i've always wondered why someone hasn't started a non-profit business to start selling goods and services, in which they should be able to out-compete the for-profit enterprises, since they can sell at cost just to break even, or sell at less of a markup.
you could get one going, then use what would be the "profits" (since you can't keep them) as seed funding a second similar non-profit in a different industry, then a third, by then the 2nd one could seed fund a fourth, and so on and so on until eventually, you would have expanded into every industry. and over time, since you can always out-compete the capitalist, you would have monopolized every industry with non-profit enterprises.
depending on how you structured it, you could stipulate some kind of collective social ownership, or each industry could be run as a non-profit worker cooperative with workplace democracy.
i am sure there are a thousand little reasons why this might fail, but i don't see any big gotcha? it seems like a sound idea. i guess maybe the capitalists would be willing to run at a loss to try and stop you, but that's still a good outcome? maybe try to make it illegal? i am not sure how you could make it illegal to sell good and services at break-even prices. price controls, ok fine, we will just have more money for seed funding.
i guess TLDR the ability to run a not-for-profit business seems like a pretty big weakness for capitalism.
my favorite restaurant in my hometown was an anti-profit, worker-owned coop. it was awesome, they sourced everything directly from supportive local farmers, so once they paid rent, maintenance costs, and a living wage for everyone involved, the cost of the meals were the same or slightly lower than what you'd pay for the same thing a few doors down. They also offered the space for community meet-ups and events and asked for donations from people who use the space.
...unfortunately they were also anti-bank, so when someone stole their safe they lost everything and were forced to close. :zizek-fuck:
Ikr? On the one hand, I can't blame them for being anti-bank and wanting to divest. On the other, there's a reason why people tend to use them, especially for businesses. Unfortunately the only local bank chain we had available in my town was bought out by a mid-size national bank a few years prior, so they didn't really have a lot of selection.
yikes. seems like they could have used a credit union and still kept with their theme.
I'm not sure if you're serious but the system is entirely geared towards rewarding profit motivated businesses. Business owners aren't just charging an extra 5 cents and pocketing the money, that's a naïve understanding of the way they exploit and abuse their employees and their customers.
Say you wanted to start selling affordable clothes to working class people. You start by designing a simple, durable T-shirt with quality (but not extravagant) material. Maybe you produce it in a few colors or maybe just in blue to save on the extra unnecessary costs. You find you can produce it at cost for $10, not bad for a shirt that will last 5-10 years of heavy use. You've also got to account for more than just your workers pay, you've got to cover support staff (accounting, customer service, lawyer fees for setting up the new business), they might cost a big company with full departments of support staff a few cents per item but for you, a small business, it's going to take hiring someone externally and set you back about $2 a shirt. Since you're already at cost and refuse to produce a lower-quality product, you have to pass that onto the buyer, $12 a shirt now, still not bad. Eventually you find a retailer willing to sell your blue shirt, and they want a cut of $3 per shirt. Again you have to pass that on to the customer so ultimately they'll be selling for $15 retail.
Did I mention the retailer also sells its own brand of blue shirts? They won't have to pay the extra $3 of course, and they likely save money on support staff as well since they're such a big company. They also use the same material as your shirt but decided that they could make the same sizes for half the amount of material you do. Yes, these shirts will be too thin and fall apart within a year or two, and the environmental cost of producing a bunch of cheap shirts instead of one quality shirt will be horrible in the long run but hey, they don't have to pay for that part anyway! So now you're competing with the retailer owned brand of blue shirts, produced at literally half the cost, but hey you trust the customers to act rationally and buy your quality shirt instead of the cheap one. But wait, the retailer will see that your shirt is higher quality, marked as $15, and then decide to list their own shirt at $15 and decide to have it perpetually "on sale" to 50% off to the original price of $7.50. Now customers see two blue shirts, both marked as $15 so probably identical in quality, and they'll pick the $7.50 shirt every single time because it hurts a little less on the wallet. In the time it would've taken your shirt to wear out the customer will have come back three or four times, paying $30 for 4 shirts because the cheaper ones just keep falling apart. Yes, they could research some reviews and discover that your shirt won't fall apart after a year, but whose really got time or energy to do that when your customer base is the same group of people working for the type of company crushing your shirt business, overworking and underpaying their employees at every turn.
