The association of free and equal producers

We acknowledge the cooperative movement as one of the transforming forces of the present society based upon class antagonism. Its great merit is to practically show that the present pauperising, and despotic system of the subordination of labour to capital can be superseded by the republican and beneficent system of the association of free and equal producers. (Marx, 1866)

• Egan, D. (1990) Toward a Marxist Theory of Labor-Managed Firms: Breaking the Degeneration Thesis.
• Jossa, B. (2005) Marx Marxism and the cooperative movement.
• Jossa, B. (2009) Gramsci and the labour Managed Firm.
• Jossa, B. (2012a) A system of self-managed firms as a new perspective on Marxism.
• Jossa, B. (2012b) Cooperative Firms as a New Mode of Production.

Key points from Egan and Jossa papers ¹

1. Both authors write about co-operatively run ‘Labour Managed Firms‘ (LMF) in the context of Marx, Marxism and the historical development from capitalism to socialism. Jossa appears to be unaware of Egan’s earlier work but can be read as a continuation of Egan’s main points, as outlined below.
2. Co-operatively run Labour Managed Firms (LMF) are distinct from Worker Managed Firms (WMF) – Jossa regards this distinction as “decisive.” (2005:14) However, for the purposes of these notes we can refer to both types of co-operative firm as ‘producer co-ops‘, which are distinct from the more common ‘consumer co-ops’. “We recommend to the working men to embark in co-operative production rather than in co-operative stores. The latter touch but the surface of the present economical system, the former attacks its groundwork.” (Marx, 1866)
3. Producer co-ops abolish wage labour. They hire capital rather than labour. This is a fundamental characteristic. “Employment is based on payment of a membership fee or the purchase of a membership share in the enterprise, not the sale of workers’ labor power. Any net surplus is distributed to labor, not capital.” (Egan: 67)
4. Another fundamental characteristic of producer co-ops is that they are democratically run. In capitalism, democracy operates politically, but not economically. Capitalist firms are not democratic. Producer co-ops uniquely establish democracy within the firm. “Advanced capitalist states are predicated on the exclusion of democracy from all but the political sphere of social life. In particular, the discourse of democracy in these states is not extended to work and the economy.” (Egan:67) A genuine producer co-op is “an organizational expression of democratic control of production.” (Egan:69) “…one main advantage of producer cooperatives (from the perspective of a critic of capitalism) is to realise economic democracy as an essential component of political democracy.” (Jossa, 2005:5)
5. A principal contradiction of capitalism is that it socialises the production of private property. i.e. labour is purchased and brought together by the owners of capital to produce more privately owned capital. In the capitalist firm, capital controls and co-ordinates labour through the wage.  Marx referred to the ‘double nature’ of management in capitalist firms, where due to the imperative to grow, capital ownership and management become separated and management is socialised (Egan: 70-71). The owner of capital supplies capital while the manager of the firm is the administrator of capital. The capitalist no longer directly supervises the production of capital. Joint-stock companies resolve this contradiction for the capitalist, in a way that remains negative for labour.
6. Producer co-ops resolve this contradiction positively for labour. “The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.” (Marx, 1894) The management of a producer co-op is established as a function of labour instead of capital. As Marx recognised: “In a co-operative factory the antagonistic nature of the labour of supervision disappears, because the manager is paid by the labourers instead of representing capital counterposed to them.” (Marx, 1894, quoted in Egan: 71) “Instead of management hiring labor, labor now hires management.” (Egan, ibid)
7. Historically, Marxists have largely dismissed the potential of co-operatively run firms as ‘market socialism’ which inevitably degenerate into capitalist firms. However, there is clear evidence that Marx understood the distinct form of producer co-ops positively and as a historical development of capitalism leading to socialism (both Jossa and Egan point to similar sources in Marx’s writing to evidence this). “Marx sees cooperatives as a “transforming force” to the extent that they reflect the structural possibilities for democratic social production found within capitalism.” (Egan:72)
