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Excepts from Humanizing the Economy: Cooperatives in the Age of Capital, by John Restakis

Excerpted by Jerry Lieberman

Here, I am including excerpts of a book written by John Restakis in 2010 entitled, Humanizing the Economy. I believe it will be helpful in our discussions about creating a new economic, political and public narrative based on a new scientific paradigm.

A key purpose of his book is to show that the popular drive to democratize economies is a force that is working to transform virtually every economy in the world today. And for those who are willing to look, the evidence of a new, more humane economic and social order is there to see.

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With over 800 million members in 85 countries, the co-operative movement is by far the most durable and most powerful grassroots movement in the world. Co-operatives employ more people in democratically run enterprises than all the world’s multinational companies combined. Although the forms co-ops take and the uses to which they are put display an astounding variety, their essential structure remains what it was when they were first organized in the mid-1800s — enterprises that are collectively owned and democratically controlled by their members for their mutual benefit. As the global economic crisis continues to take its toll, co-operatives continue to provide livelihoods and essential services.

When all transactions are turned into monetary transactions, all incomes must derive from the sale of something; it was precisely this reduction of all societal transactions to a commercial purpose that marks a radical break and discontinuity with everything that came before. For this to happen, people’s motivation had to change from subsistence, or mutual benefit, or the welfare of society as a whole, to the single motive of personal gain.

In any society, authoritarian power in economics ultimately trumps democratic power in politics. Therefore, the absence of democracy in economics is a permanent threat to the survival of democracy in politics, The human striving for equality and dignity that lay at the foundation of the democratic impulse was derailed in its extension to economics just when it was most needed, when the power of capital and the property-owning classes was consolidated during the period of the Industrial Revolution.

Emilia Romagna is a classic case study for understanding the mechanics of a successful small-firm economy. It represents one of the very rare examples, perhaps unique in the world, of the co-operative model migrating out of the co-operative movement to shape the organization and operating mechanics of the surrounding capitalist economy. The result is an economic model that includes cooperative and capitalist firms alike and allows small and medium firms to compete globally through the use of co-operation as an industrial strategy. The Emilian Model as it has come to be known is the antithesis of large-scale corporate capitalism and its most compelling small-firm alternative. The formal co-operative economy in Emilia Romagna is extensive and highly diversified. Here Kestakis is using the term “co-operative economy” to denote co-operative enterprises and the relationships and institutions that link them together as a sector within the broader economy.

The struggle for democracy in the West was waged, in large part, to establish a political system capable of distributing to the majority a share of the material security and prosperity that was the privilege of elites. This only comes with a commensurate distribution of political power. So social policy — the broad distribution of material security through public means — is one factor of democracy. Reciprocity animates a vast range of economic activities that rest on the sharing and reinforcement of attitudes and values that are interpersonal and constitute essential bonds between the individual and the human community. What is exchanged in reciprocal transactions are not merely particular goods, services and favors, but more fundamentally the expression of good will and the assurance that one is prepared to help others. It is the foundation of trust.

Consequently, the practice of reciprocity has profound social ramifications and entails a clear moral element. Reciprocity is a key for understanding how the institutions of society work. But it is also an economic principle with wholly distinct characteristics that embody social as opposed to merely commercial attributes. When reciprocity finds economic expression in the exchange of goods and services to people and communities it is the social economy that results.

Restakis references Joseph Stiglitz as pointing out that bad governance is at the heart of the trade inequities in globalization. Governance structures in global trade organizations are biased and lopsided and designed to produce precisely the types of unfair deals that benefit the already wealthy at the expense of the poor and the weak. If the IMF and the WTO were reorganized to fairly represent the interests of poor countries, they would have to adopt a democratic structure with each country having a greater share of control. Something like a co-operative model for the regulation of global trade is absolutely central to any real hope that globalization will ultimately benefit the poor.

Happiness, the sense of well-being, is inextricably linked to relationship with others. It has little to do with income level or material possessions, a very ancient truth that is now being carefully studied and documented by economists in a most welcome new field of study, the economics of happiness. One of the most far-reaching, and heartening, conclusions reached by this research is that the presence of social capital and the widespread practice of reciprocity, are fundamental not only to individual well-being, but to broader social and economic well-being as well.

