Panu Kalmi and the Seed of Cooperative Knowledge

After many months, welcome back.  It is easy to be intimidated when trying to get into the theory of cooperatives and alternative economic systems.  One feels terrified when being confronted by professional economists, humbled when reading papers of people that undoubtedly put thousands of hours into the subject, weird when trying to explain the simplest of the concepts of market socialism to an uninitiated crowd ("do you mean that people can control a factory? And who is the owner? They are? That´s crazy") and also a little bit unintellectual and a dreamy Utopian.  Bear with me, this episode of the blog seems hard, but if you are already here I suppose that you are interested in the subject.  If nothing else, skip to the end of this post where I shortly digress about the expansion of the marksoc initiative into a full-fledged economy.

For the reasons exposed above, is why Panu Kalmi is such a welcomed medicine for the troubles of the amateur marksoc scientist.  The academic articles authored by Kalmi converts the rough seas cooperatives` theories into an ordered channel of  easily followed schools and methods.  The guy creates what I like to call “seeds”.  A seed is an article that works as a starting point for intellectual endeavors, an index of complex matters that stimulates intellectual growth.  As I like this blog to become a seed for market socialism, is it worthy to include on it seed-articles that redirect the attention of the fellow researchers.

The article in question is called “The Study of Co-operatives in Modern Economics: AMethodological Essay”, and it analyzes the two big theoretic traditions of research over worker cooperatives: the neoclassical approach exemplified by Jaroslav Vanek, and the New Institutional approach represented by Henry Hansmann (“The Ownership of Enterprise”, 1966).  Kalmi also includes later developments he thinks hold potential: the contract-theoretic approach and the work of Gregory Dow.  He also indicates that he is excluding certain schools from the article: the old institutionalist, the Marxist, and the Austrian approaches.

The approaches included will try to explain the inner mechanism of the worker-owned company and its place on a free-market economy, each utilizing a different methodology and point of view. Lets try to resume the main characteristics of each school.

The Neoclassical School

The classic article on worker coops from the point of view of the neoclassical economists is “The Firm in Illyria: Market Syndicalism”, by Benjamin Ward (1958).  In this article Ward utilizes equations and the typical two-axis graphics to compare a woc firm with a capitalist company.  Here you have an example of his work:

Hey, remember those Math classes at school? You don´t? Shame on you

Please don´t fret and run , I think that Ward really meant to scare people away.  The important thing to keep in mind is that this school will compare between "labour-managed-firms" (LMFs) and "capital-owned-firms" (KOFs) with the same tools utilized regularly in the neoclassical analysis of the capitalist market (meaning lots of curves).  The main supposition is that while KOFs try to maximize profits, LMFs will try to maximize income per employee.  Ward reached the conclusion that individual LMFs "employs less labour and produces less output" (Kalmi, op. cit.) than KOFs in the same situation.

From this work emerged the oeuvre of one of the big names in marksoc theory, that you probably heard before: Jaroslav Vanek.  The Czech writer argued that despite Ward´s conclusion for any individual firm, the structure of a economy based on LMFs would allow for more competition between cooperatives, thus restoring full employment.  I let you as a homework to elucidate the significance of "the Ward effect", also called "perverse supply reaction" for individual LMFs and its counter-arguments (I suspect that I will be going back to that point in the future)  The main critique of Kalmi regarding Vanek is that despite the later´s claim that he proves the superiority of LMFs with the same techniques utilized by neoclassic economists (microeconomics) in the end he utilizes arguments that come from other currents (LMFs are more efficient because are more humane, thus positively affecting the work ethic.  In the same article Kalmi will put in doubt this crucial difference between LMFs and KOFs: what if a capitalist company gives enough incentives to its workers?). In his latter work Vanek would abandon his neoclassical approach altogether, favoring a normative view (The Participatory Economy, 1971). 


The New Institutional School

If the neoclassical school favored theoretic models, the institutional approach started its way from empirical studies of existing cooperatives.  Their main precursors are Eirik Furubotn, Svetozar Pejovich, Michael Jensen and William Meckling.  They emphasized "methodological individualism" thus centering into problems of governance (management, decision-making) and problems of re-investment.  Jensen and Meckling also developed a functionalist approach, trying to explain the reasons for the scarcity of LMFs in real life. The main problem I find with any kind of functionalism is that it is based on the existing institutions.  And our main task is to develop new ones or change the existing ones to make the establishment of LMFs a viable prospect.  Ours is not "the best of all possible worlds".

The natural conclusion of this path is the book by Henry Hansmann, "The Ownership of Enterprise" (1996).   Hansmann builds upon Jensen and Meckling but adds its own version to explain how real-world companies "choose" their mode of ownership: it depends on transaction costs.  I am not versed enough on this kind of literature, and I will kindly accept any offer to explain to me the reason why these authors use the sentence "firms choose" as if those firms are a black box.  Is not as if workers could suddenly decide that their company is not going to be owned by a capitalist anymore, and he/she would silently acquiesce.  Hansmann maintains that the costs of ownership in coops is high, but for every "cost of democratic worker assemblies" card I would raise a "cost of systematic control over workers in any capitalist company" one.  This is not natural selection, since the markets are human creations.  As I said before, if LMFs are not efficient in the current system (which I still doubt), our main problem resides with the system, not the companies.

Giving another turn to the screw, a neoclassical current called Contract Theory will, according to Kalmi, come to dominate the study of cooperatives in mainstream economics, since it combines the questions presented by the New Institutional School with a mathematical presentation.

Here you have an example from Oliver Hart and John Moore in an article from 1996: 

Please, remain seated.  This question will not be in the test.

Gregory Dow and finally a Conclusion

The work of Gregory Dow is the last one analyzed in Kalmi`s article.  Dow also is preoccupied by the rarity of cooperatives, but he does not think that it is based on the supposed inefficiency of these companies.  Instead, the cause  of the scarceness is what he calls “the inalienability of labor”.   We have here another concept to investigate, and refute or confirm its utility.  A positive trait that Kalmi finds about Dow is that he declares his support for the cooperative form.  In general, economists try to maintain “objectivity” in respect of the phenomena that they are studying, but we know that political preferences already show when the object and methodology of study are chosen.  To make social science means to have a political stance. If something, the difference between economists and Dow is that the later is being honest.

