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

10 Horvat’s Contributions to Economic and Social Theory
labour market in an economy organized around workers’ management.
The problems arise from two sources: first, the tendency, already mentioned,
for enterprises to hoard labour during a recession because the
worker as manager is reluctant to displace fellow employees. Secondly,
there is the problem of choice of technology, whether the optimum
capital–labour combinations will be deployed by the enterprise. 8
One would expect worker-managed enterprises to be more resistant
to laying off employees during a recession compared to a capitalistmanaged
firm protecting the interests of its share holders, as discussed
previously. This need not be a problem, depending upon the time
frame and what is done with surplus labour time. In the short run, it is
certainly a prudent economic decision for enterprises to hoard labour
and not immediately displace employees who may have substantial
amounts of embodied human capital investment. This human capital
can be augmented by further investments in skills-upgrading during a
cyclical phase when there is redundant labour time. It would, in fact,
be an inefficient economic decision for a firm to lay off employees in
the early phase of a recession, thereby squandering an investment. It is
as if a manager were to take a sledge hammer to a machine and destroy
it the instant it is not being fully utilized. Economics is curiously
inconsistent here. In the case of a machine, no economist would advocate
its destruction and the implosion of an investment. With individuals
and human capital, however, economists propose labour redundancy and
extol the virtues of labour market flexibility and structural adjustment,
and mitigating what they consider to be the false sentimentality of
trade union or public policies that protect labour during economic
recessions. With a machine, keep it during the early stages of recession
because of the investment in it. For the individual employee, lay-off is
the rule in standard economics, notwithstanding the fact that this
amounts to squandering an investment.
In the short-run early phase of recession, there is substantial economic
logic to hoarding labour in the enterprise. There is, however, a
distinction between short-term cyclical recession and deeper declines
into depression or general structural imbalances that call for laying off
employees. Confronted with this reality, the worker-managed firm will
no doubt cling to its employees longer, resist voting to make redundant
individuals who have stood next to each other on the factory
floor, and seek the necessary financing to keep afloat the enterprise’s
labour force. If this is coupled with an ideological commitment to the
system of self-management, so tenacious that it argues down rational
arguments for economic adjustment, then a systemic problem exists.