sign in sign up
<<
Home , Economic democracy, Social ownership

ANALYSIS

Sarajevo

An Introduction to Economic 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 rights. By contrast, is often branded an impossi- ble and even utopian undertaking, just as social was by certain layers of society 250 years ago.

„ The former Yugoslav states, many of which are currently facing chronic economic problems with rising and underinvestment, nonetheless have a rich history of self-.

„ '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 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 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 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 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 has million co-operatives world-wide, with around changed little since the Industrial , 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, 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 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 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 , and Louis munity, environmental conservation, and a fairer Blanc came up with the idea of reorganizing socie- form of . 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 . 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 and as a ba- ERT) in Argentina. sic organizational principle, e.g. of the economy under the Paris in 1871. During the 1SWXGSSTIVEXMZIWERH[SVOIVQEREKIHƤVQW , 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 system of private . 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, however, 8LMWI\TIVMIRGIMWWMKRMƤGERXJSVER]JY- we examine the example of self-management in ture attempt at establishing alternative economic the SFRY and compare that model with others models, whether by creating new economic val- that might be tried under the current political and ues or reviving existing ones. A clear distinction economic system. We then describe the basic must therefore be drawn between the Yugoslav forms of more or less (un)regulated worker self- self-management model and the system of the QEREKIQIRXMR&SWRMEERH,IV^IKSZMREERHƤ- in capitalist societies. nally look at examples of successful management models from the region and around the world. Branko Horvat characterized worker self-manage- ment in the SFRY as associative socialism, a sys- tem located somewhere between state socialist The History of Worker Self-Management central planning and the capitalist free . It and the Case of the Socialist Federal is hardly coincidental that, after severing its politi- Republic of Yugoslavia (SFRY) cal ties with the USSR, the Yugoslav turned to the ideas of socialist thinkers like Owen, The concept of worker self-management may be Fourier, and Marx. On the one hand, this policy HIƤRIHEWHMVIGXS[RIVWLMTF]ERHHIQSGVEXMG change was due to the geopolitical dynamic. On participation of the workers in the decision-making XLISXLIVXLI7*6=ŭWWTIGMƤGWXVYGXYVILMWXSV] processes of the companies (factories) they work and demographics required a more inclusive in. It has, since the early 1950s, been particularly economic system than centrally planned ones. closely associated with Yugoslav self-governing socialism. As Branko Horvat pointed out, it is in 4 The pejorative undertone of this term is due less to its being consi- dered unachievable than because it assumes fundamental social reor- fact an old phenomenon, reincarnated and often ganization can take place without class struggle.

6 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

Political ideology thus had very concrete implica- problems. The USSR wanted to bring the coun- tions for the country’s international political and try politically and economically “into line,” with economic relations. As it pulled free from the ideo- sanctions imposed by the entire Eastern Block. logical (political and economic) grip of the USSR, This compounded the hardships due to imple- Yugoslavia needed a new ideological basis for its mentation of the Five-Year Plan, causing serious unique economic system. problems for an economy that, in 1949, was still centrally planned (). Worker coun- Already by 1949, the managers of public compa- cils had been established in some companies nies were being presented as undesirable sources and they started to make collective decisions on of bureaucratization. Searching for an econom- VIHMWXVMFYXMRKTVSƤXW&]QMH[SVOIVWIPJ ic and political model of its own, the League of management “from above” had begun.7 A law was Communists of Yugoslavia (LCY) declared the passed to institutionalize it, changing the nature “opportunism of managers must be broken down of labor relations.8 Between August and October by worker consciousness,” because the managers that year, 7,136 workers’ councils were formed, could not be criticized “from above.”5 The grass- [MXL[SVOIVWERHSJƤGMEPWWIPIGXIH9 Self- roots organizations that would later form the ba- management was thus initiated by a sis of the Yugoslav labor movement already exist- workers’ movement, but the central Yugoslav au- ed during the Second World War. Geographically XLSVMXMIW[IVIUYMGOXSWIIXLIMHISPSKMGEPFIRIƤXW dispersed partisan units (and national liberation particularly for their geopolitical standing after the boards) had emerged in response to occupation political break with the USSR. This was the begin- and had deployed autonomous and self-govern- RMRKSJXLITVSGIWWSJHIƤRMRKEWTIGMEPŰ=YKSWPEZ ing forms of guerrilla resistance and political path” towards associative socialism,10 in between organization. This was a condition for the early Stalin’s state socialism and the capitalist econo- development of worker self-management, just mies of the West. EWQYGLEWXLII\XIVREPJEGXSVWMRƥYIRGMRKXLI Yugoslav economy’s paradigmatic transforma- 8LI VIHIƤRMXMSR SJ ownership was key to this tion in the 1950s. The creators of this Yugoslav transformation of a centrally economic model held the basic ideas behind its into a decentralized “market socialist” one and institutionalization to be “the withering away of was widely considered a major success of the the state, separation of the Party from the govern- Yugoslav socialist experiment. State property, i.e. ment apparatus, and the transformation of state- of the , was to social-ownership, managed by the producers XYVRIHSJƤGMEPP] ERHPEXIVTVEGXMGEPP] MRXSWSGMEP- themselves.”6 These goals were generally inter- ly-owned property, nominally redistributed to all preted as signals both to outside players (USSR workers for (democratic) management. According and the West) and to the citizenry (the workers). to the Constitution of 1953,11 “ of 9RHIVXLISJƤGMEPMRXIVTVIXEXMSRSJXLIXMQIHI- the means of production and self-management centralization and worker self-management were by the producers in industry and by the working to bring about a fairer distribution of wealth and people in municipal, urban or regional government empower all citizens. together provide the foundation for the social and political organization of the country.” As well as Grassroots from Above introducing self-management in the economic sphere, the Yugoslav authorities took a turn to- After an immediate post-war period of cen- wards societal self-management, establishing trally planned industrialization and economic it under the constitution across municipalities, growth, the Yugoslav economy began to run into  'ZINMʉERH4IXVSZMʉ 8 7PY˶FIRM0MWX7*6. 3JƤGMEP+E^IXXISJXLI7*6=   4IXVERSZMʉT 9RPIWWSXLIV[MWIMRHMGEXIHXVERWPEXMSRW  4IXVERSZMʉT into English of quotes from works written in Serbian, Croatian or Bosni- an are by the author.) 10 Later characterized as .  /PEWMʉ 11 2SZMREVWOSM^HEZEʏOSTSHY^IʉI, 1953.

7 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

towns, counties, and the educational, cultural and Despite the government’s and the party’s enthusi- . While this transformation came asm for the “three Ds” (de-bureaucratization, de- from “above,” it proved to have staying power as mocratization and ), in practice the basic principle underwriting the transforma- “in the workplace, power was concentrated in the tion of the working class from a political object to steering committee, which was dominated by a political subject. party members, experts and technocrats.”13 The workers in their councils generally deliberated on The Self-management Structure in the SFRY production processes and not on how the compa- ny should conduct its business. The company was led by its managing director, acting in line with Workers’ Councils the decisions and orders of the workers’ council, [LMGLLEHWIPIGXIHLMQSVLIVMRXLIƤVWXTPEGI Steering Committee but rarely exercised its authority to dismiss.