And here we reach the end.  Along this short history of marksoc theory we can see a constant battle between a normative view of the problem ("we need more coops") and an "objective" one ("we asses through the current methods of the economic science that there are not more coops in what we seem to think is the natural state of markets because ").  I find this dichotomy to be false, and to make good on my claims I will be spending the following weeks trying to get my points from the great market debunker, Karl Polanyi.

My small digression about a full marksoc economy came to me many years ago, but I found a literary expression in the concept of Ice-Nine, from Kurt Vonnegut.  Simply put, it means that a little molecule can change the state of an entire body of water, giving that certain conditions are present.  It is a snow-
ball effect, and it is unstoppable by common means.  I see marksoc developing as a slow bloodless revolution, a change that can be made in a capitalist democracy through laws and regulations, from which springs a complete overhaul of capitalism.  If they key changes are small, they could very well go unnoticed, hence unopposed by the ever present establishment of powerful players.  Small changes in legislation, here and there, can fertilize the soil for the unimpeded multiplication of worker cooperatives in all areas.  Coops are private companies, so the establishment cannot claim that government is trying to take private property away.  Coops would win in the market following market rules, innovation and profit, so the establishment cannot cry foul.  Our task is to find the right measures, the way of making a good seed.  I am one key stroke away of misquoting a Kevin Costner movie , so get prepared: "If you build it they will come".

KALMI, Panu: “The Study of Co-operatives in Modern Economics: A Methodological Essay”

For the accumulated Bibliography and the Glossary please click here

Competition and Cooperation: the right balance defeats alienation

Vacations are over!  Let´s go back to work.  We are in 2012, the International Year of Cooperatives.  Times are quickly changing, and the population of the welfare states of Western Europe are losing positions against the bureaucrats of the European Central Bank and politicians more interested to ingratiating themselves with the owners of financial capital than with their constituency (when they don´t come directly from the ranks of that K.A.O.S-like organization called Goldman Sachs).  In American shores, things are not faring better, and some workers are thinking about adopting our solution to their plight: namely, becoming a Coop.

Still, I have not seen many valid interpretations of the credit bubble other than the recognition of its existence.  In fact, many voices from the establishment are already claiming that the crisis is over.  For a sober analysis of the main culprit of the current capitalist crisis in scientific terms, I recommend reading the following articles by Steve Keen:

• "Economic growth, asset markets and the credit accelerator", RWER 57.
• "The Debtwatch Manifesto", RWER Blog, January 3rd, 2012.

Now, lets go back to our slow crawl towards a theory of Economic Democracy.  This week I will revisit a review of books by Richard Westra, where he analyze different kinds of institutional configurations for post-capitalist societies.

The first model is proposed by Ladislav Rusmich and Stepeh M. Sachs on their book "Lessons From the Failure of the Communist Economic System" (2003).  They propose to operationalize "Adam Smith´s idea of market functioning based on optimizing the division of labor at both intra-firm and society-wide levels"(Westra, p. 356).  They postulate that there is a lack of rationality in the production relationships inside each firm, the same rationality brought by the market when those firms interact with each other.  Their solution? Bring the market into companies, making them open systems (pp. 188-190).

My first impression is that is not compatible with a woc-msoc model.  On Economic Democracy,  companies are a black box that compete in the market to offer the best possible product or service.  Inside each company, workers need to cooperate in a democratic environment, not to compete with each other, or to be continuously menaced by the possibility of their replacement.  It is easy to understand the allure of the market: since it promotes innovation through competition, why not to introduce it inside the productive units? Because it would destroy their functionality as units, just as a biological cell, or an individual human being, are both contained into membranes that separates them from the outside world, and that allows them to function. Rusmick and Sachs are right on criticizing the up-down decision-making process of the modern capitalist firm.  But they are wrong when they refer to it as "monopolistic", when it is in fact "non-democratic".  Democratic decision-making can be seen as a competition of ideas, but finally consensus about policies is reached, and then the productive unit act as one indivisible force. Rusmich and Sachs are afraid of what they call "monopolism", and this fear makes them wish for a highly competitive individualistic society (p. 181).  I fear for dictatorship, and the destruction of communal ties is one powerful way of being subjected to one.

The second model presented in the review is Schweickart´s ED, of which I wrote already its main points in this blog, and will continue to discuss them in the future.  For more information about it, please refer to the few posts before this one.

The third model to be considered is called "Socioeconomic Democracy". Its author, Robley George, presents a series of measures that are not based on the free market to determinate personal income.  The first measure is the Universal Guaranteed Income (UGI), to be determined democratically.  The possible problems of Basic Income models will be discussed in future posts, since I regularly find this kind of proposal on many progressive economic models.  However, I doubt that BI will have the intended effect on poverty reduction once inflation and other readjustments take their toll.

The second measure is called Maximum Allowable Personal Wealth (MAW), which as can be guessed from its name, means that the maximum amount of wealth for every person is also democratically determined.  This measure is counter-productive for an economy based on free-market competition since it stifles innovation based on rewards for individuals, and a similar effect can be obtained with progressive taxes over personal income, existent today and in use in many social-democracies.  Another option utilized in many cooperatives is the democratic determination (by its members) of the ratio of wages between the management of a company and the lowest position in the same.  This policy, if done right, encourages intra-firm competition without affecting cooperation, and recognizes differences in the interest and effort each worker put into the coop.

We need to strike the right balance between cooperation and competition, the point were people can pour their hearts into something not only because of the possibility of future economic reward, but because they like the activity on which they engage every day.  There can be rich people under marksoc, if they provide society with valued services and products, derived from their own work.  Every big project needs the work of many people in cooperation, and even brilliant artists need help from others to bring their work from their heads into the world. 

