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Design of A Worker Cooperatives Society (SUMMARY)
Design of A Worker Cooperatives Society (SUMMARY)
The book that is summarised here, covers, after a general introduction, two parts: One,
Design of the organisation of a worker cooperatives society (pp. 9-240); Two, From
modifying capitalism to transition (pp. 241-395). The current summary is mainly
restricted to Part One – however, the summary’s Appendix B is on the transition.
Reading guide
(1) A 290 words impression of the book can be gathered from its Brief summary (p. 1).
(2) The Extended summary (pp. 1-9) provides the gist of Part One.
(3) Appendix A (pp. 10-17) amplifies on some additional elements of Part One.
(4) Appendix B (pp. 17-19) provides a summary of the transition (Part Two) –
restricted to the society’s economic domain.
The contents of the summary is listed on p. ii. The last page (20) lists the contents of the
book text.
*
University of Amsterdam, School of Economics. email: reuten@uva.nl; web: http://reuten.eu.
For this summary the author claims no copyright. It is available for review purposes, whether or not
literally. Reference to the book text is appreciated. [24 October 2023]
i
Contents
Brief summary .............................................................................................................. 1
Extended summary (Divisions 1-2) ............................................................................. 1
1. The organisation of the worker cooperatives economy......................................... 1
1§1. Workers the single economic class........................................................................... 1
1§2. The cooperative as legal entity and its democratic governance ............................... 1
Figure 1. The cooperative and its council’s rights and main authority ....................................... 3
1§3. Markets, types of cooperatives and the ‘single-person enterprise’........................... 3
1§4. Membership of an existing cooperative and the foundation of a cooperative .......... 4
Figure 2. Comparison capitalist stock corporation and the worker cooperative: foundation and
the legal and effective ownership and governance ...................................................................... 4
1§5. Legally required resistance buffer, ‘uncommitted’ reserves and dividends ............. 4
1§6. Credit-debt relation between cooperative banks and other cooperatives ................. 5
Figure 3. Macroeconomic connections between households and cooperatives: monetary and
physical flows (abstracting from saving) ..................................................................................... 5
1§7. Competition between cooperatives........................................................................... 6
2. Parliamentary democracy and state institutions ................................................... 6
2§1. Parliamentary democracy ......................................................................................... 6
2§2. State institutions and the public sector ..................................................................... 6
Figure 4. Public sector institutions, with estimates of their assigned state expenditure and
workforce ..................................................................................................................................... 7
2§3. State expenditure and workforce of the public sector .............................................. 7
2§4. Functions of state agencies and the judiciary vis-à-vis cooperatives ....................... 7
Figure 5. Functions of state agencies vis-à-vis cooperatives ...................................................... 8
2§5. Remuneration of public sector workers .................................................................... 8
2§6. Taxation .................................................................................................................... 9
Appendix A. Additional specific subjects .................................................................... 10
A§1. Macroeconomic income and expenditure flows between cooperatives, households
and state institutions .............................................................................................. 10
Figure 6. Main income and expenditure flows between aggregates of cooperatives, households
and state institutions .................................................................................................................. 11
A§2. Legal entities: governance and workforce in % of total workforce....................... 12
Figure 7. Legal entities and their governance and percent of the workforce ............................ 12
A§3. The single economic class and the unity of the cooperatives economy and state . 12
A§4. Physical circular production and extractions from the Earth................................. 13
A§5. Tendential aim of cooperatives’ councils; elimination of the categories of ‘capital’
and ‘accumulation of capital’ ................................................................................ 13
Figure 8. Key distinctions between the capitalist and the cooperatives economies................... 14
A§6. Wage differences in cooperatives compared with capitalist enterprises ............... 14
A§7. Markets and competition in the cooperatives economy ........................................ 15
Figure 9. Main requirements or restrictions for cooperatives and their councils ..................... 17
Appendix B. Summary of the economic domain’s transition .................................... 17
Index of some unusual or field-specific terms ........................................................... 19
Contents list of the book text ....................................................................................... 20
ii
BRIEF SUMMARY
This book offers an alternative to contemporary capitalism; it does so in considerable detail,
so that the reader can judge its feasibility. Specifically, the book sets out a detailed design of
a democratic society as organised in worker cooperatives (Part One) and an equally detailed
democratic transition to it (Part Two). (Here and in the Extended Summary, I introduce Part
One; on Part Two, see the brief Appendix B.)
