Keynes, cooperation, and economic stability
In this article, David Hamilton addresses the paucity of economic theorizing with regard to cooperative organizations. He notes that the neoclassical framework is unsuitable for any person or organization that does not maximize net returns either to consumption or to production. He notes that theorizing about cooperatives was largely left to heterodox economists such as Sidney and Beatrice Webb in their book The Consumer Cooperative Movement (1921). But he notes that the macroeconomics of John Maynard Keynes is not inherently hostile to cooperative organizations and that a case can be made for cooperative organizations contributing to macroeconomic stability. Hamilton’s argument is based on the fundamental difference between profitmaking firms and cooperative organizations. Profit-making firms pay dividends to stockholders or profits to owners. These individuals tend to be relatively affluent and consequently have a low propensity to consume. Cooperative enterprises pay patronage dividends to their members. Cooperative members have historically developed as alternative institutions serving farming and working-class families who tend to have a high propensity to consume. Cooperative enterprises have also avoided the excessive managerial salaries and compensation packages typical of private firms. This, too, contributes to affect the distribution of income in such a way as to support a higher propensity to consume. Hamilton notes the tendency of cooperative organizations to engage in vertical integration in response to the unwillingness of the business community to supply goods to cooperative retail operations, thus forcing the cooperatives to move into wholesaling and production. Hamilton concludes his paper by noting some objections to his argument. It is interesting that he anticipates many of the issues explored by Jaraslov Vanek’s The General Theory of Labor-Managed Economies (1970) fifteen years later.