Cooperative Economics: An Interview with Jaroslav
interviewed by Albert Perkins
Albert Perkins: Professor Vanek, how did you first develop your ideas on
Jaroslav Vanek: I had four major influences. First, I experienced the
evils of communism when I was a refugee in Czechoslovakia from Stalinism,
and later, when I came to the West, I also experienced the evils of western
capitalism. Then, in between, I was fortunate enough to spend time with
my late brother who did extensive work for the I.L.O. (International Labor
Organisation) and wrote the first book about the workers' councils in Yugoslavia.
I learned many of my basic ideas from him. He was a sociologist and I was
an economist, and I was able to transpose his ideas into my field. Third
was the doctrine of the Catholic Church. Pope John 23rd went a long way
toward suggesting the desirability of economic democracy. Finally, I was
influenced by Dubceck's model of social democracy. It could have been more
successful than the Yugoslavian experiment, but for the Soviet tanks. I
have had several interests in my life, including the area I call economic
democracy. Economic democracy is a transposition of the idea of political
democracy. It implies that economic life is governed by people who are
involved in thateconomic life. Capitalism is based on property rights,
and democracy on personal rights. Perhaps the most important aspect of
capitalism, its objective function, is to maximise profit. If you look
at it more carefully, profit is revenue minus labor costs and other costs.
This means then human beings enter the defining objective function of the
system with a negative sign. By contrast, economic democracy has
an objective function where people are on the positive side of the equation.
The idea is to maximise the welfare of the people participating. This is
an enormous difference, and I'm convinced that the tragic difficulties
of our culture -- ecological devastation, starvation, etc. -- can be traced
to this negative side But capitalism could be cured slowly if we developed
economic democracy. One of the main reasons why the western world is so
schizophrenic is that we have political democracy and economic autocracy.
AP: What would such a system look like?
JV: The system should be a market system, not ruled from a central ministry,
but by the rules of supply and demand This is the only true market economy.
The capitalist economy is not a true market economy because in western
capitalism, as in Soviet state capitalism, there is a tendency towards
monopoly. Economic democracy tends toward a competitive market. The system
is composed of households, enterprises government and so on. The main distinguishing
characteristics are in the area of production. Productive enterprises are
small republics. Everyone who works is a member and the enterprise is run
democratically directors are elected democratically and stockholders have
AP: Do you see all firms run cooperatively?
JV: There are many possibilities. In Mondragon you have cooperatives
developed from the Rochdale principles, characterised by democratic management.
And the Yugoslav firms, although poorly designed, were democratically run
and semi-cooperative. In an article to the Russian Academy of Sciences
concerning Khabarovsk, I argued that during the transition period they
should have democratic, but not necessarily cooperative enterprises. These
could be associations of workers in a democratic firm who would lease the
assets of the factory from the state. The American ESOP co-op provides
a good model. By insisting on co-ops we narrow things down unnecessarily.
The idea of economic democracy is broader than just co-ops. Visualize two
sets of loops. One set is co-ops and one set workers participation. Where
they intersect on the co-op side we could have housing, credit etc. On
the other side we can have participation as simple as suggestion boxes.
There are workers coops where the owners make $2000 a week while the workers
make $200. 1 wouldn't call that economic democracy.
AP: Why aren't co-ops working in the West?
JV: If you go to a bank and ask for a loan to start a co-op, they will
throw you out. Co-ops in the West are a bit like sea water fish in a freshwater
pond. The capitalist world in the last 200 years has evolved its own institutions,
instruments, political frameworks etc. There is no guarantee that another
species could function if it had to depend on the same institutions. In
capitalism, the power is embedded in the shares of common stock, a voting
share. This has no meaning in economic democracy. Economic democracy needs
its own institutions for one simple reason. Workers are not rich. Let's
face it, most working people in the world today are either poor or unemployed.
They do not have the necessary capital to finance democratic enterprises.
Hence, we need some instruments and institutions which make this possible.
Why? Because we know that once democratic firms are organized, or even
if they have all the elements of democratic principles, they work far better
than capitalist enterprises.