In the economic domain, enterprises have the legal structure of worker cooperatives.
Democracy at the level of enterprises is reached by the governance of worker councils that
vote on all economically relevant matters (such as the appointment of a removable
management, investment, and the remuneration of workers).
Workers constitute the single economic class. Unlike in capitalism, there is no class that
owns the means of production. The specific legal structure of worker cooperatives is such
that workers have full rights to the fruits of the cooperative without owning it, and yet the
state does not own the cooperatives either.
In as much as in capitalist society the state is geared to the interests of capitalist
enterprises and their owners, the state in the society proposed is geared to the interests of the
cooperatives, as well as the households.
Democracy at the level of the state is reached, first, by the governance primacy of the
elected parliament, and second, within that primacy, by the state institutions’ workers
councils’ decisions regarding the internal work organisation and the remuneration structure.
The average remuneration in state institutions (including parliament, government and the
judiciary) is equal to the average remuneration in cooperatives.
The general design is such that there is free choice of occupation and of specific
consumer goods, and more so than in capitalism.
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1. The organisation of the worker cooperatives economy
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
1
The non-reproducible agricultural land, fishery waters and mines are owned by the state and can be rented
from a state institution. The criterion is that these are ‘free gifts of nature’ that should never be the property of
an individual or economic entity.
1
position). The reason for election from the rank and file of the cooperative’s workers is to avoid
managers of cooperatives becoming a separate caste.
A cooperative can be founded by two or more workers (see 1§4). Once founded, a
cooperative shall not be alienated. This should guarantee that cooperatives are continuous
between generations of workers.
The cooperative is the owner of the assets, which because of the non-alienation is a
restricted ownership. 2 The workers are collectively merely the unique usufructuaries of the
cooperative – thus they have the cooperatives’ use right, and the rights to its fruits. They
have this right until their retirement or until they move to another cooperative or to a public
sector entity. (For comparison: one similarity between a capitalist ‘foundation’ and the
Design’s ‘worker cooperative’ is that these entities have no owners; one relevant distinction
is that the cooperative has members, whereas a foundation has no members.) Consequently,
the workers are not the owners of the means of production – nor is any other class.
An important implication of the ownership and usufruct structure is that it eliminates the
categories of capital and accumulation of capital. Because workers constitute the single
economic class, and given the ownership-like relations just outlined, there is no means of
production owning class that exploits the working class (this is one main distinction from
capitalism).
Regarding the workers’ collective fruits right (and within the cooperative’s required
legal reserves constraint – see 1§4), the workers council sets rules for the individual
remuneration of its members.
The council decides on the competences of the management. In any case, that is legally,
the council has to approve of, at least:
(a) The internal statute of the cooperative and changes thereof (the internal statute sets rules
beyond legal rules) – this statute includes rules for the building up of ‘uncommitted’
reserves beyond the legally required reserves;
(b) The annual Income account and Balance sheet of the cooperative;
(c) The structure of the individual remuneration levels (in case these are not uniform in face
of unpleasant work, or an expertise that is (temporarily) scarce);
(d) Increases in investments or the workforce, each beyond 5% of the past five years’
average;
(e) Measures regarding foreseen decreases in the cooperative’s ‘uncommitted’ reserves
beyond those due to foreseen retirement or movements (see 1§5 on required and
uncommitted reserves);
(f) In case this is opportune or required: a ‘restructuring plan’ for the cooperative.
Figure 1 (p. 3) provides a schematic summary of the current section.
2
Thus, of the three main elements that define the ‘property right’ of an entity (use right, right to its fruits, and
the right to its alienation), the cooperative holds the first two only.
2
Figure 1. The cooperative and its council’s rights and main authority
cooperative council
highest governing body
the cooperative’s workers being its
exclusive members
authority
collective usufructuary elects removable management
of the cooperative from its ranks
must approve at least of key
decisions listed in 1§2
It can be seen from the above that the collective of workers has full democratic powers at the
institutional (i.e. cooperative) level. This contrasts with capitalist enterprises where capital
shareholders decide, moreover not on a one person one vote basis, but on a capital share
basis. Thus, the latter’s ‘capital-cracy’ is indeed turned into ‘demo-cracy’: given their
character persons may not be equal, but they have equal rights. In capitalism persons may
have equal political rights (in the best case) but these rights stop at the gate of the enterprise,
that is, the place where workers spend most of their daily life. Further, even in those aborted
circumstances, a large part of their value-added product accrues to the capital owners,
because the capitalist state has granted them the right to appropriate the surplus that labour
produces. 3
3
The granting of this right, as well as the right to own much of the Earth, is what a state defines as a capitalist
state (see Geert Reuten, 2019, The unity of the capitalist economy and state, ch. 6 – ch. 1 of this book shows
that only labour produces the value-added, that is, the equivalent of wages and the surplus. See more briefly its
Glossary entries ‘capitalist state’ on p. 679 and ‘value-added’ on p. 692. <https://brill.com/view/title/38778>
open access.
