Some questions: 1. why do you assume worker ownership of the company (I assume democratic) would result in no umemployment? Just like now owners decide that it is not in their economic interest to hire more workers, the workers (and owners) in such company can come to the same conclusion. In fact, it would be more probable IMHO - since they would have to give greater share of the company profit to the new workers than owners give workers now. 2. If worker owned companies are really better and more efficient (and thus economic), why didnt they prevail on the market now? Why havent they outcompeted privately owned companies, or at least reached a substatial share of the markets? Is the issue that they fail to be created, or fail to prosper? And how do you resolve this issue in your version of socialism?
We can expect some forms of unemployment: Frictional unemployment, structural unemployment etc. However, unemployment no longer serves the role as it does in capitalism (i.e. a means to ensure worker compliance and therefore effort). Owners are motivated by profit. Profit maximisation in capitalism is inconsistent with full employment. See, for example, the 'shirking hypothesis' (whereby full employment would lead to workers not giving a toss if they are sacked as alternative employment will be available) Completely wrong. We know that the efficiency wage hypothesis is required to understand unemployment patterns in capitalism. We also know that, once the distinction between profit and compensation is eliminated, incentives are completely changed. See, for example, the impact of unionisation. Here, we see improvements in productivity but reductions in profitability. That's the key aspect. Within capitalism, profit is driven by the seizure of economic rents. Worker ownership in such conditions, particularly with market concentration, cannot compete. Its instead often restricted to maintaining employment in unstable production environments where opportunity costs has encouraged capital to flee. We merely need to protect property rights (i.e. any large enterprise must be, by definition, worker owned). Within that we'd of course expect firms to prosper or fail (although we wouldn't expect the same market concentration as we do in capitalism). In terms of the socialist calculation debate, the real issue is the importance of firm creation. In socialism, given a shift away from inequality of opportunity, that's actually encouraged. A common method to ensure that is through the one-off grant (of equal payment to what is required to achieve post-graduate education). This allows self-employment to be pursued. Whilst we can always expect failure of SME, this ensures greater exploitation of tacit knowledge (i.e. entrepreneurial spirit is harnessed)
State capitalism isn't very efficient, but it is very good at enforcing compliance. The US and the rest of the "north-western" nations have ruthlessly suppressed alternatives to their state capitalist systems. How is ownership by a group of elites in government "collective" ownership? The OP is referring to actual socialism, where the workers own their own means of production. The OP is referring to worker self-management. You're basically saying that people deserve to be oppressed--arguing that oppression is a better state of affairs than freedom. Socialism is a radical decentralization of power; a destruction of both the state and private concentrations of power.
Those weren't worker-owned farms. The collective farms were state-controlled. They were part of the command economy. The actual worker-owned farms (the small plots that Soviet citizens actually grew food on) worked quite well.
Labor would be a lot less flexible in a worker-owned company; the size of the workforce would be much more directly related to the actual work available. If a company needed to produce more, they would hire more people. The present profit-driven system leads to situations where a company will cut wages, lay off some people, and make remaining workers fear for their job enough to accept higher quotas. Basically, these sorts of companies would only hire when hiring new people means they can produce more goods and find a market for those goods. There are fewer methods they would have to expand productivity with the existing workforce. The economic system is heavily skewed in favor of investor-owned companies. It is difficult to attract capital to a worker-owned company when the majority of capital is concentrated in the hands of a few people focused only on profit. How do you sell stock when you don't intend to grant partial ownership? Where do you find an angel investor, or a venture capital firm, when they think the idea is "anti-capitalist" and a threat to their own power? There are plenty of worker-owned companies, but they usually don't grow very quickly because of these restrictions on capital availability. Not to mention, the government heavily subsidizes investor-owned companies, but does little for worker-owned companies. That is purely for political reasons. Capitalists will take a loss if it means maintaining social control--that is demonstrated time and time again through history. They consider it more important to control the political system than to make a profit every quarter of every year. The primary issue is capital availability.
Not at all. I admit that worker owned enterprises possess a key characteristic that drives greater efficiency (minimizing wage exploitation). I am just curious how such a concept could be applied on a micro level.
As I recall both Kruchev and Mao experimented with communal ownership and both considered it a failure. Hardly a hostile capitalist environment inhibiting it when the top boss tries to make it work. Also Israel for a time encouraged kibbutzes.
