Tito paced up and down, as though completely wrapped up in his own thoughts. Suddenly he stopped and exclaimed: 'Factories belonging to the workers-something that has never yet been achieved!' With these words, the theories worked out by Kardelj and myself seemed to shed their complications and seemed too, to find better prospects of being workable. A few months later, Tito explained the workers' self-management bill to the National Assembly¹."

That was 1950. Today Yugoslavia has had thirty-one years experience with workers' self-management. Today there are one thousand or so worker-owned firms in the United States. Today the demand for worker participation is being raised by labor unions throughout Western Europe. But what exactly is this worker-participation phenomenon? What are we to make of it?

An historian might respond by tracing the genesis of worker participation; a sociologist might detail case studies; but as a philosopher, I'm inclined to take a different tack. Let us try an experiment in dialectics. Let us take the basic concept worker participation-and allow it to unfold. Let us see what contradictions develop, and what transformations are called for to overcome these contradictions.

A dialectical argument such as this is of a different form than the more familiar inductive and deductive arguments, so let me be clear about the point. The point is not to prove that a certain sequence of events will necessarily transpire, but rather to provide a framework within which to situate various manifestations of the worker-participation phenomenon and to gain insight into the tensions and tendencies of these manifestations. Worker participation is very much on the world stage right now. To understand what it is all about, we need a sense of its direction and dynamic.

Let's begin with what we know: worker participation works. This is no longer a matter of conjecture. More than two hundred case studies of worker participation have been done². Experiments have ranged from small coops to large factories to, in the case of Yugoslavia, an entire country. A survey of the literature published in 1969 concluded: "There is hardly a study in the entire literature which fails to demonstrate that satisfaction in work is enhanced or other generally acknowledged beneficial consequences accrue from a genuine increase in workers' decision-making power. Such consistency of findings, I submit, is rare in social research³."

Few who have looked at the evidence would dispute this conclusion. To be sure, worker participation does not miraculously cure all worker alienation, to say nothing of our other social ills, but worker participation generally increases morale and quite often productivity. It almost never makes things worse. That this should be so is not so surprising. In a traditional enterprise management and labor are locked head-to-head in an adversarial relationship. The immediate interest of the worker is to do as little as possible far as much money, and the immediate interest of management is the reverse: to pay as little as possible for as much work as can be extracted. A participatory scheme, especially one that gives workers direct monetary benefits far increased productivity, alters the nature of this relationship. Individually and collectively workers have a direct stake inefficiency, an immediate disincentive to absenteeism and malingering, and the opportunity to apply their (often considerable) concrete knowledge of the production process more effectively. Moreover, workers have a great interest in the long-range future of their enterprise, certainly more than stockholders, who can liquidate their holdings at will, perhaps even more than management, who are commonly charged these days with maximizing short-term gains at the expense of long-range ones as they company-jump up the corporate ladder. This makes worker decision-making highly responsible.

Worker participation works because the interests of workers and management (answerable ultimately to stockholders) coincide relative to a broad range of issues. There is one area, however, in which these interests are opposed. Certain work-technologies and work-techniques increase productivity by deskilling and dehumanizing work. The owners of an enterprise have an unambiguous interest in increasing productivity, period. So they have an unambiguous interest in implementing such technology. Workers do not. Workers might agree to the change, provided they are sufficiently compensated by wage increases, or if competitive pressure has put the enterprise's survival on the line. But not otherwise.

Here we are at a dialectical impasse, one that threatens the structure of worker participation. And there is only one real solution. A participatory environment, which stresses the common interests of labor, management and stockholders, cannot disregard the costs to the workers of alienating technology. The only solution compatible with the participatory ethos is to allow those who bear the costs, i.e., the workers, to decide. That is, worker participation in decision making must pass to worker control.

In fact, the question of technology is but one manifestation of the dialectical tendency for worker participation to develop into worker control. As a high-level General Motors official has observed, once workers begin participating

"the subjects of participation . . . are not necessarily restricted to those few matters that management considers to be of direct, personal interest to employees . .. [A plan cannot be maintained for long without (a) being recognized by employees as manipulative, or (b) leading to expectations for wider and more significant involvement-"Why do they only ask us about plans far painting the office and not about replacing this old equipment and rearranging the layout?" Once competence is shown for believed to have been shown) in, say, rearranging the work area, and after participation has become a conscious, officially-sponsored activity, participators may very well want to go on to topics of job assignment, the allocation of rewards, or even the selection of leadership. In other words, management's present monopoly [of control] can itself easily become a source of contention⁴."

