An Introduction to Economic Democracy Co-Operatives As Drivers of Economic Growth
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ANALYSIS Sarajevo An Introduction to Economic Democracy Co-operatives as Drivers of Economic Growth 1%6/36%(3:%23:-ʈ7%6%.):3 June 2018 The concept of political democracy is often taken for granted in the developed world, despite its relative novelty and having emerged through a persistent and painful stru- ggle for voting rights. By contrast, economic democracy is often branded an impossi- ble and even utopian undertaking, just as social democratization was by certain layers of society 250 years ago. The former Yugoslav states, many of which are currently facing chronic economic problems with rising unemployment and underinvestment, nonetheless have a rich history of self-management. 'SSTIVEXMZIWSJJIVXLIMVQIQFIVWERHWSGMIX]QER]FIRIƤXW8LI]MRGVIEWIPSGEP communities’ resilience to external economic shocks. Given their democratic nature, they approach decisions on relocation and outsourcing with their wider implications in mind. Another positive for business is the economy of scale and increased bargai- RMRKTS[IVXLI]SJJIVXLIMVQIQFIVW4VSƤXWEVIVIMRZIWXIHSRHIQSGVEXMGTVMRGMTPIW often leading to lower costs and increased competitiveness (see credit unions below). Finally, co-operatives create stronger ties between co-workers and reduce alienation from the production process, since they encourage democratic participation at every level of the enterprise and its operations. Through its co-operatives and collectives, economic democracy offers a more inclusi- ve and fairer system for organizing society and the economy. It can also contribute to resolving pressing current problems, from rising income and wealth inequality to how society deals with the environment and climate change. In Bosnia and Herzegovina, worker self-management through co-operatives has the potential to save companies from decline and alleviate job losses due to failed priva- tization. An Introduction to Economic Democracy Co-operatives as Drivers of Economic Growth 1%6/36%(3:%23:-ʈ7%6%.):3 Sarajevo, 2018. 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo Content Introduction ..........................................................5 The History of Worker Self-Management and the Case of the Socialist Federal Republic of Yugoslavia (SFRY) ........................................6 The Break with the Soviet Union ........................................... 6 Grassroots from Above ...................................................7 The Self-management Structure in the SFRY ................................ 8 An Example of a Workers’ Council in the SFRY .............................. 8 The Present Context ...................................................9 The Concept of Co-operatives ..........................................10 Co-operatives in Bosnia and Herzegovina— the Regulatory Framework .........12 Examples from Other Countries . .13 Worker Shareholding – ITAS-Prvomajska (Croatia) ..........................13 Restarting the bankrupt enterprise .......................................14 Empresas recuperadas – the case of Argentina ............................15 The Favorable Institutional Framework in Argentina ........................15 Financing Options – Credit Unions .......................................16 Conclusion and Recommendations for BiH ................................17 Historical Legacy .......................................................17 8LI&IRIƤXWSJ'SSTIVEXMZIW ............................................17 The Potential of Co-operatives Today .....................................17 Policy Recommendations ...............................................18 Bibliography and References ...........................................18 4 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo Introduction of Yugoslav (SFRY) self-management, as well as examples from other countries, to consider how The concept of political democracy is often taken different types of worker self-management may for granted in the developed world, despite the rela- be useful in saving and reviving companies in or tive novelty of universal suffrage. While participa- near to bankruptcy. tion in political decision-making in contemporary democracies may be formally indirect and, given The history of self-management in the SFRY, the MXWI\IVGMWIEXJSYVXSƤZI]IEVMRXIVZEPWMHISPSKM- Yugoslav economic crash of the late 1980s, and cally sterile, there can be little doubt about the role the “victory” of liberal capitalism after the fall of the that individual participation plays in ensuring a Berlin Wall resulted in economic democracy being healthy exchange of opinions and so its potential perceived as a relic of the past, though data from for changing the political weather. Comparing the