From Here to There; or, If Cooperative Ownership Is So Desirable, Why are There So Few Cooperatives?

Abstract

In this paper I want to discuss a well-known but poorly understood problem: how can socialists reconcile the observed paucity of cooperatives in capitalist societies with their alleged superiority on normative grounds? If cooperatives are so desirable, why don't workers desire them? If one's ideal of socialism is central planning, it is clear enough that it cannot emerge gradually within the womb of the capitalist economy. If instead it is something like market socialism, it is not clear that a discontinuous transformation of society is required. If workers want (market) socialism, they can start up here and now. If they don't, doesn't it prove that they do not want it?I shall proceed as follows. Section I argues that the usual explanation - that cooperatives are not economically viable or that workers prefer working in capitalist firms – is not necessarily correct. The explanation may lie elsewhere, in endogenous preference formation, adverse selection, discrimination, or externalities.Section II is concerned with the variety of cooperative arrangements. Only rarely do we find cooperatives in their pure form, with all workers and only workers having equal ownership rights. Non-working owners, non-owning workers and unequal distribution of shares are frequent. When the deviations become sufficiently large, the firms cease to become cooperatives in any meaningful sense.Section III extends the argument of Section I by surveying the causes of cooperative failure. Some fail by success: profitable cooperatives often attract or turn into private ownership. Others fail outright, partly because they tend to be established under unfavorable circumstances and partly because of intrinsic difficulties of management.