3
person enterprise. For the latter, however, ‘hiring a worker’ is not allowed. The reason is to
avoid exploitative relations, as in capitalist enterprise–employee relations. A person is not
allowed to run such an enterprise and at the same time be a worker in a cooperative or in the
public sector (the public sector is introduced in Division 2).
Figure 2. Comparison capitalist stock corporation and the worker cooperative: foundation and
the legal and effective ownership and governance
Capitalist stock corporation Worker cooperative (Design)
legal form unit of production stock corporation worker cooperative (1§2)
foundation unit of production capital owning shareholders workers (1§4)
highest governance body general body of shareholders cooperative council (1§2)
alteration governance body purchase (and selling) shares successful application (1§4)
legal ownership of assets corporation: full ownership right cooperative: no alienation right (1§2)
final/effective ownership of entity shareholders: full ownership workers: collective usufruct (1§2)
appointment (top-)management body of shareholders council elects from its ranks (1§2)
4
Book text 2§4; foundation cooperative banks, ch. 2 Appendix A, §2A; Investment-credit Guarantee Fund, ch.
3, 3§15.
4
1§6. Credit-debt relation between cooperative banks and other cooperatives
Cooperative banks (COBs) provide credit for investment to production worker cooperatives
(PWCs) against an interest that consists of a risk premium, a component that on average
covers the COB’s material costs and the remuneration of its workers, as well as a component
for keeping up the required reserves.
The investment loans by COBs are the only way of external finance for the PWCs –
notably there is no bonds market.
COBs provide investment loans to PWCs via the ex nihilo creation of new money – this
is similar in the case of capitalist banks. 5
Figure 3 provides a systematic presentation of the macroeconomic relations between
households, PWCs and COBs.
households of
cooperatives’ workers
consumption expenditure
labour capacity
wages & dividends
net loans
(loans minus redemptions)
production cooperative
cooperatives banks
interest
material & services expenditure
Note: ‘Net loans’ (stream from cooperative banks to production cooperatives) is the flow of loans minus the
flow of redeemed loans.
5
On the latter, see Reuten 2019, ch. 2, pp. 103-5 (more extended pp. 103-20) – see footnote 3 for the full
reference.
5
1§7. Competition between cooperatives
In their market, cooperatives compete with other cooperatives. Even with the safety rule of a
required resistance buffer and the minimum wage before attainment of the buffer (1§5),
competition may ultimately mean that a cooperative goes bankrupt. Jobless allowances
apply – the book text (ch. 3, 3§18-3§20) shows that no one is out of work for more than two
months (‘work’ includes permanent jobs and paid traineeships, the latter being a lever to
permanent jobs). 6
The implication is indeed that cooperatives’ workers face a risk. Given the issues that a
workers council must approve of (1§2, points (a)-(f)), any decreases in the uncommitted and
the committed reserves of a cooperative will usually make workers alert before it is too late.
Furthermore, the type of competition between cooperatives is very different from the
capitalist type of competition – notably it tends to be non-aggressive (Appendix-A, A§7
under e). Moreover, the market dominance of individual cooperatives is limited by a number
of rules, including the rule that cooperatives are not allowed to expand beyond ceilings that
in their relevant market would generate market power (Appendix-A, A§7 under e).
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
2. Parliamentary democracy and state institutions
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
6
Cooperatives and public sector institutions with a workforce of more than 50 workers in FTE are required to
continuously offer paid potential traineeship positions of, as an indication, 5% of their workforce.
7
In case of a (defined) high urgency, the government may issue a decree that is legally binding for no more
than 15 days; within this period the decree is either repealed or parliament approves the (amended) decree for a
limited period.