My problem with more traditional market socialist analysis is the idea that some neoclassical perfectly competitive utopia could hypothetically be reproduced. I believe that completely misses the point. Its the inefficiency inherent within traditional ownership that's the main gain from socialism. There is admittedly some need for further research. Consider, for example, the distinction between the visible and the invisible hand. We have seen how economic planning (be it in a totalitarian regime or within a society using or abusing the socialist tag) can be crucial for engineering economic development. The relative lack of development is indeed a significant attack on orthodox economics. However, we also can see the economic success achieved by capitalism in a 'maturing economy'. For socialism, the issue is when efficiency gains are clearly dominating. Its perhaps easier to see in economies with severe inequalities (and therefore lack of choice that hinders entrepreneurial behaviour) and market concentration (which increases instabilities and leads to an increase in inefficient market power abuse)
Happy for you to refer to theory or empirical evidence. Just some economic content! The nice aspect of the socialist calculation debate is that you can focus on whether socialism is feasible.
Neither experimented with worker self-management, because that would have destroyed their command economy. Their idea of "communal ownership" is different from worker self-management or worker ownership as is being proposed here. In their case, they wanted the communally owned farms to meet quotas established by the government, to grow crops demanded by the government, using methods required by the government, etc. The members recieved no compensation for their collective "ownership" in many cases, and when they did, it certainly wasn't proportional to the output of the farm, nor certainly to the potential output of that land in reasonable production. The point of worker ownership is for the workers to receive adequate compensation for their labor... which can't happen if no one is receiving any compensation under a government-managed forced collectivization process. The fact that they also had limited political rights did not help. The private plots that existed alongside them were a better example of worker self-management. Soviet analysts int he west tried to equate that to the "private market", but really it was just an example of traditional family farming... which is also an example of worker self-management, as long as it's just the family working the farm.
A private business equally owned by its workers is more socialist than a public business managed by elites in government. In the case of the collective farms, each member was granted a small plot to farm on their own; or, perhaps, in a voluntary collective with others, like your family.
There's honestly a few ways to do this; A) Require new hires to buy their share. This is feasible for members who've built some savings. The company gets some new capital, the worker gets a job, so both sides are encouraged to do so. B) New hires are paid a wage as we presently do, until the profit the company earns from their undervalued labor is sufficient to pay for that worker's share. In other words, if a share is $1000, their labor is worth $15/hour, and their actual wage is $10/hour, they'll be vested after 200 hours. The issue there is that it's rather hard to gauge the actual value of labor in most cases--it might be easier to just pay that person as if they had a share, but withhold a portion of their compensation every month until they pay for the share. Political rights would, of course, be equal for new hires. Basically the company would just be renting them a share under a rent-to-own agreement. The latter concept might seem against the principle of worker ownership, because it relies on underpayment for labor, but that in itself isn't a problem as long as you can expect full membership in a reasonable time frame. That's not wage slavery at that point. There are probably some other practical proposals on solving this problem, but I would suggest that those two make the most sense. The company needs to receive something for hiring a person, and capital investment or reduced rate labor would both be examples of that.
The reference to savings does open up an important issue for socialism: the nature of the banking sector. If we don't have a distinction between banks and government we will certainly have unfortunate influence cost consequences and a key attack on socialism.
The problem with these methods is they are all cost prohibitive. A worker-share of many companies will often be a big five or even six figures. One small business I know well that just sold is a great example. It had nine employees and sold for 1.3 million. How many people, willing to haul trash, are able to pay over $100k to start a job like that?
Of course there's no need to have worker ownership in SMEs. Indeed, given the need to harness entrepreneurial spirit, it wouldn't make sense
I agree with you there. That business had a net profit of $1,000 the first year, with the owner working 14 hour days six days a week. I doubt he would have gone through that effort if he didn't stand to make a fairly good profit after a few years. If he had to sell ownership every time he took on employees, it would have greatly reduced his motivation. If those employees began making stupid decisions and crushing the business, it would have been devastating and that owner would never have started a business again. EDIT: Still, lets consider a very large corporation: GM it has a total assets worth just under $139 billion and a total of 209,000 employees. By any buy-in requirement, new employees would have to pay $665,000 to start working at GM. Even with their pay scale it would take a lifetime to pay off that buy-in. On the other hand, I guess they could eliminate their retirement programs. Employees could just sell their share of ownership to finance their retirement.
