Building WSDEs: Strategies and Alliances

Among those persuaded of the value of Worker Self-Directed Enterprises (WSDEs) and of a transition to an economic system that includes a large and growing number of such enterprises, the question often arises, how do we get there from here? In other words, what sorts of strategies and alliances might allow or facilitate that transition? Here is an initial response to that question.

It is well known that capitalist enterprises directly and indirectly finance the political forces that support them. They do this directly when they distribute portions of their net revenues (surpluses) to politicians, parties, lobbyists, and think tanks (both independent and university-affiliated). These distributions are in addition to what they pay in taxes out of their net revenues. By legal contributions and illegal bribes, politicians and parties are induced to speak and vote in support of both particular and general capitalist interests. By hiring and financing lobbying at all levels of government, capitalist enterprises use portions of their net revenues to shape legislation and regulations. By funding think tanks, portions of their net revenues shape the “common sense” of economic and political leaders, journalists, and academics. Capitalist enterprises do this also indirectly when they distribute portions of their net revenues to major shareholders and top executives whose consequent wealth enables them to similarly finance (usually the same) politicians, parties, and think tanks. Both direct and indirect distributions of surpluses to political groups and projects seek to secure their services to capitalist interests.

A parallel logic could and should inform the relationship between WSDEs and the political forces that would support them. Indeed, the transition from a prevalently capitalist economic system to one more based on WSDEs might well require precisely that kind of relationship between current and future WSDEs and the political forces that work for social conditions conducive to WSDEs.

Establishing and growing WSDEs could be a shared program bringing together labor unions and social movements in the United States. For social movements, that pro-WSDE program is directly consistent with and a means of furthering the following:

-       greater income and wealth equality

-       greater real political democracy

-       greater ecological and environmental sensitivity

-       greater individual development of skills and aptitudes

-       less unemployment

For labor unions, a pro-WSDE program is desirable for the reasons listed above but also because such a program could open a second front in collective bargaining with capitalist employers. Their first front – seeking union recognition, contracts, and contract improvements – would be supplemented and thereby strengthened by a second front: establishing and growing WSDEs. The latter would be a bargaining chip in contract struggles with employers: what a union could and would do if no acceptable contract were forthcoming. This is at least one possible outcome of the current alliance between the Steelworkers Union and Mondragon.

For both social movements and labor unions, there are many ways to support

a program of establishing and growing WSDEs. Helping to secure the money needed to start or expand WSDEs is one way. This might be done by pressing for

-       government subsidies via grants, low-interest loans, and tax breaks

-       governmental technical supports,

-       government purchase orders targeted to WSDEs

-       private equivalents of the above provided by labor unions, social movements and partnerships of either or both with other private institutions (religious, educational, social, etc.)

Labor unions and social movements could organize campaigns to establish WSDEs as options for unemployed workers seeking returns to employment (such as the Marcora Law in Italy). Similarly, public campaigns could

-       develop and install public school curricula around developing workers’ skills in collectively running their own businesses.

-       produce, finance, and distribute films about WSDEs,

-       sponsor conferences among WSDEs to share and coordinate strategies

-       mobilize popular audiences for WSDE presentations,

-       educate consumers to buy the products of WSDEs to build their presence and to express preferences for WSDE over capitalist enterprises.

In return, how might WSDEs support social movements and labor unions that were directly active in such ways? The answer emerges as the parallel of how capitalist enterprises support the people and institutions favoring them. Here is the basic logic:

- in the typical, familiar capitalist enterprise, this equation describes its basic activities:

Embodied value (EV) + value added (VA) = total output value  (TV)

Embodied value refers to all the material inputs (tools, equipment, raw materials, building in which work occurs, etc.). The capitalist employer buys all these with the hope and intention of using them up in production. Some (like raw materials) get used up pretty quickly while others (like machines and the building housing them) take a long time to get used up. The longer an input lasts, the smaller the portion of it used up each day. In any case, these inputs get used up in and by the process of actual labor. Hired laborers transform them into whatever the enterprise sells. In that transformation, the laborers add value (VA) to the used-up material inputs (EV). Thus the value of the output (TV) is the sum of (EV) plus (VA).

In a simple example, consider chair manufacture. The (EV) includes the used-up wood, glue, nails and portions of hammers, saws, and the workshop. The value added comes from the work done by carpenters and furniture makers. To extend our simple example, we can assign numbers as follows:

50  (EV)  +  50  (VA)  =  100  (TV)

When the capitalist employer sells the total output, chairs in our example, he/she gets 100. From that, we can presume that 50 will be taken to replace the used-up EV so production can keep going. That leaves the remaining 50 in the hands of the capitalist. What do capitalists do with that 50?