6
reasons of equity, no paid health and education services shall be provided). The institutions
that execute the work (such as hospitals and schools) have – within financial, labour force
and other constraints – a high degree of autonomy. This is reflected in their legal status of
‘worker council governed foundation’ (with a prominent role for the relevant workers
councils).
Figure 4. Public sector institutions, with estimates of their assigned state expenditure and
workforce
This sector constitutes together with the
State sector
state sector the ‘public sector’
chapter
chapter
State institutions
general governance foundations (WGFs)
Democracy at all social levels – from the cooperative to political democracy and the internal
governance of public sector institutions, including ‘workers council governed foundations’ –
is based on the moral value, and normative principle, of democracy. After the most basic
human survival elements of food, shelter and bodily security as well as mutual love,
democracy is the highest social virtue – capitalism does not effectuate this full democracy.
7
Figure 5. Functions of state agencies vis-à-vis cooperatives
nr. agen-
function subject cies
1 furthering the objectives of safeguarding the finance of 4
cooperatives and workers cooperatives and the financial
constellation at large
job securities 1
income allowances 1
real estate (renting or purchasing), 3
mining and other Earth extractions
(licensed renting) and infrastructure
2 constraining cooperatives in the climate and environment protection 1
interest of other cooperatives, or of (incl. via circular production), output
workers and households safety, work safety, work-time limits,
minimum wages
regulation of auditing, patents, 3
copyrights and competition
3 services for which cooperatives public security; judiciary not appl.
production does not apply because health; education; part of culture 3
of their character or of free sector
provision
4 public sector undertaking, either railway transport (user charged) 1
because of its monopoly or
essential production/services not (yet) 1
oligopoly character, or because of
undertaken by cooperatives †
cooperatives’ scale or risk
constraints
† Here ‘essential’ means vital to the functioning of (other) cooperatives or to the welfare of households.
8
This average remuneration is made up of wages and dividends, including ‘postponed dividends’ (1§5).
8
2§6. Taxation
State expenditure is generally financed by taxation. There are three taxation categories.
First, for cooperatives. These uniquely pay a turnover tax, one that is based on a
‘cascade system’ – a system that (contrary to a value-added tax) levies a tax on every
transaction in the production process. This taxation system is – in comparison with a value-
added tax – not only administratively simple; it also stimulates vertical integration, as a
result of which, first, work in a cooperative is more varied, and, second, there is less climate-
damaging transport.
This turnover tax should cover the revenue for about 50% of the state expenditure. Its
tax rate is uniform and is – depending on the production structure of the country at hand –
probably between 5% and 15%
Second, for persons. These pay an individual income tax that covers about 50% of the
state expenditure. (For the following it is relevant that next to the relatively high state
expenditure on health, education, pensions and costs covering child allowances and
childcare allowances – mentioned in 2§3 – there are, amongst others, also expenditures on
benefits that are between the minimum costs of living and the minimum wage. It is recalled
that the minimum wage is 167% of the minimum costs of living – or the ratio of the
minimum costs of living and the minimum wage is 60%.)
The income tax rates range from 25% (between the minimum costs of living and the
minimum wage), via 60% (between one to two times the minimum wage) and further
gradually increasing to 95% for incomes above five times the minimum wage. (Note that the
latter incomes are most unlikely, given that worker councils decide on the pre-tax income
ranges. However, the top income tax rates are relevant for the transition – not covered in this
summary.)
There are no municipal or provincial taxes nor is there a wealth tax (in comparison with
capitalist countries, individual wealth will be very minor).
Third, for persons. There is an inheritance tax levied on the receiver, with a tax rate of
50% on the equivalent of between one and two times the annual minimum wage, and 100%
above it; there is also a gift tax that is somewhat more complicated and which is not treated
here. 9 (The principle point about the – in comparison with capitalism – considerable
inheritance tax rate is that the children of all parents deserve an equal start, and that the
wealth of their ancestors is not their merit. The tax-free threshold is to cover treasured
possessions.)
In face of anticipating behaviour, the inheritance tax revenue is expected to be minor.
–––––––––
9
See the book text, 3§46.
9
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Appendix A. Additional specific subjects
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
10
Figure 6. Main income and expenditure flows between aggregates of cooperatives,
households and state institutions (abstracting from savings)
cooperatives
consumption exp.
households
turnover taxes
transfers:
taxes
state & state institutions
transfers †
* Charged provisions: mainly self-occupied dwellings rented from a state agency, and railway transport (other
transport is provided by cooperatives).
