[lbo-talk] Class nature of the state (Was: Socialist modelling)

Bill Bartlett billbartlett at aapt.net.au
Thu Dec 29 15:52:53 PST 2011

At 12:20 PM -0500 29/12/11, Wojtek S wrote:

>Re: "cooperatives facing insolvency or seeking to maximize profits
>will, like any capitalist firm, necessarily seek to cut wages,
>benefits, and work rules "
>[WS:] And what is exactly forcing them to "maximize profits"? In a
>capitalist corporation it is stockholders who seek maximum returns to
>their investment and are dumping stock of less maximizing corporations
>for that of more maximizing ones - at least according to the
>necolassical economic theory. But coops do not have stock holders, in
>fact many of them are registered as non-stock corporations? So why
>would they want to "maximize profits" instead of simply remaining
>solvent i.e. covering their operating costs? So unless we assume the
>existence of an invisible hand that makes them maximize, your argument
>is a nonsequitur.

Assuming a co-operative is not a monopoly, its costs must be around the same as its competitors and obviously it cannot demand higher prices than them. So if the for-profit firm is able to drive down wages, the co-operative competitor must do likewise, or lose market share.

The only leeway either has is the profit margin, perhaps the co-operative has a slight advantage in that it does not have to return a dividend to shareholders. But it does still need to have the capacity to invest surpluses to retain competitiveness. The choice is to borrow (thus requiring future surpluses be created to meet interest costs) or make enough of a profit to have the capacity to invest without borrowing.

>Of course, if you take Galbraith seriously (as I do) you do not buy
>all that market determinism at all.

If you want to dismiss the simple reality I have just outlined as some kind of preposterous theory of "market determinism", then you just go ahead. But facts are stubborn things and hence it will remain reality whether you prefer to believe it or not.

> Instead you would believe that
>corporations have a considerable level of independence form the market
>as long as they cover their costs and return some profit - but beuind
>that they have considerable choice.

If they are monopolies, then they have considerable choice. But if you sell a something for $10 kilo and the bloke down the street starts selling the identical item for $8, then we'll see just how far your belief that you have considerable independence gets you.

Not very far at all. The market will determine that you either compete, or go broke. End of.

> They can pursue labor cost
>cutting policy as a matter of managerial choice rather than market

Until they deplete their capital. Then they go bankrupt. End of.

> They may also pursue more labor friendly policies if they
>chose so.

Sure. They can run their business with higher costs than their competitors. of course that means they either have to charge a higher price for their product, Or sell it at the market price, as determined by the lower price the labour unfriendly business is able to sustain, thus losing money until they go broke, or they keep charging a higher price. Until they go broke.

This is all so elementary, I am unable to fathom how you could possibly believe such nonsense?

Bill Bartlett Bracknell Tas

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