So the dialectic of participation pushes toward worker control, the accountability of management to workers rather than to stockholders or to themselves alone, much as the dialectic of democracy pushes power-sharing with a feudal nobility toward popular sovereignty. Insofar as stockholders have interests consonant with those of the workforce, they will be recognized, but when interests collide, the tatter's must prevail. (Must prevail if the participatory framework is to be maintained. A dialectical impasse can be resolved only by moving forward or back-but back means abandoning participation and returning to the milieu that generated the demand for participation in the first place. This, of course, can happen. Dialectical development is not historical necessity.)

Simultaneous with the movement from worker participation to worker control is the movement to extend worker participation (and worker control) throughout the economy. If worker participation works (and it does), it will be increasingly demanded by workers in non-participatory enterprises. These demands will be seconded by participatory workers, out of solidarity and self interest. For as noted above, competitive pressure can compel worker-controlled firms to adopt technology when they would rather not do so. Such pressure originates from firms that do not hesitate to deskill and dehumanize their workers in order to squeeze "productivity" from them. It is difficult to see how such demands can be resisted in a culture in which democratic values are deeply rooted. Indeed, the worker-participation legislation now on the books or being contemplated in many Western European countries exemplifies this moment of the dialectic.

But if worker control spreads to society at large, other contradictions will develop, contradictions rooted in a structural feature of worker control too seldom noted in the literature: a worker-controlled firm is far less expansionary than its traditional counterpart. Under conditions of increasing returns to scale both kinds of firms will expand, but when returns to scale are constant (the assumptions of most managers) or decreasing (the favorite assumption of neoclassical economists), the two behave quite differently⁵. A simple example will illustrate. Suppose a traditionally-owned hamburger stand employs twenty people at the going rate and nets its owner $20,000 for the year. If this is a reasonable return on his investment, the owner has a strong incentive to open a second stand, for he can anticipate doubting his profit by doing so. Compare this case to a twenty-person worker-controlled hamburger stand that also nets $20,000. This profit would be most welcome, a $1000 bonus for each worker. But even if setting up a second stand would double profits, it would also double the workforce to share in those profits. The per-worker profit would not in crease. So the latter firm, unlike the former, has no incentive to expand.

Both theoretical analysis and empirical evidence supports the contention that worker-controlled firms are less expansionary, that they are less likely to pursue growth as an end in itself⁶. Now this feature might seem desirable in an age of resource shortages and environmental strains, and in important ways it is, but it also poses serious stability problems for the economy. For example, worker-controlled firms in a given industry will raise prices if demand for their product goes up, but they are less likely than their traditional counterparts to expand production, not if this requires bringing in more workers. Nor will competitive pressure insure expansion, for no firm is structurally inclined to greatly enlarge its share of the market, this being the equivalent of setting up the second hamburger stand. (The case should not be put too strongly. To the extent that size increases flexibility and security or enhances prestige and influence, there will be a tendency to expand. But missing is the key incentive of the traditional firm: expansion means greater profit for the owners, even under conditions of constant returns to scale.)

We have here a serious problem. If an economy of worker-controlled firms does not tend to shift labor from where it is less productive to where it is more productive in response to market forces, then that economy will not tend toward an efficient allocation of its resources. Moreover, sectoral inequalities will tend to compound rather than diminish. Nor will the economy exhibit any tendency toward full employment, not even with Keynesian monetary and fiscal policies in effect. In short, the economy will find itself in deep trouble.

Is there a way out of this impasse? As always one can regress, abandon the structure of worker control. This, however, will not be easily done if worker control has taken hold, for people rarely relinquish power without a struggle. Moreover, the historical record amply testifies that a traditional capitalist economy also experiences serious difficulties with inefficiencies of resource allocation, sectoral inequalities and unemployment. It can be argued that these problems will be less severe than under worker control-but it can also be argued that a remedy exists that does not abrogate worker control, and that promises as well an effective resolution of many of the economic ills plaguing contemporary capitalism. The remedy: public control of investment. Investment decisions cannot be left to individual worker-controlled enterprises, for the incentive structure is lacking to insure a macroscopically-optimal investment strategy. Nor can they be returned to traditionally-run firms, for they don't invest optimally either. (Cambridge economist Maurice Dobb has written, "Only myopic concentration upon stationary equilibrium could breed the supposition that there is even a prima facie case for regarding long-term investment under free-market constraints as optimal⁷.)

Public control of investment, coupled with community monitoring of profits and prices, can counteract the "anti-social" dynamic of laissez-faire worker control. Firms that experience a surge in demand can be encouraged to take on additional workers and provided with investment capital. If they resist, public authority can encourage the setting up of competing enterprises. In general, public control of investment planned investment-injects a note of rationality into the most sensitive element of the economy.

