A Commentary On The Economics Of The Labor-Managed Firm

At present, the capitalist enterprise is the mainstream enterprise model in Western world; its prevailing principle is that capital hires labor. Capital ownership is the main foundation of the enterprise residual value right and corporate control right, it directly (the owners and operators directly in one named classical enterprise) or indirectly (the owners and operators separate named joint-stock enterprise) become the main basis of decision-making power of production and distribution. From this sense, this model of enterprise is called Capital-managed firm or KMF. Capital ownership is so important that makes Capitalism. Actually, in real world there is a definitely different with or in direct opposition to capitalist enterprise, which is Labor-managed firm or LMF. For this kind of enterprise, its control, economic residual claim and the production, distribution of real decision-making power is based on labor, rather than capital. In other words, its prevailing principle is that labor hires capital.Labor-managed firm puts the rights of workers at the core of socio-economic systems in order to achieve the workers participating in management, sharing of profits and other related issues on liberation of workers. It has long history as capitalist firm; the Rochdale Equitable Pioneers Society found in 1844 is prototype. At present, its related models exist widely in Europe and the American continent; In particular, cooperatives increase so rapidly since 20 century mid-and late 90s. In this case, West academics increasingly pay more attention on Labor-managed firm theory, neo-classical economics, new institutional economics, Western Marxist economics and Western left-wing theories do research and make debate on economic efficiency, governance, social value and development prospects of LMF, put forward a number of theoretical insights, and even formed a new branch of economics, which is LMF economics. This dissertation will conduct a thematic study of the history of economic thought of LMF, on this base sort out the labor-managed enterprise's origins of 2 economic thought; make analysis, summary and conclusion of Western economics schools and Marxist economics and the West radical theories on LMF since 20th 50s. In order to get the basic characteristics and main points of LMF economics, make preliminary evaluation, and get beneficial revelation on China's socialist market economy system construction.This paper is divided into seven chapters. Chapter I is an Introduction to the main contents includes: description of the problem and significance of thesis research, and making definition of some basic concepts on LMF, making an overview of internal and external theoretical circles and making preliminary evaluation. At last, the writer will describe paper's research purposes and research ideas, the basic views and discourse structure, innovation and inadequacies.Chapter II traces the historical development of LMF's economic thought origination. The time is defined as the early 19th century to the early 20th century, briefly sort out cooperatives or co-workers factories and cooperatives economic theory. Firstly, the major schools of non-Marxist socialism designed some form of cooperative economic model. Secondly, scientific socialism theory integrate the practice of Paris Commune, fully affirmed the co-workers factories with communism nature and can be as an form of ideal society's basic economic organization. Finally, with John Mueller as representative by western economists focus on workers cooperatives operation.Chapter III studies neo-classical economics'arguments on labor management enterprise economic efficiency; the time is defined as from the 20th 50s to now. The main contents follow: "Ward - Domar - Meade"model, Ward does research on LMF micro-market operation which is the first time neo-classical economics involving in this field. And then, with Domar and Meade as representatives by some economists continue to do research. Vanek makes Labor-Managed Market Economy theory, which is a designation of social blueprint with LMF as micro-economic organizations. It is the highest level of neo-classical economics in this area. Recently, neo-classical economics make progress on LMF's financing model and membership market.Chapter IV is the new institutional economics research on governance performance of LMF, the time is defined as from the 20th 70S to now, including property rights and transaction cost economics, contract theory. Property rights and transaction cost economics are mainly related to corporate financing and governance. On financing issues, Furubotn and Pejovich make "Horizon Problem ". Macklin and Jensen think borrowing from external capital as an important feature of LMF, so they define LMF as "Pure-Rental Firm". Both theories make conclusion that LMF lack of efficiency. On governance issues, Hansmann designes a general theory on the ownership of enterprises, focused on the total cost of transactions of LMF, rather than just treat it as a special treat organizational form. Contract theory focuses on with incomplete contract conditions, the situation of LMF's decision efficiency and allocation efficiency. It also makes the concept of member's commitment or loyalty as a qualitative feature of LMF.Chapter V is Western Marxism LMF economics, the time is defined as from the 20th 80S to now, the main content is the characteristics and operation performance and transition programs of Self-government Socialism or Economic Democracy Socialism made by Branko Horvat and Schweickart. Horvat points out that the basic principle of ideal society is to achieve equality of producers, equality of consumers and equality of citizens. The ideas come from his understanding of justice theory of socialism. Schweickart and Bruno Jossa complete and expand the ideas, form a complete academic system with theoretical foundation, system designation and transition program.Chapter VI discusses the Western left-wing ideas of LMF, the time is defined as from the 20th 80S to now, includes Modern Liberal Socialist and Modern Labor Theory of Property Rights. Both of them are supporters of LMF, have a certain academic tradition, provide their own theoretical basis of labors self-government, and make theoretical model. Modern liberal socialist follows the anarchy's ideological tradition which is ideal society should be composed by cooperatives, makes participatory economics system theory. Eilemann learns from some basic ideas of Ricardo socialism to clarify the relationship between the Labor Theory of Property Rights and Marx's labor theory of value, and then makes so-called democratic firm model. Chapter VII is conclusion of the dissertation. The chapter generalizes the basic characteristics and main conclusions of LMF economics, in order to evaluate the theoretical contribution, inadequacies and development prospects of the theory. At last, the writer tries to make some useful suggestions on China's socialist market economy construction.