1. Economic Theory

An economic system consisting of self-managed enterprises is sometimes referred to as a participatory economy, self-managed economy, or cooperative economy. This economic model is a major version of market socialism and decentralized planned economy, stemming from the notion that people should be able to participate in making the decisions that affect their well-being. The major proponents of self-managed market socialism in the 20th century include the economists Benjamin Ward, Jaroslav Vanek and Branko Horvat.^[1] The Ward–Vanek model of self-management involves the diffusion of entrepreneurial roles amongst all the partners of the enterprise.

Branko Horvat notes that participation is not simply more desirable, but also more economically viable than traditional hierarchical and authoritarian management as demonstrated by econometric measurements which indicate an increase in efficiency with greater participation in decision-making. According to Horvat, these developments are moving the world toward a self-governing socialistic mode of organization.^[2]

In the economic theory of self-management, workers are no longer employees but partners in the administration of their enterprise. Management theories in favor of greater self-management and self-directed activity cite the importance of autonomy for productivity in the firm and economists in favor of self-management argue that cooperatives are more efficient than centrally-managed firms because every worker receives a portion of the profit, thereby directly tying their productivity to their level of compensation.

Historical economic figures who supported cooperatives and self-management of some kind include the anarchist Pierre Joseph Proudhon, classical economist John Stuart Mill and the neoclassical economist Alfred Marshall. Contemporary proponents of Self-management include the American Marxist economist Richard D. Wolff, anarchist philosopher Noam Chomsky, and social theorist and sociologist Marcelo Vieta.

1.1. Labor Managed Firm

The theory of the labor manager firm explains the behavior, performance and nature of self-managed organizational forms. Although self-managed (or labor-managed) firms can coincide with worker ownership (employee ownership), the two are distinct concepts and one need not imply the other. According to traditional neoclassical economic theory, in a competitive market economy ownership of capital assets by labor (the workforce of a given firm) should have no significant impact on firm performance.^[3]

The classical liberal philosopher John Stuart Mill believed that worker-run and owned cooperatives would eventually displace traditional capitalist (capital-managed) firms in the competitive market economy due to their superior efficiency and stronger incentive structure. While both Mill and Karl Marx thought that democratic worker management would be more efficient in the long run compared with hierarchical management, Marx was not hopeful about the prospects of labor-managed and owned firms as a means to displace traditional capitalist firms in the market economy.^[4] Despite their advantages in efficiency, in Western market economies the labor-managed firm is comparatively rare.^[5]

Benjamin Ward critiqued the labor managed firm's objective function. According to Ward, the labor-managed firm strives to maximize net income for all its members as contrasted with the traditional capitalist firms' objective function of maximizing profit for external owners. The objective function of the labor managed firm creates an incentive to limit employment in order to boost the net income of the firm's existing members. Thus, an economy consisting of labor-managed firms would have a tendency to underutilize labor and tend toward high rates of unemployment.

1.2. Classical Economics

In the 19th century, the idea of a self-managed economy was first fully articulated by the anarchist philosopher and economist Pierre-Joseph Proudhon.^[6] This economic model was called mutualism to highlight the mutual relationship among individuals in this system (in contrast to the parasitism of capitalist society) and involved cooperatives operating in a free-market economy.

The classical liberal philosopher John Stuart Mill argued that worker-run cooperatives would eventually displace traditional capitalist (capital-managed) firms in the competitive market economy due to their superior efficiency.^[4]

Karl Marx championed the idea of a free association of producers as a characteristic of communist society, where self-management processes replaced the traditional notion of the centralized state. This concept is related to the Marxist idea of transcending alienation.^[7]

1.3. Soviet-type Economies

The Soviet-type economic model as practiced in the former Soviet Union and Eastern Bloc is criticized by socialists for its lack of widespread self-management and management input on the part of workers in enterprises. However, according to both the Bolshevik view and Marx's own perspective a full transformation of the work process can only occur after technical progress has eliminated dreary and repetitive work, a state of affairs that had not yet been achieved even in the advanced Western economies.^[8]

2. Management Science

In his book Drive: The Surprising Truth About What Motivates Us, Daniel H. Pink argues on the basis of empirical evidence that self-management/self-directed processes, mastery, worker autonomy and purpose (defined as intrinsic rewards) are much more effective incentives than monetary gain (extrinsic rewards). According to Pink, for the vast majority of work in the 21st century self-management and related intrinsic incentives are far more crucial than outdated notions of hierarchical management and an overreliance on monetary compensation as reward.