Managing Three organizational aspects, each with different director WSYVGIWSJMRƥYIRGIERHTS[IVIQIVKI[MXLMR XLMWLMIVEVGLMGEPXVMERKPI8LIƤVWXMWXLIXIGLRMGEP aspect of production, with decision-making exer- The basic structure of worker self-management cised predominantly by worker experts at lower was triangular: the workers’ council – the steer- levels of the organization. The second is the allo- ing committee – the managing director. In theory, cation of revenues and the drafting of production the workers’ council was the backbone of this ERHƤRERGMEPTPERW[LIVIXLI[SVOIVWŭGSYRGMP new organization of labor and was as such sup- played a major role under the democratic princi- posed to do most of the decision-making in the ples. The third aspect of the internal dynamics of GSQTER]MREHIQSGVEXMGQERRIV%W4IXVERSZMʉ self-managing enterprises was human resource notes, “Workers’ councils had anywhere from 15 management, which was largely in the hands of to 120 members, while in companies with less the LCY. Workers could not be laid-off without the than 30 workers, all the workers took part in it.” 12 support of the workers’ council, however.14 Collectives elected and recalled the members of the council through general direct votes. The man- Clearly, instead of workers’ councils accelerating date lasted two years, with up to two consecutive the withering of the state (de-étatisation), they terms allowed. The workers’ council made its de- LIPTIHTVIWIVZIMXWMRƥYIRGI'SQTEVIHXSGYV- cisions collectively and was the company’s formal rent relations of ownership and production, how- WSYVGISJQENSVHIGMWMSRWERHWXEXYXIW VYPIWƤ- ever, a meaningful level of economic democracy nancial and production plans, and so forth). The clearly did exist, in combination with some specif- council in its turn elected and recalled the mem- ic inalienable management rights. However small bers of the steering committee and decided on its real impact on daily life or society may have how to deploy any surplus capital. In today’s been then, it does not exist at all today. economic system, workers’ councils have been replaced by steering committees. The main differ- An Example of a Workers’ Council in the SFRY ence from worker self-management lies in the fact that steering committee members have a longer A branch of 22 workers at a factory15 with a to- (four-year) mandate and can serve an unlimited tal of 300 would directly elect one of their col- number of terms. In some companies, they do not leagues to a two-year term as delegate on the IZIRLEZIXSFIIQTPS]IIWSJXLIƤVQ[LMGLGER workers’ council. Each branch had at least one lead to poor business decision-making, as they 13 Unovski-Korica, 2015. will not be directly affected by the consequences. 14 /YPNMʉ 12 4IXVERSZMʉT8LIJSPPS[MRKXI\XHVE[WSR4IXVERSZMʉJSV 15 The case in question is of that of Jugoremedija and is discussed in details. Markuš, 2013.

8 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

representative (more for bigger branches). In part of the rural population fell from 50% to 20%.20 XLMWƤVQSJIQTPS]IIWXLI[SVOIVWŭGSYRGMP Not only were villages being emptied out, but a had twelve members. Delegates to the workers’ smaller proportion of the people who did stay in council initially voted based on the of XLIZMPPEKIW[IVI[SVOMRKMRXLIƤIPHW the branch and the employees who had selected them, regardless of potential disagreement with After this shift to relative economic company management. All decisions made by the and de facto transfer to a (mar- workers’ council were public and available to all ket socialism) under the economic reforms of employees. In the end, this delegate system was 1964, Yugoslav companies were able to maintain the only one that allowed workers “to meet their their competitiveness on western markets for a representatives face to face every day.”16 period. Over time, however, their competitiveness weakened due to internal contradictions, unequal 8LIWIPJQEREKIHIGSRSQ][EWUYMXIIJƤGMIRXEX development between the republics, and external PIEWXHYVMRKXLIƤVWXX[IRX]]IEVW TVSFPIQW[IVI shocks from the global economy (perhaps the caused mainly by external factors).17 The results most important being the oil crisis of 1973 and of introducing worker self-management as a basic the rapid rise of rates in the USA in 1981). organizational principle were evident from 1952 This resulted in higher , unemployment, and MRƥEXMSRWXSOMRKMRXIVREPXIRWMSRW7MQMPEVHIZIP- on, as the system established itself and a rapid opments took place in many other countries, how- rise in GDP followed. GDP growth for 1955-1960 ever, and it would be biased to blame the failure was 11.3%, the highest in Europe and likely in the of the Yugoslav economy during this period exclu- world.18 sively on worker self-management. %GGSVHMRKXS-FVELMQ0EXMƤʉŰ8LVSYKLSYXXLIIR- tire post-war period, except 1990, economic devel- The Present Context opment and the rise of gross domestic product (in the SFRY) were constant. First, the pre-war agrar- The present situation differs greatly from the forty- ian social and economic structures were over- year history of Yugoslavia. The main difference is turned. After 1959, industry took a lead over all between their respective economic systems. In the other branches of the economy in production the Yugoslav case, there was a system of worker and the attainment of gross domestic product WIPJQEREKIQIRXXLEX[LEXIZIVXLIMRƥYIRGISJ goals. , which had been dominant in political factors and of manipulation, nonetheless society before the war, was displaced by industrial did afford workers an inalienable right to select production. In 1990, social product was 6.1 times VITVIWIRXEXMZIWERHMRƥYIRGIQENSVEWTIGXWSJXLI higher than in 1952. A major role in increasing pro- company’s operations. Economic democracy was duction was played by the socially owned part of established in company management on the prin- the economy, which grew by a factor of 8.5 and ciple of “one person - one vote,” conditioned by the accounted for 88% of .”19 changed nature of ownership. Property that was neither state-owned (as in the USSR’s statist mod- The period of industrial recovery and the intro- el) nor fully private (as in the capitalist economies HYGXMSRSJWIPJQEREKIQIRXFVSYKLXWMKRMƤGERX of the West) allowed everyone equal and demo- changes in society. For example, in just two dec- cratic access to the means of production. This ades (from 1961 until 1981) the urban population had an impact on productivity, relations towards increased from 28% to 46%, while the agricultural production, the community, and other aspects of life. While companies competed horizontally and 16 Ibid. so maintained competitive -levels and a de- 17 The oil crisis of 1973 and 1979, the Volcker Shock of 1981— the sudden rise of interest rates in the USA, and disintegration of the USSR. gree of , decisions on fundamental busi- 18 1MXVSZMʉ ness issues (what, how, how much and for whom 19 0EXMƤʉT 20 Novakoviʉ, 2014.

