Dictatorship Of The Entrepreneur

Nancy Folbre is holding forth in support of Worker Ownership and Producer Cooperatives on the virtual pages of the NY Times. More power to her.

In her discourse she gives a bit too much credence to an old chestnut from the Chicago School theory of the firm:

If workers receive a share of profits, they may try to free-ride on the efforts of other members of the collective — especially if effort is difficult to monitor.

Yes, indeed, but similar problems characterize the typical capitalist company, in which most workers gain little from improvements in overall performance.

If workers like one another, they may be unwilling to impose the level of discipline required to achieve efficient outcomes — like firing slackers.
Which arguments go back to Armen Alchian's just so story about the origins of the capitalist firm. The one where workers give up all their rights to an entrepreneur who then does the things that they are not able to do for themselves, like impose discipline, increase output and punish slackers.

In the story I recall that the workers get shares of the firms in exchange for submission but that is an issue of income distribution and not really relevant for the supreme economic question, efficiency.

Following this argument our brilliant economists of the 1990's oversaw the wholesale distribution of state firms to oligarchs throughout Eastern Europe and the former Soviet Union. Look how well that worked out.

Now Wonks Anonymous spent some time studying worker management in Yugoslavia and has a choice anecdote pertaining to discipline in worker managed firms. First he will note that in the latter part of the 1980's there were an amazing number of registered alcoholics in Yugoslavia. Wonks Anonymous was not registered at that time and he wondered why anyone would want to registered as an alcoholic.

Somewhere in the back pages of some paper Wonks Anonymous came on a story that illuminated the puzzle. A firm - in Croatia maybe - was trying to fire a worker who showed up drunk, lowering output and endangering himself and his fellow workers. The guy took it to court and the court, interpreting the national labor laws decided as follows:

The man was a registered alcoholic and therefore disabled. His fellow workers were obliged to accommodate his disability by continuing his pay and allowing him to come in and try to work. When he was too drunk to work they were obliged to remove him from harm's way with due sensitivity to his feelings.

This was not a case of workers protecting their own. This was a case of the government imposing a really weird idea of socialism on firms where workers had the potential to run their own lives. Veljko Rus called this condition premature communism.

One will also note that in the 1970's, before Israeli Kibbutzim became primarily factory owners living off the exploitation of third world labor, the surest path to social ostracism at a kibbutz was unwillingness to work.

People know what their fellow workers are doing. When the boss gets all the loot they do not particularly care. When their incomes, and basic fairness are on the line, they try to make sure that things are well run.


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