More recent research, however, suggests that incentives and bonuses can have positive effects on performance and autonomous motivation.^[9] According to this research, the key is aligning bonuses and incentives to reinforce, rather than hamper, a sense of autonomy, competence, and relatedness (the three needs that Self Determination theory identifies for Autonomous Motivation).

3. Political Movements

3.1. Europe

Worker self-management became a primary component of some trade union organizations, in particular revolutionary syndicalism which was introduced in late 19th century France and guild socialism in early 20th century Britain, although both movements collapsed in the early 1920s. French trade-union CFDT (Confédération Française Démocratique du Travail) included worker self-management in its 1970 program before later abandoning it. The philosophy of workers' self-management has been promoted by the Industrial Workers of the World (IWW) since its founding in the United States in 1905.

Critics of workers' self-management from the left such as Gilles Dauvé and Jacques Camatte do not admonish the model as reactionary, but simply as not progressive in the context of developed capitalism. Such critics suggest that capitalism is more than a relationship of management. Rather, they suggest capitalism should be considered as a social totality which workers' self-management in and of itself only perpetuates and does not challenge despite its seemingly radical content and activity. This theory is used to explain why self-management in Yugoslavia never advanced beyond the confines of the larger state-monopoly economy, or why many modern worker-owned facilities tend to return to hiring managers and accountants after only a few years of operation.

Guild socialism is a political movement advocating workers' control of industry through the medium of trade-related guilds "in an implied contractual relationship with the public".^[10] It originated in the United Kingdom and was at its most influential in the first quarter of the 20th century. It was strongly associated with G. D. H. Cole and influenced by the ideas of William Morris.

One significant experiment with workers' self-management took place during the Spanish Revolution (1936–1939).^[11] In his book Anarcho-Syndicalism (1938), Rudolf Rocker stated:

But by taking the land and the industrial plants under their own management they have taken the first and most important step on the road to Socialism. Above all, they (the Workers' and peasants self-management) have proved that the workers, even without the capitalists, are able to carry on production and to do it better than a lot of profit-hungry entrepreneurs.^[12]

At the height of the Cold War in the 1950s, Yugoslavia advocated what was officially called socialist self-management in distinction from the Eastern Bloc countries, all of which practiced central planning and centralized management of their economies. The economy of Yugoslavia was organized according to the theories of Josip Broz Tito and more directly Edvard Kardelj. Croatian scientist Branko Horvat also made a significant contribution to the theory of workers' self-management (radničko samoupravljanje) as practiced in Yugoslavia. Due to Yugoslavia's neutrality and its leading role in the Non-Aligned Movement, Yugoslav companies exported to both Western and Eastern markets. Yugoslav companies carried out construction of numerous major infrastructural and industrial projects in Africa, Europe and Asia.^[13][14]

After May 1968 in France, LIP factory, a clockwork factory based in Besançon, became self-managed starting in 1973 after the management's decision to liquidate it. The LIP experience was an emblematic social conflict of post-1968 in France. CFDT (the CCT as it was referred to in Northern Spain), trade-unionist Charles Piaget led the strike in which workers claimed the means of production. The Unified Socialist Party (PSU) which included former Radical Pierre Mendès-France was in favour of autogestión or self-management.^[15]

In the Basque Country of Spain, the Mondragon Cooperative Corporation represents perhaps the longest lasting and most successful example of workers' self-management in the world. It has been touted by a diverse group of people such as the Marxian economist Richard D. Wolff and the research book Capital and the Debt Trap by Claudia Sanchez Bajo and Bruno Roelants^[16] as an example of how the economy can be organized on an alternative to the capitalist mode of production.^[17]

Due to the 2010s economic crisis in Greece, a number of factories have been occupied and have become self-managed along the lines of autogestión.^[18] The Bruderhof operate several factories in the UK where workers manage their own work and are all paid in services provided to them as members of their communities.^[19]

3.2. North America

During the Great Depression, worker and utility cooperatives flourished to the point that more than half of American farmers belonged to a cooperative. In general, worker cooperatives and cooperative banking institutions were formed across the country and became a thriving alternative for workers and customers.^[20][21] Due to the economic downturn and stagnation in the rustbelt, worker cooperatives such as the Evergreen Cooperatives have been formed in response, inspired by Mondragon.