When the word meritocracy was coined (in 1958), it was intended as a satire about competition in modern society; however, we could take "merit" as some other than general knowledge or academic degrees.  Imagine a world where your place in society depends on the projects that you can generate with your peers, where everybody can be an entrepreneur instead of a little pawn in a machine that came from the sky.  In this world, people will more or less be invested in things that interest them, and if those things are marketable in some form or another, they will be the final product of amazing companies fueled by the work of passionate individuals.  "Merit" then will take his meaning: making the best possible with the things you are good at.  And I don´t see nothing wrong with that.

GEORGE, Robley E. (2002): Socioeconomic Democracy: An Advanced Socioeconomic System, Wesport, CT: Praeger Paperback, 328 pp.

RUSMICH, Ladislav & SACHS, Stephen M. (2003): Lessons from the Failure of the Communist Economic System, Lanham, MD: Lexington Books, 380 pp.

WESTRA, Richard (2008): "Economic Life Beyond Capital" (review of books), Review of Radical Political Economics, 40, pp. 354-363.

For the accumulated Bibliography and the Glossary please click here

Some conclusions for a program towards Market Socialism

Hello reader:

I have some conclusions to make from my lecture of the articles about marksoc until this point. They are spearheaded by the quick changes that many developed nations are experiencing in 2011, from the fed up population of the United States and its Occupy Wall Street  movement (read this) to the crumbling of the monetary union in Europe. I based these ideas on this article by Schweickart, and added my own.

First: To produce a global change in the status quo, we need before to change the situation on our countries.

Second: Currently, under capitalist democracy in its variants, we need to create the institutions necessary for  the transition towards marksoc.  We cannot wait for an uprising or for the situation to become dire.  These institutions will become invaluable during or after the economic crash. 

Third (first in importance): We no longer work on a theoretical construct to prove a theoretical point, now we work towards a model for praxis, to show how we want the world to be.  This also means finding practical solutions for "small" real-world problems.  

The following example is not as trivial as it seems: there is a small bookstore shop.  The owner works all day, more than 60 hours per week in the shop, but wants some free time.  Hired employees require constant supervision, since their interest clash with those of the shop owner, and for a small business they are costly (wages and taxes).  How can this shop become a micro-cooperative without the original owner taking a big hit on his income? What strategy can we suggest so a partnership can be made, to have as a result two happy new cooperativists instead of an over-worked capitalist owner with one employee?  Find the answer to this example, and a big part of the issues regarding the adoption of marksoc by the general population will be solved.

Fourth: We will not permanently win hearts and minds with a shocking  revolution.  The economic violence against the majority, however grave, cannot be destroyed with physical violence.  If we are right, cooperative companies as a whole will supersede their capitalist counterparts because they are better, more efficient, more responsive to the demands of society.  If the game is rigged and tweaked, it means that not all the rules are against us.  We beat the current system with more democracy, not less.  In this way, change will become permanent, as "natural" as capitalism felt until now.
  
We still need to discuss the details.  As we saw in the last posts, some of the important issues to decide upon include:

• the degree (or possibility) of control of investment by the State,
• the degree (or possibility) on which the State can function as an employer of last resort,
• surprisingly, for some authors such as Schweickart we need to include in the system the possibility of allowing small and even grand capitalists to continue developing companies.

I will try to speed-up my reviews of articles about marksoc, and you reader will need to ask me questions and posit answers to make me run faster towards the objective.  We need to start somewhere.

Bibliography

SCHWEICKART, David (2006):  "Economic Democracy: A Worthy Socialism that Would Work", Presentation at the Book Launching of "Derecho a Decidir: Propuestas para el socialismo del siglo XXI", ed. Joaquin Arriola.

For the accumulated Bibliography and the Glossary please click here

Investment in David Schweickart´s "Economic Democracy" (Part 2)

Welcome back.  In this post I will continue analyzing the way on which investment is funded and distributed in David Schweickart`s model of market socialism, denominated Economic Democracy (ED).  

As we saw in my last post, the system of funding in ED consist in a general tax over the capital assets of companies; the resultant income is later distributed by the state to a myriad of “social banks”.  Schweickart itself recognized in his book "After Capitalism" (2002) the possibility of a system of "laissez-faire" marksoc, but preferred to develop a system of banks that would invest in cooperative companies based in social goals, especially to reach full employment.  This alternative laissez-faire system would be structured in the following way: 

Banks would be charged a centrally determined interest rate on the funds they receive. They would be expected to make a profit, that is, to charge more than the baserate interest, adjusted according to risk. Bank officials, who are public officials, would be paid in accordance with performance. Banks would compete, as they do now, trying to balance the riskiness of their loans against the interest rates they charge. As under capitalism, managers of successful banks (i.e., the most profitable) would be rewarded, managers whose banks performed poorly would be sacked. In all cases, bank profits are returned to the national investment fund. (p.49)

For the author of this blog, this system constitutes a mix between what I call pure marksoc and Economic Democracy, since in the later banks are managed by public officials and not by its own workers, and the State controls part of the economy through its management of the "investment fund".  We should remember that in Economic Democracy the workers are not owners of their companies, which belong to all of society. Workers cannot sell the capital stock and use the resultant money as income. 

Let me describe some positive aspects of the ED proposition.  In ED investment is proportionally allocated among regions according to their population.  Following neo-classical economic theory, this allocation would be clearly inefficient, since profitable companies could lack access to funds while less profitable ones could receive them because of their location.  Bruno Jossa (2004) is right to point that labour also moves between regions (albeit more slowly than capital), thus we could see a population movement towards those regions where the returns to capital are higher.  Per-capita allocation of investment can mitigate the concentration effect, and it is based in the principle of fairness.  Being that in ED there is not interest earned for personal savings, the mechanism of tax over the capital stock of companies and fair redistribution of investment avoids the “problem of austerity” of capitalism, because S(avings) can then be equal to I(nvestment) with some slight manipulations.  Jossa argues that in ED we can dispense through the fiscal system with both “Keynesian” and even structural unemployment.