Feasible socialism ultimately has to focus on firm creation. Its the reduction in inequality of opportunity (and therefore 'true' choice amongst the population) that drives it
Theory does not completely agree with reality. Employee owned (and I mean true employee owned, not the kind where 90% of the stock is owned by a handful of people and the rest is spread among 1,000 employees) has its rewards but it is not the utopia you think it is. I worked for years at a large employee owned company, and I currently own a company. In an employee owned company, the pressure and the workload are higher than at the standard companies. People are expected to be self-starters, be dedicated to the company, be competent at their job, and require minimal management (if you think about it, "managing" people is not the best use of resources). People with a 9-to-5 mentality are not suited for this environment. People with time consumming issues/activities outside the company are not suited for this environment. Despite some fairly rigorous and careful hiring procedures, some people will be hired only to find that the environment does not suit their life style. There will also be some new hires that try to take advantage of the system. These "slackers" cause resentment with other workers and must be fired quickly. Historically, even though we target people with the appropriate attitude, we have found that about 10% of the people hire will not be able to cut it and will leave or be fired within their first year. There is a strong tendency to delay hiring additonal people particularly in these uncertain times. Employees want to maximize their income/profit, and prefer to stay "over-employed" (working more than 40 hours a week) rather than hire. The typical employee works 50-60 hours a week with surges beyond that level when needed. Capital availability....not a problem. I think your politics is getting in the way. Investors don't seem to care whether it is employee owned or not, they care about the bottom line. They are in it to make money, and I have never met one that gave a dam* about "social control". The government subsidizes certain industries, and certain companies, but I have never seen a bias against employee owned companies. Actually, the only companies that seem to get special treatment are the behemouths that can afford full time DC lobbyists or play the political favors game. Companies like CitiGroup, BofA, GE, GM.
Utopia? No. Just a more efficient means of ownership. We'd expect more shirking within traditional firms. Indeed, its those problems that encourage hierarchies that are independent of division of labour criteria. And those hierarchies will produce more resentment. Its divide and conquer after all The standard criticism is one of 'too many workers'. I'd also like to note that overemployment, according to the empirical evidence into desired hours, is a significant problem within capitalism. That is often encouraged by firms finding means to cut overall non-pecuniary benefits.
No. Its of course up to the firm but I'd expect different compensation packages. At the moment we have, for example, seniority pay (i.e. wages purely according to an artificial human resource management technique to discourage worker militancy). We wouldn't have any need for such inefficiency, but a firm could well have compensation related to their overall work investment in the firm. That would be an adaptation of wages according to investment in organisation knowledge
Why would option B not work for that? So what if it's 100k for a share? The compensation for the worker would be far higher than under the wage model--they could afford to make payments for a few years. Note also that pricing would be adjusted downward quite steeply under socialist organization. Businesses would not cost nearly as much if organized along those lines--there would be less reinvestment, more divestment.
Then that is a business that shouldn't have existed. It is unproductive labor. If a person can only be compelled to work because he expects a disproportionate return for his investment, that is not worthwhile work. Perhaps you ought to consider the idea that maybe he was only working so hard, and for so little, because the system is designed to make that the basic reality of entrepreneurship? Owners are expected to scrimp and save, and barely make ends meet at first, because they're required to assume tremendous risks (like making large capital investments, on trucks, dumpsters, etc). There's no particular reason for that. The socialist form of business organization would require a lot less risk. Rather than he, personally, deciding that he would, individually, collect garbage... he would have approached others to begin with. Why? I can see why he might not hire more workers, but presumably the company would hire more workers because two workers allows for more valuable contracts. In a society that accepts socialist business organization, that would not represent a disincentive for further business creation; people would be used to businesses failing for that reason, if indeed it was common for them to do so. I think you're not giving nearly enough credit to people. Their pay scale would be radically higher under a socialist model, and the company would not be valued nearly so highly. And I think it is very likely that they would have more employees than they do now if organized along those lines. You can't just take a current for-profit company and try to convert it to a socialist model--it's a totally different way of approaching business, and it wouldn't result in even remotely the same sort of valuation.
