The most generic definition of the word “socialism” simply means “worker ownership over the means of production”. When I say cooperative property is not socialism, I do not mean in this generic, broad sense. I mean very specifically in the Marxian sense. Of course, you can have any vague and nonsensical ideology you want that says whatever pleases you. But if we wish to be more rigorous and objective, we must stick to Marxian economics, and cooperatives simply have no foundations within it.
Capitalism lays the foundations for socialism. It does so by centralizing property of its own accord. The more one lets free markets play out, the more and more they move away from free markets and towards centralization. This is something I will not get into here, as it is a much lengthier discussion.
From a classical Marxian point of view, there is simply no form of property between private and public. The development of industry lays the foundations for public property. It is clear from reading Marx’s writings that he never at any point envisioned any sort of transformation of the private sector into a cooperative sector as a “transitional stage” between capitalism and socialism, nor was this what he envisioned as the final and complete stage of socialism.
“The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State, i.e., of the proletariat organised as the ruling class; and to increase the total productive forces as rapidly as possible.”
— Marx & Engels, Manifesto of the Communist Party
What he expected is for the proletariat to take state power and then centralize productive forces in the hands of the state “by degree”, meaning, “gradually”, as more and more industry developed, as they increased “the total productive forces as rapidly as possible”.
The image Marx is painting here is rather clear: there is a mix of public and private ownership, and as the private sector develops on its own, it is gradually expropriated into the public sector. There is no room for cooperatives here. The concept of a cooperative transitional phase was not something in his mind at all. The private sector passes into the public sector without any third form of property in between.
The concept of a cooperative based economy is nothing new. Eugen Dühring proposed this idea quite a long time ago. His idea was also similar to the proposals by many anarchists as well. Communities would own the means of production in a decentralized way, and then those communities would trade with one another. Therefore, the kind of centralization called for by Marxists is done away with, and instead is replaced by a system of small decentralized communes where the workers own the means of production much more directly.
“…exchange, however, does not take place between individuals as the community is the owner of all means of production and consequently also of all products; on the one hand it takes place between each economic commune and its individual members, and on the other between the various economic and trading communes themselves. On the other hand, however, the commune must also put its individual members in a position to buy from it the articles produced, by paying to each, in compensation for his labour, a certain sum of money, daily, weekly or monthly, but necessarily the same for all…the free economic society…consequently remains a vast exchange institution, whose operations are carried out on the basis provided by the precious metals”
—-Eugen Dühring
This system is not too different from a cooperative based economy. One difference between this more anarchist model and a cooperative model is that cooperatives tend to be centered around a single business while this model is centered around potentially several within a small local community.
However, this difference does not matter much. They both have in common the same problem, and it comes down to decentralization itself. Dühring here at least doesn’t make the same mistake as the anarcho-communist. He is fully aware that a decentralized society as such, there will need to be trade between the separate communes, and when you have trade, you will also need money, in this case in the form of precious medals.
From this system, inevitably, great wealth inequalities will begin to arise. Despite the system giving workers ownership over their personal means of production, there is no reason why they might not save up wealth in other ways. This problem gets compounded if we also recognize the right to inheritance. If one can pass down wealth to their children, wealth can become compounded over many generations, even without capitalist exploitation. Add on top of this the loaning of money. If one accumulates enough, he can begin to loan money out to those he need it, and accumulate his wealth even further.
“Herr Dühring gives everyone a right to ‘quantitatively equal consumption’, but he cannot compel anyone to exercise it. On the contrary, he is proud that in the world he has created everyone can do what he likes with his money. He therefore cannot prevent some from setting aside a small money hoard, while others are unable to make ends meet on the wage paid to them…Both the Opportunity and the motive are present, on the one hand to form a hoard, and on the other to run into debt. The needy individual borrows from the individual who builds up a hoard…On the world market gold and silver remain world money, a general means of purchase and payment the absolute social embodiment of wealth. And this property of the precious metal gives the individual members of the economic communes a new motive to accumulate a hoard, get rich, exact usury”
—-Friedrich Engels, Anti-Dühring
Even in a cooperative-based economy, it would not be surprising to find large wealth inequalities. Indeed, in practice, this has been shown. The Soviet Union did not fully nationalize all its industries. In the agricultural sector there were large numbers of farming cooperatives called the kolkho. Despite these cooperatives not being allowed to hire labor or even buy and sell means of production, Soviet millionaires started to materialize as early as the 1940s.
