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Eastern European Economics
ISSN: 0012-8775 (Print) 1557-9298 (Online) Journal homepage: http://www.tandfonline.com/loi/meee20
The Advantages of Self-Management for the
Cooperatives
Otakar Kraus
To cite this article: Otakar Kraus (1969) The Advantages of Self-Management
for the Cooperatives, Eastern European Economics, 8:2, 183-203, DOI:
10.1080/00128775.1969.11648006
To link to this article: http://dx.doi.org/10.1080/00128775.1969.11648006
Published online: 10 Feb 2016.
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Date: 25 October 2017, At: 15:50
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I
I
lv'
Planovane
hospodarstvl,
1969, No. 3
Otakar Kraus (Czechoslovakia)
THE ADVANTAGES OF SELF-MANAGEMENT FOR
THE COOPERATIVES
1. The General Basis of Cooperative Self- Management
At the very beginning I wish to stress that in certain sectors
of the national economy it is possible for cooperatives - if
they eliminate undemocratic and unautonomous distortions to evolve into a very useful form of socialist enterprise. The
optimality of the cooperative form can be seen not only from
the aspect of the economy, but also from the point of view of
the interests of society as a whole. For example, in the
sector of internal trade in consumer goods, consumer cooperatives will concern themselves with self- management for consumers, which can develop into a most effective weapon against
speculative price increases, against injury to the consumer
resulting from production of goods of low quality and even from
forcing unsuitable or technologically obsolete products on consum~rs, and against the negative effects of our administrative
monopolies in manufacturing and trade. Similarly, producer
183
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EASTERN EUROPEAN ECONOMICS
and worker cooperatives, whose primary significance lies in
the personal co-entrepreneurial factor of their member- shareholders, are in all probability the most advantageous form of
small-scale production and provision of services. Likewise,
a marketing cooperative of farmers (an economic cooperative)
is being established - it is to be an economic integration of
individual agricultural cooperatives, which already contain in
their foundation very valuable backward economic linkages: an
economic cooperative whose management is composed of representatives of the individual agricultural cooperatives will
try to purchase and then sell all that is grown by the individual
agricultural cooperatives, and vice versa - the cooperative
will produce those products that their integrated marketing
unit can most advantageously sell for money under the prevailing demand and price conditions. These automatic economic
linkages are obviously more advantageous for agricultural cooperatives and for our economy in general than the present
administratively directive nature of the state procurement
agency.
It should be a matter of course for the national economic
leadership to derive practical conclusions based on the optimality of cooperative self- management in certain sectors of the
economy - and not only those of an institutional nature but also
in terms of fiscal, financial, credit, investment, and other economic policies. Initially, however, we must handle two problems in detail:
a) the mistaken notion, extensively prevalent, that the cooperatives are a lower and less socialist developmental form [of
organization] than the state sector;
b) the question of the difference between self-management
in cooperatives and autonomy in noncooperative enterprises,
as represented by the enterprise workers' councils.
As for the first problem, it is symptomatic that certain of
these mistaken assertions have been retained for an entire tenyear period, for they serve as a convenient argument for the
noneconomic acquisition and maintenance of privileges. As far
back as twenty years ago - during the period of the second
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stage of nationalization - the state economic agencies operated under a magic formula in which cooperative ownership
was considered a less developed form, so that the state would
acquire preferential advantages in taking over the property of
private manufacturing and commercial business establishments.
Today this type of argument is often utilized by our administrative monopolies - even when it is contrary to the requirements of the new economic system - as a means of maintaining their monopoly position and privileges that have been acquired through noneconomic and administrative methods. In
particular, we are referring to the refusal of economic rehabilitation to manufacturing and consumer cooperatives; this requires corrective action on the part of state agencies that would
at least partially make up for these past mistakes.
