This reality provides one of the best arguments for a switch from a capitalist economy, in which it is shareholders who have little to do with the creation of value in the economy who ultimately benefit the most from it, to a free market socialist economy (one based on democratically owned worker cooperatives). In an economy based on worker cooperatives, the distinction between "employee" and "owner" is eliminated. Instead of there being competition in the labor market which drives salaries well below the value created by individual laborers, labor simply receives the value it creates.
Consider that practically every company begins as a democratic worker-owned cooperative, and those worker-owners generally can't wait to diversify themselves out of that position. Risk exposure is a lot higher when you're a worker-owner, and most people are horribly risk-adverse.
Ignoring the risk factor in the equation leads to some rather wrong conclusions.
exactly. The point of shareholders is so that you can spread risk and reward. Instead of contributing all the capital yourself, you sell shares in your business to others, giving up some reward, but also a lot of the risk. Without this, the economy would collapse
What do stock holders actually risk when they buy stock? Only the money they put into the stock. What does an employee risk when he joins a company? Potentially his livelihood if the company goes under with out warning.
I would argue that the employee's current risk is greater than the stockholder's risk, since the stockholder generally has much more information about exactly what he is risking than the employee does -- and a greater legal right to that information. The average employee has no legal right to information about the health of the company where he's employed. He has to take the risk that the company isn't simply going to collapse out from under him leaving him with no income and a, best case, several week or month job search.
So what about the case of a worker cooperative economy? Where would the risk come from in a worker cooperative (beyond the normal risk an employee assumes)? Capital financing, which could still be done by debt or by crowd sourcing. In the case of debt, the risk depends on how we structure the companies. If they are structured as limited liability corporations, where only the property of the company can stand as collateral for debt, then the employee owner doesn't risk anymore than he does joining any other corporation. The difference is he has a legal right to complete information about the company's health and a voice in picking its direction.
He actually take substantially less risk in a worker cooperative (where employment means ownership is granted as a part of salary as opposed to being required to buy shares) than with a normal corporation. And he stands to reap the full benefits.
Free market socialism (i.e. a large UBI + single payer healthcare + low regulation) would largely mitigate that risk aversion, especially when combined with low levels of personal debt, since if you fail you can always count on decent healthcare and the UBI check.
That can work fairly well. If you finance the government largesse with a land value tax, you can even untax capital and labour and remove almost all distortions to the economy.
Err no not in my experience - I used to be member of a well lnow tech coop in the UK. They way you structure it is your a member of the coop that owns the company who employes you .
Of course Mondragon in spain is different you have to Ante up
This is interesting. Can you suggest any resources that lay out concrete proposals for how this could work in practice? Are there examples of where it has already worked in the world?
Some questions:
1. Wouldn't there still be a need for capital to finance risky ventures that take a long time to create value? How would a forward-looking startup with high capital costs, such as a biomedical device company with unproven technology, work in this economy?
2. How do you measure the value labor creates?
3. Is the allocation of resources among labor proportional to the value it creates? How does that work among a team of specialists that are more than the sum of their parts?
I'd genuinely like to understand whether this could work or has worked.
Richard Wolff and Gar Alperovitz have both written about alternative economies based in part or in whole on worker cooperatives. If you're just curious about how worker cooperatives work in the existing economy, read up about Mondragon or the South Mountain Company. A good book about the latter, written by its founder, is Companies We Keep by John Abrams.
