Re: Corporations/Side Issue

[paul phillips <phillipsp@xxxxxxx>]

Just to supplement Jim's  comments, in Mondragon wages were set at comparable
outside market wages and then profits at the end of the year were allocated
to individual members savings funds which would be paid out on retirement.
 The purpose was to build up funds for investment in expanding the coops
without having to rely on the commercial money market or banking system.
 All employees were required to become members except for specialists brought
in for short term projects (e.g. an engineer hired to design a new product
or process.)  Wage differentials were regulated with a maximum differential
of 3 to 1 although last I heard, they were considering raising this to 6
to 1 because of the difficulty they were having in attracting professionals
as  members as the co-ops moved more and more into high tech  areas and into
research and development.

In the case of Yugoslavia, wages were set by the workers councils, usually
at levels suggested by the managers.  With the 1974 constitutional changes
that introduced contractual self-management and the 1976 Law on Associated
Labour, the financing of investment was abandoned by the state and the independent
banks and was transfered to the enterprises from retained earnings and borrowings
from their captive banks.  This led to what became known as the 'Yugoslav
disease' because the workers would distribute all the earnings in the form
of wages leaving nothing for reinvestment.  The enterprises would then borrow
from their captive banks which basically printed the money with the resulting
inflation that really was a major factor in the collapse of the system.  This
was, of course, illegal under Yugoslav law but by then the state authority
was so dispersed and self-management so intrenched that little was done to
curb it.  Horvat claims, and I think he is right, that the real mistake was
to abolish the state investment funds.  It was during the time of the state
investment funds (the period of market socialism) that the rate of economic
growth and wage growth was at its highest.

Nevertheless, the self-management system of setting wages did result in the
most egalitarian distribution of wages in  Europe, both in the capitalist
and communist worlds.

Paul P

Devine, James wrote:
> Mike B. writes:
> > I'm wondering about these pressures to cut costs which
> >   
> Chomsky refers to.  Don't they lead to the big, nice
> co:operative having to try to find cheaper sources of
> material via low wage, usually dictatorial political
> states?<
>
> FWIW, David Schweikert's "market socialist" utopia of worker-managed co-operatives has two major institutions that are aimed at preventing the co-ops' profit-maximization from turning into this kind of thing:
>
> 1) a minimum wage, so that profit-max doesn't involve co-ops competing via a race to the bottom among themselves.
>
> [I think there must also be some rule about not hiring non-co-op members to do work. But I don't remember it.}
>
> 2) a special tariff on imports from countries that don't live up to labor standards. In this case, the revenues collected by making these imports more expensive to domestic consumers are supposed to be returned to the country whose imports are taxed as a lump sum (development aid).
>
> Jim Devine
Paul Phillips,
Senior Scholar,
Department of Economics,
University of Manitoba