This magic formulation is, on the face of it, very simple and
therefore has a very suggestive effect: "Cooperative ownership is a less developed form of organization because it amounts
to ownership by only a specified group of citizens; state ownership is a more highly developed form because it amounts to
ownership by all the people." In reality, however - after
closer examination - this argument does not hold up, particularly for these reasons:
This formulation confuses ownership in the legal and in the
economic sense. Ownership "by all the people" is, from the
legal aspect, a fiction without content. The concept of "ownership by all the people" can be used here only in the context of
ownership by society as a whole in the economic sense and, therefore,
according to Marx, "in its real form as the totality of economic relations." This totality of economic relations (in this case,
socialist relations) is, however, a common ground encompassing a great many forms of socialist ownership: not only cooperative ownership, but also ownership by the state as a legal
entity (especially in the noneconomic sectors and in all cases
where it is desirable to have direct control by state agencies)
as well as noncooperative enterprise ownership by economic
agencies (the existing national enterprises). It also includes
ownership by social and other socialist agencies, by foreign
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EASTERN EUROPEAN ECONOMICS
trade enterprises, and by socialist joint- stock companies, and
all other types and forms of socialist ownership that will develop in the future exper~ence of a socialist economy.
Twenty years of socialist experience have already passed
since the second stage of nationalization after February 1948.
During that time we experienced an immense organizational
concentration in the production and sale of consumer goods (I
refer here only to consumer goods since the primary activity
of not only consumer but also of producer cooperatives is related to consumer goods). National enterprises dealing with
manufacturing and trade, as well as their giant administrative
monopoly, evolved in their own specific ways. Even though
they were under the control of ministries and other state central agencies, they lived their own lives, very often protecting
their peculiarities and their material interests to the detriment
of society. They shifted the distortions of the old administratively directive system to the next purchaser. The ultimate
purchaser - the consumer - is, of course, unable to shift
these inadequacies to anyone else.
The iron chain choking our consumers has consisted (unfortunately, practically up to the present) of four main links:
the general results of the old system of planning and management;
the administrative (noneconomic) monopolization of production;
the administrative monopolization of trade;
and finally, the joint impact of monopoly in manufacturing
and trade.
It is still necessary to add that an absolute and administrative monopoly is multiplied by the drawbacks of monopoly in
general. It is very often said that in the interests of the consumer there must exist either powerful pressure groups agains1
monopolies in production or a monopoly in the area of trade.
The experience of more than fifteen years, however, has shown
unequivocally that this assertion is incorrect, that our noncooperative trade monopolies have, in general, not protected the
consumer against the producers, but that this monopoly has
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rather protected its own interests in monopolizing trade, sometimes even to the disadvantage of the consumer.
Let us now pose this question: is it possible, in the case of
these national enterprises (and their monopoly position), which
live their own lives and follow their own material interests
and whose economic and trade activities are so often at variance with the interests of society as a whole or of its large social components (for example, the consumers) - is it at all
possible to dignify these economic units as involving "ownership by all the people" and "a higher organizational form" than
cooperative socialist ownership? I think that the reader can
by now answer this question himself.
There do exist specific economic and social reasons which
prove concluSively that the cooperative form is the optimal
form for the enterprise in certain economic sectors and
branches. A detailed examination follows in later sections of
this study.
It is possible to doubt the optimality of the state ownership form
even from the standpoint of the teachings of Marxism- Leninism.
The classicists Marx, Engels, and Lenin always considered
the state to be organized by violence, force, and suppression
for a transitional stage of development that will die under communism. In my opinion, this critical attitude concerning the
state apparatus in general - and here, the apparatus of the
socialist state in particular - has, in practice, been reduced
to a trivial significance during the long Stalinist period, and
that, on the contrary, there arose a noncritical worshipping of
the state apparatus. In reality, the general management of the
administrative monopolies fell to state agencies, under the
supervision of ministries.
