Democracy@Work: A Movement toward democratic workplaces
Ricahrd Wolff on raising money to start WSDEs
February 28, 2013
Where would WSDEs obtain the money needed to start and/or later grow their enterprises? Existing WSDEs have answered that question practically in a variety of ways. In addition, we can suggest still other ways that could be established. The problem of raising the money needed to start or grow a workers’ cooperative or self-directed enterprise is solvable. Of course, each WSDE will need to locate and access money resources and not every WSDE’s efforts to do so will be successful. That was always true for capitalist enterprises as well. Financing issues are always enterprise problems, but they are not an insurmountable barrier for transition to a WSDE-based economy.
Here then is a discussion of some ways WSDEs have raised money. One widespread practice is to require each worker in a WSDE to contribute a kind of entry fee in cash that becomes part of the capital of the enterprise. Other known sources for capital are local or regional social institutions (such as municipal or regional governments, religious establishments, non-governmental community centers and organizations, foundations offering grants or loans, trade unions, and political parties). Federal or central governments have also provided such capital. Thus, for example, under Italy’s Marcora Law since 1985, lump sum grants for establishing worker cooperatives may be chosen by unemployed workers (with certain conditions) in lieu of weekly unemployment compensation checks.
As is clear already above, the provision of money to WSDEs can take the form of grants, investments, or loans. Grants refer to provisions of money to WSDEs for which grantors do not expect a cash return. Grantors motivation is support for social transition to a greater number and/or greater social influence of WSDEs. In contrast, investments are motivated by desire for a cash return with or without the additional motivation of support for such a social transition. WSDEs could allow common shares to be purchased by such investors and could pay dividends to their owners. Of course, in a WSDE it would be the workers, in their collective capacity as their own board of directors, who would determine whether to pay a dividend and at what rate. WSDEs could likewise issue preferred shares paying fixed dividends and bonds paying fixed interest rates. WSDEs could also borrow from banks.
By these means, WSDEs would secure financing in ways similar to how capitalist enterprises have been doing so, but with these key and major differences. No matter how money is secured, the internal organization of the WSDE cannot be compromised since its existence and indeed growth is the premise and purpose of securing the money. Thus, if common shares were sold by a WSDE, the purchasers would not have the right that they enjoy in capitalist systems, namely to select by voting who will be on the board of directors of the WSDE. That is because the constituting definition of WSDE is that only the workers and all the workers comprise the enterprise’s decision-making board of directors. In short, providers of money to WSDEs would need to accept the operating principles governing WSDEs.
Many providers of money capital to WSDEs have accepted those principled conditions. Indeed, as the example of the Mondragon Cooperative Corporation shows, when WSDEs grow large enough, they can establish and grow their own bank subsidiaries or allied bank enterprises – themselves also WSDEs. Needless to say, banks organized as independent WSDEs or as subsidiaries of non-bank WSDEs will all the more readily facilitate and broaden access to money for further WSDE growth and expansion.
We may also suggest further ways in which money could be raised for WSDEs. If supported by strong political organizations in economies where capitalist enterprises still predominate, financing for WSDEs might become a major political objective of those organizations. For example, during recurring capitalist downturns, high unemployment could be addressed by suggesting a government employment program focused on providing the money (and perhaps also the technical and managerial supports) for WSDEs as the best way to revive employment. Italy’s Marcora Law provides one effective model for doing this. Others might entail building on existing initiatives such as Small Business Administrations , Women’s Business Administrations and Minority-led Business Administrations that exist in various forms in many countries. They enable certain kinds of businesses to get special government supports (grants, below-market-rate loans, technical assistance, preference in government purchasing, and so on) because the growth of those businesses is thought to be a worthwhile social goal. A political movement supporting the growth of WSDEs could ask that they be accorded the same sorts of special government supports for parallel reasons.
An example of such reasons is that the increase of WSDEs would provide all workers with a real freedom of choice. Workers could compare and choose between employment within capitalist enterprises or within WSDEs. In capitalist countries today no such choice exists for the vast majority of workers. Consumers too would have a new choice available to them: they could purchase goods and services from capitalist or from WSDE sources. They could support the organization of production they prefer (much as many can now choose according to country of origin, physical ingredients, and whether “fair trade” has been observed in exchanges prior to the act of purchasing the final product).
Of course, the history of nearly all successful WSDEs shows that self-financing was often important. That is, net revenues of a WSDE were partly used to enable growth of that enterprise and/or provision of money to another WSDE. Where a country or a region had a significant tradition of other kinds of cooperative enterprises (credit unions, purchasing coops, sales coops, ownership coops, and so on), it might well be possible to appeal successfully to them for money provision to establish or grow WSDEs. The grounds for such appeals would be twofold: (1) to extend the cooperative principle governing those other enterprises into the process and organization of production itself, the hallmark of WSDEs, and (2) to thereby strengthen the larger cooperative movement for all its component parts. For example, WSDEs could join or partner with credit unions, while credit unions might find ways to help finance WSDEs premised on such partnerships, etc.
Final thought: establishing WSDEs might also become a policy of new social movements. Partnerships between such movements and WSDEs might well strengthen them both.
Posting this because I’ve been thinking about how best to raise initial funds for a Workers’ Self-Directed Enterprise – I hope to be able to start the process in the next 12-18 months.