In an article in Dollars and Sense, Dan Bell noted that worker-owned enterprises and labor unions would appear to have much in common. Both share the goal of improving pay and working conditions. Both aim to give workers a say in the workplace. And both belong on any progressive's short list of strategies for building a more just economic system. In practice, however, worker-owned cooperatives and labor unions have a long history in which the relationship between the two forms of worker organization ranges from "comrades in arms" to "frienemies."
A Brief History and Overview.
The first major cooperatives in the United States were formed during the populist struggles of the late 1880s when coops played an important role in the Knights of Labor movement . In the early 1900s the Emma Goldman Anarcho-Syndicalists and the International Workers of the World (IWW) both supported worker-owned and managed cooperatives as a revolutionary form.
The rise and solidification of industrialization in the 1880s, led to the development of large centralized factories with large labor forces of wage workers. This, in turn, empowered the trade union movement as the main vehicle for radicalizing large numbers of workers. Through strikes, workers had an immediate and influential impact on capitalism. Cooperatives generally had less impact on capitalism. They were generally smaller decentralized places of business, unable to raise the capital to threaten the profits of centralized industrialized factories. The main form of revolutionary struggle was, therefore, class warfare between the owners of production and wage workers in the Marxist model.
Under trade unions, workers in many countries were able to make substantial gains not only in workers' wages and working conditions but also more general gains in the larger society by improving and equalizing living conditions (pensions, healthcare, housing, sanitation) as well as workers' rights (i.e, gaining the vote for excluded groups -- non-propertied men, women's right to vote, the vote for African Americans in the U.S., etc.)
Today, many trade union progressives continue to view cooperatives as a fringe part of the radical/revolutionary movement. They are often criticized as utopian in nature by creating alternate egalitarian economies that do nothing to change the basic structure of capitalist society since they are too small and decentralized to be able to change society in any significant ways. As private "businesses," they are also viewed as a part of capitalism and integrally opposed to the concept of "class struggle."
At the same time, workers' movements have traditionally used cooperatives as a fall-back solution for unions when workers are locked out of plants in a strike or when there is a major depression and there are insufficient jobs for their members. Cooperatives were created in large numbers to help stabilize floundering economies in the depressions of the 1880s, 1930s and today. In the current recession/depression, the U.S. Small Business Administration has decided to loan capital to cooperatives in an effort to shore up the U.S. economy.
Today, increased technology, globalization of labor markets and the mobility of capital has ended the reign of large centralized factories. The new casual and decentralized labor force has decimated the major strength of the trade unions' power -- a large, unified labor force. Unions have been forced to look at the creation of unionized worker-coops not just as a fall back during depressions, but as the new order of the day. The United Steelworkers have been leaders in this movement toward worker-owned and managed work units and recently signed a contract with Mondragon, the multibillion dollar cooperative network of Spain to create several unionized cooperatives in the United States. This decision is proceeding very slowly and cautiously, however. (Mondragon, incidentally, was itself created in a depressed job market in Northern Spain during the reign of Franco.)
WHAT COOPERATIVES AND UNIONS CAN DO FOR EACH OTHER.
Lisa Ryder in Grassroots Economic Organizing (Issue 71) has put forth the following strategy:
"Our [labor's] objective is to bring about an institutional change to allow members of worker cooperatives to become full dues-paying members of labor unions and to make the formation of new worker cooperatives one of our [the labor movement's] organizing strategies."
What Can Cooperatives Offer Unions?
Incorporating worker cooperatives into union membership would broaden the labor movement's political power and dues base, as well as expand the labor movement's organizing potential. Cooperatives can also provide some strategic control of unemployment levels, frequently resulting in an overall increase in wages.
In terms of globalization, when workers own the workplace, they have a say in place-based production. Since most workers have stable lives in the community in which they work, this substantially lowers the chance that cooperative businesses will move abroad or to another city in search of maximum profit.
Coops can also help provide a revenue stream for organizing within the capitalist enterprises as well as introducing the concept of profit sharing and work place democracy. Cooperatives provide leverage to unions in negotiations with employers throughout industries in which cooperatives provide high road and high wage models.
Finally, the proliferation of cooperatives provides a growing worker-based economy in which to participate as consumers.
What can Unions Offer Coops?