† Transfers to the providing ‘workers council governed foundations’ (2§2)
11
A§2. Legal entities: governance and workforce in % of total workforce
Figure 7 below is a variant of Figure 4; here the focus is on the governance of the entities.
All entities are governed by workers councils, either fully (rows 1-2) or only for their
internal organisation (rows 4-6).
Figure 7. Legal entities and their governance and percent of the workforce
delegated governance:
estimated workforce
highest governing elected and removable
legal entities of institutions as %
body (HGB) by HGB;
total workforce
accountable to HGB
1 cooperatives workers council management 72.5%
public sector
director general
general state
4 ministries and state parliament (appointed by government;
agencies * accountable to parliament) 6.5%
5 municipalities municipal council † executive board
6 provinces provincial council ‡ executive board
entities rows 4–6
7 regarding their secretary general and
workers council
other management
internal organisation
† Elected by the eligible voters. ‡ Indirectly elected by the province’s municipal councillors.
* Parliament and the judiciary are extraordinary state institutions; see row 7 for the internal organisation of
their civil service staff.
A§3. The single economic class and the unity of the cooperatives economy and state
In any stable mode of production, ‘the state’ (or whatever a similar body is called) must be
tailored to meeting the requirements of its particular economy. Thus, the two spheres must
constitute a unity. This applies for the designed mode of production as much as for any
other. 10
Because the capitalist economy is based on the class antagonism between owners of
capital and labour, the capitalist state reflects and sustains this class antagonism.
Specifically, it grants, in the form of capitalist rights, the capitalist enterprises’ claims of
entitlement to the private property of much of the Earth; their claims of entitlement to
private property in means of production other than for production by the claimant; and their
claims of entitlement to employ labour as combined with the appropriation of the surplus-
value (profit) produced by that labour.
Because in the cooperatives economy workers constitute the single economic class
(1§1), the worker cooperatives state reflects and sustains the common interests of this single
class.
It might be posited that even if the cooperatives state reflects and sustains the single
economic class, there nevertheless is, or might be, separate interests between cooperatives
workers and workers of state institutions or of the public sector at large (for ‘public sector’,
see the outer right-hand side columns of Figure 7). There are differences in work-related
10
For capitalism see Geert Reuten, 2019, The unity of the capitalist economy and state.
<https://brill.com/view/title/38778> open access.
12
circumstances (see the next paragraph), but public sector workers – including members of
the parliament and the government – have a direct interest in the flourishing of the
cooperatives economy, because the per worker average remuneration in each public sector
institution is equal to (and derived from) the per worker average of all cooperatives (2§5).
On the other hand, cooperatives, their workers and workers’ households have an interest in
the flourishing of public sector institutions because the latter work in the formers’ common
interest. In this sense there is a unity between the cooperatives economy and state (and the
public sector at large).
Nevertheless, there are differences in work-related circumstances. (a) Normally public
sector workers have a permanent position – unless they obviously do not function according
to their capacities – that also applies to cooperatives workers. (b) Cooperatives workers, in
contradistinction, can lose their position due to bankruptcy. However, as against public
sector workers, these workers can – per individual cooperative as a whole – influence their
income by being above average productive. (c) In case an individual (after leaving school or
later in their career) makes the choice between the two sectors above – and if income were
the only consideration – then the choice is not obvious. It would probably be character
dependent (whether they are risk-averse). (d) Nevertheless, there is another difference
between the two sectors. Within the constraints set by parliament (such as regarding
physically circular production, safety of output, safety at work, the work-time duration, and
minimum wages – 2§5, Figure 4, row 5), cooperatives worker councils have complete
democratic autonomy over the aims and arrangement of their cooperative. However,
whereas councils of ‘workers council governed foundations’ (mainly in the health and
education sectors) have a considerable autonomy, the councils of other public sector
institutions (Figure 7, rows 4-6) have far less autonomy. Parliament decides on the public
sector aims and on the main line of the policies of state institutions, and all these are directly
or indirectly accountable to parliament. Still, councils of public sector institutions elect their
management, decide with the latter on the work organisation, and decide on the internal
structure of the wage scales within the institution. How all of the points above (a–d) sum up
for individual choices about preferred work is probably, again, character dependent.
In conclusion, there is a unity between the cooperatives economy and state (and the
public sector at large), but also differences within this unity that may match individual
profession preferences.
