Equality, Participation, Transition: Essays in Honour of Branko Horvat

5.3 Producer cooperatives in real life – why
are they so few?
Dinko Dubravcaić 83
In their extensive review of the performance of producer co-ops in
Western economies, 10 Bonin et al. (1993) state that there are no significant
negative findings of free-riding and lower productivity that could
be the consequence of entrepreneurial control by workers. It seems
that ‘horizontal monitoring’ successfully replaces vertical (hierarchical)
monitoring in capitalist firms. There are less managers in producer coops
and they receive more modest salaries, which possibly indicates
that the elimination of the antagonistic environment of capitalist firms
makes managerial duties less demanding.
The acceptance of non-members vary among producer co-ops. In
Mondragon, non-members are accepted on a temporary basis only, and
no member has ever been dismissed. In most other producer co-ops,
non-members are admitted and receive the same wage and bonuses as
members. Non-members, however, have no say in the essential decisions
in the co-op and have a less secure employment status. Although
the existence of a negative supply curve is not confirmed in practice, it
seems that supply, and especially employment, are less elastic than in
comparable capitalist firms. Protection of employment is an important
element of the objective function of co-ops and is often even more significant
than rent sharing.
In practice, all co-ops demand from their would-be members an
admission fee that is well below the amount of funds per capita needed
to secure assets for a normal functioning of the co-op. There are few
cases where individual stakes can be bought (by newcomers) and sold
(by departing members), the plywood co-ops in the northwestern part
of the United States being the best known instance. 11 Even there, however,
the price of the stake is well below a computed discounted rent,
the cause probably being the risk element in the anticipated income as
well as liquidity problems of the incoming members.
Empirical findings on plywood co-ops, as well as on other producer coops,
confirm a lower capital intensity (that is, comparative capital ‘starvation’
of the co-ops), due to lower investment out of internal funds, and
more expensive external financing. The co-ops, obviously, are not
accepted as good loan takers by the conventional financial institutions.
When trying to explain the comparatively low share of producer
co-ops in economic activities 12 in Western countries, Bonin et al. point
to the problem of securing funds as the main cause of their sluggish
development. They state that ‘the explanation of the relative scarcity