9 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

to produce, how much to invest, what level of pay to Among other things, co-operatives support: maintain, etc.) were made democratically in-house. ƒ free, open and voluntary enrollment in and Under current liberal capitalist conditions, it is withdrawal from membership in co-operative possible for associations to retain, enterprises; under certain circumstances, characteristics reminiscent of worker self-management and sur- ƒ democratic forms of organization where each vive. Where are also employees and member has one vote, decisions are made by TEVXMGMTEXI MR S[RIVWLMT SRI WSQIXMQIW ƤRHW the democratic resolve of the majority, and some of the features of worker self-management. the elected management is responsible to the Such circumstances are, admittedly, rare, given members of the co-operative; the nature of the institution of private ownership and the tendency to amass capital. Under such ƒ E JEMV HMWXVMFYXMSR SJ TVSƤXW EYXSRSQ] ERH circumstances the “one person - one vote” rule independence. no longer applies and “one share - one vote” does instead. Moreover, both companies and individu- Co-operatives are established on the following als can be shareholders and the latter do not have core co-operative principles and values, adopted to be employed by the company. Consequently, by the International Co-operative Alliance:23 decisions are often made by a far smaller group of people than they affect. This has an impact on ƒ Open and voluntary membership. Mem- the entire life cycle of a company: from basic is- bership in a co-operative is open and voluntary sues related to business operations (what, how, for all individuals who see an opportunity to how much and for whom to produce) to decisions work and participate in the co-operative and on investments, human resources, salaries, loans, are willing to accept the promulgated rules of the relationship towards society, bankruptcy, etc. the co-operative. Add the poor standing and organization of many trade unions and the badly designed and even ƒ All members of the co-operative carry out bu- more poorly implemented privatization of public siness supervision. assets21 and we get the recipe for the failure of so many companies, one which has entailed the ruin ƒ A co-operative is a democratic environment of entire industries, communities and generations. where the members supervise its work and make decisions at assemblies on the Even under current circumstances, however, sever- “one member - one vote” model regardless al options do continue to exist that offer a legal and of the scope of business of the individual organizational framework for economic democra- co-operative. cy within companies. In remainder of this paper, we discuss the co-operative model through examples ƒ )GSRSQMG TEVXMGMTEXMSR ERH TVSƤXWLEVMRK of organized employee shareholding (ESOP). JSVGSSTIVEXMZIQIQFIVWMembers partici- pate through their work and so contribute to growth of the co-operative. It is not enough to The Concept of Co-operatives pay membership fees and become a member. Active participation in the work of the co-ope- The term co-operative refers to autonomous, vol- VEXMZIMWIWWIRXMEP%R]TVSƤXW EJXIVWIXXMRK untary organizations whose members meet to aside the amount dictated by law) are then dis- reach mutual economic, social and cultural goals tributed among the members, in proportion to through a democratically managed organization XLIMVVSPIMRKIRIVEXMRKWEMHTVSƤX 22 that they own. 23 The following seven points are taken over from the website of the Croatian Centre for Co-operative , 2016 - http://zadruge. 21 Transparency International BiH, 2009, p. 27. /hr/o-zadrugarstvu/sto-je-zadruga-i-kako-je-osnovati/1. The trans- 22 &EFMʉERH6EʏMʉ lation into English is the author’s.

10 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

ƒ Independence and autonomy. As an indepen- process. Every co-operative member is directly in- dent and autonomous legal entity, the co-ope- volved in operations and acts through the co-op- rative relies legally on the work and resources erative or uses its services or in some other way of its members, under their direct supervision. directly participates in meeting its founding goals.24 Co-operative members have rights and responsi- ƒ 'SSTIVEXMZIQIQFIVWERHIHYGEXMSRTVS bilities, established democratically through stat- fessional development and the right to infor utes and . Examples include: the right mation. It is essential members be well-edu- to vote in decision-making on company manage- cated and informed, so that they can make QIRX IUYEPEGGIWWXSER]TVSƤXWFIMRKHMWXVMFYXIH  appropriate decisions and contribute to deve- EGGIWWXSƤRERGMEPVITSVXW ERHIUYEPEGGIWWXS lopment of their co-operative. available work (at times of reduced demand, work- ers are not laid off; instead everyone works less). ƒ 'SPPEFSVEXMSR FIX[IIR GSSTIVEXMZIW Co- Responsibilities include running for executive posi- operatives exist for their members and to tions on a limited mandate, equality of contribution, strengthen the co-operative system by connec- willingness to be an active member, and equal re- ting and collaborating at the local, regional, na- sponsibility for any losses. tional and international levels. Under the current economic system, the difference ƒ Concern for the community. By conducting between “ordinary” companies and co-operatives is their business successfully, co-operatives that the former conduct their business in the inter- have a positive impact on their members’ lives est of majority owners or investors. In the latter, and contribute to their environment and local return on capital is usually subordinate to the co- communities. operative members’ social and economic interests. We may therefore classify “ordinary” companies as 8LIQENSVFIRIƤXWSJGSSTIVEXMZIWMRGPYHI associations of capital, while co-operatives are as- sociations of people. Similarly, when it comes to Joint entry to More bargaining power, a bigger - the market market share ƤRERGMRK[IQE]EWWYQIXLEXMRŰSVHMREV]GSQTE nies” capital generally leases labor, while in co-oper- Lower reduce EXMZIWPEFSVPIEWIWGETMXEP'SSTIVEXMZIWVIHIƤRI production production costs and increase productive and other business relationships within costs competitiveness the company to at least some degree and provide Better price for Increases competitiveness, mainly alternative answers to such questions as: who the raw materials through increased bargaining S[RIVMW[LSŭWLMVMRK[LSQ[LEXXSHS[MXLTVSƤXW power and so forth. Sharing Economies of scale, shared warehouses maintenance costs, and better Use of the delegate model is crucial in worker self- and machinery capacity utilization management to ensure co-operatives are fully op- Joint marketing Economies of scale, the co-op erational and reach their full potential. The demo- brand adds value cratic right to vote and the “one member - one vote” 'SSTIVEXMZIW Instead they lower the price of TVMRGMTPIEVIJSYRHEXMSREPXSXLIZIV]HIƤRMXMSRSJ do not services for members (e.g. lower co-operatives. How each member uses their vote accumulate interest rates at credit unions) and affects outcomes. A number of common man- TVSƤXW ensure them a higher price for agement structures exists: 1. their labor (all members decide on everything); 2. voting by delegating power to an individual or committee (managing director); 3. electing a representative Co-operatives exist to meet the needs of their body (—steering and su- members, who are the ones bringing in capital and pervisory boards); 4. creating an ad hoc managerial investments, as well as overseeing the business 24 Croatian Centre for Co-operative Entrepreneurship, 2016a.