Unions can help alleviate the inherent capitalist tendency of individual cooperative businesses by increasing cross-company worker solidarity, leveraging workers' interests in a competitive capitalist economy and provide perspectives on industry-wide trends.
Unions could assist in the formation of worker cooperatives by forming an organizing committee in the workplace, researching a business plan, finding and helping to structure and provide healthcare coverage and pension plans. Most importantly, they can sometimes provide the needed start-up capital for a cooperative.
Unions can provide a motivated workforce and access to a large pool of trained workers and intellectual capital. Unions can also provide the potential to reproduce the cooperative model in abandoned facilities that have fled to nonunionized areas.
HOW HAS THIS WORKED IN PRACTICE?
So what are the prospects of a blending of worker-owned and managed cooperatives and the trade union movement today? Will it continue to be a fall-back for unionized failing companies or will unions take up this form of worker organization as a new organizing tool for new workers as well as already unionized workers? And will cooperatives accept the responsibilities of union membership that extend beyond their own cooperative?
Time and again, when a union shop has gone from traditional owner/worker relations to a cooperative model, the results have been a spectacular increase in efficiency and profits. One textile plant [Gen Corp, Amalgamated Clothing and Textile Workers] worked closely with the management, and was able to increase productivity by 28%, drop scrap by 40% and decrease machine down time. The company immediately became profitable. Yet, after several years, the workers decided to sell the company to a private owner. This has been the pattern among a number of what could be considered successful transitions from privately owned companies with unions to cooperatives. Workers choose the cooperative model when necessary (i.e., the company will close or jobs will be off-shored), but, once the crisis is past, choose to revert to traditional boss/worker relations. Why?
Unions do have reasons to be suspicious of the cooperative model since it has frequently been used against the workers. Since the shift to a cooperative model from a union shop has, in the past, usually been done when the union model is failing and the company is either ready to move or close, the workers are in a vulnerable position when they choose to buy the company from the owners. This often means that the purchase price negotiated is too burdensome to make a real go of the cooperative.
Moreover, many of the union buy-outs are from large companies where it is difficult to adapt to a cooperative process and they are only nominally worker-owned. (ESOPS). In these companies, workers own the stock (ESOPS), but the traditional management ( or a business management selected by workers, but not made up of workers)still makes all the decisions including hiring and firing, location of facilities, wage levels, etc. Yet the workers still take the risks -- instead of negotiating increases in wages, they must count on the success of the company -- success over which they have no control. In other cases, the companies try to get the workers to decertify their unions to presumably get stock options which workers cannot access until retirement. Moreover, companies frequently fudge on the value of the stock.
Dan Bell of the Ohio Employee Ownership Center provides technical assistance to worker buyouts. Here are two examples of what to watch out for:
An initially strong union-ESOP relationship failed to prevent a breakdown of the worker-ownership structure. Republic Engineered Steels' 4,500 employees, spread among eight plants in four states and primarily organized by the United Steelworkers (USWA), chose to buy their division from steel giant LTV in 1989 to avoid a shutdown. The new contract defined a structure for employee participation. To get this structure to work, 100 managers and their corresponding 100 union representatives trained jointly for a week to become co-facilitators. Union and management also formed a joint committee to direct the ownership training program.
With a solid foundation of worker-owner participation, the company successfully cut $80 million out of its annual $800 million expenses in only 18 months—not by cutting compensation, but by implementing employees' ideas for improving operations.
Two events changed the picture. First, management convinced the employees to let the company go public to more quickly pay off the debt they had incurred in the buyout. However, since workers did not have all the shares, in an attempt to enhance the company's reputation with its new outside shareholders and raise its share price, management became less sensitive to the priorities of its worker-owners.
Then, in the late 1990s the price of steel took a deep plunge. Instead of responding to the crisis by taking advantage of the participatory structures that had so methodically been created, management fell back on its traditional MO, implementing changes with no worker input. When management made plans to open a new plant where it could get the most concessions from the local government—a decision that would have put many of its Massillon, Ohio, worker-owners on the street—the union became so frustrated that it sought out an investor to buy the company, giving up ownership in order to dislodge an entrenched management.
In a second, more blatant instance, the International Brotherhood of Teamsters has good reason to be suspicious of employee ownership. In the 1980s, when deregulation was exposing trucking companies to lower-cost competition, the Teamsters refused to negotiate any changes to the master contract. At the same time, the union did not object if individual locals chose to exchange specific items in the contract for an equivalent amount of company stock held in an ESOP.