8. Marx recognised that emerging producer co-operatives continue to operate within capitalism and reproduce the commodification of use-values through the sale of things in the market. In this way, the sustained success of producer co-operatives approximates that of the capitalist firm. Egan states that “this is where most contemporary Marxist commentary on labor-managed firms in advanced capitalism stops… A form of market determinism permeates this commentary; the power of the market to force cooperatives to degenerate into capitalist firms (if they survive at all) is seen as absolute.” (Egan: 73) However, capitalist markets are a historically specific form of social relations and therefore a dialectical analysis reveals the possibility of an alternative. “Worker cooperatives are politically and theoretically problematic, but so are all struggles which arise out of and challenge (either intentionally or unintentionally) the logic of capitalism… A Marxist analysis of worker cooperatives must critically examine the limitations of such an organizational form within capitalism, but it must do so from a foundation which also recognizes the positive qualitative developments which such organizations reflect.” (Egan: 76) “The potential for degeneration [into a capitalist firm] must be seen to lie not within the cooperative form of organization itself, but in the contradiction between it and its capitalist environment. Degeneration is not, however, determined by this contradiction.” (Egan: 82)
9. For Marx, the formation of co-operatives as a historical (dialectical) outcome of capitalism must be the outcome of class struggle, rather than instituted by the state or paternalistic capitalists. For Marx, Egan and Jossa, a further fundamental characteristic of producer co-ops is “the development of a cooperative, solidaristic orientation between cooperatives themselves.” (Egan: 74) Co-operatives must assist each other rather than compete with each other in a “unity of action, and identity of interest.” (Egan, quoting Jones: 74)
10. Drawing from Marx, Egan outlines “three institutional mechanisms designed to prevent co-operative degeneration.” First, hired labour must be prohibited. Second, co-operatives should belong to a national organisation. Third, a proportion of the surplus of co-operatives should be devoted to a fund for the creation of new co-operatives. (Egan: 75)
11. Worker Managed Firms, “which are widespread in the Western world, self-finance themselves and consequently do not strictly separate labour incomes from capital incomes; their members earn mixed incomes (from capital and work), in place of pure incomes from work.” (Jossa, 2005:14) In such firms, workers are “their own capitalists”, a progressive development of capitalism. Marx wrote: “The co-operative factories of the labourers themselves represent within the old form the first sprouts of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system. But the antithesis between capital and labour is overcome within them, if at first only by way of making the associated labourers into their own capitalist, i.e., by enabling them to use the means of production for the employment of their own labour. They show how a new mode of production naturally grows out of an old one, when the development of the material forces of production and of the corresponding forms of social production have reached a particular stage.” (Marx, 1894)
12. Labour Managed Firms “are cooperatives which fund themselves with loan capital and consequently draw a clear-cut distinction between incomes from work and incomes from capital or property.” (Jossa, 2005:14) LMFs “effectively reverse the capital-labour relationship… the moment when cooperatives are prevented from self-financing themselves (i.e., provided they are organised as LMFs rather than WMFs), the description of producer cooperatives as firms run by workers as ‘their own capitalists’ will no longer apply. And as the LMF reverses the capitalistic relationship between capital and labour, it can without doubt be rated a genuine socialist enterprise in which workers cease acting as their own capitalists.” (Jossa, 2005:15) Does this mean that the LMF abolishes the duality of concrete and abstract labour determined by capitalist wage labour and therefore the production of value based on the exchange of labour as a commodity? For Jossa (2005:8), “The commodities manufactured by democratically managed cooperatives cease to be ‘in the first place an external object’ unrelated to our work … and turn into the product of free choices made by workers in association.”
13. For Jossa, the successful transition to socialism can and must be a gradual, non-violent process (Jossa, 2009). Producer co-operatives operating within a market economy “must be looked upon as a transitional economic system.” (2005:12) “This [co-operative] system can be established piece by piece, by enacting parliamentary legislation designed to further self-management in manners that will encourage the creation of democratic firms until these end up by outnumbering capitalistic firms. (Jossa, 2012a:834-5) Producer co-operatives mark a change in the mode of production and in this sense are revolutionary.  Socialism based upon national and international associations of producer co-operatives is the most credible alternative to the failures of state socialism and its centralised planning. (Jossa 2012a: 823)
14. According to Jossa, a defining characteristic of capitalism is not that commodities (use values) are produced primarily for sale (exchange value), but that labour power is purchased as a commodity for the production of profit (surplus value).  In a LMF, labour power is not purchased and consequently a number of features of capitalism are called into question (e.g. alienation, the ownership of the means of production, the mode of production, the division of labour, the necessity of work). (Jossa, 2012a: 836)

1. Thanks to my colleague, Mike Neary, who made me aware of these authors. Mike is writing a paper entitled ‘A Co-op Alternative to the Neo-Liberal University’ for the Co-op Education Against the Crises conference, Manchester, 4th July.