Public ownership and social investment constitute “protective” measures that show an overwhelming preoccupation about the possible destruction of companies and the increase of unemployment, preoccupation proper of developed service economies such as the United States.  In my opinion the gains in efficiency (and happiness) due to real ownership far outweigh the potential costs of the destruction and reconstruction of companies (still, in a mixed system where cooperatives and capitalist companies cohabit, this means that we could see our hopes for the establishment of marksoc dashed by the degradation of cooperatives and their eventual transformation in capitalist companies). 

Jossa agrees that banks should be cooperatives in themselves which can pursue profits, but desires to maintain the per-capita basis of the tax funds`distribution.  He also sustains that granting interest for personal savings (in the form of government bonds) is not a problem in an economy where workers are also company owners.  Jossa recognizes that letting the banks choose companies according to expected returns on their loans could greatly reduce the available funds for the creation of new cooperatives.  However, it is important to note that there is an intrinsic limit to the size of a cooperative company (depending on the sector).  This fact lets horizontal spaces to be filled by new potential enterprises in a specific market, existing also an interest on the cooperatives`side to spur other companies to work with along the production chain, in the way a federation does.

I think that is important to differentiate between complete ideal models such as ED and the possibilities of reality, shaped by political conflict and power struggles.  The conceptual transition from capitalism to pure marksoc, given its similitudes to libertarianism and other “free-market” philosophies, seems to be easier than the transition towards ED at this moment (2011). The most important problem to solve, if we are going to take the pure road to a marksoc system, is how we are going to facilitate the necessary funds for the establishment of the required thousands of new cooperative companies.  If we are right, with minor adjustments our system can quickly supersede the current “capitalism of chaos and friends in high places” (how else can it be described?) and from there further changes towards fairness can be implemented.  Am I too timid to make revolutionary changes?  We should discuss then the desirability of more involvement of the State in the structure of investment, the fairness principle in investment distribution, and the future effects this can have in the environment and personal happiness.  Fire away.

Bibliography

JOSSA, Bruno (2004): "Book Review: Schweickart and Economic Democracy", Review of Radical Political  Economics (36), pp. 546-561.

SCHWEICKART, David (2002):  "After Capitalism", Lanham: Rowman & Littlefield.

For the accumulated Bibliography and the Glossary please click here

Investment in David Schweickart´s "Economic Democracy" (Part I)

Welcome back.
 
First, I want to give a hint to everybody.  If you like to study a subject, but you don´t have enough time (and money) to do it, a simple equipment upgrade can make wonders.  I recently bought a popular e-book reader, converted some of the PDFs of my extensive marksoc bibliography and uploaded them to the little machine.  The change in my disposition to read and the rate at which I can comment on articles and write posts based on them is nothing short of astonishing. Do not attempt to read articles in your computer.  You can print the articles (bad for nature, expensive and a pain in the head when you want to copy your notes into an usable digital format), or you go the e-book reader path.  Notes made to articles this way cannot yet be shared with other readers in the way is done in Google Docs, but it is only a matter of time until e-book readers can properly manage readable PDFs  in their native format, or export documents with their remarks in the right place, including highlighting and notes, and from there to a full collaborative effort there is only one small step.

Second, from now on  I will add a link to a Glossary and Bibliography post at the end of each new entry, so those of you new to the concepts in this blog can catch up, and the rest can have a long and nice list of articles to peruse and help with this project.

Third, today´s post! The theme of the current post is a central element in David Schweickart´s model of woc-marksoc that I previously misunderstood.  A marksoc model consist in three parts: a free market, more democratic companies, and a more democratic way of allocating investment.  The first one is implied in marksoc (is part of the name).  The second one is the core of the woc-marksoc model, since cooperatives are expected to be more democratic than their capitalist counterpart.  The third point, however, can be achieved in varied ways, ranging from social planning to private profit-driven investment.  It was my view that in marksoc, cooperatives would be financed by banks that would constitute cooperatives in themselves, which would be guided by profit to make the best possible choices between the companies (existing or future) competing for its funds.  However, according to Schweickart this is not the case.

Schweickart sustains that one of the main problems of capitalism is the dependence on "investors confidence". Capitalism needs continuous growth to work.  There needs to be an increase in consumption to convince private investors that there will be profits to be made at the end of the road.  Any bumps can be translated by some into a pessimistic outlook, and "their pessimism becomes a self-fulfilling prophesy" (Schweickart, 2008).  Then, decreasing investment means higher unemployment, which it means less aggregated demand, and there we are, trapped in a downward spiral (as an example, the current situation in the United States described here).  Now, in woc-marksoc we have a built-in corset for those people that own companies: they work there too, and they will be averse to act against their own workplace, so if they are not confident enough in the future to re-invest their earnings into new technology or an expansion, they will nevertheless look to maintain themselves occupied because they are the people on the line of fire.  I am sure that most folks do not like to commit economic "suicide".

But what about outside investors in marksoc?  Namely, those that can make the initial "investment" in the form of a loan or grant?  If those investors are cooperative banks, they must also be reticent to stop all their activity, because they must keep the bank running to obtain profits.  Closing the bank to do other stuff with the money would not work, since ownership is distributed between every employee involved.  But we cannot ensure that cooperative banks will use its funds to make loans to cooperative companies, instead of choosing other investment paths that could generate higher earnings.  Unless we make them do exactly that through regulation, of course.

The solution that Schweickart provides is to bring financial markets "under conscious collective control".  How does he plans to do that?  Exacting a tax on cooperative companies, which the State will later redistribute to social banks based on the population of each region of a country (per-capita basis).  I let him to explain here how this redistribution system would work:

These funds are then distributed to local and regional investment banks —public banks—charged with loaning them out to individuals and enterprises needing funds to start up, upgrade, or expand business operations. Loan applications are judged in terms of projected profitability, employment creation, and, if the community so desires, environment enhancement.