13
increase by expansion investments and workforce increases. 11 The reserves of cooperatives
are not an aim, but an instrument for job preservation; the cooperative’s assets are an
instrument for the value-added per worker. Because, as mentioned in 1§3, workers have no
direct or indirect ownership in the cooperative, and neither invested funds in the cooperative,
no aim of enhancing of such funds (‘valorisation’) can play any role. These considerations
imply that the Design eliminates the capitalist economic categories of ‘capital’ and the
‘accumulation of capital’. 12 They also imply that the type of investment decisions by
cooperatives are utmost different from those of capitalist enterprises.
Figure 8 lists key distinctions between the capitalist and the worker cooperatives
economies. (See also 1§4, Figure 2.)
Figure 8. Key distinctions between the capitalist and the cooperatives economies
Production relations Capitalist economy Cooperatives economy
1 economic classes capitalist and labour labour (single class) (1§1)
2 relation to means of production property by members capitalist class usufruct by labour (1§2)
3 economic class relation exploitative not applicable: single class (1§1)
4 organisation units of production authoritarian democratic (1§2)
5 measure of value † monetary monetary (1§2)
6 general form efficient production value output > value input value output > value input
7 result of efficient production value-added (VA) value-added (VA) (A§5)
8 producer of value-added labour 13 labour
9 core economic category capital labour; category capital eliminated (1§2)
10 aim of production profit and accumulation of capital work preservation and VA (A§5)
11 instrument for aim of production labour employment and wages (costs) cooperative assets and reserves (A§5)
12 internal finance capital shareholders or owner(s) firm no funds or dues of workers (1§4) ‡
† This regards the means of payment for – and the means of circulation of – commodities or other entities.
‡ Nevertheless the minimum wage related to the legally binding resistance buffer might be considered as a
form of internal finance. This buffer cannot be alienated by individual workers, whereas capital shares can.
11
These issues are also the case for ‘worker-owned cooperatives’ under capitalism such as the Mondragon
cooperatives. (See, e.g., Virginie Pérotin 2016, ‘Democratic firms: Assets for the long term’, ch. 20, pp. 330-51
in A. Gosseries and I. Gonzalez (eds), Institutions for Future Generations, Oxford University Press.
https://www.researchgate.net/publication/312563888_Democratic_Firms. One of Pérotin’s conclusions is that
these cooperatives are on average larger than capitalist enterprises.
12
The aim of capitalist enterprises is to accumulate capital and to maximise the profits as calculated over the
equity capital – the profit rate. At a given profit rate, the accumulation of capital maximises absolute profits.
For these enterprises ‘wages’ are no aim but rather a cost, nor is ‘employment’ an aim but merely a profit
instrument – thus employment and wages are a capitalist valorisation instrument.
13
See 1§2, p.3, footnote 3.
14
In ‘worker-owned cooperatives’ as currently existing within capitalism, the bottom to
top salary ratios are far less skewed than in capitalist corporations. (Around 2020, in the
about 100 Mondragon cooperatives, e.g., the maximum wage differences are 1:9 and in
these cooperatives on average they are 1:5. 14 Although 1:9 is considerable, it regards a
constellation surrounded by a capitalist labour market.)
14
Book text 6§6, and Reuten 2023, §4.3 <https://brill.com/view/journals/jlso/26/3/article-p336_003.xml >.
15
can, by varying the rate of interest on the loans, directly and rather promptly affect the
macroeconomic investment. Parliament may temporarily also authorise the SLB to adopt
mesoeconomic investment policies. 15
(d) No real estate market
One state agency is responsible for the nationwide real estate. 16 Cooperatives that wish so
can own self-occupied premises as including the plot of land on which these are built (this
ownership excludes the right to alienation – 1§2). All other land (including agricultural land)
and the waters, as well as all dwellings are owned by this agency. It is the only institution
from which or to which premises can be purchased or sold at ‘reasonable prices’. This
agency also rents out premises to cooperatives (including to agricultural cooperatives) and
the self-occupied dwellings to individuals, each at costs covering or ‘reasonable’ prices.
The effect is that there is no real estate market that speculatively drives up real estate
prices.
The maintenance and construction of buildings is carried out by cooperatives. For the
construction of new premises and dwellings, the agency is committed to acclaimed high
standard urban and landscape designs, which means that it has a huge impact on the beauty
of cities, towns and villages.
