The tensions between capital and labor began with industrialization in the 1800s and continue to this day. In this week’s Principle 6 newsletter, Mike Mercer considers where co-ops fit into this landscape.
Read the full newsletter below, then consider how cooperatives could work together to advance the co-op business model as a bridge between capital and labor. NCBA CLUSA is on a mission to document Principle 6 collaborations across the country so we can identify trends, document best practices and share this knowledge with you—our fellow cooperators!
Principle 6 Newsletter – Capital and Labor
February 8, 2023
Advocates and critics of capitalism agree that its distinctive contribution to history has been the encouragement of economic growth. Capitalist growth is not, however, regarded as an unalloyed benefit by its critics. – “Capitalism,” Britannica, 1-30-23
In a nation, even a world should I get too hopeful, where the supremacy of labor reigns, all matters of national, local, and global concern are in the interest of labor. Capital still has a place, but only in the advancement of their goals in a smaller, tightly regulated space. – Judd Carr, “The Supremacy of Labor,” 5-27-21
The two great agencies of production, in addition to the forces of nature, are labor and capital…it is obvious that whilst capital can do nothing without labor, labor could never rise above a state of barbarism without capital. – Erastus Bigelow, “The Relations Between Labor and Capital,” Atlantic, Oct 1878
It would be hard to argue (although some do) that free market capitalism has not made a significant contribution to innovation, productivity and the standard of living. But it is fair to say that, unchecked, the owners of capital (money, factories, machines, intellectual property, and the like) will do whatever it takes to minimize the cost of labor. The tensions between capital and labor began with industrialization in the 1800s and continue to this day. It will not be our intention here to demonize the owners of capital or to vilify wealth concentration. Neither will it be our objective to sanctify the practices of organized labor or argue for more wealth redistribution. Rather, we’ll contemplate where co-ops figure into this struggle between capital and labor.
Co-ops mostly try to ply their trade in the scorched earth between advocates for capital and defenders of labor. This plays out most uncomfortably when the co-op associations call on elected representatives in government. Sometimes, co-op lobbyists must be prepared with two scripts while walking the halls of Congress, one for the working class and one for the free market advocates. The contest for power between capital and labor is present in many ways at the local level as well. In fact, the persuasions toward capital or labor even influence discussion at the co-op board table. Where do/should co-ops fit in the societal struggles for influence between capital and labor?
It might help to characterize the relationship options—between capital and labor.
There is, in theory, the possibility that those seeking a return on capital and those seeking a “living wage” from their labor could co-exist in a realm of mutual benefit. Since the invention of the limited liability corporation, however, the owners of capital do not generally do the work and those providing labor rarely own or control the capital. Add the western operating philosophy of economic individualism and it doesn’t take long to consider harmony between capital and labor to be an unsustainable condition in our society.
Some contend that free-market capitalism can be suspended in a sort of benevolent relationship between capital and labor, with capital providing the benevolence. Government, the thinking goes, would prevent capital from its brutal Darwinian proclivities by setting rules and redistributing wealth to some degree. In a democracy, government is elected by the people, the preponderance of whom would be workers and their kin. Different versions of this government-regulated capital primacy system are in the DNA of European and American societal fabric.
Laissez-faire (without government interference) economic systems invariably lead to the supremacy of capital in its relationship with labor. The overworked, under-protected, nearly starving factory workers of the early industrial revolution and the poorly paid workers in the gig economy of today serve as illustrations of the lopsided relationship when capital reigns supreme. Likewise, the emergence of communism and the disruptions occasionally exercised by organized workers illustrate solutions that attempt to establish supremacy of labor. Like harmony, supremacy is probably not a sustainable state of societal affairs. Supremacy sows seeds of revolution.
Enter politics. And political parties. Societal polarization that feeds from a sustained state of incompatibility between capital and labor. The contest assures large donations from high net-worth individuals and mobilizes workers to vote. One party promises jobs and wage growth from policies that encourage more investment by the holders of capital. The other promises benefits from social services funded by wealth redistribution. Both parties fashion rationales that appeal to capital and labor in pursuit of money and votes. Both parties benefit from a state of incompatibility—one is either on the free-market team or the general welfare team. In Congress, in Parliament, at the Statehouse, at town hall, in the local pub, or even in the co-op boardroom.
Co-ops and the Political Landscape
So, in the shadow of this titanic, never-ending struggle between capital and labor, where do co-ops fit in? Taking sides is a feast or famine strategy. The UK Co-op Party has become enveloped in the Labour Party. When Labour is in power, things are good. Not so much when they’re in the minority. The Polish credit unions have been very close with the conservative Law and Justice Party, presently in power. Things went badly when the Civic Platform Party was in power some years back. Rules were changed and some credit unions were confiscated by the government, sold to foreign banks. Since co-ops are often organizations of people, in some cases of workers, it is probably easier to imagine them taking the side of labor in terms of policy positions and public perception. Taking either side is a ticket to disappointment when the winds of party control blow in the other direction.
In the U.S., co-ops try to stay non-partisan, easier said than done. This is accomplished largely by staying out of the capital-labor (and other polarizing) debates. In the late 1990s, Republican Speaker Newt Gingrich was very helpful to the U.S. credit unions in passing much needed legislation, in part to counteract a devastating Supreme Court decision. At one point, he suggested that credit unions could become a grassroots path to voters for his party, which had to be politely deflected. Campaign support is necessary for maintaining access to lawmakers. Co-op lobbyists have to be careful, “we support you because you support co-ops…not because you are pro-labor (which usually goes together with heavy social welfare programs) or pro-free market (code for protecting the capital and managerial elite).”
The political landscape matters because it can affect the fortunes of the cooperative business model. But the best way co-ops can contend with the societal tensions between capital and labor is to change the conversation—in practice. Co-ops don’t pit capital against labor, they replace one-sided stakeholders (picture disinterested investors or activist union leaders) with “all-sided” members (beneficiaries of service). Co-op members democratically elect representatives from among themselves to hire management that is tasked to contend with all issues of building capital and motivating workers—but only for the business of running the co-op. The cooperative business model and the cooperative identity that drives it is the co-op response to those that persist with the posture of capital OR labor. Co-ops are a solution that introduces a legitimate posture of capital AND labor.
Starting, growing and proliferating co-ops is hard work. It is not the path for those seeking insane riches or magnanimous benevolence. But it is a rewarding way to make a difference in the lives of people, without contributing to the growing polarity that surrounds us in society.