3.3. South America

In October 2005, the first Encuentro Latinoamericano de Empresas Recuperadas ("Latin American Encounter of Recovered Companies") took place in Caracas, Venezuela, with representatives of 263 such companies from different countries living through similar economical and social situations. As its main outcome, the meeting had the Compromiso de Caracas ("Caracas' Commitment"), a vindicating text of the movement.

The Hotel Bauen in Buenos Aires, occupied and self-managed since 2003. By Brian Zbriger - https://www.flickr.com/photos/brian_z/242103876/, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=1168177

Empresas recuperadas movement

English-language discussions of this phenomenon may employ several different translations of the original Spanish expression other than recovered factory. For example, worker-recuperated enterprise, recuperated factory/business, worker-recovered factory/business, worker-recuperated/recovered company, workere-reclaimed factory, and worker-run factory have been noted ^[22]. The phenomenon is also known as autogestión ^[23], coming from the French word for self-management (applied to factories, popular education systems and other uses). Worker self-management may coincide with employee ownership.

Argentina's empresas recuperadas movement which emerged in response to Argentina's 2001 economic crisis^[24] is the current most significant workers' self-management phenomenon in the world. Workers took over control of the factories in which they had worked, commonly after bankruptcy, or after a factory occupation to circumvent a lockout.

Empresas recuperadas means "reclaimed/recovered/recuperated enterprises/factories/companies". The Spanish verb recuperar means not only "to get back", "to take back" or "to reclaim", but also "to put back into good condition" ^[25]. Although initially referring to industrial facilities, the term may also apply to businesses other than factories (e.g. Hotel Bauen in Buenos Aires).

Throughout the 1990s in Argentina's southern province of Neuquén, drastic economic and political events occurred where the citizens ultimately rose up. Although the first shift occurred in a single factory, bosses were progressively fired throughout the province so that by 2005 the workers of the province controlled most of the factories.

The movement emerged as a response to Argentine's 2001 economic crisis^[24] and about 200 Argentine companies were recovered by their workers and turned into co-operatives. Prominent examples include the Brukman factory, the Hotel Bauen and FaSinPat (formerly known as Zanon). As of 2005, about 15,000 Argentine workers run recovered factories.

The phenomenon of empresas recuperadas ("recovered enterprises") is not new in Argentina. Rather, such social movements were completely dismantled during the so-called Dirty War in the 1970s. Thus, during Héctor Cámpora's first months of government (May–July 1973), a rather moderate and left-wing Peronist, approximately 600 social conflicts, strikes and factory occupations had taken place.^[26]

Many recuperated factories/enterprises/workplaces are run co-operatively and all workers receive the same wage. Important management decisions are taken democratically by an assembly of all workers, rather than by professional managers.

The proliferation of these "recuperations" has led to the formation of a recuperated factory movement which has ties to a diverse political network including socialists, Peronists, anarchists and communists. Organizationally, this includes two major federations of recovered factories, the larger Movimiento Nacional de Empresas Recuperadas (National Movement of Recuperated Businesses, or MNER) on the left and the smaller National Movement of Recuperated Factories (MNFR)^[27] on the right.^[28] Some labor unions, unemployed protestors (known as piqueteros), traditional worker cooperatives and a range of political groups have also provided support for these take-overs. In March 2003, with the help of the MNER, former employees of the luxury Hotel Bauen occupied the building and took control of it.

One of the highest difficulties such a movement faces is its relation towards the classic economic system as most classically managed firms refused for various reasons (among which ideological hostility to the very principle of autogestión) to work and deal with recovered factories. Thus, isolated recuperated enterprises find it easier to work together in building an alternative, more democratic economic system and manage to reach a critical size and power which enables it to negotiate with the ordinary capitalistic firms.

The movement led in 2011 to a new bankruptcy law that facilitates take over by the workers.^[29] The legislation was signed into law by President Cristina Kirchner on June 29, 2011.^[30]

The content is sourced from: https://handwiki.org/wiki/Philosophy:Organizational_Self-management