In its function of contracting authority for cooperatives, the agency bases itself on long-
term and medium-term planning; this means that it does not act pro-cyclically, whence it
operates as a stabilising agent for the economy’s construction sector.
(e) Market dominance, technical change and competition
Possible market dominance of individual cooperatives is restricted by four rules: (1) they
shall be organised in no more than one location; 17 (2) they are not allowed to found other
cooperatives; (3) they shall not take-over other cooperatives; (4) they shall not expand
beyond ceilings that in their relevant market would generate market power (as an indication,
for cooperative banks in a ‘large’ country, the ceiling might be a nationwide market share of
1%). 18 Nevertheless, these rules are not incompatible with large-scale production; depending
on the country, a single cooperative might provide jobs to several tens of thousands of
workers in a location of several hundred thousand m2.
These restrictions – together with the council’s aims of preservation of the cooperative’s
jobs and of a maximisation of the average value-added per worker (mentioned in A§5) –
mean that technical change has a very different role in comparison with capitalism. Whereas
capitalist enterprises tend to use technical change as an instrument to squeeze out
competitors, it is for cooperatives primarily an instrument for increasing their per worker
value-added – usually leaving the production and jobs of competitors unaffected. In this
respect the cooperatives’ economic interaction tends to be non-aggressive and non-
destructive regarding competitors. Comparatively this tends to result in less technical-
change-induced joblessness; and to the extent that competitors’ physical plants are not
scrapped, less dwindling of environmental resources.
The restrictions mentioned under (e), together with other restrictions for cooperatives or
their councils, are listed in Figure 9 (p.17).
15
Book text 3§16 under c and d; 3§47 under a-first and c.
16
Book text 3§37.
17
The primary reason for this rule is that that a multitude of locations would dilute the power of the
cooperative’s council. The rule also affects potential market power.
18
All nationwide ceilings (also those for production cooperatives) indeed dependent on the size of a country.
(For the sector-specific market shares, see the book text ch. 3, 3§45.)
16
Figure 9. Main requirements or restrictions for cooperatives and their councils
foundation of cooperatives current text book text
1 cooperatives are founded by workers; cooperatives shall not found cooperatives 1§4; A§7-e 2§4.0
2 foundation of cooperatives requires no own funds of workers 1§4 2§4.0
cooperatives
3 a founded cooperative shall not be sold; nor shall it convert its juridical status 1§2 2§3.0
4 take-overs are prohibited (implied by the previous point) A§7-e 2§3.2
5 cooperatives are organised in no more than one location A§7-e 2§3.3
6 cooperatives pay at least the minimum wage (set by parliament) 1§4 2§8.0
7 a maximum labour-time duration per day, week and year applies (parliament sets) 2§8.1
cooperatives shall build up a legally binding resistance buffer, expressed as a 1§5
percentage of the balance sheet assets – 10% for COBs and on average 30% for
8 2§7.0
other cooperatives; before meeting it, workers are paid no more than the minimum
wage †
9 in face of market dominance, the cooperatives’ expansion is restricted 1§7; A§7-e 2§14.0
cooperatives shall register their incomes and expenditures, and annually record an
10 2§11.0
‘Income account’ and a ‘Balance sheet’
additional workers
11 positions shall not be denied on ethnic, gender, social, political or religious grounds 2§3.4
12 any probation period for new workers is a maximum of two years 2§3.4
cooperative banks, specifically
13 besides servicing payments, COBs uniquely provide investment loans to PWCs † A§7-c 2§6.4
councils
14 membership of councils is not bound to refundable or non-refundable dues 1§4 2§3.0
15 only the cooperative’s workers can be member of its council 1§2 2§3.0
the council elects the management (removable) from its ranks, and decides on the
16 1§2 2§5.0
competences of the management
the council must approve of at least five key issues listed in 1§2, including the
17 internal structure of the wages and dividend levels, and increases in investments or 1§2 2§5.1
of the workforce, each beyond 5% of the past five years average
† COB: cooperative bank. PWC: all other cooperatives (production worker cooperatives; including services
production).
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Appendix B. Summary of the economic domain’s transition 19
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The start of the transition is defined as the point in time when there is a parliamentary
majority that wishes to put the Part One Design into practice. The transition itself is a
process in which capitalist enterprises are gradually turned into Design cooperatives, without
any enforcement other than the legislation of the Design’s taxation categories and tax rates.
