The debate over the cooperatives

The 28th Soviet Party Congress

By Sam Marcy (July 12, 1990)

July 2--One of the principal issues that is certain to be discussed at the 28th Party Congress now opening in the USSR is the role of the new cooperative movement, as it is occasionally called.

The cooperative movement has a considerable history in Western capitalist society. In the early 1900s, philanthropists financed a variety of different cooperative societies in order to demonstrate their superiority over private production and also to show up the avariciousness and disruptive character of private property interests. Even to this day, there are cooperative communities in parts of the U.S. and elsewhere.

There are also large consumer cooperatives affiliated with giant supermarkets and financed by banks. Some are the property of large unions, like the Amalgamated Clothing Workers of America and its affiliate the Amalgamated Bank, or the International Ladies Garment Workers Union. The United Mineworkers Union had a strong bank until recently, but it was battered by a vicious strikebreaking and unionbusting campaign, rivaling those of a century ago.

Workers angry at price-gouging by cooperatives

What's involved in the cooperative movement in the USSR at the present time must be examined in the light not only of the earlier Western type of cooperative, but of the historical development since the October Revolution. At the present time, there is widespread--one may say frenzied--public hatred of the cooperative movement by the working class, and especially by the poor in the rural areas. Instead of serving the public, these institutions have become a means of gouging the public for the private profit of the handful of "cooperators" who run them.

A symptom of the public hatred of the cooperatives was the recent election of Ivan Polozkov, the Communist Party First Secretary from Krasnodar, to be General Secretary of the newly formed Russian Communist Party. He had characterized the cooperatives as a "social evil--a malignant tumor," and virtually called for them to be shut down. However, the Soviet parliament had earlier passed several laws relating to the definition of property which seemingly sanctioned a further mushrooming of these types of cooperatives.

In the Russian Republic, Polozkov has utilized his authority and that of the Party and the Soviets to shut several hundred cooperatives down. His opponents branded this illegal. His answer was, "We must react proceeding from the essence of things, not from the law."

A great deal depends on how the debate on the cooperatives--which are everywhere understood as businesses--is conducted. Most of the criticisms are directed not at these institutions per se but at the corruption they engender, which is being vigorously exposed by the masses and occasionally, but not very frequently, by the Soviet press. However, if the debate is to have the necessary salutary effect on the working class, the peasantry, and the progressive intelligentsia, it has to deal not merely with corruption but with political principle.

Lenin's view of cooperatives

First it is necessary to explain how and why Lenin proposed cooperatives during the period of the New Economic Policy, and how the present form of cooperative differs from them as heaven differs from earth. It must be explained why the cooperatives are in reality a back-door form for the restoration of capitalism.

Of course, corruption must be thoroughly exposed. But the struggle should not rest on that alone. Corruption in the co-ops is so notorious that even the Moscow News, a fervent proponent of the cooperatives, has to occasionally expose it.

For instance, on July 30, 1989, it told the story of "one of the pioneers of the Moscow co-op movement," an enterprise called Farkhad. It took over a village diner and turned it into a prosperous cafe and delicatessen, catering to affluent visitors from Moscow who could pay higher prices. The article said the district committee and the prosecutor found a list of transgressions: an alarming turnover of personnel, an absence of culinary experts, delays in paying rent, instances of short-weighing customers, as well as "drunken orgies and secret extortionist practices." In addition, the cooperative chairman of Farkhad, by the name of Gasumov, had a previous criminal record, but his conviction had been dropped.

After exposing all this corruption, the article avoided the questions of principle: Should these cooperatives exist in this form? Do they really have a socially useful function as far as the broad mass of the working class and peasants are concerned? Or are they trying to utilize the rural areas to serve the new bourgeois stratum in the large cities? Do they promote socialism? Or are they a form for destabilization, if not for capitalist restoration? Farkhad is one of a myriad of examples.

Capitalism and cooperation

The origin of the cooperative movement in the Soviet Union--and first of all in the West--is the objective result of the indispensable cooperation that exists in capitalist production. It is cooperation that has made possible the development of capitalism.

Huge masses of workers were driven into the factories everywhere--in England, France, Italy, the United States, as well as in czarist Russia--and it was on the basis of that cooperation that manufacturing and machine industry, industrialization, advanced on such a broad scale. The truth of the matter is that capitalist production is cooperative in character. All products developed under capitalism are the result, in the final analysis, of millions upon millions of workers who work cooperatively or collectively. The tiniest computer disk is the collective product of millions using raw materials gathered from all over the globe.