In the intervening years, governments have experimented with various "Keynesian" techniques for indirectly manipulating investment, mast notably monetary and fiscal policies to stimulate or retard effective demand. But as everyone now knows, these policies do not always work. They aren't working now. In response, some economists call for a return to laissez-faire, conveniently forgetting why laissez-faire was abandoned in the first place (an example of a dialectical regression), but the more thoughtful see the need far a greater governmental role in investment planning. MIT's Lester Thurow puts the case bluntly:

"For most of our industrial competitors the central bank plays an important role in allocating investment funds . . . The system is probably most heavily developed in Japan but exists to some extent in Italy, France and West Germany ... A national investment bank ... certainly represents more government in a mixed economy, but the time has come to recognize that if we are going to compete with some of our more successful industrial neighbors, we are going to have to change the way we have been doing things in the past . . . Major investment decisions have become too important to be left to the private market alone¹⁰."

So we see, the move from worker participation to worker control, while desirable on many counts, exacerbates certain dysfunctions already present and getting worse in contemporary capitalism. The resolution of this contradiction requires greater public control of investment. But how is the government to exercise this control? The Keynesian policies have proven ineffective, so more direct means will be (and are being) tried. The major candidates are regulation and tax incentives but these are also problematic. Private individuals and private businesses (even worker-controlled ones) resent being told what they may or may not do with their money: they bristle at and resist the "red tape" of regulation. Tax incentives are more palatable to investors, but it becomes ever more apparent that it is inefficient, inequitable and irrational to give more money to the wealthy (i.e. tax breaks) to entice them into doing with their wealth what society needs to have done. Sooner or later the demand will arise for the government to cut through the thicket of ever more complex regulations and tax laws, to bypass the "middleman" and generate the investment fund directly. That is, to tax stockholder dividends or corporate assets for the specific purpose of acquiring the funds needed for investment. These can then be dispensed according to plan. It will no longer be necessary to threaten, cajole or bribe private investors, for it is no longer their money that is being invested.

But if this demand does arise and is implemented, it will signal a profound societal transformation. If the government replaces the private sector as the generator and dispenser of investment capital, the "capitalists" become functionally obsolete. Already removed from any direct role, qua capitalists, in the management of enterprises, they now find themselves unnecessary even as a source of investment funds. They remain a major source of economic inequality in society, since they still "own" the productive resources, and are rewarded accordingly (paid interest, dividends, rent). But they no longer have an economic role to play.

The next dialectical move is predictable. After all, the feudal nobility disappeared when they became anachronistic. The culmination of the participatory dialectic is a worker controlled economy with public control of investment, a democratic, socialist society. We should not be horrified. Such a society, while neither perfect nor immutable, is more desirable on both economic and ethical grounds than capitalism. I have argued this elsewhere, that such a society will be more efficient, more rational in its growth, more democratic, more egalitarian than any society in existence today¹¹. It may not come to pass. But as I have tried to show, worker-controlled socialism is the logical outcome of the participatory dialectic.

Footnotes
1. Milovan Djilas, The Unperfect Society: Beyond the New Class (New York: Harcourt, Brace and World, 1969), pp. 222-3.
2. Hem Jain, Worker Participation: Success and Problems (New York: Praeger, 1980), p. 179.
3. Paul Blumberg, Industrial Democracy: The Sociology of Participation (New York: Schocken, 19691, p. 123.
4. Thames Fitzgerald, "Why Motivation, Theory Doesn't Work," Harvard Nosiness Review 49 (July-August 1971): 92.
5. Increasing, constant and decreasing returns to scale are conditions under which increasing labor and capital inputs by X% results in an output greater than, equal to or less then X%. Economies of scale account fur the first. diminishing returns for the second.
6. See for example, Benjamin Ward, The Socialist Economy: A Study in Organization Alternatives (New York: Random House, 19671, p. 190 ff. Also, jaroslav Vanek, "The Yugoslav Economy Viewed Through the Theory of Labor Management." in The Labor Managed Economy: Essays by Jaroslav Vanek (Ithaca Cornell University Press, 1977), pp. 48-92.
7. Maurice Dobb, Welfare Economics and the Economics of Socialism (Cambridge: Cambridge University Press, 1969), p. 199.
8. Cf. Vanek. "Yugoslav Economy."
9. John Maynard Keynes, The End of Luissez-Fnire (London: Hogarth, 1927), pp. 48-9.
10. Lester Thurow, The Zero-Sum Society (New York: Basic Books, 1980), pp. 96, 192.
11. David Schweikart. Capitalism or Worker Control: An Ethical and Economic Appraisal [New York: Praeger, 1980].