I’ve never studied philosophy nor economy so I don’t know relevant it is today, but Karl Marx had some ideas on how to fix this situation and wrote about it in Das Kapital. The short answer is basically democratize the workplace. Instead of a CEO and shareholders making decisions for the workers. The workers should have to powers to pick their own benefits from the profits they are creating.
This is “decision by committee” in practice, with all the issues relating to decision quality and operational tempo that entails. They are empirically inefficient, so other organizational structures very effectively outcompete them.
That sounds like a badly designed co-op, surely the better approach would be to swap the shareholders for the workforce and keep executive power centralised in a CEO?
I don't think anyone has an argument in favour of a committee making every single decision. The advantage of the co-op model is that the shareholders are all domain experts and the workforce would be maximally incentivised to pursue profits.
No, you're thinking of Soviet-style central planning.
The idea of worker democracy is not to vote on every single decision. You can still delegate tactical decision making and even overall strategic planning to individuals and in fact usually this is what happens. The difference is the power dynamic when a disagreement arises. The idea is consent, not compromise.
In hierarchical companies, the hierarchy decides everything and if anyone from below disagrees they can either fall in line or leave. This incentivizes those at the top to chase the profitability that benefits themselves most, which can often mean high bonuses short-term before moving on to a different company or aiming to sell off the company rather than build a sustainable business.
Cooperatives are actually fairly resilient and often also aim to strengthen their local communities.
> empirically inefficient
This doesn't mean anything if you don't qualify your metric. If you define efficiency in terms of profitability you're defining it in terms of surplus value after expenses including salaries that can be paid out to shareholders. Using that metric is nonsensical as the workers ARE the shareholders. If you mean for manufacturing coops the goods tend to be more expensive you're probably not accounting for externalities.
> other organizational structures very effectively outcompete them
This isn't really true either, unless you define success in terms of growth rather than sustainability, in which case the claim becomes almost tautological: coops tend to be designed to focus on sustainability almost by definition, so of course they'll perform worse when you measure them by growth rather than sustainable profitability.
>If you mean for manufacturing coops the goods tend to be more expensive you're probably not accounting for externalities.
What are the "externalities" in this case? I doubt an oil extraction coop is going to be paying carbon offsets.
Also, the metric that you failed to consider (other than profit/price) is market share.
>the claim becomes almost tautological: coops tend to be designed to focus on sustainability almost by definition
How is it "by definition"? I get that workers don't want their coop to go under, but I doubt that capitalist investors want their investments to go under either.
> Also, the metric that you failed to consider (other than profit/price) is market share.
In an economy where almost all companies are hierarchical capitalist corporations, most of the market share is going to be owned by these corporation regardless of how successful a few alternative models are. This is by simple statistics and the regression to the mean.
On top of that, in the current capitalist economy wealth naturally accumulates on a handful of companies (this is also a natural statistical phenomenon) and in the absence anti-trust and monopoly enforcement the biggest companies have an easier time driving any corporation out having a chance to out-compete them. This is also regardless of company structure.
Market share is not a good metric to evaluate efficiency for this reason. There are simply too many unrelated dynamics affecting the who will become market dominant.
>In an economy where almost all companies are hierarchical capitalist corporations, most of the market share is going to be owned by these corporation regardless of how successful a few alternative models are. This is by simple statistics and the regression to the mean.
But surely there would be at least one or two industries where coops rein supreme? If 5% of companies were coop, you'd at least expect 5% of leaders to be coop, or they control 5% of the market share.
>On top of that, in the current capitalist economy wealth naturally accumulates on a handful of companies (this is also a natural statistical phenomenon) and in the absence anti-trust and monopoly enforcement the biggest companies have an easier time driving any corporation out having a chance to out-compete them. This is also regardless of company structure.
why can't coops do the same? consolidate, gain economies of scale, making all of their members better off?
> If 5% of companies were coop, you'd at least expect 5% of leaders to be coop, or they control 5% of the market share.
This not how hegemony works in statistics. If you have 10.000 companies and 9.500 are capitalist hierarchical corporations, all else being equal, if you take the top 300 companies by profit (assuming profit is not uniformly distributed), the chances of the sample of 300 having the same distribution as the total 10.000 is very slim.
Think about it this way: Take two normal curves. Align them so that they have the same mean and variance. Now shrink one of them so that it is only 5% of mass of the other. Now go to the right extreme of the unmodified curve (say 2 standard deviations where 2.3% of the unmodified samples are), do you think you’ll get the same proportion of the smaller curve or do you think it will be much smaller?
> why can't coops do the same? consolidate, gain economies of scale, making all of their members better off?
