Socialism or Capitalism: the workplaces with both

With the modern workforce under pressure, are there better alternatives?

Democracy Manifest

I was employed at Collection of Style (COS) for about two years before I resigned last November. I worked casually to support a convenient lifestyle: rent-free residence, studying, and occasional debauchery.

The main pitfall was the hours. Some weeks I’d work 12 hours and make about $200. Other times I’d work 5 and make $60. On a few occasions I got an unwanted holiday and a strong sense of rebuke. When you don’t want to appear unprofessional or take hours from friends, you pretend you’re okay with it. The same goes for directives from above, and contempt from clientele, as most employees know.

In Australia, the number of casual workers increased from 850,000 to 2,239,900 between 1984 and 2003. They have constituted about one-fifth of employed Australians since the turn of the millennium. Young people, women—particularly young women and students—are disproportionately acquainted. They know that they are not guaranteed work; that they are usually rostered on abruptly, with short and scattered schedules; and that they don’t receive paid sick or annual leave. And while casual workers can resign pretty much unimpeded, employers are just as free to jettison them.

These are some of the Laws of the Service Sector; regulations that workers are expected to conform to in order to get by. You comply with them until the money coming in isn’t worth the happiness going out, and then you try again somewhere else. But none of this — as well as the meagre wages, poor working conditions, and unreasonable workloads—is preordained. It has become ingrained through legal mandate and bureaucratic control.

Under 18th century English Common Law, freely contracting ‘Servants’ were legally bound to serve their ‘Masters’. For indentured workers and apprentices this meant a number of years. Explorers brought this jurisprudence to the colonies. The ‘Master and Servant Acts Australia 1902’ declared that recalcitrant workers would “be liable to penalty… [and] forfeit the whole or such part of the wages then due.” Absence was “punishable by imprisonment… with or without hard labour.”

The modern workplace took shape when managers began monopolising planning the execution of technical work, specifying and imposing it as strictly as possible. BHP invested in just this approach at its Newcastle Steelworks: American consultants were appointed managers, foremen ensured conformity, dissidents excised. As Guillaume Delprat underlined to his supervisors, they could “never give way on the question of changing a Foreman” because “the moment such a demand is given way to, it invariably brings with it many other demands from all sections of men.” This unyielding control developed alongside the large corporation, and entailed unprecedented bureaucratic planning. Two centuries ago in the United States, four-fifths of the population were self-employed. Today it is around five percent.

If you quit voluntarily, Centrelink is not required to provide unemployment assistance for eight weeks.

Elizabeth Anderson is a Professor of Philosophy and Women’s studies at the University of Michigan, who recently published her work Private Government. She explained that the corporation drastically transformed employer-employee relations. Contracts today “entitle the employer to fire the worker for any or no reason at all. The same goes for hiring, promotion, [and] altering the conditions of work”. She thinks it’s “enough to establish the undemocratic, dictatorial structure of the workplace.” Managerial power over the workforce has been partially checked in Australia, but is returning: the Fair Work Ombudsman website states that employers do not “need to provide notice of termination (or payment in lieu of notice) to employees who are casual”.

In service industries, employees learn another form of servility in ‘customer service’. Researcher Isabella Farreras interviewed cashiers in Belgium who were instructed to “never talk back”, “never argue”, and “accept contempt without reacting”. Farreras compared these directives to those imposed by slave-owners on domestic servants. The fact is that deference is profitable.

At COS, one Google reviewer was “absolutely disgusted” when an “aggressive and rude” sales assistant informed her and her colleague that the store was closed. The situation destabilised when the reviewer’s colleague offered to try a shirt “on the spot” rather than in the fitting-rooms. In what the reviewer described as “a rant about her being a human too and needing a life”, my coworker rejected the offer.

This one-star appraisal was left partly out of national shame: the colleague was from “over seas and that is now an impression of Australian service [sic]”. It was nevertheless screenshotted and shared our unofficial Facebook page, so that the offending coworker’s insubordination could be applauded. It was: roundly. The employee, a middle-aged mother, had told the man four times that the store was closed, ignored each time.