The key to addressing the current crisis in community is rebuilding the stock of social capital in society. And the key to this is building up the kinds of organizations and institutions that develop social capital and the relationships of reciprocity and generalized trust upon which community rests. Co-operatives are a central part of such a strategy. This is not to say that other forms of organization that operate on the principle of reciprocity are not also important (charitable organizations, volunteer organizations, social clubs, etc.). But co-operatives, as illustrated throughout this book, have a unique capacity not only to build a sense of community but also to challenge and reform the economic structures that are so often the cause of social breakdown. Because quite apart from the truly diabolical efforts of corporate powers to deliberately manipulate human feelings for commercial advantage — the essence, after all, of modern advertising — the very nature of a capitalist enterprise is to consume social capital without replacing it.

Capitalist enterprises, like all businesses, need trust to function. So do the institutions that sustain them, like banks and stock markets. Once trust is lost, business becomes impossible, stock markets crash. If contracts can’t be relied on, business comes to a standstill. You need only witness the sorry state of trade and economic development in societies where corruption is rife to see the economic effects of mistrust. But the direction of contemporary capitalism is driven by an ideology of predatory competition and profit maximization at any cost, whether material or psychological. Unchecked, the logic of this system will sooner or later deplete a society’s stock of social capital, just as if it were water, wood or oil. Capitalism and the consumer culture it generates are not only environmentally unsustainable, they are socially and psychologically unsustainable as well.

The restorative power of co-operation in the world of work goes beyond a worker’s connection to others, powerful as this is. It can also provide an individual with a coherent sense of what work means beyond a paycheck or as a steppingstone to some other end. Everyone knows how insecure work has become in modern societies.

Part of the language of self-construction is the ability to remain flexible, to continuously “upgrade” our skills, to remain marketable — like commodities — on the ever-sinking sands of the labor market. At any moment, even the most skilled jobs can be shipped overseas to where labor is cheaper. This is one of the most pernicious effects of globalization and a primary source of anxiety for people everywhere, from the industrial towns of the American rust belt to the free trade camps of the Mexican maquiladoras. This is possible because our places of employment are not our own.

So long as the workplace remains a mere mechanism for the generation of wealth, so long as labor is an instrument of capital, this will not change. It can only get worse as capital extends its dominion over more and more dimensions of the economy. The privatization of the public sector and the casualization of work are object studies of a process that is undercutting the sense of permanence in work everywhere. But the episodic and transitory quality that now characterizes the working life of millions is also making it impossible for people to construct a coherent story line of what work signifies to them, or to integrate the work experience as a meaningful dimension of their self-image. How meaningful can work be if it is likely to change every few years? How does one commit oneself to a job if that job is constantly under threat of export?

The old Marxist notion of the alienation of work has extended farther and deeper than even Marx may have imagined. Worker co-operatives provide a way of making work meaningful by sustaining employment in situations where those jobs would be sacrificed — not because they were untenable but because the business didn’t generate the levels of return demanded by shareholders. Co-operatives invite worker-members to invest their identities in their work, to see their work as extensions of themselves through the mechanisms of shared ownership and personal control.

Any workplace can undergo a profound change in meaning if it shifts from being primarily a mechanism for the generation of profit over which one has no control, to being a community of relationships with an inherent worth of its own. This is perhaps the quintessential difference between the cooperative and the capitalist firm. In one, the enterprise is a means to the human fulfillment of all through the creation of community. In the other, the enterprise is a means for the fulfillment of some through the subordination of others. It is strange how such a simple and self-evident truth seems so foreign in our culture.

At some basic level co-operation is hard wired into human behavior — otherwise there could be no possibility of human society — but the instinct is unrefined and atrophied in a society in which the norm of social relations is competition, dependence or subservience to authority.

We need to be thinking about the organic structures of society that play formative roles in molding personal identity and interpersonal relations. As thinkers from Aristotle to Tocqueville have pointed out, one of the chief virtues of democratic civic life is that it teaches people how to be citizens. This is the political dimension of an open and inclusive society. At a personal level, the nature of the organizations that mediate the interests of people have a defining influence on how these individuals see themselves and their connection to others. Institutions that promote selfishness, individualism, competition and dependence on authority have the predictable result of simultaneously isolating and disempowering people. On a mass scale the effects are clearly visible in the societies we have created. On the other hand, social institutions that identify and reinforces the mutual interests of people that invite them to seek common solutions to common problems and that link individual fulfillment to the support and co-operation of others, create those habits of mind that is the building blocks of healthy societies.