Now this is a more interesting question. The answer is not statistical but sociological, because statistically accumulation of wealth happens regardless of the system, and would happen also if most corporations were worker owned (I believe I even stated it above). However this question is also a bit of a distraction since the claim here is that market share is a poor metric to evaluate efficiency. And whether wealth accumulates in a primerly socialist economy like it does in a capitalist one takes nothing from that claim. A worker owned monopoly earning most of the profit can afford to be just as inefficient as a company earning it’s shareholders the pretty buck.
Because by and large they tend to be extremely poorly managed. Research has show time and time again that large multinationals have much more effective management practices. In almost any competitive market, multinationals will eventually dominate the industry because of their higher efficiencies.
OK, but what are the criteria for that? If the measurement is "most money, fastest, for the owners", than we aren't even talking about the same things. I live in the country where my utilities are all provided by small local co-ops. There are co-op grocery stores, too. As a customer, they all work quite well. They wouldn't impress an investor, but that isn't the point - they get the job done to support our community. Getting the job done is my measuring stick.
The limiting attribute of the smartphone market isn't the release cycle. Even large international corporations find it hard to compete in the smartphone market.
The biggest problem is that a sustainable smartphone product wouldn't sell very well and the market is heavily based on selling incremental changes and flashy non-features as groundbreaking innovations.
I'd say one of the biggest differences between sectors where coops do well and where they don't is that the latter tend to be sectors where the value proposition of the product is almost entirely driven by marketing and the products are only profitable because they're disposable.
Apple doesn't make a profit from selling you an iPhone every five years. Apple makes a profit from selling (lowercase-i) influencers an iPhone at least once a year to convince everyone else they should really cycle out their current model long before it's actually obsolete.
Another important factor of course is that coops tend to focus on local communities and smartphones are almost entirely manufactured overseas at this point (speaking from an American or European POV). It's hardly a coop if 99% of the workers involved are working for non-coop subcontractors in a different country.
Managing a co-op is much more difficult. Basically, it depends on people. Where your view are very much aligned, you can do quite well. Where I live there are many green co-ops run by people with similar views and aims, and there is a sense of community. In this way you increase the chances of success. Also there is some relationship between the people who run the co-op and the customers.
If this sense of community is lacking and people think about themselves mainly (as it normally happens), you can't make any meaningful decision. So in this case a more traditional business is likely to give much better results.
> The question is: why are co-ops relatively uncommon?
Because they have access to capital problems, because the people who disproportionately control capital also prefer that capital, not labor, controls the business.
Because capital is more necessary than many would like to admit. It's why a lot of the more common worker co-ops were essentially gifts to employees from the original founder. Bob's red mill, Publix, etc...
Most people want to be told what to do, get paid for it and go home. Only small part is able to accept risk of loss and stress coming from actually taking care of the company.
That's exactly what happened in Eastern block countries. Most of the people exploited the system for personal gain. (source: living there). Marxism is pure utopia.
You're conflating Soviet style socialism for all forms of socialism (though it's hard to blame you as the Soviet Union didn't really care to make that distinction either) much like some critics of capitalism are conflating utopian anarcho-capitalism or extreme laissez-faire capitalism for all forms of capitalism (which is how you get political pundits fluctuating between calling social market economies in Europe "socialist" or "capitalist" within the same sentence depending on whether they talk about aspects they like or not). Worker democracy is actually closer to anarchism (which for most Westerners sadly evokes images of angsty teenagers in black hoodies throwing molotovs or spray painting buildings, rather than community organizing and radical democracy).
Soviet style socialism was heavily based on a fixed hierarchy (the infamous communist bureaucracy) and centralization. Especially near its decline (i.e. 1980s) it was heavily plagued with corruption and shortages of "non-essential" goods because of structural issues but also the dual stresses of trying to compete with capitalist economies through production for exports and trying to compete with capitalist militaries through production for weapons and supplies for strategic partners. All this while also starting from the disadvantage of not only having been an agricultural economy until fairly recently but also having suffered massive losses in a world war while still recovering from their own civil war.
Ironically, the Soviets were actually a bad example of organizing around "soviets" (worker councils) and the Bolshevist revolution involved disempowering and purging a lot of worker democracies and trade unions as "counter-revolutionary" because the founders thought they had to lay the groundwork for socialism from the top down (ironically often using pre-existing capitalist structures and stakeholders) rather than build from the ground up.
There are many thinkers outside the Marxist-Leninist and Marxist-Leninist-Maoist spheres like Bakunin, Bookchin, Kropotkin or Malatesta. The reason these names tend to be less familiar is not only that the Soviet and Maoist traditions tended to heavily suppress anarchism but also that anarchism by its nature puts less emphasis on individuals than ideas so you rarely find self-identifying "Bookchinists" or "Malatestaists".
> Most people want to be told what to do, get paid for it and go home.
Voter turnout in many country has been as low as less than 50%. One could say that in those countries "most people" want to be told what to do and not bother with politics. Would you argue this means they should therefore not be allowed to vote?