Bankers can indirectly control what is built and where simply by investing and divesting into particular industries. These bankers can decide the fate of entire cooperatives, many who may fall deep into debt to the bank, or may require a loan to survive. This would give individuals immense control over the means of production themselves.
“The usurers are transformed into dealers in the medium of circulation, bankers, controllers of the medium of circulation and of world money, and thus into controllers of production, and thus into controllers of the means of production, even though these may still for many years be registered nominally as the property of the economic and trading communes. And so that hoarders and usurers, transformed into bankers, become the masters also of the economic and trading communes themselves.”
— -Friedrich Engels, Anti-Dühring
He who controls finance also controls the means of production, at least indirectly. This problem has become even greater today with the rise and development of finance capital. All industry relies on banking controlled through centralized finance. Whoever controls finance can indirectly control the rest of the entire economy.
“Once finance capital has brought the most important branches of production under its control, it is enough for society, through its conscious executive organ — the state conquered by the working class — to seize finance capital in order to gain immediate control of these branches of production. Since all other branches of production depend upon these, control of large-scale industry already provides the most effective form of social control even without any further socialization.”
— Rudolf Hilferding, Finance Capital
The line between bankers manipulating the means of production in their own interests, and between private ownership of the means of production, is quite fuzzy. It may not even be obvious at which point this would pass from indirect to direct ownership. One’s cooperative may become completely subservient to the banks, and at some point, may be fully taken over, and from the outside, the change between the former and the latter would not be obvious.
We can see, then, that the private accumulation of wealth can quite easily turn into private control of the means of production, even if it is illegal on paper for individuals to own the means of production.
What advocates for cooperatives do not seem to realize is that human societies at one point already lived in “economic communes”. They lived in decentralized communal societies where everyone owned everything equally. Occasionally, too, these communes would trade with one another.
It was private accumulation and the rise of commodity production which destroyed the primitive communal system. The cooperative system simply tries to recreate these communes but tied to particular businesses, without acknowledging the historical development of things, without acknowledging that commodity production and private accumulation — which the cooperative system maintains — is the very thing that leads to the development of private property and the dismantling of communes.
Of course, I know what you may be thinking. These problems could be solved with more laws to prevent wealth hoarding in the first place. Simply have some sort of wealth cap, outlaw or centralize banking, and prevent or limit inheritance. This would prevent people from mass hoarding wealth of wealth.
This, however, introduces some other problems.
The interests of the bourgeoisie, as we all know, it is not the same as the interests of the proletarian masses. Their interests lie in securing their own profits at the expense of the proletarian masses. Therefore, the bourgeoisie would oppose the expropriation of private property and its transfer to public property. They, too, would oppose laws to prevent their hoarding of wealth.
In the same sense, this would also apply to the cooperatives. When a cooperative is formed, the proletariat are turned petty bourgeoisie, their interests no longer lie with the proletarian masses but with maximizing their own surplus. The proletariat, under bourgeois property relations, is exploited by the bourgeoisie and their interests lie with the masses. However, the interests of the proletariat-turned-petty bourgeoisie in these cooperatives no longer lies with the masses. Their well-being becomes tied to the development of the enterprise they directly own, in contradiction with the rest of all enterprises.
The proletariat-turned-petty bourgeoisie thus develops a separate ideology from the rest of the proletariat. In the USSR, for example, the interests of the kolkho were fundamentally different to that of the proletariat in the public sector. Their interest were not with the proletarian masses, but with their own enterprise.
“What is a cooperative? If a group of producers are owners of their own means of production, compared to capitalism, it is an advance, in socialism, a backwardness, since it places these groups against the society that owns the other means of production. In the USSR, land is social property but not the other means of production that belong to the kolkho; without counting on the small kolkhozian property that supplies increasing quantities of basic foodstuffs and widens the gap between society and the kolkhozian, if not monetarily, if ideologically.”