I think this example illustrates a few points well, a few not so well, but ultimately I want you to take away the fact that capitalism will not play fair, it will not think of the people, the environment, or the product. I didn't even begin to cover any of the ways giant corporations use their influence and connections to stifle smaller businesses or the role that equity and acquisitions play in padding the pockets of capital owners. Even in a more even playing ground it would take loads of labor, environmental, and consumer protections that simply don't exist in the united states (where I'm writing this, I'm sorry if its not where you're from but I think the general idea still applies everywhere). There are exceptions to the rule but at its core competition in capitalism is a race to the bottom , its an inefficient horrible means of resource allocation, and its certainly not designed to bring the best for everyone.
Great analysis. Also, OP should be aware that the retailer's shirts are probably manufactured in a place where they can get away with paying cents-per-hour of labor.
It'd be a lot like trying to start a cotton business in 1800s Georgia while competing against slave plantations. It's just not going to be scalable until you've freed the slaves and raised their standard of living to the same as everyone else.
That particular thing is easily avoided by selling products directly online. Or you appeal to some niche of consumers (like socialists) who might be willing to pay a few dollars more for a product to know it was made by a worker cooperative. At least until you could establish a successful model, and start accumulating surpluses to expand.
I understand you are saying these kinds challenges would exist for any market, but my main response is that you haven't really described a challenge that would be unique to a non-profit worker cooperative. Any business that comes along to sell shirts is going to face the same issues. But it is clearly not an impenetrable barrier, because we do see new enterprises successfully selling shirts from time to time. And we see new successful capitalist enterprises of all different kinds.
And sure, even as a worker cooperative, you would still be a capitalist enterprise operating under capitalism, so you would not be able to avoid all the ethical problems that go along with that, including sourcing materials or environment harms, and so on. There is no ethical consumption under capitalism, a non-profit worker cooperative model can't change that.
The only idea I have really presented here different from starting any new business, is to use some accounting tricks that would build seed funding for more worker cooperatives rather than profits for capitalists. Capitalists will not play fair, but we don't have to play fair, either. If you could get one enterprise established, say based on the goodwill of a certain market segment, then there is nothing stopping you from using these same methods of capitalism to undermine other capitalists enterprises, except you would be able to undercut any expectations for profitability (if they expect 4% margins, you can settle on 2% surpluses for your fund). You should be able to produce better products and/or at a lower cost. If you open a new chain of merchandisers called The Leftorium, where all the zoomers want to do their shopping, you might use the same kind of markups to gouge the capitalists, since you bring in a certain demographic they really want to sell to.
That said, I think producing shirts would not be the right place to start. You would need to get going with something with low capital costs and high labor costs, since in the worker cooperative model, labor is easy to come by capital is not. So you wouldn't want to build or buy a shirt factory, or anything brick and mortar. I know you were just picking an arbitrary example, but the shirts, you might say, are just not a good fit.
I just wrote out a whole long response to your comment that somehow got deleted so I apologize that you'll get a shorter one.
First, yes worker coops and new businesses exist and survive. But the OP is talking about taking over entire industries, right? Niche markets won't do that and certainly won't build up enough capital to expand fast enough either
Basically the big issue with your idea comes down to taking less of a profit to undercut and hopefully drive out competition. When you say I'm going to only ask for two percent instead of my competitions four percent, you're implying that you both operate at the same margin, which assumes the same costs. Even in a dream scenario where you pay your employees a fair wage and come out with the exact same bottom line as the competition (labor is the leading cost of any business, good luck with that), youve now got to divide that 2% by every single employee (worker owned, they're getting a cut too remember?) and you'll end up with a fraction of a percent left to contribute to a seed Fund.
Theres no "accounting trick" that can multiply your liquid cash, the word you're looking for is alchemy.
youve now got to divide that 2% by every single employee (worker owned, they’re getting a cut too remember?)
In a non-profit this is not possible. Employees only make their salaries. What makes it a worker cooperative would be workplace democracy, all the workers would be able to vote, basically as board members. No one truly "owns" a non-profit.
Not sure what I said that could be construed as 'multiplying liquid cash'. That doesn't even make sense.
Actually a cooperative is one of the few nonprofit structures where you can distribute surplus margins back to members.
The alchemy comment was in reference to where you said you would use accounting tricks to accumulate seed funding for the next venture. There's no "trick" that can help you save money faster, you'll still be operating at for-profit margins likely worse because again, your system is designed to put employees in control of how much they are earning. (and of course you've accepted a profit margin of half your closest competitor)
It sounds nice for one company but won't be earning enough to spawn others as quickly or effectively as you believe it will. Cute little neighborhood coop? sure. Titan of industry crushing giant corporations changing the landscape of capitalism? Never.