11 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

structure approved by the full membership assem- 8LIHMWXVMFYXMSRSJXLITVSƤXSVWYVTPYWMWERSXLIV bly; and 5. a combination of the above. Within the important trait of co-operatives. Established pro- framework of whatever management structure is cedures mean that the co-operative must cover established, the co-operative may retain its right losses from previous periods from current gains, as to decide on important issues through direct dem- determined by annual audits. After this, the co-op- ocratic vote. What is important is that decisions erative may allocate and record a pre-set percent- remain democratic and be changed only through age for future growth and a minimum percentage democratic means. for required reserves, until they reach the total capi- XEPGSRXVMFYXIHF]QIQFIVW%R]VIQEMRMRKTVSƤX How one becomes a member is a further impor- can, in accordance with assembly decision, be tant aspect of the co-operative, often determined used for: signing up additional members and pay by statute. As co-operatives can have employees, their contributions for them, bearing in mind each whether and how they become co-operative mem- member’s degree of participation, or for disburse- 25 bers over time and how long they remain such must ment to members, investors and workers, etc. FIHIƤRIH'LSMGIWQEHISRXLIWIX[SSTXMSRW GERLEZIWMKRMƤGERXMQTPMGEXMSRWJSVLS[[SVOIV self-management works out in practice. If the path Co-operatives in Bosnia and XSJYPPQIQFIVWLMTMWRSXTVSTIVP]HIƤRIHEGSST- Herzegovina— the Regulatory Framework erative can lose its democratic essence over time. Co-operatives in Bosnia and Herzegovina are cur- rently regulated by a state-level law (The General *MRERGMRKMWERSXLIVMWWYIVIUYMVMRKTVIGMWIHIƤRM- 0E[SR'SSTIVEXMZIWMR&M,), which superseded the tion under the rules and statutes to avoid undermin- existing entity laws (XLI*&M,0E[SR'SSTIVEXMZIW ing any of the fundamental principles mentioned and XLI0E[SR%KVMGYPXYVEP'SSTIVEXMZIWSJXLI above. Members of the co-operative bring in “seed Republika Srpska). .” This does not automatically confer own- ership rights but does entail membership rights Under the +IRIVEP0E[SR'SSTIVEXMZIWMR&M,,26 a and obligations. This means that despite varying co-operative may be established by no fewer than levels of contribution, which are themselves de- ƤZIMRHMZMHYEPWERHSVPIKEPIRXMXMIWMJXLI]QIIXXLI TIRHIRXSRXLIƤRERGMEPRIIHWSJXLIGSSTIVEXMZI conditions set out under the relevant co-operative’s members have only one vote each. Differences in rules. The rules can specify that members must be contributions can be offset through a system of individuals, while the articles of incorporation can internal loans (between members, often interest- allow for a greater number of founders. free), which the new member returns through sal- ary deductions. The founders’ meeting or assembly is the co-oper- ative’s largest body and its members are the found- Where a co-operative has needs that go beyond its ers of the co-operative. Co-operative regulations QIQFIVWŭƤRERGMEPGETEFMPMXMIWI\XIVREPPSERST- are established by majority vote at the meeting.27 tions should also follow the internal co-operative TVMRGMTPIW,IVIHIGMWMSRWSRƤRERGMEPXVERWEG- 25 Narodne Novine, Republic of Croatia, 2013. tions and borrowing are often made by co-opera- 26 7PY˶FIRMKPEWRMO&M, 8LI3JƤGMEP+E^IXXISJ&-, , no. 18/03, 2003. tive assemblies on a case-by-case basis. Like other 27 The co-operative’s rules determine: , co-operatives can take out loans from ŵ its activities, banks, funds, and credit unions, which tend to offer ŵ its principles, more favorable lending conditions. It is important ŵ how to change its status or wind it up, XSRSXIXLEXMRZIWXSVWSVƤRERGMEPMRWXMXYXMSRW[LS ŵ its representative bodies, lend or provide capital against ownership rights in ŵ the conditions for joining, ŵ the conditions for leaving, a co-operative rarely themselves become members ŵ the form and amount of the membership stake and deadlines for of the co-operative on that basis. presenting it,

12 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

On the “one member - one vote”28 principle, the and reports on revenues to the assembly. It also meeting elects such other bodies as: the board of prepares recommendations for the assembly and directors, the supervisory board, and, if envisaged carries out its decisions. Finally, it prepares busi- in the co-operative’s rules, a managing director. ness reports, balance sheets, and income state- The president and members of the board of direc- ments, and conducts business policies, and so on. tors, the managing director, and the president and members of the supervisory board are all elected The supervisory board oversees the legality of in a timely manner in line with the co-operative’s the co-operative’s business, discusses the annual VYPIWJSVETIVMSHSJRSPSRKIVXLERƤZI]IEVW[MXL ƤRERGMEP ERH TVSKVIWW VITSVXW TVSZMHIW STMR- the possibility of re-election. MSRWSRTVSƤXWLEVMRKERHWSJSVXL8LIHMVIGXSV represents the co-operative and runs day-to-day Once the co-operative has been established, one operations. becomes a co-op member by submitting a re- quest, accompanied by a statement accepting %WXSTVSƤXWPIKEPVIKYPEXMSRWVIUYMVIEWTIGMƤG all the rights, obligations and responsibilities of reserve fund be set aside each year. A co-opera- membership, as determined by the co-operative’s tive must contribute up to 5% of the membership rules. capital each year. Reserves accrue until they equal the total value of the co-operative’s capital when The assembly, which must meet at least once a it was established. Under the +IRIVEP0E[SR'S ]IEVHVE[WYTERHGSRƤVQWXLIVYPIWWIPIGXWERH STIVEXMZIWMR&M, co-operatives can envisage the dismisses the chair, the managing director, and creation of other funds in their regulations. In cer- the members of both the supervisory board and tain countries (e.g. Croatia) the creation of a co- the board of directors, approves the co-operative’s STIVEXMZIHIZIPSTQIRXJYRH  SJTVSƤXWEJXIV FYWMRIWWERHƤRERGMEPTPERWERHHIGMHIWSRXLI losses from previous years) is considered advis- disposal of any property and the distribution of able or even mandatory. TVSƤXWERHER]SXLIVMQTSVXERXMWWYIWEWHIƤRIH by the statutes. Where there are more than 300 members, the rules may stipulate delegation of Examples from Other Countries the assembly’s activities to representatives, of whom there should be no fewer 30, elected for a Worker Shareholding – ITAS-Prvomajska 'VSEXME TIVMSHSJRSXQSVIXLERƤZI]IEVW ITAS-Prvomajska is a company from Ivanec, in Co-operatives with fewer than 25 members do not :EVE˶HMR'SYRX]'VSEXME-X[EWJSYRHIHMR appoint steering boards. Where there is a steering and originally produced tools and machinery board, it must have at least three members. This parts. At its height, it employed around 12,000 board executes the co-operative’s business policy workers and was sixth in the world in exports in its branch. After economic transition and the ŵ how and when the founders‘ capital investments must be made, transformation of ownership forms of the 1990s, ŵ members’ responsibilities, ITAS went through a problematic and question- ŵ LS[TVSƤXWSVWYVTPYWMRGSQISZIVI\TIRHMXYVIWEVIXSFIHMWXVMFY- able privatization process. ted and losses covered, ŵ EPPSGEXMSRJVSQTVSƤXWXSXLIQERHEXSV]VIWIVZIJYRH Business problems accumulated, salaries were ŵ the rules for election and dismissal and the scope of work of the co-operative’s departments, not paid on time, and were not serviced. ŵ the co-operative assembly’s rules for decision-making, electing and In 2005, the company declared bankruptcy. The dismissing representatives, and members’ rights and responsibilities, collapse of this business giant, which had sup- ŵ other matters. ported the economy of an entire region, meant 28 The law also allows voting rights to be weighted (by each member‘s obligations towards the co-operative or by recorded investment). No economic catastrophe for the town of Ivanec, with member should control more than 5% of the vote at an assembly of 50 MXWTSTYPEXMSRSJERHƤRERGMEPMRWIGYVMX] members or more. The limit may be lower, if so determined by the co- operative’s rules. for many families.

