Since many of our most prestigious economic institutions have embarrassed themselves at our expense over the last year, maybe it’s time to look around.þþWorker-owned and -managed businesses combine the romance of entrepreneurship with solid family values and commitment to community. What’s not to like? þþRousing examples abound, from the large Mondragon group in Spain (whose planned collaboration with the United Steel Workers featured in my last post) to the two companies that shine in Michael Moore’s recent film, “Capitalism: A Love Story” — the Alvarado Street Bakery and Isthmus Engineering. þþCNN Money recently profiled six worker-run businesses including Pelham Auto, whose mechanics have cheerfully fixed every car I’ve owned for the past 20 years. þþWhen the times get tough, the tough form co-ops.þThe upscale Colors restaurant in New York City was founded by workers who lost their jobs when the 9/11 attacks destroyed their previous site of employment in the north tower of the World Trade Tower.þþCo-op determination isn’t limited to big cities and college towns. In Cleveland, community activists and politicians have rallied support for several new cooperative ventures to help create local jobs.þþBut we shouldn’t rely on anecdotes, videos or wishful thinking. What does economic research tell us?þþNot nearly as much as this economist would like to hear. As an organizational form, worker-owned and -managed companies are largely ignored in economics textbooks. Still, research by Richard Freeman, Henry Hansmann, Douglas Kruse, John Pencavel, Louis Putterman and others has informed my thinking on the issue. þþDemocratic decision-making can be costly and contentious. But we knew that already. Why should workplace democracy be harder — or less efficient — than shareholder democracy (which, in principle, most public corporations are bound by)?þþIf workers receive a share of profits, they may try to free-ride on the efforts of other members of the collective — especially if effort is difficult to monitor. þþYes, indeed, but similar problems characterize the typical capitalist company, in which most workers gain little from improvements in overall performance. þþIf workers like one another, they may be unwilling to impose the level of discipline required to achieve efficient outcomes — like firing slackers. More generally, workers may favor the quality of their own work environment as much as increased profitability. þþTrue, but similar concerns apply to most other companies. In principle, market competition should have the same salutary effects on all of them, rewarding only those that provide the best. þþWorkers shouldn’t invest all their savings in the same company they depend on for job security. Fine, no problem. They can diversify their pension plans. þþWorker-owned and -managed companies may have a hard time borrowing from banks who aim only to maximize return on capital. This explains why they may need to develop their own sources of finance, as Mondragon has done. þþMaybe worker-owned and managed companies, with more complex goals than maximizing profit, are less growth-oriented than other companies. þþDon’t tell Wall Street, but that could be a good thing. þþThe structure of companies may matter less than the political, institutional and cultural environment in which companies operate. The success of an individual species, after all, is largely determined by its place within a larger ecosystem. þþAnd our ecosystem — of which our money economy is only a small part — is undergoing rapid transformation largely as a result of unhealthy forms of growth. þþFrankly, the main reason I like worker-owned and -managed companies is largely ignored in the economics literature. þþThey could help develop the democratic institutions and collaborative skills we need to manage our planet better, along with the plants we grow and build on it.þ
Source: NY Times