Loan officers are public officials, democratically accountable, charged with effectively allocating the funds entrusted to them. If their loan portfolios perform poorly, they can be discharged.

In this way, investment would be divorced from these harmful "animal spirits" that cannot agree in taking the economy out of the dump when the free market mechanism fails.  But can we still talk about market when investment is not guided by companies (banks) making independent decisions?  Let´s say that job creation is a decisive element to decide the continuity of a loan officer.  Should this officer benefit companies creating lots of low-paying jobs over companies creating fewer high-quality jobs?  Who decides if an investment portfolio has performed poorly? The State, the citizens of the region, or the employees of the particular bank?  And what does poorly means in this context?

There are many details to work on: first, we have the big choice between cooperative banks and "social banks", then the issue of the system of redistribution of funds gained through taxes over the capital stock of cooperative companies, and finally the criteria utilized to distribute these loans between producer cooperatives (which, again, in Schweickart´s system are not like regular loans, more about this in my next post).  Personally, I prefer a woc-marksoc system comprised exclusively of companies owned by their own workers, guided by their own interests (always under the law), with supporting government agencies that can bankroll investment in certain areas according to motives other than profits.  It seems that I will have a hard time letting go of my free market approach to the issue.

I will stop here, since the article I used as a base doesn't get much further.  In my next post I will be exploring ideas about investment under the guidance of an article written by Bruno Jossa that lingers on this very issue (see Bibliography below).  Please add any ideas that you can have about this, the comments box is below for you to use it.  See you next time (soon).

Bibliography

JOSSA, Bruno (2004): "Book Review: Schweickart and Economic Democracy", Review of Radical Political  Economics (36), pp. 546-561.

SCHWEICKART, David (2008): "Is Sustainable Capitalism Possible?", Beijing Forum: The Harmony of Civilizations and Prosperity for All -The Universal Value and the Development Trend of Civilization.

For the accumulated Bibliography and the Glossary please click here 

Accumulated Glossary and Bibliography

Glossary

BI - Basic Income. 

ED - Economic Democracy, system designed by David Schweickart.
I - Investment.
KOF - Capital Owned Firm.
LMF - Labour Managed Firm.  
marksoc - Market Socialism
(pure) marksoc - Pure Market Socialism (Vanek, Ward).  Free market of good and services with competition between cooperative companies, capital is not controlled by the State.
MAW - Maximum Allowable Personal Wealth (R. George)

S - Savings.
UGI - Universal Guaranteed Income (R. George)
woc-marksoc - "Worker-Owned Companies" Market Socialism



Bibliography utilized:

BUNGE, Mario (1998): Social Science under Debate: A Philosophical Perspective, University of Toronto Press Incorporated.

ERRASTI A., BRETOS I., and NUNEZ A. (2017). "The viability of cooperatives: The fall of the Mondragon cooperative Fagor". Review of Radical Political Economics, First Published February 2, 2017.

JOSSA, Bruno (2004): "Book Review: Schweickart and Economic Democracy", Review of Radical Political  Economics (36), pp. 546-561.

KALMI, Panu (2003): “The Study of Co-operatives in Modern Economics: A Methodological Essay”, Helsinki School of Economics Working Paper No. 351.

MILL, John Stuart (1848, revised 1852): Principles of Political Economy: with some of their applications to social philosophy. Book IV,Chapter 7. John W.Parker, London. 

NAYERI, Kamram (2003): "Market Socialism: The Debate among Socialists (book review)", Review of Radical Political Economics, 35, pg. 362. 

OLLMAN, Bertell ed. (1998). With SCHWEICKART, David, LAWLER, James, TICKTIN, Hillel (1997): "Market Socialism: The Debate Among Socialist". Routledge; 1st edition.

RECTOR, Tully (2021): "Market socialism as a form of life", Review of Social Economy, DOI: 10.1080/00346764.2021.1886319

SCHWEICKART, David (1996): Against Capitalism, Westview Press.

SCHWEICKART, David (2002):  After Capitalism, Lanham: Rowman & Littlefield.

SCHWEICKART, David (2006):  "Economic Democracy: A Worthy Socialism that Would Work", Presentation at the Book Launching of "Derecho a Decidir: Propuestas para el socialismo del siglo XXI", ed. Joaquin Arriola.

SCHWEICKART, David (2008): Is Sustainable Capitalism Possible?, Beijing Forum: The Harmony of Civilizations and Prosperity for All -The Universal Value and the Development Trend of Civilization.
  
WESTRA, Richard (2008): "Economic Life Beyond Capital" (review of books), Review of Radical Political Economics, 40, pp. 354-363.

WOLFF, Richard (2012): Democracy at Work: A Cure for Capitalism. Haymarket Books. 

 


Bibliography from articles ("the Utopia List"):
 
   Here I will include bibliography that appeared in the articles utilized to write my posts, but that I still haven´t got to use.  With time, these items will be copied to the upper section (meaning that they have been read, analyzed, and discussed).  In the end I hope that all existent articles about Market Socialism can be found in this page and constitute a more or less complete reference list about the subject.  If my blog comes to nothing, the least I can do is to compile a list of material for other people to make Utopian dreams come true.

Aspromourgos, T. 2000. Is an employer-of-last-resort sustainable? A review article. Review of Political Economy 12 (2).

Banerjee, Abhijit, Dilip Mookherjee, Kaivan Munshi, and Debraj Ray (2001): 'Inequality, Control Rights, and Rent Seeking: Sugar Cooperatives in Maharashtra', Journal of Political Economy, 109 (1): 138-90.

Benham, Lee and Philip Keefer (1991): ‘Voting in Firms: The Role of Agenda Control, Size and Voter Homogeneity’, Economic Inquiry, 29: 706-19. 

Ben-Ner, Avner (1988): ‘The Life Cycle of Worker-owned Firms in Market Economies: a Theoretical Analysis’, Journal of Economic Behavior and Organisation, 10:287-313. 

Blaug, Mark (1998): 'The Problems With Formalism', Challenge, May-June.