It is clear that with the gradual establishment of communism
the people will more frequently and more fully take care of
their own affairs - not only political but also economic. And
it is indeed the cooperative organism that represents the ideal
actual economic independence of the people in its entire concept.' However, even in those cases where, for economic reasons, the cooperative form would not be suitable (for example,
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in large- scale industry), the concept has paved the way persistently for at least partial economic independence for the workers, especially in our development after January 1968.
Hence I conclude - and I believe this to be reasonable - that
even from the standpoint of the basic principles of MarxismLeninism, cooperative socialist ownership cannot be considered
a less developed form than state ownership.
And now for the second basic question: the basis of cooperative socialist self- management and its divergence from selfmanagement in noncooperative enterprises.
A general theoretical consideration would seem to indicate
that the realization of self- management in the noncooperative
enterprise would lead to the gradual convergence of both forms
- noncooperative enterprises and cooperatives - especially
when in certain cases it is also possible to speak in terms of
a proportional share for members in some noncooperative enterprises. Other arguments are being heard to the effect that
the enterprise would actually - with complete independence
- be transformed into a cooperative. This idea is incorrect.
Above all, it is altogether too general: if, for example, we make
a detailed comparison of employee self- management in state
trading enterprises with self- management by consumers in
consumer cooperatives, dramatic differences are revealed immediately in terms of the interests of society as a whole even if the self- management in both areas were most complete.
In addition, there will always remain differences in the methods
of establishing the cooperative and, on the other hand, the
other enterprise, as well as differences connected with handling
of the net surplus or of the loss upon liquidation.
It is further necessary to take into account that, for economic reasons, the cooperative form is not suitable for certain
economic organizations (for example, for large- scale industrial
enterprises, for public enterprises, etc.). Finally, it is necessary to take into account contemporary concepts of economic
self- management in noncooperative enterprises, which, based
on discussed suggestions, is far from being as universal as in
the case of the· cooperatives. In the legislative bill dealing with
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the socialist enterprise, economic self- management is divided
into three levels, with differing types and degrees of intensity
of enterprise interest: the level of departmental management,
then the level of the entire enterprise collective (of course,
with their function distinct from that of the departmental organization), and finally [the level of] the representatives of
the promoters and other organizations that invest their resources in the enterprise. The influence of the state administration in naming enterprise managers - inherent in the law
- is obviously a compromise measure.
The basic thought behind socialist economic self- management
- for the cooperatives and non cooperatives - is embodied in
the direct establishment of socialist economic democracy. In
order that socialist production relations within the enterprise
do not become a mere slogan, phrase, or proclamation, they
must be institutionally entrenched in the total area of the guidelines of general rules.
To refer to ownership by all the people is too general and
too distant an intermediate argument for the workers; they
want to see and to be able to feel every day the actual socialist
production relations between management and other workers
within their enterprise and within their factory. The issue here
is greater than the mere desires of the workers; it is that this
condition is an essential requirement for a socialist society's
economic development, since it amounts to initiative and to an
immense innovative force.
We can therefore state that a socialist market economy
equals a market economy (regulated by the national economic
policies of the leadership) plus socialist economic selfself- management.
For quite some time discussions have been under way in this
country concerning the organizational forms of self- management for noncooperative enterprises. Cooperatives have no
basic problems in this area, since the entire organizational
structure of the cooperative is built on the economic independence of its members. However, in terms of the actual fulfillment of this self- management and of its elimination of formal-
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ism and distortions, the cooperatives certainly cannot complain
of lack of very serious problems.
What are the main features of a cooperative self- management
that is free of distortions?
Above all, we are referring to self- management for members of the cooperative. Member- shareholders are socialist
co-entrepreneurs and, therefore, their elected bodies are always agencies of the enterprise; they need not divide this function with anyone else (as opposed to the enterprise workers'
council in noncooperative enterprises). The issue here is not
one of employee self- management, not even in those cases
where the cooperative members also work there - as, for example, in producer and worker cooperatives. These members
are not employees, but rather associate co-owners; they do
not receive wages, but rather shares in the economic results
of the cooperative.
