political spectrum, but more like falling off your chair, arms flailing about wildly, disorienting and confusing. Such are the feelings described, for instance, by those raised in religious communities who all of sudden realize that they’re queer. It’s the way a friend described to me the disorientation she felt from deciding she no longer wanted to be monogamous, so that a universe of norms — dating leading to marriage to happily-ever-after — with its constellation of social expectations suddenly became unanchored and topsy-turvy.
One version of this disorientation from the mainstream — and not a particularly unusual one — happened to me as young graduate student. My sense of the rationality of society was overthrown, not by any traumatic or transcendental experience, but almost by accident. It started when I was sitting in a tedious lecture on political democracy in grad school, yawning over some journal article that was so dry that it could practically be used as kindling, when the prof asked, half jokingly, why it was that we were entitled to elect our politicians but not our bosses? My eyes popped open as if a bucket of water had been splashed on my face.
I knew the textbook answer of course. The state was part of the public sphere — its concerns affected us all, so we all had a right to a say, hence political democracy. The economy by contrast was the “private sphere.” Individuals owned their property and labour and traded it with others on a voluntary basis. Democracy had no place in the factory or office for the same reason that it had no place in the bedroom: what happened there was the concern of the Private Individual and no one else.
Yet such an answer felt as satisfying as being served a peanut at a feast. It made sense that the state was a public concern, but the economy private? Really? Maybe 200 years ago, when 90% of workers in North America were small farmers, and the economy did more closely resemble the textbook image of private individuals engaging in personal transactions. But what possible relevance could that have now, in an economy where 90% of the labour force works not as lone individuals but in associations — in large social units like corporations and public bureaucracies? Our economy is composed of nodes of power that ripple outward affecting large groups of people. We have gigantic corporations — Wal-Mart is bigger than Pakistan, Exxon is bigger than New Zealand — which employ tens of thousands of people. We live in a world where CEOs can fire a thousand people before breakfast if they choose; where a manager can make a mistake (oops!) and ok deep-sea oil extraction leading to predictable ocean spills; where money managers can remove a billion dollars from a country with the push of a button causing all kinds of havoc with its currency; where bankers can sell mortgages and then repackage them as complex debt instruments to sell again and again and again, creating an enormous bubble whose fallout when burst would be measured in trillions of dollars, millions of jobs lost, and countless lives ruined. Yet, we’re supposed to believe that such decisions are private? That is ludicrous.
But if the “private sphere” explanation was wrong, then what was the answer? Why can’t citizens in a democratic country vote for their boss? There had to be an explanation. But the more I read the less I understood.
The other standard explanation for the puzzle was that it was necessary for businesses to be hierarchical and undemocratic so that they could be efficient. Yet here, too, things didn’t make sense. Around the time I first heard this justification I was working in a restaurant as a dish washer, and the logic just didn’t add up: if I worked harder and more efficiently, it would be the boss, not me, who made more money. The more this realization got under my skin the more my general attitude to the workplace morphed into something along the lines of, “screw this!” I tried to appear busy whenever the boss was around, but otherwise, worked as slowly as possible, took as long breaks as I could get away with, tried to avoid the hardest work, and generally tried to get out of there as soon as possible. The undemocratic top-down nature of the firm gave me less incentive to work hard, not more. Whereas if the firm had been democratic, so that I actually shared in the profits and decision-making, wouldn’t that have actually increased my motivation and efficiency? That seemed like an empirical question, which was impossible to know the answer before actually doing the real-world comparisons. At this time I didn’t know the answer. But while the empirical facts are important (I’ll talk about them below), the main problem with the efficiency argument is that, at the end of the day, it’s a pretty weak reason to reject democracy. Consider: it would probably be far more efficient for political democracy if we only let millionaires vote, that way we could write off all those concerns of masses as irrelevant — “let them eat cake!” Indeed, if efficiency was what we cared about most, surely the most efficient thing would be to have a supreme leader who doesn’t have to deliberate in parliament at all — surely a kingdom (or dictatorship) is the most efficient system of governance around. But that’s not much of a reason to reject democracy. So even if democratizing work causes reduced efficiency, is that a good enough reason for not having it? Do we really value efficiency over justice?
So about halfway through my Master’s degree I was, to say the least, utterly confused. I was finding it harder and harder to believe what everyone around me simply knew to be true. The societal taken-for-granted — that we have rights of democratic accountability in our political lives but not in our economic lives — which seemed so obvious to everyone else, was seeming increasingly bizarre for me. The standard justifications about the private sphere and efficiency seemed far too flimsy to sustain such weighty issues. The only answer that persuaded me at all was that of a classmate who, growing fatigued by my constant pestering about this question, said, “look, abstract theory aside, the fact is that corporations exist and they work. Maybe not perfectly, but they work. And there is no realistic alternative. End of story.” That felt deflating, but I had to grudgingly admit that maybe he had a point.
And then I discovered Mondragon.
In the 1950s, five workers in the Basque country in northern Spain, under the guidance of catholic priest, bought a small bankrupt factory and went into business producing paraffin stoves. What was remarkable about the workers was their realistic utopianism: they wanted to succeed as a business but were just as determined to incorporate their views of social justice into the structures of their business. They organized as a worker cooperative so that the workers would also be the owners, meaning that the governance of the firm would be democratically accountable to all the members. As Mondragon grew, the governance structure came to be codified in ten principles: Open Admission; Democratic Organization; Sovereignty of Labour (i.e. workers control the co-op and distribute its surplus); Instrumental Character of Capital (so that the co-ops pay a just but limited return on invested capital, and ensure that owning capital does not give any rights of governance); Self-Management (to ensure participation in management and the ongoing development of skills necessary to manage); Pay Solidarity; Group Cooperation; Social Transformation; Universal Nature (emphasizing solidarity with all workers); and Education.