The process is divided into five legislative phases that together take about five years.
This Appendix is restricted to the transition of the economic domain. 20 It is
accomplished via the following six enactments.
19
Chapter 8 of the book, which covers 78 pages (exclusive appendices).
20
The transition of the State domain, as including amongst others the health and education sectors, is far more
complicated than the transition of the economic domain.
17
First. The Design’s cooperative is enacted as legal entity, together with the enactment of
the rules listed in Figure 9 above. (Phase 1.) Some of latter rules enter into force in a later
phase. In addition, the following two transition rules are enacted in Phase 1. First, regarding
the economic domain (and except for a ‘single-person enterprise’) no new legal entity shall
be established other than a Design cooperative. Second, the sole allowed non-public sector
legal conversion of an entity is that into a Design cooperative. These two transition rules, in
combination with the rules below, are core to the transition.
Second. In the Design there are no shares and bonds markets. For the transition it is
enacted that no new shares or bonds shall be issued. In line with the Design, bank savings
accounts must be terminated and be transferred to a savings account with the ‘Savings and
Loans Bank’ (Phase 1).
Third. Taxation measures include steeply progressing individual income and inheritance
tax brackets (each as in the Design). 21 For corporations the income and property taxes are
maintained as they were before the transition; those for cooperatives are nil (as in the
Design). This implies a comparative advantage for the latter – note that under capitalism
there are also different taxation regimes for different legal entities. (Phase 1.) The
inheritance tax (with, as in the Design, a top bracket of 100% above twice the equivalent of
the minimum wage) implies that after a generation, the individual property ownership, in
shares, bonds, non-incorporated firms, and in real estate will have evanesced.
The three sets of rules above are sufficient for a fading away, within a generation, of the
capitalist sector and a complete transition to worker cooperatives. This hinges on the
inheritance tax together with the rule that in the economic domain no legal entities other
than Design cooperative can be established (first above). The three rules below accelerate
the transition process.
Fourth. The enactment of the Design’s competition policy rule about maximum market shares,
which for the transition implies that current pre-transition enterprises will have to break up into
two or more independent smaller legal entities. (Phase 1; this rule enters into force one year after
the enactment.)
Fifth. Enactment of the Design’s rule that economic domain entities shall be organised in no
more than a single location, which implies that current pre-transition multi-location enterprises
will have to break up into two or more independent single location legal entities. (Phase 3; the
rule enters into force six months after the enactment.)
Rules four and five formally merely mean that capitalist enterprises lose a market
power/dominance ‘advantage’ above Design cooperatives.
Sixth. Enactment of the Design’s ‘Agency for temporary workers’ council governed
foundations’ (Phase 1). Amongst several other competences, the main one is that when, during
the transition, corporate shares, or a firm, are part of a bequest, the agency has a pre-emptive
right to purchase these – against reasonable prices. (Given the inheritance taxes, the inheritors
are required to sell anyway.) Once this agency acquires the majority of the shares in a
corporation, it can insist on the legal conversion into a cooperative (perhaps via the stage of a
temporary workers’ council governed foundation).
The general strategy for the gradual legal conversion of pre-transition capitalist enterprises
into Design cooperatives is expanded on in 8§23 of the book text.
21
The argument for the steeply progressive inheritance tax rates was set out at the end of 2§6 above (p.9).
18
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Index of some unusual or field-specific terms
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alienation, 1§2
cooperative as legal entity, 1§2
cooperative workers council, 1§2
dividend, 1§5
legal entities, governance of, A§2, Figure 7
legally required resistance buffer, 1§5
public sector, 2§2; A§2, Figure 7
reserves of a cooperative, see ‘legally required resistance buffer’ and ‘uncommitted
reserves’
state agencies and other public sector institutions, 2§2; 2§2 Figure 4; 2§4, Figure 5; A§2,
Figure 7
single-person enterprise, 1§3
uncommitted reserves, 1§5
usufructuary / usufruct right, 1§2
worker council governed foundation, 2§2
workers council of cooperatives, 1§2
workers council of public sector institutions, 2§2
19
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Contents list of the book text
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Preface and acknowledgements (vii)
About the author (ix)
GENERAL INTRODUCTION (1)
References (421)
Index of names (432)
Index of subjects (434)
Abbreviations (459)
Extended list of contents (460–476)
20