— Che Guevara, Apuntes críticos a la economía política
The issue here arises in the contradiction between the “collective” and the “great collective”. These cooperative workers will form fundamentally different class interests than the rest of the proletariat working in the public sector. They will only benefit from the dismantling of public property which they could then purchase for their business. They will only benefit from the dismantling of regulations. Hence, they will attempt to do so, and strive for the restoration of capitalism.
“There is no convincing rebuttal that the cooperative does not engender capitalism. Although it has collective tendencies, it exists in contradiction to the great collective. If it is not a step towards more advanced forms, it develops a capitalist superstructure and enters into contradiction with society. This is typical of the USSR, not of socialism (perhaps it would be better to consider the kolkhoz as a pre-socialist category, of the first period of transition). Usually in this book the notion of socialism is confused with what practically happens in the USSR. Kolkhozian cooperative ownership should be considered as a characteristic of the Soviet regime and not of socialism, it is not essential for its theoretical formulation nor has it proved in practice to be inescapable. I insist: cooperative ownership is not a socialist form.”
— Che Guevara, Apuntes críticos a la economía política
The inability to pass down inheritance, the inability to buy and sell means of production, the inability to control finance, etc. All these things restrict the development of this new petty bourgeois class. They will push against it relentlessly, and in fact, with an even greater force than would private bourgeois owners. Within a bourgeois enterprise, at least the vast majority of people in the enterprise have interests with the masses. If all the proletariat is turned into petty bourgeois through the converting all businesses into cooperatives, at this point, no one will any longer have class interests in line with the masses. The proletariat would not have been empowered, they would have been destroyed.
A system based around cooperatives would not last very long. The immense pressure from the petty bourgeoisie will quickly push forwards the dismantling of the system, and it will not be long before it unravels itself and returns to capitalism.
This is not to say that cooperatives are inherently bad. Rather, they are not a natural property relation. There is no theoretical basis from a historical materialist perspective to posit that cooperatives are the system to replace capitalism. They are largely artificial and can only maintain their existence long-term in the context of a much larger and more powerful public economy. They can have huge benefits for the people who are part of the cooperative, but that says nothing about their theoretical basis.
In fact, Marx compares cooperatives directly to privately owned joint-stock companies. Since capitalism develops away from markets and towards greater and greater centralization over time, both a privately owned joint-stock company and a worker cooperative would equally be a “transitional form” from the capitalist to the “associated” mode of production. Marx uses the term “associated” a lot to refer to centralization. The main difference being in joint-stock companies, the antagonisms between the workers at the company and the bourgeoisie grows ever greater, while in the latter, the conflict is resolved, at least within the confines of that particular business.
“…in some branches, where the scale of production permitted, to the concentration of the entire production of that branch of industry in one big joint-stock company under single management…The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.”
— Karl Marx, “Capital”
Some may point out that Engels does endorse the idea of cooperatives in his The Peasant Question in France and Germany. However, this is clearly only discussing cooperatives among the peasantry, not generally, as it would be impossible to try and nationalize the peasant farms. This recommendation was an idea put forwards by Engels because the development of industry inevitably destroys the peasantry, and in order to preserve the peasantry in an alliance, cooperatives could temporarily save them and make their development into proletariat less harmful.
This was only a recommendation in order to further the alliance with the proletarian and peasantry, and specifically only applies to the small peasantry, not the peasants universally, and also cannot be universalized to every sector of the economy such as small industry and the petty bourgeoisie. It was meant as a method to transition the small peasantry into the proletariat. Not as a method to transition private property into socialist property, but as an attempt to save the small peasantry from ruin.
This recommendation has been tried out in various countries, such as the Soviet Union with their peasantry, and today in China roughly 50% of all rural families are part of farming cooperatives. It has had some success among the peasantry, but again there is no basis to attempt to universalize it outside of the peasantry.
There is nothing more or less “socialist” about the cooperative. They are not, by any means, socialist property, and effectively convert the workers into petty bourgeoisie. While they may have benefits, one must not assume they are universalizable, nor should we pretend they qualify as a form of socialism. They, in fact, are in contradiction towards socialism, and contribute to a superstructure that leads to the dismantling of socialism.
