Introduction
This brief chapter provides a preview of the two main chapters of Part One: those setting out the organisation of worker cooperatives (ch. 2) and the organisation of the state and state institutions (ch. 3). Division 1 presents the main elements of a constellation in which worker cooperatives are the dominant way of organising production. Division 2 describes headlines of the Designâs parliamentary democracy and the organisation of state institutions. Division 3 presents schematically the main income and expenditure flows between aggregates of cooperatives, households and state institutions. Division 4 lists the Designâs legal entities.
Division 1. Main elements of the organisation of the worker cooperatives economy
The Designâs worker cooperatives economy is such that workers constitute the single economic class. As against capitalism, there is no class of owners of means of production â hence no antagonism between those owners and workers. In contrast with state socialism, the state does not own the economyâs reproducible means of production.1
1§1 The cooperative as legal entity and its democratic governance
A cooperative is a legal entity that is governed by a legal association of which only the workers of the cooperative are members. The association is identical to the cooperativeâs workersâ council, which is the cooperativeâs highest governing body. Decisions are made on a one person one vote basis. From its ranks it elects one or more managers, the manager(s) being removable by the council. A cooperative can be founded by two or more workers (see 1§3). Once founded a cooperative shall not be alienated.
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 â thus they have the cooperativesâ 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 âfoundationâ and a âDesign worker cooperativeâ 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 â nor is any other class.
An important implication of the Designâs ownership and usufruct structure is that it eliminates the categories of capital and accumulation of capital (see further 2§10). 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 workersâ collective fruits right (and within the cooperativeâs required legal reserves constraint â see below) the 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:
-
The internal statute of the cooperative and changes thereof (the internal statute sets rules beyond legal rules)Â â this statute includes rules for the building up of âuncommittedâ reserves beyond the legally required reserves;
-
The annual Income account and Balance sheet of the cooperative;
-
The structure of the individual remuneration levels;
-
Increases in investments or the workforce, each beyond 5% of the past 5 yearsâ average;
-
Measures regarding foreseen decreases in the cooperativeâs âuncommittedâ reserves beyond those due to foreseen retirement or movements (see 1§4 on required and uncommitted reserves);
-
In case this is opportune or required: a ârestructuring planâ for the cooperative.
(These six points are further detailed in chapter 2.)
It can be seen from the preview 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 latterâs âcapital-cracyâ is indeed turned into âdemo-cracyâ: 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
1§2 Markets, types of cooperatives and the âsingle person enterpriseâ
For their inputs and outputs cooperatives operate on markets, the measure of value being monetary. There are two types of cooperatives: production worker cooperatives (PWC) and cooperative banks (COB). (âProductionâ is used in the wide sense, as including retail and other services). The term âcooperative(s)â without specification â as in 1§1 â refers to banking and non-banking cooperatives.
Within the economic domain there are only three legal entities: the two mentioned cooperatives and the âsingle person enterpriseâ. No one is forced to become a member of a cooperative. Within the economic domain the only other possibility is to start a single person enterprise. For the latter, however, âhiring a workerâ is not allowed. The reason is the avoidance of exploitative relations, as in capitalist enterpriseâemployee 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).
1§3 Membership of an existing cooperative and the foundation of a cooperative
A person can become a member of an existing cooperativeâs association after a successful application for a vacancy. The membership requires no funds of the worker nor a membership fee. A new cooperative can be founded at all times by a group of workers. The foundation requires no funds of the workers. (Details on each of these points are set out in chapter 2.)
1§4 Legally required resistance buffer, âuncommittedâ reserves and dividends
Cooperatives are required to build up a âlegally binding resistance bufferâ, expressed as percentage of the assets. As an indication it is set at 10% for cooperative banks, and at on average 30% for other cooperatives. Prior to having built up this buffer, workers shall receive no more than the minimum wage. (It will be seen in ch. 3 that the minimum wage is 1â (167%) of the minimum costs of living.)
The council of a cooperative decides whether all or part of the end of year disposable surplus is distributed as a dividend to the workers (thus workers receive wages, and at the end of a year they may also receive dividends). The non-distributed part is added to the âuncommitted reservesâ on top of the required buffer of the cooperative. Once the buffer has been reached it is â in face of possible unfavourable market circumstances â in the interest of cooperatives to build up âuncommittedâ reserves beyond the legally required reserves because this may avoid falling back to minimum wages. To stimulate the building up of uncommitted reserves, retiring workers or those that move to another institution, may receive their dated share in the then existing uncommitted reserves, which is in fact a postponed remuneration.
1§5 Credit-debt relation between cooperative banks and other cooperatives
Cooperative banks (COBâ¯s) provide credit for investment to production worker cooperatives (PWCâ¯s) against an interest that consists of a risk premium, a component that on average covers the COBâs material costs and the remuneration of its workers, as well as a component for keeping up the required reserves. (On the interest and debt servicing by PWCâ¯s, see 2§6 and 2§8.) The investment loans by COBâ¯s are the only way of external finance for the PWCâ¯s â notably there is no bonds market.