Who can doubt that modern capitalist production is collective in character? The problem is that while the labor of the workers is collective, what they produce is privately owned by a small number of avaricious millionaires and billionaires, who literally dominate the millions of people. Powerful dynasties, international cartels, monopolistic trusts, and the modern transnational corporations are the levers which direct capitalist production, so as to garner the highest superprofits based upon the most intensive, brutal exploitation of the workers, especially in the underdeveloped parts of the globe.

It is no exaggeration to say that the bulk of the earth's wealth, at least in the capitalist sector, is firmly in their hands.

Utopian cooperatives

The hope of the early Utopians, like Saint-Simon, Robert Owen and others, was to set up cooperatives free of the avariciousness of the exploiters on the basis of the objective nature of collective labor. An idea so just, so fair, so human would become irresistible.

The problem, as they saw it, was that if the worker received the full product of his or her labor, minus the cost of administration and organization, it would be easy to do away with the cruelty and extortion of the private capitalist establishments, who appropriated the unpaid labor of the workers. The unpaid labor of the workers, according to the Utopians, would then go into the common fund, for health care, housing and all human needs.

The cooperative could show that the capitalists are really not necessary, that they are an ulcer on society. They could be gotten rid of by mere example--no violence needed. Life would show the superiority of the collective over private enterprise.

Unfortunately, the cooperatives--small and scattered as they were, among other reasons--came late on the scene. Capitalism was already a world system by that time, with a world market. In order to undo the capitalist system, the cooperatives had to compete with full-grown capitalist enterprises. Not only was the capital investment of these enterprises formidable and overwhelming, but they had enormous capacity to undersell, even taking big losses, in order to drive the cooperatives out.

There used to be 3,000 daily newspapers in the United States. There were nine big dailies in New York City alone. Now there are only three, and the competition is between three dynastic monopolies: the Sulzbergers, the Knight-Ridder group, and the Pattersons of the Chicago Tribune group.

Capitalism overwhelmed cooperatives

Price cutting and rigging of prices was only one of the instrumentalities used by the capitalists to drive the cooperatives out. Besides these classic methods--as well as sharing of markets and locking out cooperatives--they got government loans and aid of all kinds in the form of tax breaks. Indeed, they really own the capitalist government, which functions as their executive committee.

Moreover, the capitalist enterprises have a singular advantage: access to credit and financing from the banks. The banks proved the most potent factor in the undoing of the cooperatives, because of their strategic role in dispensing credit. The worldwide cooperative movement was therefore relegated mostly to fringe areas of the economy. For the most part, it survived in those areas of the economy where the capitalists felt they couldn't get an adequate rate of profit, and driving them out was thus not worthwhile.

Most of the cooperatives in the 19th century disappeared quickly. In his celebrated "Socialism: Utopian and Scientific," Frederick Engels showed that while the cooperatives could work and set an example, could make life livable and humane, free of exploitation and oppression, what stood in their way was the raging class struggle of the bourgeoisie against the proletariat. Its drive for greater and greater concentration and centralization of industry just swept them away.

Marxists scorned bourgeois cooperatives

The attitude of Marxists toward these Utopian attempts in the latter part of the 19th century and the early 20th was one of scorn and ridicule, for two reasons. The Marxists made a distinction between the early cooperatives, which were motivated by socialist idealism, and the later ones which were bourgeois in character. These were motivated solely by the idea that the unpaid labor of the workers which the capitalists appropriated could be utilized as retained earnings and distributed to the workers. This too was progressive, but it was really an attempt to beat the capitalists at their own game in competition. It lacked entirely the motivating force of a socialist society.

Their attempt to beat the capitalist class at their own game proved especially disastrous during periods of capitalist crisis, when even some of the strongest capitalist firms went under. The cooperatives were wiped out en masse. Only a few pockets survived, those where these communities acted as a supplement to the capitalist economy. But they were insignificant in relation to the capitalist economy.

Any cooperatives existing today, for instance in the U.S., are in reality capitalist enterprises, mostly in the consumer field or in farming areas. And the differences between the large capitalist firms and the cooperatives are not of a qualitative, but quantitative character. They do not affect the devastating operations of the capitalist system. They are in reality an element in capitalist production.

The early Utopians tried to avoid the cruelties and barbarities of the capitalist system and establish an egalitarian society, which had been projected centuries earlier by Campanella in Italy and later by Thomas More. But the latter-day cooperative societies are bourgeois in content, and are impossible as a lever in the struggle against capitalist exploitation and oppression.

Lenin's `On Cooperation'

The question then arises: Why did Lenin, virtually at the end of his life, come out for the development of a cooperative movement in the USSR? Why was he so fervently for it? He does this best in his article, "On Cooperation," written January 4, 1923. (Collected Works of Lenin, Vol. 33.) Lenin's position is likely to be brought up again and again at the 28th Party Congress.