13 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

Many of ITAS’s assets were transferred to so- Restarting the bankrupt enterprise called “phantom companies” before bankruptcy was declared. When it was, ITAS’s total assets With the new commissioner and bankruptcy plan amounted to only 3.4 million Croatian Kuna (HRK), in place, a new company with initial capital of 3.4 while creditors were claiming 32 million HRK. An million HRK, ITAS-Prvomajska, was created. The important detail that ultimately enabled ITAS workers also succeeded in restoring their part- workers to establish their right to worker self- ners’ trust and were able to continue with jobs management of the company was that their claim that had already been begun. The other creditors for unpaid wages and contributions amounted included banks and it was determined under the to 52% of total dues. Thanks to the high level of FEROVYTXG]TPERXLEXXLIRI[ƤVQ[SYPHWIXXPI worker at the creditor meeting (made its debts at 12.4% of the nominal value. The eq- up of bankruptcy creditors with the right to vote uity capital of 3.4 million HRK was then converted and make important decisions on bankruptcy pro- to 340,000 shares, each worth 10 HRK. The new ceedings), 311 workers acted jointly and secured company offered two options to creditors: either a majority of the votes. Prior to the bankruptcy to get their money within three years, dependent declaration, the workers had mobilized and physi- cally occupied the factory. This was of crucial im- on the factory’s performance, or to convert their portance, as it prevented any additional sale of debts into shares (i.e. equity). The banks took the the property or productive assets. As Dragutin ƤVWXSTXMSR[MXLXLIVIWYPXXLEXXLI[SVOIVWXLIQ- Varga, an employee and current Chair of the ITAS selves bought 100% of the shares and became board, said of this action by the workers, “the fac- sole owners of ITAS-Prvomajska. tory had to be defended from the inside.”29 The workers encountered many obstacles during this Over time, the workers managed to restore pro- period, including disconnection of electricity and duction, partnerships and lost customers. 116 water and the termination of existing contracts workers were employed in production, though with suppliers and customers abroad. there was work for only about 50. Instead of cut- ting the number of workers, they adjusted the indi- Once the workers had managed to prevent sale vidual workload. Perhaps the most important as- of the property and any further reduction of the pect for this paper is that a democratic structure liquidation assets,30 a new bankruptcy process was established for making business decisions. was declared and the court appointed a bank- “The most important democratic factor in a com- ruptcy commissioner, who was however already pany (alongside the workers’ council and trade 31 dealing with 21 other cases. The workers were union) is the production committee (made up of unhappy with the bankruptcy plan, convinced its union trustees, the workers’ council, production primary goals were to sell off assets, settle claims managers and elected worker representatives). It and shut down the factory. Since the law allows makes binding and advisory decisions and then companies to continue trading under bankruptcy, GSRƤVQW ERH MQTPIQIRXW XLIQ XSKIXLIV [MXL the ITAS workers decided at a creditor meeting the board of directors. The production commit- to dismiss the bankruptcy commissioner and ap- point a new one with more understanding for their tee informs the workers about its work and to- problems and efforts to rebuild production under gether they make decisions on key issues, such as HMJƤGYPXGSRHMXMSRW [LIXLIVTVSƤX[MPPFIMRZIWXIHMRXSTVSHYGXMSRSV salaries.”32 A number of protection mechanisms were put in place to ensure ITAS could never again be purchased by a single owner. Under the com- 29 :VEKSPSZMʉ pany’s statutes, no one can own more than 10% 30 This includes both the debtor’s property when bankruptcy procee- of the shares and, regardless of how many shares dings start and any property that may accrue while proceedings are on- going. one has, everyone’s vote counts for the same. 31 :VEKSPSZMʉ 32 1MPS˙ERH4XMʉ

14 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

A so-called “closed model” was also put in place, model, under the slogan “Occupation! Resistance! so that only employees can purchase .33 Production!” This entailed collective action to pre- vent production resources being removed or the The factory now produces highly sophisticated premises being used for other things (occupy- CNC machines (computer numerical control ma- ing the premises and physical resistance) and to chines used in making car and machine parts). It restore production and service provision, while employs around 250 workers (overall, some 400 negotiating with local and central authorities to employees have been employed here since 2006) continue production during bankruptcy proceed- and 90-95% of its machine tool production is sold ings.36 The legal process used by the recovered to foreign markets. Production has been growing companies was based on co-operative principles. 15-20% per annum.34 The workers themselves The Argentine Bankruptcy Law was later amended decide on their business activities and over the to allow production to continue, as well as change last four years they have invested more than two of ownership during bankruptcy. The co-operative million Euro into new technology and machinery assemblies in the recovered companies made im- to improve their competitiveness. In 2015, the portant decisions on their company’s organization average net salary at ITAS-Prvomajska was 4,000 and activities. Under “one worker-one vote,” every- HRK.35 The company has its own cultural associa- one had equal access to decision-making, includ- tion and a soccer club. ing on the allocation of assets (not part of the liquidation estate) as production recovered. By While workers did form a majority of the credi- 2014, there were more than 300 such recovered tor group, the relatively high added value of ITAS companies with 13,000 employee-shareholders. products and the concomitantly educated staff EPWSTPE]IHERMQTSVXERXVSPIMRVIZMZMRKXLMWƤVQ 8LIRYQFIVSJ)68WMRGVIEWIHEJXIVXLIƤRERGMEP Moving production to another country would have shock and it has continued to increase even after FIIRHMJƤGYPXERHXLIVI[EWEPVIEH]E[IPPIHYGEX- the economy recovered.37 ERTs are distributed ed and trained workforce. by sector as follows: 42% of companies in metal- lurgy, the graphic industry and construction, 19% The ITAS-Prvomajska case makes clear the po- in the food sector, and 22% in the non-productive tential of worker self-management in the current sector (education, health and other services). context, not just as a principle, but as a way of VIWGYMRKJEMPMRKƤVQW-XMWMQTSVXERXXSWXVIWWXLEX Certain preconditions were important in the certain prerequisites had to be met for success in %VKIRXMRIGEWI8LIƤVWX[LMGL[MPPRSXGSRGIVRYW the case of ITAS, but that there are also common in this paper, was the existence of a strong devel- characteristics with cases of failed privatization oped tradition of trade unions and co-operatives. at former giants in the region. In the 20th century, Argentina had developed its industry by import substitution through industri- Empresas recuperadas - the case of Argentina EPM^EXMSRERHXLIVI[EWEWMKRMƤGERXERHVIPEXMZIP] well-organized manufacturing workforce. In the wake of the Argentine economic crisis of the early 2000s, which brought state bankruptcy, The Favorable Institutional Framework in LMKLMRƥEXMSRVEXIWERHJEPPMRKKVSWWHSQIWXMG Argentina product and , thousands of previously successful companies went bankrupt. Workers at Perhaps more importantly for our analysis, the some of these companies organized and, in the institutional and legal framework and changes to spirit of economic democracy, developed the “re- it in the early 2000s contributed considerably to covered companies” (empresa recuperada-ERT) the maintenance and development of the recov-

