Are Cooperative Firms Uncompetitive Against Capitalist Firms?

Hacienda, a supporter of neoliberal capitalism, says worker run companies could not survive the competition against capitalist firms in Silicon Valley:

There are no worker run firms in Silicon Valley.There aren’t any, because they couldn’t survive the competition. That’s seems to be the flaw of worker run firms. They can’t compete.

There’s no reason why a worker run could not survive against capitalist firms. I’m having a hard time imagining why they could not.

The cooperative sector in the US, the rest of the West, Cuba, Nicaragua, Vietnam, China and lots of places, does just fine. Most of China’s firms that are kicking the world’s ass are actually publically owned firms, often run by labor collectives or small municipalities. And co-ops have been going like gangbusters in Western Europe for ages. Don’t sell it short. It’s run just like any other firm, accept that the workers get the profits as owners instead of management.

Tito’s worker run firms did very well for a long time, but there was a flaw. Given the choice of reinvesting in the firm or taking the profits home in their pockets, workers usually decided to take them home, thinking short-term. Eventually, the plants collapsed through lack of upkeep.

The Mondragon Cooperatives in the Basque Region have been running great for years.

Mondragon has gotten away from the Yugoslavian problem in that large banks actually own the plants and run them. They make the decisions about how much to reinvest and how much to pay out to workers. In Mondragon, workers hire and fire their own managers. You would think they would fire anyone who made them work and only hire those who let them slack off, but it has not worked that way at all.

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5 thoughts on “Are Cooperative Firms Uncompetitive Against Capitalist Firms?”

  1. I like the idea of a worker-run firm, but worker-run firms tend to be at a disadvantage because there is no cognitive sorting at the leadership level. For-profit firms tend to be run more efficiently because there is cognitive sorting within the organisation. Because there is higher paid positions at the top which are attractive & tend to be competitive, those with the best credentials tend to get these positions & they tend to have higher IQs. (i.e. If a firm is to be well-run you do not want your 115 IQ people spending the same amount of time managing the books and growing food as the IQ 90 people.)

  2. If you want a good mix of capitalism and socialism we actually do a pretty good job of it in the USA — in certain sectors. You’ve got your corporations or gov’t entities, & you’ve got your unions — sometimes. From an efficiency standpoint the aforementioned model is better than a COOP but worse than a corp with no unions; however, at least the lower-IQ underlings with have some power…

    1. I seriously doubt you could get a Google or Apple developed from a cooperative base or cooperative culture. I’d like to see one. There is no law in the US that prevents coop firms. Just as there is no law that prevents people from living in communes and collectives.

      The Mondragon system is Basque and the companies draw from a cooperative college. So there is some ethnic/communal/educational stickiness built in. I don’t doubt worker led firms can succeed to some level. And I’ve met Basques on the internet. Sharp. One knew more about the back of my hand, than I knew about the back of my hand. LOL.

  3. Worker-run firms and co-operatives sound so great in theory. If they could work in pristine that’ll be awesome and I see no reason why they can’t.

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