Bonin, John P. and Louis Putterman (1987): Economics of Cooperation and the Labor-Managed Economy, New York: Harwood.

Bonin, John P., Derek C. Jones and Louis Putterman (1993): 'Theoretical and Empirical Studies of Producer Cooperatives: Will Ever the Twain Meet?' Journal of Economic Literature, 31:1290-1320.

Bowles, Samuel and Herbert Gintis (1996): 'The Distribution of Wealth and the Viability of the Democratic Firm', in Pagano and Rowthorn, 82-97.  

Dickinson, H. D. 1933. Price formation in a socialist community. Economic Journal 43 (June).
 
Dobb, M. [1939] 1955a. Economists and the economics of socialism. In On economic theory and socialism. Collected papers, ed. M. Dobb. London: Routledge & Kegan.

[1939] 1955b. A note on saving and investment in a socialist economy. In On economic theory and socialism. Collected papers, ed. M. Dobb. London: Routledge & Kegan.

 [1953] 1955.Areview of the discussion concerning economic calculation in a socialist economy. In Oneconomic theory and socialism. Collected papers, ed. M. Dobb. London: Routledge & Kegan.

1956. Pianificazione. In Dizionario di economia politica. Milan: Comunitá.

1969. Welfare economics and the economics of socialism. Cambridge, UK: Cambridge University Press.

Davis, John B., D. Wade Hands, and Uskali Mäki (1998, eds.): The Handbook of Economic Methodology, Cheltenham: Edward Elgar.

Domar, E. D. 1966. The soviet collective farm as a producer cooperative. American Economic Review 56 (4).

Doucouliagos, Chris (1995): 'Worker Participation and Productivity in Labor-Managed Firms and Participatory Capitalist Firms: A Meta-Analysis', Industrial and Labor Relations Review, 49 (1): 58-77.


Dow, G. 1993. Democracy versus appropriability. Can labour-managed firms flourish in a capitalist world? In Markets and democracy: Participation, accountability and efficiency, ed. S. Bowles, H. Gintis, and B.
Gustafsson. Cambridge, UK: Cambridge University Press.

1998. Review of Jossa & Cuomo, 1997. Journal of Economic Literature 36 (2).

Dow, G., and L. Putterman. 1996. Why capital (usually) hires labour: A review and assessment of some proposed explanations. MIMEO.

Dow, Gregory K. (2003): Governing the Firm: Workers' Control in Theory and Practice, Cambridge, UK: Cambridge University Press.


Dow, Sheila C. (2002): Economic Methodology: An Inquiry, Oxford: Oxford University Press.
 
Drèze, J. H. 1989. Labour-management, contracts and capital markets. A general equilibrium approach. Oxford: Blackwell.  

1993. Self-management and economic theory: Efficiency, funding and employment. In Market socialism: The current debate, ed. P. Bardhan and J. E. Roemer. New York: Oxford University Press.

Dubravcic, D. 1970. "Labor as an entrepreneurial input; an essay on the theory of the producer cooperative economy". Economica 37 (147).

Earle, John S. and Estrin, Saul (1996): ‘Employee Ownership in Transition’, in Roman Frydman, Cheryl Gray and Andrzej Rapaczynski (eds): Corporate Governance in Central Europe and Russia, vol. 2: Insiders and the State. Budapest:CEU Press.
 
Elster, J., and K. P. J. Moene, eds. 1989. Alternatives to capitalism. Cambridge, UK: Cambridge University Press.

Erlich, A. 1978. Dobb and the Marx-Feldman model: A problem in the soviet economic strategy. Cambridge Journal of Economics 15 (2).

Estrin, S. 1983. Self-management: Economic theory and Yugoslav practice. Cambridge, UK: Cambridge University Press.

Furubotn, Eirik and Pejovich, Svetozar (1970): 'Property Rights and the Behaviour of the Firm in a Socialist State: the Example of Yugoslavia', Zeitschrift für Nationalökonomie, 30: 430-454. 

Furubotn, Eirik (1976): 'The Long-Run Analysis of the Labor-Managed Firm: An Alternative Interpretation', The American Economic Review, 66: 104-123.

Furubotn, Eirik and Richter, Rudolf (1991): 'The New Institutional Economics: An Assessment', in Furubotn and Richter (eds.), The New Institutional Economics, Tübingen: Mohr, 1-34.

Gintis, H. 1989. Financial markets and the political structure of the enterprises. Journal of Economic Behaviour and Organization 1 (1).

George, Robley E. (2002): Socioeconomic Democracy: An Advanced Socioeconomic System, Wesport, CT: Praeger Paperback, 328 pp.

Hansmann, Henry (1996): The Ownership of Enterprise, Cambridge, MA: Belknap Press.

Hart, Oliver and Moore, John (1996): 'The Governance of Exchanges: Members' Cooperatives versus Outsider Ownership', Oxford Review of Economic Policy, 12 (4): 53-69.

Hart, Oliver and Moore, John (1998): 'Cooperatives vs. Outside Ownership', NBER working paper 6421, February.

Hodgson, Geoffrey M. (1988): Economics and Institutions: A Manifesto for a Modern Institutional Economics, Cambridge: Polity University Press.

• (1996): 'Organisational Form and Economic Evolution', in Pagano and Rowthorn, 98-115. 
• (1999): Economics and Utopia: Why the Learning Economy Is Not the End of History, London: Routledge. 

Horvat, Branko (1982): The Political Economy of Socialism: A Marxist Social Theory, M.E. Sharpe.
 
Ireland, N. J., and P. J. Law. (1981): "Efficiency, incentives, and individual labor supply in the labor-managed firm". Journal of Comparative Economics 5 (1).

Ireland, Norman J. and Law, Peter J. (1982): The Economics of Labour-Managed Enterprises, London: Croom Helm.

Jensen, Michael C. and Meckling, William H.  (1979): 'Rights and Production Functions: An Application to Labor-Managed Firm and Codetermination', Journal of Business, 52(4): 469-506.
 
