Economic Performance of the Cooperative Factories

Any in-depth investigation of the economic performance of a group of cooperative factories encounters considerable problems at both the theoretical and the empirical level. For example, a specification of the objectives and of the operational behaviour of firms first has to be made before it is possible to test whether a real case fits a specific theoretical model. At a high level of abstraction, a self-managed enterprise whose aim is to maximise income per worker may be contrasted with a capitalist enterprise whose goal is the maximisation of profit. Several hypotheses for self-managed firms have been developed at this level; for example, Ward, Domar and Vanek (Ward 1958; Domar 1966; Vanek 1970) have theorised on the behaviour of self-managed enterprises. The first of these hypotheses is that their level of output is lower than that of the ‘capitalist-twin’ enterprises; at the same time, the level of employment is less than that of capitalist enterprises. Secondly, self-managed firms are more likely to operate on a scale that still shows increasing returns to increments of production factors rather than to expand further, as capitalist firms would do under similar conditions. ¹ Thirdly, self-managed firms generally have a lower capital-labour ratio than capitalist enterprises. Various authors (Vanek 1970; Dréze 1976) have shown that a self-managed economy – like the capitalist twin economy – is able to reach a Pareto-optimum equilibrium, but the need for entry of new firms and for a high degree of capital mobility creates additional difficulties in the adjustment process of a self-managed economy (Meade 1979).