The neglect, and decline, of reciprocity as a value has its roots in classical economic theory. But through their accumulated weight and momentum, the social, political and economic institutions that have accompanied the rise of neo-liberal ideology have acquired a life of their own. Like biological organisms, institutions, once established, develop a paramount instinct for self-preservation independently of their actual purpose.

Social goods need not be traded off for the sake of economic efficiency. Nor, at the other end of the political spectrum, is it true that personal freedom must be traded off for the sake of equity — the fallacy that lies at the bottom of communist ideology. Social and personal worth can both be embodied in an economic paradigm that is based on the social-personal dynamics of reciprocity. The co-operative enterprise is one way of combining these elements. But the co-operative does something more. It democratizes the operations of the marketplace and provides a means for the democratization of economic institutions, beginning with the form and function of the workplace. Co-operatives expand democratic space.

Restakis is not advocating the transformation of all economic institutions into co-ops or the imposition of the co-op form on individual enterprises. Such a policy would be folly. It would immediately negate the democratizing and humanizing value of co-operatives and make the model an instrument of yet another controlling ideology, this time one that would turn co-operation into an authoritarian dogma, a contradiction in terms. Rather, he is proposing that the idea of co-operatives and co-operative economic systems, based on the principle of reciprocity, be promoted, extended, studied, taught and reinvented, not only as a matter of public policy, but as a far higher political priority within the co-operative movement itself. For if the coop model is not promoted far more vigorously by the co-op movement, its role as an alternative to contemporary capitalism will remain as tenuous and marginal in the future as it is today.

Not everyone is inclined to co-operation. The natural entrepreneur’s risk-taking individualism is absolutely crucial to the ingenuity and wealth creation that comes from the capitalist form which gives freedom to this impulse. Who can deny the benefits that flow from this recognition and promotion of individual initiative? But we have noted its dark side when left unchecked. On the other hand, contrary to the simplifications of economic theory, everyone is not motivated solely by individualistic goals. Many find fulfillment in service, in helping others or in the profound joy of collective effort. Where is the space for these individuals to express this fundamental aspect of the human personality? Most societies in the West have been organized around economic paradigms in which either efficiency or equity has been paramount.

Elinor Ostrom, is cited by Restakis for focusing on the imperative of communities. She found that groups that organize and govern their behavior successfully also share some basic design principles: users have a say in how the resource is managed; monitoring of the resource is done by those who use it; sanctions are applied against miscreants; group boundaries are clearly defined; and community members have access to low-cost mechanisms to resolve conflicts. In addition, for resources that are part of a larger system, the governance and monitoring activities are organized in multiple layers of nested enterprises. In short, Ostrom’s research showed something that should have been obvious to anyone that cared to look — people have been managing common resources co-operatively for centuries. Far from being trapped in a set of conditions over which they have no control, they can change the rules of the game. They can agree to co-operate and to create the social mechanisms that normalize co-operative behavior.

Humane economies are a lot like healthy ecosystems. They depend on the creation and recreation of a diversity of economic forms that respond to the different dimensions of human societies and provide scope and freedom to the broad range of human needs and talents that compose them. Just as the domination of any one species to the exclusion of others will destroy an ecosystem, so too do economies require the presence of a broad diversity of economic forms — capitalist enterprises, large and small, that aggregate and generate wealth; public and state institutions that redistribute wealth and promote equity; and co-operative enterprises that generate social solidarity through the practice of reciprocity.

There are other forms also: charitable and voluntary organizations that promote the practice of altruism; social enterprises that use the market to promote social goods; and hybrids among all of these that combine the unique strengths of different forms to produce goods and services in new ways and for different purposes. What is crucial is that the deadening effect of any single model be averted. When this happens, it is always accompanied by an ideology that both justifies its domination and undermines our capacity to imagine alternatives. But there are alternatives.



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