AP: Tell us why'?
JV: There are many reasons. First of all, if you know that your employer
is maximizing profit and you are a negative aspect of production for him,
it creates a terrible situation. In the UK recently, the miners said "Don't
fire the miners. Fire Prime Minister Major." This is the conflict. Major
is like a director of a state enterprise. But if the director is elected
by the workers to represent their will, as in Mondragon, there is a greater
likelihood of mutual respect. One of the greatest advantages of economic
democracy in well organized co-ops is mutual supervision. Normally the
foreman must be paid three times more than the average worker, because
he is really a slave driver who doesn't produce anything. In fact the workers
will produce as little as possible in this situation. We have found from
studies that the opposing forces of alienation and cooperation can be exceedingly
strong. In French construction coops, capital productivity is double the
norm. The democratic firm can produce two buildings while the capitalist
firm produces only one. The reason for this increased productivity is that
in a democratic firm the workers supervise each other while in capitalist
firms they cover each other's theft or poor work. In GM you will be called
a pig if you expose a theft by a fellow worker. Then there is the savings
of materials. Capitalist firms invest in a lot of unnecessary machinery.
They replicate the inclination of the average Americans buying things they
don't need. The democratic firm can adjust to the optimum level of intensity.
Productivity is not measured only in dollars and output but also in happiness
and job security. Job security is more important than whether you earn
three or four or five hundred dollars a week. In fact, one of the main
theoretical and practical characteristics of the cooperative system is
job security. In capitalist firms workers are constantly being laid off
and fired Unfortunately, the people that would benefit most from economic
democracy have infinitely less power than the people who rule, the captains
of capitalism who create laws, customs, bartering systems, and especially
schools. By and large, the economic departments of America's universities
are institutions for brain washing. They pour a certain culture into students'
heads which teaches them that the capitalist system is the best thing in
the world. Our politicians have called Russia the evil empire, which might
have been true at one time, but since it has disappeared, our system has
become the most evil in the world.
AP: What sort of support systems do we need to get cooperative enterprises
off the ground? Perhaps you could use Khabarovsk as an example.
JV: First of all, we must take into consideration the history of Russia.
The problem is the Harvard school -- and Western leaders have often echoed
this --wants to take a textbook example of capitalism and transpose it
onto Russian soil. Russia has had a functioning state socialist system
for over 75 years. To suddenly import an alien system is exceedingly difficult.
Certain support structures are necessary if a new system is to be accepted.
We know the evils of the police state, one party system, absence of democratic
expression etc., but all was not bad with socialism. Income distribution
was, if anything, overly just: medical doctors could earn half that of
miners; and workers enjoyed reasonable job security. Both are necessary
conditions for the Russian mentality of fairness of distribution and job
security. However, economic democracy provides for a more equitable income
distribution, and far greater income security. A major historical coincidence
that will help, whether we like it or not, is that, in Russia, bureaucratic
ministries organized most of the industrial sector. A ministry for shoes,
another for mining and so on. The capitalist model abolishes this structure
and substitutes a stock market. This bureaucratic structure is still in
place and by incorporating it into the incoming system, the transition
can be smoothed. Thus, before we discuss the implementation of economic
democracy in Russia, we must first consider the historical evolution of
the Russian people over the past 75 years. When we do this we see the enormous
difficulties that a proposed capitalist system must face. For example,
several important ingredients in a successful capitalist system are risk
taking, entrepreneurship and a moneyed class. None of these three are present
in Russia. On the positive side, the historical conditions that led Russia
to accept a system that offered equitable income distribution and job security
will make them much more open to the implementation of economic democracy.
AP: Will there be less people working in the ministries?
