Once again the spokesperson of the progressive left demonstrates a total lack of understanding of capitalism and how it operates.
In order to survive, a worker-run business must pursue the goal of profit maximization, just like every other. Because a worker-owned factory would have to compete with ordinary capitalist businesses on the same terms as them, so they are subject to the same competitive pressures, to keep costs down and to maximize the difference between sales revenue and costs.
The worker-owned factory has to buy its raw materials on the market, along with every other company. It does not get steel, oil, copper, electricity any cheaper because it is owned by its employees. In buying in its machinery, equipment, materials, premises, transport etc., and in paying its rates etc, any unit, including any workers’ co-operative, must pay all these costs. How could any imagined “socialistic” unit operate without power supplies? In its application of socialist principles in production and consumption, is it going to persuade the utility companies to provide supplies free?
In addition to this income, the workers in their worker-owned unit must have income to cover personal living costs such as rent or mortgage repayments, food, clothes, leisure activities, and so on and on. This is inescapable. Regardless of their make-up, production or service co-ops can only continue their existence whilst they are economically viable; that is, where income exceeds expenditure. If expenditure exceeds income, then inevitably they disappear.
A worker-owned factory has to sell its products on the market, along with every other company. It does not get higher prices for its goods because it is owned by its employees. It has to compete with every other manufacturer in terms of price, delivery dates, quality etc. In order to compete over any length of time, it will have to invest in new plant and equipment. To do this it will require a large amount of capital. If this is obtained by borrowing, then they will have to convince the banks that it is a viable and profitable concern, run along good business lines. It will be under even greater pressure to prove that it is viable just because it is a different sort of enterprise. Of course, it may decide to raise the capital needed for investment out of the profits. Inside the factory, there are no owners other than the workers. But they buy goods at the same price as other capitalist concerns. They sell goods at the same price as other capitalist firms. They compete flat out with other capitalist firms. If they are to make enough surplus to re-invest, or to convince the banks they are good for a big loan, how are they to do it? They are in a trap. Either they sack some of their fellows; or they increase their own intensity of work; or they take a wage cut. Elected workers’ councils would be in exactly the same position of having to lay off staff, if there is no market for the goods they produce.
Whichever avenue they choose, their decision has two effects. Firstly they have attacked their own living standards. Secondly, they are acting as an unconscious argument in the hands of other bosses against their work-forces. If an employer in another factory is faced with a demand for, say, a wage rise, he will immediately reply that he can’t afford it and point to a worker co-operative and say: ‘they work for less than you are demanding. It seems a perfectly reasonable wage to them, with no boss, why are you demanding from me more?’
The capitalist has been provided with an excellent propaganda weapon against his own employee demands as a way of mitigating the class struggle and persuading workers that they have an interest in accepting ‘realistic’ (i.e. lower) wages. Worker-owned enterprises exhibit the exact same vices as capitalist firms.
Where workers owned their factories and it has been a success it was because it was merely the success of essentially capitalist undertakings. There is a tendency for worker co-ops to resemble more and more over time the conventional capitalist business model and the case of Mondragon - the largest worker co-op conglomerate in the world - would seem to bear this out. It has grown and has departed more and more from its original egalitarian principles and Mondragon has been noted for employing heavy hand tactics against its own two-tier workforce of privileged co-op members and outsourced offshore temporary casual workers.
Worker-owned enterprises as proposed by Sanders may very well offer an example of self-management but they simply cannot compete with the economic might of modern capitalism. We cannot self-manage capitalism in our own interests and the only way we can really live without exploitation is by abolishing capitalism. The state can be counted on to represent and protect the interests of the privileged minority. A “non-capitalist” sector just do not have the same resources at its disposal and therefore cannot beat the capitalist sector at its own game. History is littered with the experience of failed co-operatives or corrupted co-operatives. Either the co-operatives “sell-out” or they are “put-out” by market-forces. We know what happened. This was because they had to compete with ordinary capitalist businesses on the same terms as them and so were subject to the same competitive pressures, to keep costs down and to maximize the difference between sales revenue and costs. The co-operative movement was out-competed. Look at the example in the UK of the John Lewis Partnership.