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Re: [tlug] Introduction to (Tech) Worker Cooperatives, 09:00AM on Sunday, July 12th JST

Benjamin Kowarsch writes:

 > Your response to that is like "That could never work for X"

I didn't say it *can't* work like that.  I said a *workers*'
cooperative[1] *does not* work like that -- instead, the workers make
the decisions, other stakeholders receive externalities of those
decisions.  Also, in another recent post I give examples of how a
workers' cooperative *could* provide representation to other
stakeholders, and presumably could get to representation of
"essentially all" stakeholders in decision-making.

Evidently a Raiffeisen cooperative is not, in general, a workers'
cooperative, and cannot be, except by the accident that only workers
in the particular enterprise purchase shares.  More about that
possibility later.

 > As far as the Raiffeisen model is concerned, nobody is excluded.
 > You buy a share in the bank and even if you are not an employee nor
 > even a customer, voila, you have the exact same voting power than
 > anybody else.

This is just wrong as a matter of logic.  If you have to buy a share,
by definition it's possible to not have a share.  Those who do not
have shares *are* excluded from decision-making.  The point is not to
criticize such cooperatives for being undemocratic, if that's what
you're thinking.  It's that they *can* have externalities, and
inevitably those externalities will become important if cooperatives
become much more common, especially if cooperatives get control of
industries that are "natural monopolies".

But I'm not really interested in the Raiffeisen model, except as it
applies to producer cooperatives.  So I'm not going to respond to most
of your rant.

Now, let's consider an ideal Japan in which we all decide to convert
our workplaces to Raiffeisen-style cooperatives.[2]  Sit down, folks.
"It's time to do some game theory."

There are about 65,000,000 people in the Japanese labor force.  If we
suppose that the average producer cooperative has 1,000 people in it
(that's a generous estimate, I think), that's 65,000 cooperatives --
and we haven't even started on consumers' cooperatives, etc.  In other
words, if your *job* is to "participate" in all the cooperatives you
have the right to participate in, you can spend 2000*60/65000 = less
than two minutes on each per year.  Just googling the home page of
each and navigating to the page that tells you when and where the
annual meeting is, and you're done for the year.  It's also not going
to be cheap even if each share is a nominal ¥1000.

Obviously this is a superficial analysis, but the "economics of
attention" clearly implies that if Raiffeisen-model cooperatives
become pervasive in the economy, consumers and communities are going
to be represented indirectly at best in many enterprises that affect
them, including some whose existence takes great effort to discover
(supply chains tracing back to child labor are long, and sand blows in
to Hiroshima from the Gobi Desert, you know).  Looking around the
world, one-person one-vote hasn't worked all that well in politics.
It's not at all obvious me that it would be better in the economic
sphere, and you might very well empower wannabe Erdogans and Putins by
the hundreds of thousands, as they get their factions to elect them to
*both* political power and economic power.

Most likely such politics + economics scenarios are best explored in
realist near-future SF novels[3] rather than attempting to do a
political economic analysis if you're really serious about it.  Marx,
as we know, was a complete disaster when it came to predicting the
evolution of the capitalist economy, and nobody since has done any
better (except cheaters like Schumpeter who just predicted cycles of
technological disruption).  Near-futurist SF at least can be great
literature even if it's dead wrong.  And of course great novels may
get a second run at the man in the high castle.  But I'm not a great
novelist, so here we are. :-)

Now, given that the cost of participation is high, what is the likely
distribution of share ownership?  In a Raiffeisen-style governance
model where any human person can buy a share[4], I would expect the
following outcomes, not limited to producer cooperatives:

(1) Many individuals would buy (or perhaps be granted as a condition
    of employment) shares in their employer[5].  Worker-dominated
    cooperatives seem likely.

(2) Many individuals would buy shares in one or a few financial
    institutions they have important relationships with (their direct
    deposit account and the holder of their mortgages -- of course
    they're quite likely the same).  Depositor/borrower cooperatives
    seem likely.

(3) People who have managerial positions in their enterprises may
    acquire shares in their suppliers and customers, and encourage
    colleagues to do the same, creating Japanese-style keiretsu.

(4) Similarly for competitors, direct and potential.  Cross-
    shareholding seems likely to be used to coordinate industries in
    anticompetitive ways, as they are in Japan and Korea.

(5) Social movements (PETA, greens) may attempt "hostile takeovers" of
    enterprises in industries they don't like.

(4) and (5), and maybe (3), seem like they would be disliked by
workers.  If there is an option for governance (including conventional
partnerships or non-profit corporations) they might prefer a pure
worker cooperative to a Raiffeisen-style cooperative.

I imagine there will be other things we can say.  For example, people
who have good experience with worker cooperatives may decide to form
consumer cooperatives.  However, it's not obvious that would be that
universally attractive given the (truly abysmal) experience that many
people have with homeowner associations (HOAs).  And the unfortunately
frequent illiberal (eg, racist) rules and informal behaviors that HOAs
engage in suggests they may need regulation on that front in many
countries (specifically the US and Japan).

Restricted to producer cooperatives, there are probably other groups
that might want to buy shares to influence their behavior.  And if
capitalist enterprises are still allowed, Benjamin describes the case
of the British housing societies which were bought out by for-profit
banks.  Of course in the Raiffeisen model direct buyout is prohibited
by law, but there are probably ways to get around it (eg, sell all the
assets and transfer all the workers individually -- probably you'd
need to do quite a bit of the latter first, and they'd still retain
their shares giving them an incentive to vote with their new

 > Note that Austrian and German law doesn't distinguish between
 > banking/utility cooperatives, manufacturing/trading cooperatives
 > and consumer cooperatives. Under the law they are all the same.

Granted, but it is still true that the incentives in the different
industries are different.  The *economics* of the different industries
are different.  The *stakeholders* are different.  The likely division
of stakeholders into *members and nonmembers* is different, resulting
in different realized governance structures, even if they all have the
same governance model under law.  So there's no good reason to believe
behavior or economic performance will be the same.

[1]  I'll use the term "producer cooperative" as as the generic term
because it focuses on the economic role of the cooperative rather than
its governance structure.  *Worker cooperative* is reserved for the
case of a producer cooperative where workers monopolize, or at least
dominate, governance.

[2]  Maybe I'll think about other governance structures later.  If you
want to read ahead in the textbook, look up the Mondragon cooperatives.
Aside from the usual suspects, this is a useful short guide that covers
both the nitty gritty of governance and some issues with values:

[3]  Apparently there are a bunch of good ones out for this summer's
reading, though I don't know of any on the theme of worker cooperatives.

[4]  Assuming I've understood Benjamin correctly.

[5]  This is a bit awkward, but I don't feel like coining a term: I
mean the enterprise to which the individual provides the substantial
majority of their efforts and talents.  Also, in Spain cooperatives
are considered employers for the purposes of participation in the
national social safety net.

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