COBâ¯s provide investment loans to PWCâ¯s via the ex nihilo creation of new money â this is similar in the case of capitalist banks.4
1§6 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§4), competition may ultimately mean that a cooperative goes bankrupt. Jobless allowances apply â it will be seen in ch. 3, 3§18â3§20, that no one is out of work for more than two months (âworkâ includes permanent jobs and paid traineeships, the latter being a lever to permanent jobs).
The implication is indeed that cooperativesâ workers face a risk. Given the issues that a workersâ council must approve of (1§1), any decreases in the uncommitted and the committed reserves of a cooperative will usually make workers alert before it is too late.
Further, as will be seen in ch. 2 (2§19) the type of competition between cooperatives is very different from the capitalist type of competition â notably it tends to be non-aggressive. In the same chapter (2§3, 2§4 and 2§14) it will be seen that 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.
Division 2. Description of the designâs parliamentary democracy and state institutions
1§7 Parliamentary democracy
The parliament is the highest governing organ of the nation. It has to approve of all legislation as well as of any decrees.5 There are no exceptions to this power of parliament (as in some capitalist nations, especially those with a presidential system). Parliament is elected on a proportional basis, without an electoral threshold; apart from the principle of proportionality, this has the advantage that minorities can be represented in parliament.
The parliament elects a government that is accountable to the parliament and that is removable by the parliamentâs majority. There are rules that should prevent monetary means, including gifts, to play a role in the candidacy of parliamentarians (these apply for individuals and for political parties).
1§8 State institutions and the public sector
Table 1.1 provides an overview of the public sector institutions. The left part lists the state sector, with in its second column the âstate institutionsâ; its right part lists the other public sector institutions. The judiciary is a specific state institution (ch. 3, 3§6 sets the appointment rules). All state institutions are internally organised via âworkersâ councilsâ which, among other things, decide on the internal work organisation and the internal wage scales (on the latter see further 1§11).
Table 1.1
Public sector institutions, with estimates of their assigned state expenditure and workforce
|
State sector |
This sector constitutes, together with the state sector, the âpublic sectorâ |
|||
|---|---|---|---|---|
|
Legislation and general governance |
State institutions |
Ch. |
Workersâ council governed foundations (WGFâ¯s) |
Ch. |
|
⢠Parliament (highest body) |
⢠The judiciary |
3 |
⢠State-financed WGFâ¯s |
3 |
|
⢠Government |
⢠Ministries |
3 |
Health sector |
|
|
⢠Provinces |
4 |
Education sector |
||
|
⢠Municipalities |
4 |
Part of the culture sector |
||
|
⢠18 State agencies |
3 |
⢠User charging WGFâ¯s |
3 |
|
|
â |
Rail transport |
|||
|
for the internal organisation of all five above: workersâ councilsâ |
Essential production/services not undertaken by cooperatives |
|||
|
Estimated workforce (% of total workforce): 6.5%â¡ |
Estimated workforce (% of tot. workf):Â 21% |
|||
|
Estimated state expenditure: 25% of GDP* |
Estimated state expenditure: 18% of GDP |
|||
| â |
With competences as set out in 3§3-d. |
| â¡ |
Cf. Appendix 3A, Table 3A.6. |
| * |
Cf. Appendix 3A, Table 3A1. This is exclusive of the transfers to the state-financed institutions of the upper part of the next column (18% GDP). |
Within the officialsâ organisation (the civil service) there is quite some division of powers. Next to the ministries, there is a key role for 18 state agencies that each have to report annually to parliament. The latter can also adjust the main line of their policies. It will be seen that chapter 3 is mainly organised along these state agencies.
Five of these state agencies are responsible for the sectors listed in the right-hand part of Table 1.1, such as the health and education sectors that provide free of charge services. The institutions that execute the work (such as hospitals and schools) have â within financial, labour force and other constraints â a high degree of autonomy. This is reflected in their legal status of âworker council governed foundationâ (with a prominent role with regard to workersâ councils).
1§9 State expenditure and workforce of the public sector
The bottom of Table 1.1 provides estimates of the workforce of and the state expenditure on all these institutions. In can be inferred from the last but one row that the total workforce of the cooperatives economy (division 1 above) is estimated at 73% of the total workforce. Next to the state expenditure on health and education (12% and 6% of GDP) the largest state expenditure is on equal pensions for all (9% of GDP), and full costs covering child costs of living and childcare (5% of GDP).
1§10 Functions of state agencies and the judiciary vis-à -vis cooperatives
After a division on parliamentary democracy and governance, chapter 3 will treat the state agencies as well as the judiciary in priority order. Each of the 18 state agencies will not be listed here (see Appendix 3G). Instead Table 1.2 indicates, group-wise, their functions.