Jossa, B. 2001. L’impresa gestita dai lavoratori e la disoccupazione classica e Keynesiana. Rivista italiana degli economisti, 1, April.

2004. Marx, Marxism and the cooperative movement. Cambridge Journal of Economics.

Jossa, B., and G. Cuomo. 1997. The economic theory of socialism and the labour-managed firm. Cheltenham, UK: Edward Elgar.

Kaldor, N. 1972. The irrelevance of equilibrium economics. Economic Journal 82 (December).
 
Kornai, J. 1992. The socialist system: The political economy of communism. Princeton, NJ: Princeton University Press.

Meade, James E. (1972): ‘The Theory of Labour-Managed Firms and of Profit-Sharing’, Economic Journal 82: 402-28.

Meade, J. E. 1972. "The theory of labour-managed firms and of profit sharing". Economic Journal Suppl. No. 82 (March).

1979. "The adjustment processes of labor cooperatives with constant returns to scale and perfect competition". Economic Journal 89 (December).

Mygind, N. 1997. Employee ownership in Baltic countries. In Privatisation surprises in transition economies: Employee ownership in Central and Eastern Europe, ed. M. Uvalic and D. Vaugham-Whitehead. Cheltenham, UK: Edward Elgar.

1962a. Squilibri economici e pianificazione in Italia. La Rivista Trimestrale 2 (June). 

1962b. Mercato, pianificazione e imprenditorialità. La Rivista Trimestrale 3 (September).

Nuti, D. M. 1978. Investment, interest and degree of centralization in Maurice Dobb’s theory of socialist economy. Cambridge Journal of Economics 3 (2).

Pagano, Ugo and Rowthorn, Robert (1996, eds): Democracy and Efficiency in the Economic Enterprise, London: Routledge.

Pencavel, John (2001): Worker Participation: Lessons from the Worker Co-ops of the Pacific Northwest, New York: Russell Sage.

Perkins, Albert (1995): 'Cooperative Economics: An Interview With Jaroslav Vanek', New Renaissance Magazine, 5(1), available also at http://www.ru.org/51cooper.html 

Pica, F. 2000. Per un federalismo municipalista (I principi: il federalismo e la costituzione italiana). In Teoria e fatti del federalismo fiscale, ed. D. Fausto and F. Pica. Bologna, Italy: Il Mulino.

Pittatore, Silvia and Turati, Gilberto (2000): ‘A Map of Property Rights in Italy and the Case of Co-operatives: An Empirical Analysis of Hansmann’s Theory’, Economic Analysis: Journal of Enterprise and Participation, 3(1): 23-48.

Putterman, L. 1993. After the employment relation. In Markets and democracy: Participation, accountability and efficiency, ed. S. Bowles, H. Gintis, and B. Gustafsson. Cambridge, UK: Cambridge University Press.

Prychitko, David (1996): 'The Critique of Workers' Self-Management: Austrian Perspectives and Economic Theory', Advances in Austrian Economics, 3

Rey Patrick and Tirole, Jean (2000): 'Loyalty and Investment in Cooperatives', mimeo, University of Social  Sciences, Toulouse.

Rey, Patrick and Tirole, Jean (2001): 'Financing and Access in Cooperatives', mimeo, University of Social Sciences, Toulouse. 

Roemer, J. E. 1992. The morality and efficiency of market socialism. Ethics 102. Reprinted in J. E. Roemer, Egalitarian perspectives; essays in philosophical economics. Cambridge, UK: Cambridge Economic Press, 1994.

1994. On public ownership. In Egalitarian perspectives; essays in philosophical economics. Cambridge, UK: Cambridge Economic Press.

Rusmich, Ladislav & Sachs, Stephen M. (2003): Lessons from the Failure of the Communist Economic System, Lanham, MD: Lexington Books, 380 pp.


Schweickart, D. 1993. Against capitalism. Cambridge, UK: Cambridge University Press.

1998. Market socialism; a defense. In Market socialism; the debate among socialists, ed. B. Ollman.London: Routledge.

Sen, Amartya K. (1966): ’Labour Allocation in a Co-operative Enterprise’, Review of Economic Studies, 33: 361-71.
 
Stephen, F. H. 1984. The economic analysis of producers’ cooperatives. London: Macmillan.

Thomas, H., and C. Logan. 1982. Mondragon; an economic analysis. London: Allen & Unwin.

Tortia, Ermanno (2002): The Internal Organisation of Labour Managed Firms: The Problem of Value Added Distribution and of Capital Accumulation, unpublished Ph.D. dissertation, University of Ferrara.
 
Vanek, J. 1970. The general theory of labor-managed market economies. Ithaca, NY: Cornell University Press.
 
Vanek, Jaroslav (1971): The Participatory Economy: An Evolutionary Hypothesis and a Strategy for Development, Ithaca: Cornell University Press.

Vanek, Jaroslav (1975): Self-Management: Economic Liberation of Man, Harmondsworth, UK: Penguin.

von Mises, L. [1932] 1981. Socialism; an economic and sociological analysis. Engl. translation. New Haven: Yale University Press.

Ward, Benjamin (1958): 'The Firm in Illyria: Market Syndicalism', American Economic Review, 48: 566-89.

Still Not In Proper Order, will be shortly:


Mäki, Uskali (1998): 'Realisticness', in Davis, Hands and Mäki, 409-13.Morduch, Jonathan (1999): ‘The Microfinance Promise’, Journal of Economic Literature, 37 (4): 1569-634.
Schotter, Andrew (1997): Microeconomics: A Modern Approach, Reading, MA: Addison-Wesley.Steinherr, Alfred and Jean-Jacques Thisse (1979): ‘Are Labour-Managers Really Perverse?’, Economics Letters, 2: 137-43.Jean (1999): ‘Incomplete Contracts: Where Do We Stand?’, Econometrica, 67 (4): 741-81.
Tirole, Jean (2001): ‘Corporate Governance’, Econometrica, 69 (1): 1-35. 
Torgerson, Randall E., Bruce J. Reynolds, and Thomas W. Gray (1998): ‘Evolution of Cooperative Thought, Theory and Purpose’, Journal of Cooperatives 
Williamson, Oliver E. (1985): The Economic Institutions of Capitalism, New York: The Free Press.