The elected collective bodies of the cooperative have decisive jurisdiction in all fundamental matters, just as the enterprise agencies do. Therefore, they are superior to every individual worker in the cooperative even if the worker holds
the most highly paid position - for example, the manager, his
representatives, and other managerial employees of the cooperative. The elected body of the cooperative should critically
evaluate the activities of these workers on a regular basis.
Economic self- management for the cooperative is in no way
a new or foreign element that must be introduced from the outside. Rather, it is directly and organically related to the foundations of the cooperative; since it has a tradition going back
many years, it also has valuable experience with this type
of management.
The entire net profit of the cooperative - after deducting
tax liabilities to the state - belongs to the members; they do
not in this case participate merely in a certain share of the
profit. What part of the net profit is to be allocated to the expansion of the cooperative's productive capacity, or perhaps
to some other fund, and what part the members can divide directly among themselves, depends solely on the decision of the
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membership meeting.
It is well known that these main general features of cooperative self- management were subject to formalism and distortion
in the earlier central-directive system. These stemmed, in
particular, from outside interference with the democratic method of choosing the elected body of the cooperative. The cooperatives became more and more like firms with employees,
and the members' self-management stagnated. However, it was
not only the individual subjectivist interference from the outside, but rather the entire administratively directive system
that had a deleterious effect on the activity and initiative of the
cooperative's members and officers.
It is symptomatic that attempts to resurrect actual selfmanagement for cooperatives were initiated concurrently with
the overall efforts toward establiShing our new economic system. For example, already in 1966, both the main cooperative
federations accepted at their conventions the principle of voluntary membership of the cooperative in the federation, as well
as the principle of voluntary withdrawal of the cooperative from
the federation - an advanced principle of integration that the
administrative departmental monopolies in the state sector
continue to resist to this very day. In the last three years, the
consumer and the manufacturing cooperatives have struggled
to gain at least a partial economic rehabilitation (the return of
some activities and places of business). The removal of distorting sediments from cooperative self- management was then
strengthened particularly after January 1968, when an especially strong process of democratization and independence began
in the cooperatives, a process that found its concrete expression in action programs of manufacturing and consumer cooperatives, as approved by representatives of the cooperatives
in mid-1968.
2. SpecifiC Features and Economic
Advantages of Self- Management for the Cooperatives
The new conception of self- management for consumer coop-
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eratives is fundamentally based on the following theoretical
construct:
a) the politi cal- economic equation under which a socialist
market economy equals a regulated market economy plus socialist economic self- management;
b) overcoming the erroneous dualistic theory of state versus
cooperative ownership, which considered cooperative ownership as a less developed form;
c) the optimality of consumer cooperative sell-management
in the field of internal trade for society as a whole;
d) the fact that consumer cooperatives are the only direct
representatives of the consumer (in both the economic and the
legal sense) and that the so-called state trade does not and
should not perform this function.
The first two points have been dealt with in great detail in
preceding paragraphs.
As for point (c): in the field of internal trade, the consumer
cooperative is in the interest of the consumer as well as in the
interest of society as a whole - that is, the consumer cooperative is a more optimal form of socialist trade than the
so- called state trade.
Why is this so?
Hopefully, there is no contention about the fact that socialist
trade enterprises cannot be placed into the category of state
or public enterprise, that is, into the sector of state ownership
in the organizational-legal sense. The latter is suitable only
for institutions outside the economic sphere and for those cases
where the public interest predominates so much that the advantages of direct control by agencies of the state are thus
proven (for example, in the case of railroads, communications,
a part of electric power, a part of health and welfare, special
enterprises in the field of national defense, unpaid communal
services for the benefit of the entire population of a locality,
etc.).
For all practical purposes, therefore, there remain two
main forms for socialist trade enterprises (excluding less substantive types): ownership by the noncooperative socialist en-
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terprise, and the consumer cooperative. In both cases these
forms should embody the basic elements of socialist economic
self- management.