JV: Yes. Perhaps by as much as 50 percent. However, we must not totally
eliminate the possibility of capitalism in Russia. Some of the younger
and more able bureaucrats may wish to set up private enterprises. It's
not my preference, but it may be theirs. Anyone who reads this interview
would benefit greatly by watching the video the BBC made on the Mondragon
co-ops in Spain. You can see the practical implementation of much of what
I am saying. Economic democracy is based on a competitive system, with
a large number of autonomous firms which, by themselves, cannot fulfill
all the functions of a large company. General Motors, for example, is so
big it can it can do its own R&D, banking, credit, accounting, transportation,
marketing etc. Democratic companies, which are smaller and more personal,
need support systems to help in these areas. These would be second level
co-ops. They would follow in the same spirit of the larger firms, maximizing
welfare and income for all its members.
AP: How would the poor be able to capitalise their co-ops?
JV: There are existing enterprises already in place. These can be leased
to the workers at a reasonable price. It could be in the form of a fixed
lease contract that would give an incentive to the workers to earn extra
income. The lease money would have to be efficiently allocated to those
who need it for start up costs. The best use of finance is to develop second
level co-ops. If we have mining in an area, we should also have local production
facilities. Rather than ship copper to Moscow for smelting, they could
build a smelter and factories for the production of copper commodities
for sale in their local market as well as for export.
AP: What are their prospects for success?
JV: The Russians are being bombarded by big money on one side, and on
the other, by some Vanekian notions of economic democracy. The odds are
a million to one. It should be said, however, that in the early days of
perestroika, there were some very successful co-ops. Too successful. They
were killed by the bureaucrats because they caused unrest as other enterprises
failed. But education and information are important, as well as pilot projects
so these ideas can be tested in context. Perhaps Khabarovsk will be one
of these test cases.
AP: What are the possibilities of developing successful co-ops in America?
JV. It will not be easy. However, the present economic crisis may worsen
and eventually create a shock that may help the large scale development
of economic democracy in the US. The itinerary, of course, would be entirely
different from that in Russia because our history is so different. Americans
are familiar with political democracy but it will be difficult for them
to move away from the Wall Street power that bought the last two presidents.
Labor unions, though not very strong today, are still important tools.
They could help both in the collective bargaining process, and as part
of the support structure for the new economic democracy. Some developments
that fit into Economic democracy are already at work in the US. The so-called
ESOP, worker controlled businesses, is a step in the right direction. Another
is profit sharing. They are opening new vistas. Galbraith points out that
many people hold shares but don't exercise power. if the present crisis
deepens, we may complete these experiments of worker ownership and profit
sharing and use them to create support organisations. In my life to date,
I have engaged in a series of transformations, or what I call praxis progressions,
going from critical reflection to action: from Stalin's serfdom to the
freedom of the Western white upper class; from capitalism to economic democracy
and self-management; from neo-classical economics to a critical, history-based
and human-oriented study going beyond the confines of economics; from comfortable
agnosticism to a deep, all-pervasive Christian faith; from believing in
Western-style economic development to assisting a sustainable human betterment
of the world's poor through cooperation, solar energy and human technology;
from the AEA to association with the poor of Calcutta, Lima, Nairobi or
Manila, who indirectly are victims of the former. The inflated standard
of living enjoyed by the rich of the world can never, for many reasons,
become the way of life of the 80 percent who are poor. The sane levels
at which all humanity can survive indefinitely is somewhere near the order
of ten times less than today's rich, and ten times more than today 's poorest.
For the latter, whose only wealth is solar energy, there is the promise
of a significant improvement over the long haul. This I would call
the economics of hope. By contrast, the potentially cataclysmic road of
our present, self-centered mainstream economics and "atom defense" of our
ill-gotten riches is what I call the economics of damnation. The road ahead
appears bright for the poor (if the rich do not destroy it), and assisting
and learning from it appears to me to be the only redemption for the rich.
from Prout Journal
Jaroslav Vanek is Professor of Economics
at Cornell University, where he directs the program on "Participation and
Labor Managed Systems" . Vanek is a leading authority on, and advocate
of, cooperative economics. He is currently working on strategies for the
transition to worker-managed economies in post-communist countries. Vanek
also founded and heads STEVEN, a company which designs appropriate technology
for use in the Developing World .
was published in New Renaissance magazine Vol. 5, No. 1
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