In the USSR today there are three basic positions with respect to the cooperatives. The first is represented by the so-called Democratic Platform. They are the out-and-out representatives of the bourgeois elements in the Soviet Union. They are not merely for perpetuating these cooperatives but for expanding them and making them nationwide. And they frankly state that the purpose of the cooperatives should be to give incentive to private interests and profit. They are private enterprise promoters, and the cooperatives offer them an opportunity to widen and deepen the influence of capitalist reforms. But they are likely to be a small minority at the Congress. They are frankly pro-capitalist.

The real debate will be between the centrist elements on one side, led by Gorbachev, and on the other side Yegor Ligachev and especially Ivan Polozkov, who are opposed to the cooperatives. How will they approach the issue? Will they confine themselves to the chaos and havoc, the fraud and corruption which the cooperatives generate--or will they deal with the more fundamental issue: that it is a form for the restoration of capitalism? A back-door form, it is true, but that is what it is essentially.

The corruption and fraud are merely the symptoms of the operations of capitalism. Fraud and corruption are inseparable from capitalism, because it's based on the profit motive.

What is the difference between the cooperatives being set up today and what Lenin suggested? The difference is profound, and of a fundamental character. Lenin was writing, as we said, in January 1923, in the midst of the period of the New Economic Policy (NEP)--which was a policy of a strategic retreat in order to regain strength and resume the struggle for socialist construction. Its purpose was to strengthen the Soviet Union as a revolutionary workers' state, which was building a new socialist society.

Under the NEP the vast peasant mass was based upon individual land ownership. It required a mechanism to reach not merely the Soviet government but the world market with its produce, which was mainly agricultural in character. It needed consumer products in return for its products of the soil.

In the czarist days, this had been done by trade. The small but powerful merchant class, with the financial backing of the czar, gobbled up all that the peasants produced--aside from the meager share they retained for their own sustenance--and sold it on the world market, leaving the peasants in incredible poverty.

Reactionaries idealize peasantry under czarism

Aleksandr Solzhenitsyn and those of his compatriots who are now advisers to the Gorbachev administration always point out that czarist Russia had a surplus of grain and other agricultural products for export, while today there are shortages and grain must be imported. But they leave out the condition of virtual semi-servitude and starvation to which the landlords subjected the peasantry! Their current view of the life of the pre-revolutionary peasantry is idyllic.

They forget to mention the hundreds of peasant rebellions. And they forget that the peasants themselves began the seizure of the land from the landlords. The Bolsheviks only had to encourage the peasants to expropriate the landlords. As a matter of fact, the peasants, especially after the victory of the October Revolution, began to take the land themselves, and freed themselves from the bondage and oppression of the landlords. The distribution of the land, and the destruction of the landlord class--that was the work of the peasantry. The Bolsheviks alone could not have done it.

The Bolsheviks originally were for the nationalization of the land, but the course of events proved that the most profoundly revolutionary thing the Bolsheviks could do was support the land revolution of the peasants in ousting the landlords, and postpone the question of the socialization or nationalization of the land to a later period.

During the difficult years of War Communism, the market was abandoned in favor of direct requisition of grain for the front and the city workers. However, during the NEP period wholesale and retail trade--that is, buying and selling--were revived. It became noticeable, particularly to Lenin, how meager the connections were between town and country (between the peasants and the workers' state), and how little experience the peasantry had in trading--that is, in the exchange of products.

In analyzing the problem, Lenin wrote that "Our peasantry lack civilization--they lack the culture of the merchants." He clarified this, saying, "They do trade, but that is far from being cultured traders. They now trade in an Asiatic manner. But to be a good trader, one must trade in the European manner. They are a whole epoch behind that."

What Lenin was saying was that, at a time when the literacy level was still very low among the peasants in particular and the masses in general, trade required not only culture in general, but experience and knowledge. To utilize an earlier thought Lenin raised in his 1913 article "On Dialectics," knowledge is not a thing, it is a process of development, "from non-knowledge to knowledge," a process that may take a considerable time, depending on the speed with which socialist construction can develop under the circumstances of a besieged workers' state.

Lenin saw, therefore, the need for developing cooperation among the peasants. Moreover, he extended this to include cooperation on a countrywide basis. And he asked, "Are we not going back to the old, social-democratic formulas, which we so roundly exposed and scorned?" His answer was no.

"What we criticized at that time," he said, "was not so much the cooperative or collective forms, but their utter disregard of the class character of the society, the raging class struggle of the workers, and the nature of the capitalist state as an arm of the capitalist class--all of which made the downfall of the cooperatives inevitable."