33 :VEKSPSZMʉ ered companies. Firstly, the way the co-operative 34 1MPS˙ERH4XMʉ 36 'ZINMʉERH4IXVSZMʉT 35 :VEKSPSZMʉ 37 Ibid., p. 252.

15 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

concept was legally regulated allowed workers to being reached. Similarly, employee claims were of- takeover bankrupt companies, both because they ten less than the bankruptcy assets, meaning they did not face legally liability with their own prop- either could not purchase the company or else had erty and because are exempt from to take on the debts of the previous owners. Due to corporate income . Moreover, they could apply legal uncertainties and lengthy court proceedings, for government and national co-operative asso- by 2013, only 10% of ERTs were operating lawfully ciation subsidies and loans. At the same time, the under the new &EROVYTXG]%GX.40 recovered companies formed strong associations (MNER and MNFER) to lobby for their interests Apart from the associations established within the and those of their workers. recovered companies, the rest of the institutional framework did not favor the ERT workers particu- Perhaps the most important piece of legislation larly either. Virtually no union in Argentina sup- after the Co-operatives Act was the Expropriation ported the ERT workers during the initial phases ActERHMXWETTPMGEXMSRXSXLI)68W'ZINMʉERH of taking-over bankrupt factories.41 Such circum- 4IXVSZMʉWXEXIXLEXŰMX[EWMQTPIQIRXIHHYVMRKXLI stances were perhaps required for the creation of early phases and it was initiated by two of the main a network of solidarity and associations. The state movements for the recovered companies – MNR itself did support company renewal, however, and and MNFER… Expropriated assets (bankrupt com- over time developed an active policy of subsidies panies) were assigned to the ERTs for a two-year ERHKVERXW%W'ZINMʉERH4IXVSZMʉGSRGPYHIXLI period, with the possibility of extension.”38 In 63% basic reasons the ERT movement was a success of cases, expropriation was carried out in favor of were Argentina’s favorable history, state subsidies the ERT. Most expropriations were short-lived, but and the amendment of key laws. On the other GSRXVMFYXIHXSOIITMRKXLIFYWMRIWWEƥSEXIWTI- LERHEGGIWWXSQSVIJEZSVEFPIƤRERGMRKERHRI[ cially during the initial stages of takeover. markets for their products and their unresolved legal status all remain obstacles facing workers The next important precondition for development at recovered companies. of the company renewal movement in Argentina was the &EROVYTXG]6IJSVQ%GX, which established a more favorable framework for sustainability. The previous legal framework had favored swift and Financing Options – Credit Unions “facilitated” disbursement on behalf of creditors (especially banks), while asset and reserve sales As the above examples suggest, lack of access to FIJSVIFEROVYTXG]XSFIRIƤXXLIS[RIV[IVIRSX favorable funding is a major problem facing mod- considered white-collar crimes. Bankruptcy pro- ern-day co-operatives. The high commercial bank ceedings did not take into consideration lost jobs or interest rates play a role here, as does a general the possibility of continuing production. Generally, PEGOSJGSRƤHIRGIMRXLIFYWMRIWWQSHIP0EGOSJ they aimed at rapid liquidation of the property. access to appropriate funding poses a problem The &EROVYTXG]6IJSVQ%GX allowed for continued not just for co-operatives (capacity expansion, production and use of liquidated assets and not , new technologies, etc.), but also in just as a temporary measure. Worker claims for HIXIVQMRMRKWXVEXIKMIWXSFY]SYXFEROVYTXƤVQW salaries and contributions could also be used as capital for buying out the company.39 The act has Establishing credit unions offers a partial solution GIVXEMRƥE[W*SVSRIEGSSTIVEXMZIGSYPHSRP] to the problem. Credit unions can offer cheaper participate if it represented at least two thirds of ƤRERGMRKFIGEYWIXLI]EVIRSXJSVTVSƤXSVKERM^E- the workforce. They could not be formed where de- tions. Instead of being divided between sharehold- parture of administrative staff or a lack of solidar- IVWERHHMVIGXSVWER]TVSƤXWEVIVITVSKVEQQIH ity and coordination prevented that threshold from through lower interest rates on loans and higher

38 Ibid., p. 255. 40 Ruggeri, 2014. 39 Ibid., p. 256. 41 'ZINMʉERH4IXVSZMʉT

16 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

ones on savings, while maintaining the sustain- consequences for the community when making ability of business operations. decisions to outsource or relocate. Co-operatives also offer small producers a more equal footing Approximately 15,000 credit institutions in Europe ERHMRƥYIRGIMRHIGMWMSRQEOMRKMRGVIEWMRKXLIMV work on co-operative principles. In Germany and bargaining power and market-share and reducing Austria, they are known as sparkasse, in , costs through economies-of-scale (sharing ma- Italy and France as FERGS GSSTIVEXMZI co- chinery and warehouses, etc.). operative banks) or FERGS TSTSPEVI people’s banks). The E-banka (Ethical Bank) in Croatia is The Potential of Co-operatives Today an example of such a bank established as a joint stock company. This is because banks there are There are many examples in Bosnia and required by law to be joint stock companies. Its Herzegovina of problem companies like ITAS in sole shareholder is, however, the Co-operative for Croatia or the recovered Argentine companies Ethical Financing (ZEF), and all the co-op mem- (e.g. DITA Tuzla and Energoinvest - Rasklopna bers have equal rights and responsibilities regard- oprema (6%34)), as there are in the rest of the re- ing the bank’s operations under a “one member gion. Many factories that went through privatiza- - one vote” system, regardless of investment size. tion ended up bankrupt, with major losses of pro- The E-Banka is a development bank owned by its ductive capacity and jobs. We again stress that in members and with the primary goal of investing in this context the debate should be about systemic - GSQQYRMX]HIZIPSTQIRXXLVSYKLƤRERGMEPP]WS errors and omissions rather than any lack of com- cially and environmentally sustainable projects.42 petitiveness on the part of the failed companies.

