Markets Can Be Healthy

As part of my studies this semester, I am reading the English edition of Cooperative Enterprise: Facing the Challenge of Globalization* by Stefano and Vera Zamagni.

In their opening chapters, they lead a discussion about the nature of cooperation (from their Italian perspective), the nature of competition and the nature of the market.

For decades, Stefano has argued that capitalism has been incorrectly used as a synonym for “free market.” Indeed, that connection is so embedded in our culture in the United States that anyone suggesting anything else often gets labeled a socialist. The dominant paradigm sees the dichotomy of the planned economy of socialism and the market economy of capitalism. There isn’t any other means except the historically defunct feudalism.

Today isn’t about getting into the argument about State Capitalism of the former Soviet Union and modern China, rather, it is about debunking the intimate connection between a free market and capitalism. The Zamagni’s carry this thought throughout the introduction to their book.

Essentially, they argue in the language of Flora and Fauna taxonomy. If we consider the “marketplace” to be the Genus of this particular economic strain, then capitalism is but one species within it. Co-operation, they argue is a unique species within the free market. Cooperation is not opposed to the marketplace, but utilizes it in a manner that seeks to maximize the benefit for the community. Capitalism utilizes the market to maximize the benefit for those owning the capital. Both are subject Adam Smith‘s invisible hand of the marketplace that provide the mechanism for each type of business to make adjustments. Both seek to use government (although capitalism is much better at it) to ameliorate the effect of the invisible hand towards the benefit of their shareholders or stakeholders as the case may be.

As a condition of this, competition plays different roles. In the capitalist species, competition is expected to be a ruthless Darwinian arbitrator determining the most fit organization (again for the benefit of the narrow group of stockholders). In the Co-operative species, however, competition plays a much different, almost helpful, role. The authors argue that the root word for competition is cum petere (“literally, tend together toward a common goal”). It is the basis of a free market. This is the antithesis of “creative destruction”:

“We are well aware of the many economic advantages created by this mechanism. But we are equally familiar with its brutality, its harmful social and political reprecussions. And it is clear that creative destruction may enjoy some legitamacy as long as the value of what is created is grreater than that of what is destroyed, that legitamcy ends when–as is the case today–the relation is inverted. We call the specific form of competitive practiced by cooperatives ‘competitive cooperation’, which is a powerful antidote to the damage that would be done by positional competition. “(Zamagni, 2010, 4)

A competition to see who can best serve the community is part of a truly free market. Further, a free market also requires an educated consumer. In the cooperative species, this means much more that printing ingredients on labels. For one, it means that the consumer (in the broadest sense), must be able to read and understand that label! It means that the consumer must posses the analytical skills to discern between products and services and the related price. During this election year, we will hear a lot about paying for education and the free market, but we will likely not hear about how they are connected. We can’t have a free market if we don’t have a populace educated to a level that allows them to make informed decisions.

Of course, this is one of the key traits of the Co-operative species as espoused by the 5th Principle: Education, Information and Training. The principle states: “Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.”

Co-operation, not capitalism, embraces the free market. Capitalism uses a vicious form of competition, the type found in nature by parasites, to stifle other actors in the market. The Zamagni’s quote economists Rajan and Zingales’s work Saving Capitalism from Capitalism (2003, University of Chicago Press):

“The worst enemies of capitalism are not union agitators with their corrosive critique of the system, but the managers in pinstriped suits who sing the praises of competitive markets in every speech while they try to suppress them with every action.”

The next time you hear someone trying to red-bait our movement, you could have a lot of fun pointing out that the practice of modern capitalism is much closer to the Kleptocracy of Russia and the party contolled economy of China while the true competitors and champion of the free market are, in fact, co-operatives.

*The only place that I have been able to find an English copy of Cooperative Enterprise has been through Abe’s Books, however, if your local book coop has a good search engine, they might also be able to find it.

About John McNamara

John spent 26 years with Union Cab of Madison Cooperative and currently helps develop co-ops in the Pacific Northwest. He holds a Ph.D. in Business Administration and Masters in Management: Co-operatives and Credit Unions from Saint Mary's University.
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