With this hands-off position, neither opposing nor encouraging employee ownership, the union left its locals at the mercy of the companies. Some trucking company owners were able to get away with matching their workers' concessions with stock in assetless "front" companies that leased their trucks from the owner's separate asset-holding company. When the front companies failed, the workers had neither revenue nor assets to give their stock any value.
With this kind of record, one understands the hesitation of unions to embrace the cooperative model. However, in the changing mode of production, unions, if they are to be viable, have no choice but to pursue other models of worker organization. If they can negotiate real cooperative structures (or at least minimally cooperative structures-- ESOPs where workers have majority ownership with one share one vote and a strong union) there is a real chance for a renewed labor movement. We have seen this model work in Mondragon, in Argentina, in Northern Italy, in Venezuela. It just means unions have to be careful.
On the flip side, many unions have been unions in name only --"business" unions who care more about the salaries of their own bureaucrats than the workers they are supposed to represent. And the workers, in turn, think of their unions as their individual insurance plans and have little class consciousness. It is possible that the combination of the worker-owned and managed model with such unions will infuse a renew energy in the membership to democratize and take control of their workplace.
Cooperatives are also suspicious of throwing their lot in with the union structure. Dan Bell relates the following story:
"Unions have a duty to workers across an industry as well as to those in a particular workplace. Recently a worker co-op member was looking for guidance on resolving a difficult conflict between his co-op and the union that organizes a few of its employees. Most of the workers at this site had supported the worker buyout and joined the co-op. A few of the workers, who are represented by a union, chose not to become members. In order to generate the surplus necessary to pay off the acquisition debt, the members agreed to reduce their wages and benefits. However, the union insisted that the terms of the collective bargaining agreement not be altered. The co-op members believed that to stick to the contract would be unfair to the members who were not in the union, because they were making sacrifices to help the co-op survive. And if all of the members were compensated as the union members expected to be, the business would fail. Since one of the principles of a co-op is autonomy from outside organizations, it seemed inappropriate for the union to be insisting on sticking to the contract, when even the members affected were willing to adapt.
But the co-op members had to recognize that the union was not dealing with their company in a vacuum. A union has to bargain with the entire industry and try to get the best possible deal for all of its members. Any time a local agrees to a lower-cost contract with one employer, that undercuts the union's bargaining position with all other employers. Each employer will expect to get the same contract as the competition, so the result is that wages fall. Industry-wide worker solidarity is just as important to union members as autonomy is to co-op members.
As it turns out, in this instance both the need to respect an industry-wide collective bargaining agreement and the co-op members' right to compensate everyone fairly and according to cooperative values can probably be satisfied. For the co-op members, their compensation is not wages per se, but rather an advance on their profit share. If the union-member employees are to receive higher pay in accord with their contract, that can be offset by giving them a smaller share of the surplus as owners. The nonunion co-op members, who get a smaller "advance" now, will receive a larger profit-share down the road."
As the world changes and the mode of production changes, we have to change with it. The relationship between worker cooperatives and trade unions may be somewhat of a shot gun marriage at this point. Only time will tell if it will give birth to a renewed labor movement.
"Worker-Owners and Unions: Why Can't We Just Get Along?" Dan Bell. Dollars & Sense. September/October 2006.
[exerpt] "Corporation Busting: A strategy for Unions and Coops Toward Building a Labor-Ownership Economy."by Lisa Stolarski. Issue 71 of Grassroots Economic Organizing. DECEMBER 18, 2006
"Unions and Cooperatives: Allies in the Struggle to Build Democratic Workplaces."by Lisabeth L Ryder.Issue 71 of Grassroots Economic Organizing . Dec 18, 2006.
Worker Co-ops & Unions: a Strategy for Creating Jobs and Growing Union Membership. By Deborah Groban Olson, Center for Community Based Enterprise & Ingenuity US, L3C. PPT Presentation to US Federation F Worker Cooperatives. Aug 6, 2010
Anti-Capitalist Meet-up: The Development of a Cooperative Economy in Practice
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Anti-Capitalist Meet-Up: Is A Non-Exploitive Economy Based on Worker-Own Cooperatives Possible? by Geminijen; http://www.dailykos.com/....