According to one of its founders, Goran Jeras, the As shown, given an at least marginally more fa- E-banka needs about 15,000 members or clients vorable institutional framework, basic co-opera- (individuals and businesses) to be self-sustaining, tive principles can bring factories back from the a goal they expect to reach within three years.43 brink of bankruptcy. The examples offered were ITAS Prvomajska and the recovered factories in Conclusion and Recommendations for Argentina. In the former case, the factory was pro- BiH ducing relatively high value-added products, and the workers stood together, pooling their claims Historical Legacy against the owners and later the bankruptcy trus- tee. They utilized internal democratic principles to As explained above, the region enjoys a very rich agree replacement of the trustee and create the historical legacy of economic democracy and preconditions for continuing production. At least worker self-management. Although conceived un- two major conclusions for future policy can be der a different geopolitical context and subject to drawn from their experience: the bankruptcy law shortcomings (e.g. frequent political interference), needs amending to give bankrupt companies more the experience demonstrated that Yugoslav work- ƥI\MFMPMX]MROIITMRKTVSHYGXMSRKSMRKERHGSSTIV- ers could create co-operatives and manage their ative organizational principles should be promoted S[RFYWMRIWWIW8LIQSHIPFVSYKLXWMKRMƤGERX in such factories, before factory property is trans- economic growth, especially in the 1950s. ferred to “phantom companies” or sold off.

8LI&IRIƤXWSJ'SSTIVEXMZIW Another area of application for co-operative prin- GMTPIWMWMRXLIPSRKXIVQƤRERGMRKSJFYWMRIWWIW Co-operatives offer local communities more resil- and individuals through credit unions. The ben- ience to external shocks. They consider the wider IƤXWXLI]SJJIVMRGPYHIPS[IVMRXIVIWXVEXIWERH

42 http://www.ebanka.eu. PSRKIVXIVQƤRERGMRK8LMWMWWSQIXLMRKQER] 43 /VWXMʉ small-to-medium enterprises currently need. The

17 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

example of the E-bank in Croatia has been de- miracle, but would surely alleviate shocks, mass scribed above. layoffs and the destruction of entire communities. As our examples show, over the medium-term, Policy Recommendations co-operatives and worker shareholding can help a sustainable and integrated model emerge that is Overall, we have stressed certain important fea- much more resistant to endemic economic crisis, tures that we believe may be useful in promot- while the long-run focus should be on expanding ing this economic model in future and will allow the co-operative ecosystem in general. some of the strategies outlined above to be used to form and promote co-operatives, not least as a model for reviving bankrupt companies in Bosnia Bibliography and References and Herzegovina. &EFMʉ>ERH(6EʏMʉ  Ű>EHVYKEVWXZSY Government bodies and non-governmental or- Hrvatskoj: trendovi, pokazatelji i perspektiva u eu- ganizations in Bosnia and Herzegovina and the ropskom kontekstu”. Sociologija i prostor: ʏEWSTMW Western Balkan region more generally should pri- ^EMWXVE˶MZERNITVSWXSVRSKEMWSGMSOYPXYVRSKVE^- oritize co-operatives as a development resource voja, 287-311. JSVWTIGMƤGIGSRSQMGƤIPHWERHJSVGSQQYRMXMIW +MZIRXLMWXLIƤVWXWXITMWXSVEMWIE[EVIRIWWERH 'ZINMʉ7ERH-4IXVSZMʉ  Ű3ʏYZERNI^ETSW- knowledge of this economic model, combatting PIRSWXMTYXIQVEHRMʏOSKWEQSYTVEZPNERNE7PYʏEN prejudices that have arisen over time. In times of STSVEZPNIRMLTVIHY^IʉEY%VKIRXMRMűSociologija, economic hardship, co-operatives provide eco- 239-264. nomic “leverage” by sharing resources and knowl- edge, as well as motivating people to be more ac- *SVXYRI0MWX (2017). Available at http://for- tive in their communities. tune.com/fortune500/ As a model for company renewal, co-operatives Hamburgh, R. (2015). “The Rise and Rise of UK GERLEZIERMQTEGXSRWTIGMƤGNSFWERHIGSRSQ- Cooperatives.” Available at Positive News: https:// ic activities, as well as providing positive exam- www.positive.news/2015/economics/17836/ ples of good practices for further development of common-good-rise-and-rise-uk-- co-operatives. Branches and enterprises facing movement. ƤRERGMEPHMJƤGYPX] FEROVYTXG]TVMZEXM^EXMSRJEMP- ure, etc.) but with the potential to rebuild produc- XMSRWLSYPHFIMHIRXMƤIH-RWYGLGEWIWXLIKSEP ,SPNIZEG8YOSZMʉ %   should be to build up worker solidarity within the “Društvenogospodarske reforme 1950-1952. i nji- ƤVQWSXLEX[EKIERHGSRXVMFYXMSRGPEMQWGERFI hov odraz na upravu Narodne Republike Hrvatske.” converted into worker shareholdings. Over time, Arhivski vijesnik, 131-146. this will enable direct joint management of the company. ,VZEXWOM GIRXEV ^E ^EHVY˶RS TSHY^IXRM˙XZS (2016). “Što je zadruga i kako je osno- Another area for such policy intervention is to vati?” Available at Zadruge.coop: http:// amend bankruptcy legislation to give bankrupt zadruge.coop/hr/o-zadrugarstvu/ enterprises breathing space to restart produc- sto-je-zadruga-i-kako-je-osnovati/1 tion and convert workers claims into ownership, preserving as many jobs as possible. Given that ,VZEXWOM GIRXEV ^E ^EHVY˶RS TSHY^IXRM˙XZS owners and, often, bankruptcy trustees tend to (2016). +SHM˙RNI M^ZNI˙ʉI S WXERNY ^EHVY˶RSK focus on shutting down production and layoffs, poduzetništva za 2015. Available at Zadruge.coop: organized worker shareholding and co-operative- http://zadruge.coop/upload_data/site_files/02- based production might not create an economic godisnje-izvjesce-o-stanju-zadrugarstva.pdf

18 1%6/36%(3:%23:-ʈ| AN INTRODUCTION TO ECONOMIC DEMOCRACY Sarajevo

International Co-operative Alliance. World Co- 1MXVSZMʉ1  Ű3PEOSVY˶IRNI.YKSWPEZMNIű operative Monitor Report (2017, 2016, 2015 and Available at 4I˙ʏERMO: http://pescanik.net/ 2014). Brussels. Available at https://monitor. olako-ruzenje-jugoslavije. coop/en/media/resources Narodne novine RH. (2013). “Zakon o zadrugama International Labour Organisation (ILO). (2009). RH.” Available at https://www.istra-istria.hr/up- Ű'SSTWERHXLIKPSFEPƤRERGMEPGVMWMWű%ZEMPEFPI loads/media/Zakon_o_zadrugama.pdf. at -03: http://www.ilo.org/global/about-the-ilo/ newsroom/features/WCMS_105073/lang--en/ 2SZEOSZMʉ ( 2   Ű6EHRMʏOE OPEWE index.htm. Jugoslavije i samoupravljanje.” Available at Danas.