First and foremost, they must pay the workers whose labor added value. If not paid, those workers will stop working. Lets assume, again just for simplicity, that  workers want and capitalists pay 20 for the work done in our equation. That would then leave our capitalist with 30 remaining.

This 30 represents what some economists call “the surplus.” In the capitalist system, this surplus belongs exclusively to the capitalists. They use it as they see fit to support and grow their enterprises.

They do this by distributing the surplus toward specific ends. For example, they use a portion – lets say 8 – to pay the wages and salaries of people needed to run the enterprise but who don’t themselves produce the output. For example, the salespersons – those who market the produced chairs – need to be paid; so does the security guard who watches over the workplace at night; so does the file clerk, the enterprise’s lawyer, and so on. We may call these enabling employees: they do what enables other workers actually to make the enterprise’s products.

Of the remaining 22 in the surplus, another portion is paid to the state in taxes, say 4. Of the remaining 18, another portion is paid as interest to banks on loans to the enterprise, say 3.

That leaves 15 in the surplus that capitalist enterprises use for distributions that deserve our close attention. To keep our example simple, lets divide these 15 into three equal parts: 5 is distributed in high salaries to top executives, 5 is distributed in dividends to share-owners, and 5 is used to expand the enterprise (to buy more EV and hire more workers).

In capitalist corporate enterprises, the board of directors (usually 15-20 persons) makes the decisions about surplus distribution. The shareholders select the board. Since the shareholders get one vote for each share they own, the major shareholders (usually a few persons or institutions who own the biggest blocs of shares) have the decisive votes. Thus, major shareholders and their boards of directors use the surplus to achieve their purposes: to perpetuate and grow their capitalist enterprises and their positions atop them.

We can now show how WSDEs could and would differ from capitalist enterprises in how, to whom, and for what purposes they distribute their surpluses.

            For simplicity, we assume a WSDE chair producer using the same production system as the capitalist enterprise described above (50 + 50 = 100) and returning the same 20 to the chair-making workers. Thus this WSDE has a surplus of 30 just like its capitalist counterpart. And to keep matters simple so we can focus on what matters, we will further assume that our WSDE also pays out 8 to enabling employees, 4 in taxes, and 3 in interest just like the capitalist chair enterprise.

So now we can focus on the remainder of the surplus which is 15. Here the differences between a WSDE and the capitalist enterprise are stark indeed. First, because all the chair-making workers together make the decisions, they will not likely use 5 units of surplus to pay very high top executive salaries. Likewise, because they have different structures and priorities, they will not use another 5 to pay dividends to shareholders.  Nor is growth likely to be the imperative it usually is for capitalist enterprises.

WSDE’s might then decide to use up 5 units of surplus by lowering their prices as a competitive strategy against capitalist enterprises who can less readily do that. That is, such an WSDE does without 5 by cutting its price to make its chairs more successful in the market place to secure a foothold. The additional 5 that an WSDE can avoid paying to shareholders could be made available to improve its technology (also for competitive reasons). Or it could be provided as start-up capital for new WSDEs. Or it could be contributed to the organizing funds of labor unions and social movements. And the same is true of the final 5.

In simplest terms: the 15 worth of surplus used in capitalist enterprises to take care of their capitalist objectives (dividends for owners, high executive salaries for top officials, enterprise growth to boost share prices, etc.) do not apply in WSDEs. There, by contrast, those 15 are available, partly or completely, to grow themselves, to help other WSDEs exist and grow, and to strengthen the labor unions and social movements in return for their support of pro-WSDE programs.

This kind of analysis can proceed further. For example, consider the 8 spent on enabling workers. Some of these are supervisors managing the production workers. If workers in a WSDE decided – as they might well be expected to do – that they preferred self-management to supervisors, part of that 8 might be saved and made available for other WSDE priorities. If labor unions and social movements could secure, at least for an initial period, a favorable tax treatment for WSDEs as they emerge to become a real choice/option in the US economy, the surplus saved from taxes would likewise fuel other WSDE priorities.

Social movements and labor unions that endorse pro-WSDE programs can thereby build an alliance with WSDEs that can and should be self-financing. Here is a way to merge programmatic and strategic objectives of all these allies with a source of the growing financial resources needed to realize their shared objectives.

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