Despite the woman’s concern, their disrespect was fairly moderate. In 2016, the Shop, Distributive and Allied Employees Association surveyed 6,000 retail and fast food workers. 85% had experienced abuse from customers. One of Farreras’ interviewees was called a “stupid cunt” when a product didn’t scan. “Subordination” and “injustice” were persistent themes in her research.

Casual workers,  shouldering  the  burdens of precarity, home duties or assessments, are concentrated largely in these kinds of workplaces. They are highly prone to stress. Australian researchers found that generations who “experienced the peak of the suicide epidemic during the 1990s have continued to have higher suicide rates.” This increase coincided with “changes to [the] labour force characterised by greater ‘flexibility’ and ‘casualised’ employment, especially in younger aged cohorts.”

Democracy Manifest 2

As industries monopolise and corporatise, and labour markets become more casual and competitive, alternative employment opportunities dry up. And costs remained stacked against workers. If you quit voluntarily, Centrelink is not required to provide unemployment assistance for eight weeks. Voting with one’s feet can no longer prevent corporate despotism. One might suggest, as Anderson quipped, that “Mussolini was not a dictator, because Italians could emigrate.”

This state of affairs is not immutable. Economic democracy provides a viable alternative, despite its lineage and successes having been forgotten. Alexis de Tocqueville asked if democracy, “which has overthrown the Feudal system and vanquished Kings, will retreat before tradesmen and capitalists?” John Stuart Mill believed it could be rediscovered through democratic participation in industry.

Democracy in ‘private’ business rests on the same principles that underlie ‘public’ democracy: that we have inalienable rights over our conscience and ourselves. Democracy secures this, not by getting us what we always want, but by ensuring no one individual exercises this power over others. With equal voting rights and responsibility for gains and losses, only democratic associations permit self-government. They provide dignity, security, fair remuneration and purpose within the workplace.

These institutions privilege employees’ voices. Workers, especially in service roles, are frustrated with being silenced. Ferreras’ interviewees resented the fact that they had to behave like servants and saw no reason why they should have to sacrifice their dignity to earn an income.

Eroski—part of the Mondragon Corporation—is a Spanish supermarket chain with nearly 1,000 outlets across Europe. A worker-consumer cooperative, Eroski began in 1969 with 88 workers. It now employs nearly 35,000. Mondragon itself is located in the Basque region, which has the second highest GDP-per-capita of Spain and is one of the top twenty most educated populations in Europe.

Labouring members all have a stake in the company and an equal say in the election of their representatives and managers. This ensures accountability, autonomy and morale, as well as equality between managers and workers.

Cooperatives are far more likely to survive their first five years than traditional businesses.

Duncan Wallace, Education Officer at the Business Council of Co-operatives and Mutuals in Australia, says co-operatives “get overlooked” here, simply because “people don’t know about them”. Where minority-controlled, profit-oriented businesses have an interest in keeping workers in the cargo hold, exposed to ejection at the slightest turbulence, cooperatives provide substantial job security. “They don’t have that same internal drive or ability [as a regular corporation] to grow exponentially.” This means that they are “very good at smoothing out business cycles.”

Wallace was quick to point out that “customer owned co-operatives are prone to problems, and there have been times where workers have been exploited.” Wallace maintained cooperatives offered the fairest and most lucrative employment model for casual workers, provided the necessary rights and privileges were secure.

Regarding cooperatives and customer-worker relationships, Anderson was optimistic but cautionary. “I think there is a potential for co-operatives to better realize justice, but it all depends on the values under which they operate and the practical ideas through which they practice those values.” Anderson first recommends “legal reform to protect workers against the worst abuses, to ensure that their basic rights to autonomy and dignity are effective, to enable a better ethos to develop.”

Proponents of cooperatives emphasise that they are designed to foster a communal ethos. Eroski’s General Assembly of Delegates is comprised of 500 representatives—half worker, half consumption partners, elected by members. Punishments for violating rules—ranging from written warnings, probation and expulsion—are adjudicated by the Assembly.