The cooperative form in itself is merely a derivative of the cooperative nature of capitalist production--that is, its progressive aspect, as against capitalist appropriation, which is reactionary. How different, then, Lenin asked, would it be in the Soviet Union? Here we do not even have a culture of the merchant class. We don't know how to trade. We don't know how to exchange things so as to bring products from one area to another, and raise the level of production. Land and its produce are still in the hands of individual peasants. Individualism predominates. The cooperative form will be an advance over this situation, especially if it takes on a mass character. And the dictatorship of the proletariat will support it financially. Instead of the onerous taxes of the czarist government, it will have financial assistance from the workers' state.

He then adds the following generalization: that every class that rose to the leadership of society did not do it all on its own, but got the financial support of the state, and the Soviet government would of course be most generous in its support of the formation of cooperatives. Which would be a step forward, away from the scattered, atomized, individualistic peasant economy.

Moreover, said Lenin, it was a step toward socialism. From these cooperatives, which would retain within their framework private as well as collective interests, the state would continually edge forward toward socialism. From them there would develop the consistently socialist form of state ownership, followed by ownership by the people as a whole.

The whole idea of cooperatives, as one can see, was to find a way out of a stagnant agricultural situation of an atomized peasantry, of the inability to raise the productive level of agriculture, and ultimately bring it into the fold of a socialist enterprise and the building of communism. The entire perspective of Lenin was the construction of socialism--the wiping out of all the evils of social inequality, and ultimately abolishing the tremendous gap between the developed and undeveloped republics in the Soviet Union. And of course, first of all, wiping out illiteracy. All this needed the firm and unstinting support of the socialist government.

Certainly now there are hundreds of thousands of skilled cadre, whose education has been paid for by the working class and the mass of the people, who can deal with trade and have dealt with it for decades. Many of them have attained eminent reputations for their skills in dealing with the imperialist powers, all on the basis of a socialized economy and wholesale trade.

Negative aspect of cooperatives

The negative aspect of the cooperatives, caused by the dire necessities of the NEP period, was, as Lenin said, that "a number of economic, financial and banking privileges must be granted to the cooperatives," which in turn meant privileges to its leaders, because of the scarcity at that time of skilled communist cadre. These privileges turned into a lever for the growth of social inequality, and nurtured the growing bourgeois element from the soil.

But what about the new proponents of cooperatives? What is their motivation? What in fact have they tried to put into law? At the beginning, very early on, it was not clear. The general idea of the reforms was to modernize technology and accelerate the socialist production of consumer goods. But the reality of the present situation is that now, 70 years after the October Revolution--after virtually all industry has been nationalized, and the peasants have come (by whatever difficult and harsh measures) to collectivization and the formation of cooperation of their own--what these new savants have in mind is to change the character of the cooperatives. What they are developing under the new law are business cooperatives, a development away from socialism.

As even the Moscow News grudgingly admits, the motivation of the cooperatives is profit--not by raising productivity levels, introducing new managerial forms and new technology which would benefit everyone--but by dividing individual profit among a small group of operators and managers, who for the most part can demonstrate their skill at conning profits for themselves at the expense of the cooperative and the community.

It was never assumed by the public that the cooperatives would become a departure from socialist construction, and open the road to so-called free enterprise, to capitalist ventures. On the contrary, they were supposed to reinforce socialist construction. But because of the way the new law was double-talked into the laws of the USSR, at a moment of incredible confusion introduced by the Gorbachev reformers, it was difficult at least for some to grasp what the ultimate results would be.

Cooperatives vs. socialized planning

Now, five years into the Gorbachev administration, it has become clear that these cooperatives are nothing but bourgeois enterprises for the purpose of enriching their initiators and organizers. And they are becoming more widespread every day. Furthermore, the individuals involved in this have their connections in industry, which is in a state of disarray because of the effort to dismantle socialized planning.

In state enterprises, products may be in short supply precisely because, under the mask of decentralization, materials are hoarded. Under decentralization the enterprises have become more autonomous, and tend to compete with each other for materials. Hoarding becomes widespread precisely because the enterprises are driven by the profit motive rather than the pursuit of a common plan for the good of all.

Democratizing centralized planning is one thing. Setting the individual enterprises against each other--an embryonic form of bourgeois competition--brings to the fore all the inherent evils of capitalist competition, of which hoarding as well as overproduction are common phenomena.

While it might have been difficult two years ago to unmask the true character of these cooperatives, today it has become scandalously apparent that they are nothing but money-gouging enterprises, and serve no socially useful function. Their principal purpose is to meet the appetites of the upper crust of Soviet society, which can afford to purchase their expensive goods and services.

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