From Market Socialism to Technoholodemocracy

Before we continue, let´s analyze a definition of Market Socialism, the one provided by Wikipedia, the example of non-profit collaborative effort in the Internet, as of today: 

Market socialism refers to various economic systems where the means of production are publicly owned, managed and operated for a profit in a market economy. The profit generated in a market socialist system would be used to directly remunerate employees or go toward public finance. Theoretically, the fundamental difference between a traditional socialist economy and a market socialist economy is the existence of a market for the means of production and capital goods under market socialism.

It is correct to affirm that marksoc refers to various proposed economic systems, since each author interested seems to have his own variation, but all hover around a central theme.  The Wikipedian definition centers too much in the "market" aspect of marksoc, and this is understandable, because the existence of a free market is what differentiates this system from Central Planned Socialism, the commonly known type of socialism of which we had real-life examples in the 20th Century.

However, the definition translates the "socialist" part of the equation directly into the words "the means of production are publicly owned".  This mistaken phrase derivate from the description of Capitalism as a system where the means of production are privately owned without referencing the rationale behind the right of the owners to receive profits.   As we know, profits are the reward received for a successful investment (of capital), regardless of the amount of work that the investor personally contributed (or not) to produce those profits.  Without this consideration, the opposition to Capitalism appears to be the opposition to the private character of ownership, when in fact Socialist advocates want to distribute the fruits of labor in a different manner than the typical Capitalist configuration of rents for resources; wages for workers; and  profits for investors.   In the case of  market socialism, ownership can be public (at community or State level) or private (the workers are owners), but the product or service will always be gauged in the market, and the profits will not be paid to non-working private investors.  This being said, it is common to understand private ownership as being equivalent to capitalist ownership when we include the concept of “wages” in the same discussion, but I prefer to maintain a clear set of definitions to prevent mistakes (such as conflating public with a collective, or a private cooperative with the commons).

As we saw in my last post, David Schweickart differentiates between marksoc and a specific kind of which he (and me) is partisan: “worker-self-managed” market socialism.  We will call this particular version woc-marksoc (Worker-Owned-Companies´ Market Socialism), since ownership will mostly imply that the workers manage their own work process.   

The main characteristics of this system can be resumed as follows:

•  Each company is owned by the people working on them.  They manage the company and decide how to distribute the income of the company net of production costs, excepting wages, which are now included in the net income with the profits, since workers will receive both. 
• Companies compete with each other in a free market of good and services.  
• The State mediates in the cases of market failure, and helps to create new companies through the financial system, composed of banks that are cooperatives in themselves.  The State can also own companies.  

The positive (and negative) effects of this system will be throroughly analyzed in this blog, but we can already visualize the most obvious of them: an increase in competition under a woc-marksoc scheme will spur innovation and decrease unemployment; self-management will improve workers` satisfaction and self-worth;  the resultant reduction of inequality could greatly reduce violent crime, class discrimination, and even divorce (since most of it has economic roots).

Once done the conceptual jump towards a system that can supersede capitalism, there is only one way to go, and it is forward.  The Argentine-Canadian intellectual Mario Bunge takes woc-marksoc as a base for a more comprehensive system which would include not only the economic facet of social life but also the biologic, cultural and environmental aspects of society. Bunge calls this starting point “authentic socialism”, a system on which the means of production, commerce and credit are cooperatively owned, and on which there is full democracy in the workplace.  This is closer to my conception of woc-marksoc than the generally accepted convention of socialism as a classless society with collective ownership.  However, he finds this “authentic socialism” to be desirable but insufficient, since ignores the necessity of national and international-level cooperation between companies alongside regulated competition, doesn't occupy itself with the State`s inherent tasks (security, health, etc.) and it is limited to the particular economic sphere of social life.  Instead of the particular addition of economic democracy to an already existing system of political democracy, Bunge proposes an expanded kind called “technoholodemocracy”.


In his words, this technoholodemocracy is “the equality of opportunities through biologic equality (sex and race), participative democracy, cooperative ownership, self-management, technical skills and the free access to culture” (Bunge, 1998, p. 435, my translation from Spanish version).  It is a “qualified equality”, a balanced mix between equality and meritocracy (see here).  I suspect that Bunge wants to somehow eliminate the pervasive problem of inter-generational social and cultural capital, which depends on established relationships that act as a ceiling for those people that cannot participate in the right social circles.  After all, many of the richest cooperatives in a woc-marksoc system would probably be populated by those professionals that already have an edge in current capitalism, letting those below them in a better position than before but still without clear possibilities of progress related to potential individual capabilities, meaning that each person would still suffer or gain according to his previous social connections and access to culture. Technoholodemocracy also addresses a problem that I tend to disregard too quickly: even woc competition cannot ensure that environmental degradation will stop without a collective effort.  In his words: “we need a social or controlled market rather than the free market”.  He asserts that this can be achieved with a relatively small State, since full employment, cultural access and autonomous and voluntary organizations would make a large bureaucracy mostly irrelevant, letting to the State the task of coordinating the system.  It almost sounds like the wet dream of both communists and libertarians, without being any of them.


This Utopian exercise is fun and useful to determinate where we want to go in the end, but we must come back to the practical problems at hands´ distance.  We must analyze all possible issues to be presented against our woc-marksoc model and we must find ways to foster the transition to that system without any kind of magic revolution.  Given the current turbulent economic and political juncture, it is our task as intellectuals to be ready when the time comes, because it seems more than ever that elite and the masses will be looking for an answer, and we must be there with the “book” in our hands to gave everybody a chance, to put society in the safe path of Democracy and far away of any tempting authoritarian solution that could lead society into chaos.

Bibliography: 

BUNGE, Mario (1998): “Social Science under Debate: A Philosophical Perspective”, University of Toronto Press Incorporated.