developed countries suggest otherwise. After the political systems of most nations today to those of ƤRERGMEPGVMWMWQER][SVOIVWJSYRHXLIMV even 200 years ago reveals astounding differences. answer to reviving the economy in co-operatives (discussed below). There are currently some 1.4 By contrast, our current economic system has million co-operatives world-wide, with around changed little since the Industrial Revolution, cer- 800 million members and 100 million employ- tainly in terms of worker participation, how key de- ees1. According to Hagen Henry, former Head of GMWMSRWEVIQEHISRTVSHYGXMSRTVSƤXHMWXVMFYXMSR the Co-operatives Department at the International or investment, ownership types, and the relations Labor Organization (ILO), co-operatives in almost of production. It is a basic assumption of this paper all economic sectors are more resistant to crises that political democracy without economic democ- and economic shocks than “standard” compa- racy cannot reach its full potential. Giving equal nies. Moreover, the World Co-operative Monitor’s weight to both forms, this paper presents ways and most recent data (report from 2017, data for prospects for developing economic democracy in 2015) show that the 300 largest co-operatives in Bosnia and Herzegovina and the Western Balkans. the world have aggregate total revenues of 2.16 trillion USD, which is more than Brazil’s nominal The keys to understanding how our civilization ap- gross domestic product (see graph below).2 For proaches human potential and its development perspective, it is worth noting that the 300 largest certainly do lie in ownership relations, democratic global companies on the Fortune 500 list (mainly decision-making on the means and goals of pro- JSVTVSƤXERHPMWXIHNSMRXWXSGOIRXIVTVMWIW LEZI HYGXMSRERHXLIVIHMWXVMFYXMSRSJER]TVSƤXFYX combined revenues of 22.2 trillion USD.3 not in them alone. They also lie in the limited and 1 Hamburgh, 2015. tactical approach taken to revitalizing weakened 2 Data from the World Co-operative Monitor (2017, 2016, 2015 and economies, so that failed privatization continues 2014). to affect everyday life. We will look at the case 3 The Fortune 500 list for 2017. Number of co-operatives with revenues higher than Revenue of top 300 co-operatives by year 100 mln USD (in billion USD) 3500 3.000,00 3000 2.500,00 2500 2000 2.000,00 1500 1.500,00 1000 500 1.000,00 0 500,00 2012 2013 2014 2015 2012 2013 2014 2015 Figure 1: source World Co-operative Monitor data Figure 2: source World Co-operative Monitor data 5 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo Economic democracy in general and co-opera- revitalized through history. In each incarnation, it tives and employee stock ownership plans more took on the characteristic forms of the time, in- particularly focus on worker involvement in key ar- GPYHMRKI\MWXMRKTVSTIVX]VIPEXMSRW8LIƤVWX[EZI eas of business development and long-term viabil- XSSOTPEGIHYVMRKXLIƤVWXLEPJSJXLIth century, ity, along with deeper integration in the local com- when Robert Owen, Charles Fourier and Louis munity, environmental conservation, and a fairer Blanc came up with the idea of reorganizing socie- form of globalization. Beyond its intrinsic value, ty through the voluntary merger of manufactures. such a model can contribute to saving compa- Although later considered utopian,4 their ideas in- nies devastated by bad (business) management, spired the early co-operative movement and came ƤRERGMEPGVMWMWSVJEMPIHTVMZEXM^EXMSR)\EQTPIW to be termed associative socialism. Over the past of successful worker self-management include two centuries, the ideas of the co-operative and of ITAS-Prvomajska in Croatia, Dita in Tuzla, and the economic democracy have served (among other ZEVMSYWŰVIGSZIVIHűƤVQW empresas recuperadas- things) as inspiration for syndicalism and as a ba- ERT) in Argentina. sic organizational principle, e.g. of the economy under the Paris Commune in 1871. During the 1SWXGSSTIVEXMZIWERH[SVOIVQEREKIHƤVQW Paris Commune, industry was handed over to the LEZIEFMKKIVTVSFPIQXLERNYWXTVSƤXEFMPMX]SV workers for management. Today, organizational competitiveness. The lack of a proper “framework” models very close to worker self-management (comprising the legal framework, favorable long- have been developed that integrate well with the XIVQƤRERGMRKI\TIVXMWIGLERKIWXSFEROVYTXG] liberal capital system of private property. laws, etc.), combined with external pressures, all too often predestine worker attempts at running The Break with the Soviet Union ƤVQWHIQSGVEXMGEPP]XSJEMPYVI Self-management saw perhaps its most complete In this paper, we look at some examples of such theoretical and practical expression in the SFRY “frameworks” in a few different countries and how economy, after the break with the Soviet Union in they might be applied elsewhere. First,