Let us, however, examine the full content of economic independence of both forms from the vantage point of society as
a whole.
In the case of noncooperative socialist trade enterprises,
the issue will always basically be one of employee self- management, even though it is perhaps supplemented by some consumer representation. The material interest of the employee
will always predominate (premiums, shares in the economic
results, leisure time, etc.); this can be misused, to the detriment of the consumer, especially during the present period of
disequilibrium and lack of competition in our economy. In addition, the commercial employee cannot really be counted
among the most numerous social groups - laborers, farmers,
consumers - whose main concern is the realization of actual
socialist production relations with the help of economic selfmanagement.
Theoretically, the issue for consumer cooperatives is that
of the most complete economic self-management. All of the
managing organs of the cooperative are elected by the consumers, or rather by their delegates. At the present time,
consumer cooperatives are indeed deepening the principle of
democracy even further, and are ridding their organizational
structures of the remainders of distorting sediments. For them,
economic independence is not a new or a foreign element that
must be introduced from outside (as is the case with current
experiments with enterprise councils in noncooperative organizations); it is, rather, a direct organic outflow from the very
foundation of the cooperative. It has a tradition of many years
and therefore yields valuable experiences in the field of this
type of management.
From the point of view of society as a whole, consumer cooperatives have the following advantages over noncooperative
trade enterprises:
A broadly organized consumer cooperative can serve as an
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economic defense against speculative price increases, the omission of lower- priced goods from the market, agreements between trade and production monopolies at the expense of the
consumer, and the forcing of substitute consumer goods on the
market.
The consumer cooperative cannot enact any trade policy that
would be in contradiction to the interests of the consumers the managing organs of the cooperative would thereby lose the
confidence of the membership body that elected them.
Even when only part of the membership actually participates
actively in the work of the cooperative (membership meeting
proceedings, functions involving local supervision of production,
etc.), a favorable psychological climate prevails throughout
the entire cooperative, expressed primarily through the fact
that the consumer cooperative will not make deals contrary to
the interests of the consumers. That is why this form is also
attractive to those citizens who are "cooperatively minded"
only to the extent of their membership share and their continual purchases in the cooperative store.
It follows from the organic basis of the cooperative that protection of consumer interests permeates all levels of activity
in the cooperative - from the retail store, through the wholesale capacity of the cooperative, to their purchases from the
producers, and finally even within the production of the cooperative itself (in this last instance we refer to a particular
type of economic integration: a trade body with control over
production in the interests of the consumer). This advantage
of consumer organization is lost to those people who make purchases in retail outlets of other trade enterprises. The institution of consumers' councils in the organizations of the socalled state trade network can hardly compensate for the advantages that accrue to the consumers in cooperatives: consumers' councils basically exert supervisory and controlling
jurisdiction only over retail outlets; they simply cannot affect
the overall trade policies of noncooperative trade organizations.
For many years now, our public has been in need of some institutional protection of the interests of the consumer against
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the antisocial tendencies of administrative monopolies in both
trade and production in the consumer goods sector. In my opinion, this function can be developed economically and to its fullest extent most directly by the Union of Consumer Cooperatives
as a voluntary interest group that also defends the interests of
the consumer from the political aspect (through representation
of the Central Council of Cooperatives in the National Front
and in the National Assembly , the right of petition, the capacity
to advise on the preparation of legal norms and regulations
affecting the interests of the consumer, etc.).
As for point (d): it is also necessary to explain in somewhat
greater detail the fact that consumer cooperatives are the only
direct representatives of the consumer. This is absolutely
clear from the legal standpoint. Consumer cooperatives are
cooperatives of consumers who form an association in order
to obtain on their own - through their cooperative, all of whose
bodies they elect - the consumer goods they require for their
households. From the legal standpoint, consumer cooperatives
are therefore undoubtedly the direct and the only representatives of the consumer. No other similar organization exists.