You can participate in a worker democracy led company without participating in elections or any of the decision-making processes. The important point is that if you do care or an issue arises that affects you more strongly, you can. Under a hierarchical company the best you can hope for unless you have a union is to raise the issue with HR or management and hope doing so will not affect you negatively.
I have no idea why you are thinking I want to disallow anything. I merely point out that most of the people is not proactive enough to form cooperative.
To add some background I'm running sizable division in a company hiring about 100 people. We're very flat and open to suggestions no matter what is your title. Some people actually use that opportunity, but it's maybe a half. And we're actually targeting for that when hiring! More than that - over the years we had some people left us, because they wanted narrower responsibility, without bothering them with bigger picture.
As for the discussion about "true Marxism" - sorry. Hard pass.
> I have no idea why you are thinking I want to disallow anything.
Because if we wanted our governments to work like businesses, we'd have to ban elections. Businesses deciding to offer some leeway towards employees in their decision making process doesn't turn them into democracies the same way as a dictatorship doing opinion polls wouldn't be a democracy.
> As for the discussion about "true Marxism" - sorry. Hard pass.
Nobody said anything about "true Marxism". Marx neither invented the ideas of socialism, nor do I care for his opinion on it in particular.
If anything my point is that the Soviets (and their related states) tried to sell their actions as "real socialism" but that this is like calling America's actions "real capitalism" despite other forms like social market economies (e.g. half of Europe) existing.
I don't care if anarchism is any truer of a Scotsman than Bolshevism, I only care that anarchism is more communal and less oppressive.
>Because if we wanted our governments to work like businesses, we'd have to ban elections. Businesses deciding to offer some leeway towards employees in their decision making process doesn't turn them into democracies the same way as a dictatorship doing opinion polls wouldn't be a democracy.
This statement has no connection to my comments. I am not expressing any opinion how I want business or government to operate. I'm just sharing my observations, about why people do not form cooperatives.
Unpopular take: co-ops will not be able to behave in sociopathic ways shareholder value driven corporations can and will be outcompeted because of that. The fact this arrangement is not sustainable in the long term doesn’t prevent corporations from being successful in the short run.
What exactly is the long term? 3M is 120 years old. Ford motor almost as long. DuPont was founded in the 1800s. Proctor and Gamble was founded in 1837.
All are still profitable today and in relatively good health.
That's basically just cooperative, and the main issue is that they end up not being competitive with corporation. We used to have a lot of cooperatives in Vietnam, they got outcompete by capitalist corporation over the past 20 years.
Yeah, Carl Marx died in 1883. The economy has changed a lot since then so perhaps his ideas shouldn’t be taken at face value. However I believe he saw his solutions as being applied on a societal level, i.e. no single corporation could fix this on its own. Socialists today still believe this and seek regulatory frameworks which will enable cooperatives to thrive in a better economy, and not simply be out-competed by capitalist corporations as they are today.
Marxism isn't when you have coops under the capitalist mode of production, because things are still being produced for the sake of profit, not for social and common, and it still has the effect of making living labour serve accumulated labour, among other factors.
That being said, worker coops are a good thing and are often more stable and efficient than conventional businesses^1 (not to mention leading to better outcomes for the workers). The problem comes with economy of scale when it comes to competing against accumulated labour (startup capital is a problem, and by the nature of taking startup capital you are working to multiply the exchange value of accumulated labour). The living labour of the worker coop will still likely be at work to maximize the exchange value of some other's accumulated labour (loans, contracts, etc) or become of the M-C-M model themselves, siding with accumulated labour class (bourgeoisie). That's capital for you.
I am slightly familiar with Marxism. One point I never understood is that Marxist philosophy is almost always applied as a solution to a currently capitalist economy.
What are the Marxist incentives for new business creation as opposed to just reforming an existing capitalist company?
> What are the Marxist incentives for new business creation as opposed to just reforming an existing capitalist company?
I'm not sure I understand your question. Capitalism is fairly recent. In fact "businesses" are fairly recent. Humanity didn't idle until someone came up with the idea of corporations, so I don't think you're asking how production or innovation can happen under models compatible with Marxism without reforming existing companies.
Under capitalism, the incentives for new worker coops are the same as for working for an existing company, i.e. not starving to death (or avoiding poverty). Capitalism aside, humans have many incentives for productive work. Research actually shows that intrinsic motivation can greatly exceed extrinsic motivation (e.g. being paid) but adding the latter can almost entirely eliminate the former, chronically: introducing money makes it a transaction rather than a favor.
If your question is why anyone would found a new fruit juice company under Marxist philosophy to compete with the existing reformed ex-capitalist fruit juice companies and claim some of their market share, I think you're still thinking in capitalism.