Table 1.2
Functions of state agencies vis-Ã -vis cooperatives
|
Function |
Subject |
Agencies |
Ch. 3 |
|
|---|---|---|---|---|
|
1 |
furthering the objectives of cooperatives and workers |
⢠safeguarding the finance of cooperatives and the financial constellation at large |
4 |
3D4 |
|
⢠job securities |
1 |
3D5 |
||
|
⢠income allowances |
1 |
3D6 |
||
|
⢠real estate (renting or purchasing), mining and other Earth extractions (licensed renting) and infrastructure |
3 |
3D8 |
||
|
2 |
constraining cooperatives in the interest of other cooperatives, or of workers and households |
⢠climate and environment protection (incl. via circular production), output safety, work safety, work-time, minimum wages |
1 |
3D3 |
|
⢠regulation of auditing, patents, copyrights and competition |
3 |
3D10 |
||
|
3 |
services for which cooperativesâ production does not apply because of their character or of free provision |
⢠public security; judiciary |
not appl. |
3D2 |
|
⢠health; education; part of culture sector |
3 |
3D7 |
||
|
4 |
public sector undertaking, either because of its monopoly or oligopoly character, or because of cooperativesâ scale or risk constraints |
⢠railway transport (user charged) |
1 |
3D9 |
|
⢠essential production/services not (yet) undertaken by cooperativesâ |
1 |
3D9 3D9 |
| â |
Here âessentialâ means vital to the functioning of (other) cooperatives or to the welfare of households. |
1§11 Remuneration of public sector workers
One core part of the Design is that public sector workers â from members of parliament, government and the judiciary to state agencies and workersâ council governed foundations â receive a remuneration that is derived from, and per institution on average equal to, the nationwide average remuneration of cooperativesâ workers.6 Each institutionâs workersâ council decides on the allocation of that average within the institution (3§3-b).7 This implies that all these workers have an interest in the flourishing of the cooperatives economy (quite apart from any general social delight they might derive from this).
Other core aspects of the Design are its âphysically circular productionâ (3§7) and advertisement prohibition (so as to protect consumers and (small) cooperatives) â notably this includes internet advertisement (3§8).
1§12 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 âcascade systemâ â a system that (contrary to a value-added tax) levies a tax on every transaction in the production process. This taxation system is â in comparison with a value-added tax â 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 â depending on the production structure of the country at hand â 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 â mentioned in 1§9 â 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 â 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 â see Part Two.)
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 (see 3§46). (The principle point about the â in comparison with capitalism â 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.
Division 3. Macroeconomic income and expenditure flows between cooperatives, households and state institutions
Scheme 1.3 (see page 21) shows the main macroeconomic income and expenditure flows between aggregates of cooperatives, households and state institutions â saving flows are not shown.
(Macroeconomic implies, amongst other things, that the mutual flows between cooperatives â including those between production cooperatives and cooperative banks â are aggregated, and thus are not shown. The households of cooperative workers and of the workers in state institutions are equally aggregated.)
The following are the main monetary income and expenditure flows shown in Scheme 1.3 (p. 21).
-
Cooperativesâ income: consumption expenditure households; material expenditure of the state and state institutions.
-
Cooperativesâ expenditure: wages and dividends (to workersâ households). (Investment of cooperatives are an intra-cooperatives flow. Rent payments to state institutions are not shown.)
-
Householdsâ income: wages and dividends (from cooperatives and state institutions, as including from the âworkersâ council governed foundationsâ that execute the health and education services); transfers (regarding child allowances and pensions; the quantitively minor transfers are not explicitly shown).
-
Householdsâ expenditure: consumption expenditure (with cooperatives); charged provisions from or via state institutions (mainly railway transport, and rent of self-occupied dwellings).
-
State (institutionsâ) income: taxes from cooperatives and households; charged provisions (mainly regarding rented out self-occupied dwellings, and railway transport). (Rents from cooperatives to the state are not shown.)
-
State (institutionsâ) expenditure: material expenditure (with cooperatives); transfers (to households and to âworkersâ council governed foundationsâ â the latter mainly regarding health and education).
Division 4. The designâs legal entities
The Design encompasses the following seven legal entities (as further explained in chapters 2â4):
-
The Cooperative (2§3)
-
The Single person enterprise (2§2.2)
-
The State (3§1)
-
Agency of the state (3§2);
-
The Workersâ council governed foundation (3§25)
-
The Province (4§1)
-
The Municipality (4§1)
âState institutionsâ include: the Judiciary; the ministries of government; the agencies of the state (4); the provinces (6); the municipalities (7).
Scheme 1.3
Main income and expenditure flows between aggregates of cooperatives, households and state institutions (abstracting from savings)
The non-reproducible agricultural land, fishery waters and mines can be rented from a state institution. The criterium is that these are âfree gift of natureâ that should never be the property of an individual or economic entity.
Thus, of the three main elements that define the âproperty rightâ of an entity (use right, right to its fruits, and the right to its alienation), the cooperative holds the first two only.
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 (Reuten 2019, ch. 6; ch. 1 shows that only labour produces the value-added, that is, the equivalent of wages and the surplus. See more briefly its Glossary entries âcapitalist stateâ on p. 679 and âvalue-addedâ on p. 692
On the latter see Reuten 2019, ch. 2, pp. 103â5 (more extended pp. 103â20).
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 of the (amended) decree for a limited period.
This average remuneration is made up of wages and dividends, including âpostponed dividendsâ (2§13.0 and 3§3).
However, the members of the parliament, the government and the judiciary each individually receive the cooperativesâ average remuneration.