But let us inquire into the economic aspect. Are consumer
cooperatives also the sole representatives of the consumer
from the economic standpoint? It is known that this economic
representation of the consumer is also claimed by the state
trade network. However, experience has proven that noncooperative trade is an organizationally independent, special component of the distribution phases of the overall production process, and that it follows its own egotistical economic interests
when dealing with either consumers or producers. On the one
hand, this special agent of distribution, concerned exclUSively
with the buying and selling of consumer goods - if we leave
out of consideration its secondary heterogeneous commercial
activities - is economically linked to production. Both partners mutually need each other: commerce needs goods from
the production sector which, in turn, has to be able to commit
to the commercial sector the total of the finished output it has
realized.
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On the other hand, commerce is linked by its economic interests to millions of individual consumers to whom it must
sell goods in order to fulfill its economic function.
The trade sector is, therefore, economically compelled to
represent the needs of the consumers before the producers in terms of at least a decisive amount of the consumer goods
and a decisive percentage of the volume of the consumption
fund of the population. This representation is not motivated by
idealism; it is not a conscious, moralistic fulfillment of the
socialist trade function (as is sometimes said or written); it is
rather a representation enforced by the economics of the situation, and it also is necessary to enable the commercial sector
to sell the already purchased goods. This statement concerning enforced economic representation does not by any means
apply to the consumer cooperatives, where the situation is
rather one of voluntary and desired representation having the
full approval of the consumers.
The situation is, however, somewhat more complex. Noncooperative commerce - in this case especially, the so-called
state trade network - is actually an independent agent between
the producers and the consumers, and does not depend on them
either organizationally or legally. This fact stems first from
the independent and, to a Significant extent, the monopoly position of state- sponsored trade, as well as from the opportunities
of utilizing - or rather misusing - the substitutability of consumer goods. If the supply of consumer goods on the market
does not suit the consumer, he is no doubt dissatiSfied, but he
seeks substitute items that will yield him a similar use value
(for example, margarine in place of butter, a different brand
of radio or television, etc.).
State trade organizations sometimes misuse this substitutability of consumer goods; this leads to a situation where the
first items to disappear from the market are the lowest priced
varieties of any product, the most favored patterns and colors,
and finally, to be sure, the generally inexpensive essentials.
In part, this "policy" of internal trade takes place as a result
of agreements with the manufacturing partners: for example,
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both receive the benefit of a higher price level for a given type
of commodity, since both partners in this way "produce" a
greater amount of gross income - at the expense, of course,
of consumer interest.
This expanded explanation will perhaps enable us to show
conclusively that the so- called state trade network is not, and
cannot be, an actual economic representative of the consumer,
that its position is rather that of an organizationally and legally
independent element in the distribution phase, living its own
economically egotisticalUfe, and that its own economic interests sometimes can, and even must, be in opposition to the interests of the consumer.
3. Specific Features and Economic Advantages
of Self- Management for Producer. Cooperatives
Why would it be economically unsuitable
for large- scale inv
dustrial enterprises, for example the Skoda works or the
Ceskomoravska Kolben-Danek, to takethe form of a producer
cooperative? Why, on the contrary, is the cooperative form a
more optimal solution for small business establishments and
for specialized products and services than the noncooperative
form of organization? What are the economic ties between
producer cooperatives with the most varied manufacturing and
employee aims, extending into more than ten branches and sectors of production? In these cases, there is no enterprise relationship such as exists, for example, in the consumer cooperatives, but in spite of this the producer cooperatives are
joined together in a single cooperative association.
An analysis of these questions shows us the particular, specific, and economically most useful elements of this selfmanagement for the producer cooperatives, and at the same
time proves for us the optimality of, and the need for, the
permanent existence of producer cooperatives.
Above all, we must now put into its proper place the excessively general thesis of the progressive squeezing out of the
small enterprise by large- scale industry. This has already
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been very successfully attempted in this country by A. Remes
in his study "The Functions of the Small Enterprise" (Politicka
ekonomie, 1967, No.4) in which the author presents conclusive
statistical data on the significant proportion of small enterprises in the technologically most highly developed countries
of the world, and also explains the economic causes [of their
existence] .