On hearing this in the abstract, most of us would probably scoff that such business was impossible. We’d likely think, “nice but naïve.” But Mondragon is very real. It is now a network involving 110 worker cooperatives, with total employment of 80,000 people, and assets of a staggering €35billion. The co-ops are organized into four business groups: a financial group, a retail group (dominated by the Eroski supermarket chain), an industrial group (itself divided into several divisions), and a knowledge (research/training) group (Mondragon also has its own university that, among other things, helps to train expert co-op managers).
For one example, Irizar is a bus manufacturing co-op of Mondragon. Like all co-ops it has a Board elected once per year to manage the firm, so the firm is a mini representative democracy. But beyond this, the firm fosters “self-management” by encouraging participation at the shop-floor level. To this end Irizar has developed a flat organizational structure based on work teams, with no bosses but with “shared leadership”. Not only is this participation good from a democratic perspective, it has also proven to be important from an economic perspective as it increases innovation, the transfer of ideas, and overall productivity. According to the Economist Intelligence Unit, Irizar is “probably now the most efficient coach builder in the world.”
Discovering Mondragon was the straw that broke the camel’s back and produced a paradigm shift in my brain. I started to see society differently as the classic defenses of undemocratic work, which seemed feeble at the best of times, totally collapsed under comparison with a real, concrete alternative. Mondragon showed that another world was indeed possible.
Flash-forward several years and my dissertation on economic democracy is complete. My studies revealed a wealth of empirical research describing real-world functioning of worker cooperatives, and most of it was surprisingly positive. Here are a snapshot of the main findings:
- While co-ops are rare in North America, they are not rare everywhere. Europe has more, and in particular, Northern Italy has a very significant concentration of co-ops (about 13% of the economy of Emilia Romagna is generated from worker-co-ps). Such examples suggest that it may be entirely feasible to have an economy based largely on co-ops. Co-ops in Italy appear to thrive due to a fascinating mix of institutional support from the state, cooperative banks, and leagues of other co-ops, like La Lega, which provide business, financial, and cultural support.
- Perhaps the most important finding is that co-ops are just as efficient as comparable capitalist firms. This result is robust, being found wherever comparative studies have been performed: in the US, Uruguay, France, Italy, Spain, Sweden, Denmark, and the UK.
- Co-ops have far more wage equality. In conventional firms, the average American CEO makes roughly 300-times the average workers; in continental Europe it’s about 20-times more. In co-ops, the highest paid tend to make about 3-times the lowest paid.
- Another robust finding is that co-ops have significantly higher job security than conventional firms. It is not very surprising that worker-owned firms would be reluctant to fire themselves. The difference is that in downturns, conventional firms tend to lay-off workers en masse, whereas in co-ops, workers can collectively agree to reduce their hours or wages. Lay-offs happen rarely and only as a last resort. This has been referred to as “economic rationality with a human face.” To give one example, during the Basque recession from the mid-1970s to 1984, the region saw the loss of 100,000 jobs and a 20% unemployment rate, yet, remarkably, not a single Mondragon member lost her job (though some temporary non-member workers did).
- Ironically, one of the not-so-bright spots in the empirical evidence is Mondragon itself, which has successfully maintained the health of the co-ops “at home” but has been forced by pressures from globalization to open up conventional (non-co-op) subsidiary firms in Spain and overseas. The biggest change happened when Mondragon bought a huge grocery chain from a competitor — Eroski — and so ended up with thousands of new workers who are not currently members of any co-op. This has provoked major soul-searching at Mondragon, and there is now a commitment to “redemocratize” by slowly cooperativizing these new stores by 2017.
- To provide a balanced picture, it should also be pointed out that the evidence shows that not every co-op does a good job of creating a genuinely democratic workplace where workers feel empowered. Creating effective democratic structures — particularly participatory ones at the shop floor — is no easy task, and requires constant learning and experimentation.
Those of us who have grown up in North America tend to just assume, as natural and obvious, that capitalism — our economic system of private firms, banks, and stock markets — is the backbone of democracy, that the two go hand-in-hand. I now think this is a lie. While there are many things, both good and bad, that one can say about capitalism, it seems to me that the most important point, and the most fundamental critique, is that it is inherently undemocratic. Workplace decisions are not accountable to the workers; investment decisions of firms are not made with any participation of the citizenry; financial decisions of banks and money markets are not accountable to the communities that are deeply affected by them. This means that the major institutions and structures of economic power in our society are not accountable to those affected by them. That makes them fundamentally undemocratic.
Since capitalism is not democracy, we are forced at the end of the day to choose a side: do we want to live in an actually democratic society (i.e. one with both political and economic democracy), or do we want capitalism? We cannot have both.
That’s a serious question. I won’t presume to answer it for anyone else. But if you’ve read this far and can allow yourself the open-mindedness to actually see it as a real question, one that doesn’t have a simple, facile answer. Well, be careful, because you’re perilously close to becoming a radical yourself.