Eroski is just one of many thriving democratic production, consumption and service institutions. There is today over 3 million such organisations, employing 10% of the world’s working population, and generating almost 3 trillion dollars in turnover.

One popular concern is that cooperatives will undermine the entrepreneurial incentive. Without markets allocating rewards, society would lose the capacity to motivate individuals to work or invest. Anderson emphasised that, within the firm, it is managers rather than markets that decide compensation. While individuals should be rewarded for hard work and diligence, “there is absolutely no incentive-based … justification” for the immense pay many executives now receive.

In 2016, H&M’s CEO Karl-Johan Persson was paid over $2,000,000. A Bangladeshi factory worker at the bottom of the H&M supply chain earned around $1,300. In its Sustainability Report that year, the company claimed to have a “100% Fair & Equal ambition in two focus areas: fair jobs for all and being stewards for diversity and inclusiveness.” Business leaders, like the Persson family (who have stewarded H&M for three generations), know that market mechanisms don’t decide or justify pay structures; hence the propaganda.

Over half the 70,000 respondents in OXFAM’s recent ‘Reward Work, Not Wealth’ report believed that it is difficult or impossible for ordinary people to increase their wealth with hard work. With rampant inequality, corruption and monopoly, those at the bottom lose the incentive to participate.

At Mondragon, there are democratically agreed-upon ratios between managers and shop workers. Differentials rarely exceed 5:1. As a member of a cooperative, Wallace informed me, “you are given a set of shares in the entity” and part of the profit is redistributed as dividends. “[A] cooperative has a choice to distribute the dividend to the number of shares held … or it could distribute dividends according to the business done.” Far from failing to incentivise workers, the Basque region registers some of the highest productivity rates in Europe.

Mondragon’s failings show that the blueprints shoulld be extended and refined, not replicated unquestioningly.

Some, including  Anderson, have pragmatic concerns, at least as cooperatives are taking off. “Most workers can’t come up with the capital. And even if they could, it’s often an imprudent investment. If the firm goes under, they lose their jobs and all their savings.”

In fact, cooperatives are far more likely to survive their first five years than traditional businesses. Yale’s Henry Hansmann observed that “the experience at Mondragon provides further evidence that capital accumulation and risk-bearing are not in themselves insuperable obstacles…” Even if the data were less flattering, cooperative members can claim genuine responsibility for their losses: a considerable moral justification for workplace democracy.

But as with traditional forms of employment, casual employees will remain, to some degree, less integrated than permanent members. They will be a minority, invest less of their time, and may not share the organisation’s long-term ambition for success. This makes career advancement more difficult, and it is likely that they won’t be provided the full member’s suite of benefits. One must not focus on the workplace at the expense of all else: public institutions designed to provide security and protection, like those that Anderson emphasises, must be developed in corollary.

The shortcomings of existing cooperatives provide pertinent lessons. Mondragon is not a perfect model, with cases of exploitation of casuals and other non-members working overseas. But this is the exception that proves the rule. Wallace thinks that “there’s no reason why a casual worker shouldn’t have the same amount of votes as a full-time workers.”  Even if casuals are not granted wide-sweeping benefits, providing comprehensive representation ensures accountability and personal responsibility, because no one is excluded from decision-making. Mondragon’s failings show that the blueprints should be extended and refined, not replicated unquestioningly.

Mill argued that humankind’s improvement requires building “association[s] of labourers themselves on terms of equality, collectively owning the capital with which they carry on their operations, and working under managers elected and removable by themselves.” This would allow, among other things, “the transformation of human life … to a friendly rivalry in the pursuit of a good common to all”. Democratic workplaces are ideally suited for counteracting the pernicious effects of casual employment, which stem largely from insecurity and lack of discretion over one’s work.

Cooperative workplaces in Basque and around the world are proof that economic democracy has unprecedented potential. The ambition to institute them is not naïve or academic: besides financial security, the main reasons that people give for investing in employee ownership and management are fairness and equality.