It is clear that in a market economy in equilibrium, the small
enterprise cannot successfully compete - that is, in terms of
offering an absolutely suitable assortment of goods - with
large- scale producers in technologically more advanced largescale industry. However, in the final analysis, the small enterprise has a better economic basis than large- scale industrial firms in terms of certain types of production, trade, and
services. Here I refer particularly to specialized and smallscale production requiring primarily outlays on labor - and
for the most part highly qualified labor - to services of all
kinds (repair work, maintenance, custom-made work, and also
so- called personal nonindustrial services); to production activities and services limited, by either natural or economic
conditions, to a small territorial area or a relatively small
number of customers; and to production activities and services
that depend significantly on the confidence of the consumer in
the ability of the individual immediate producer (for example,
a tailor, barber, television repairman, painter, etc.). This
confidence of the consumer in the ability of the actual worker
is an important psychological factor, analogous to the confidence of a patient in a particular physician.
These and similar types of production activities and services
are generally abandoned by large- scale industry in favor of
small- scale enterprises - naturally, not as the result of any
social altruism but rather due to lower profitability or to threat
of losses in view of the complex organizational and administrative apparatus of large- scale production: the continuous world
movement toward specialization is forcing large- scale industry
to concentrate on the more profitable elements of large- scale
production. At the same time, however, it is also true that the
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small and medium- sized enterprises do have an important and
permanent social function in the national economy, and that they
are not threatened with extinction or about to be "swallowed
up" by large-scale industry. As has been shown by the experience
of the technically developed countries with modern market economies, large- scale firms do not, to an ever greater extent,
manufacture specialized products on a small scale themselves;
instead, they order these on a subcontract basis from a widespread network of small and medium- sized enterprises. Therefore, small and medium- sized firms have a permanent raison
d'etre in relation not only to the ultimate consumer but also to
the large industrial consumer.
If we analyze the causes for the persistence by small service
organizations and enterprises vis-a.-vis large- scale industry,
we will in the final analysis always arrive at the predominant
and decisive role played by the personal factor. The existence
of a more simplified organization, ensuring profitability, is
made possible by the fact that the craftsman not only makes,
or in some case repairs, his goods, but also purchases materials and sells the finished product, that is, he personally controls the entire process of production and marketing and is not
only a complex producer but a merchant as well. In specialized
and small- scale production, the personal factor also plays a
decisive role (with the worker's ability and skill to which the
machinery is subordinate used more in this complex productionprocedure than ina mere part of it). In the majority of services this dominant role of the personal factor is entirely obvious, analogous to the psychological factor of the personal
confidence of a customer in a particular, specifically designated artisan. (Of course, the author is aware that the economic significance of the personal factor declines in certain large
producer cooperatives which, from the technical aspect, approach the modern industrial enterprise.)
This personal factor, which is the cause. of not only the persistence but also of the overall economic effectiveness of the
small enterprise in all social areas, must also be protected
and expanded in socialist economic activity. The optimal
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socialist form for the development of this personal factor, so
essential in the sector of small- scale and specialized production and services, is an autonomous producer cooperative, and
this is how the autonomous producer cooperative acquires its
specific economic function. From this specific nature of the
self- management of producer cooperatives, the cooperatives
must draw the requisite conclusions or else they will lose
their distinguishing characteristics that enable them to prosper side by side with large- scale industry - they will lose
their particular character.
This personal factor, which plays such a dominant and overwhelming role in small- scale production and in services, also
requires emphasis from the institutional aspect - in this case,
precisely the form of cooperative co-ownership in place of a
lump-sum employee share. That is why I consider the form
of producer and consumer cooperatives for small-scale production and services as a more optimal socialist form than the
existing noncooperative enterprises of local industry, whose
control by national committees is still a legacy from the administratively directive model of the old system.