International Monetary Fund (IMF). (2016). “IMF 2SZMREVWOSM^HEZEʏOSTSHY^IʉI  Ustavni Reaches Staff-Level Agreement with Bosnia ^EOSRSSWRSZEQEHVY˙XZIRSKMTSPMXMʏOSKYVIцIRNE and Herzegovina on an Arrangement under the *IHIVEXMZRI 2EVSHRI 6ITYFPMOI .YKSWPEZMNI M Extended Fund Facility.” Available at IMF: https:// WEZI^RMQSVKERMQEZPEWXM&IPKVEHI www.imf.org/external/np/sec/pr/2016/pr16242. htm. Pérotin, V. (2016). ;LEXHS[IVIEPP]ORS[EFSYX worker co-operatives? London: Coop UK. /PEWMʉ(,  ŰY.YKSWPEZMNM(VY˙XZIRS TSPMXMʏOITVSQNIRIY.YKSWPEZMNMYOSRXIOWXYWZNIX- 4IXVERSZMʉ&  -WXSVMNE.YKSWPEZMNI/RNMKE skih zbivanja.” Available at Forum za primenjenu III 7SGMNEPMWXMʏOE.YKSWPEZMNE. Belgrade: istoriju: http://www.fpi.rs/blog/1968-u-jugoslaviji Nolit.

/VWXMʉ -   Ű1SVEQS MQEXM FEROI OSNI WY 7PY˶FIRMKPEWRMO&M,RS  Ű3T˙XM^E- nama servis.” Available at Mašina: http://www. kon o zadrugama BiH.” Available at http://mp.ks. masina.rs/?p=2572. KSZFEWMXIWQTOWKSZFEƤPIW>EOSR S  zadrugama%2018_03_1.pdf /YPNMʉ8  Ű.YKSWPSZIRWOSVEHRMʏOSWEQSY- pravljanje.” Available at European institute for 7PY˶FIRMPMWX*26.  3WRSZRM^EOSRSYT- progressive cultural policies: http://eipcp.net/ VEZPNERNYHV˶EZRMQTVMZVIHRMQTVIHY^IʉMQEMZM˙MQ transversal/0805/kuljic/sr/ TVSZVIHRMQYHVY˶IRNMQESHWXVERIVEHRMLOSPIOXMZE

0EXMƤʉ-  .YKSWPEZMNE6E^ZSN Transparency International BiH (2009). Privatizacija privrede i društvenih delatnosti. Beograd: Društvo HV˶EZRSK OETMXEPE Y &SWRM M ,IVGIKSZMRM. Banja ^EMWXMRYSERXMJE˙MWXMʏOSNREVSHRSSWPSFSHMPEʏOSN Luka. Available at: https://ti-bih.org/wp-content/ borbi u Jugoslaviji. uploads/2011/03/PRIVATIZACIJA_DRZAVNOG_ KAPITALA_U_BiH.pdf 1EVOY˙ &   Ű6EHRMʏOS WEQSYTVEZPNERNI moje iskustvo: Zaboravljena vrednost ili strah da Unkovski-Korica, V. (2015). “Jugoslovensko se ne setimo tih vrednosti.” Available at Forum samoupravljanje: upravljanje radništva ili uprav- za primenjenu istoriju: http://www.fpi.rs/blog/ ljanje radništvom?” Available at Marks21: http:// radnicko-samoupravljanje-moje-iskustvo. www.marks21.info/istorija/jugoslovensko- samoupravljanje-upravljanje-radnistva-ili-upravl- 1MPS˙.ERH24XMʉ  Ű2IOSPMOSGVXMGES janje-radnistvom. VEHRMʏOSQHMSRMʏEVWXZYWPYʏEN-8%7Eű%ZEMPEFPI at &MPXIR: http://www.bilten.org/?p=4813. :VEKSPSZMʉ %   Ű8ZSVRMGE WI RI FVERM u Zagrebu, ona se brani iznutra.” Available at 6EHRMʏOMTSVXEP: https://www.radnicki.org/tvorni- ca-se-ne-brani-u-zagrebu-ona-se-brani-iznutra

19 About the Author Imprint

1EVOS 6EHSZERSZMʉ received his Masters in International *VMIHVMGL)FIVX7XMJXYRK *)7 `3JƤGIMR&SWRMEERH Relations from Queen Mary College of the University of Lon- Herzegovina don, where he focused on the political economy of develop- Kupreška 20, 71 000 Sarajevo, Bosnia and Herzegovina ment and contradictions in Chinese growth. On graduating, he worked at the Group for International Affairs with Amnesty Responsible: International in Prague, where he analyzed the economic and Marius Müller-Hennig social dimensions of human rights violations. He is currently a diplomat with the Ministry of Foreign Affairs of Bosnia and Tel.: +387 33 722 010 Herzegovina. Fax: +387 33 613 505 E-mail: [email protected] www.fes.ba

8VERWPEXSV7IPQEʎEQTEVE DTP: Filip Andronik Print: Amos Graf, Sarajevo Printing: 50 copies

The publication can be delivered upon request via e-mail: [email protected].

Attitudes, opinions and conclusions expressed in this publi- cation do not necessarily express attitudes of the Friedrich- Ebert-Stiftung. The Friedrich-Ebert-Stiftung does not vouch for the accuracy of the data stated in this publication.

Commercial use of all media published by the Friedrich- Ebert-Stiftung (FES) is not permitted without the written con- sent of the FES. ------&,3.DWDORJL]DFLMDXSXEOLNDFLMLb Nacionalna i univerzitetska biblioteka %RVQHL+HUFHJRYLQH6DUDMHYRb

  b

5$'29$129,È0DUNRb bbbb$QLQWURGXFWLRQWRHFRQRPLFGHPRFUDF\FRRSHUDWLYHV DVGULYHUVRIHFRQRPLFJURZWK0DUNR5DGRYDQRYLÉ >WUDQVODWRU6HOPDÎDPSDUD@6DUDMHYR)ULHGULFK(EHUW 6WLIWXQJ)(6VWUJUDISULND]LFPb

3ULMHYRGGMHOD8YRGXHNRQRPVNXGHPRNUDWLMX$ERXWWKH DXWKRUVWU>@%LEOLRJUDͤMDVWUELEOLRJUDIVNHL GUXJHELOMHģNHX]WHNVWb

,6%1b

&2%,66%+,'bb ------