4. Main Assumptions Underlying the Realization of
the Advantages of Cooperative Self- Management
Obviously, the national economic policy of the state leadership should make full use of the above- mentioned overall social
and economic advantages of cooperative self- management.
This means, of course, first, supporting their realization
in general. In my opinion, the main assumptions underlying
the realization of the advantages of cooperative self-management seem to lie especially in the solution of the following
groups of problems:
a) In the basic, qualitative change in the relationship of cooperative self-management with the agencies of state control and
authority. This means, first, the relation ofthe cooperative with
the central state agencies and then with the local agencies, that
is, the national committees. At present, these relations con-
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201
tinue to be marked by the distortions of the old, administratively
directive system of management. The problem lies primarily
in the unfavorable results of merging state authority with the
economic sphere. It was considered a rule that ministries and
national committees controlled their so- called "own organizational systems," which were given economic and administrative
preferences over the cooperatives (for example, preferential
allotments of raw materials and other materials, administrative
limitations, departmentalization, monopolization, etc.). For example, producer cooperatives have been placed, and to a certain
extent still remain, on such an unequal level in relation to the
state consumer goods industry and to local economic enterprises controlled by the national committees. The same is true
of consumer cooperatives in relation to the Ministry of Internal
Trade, and - for public catering - in relation to the national
committees as well.
The necessary objectivity of agencies of state authority and
of state administration has come into conflict with the effectuation of a part of the interests of the enterprises of the state
sector that were in direct control of these agencies and were
responsible for their success or failure. This was a case, as
a matter of fact, of misusing the agencies of state authority.
As a rule, objectivity always had to lose in this encounter between opposing interests.
Direct management of the economic sphere by the agencies
of state authority thus became an impediment to the objective
influencing of the economic sphere by the national economic
policy of the center. Correcting this depends on qualitative
changes in the functions of the ministries and of the national
committees.
b) A further basic condition is the full economic rehabilitation of the cooperatives. This involves the return of certain
capacities (storage, retail outlets, other places of business)
that were taken away from them and transferred to the state
sector during the era of the administrative system. It does not
mean returning only the authorization, for example, the permission to perform their own wholesale activities, permission
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to develop their own sales network, etc. The effect of this restitution should actually be the creation of substantive technological conditions for effective economic competition (e. g., in
the area of 20-25% of competitive retail turnover). If the
task of creating the base for this effective competition were
left solely to the operation of the market mechanism of the new
economic system, attainment of the desired effect would probably take an entire decade. In my judgment, state agencies
cannot disappear from the scene of the old administrative system without correcting the most serious earlier administrative
distortions - at least, through some restitution. The argument
that it is already too late today for general management to
give orders to anyone for this purpose is totally erroneous,
sophist, and very transparent. On the contrary, there is a need
for the state authority, as its last "liberating" act, to correct
the previous noneconomic administrative interferences in the
economic sphere.
c) The overall and the economic advantages of se1£- management for the cooperatives is fully substantiated by certain fiscal, credit, and financial measures that should be utilized by
the state leadership to support the expansion of socialist cooperatives. Both consumer and producer cooperatives maintain
a substantial number of business establishments that are unprofitable or below average in profitability (retail outlets, service establishments) in border areas and in economically backward areas. Their liquidation would endanger the provision of
food and services. In the majority of cases, this situation could
be corrected through a suitable graduation of the taxes levied
on net profit, through which the state financial authority would,
in justifiable instances, grant reductions in or even a complete
exemption from taxation. It is not correct to make another cooperative pay additionally through a redistribution of taxes in
the public interest: this also has an outright demoralizing effect. In no case should the union of cooperatives engage in taxation for redistributive purposes - this is interference of the
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most serious variety, contrary to the present function and conception of the union of cooperatives as a voluntary, integrated
interest organization serving the needs of cooperatives.
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Translated by Lydia Castle
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