Unless otherwise indicated a worker cooperative is a for-profit institution, with the profit going to the worker-owners. A nonprofit is a completely different kind of institution, which cannot redistribute surpluses as profits under any conditions. But a nonprofit can be structured as a cooperative. "Nonprofit cooperative" is a very tiny category of businesses, as far as I can tell. If you want to be really technical, a nonprofit can't be a true worker cooperative because it's not "owned" by anyone, including the workers. But it can be structured to be governed by the workers collectively.
https://cdi.coop/how-are-nonprofits-and-co-ops-different/
a tax-exempt nonprofit organization cannot distribute profits to members or investors, while a cooperative corporation generally distributes profits based on members’ participation in the cooperative (through patronage dividends)
The only mechanism the workers would have to distribute surpluses would be through bonuses, but that is pretty thin ice. Total compensation for nonprofit employees must be "reasonable" and "not excessive" so that would possibly allow for bonuses, but not to a degree beyond the typical range of total compensation for the type of employees receiving the bonus.
A for-profit cooperative, on the other hand, would be doing this as a standard practice.
Amazon kinda ran like this for ages. You can reinvest everything and run your company without profit trying to get as massive market share as it's possible.
The big gotcha is and why Amazon is not a non-profit is that you won't be able to get capital without profit motive.
You couldn't operate as a public stock company, but there plenty of successful privately-owned companies, so I don't think that's necessarily a requirement. You would have a unique avenue to raise funds, which is accepting charitable donations. And you could still take out loans or issue bonds.
A lot of successful privately-owned companies have investors. And taking over industries would require massive ammounts of capital that you wouldn't realistically be able to raise without a profit motive.
The idea of the non-profit is to accumulate surpluses into a seed fund, rather than as profits for owners. The competitive advantage is that the surpluses could be smaller than acceptable profit margins for capitalist enterprises. But eventually, you could still accumulate enough to have capital.
But also being non-profit, you could always get lucky on a big charitable donation, maybe some rich fucker trying to ease his conscience. Or a kind of crowdfunding situation where a large number of people might say, "wow this is a good idea I will buy your cool product and also donate $5 to this cause."
The competitive advantage is that the surpluses could be smaller than acceptable profit margins for capitalist enterprises
But again lot of magical tech companies run like that. They run at no profits or even in red numbers for years, trying to get as much of a market share as they can. Often times they don't even have a clue how exactly they are going to monetize their userbase. See twitters and reddits etc. And after ipo you can profit off of your investment, because if the company is growing and market believes in it, it's share price is going to rise, even if the company itself isn't really making money.
But also being non-profit, you could always get lucky on a big charitable donation, maybe some rich fucker trying to ease his conscience.
A lot of huge charitable donations are basically rich people moving their stocks/money from their left pocket to their right pocket and getting pr out of it for their kindness. At best they are donating to one of their rich friends. If they want to ease their conscience, they will fund public libraries and schools like Carnegie did, or fund medical research. In my opinion it's about as realistic as trying to buy lottery tickets to fund your operation.
Or a kind of crowdfunding situation where a large number of people might say, “wow this is a good idea I will buy your cool product and also donate $5 to this cause.”
I don't know if crowdfunding would work. A lot of people soured on it after years. And projects that got crowdfunded to me almost always seemed like projects that would highly likely get a conventional investment as well, but with crowdfunding you basically don't have any pressure from investors or any oversight of how the money is actually used. To get the crowdfunding you already need some success, marketing, have a good proof of concept etc.
And crowdfunding can be further used to illustrate the futility of this endavour. The project that raised the most money in history using crowdfunding is still Star Citizen as far as I know. They raised around 300 millions in around a decade (and they also took around 50 millions in private investments as an interesting side note). That is a similar sum for which Sony bought Insomniac like a year ago or so. Now Insomniac are a nice productive company of around 300-400 employees I think. How many game companies of similar size are there in the world? Another interesting thing that happened in the game industry around a week ago is Microsoft buying Zenimax for 7.5 billion dollars. You would need around 25 Star citizens to buy just Zenimax, which would be very far from taking over the industry.
The main problem with this idea is that you're just using the Uber model (subsidize net loss to establish and maintain market dominance) but saying "we won't ever make profit" right out of the gate, so you're never going to get the funding needed to actually expand past your local sphere of influence.
"Profit" here doesn't mean you aren't making any money on your goods and services, it means you aren't distributing those surpluses out to owners as a "profit", but you can keep them as surpluses to do things like expand the business. The trick would be, you don't need to meet any certain profitability metrics, so you could undercut what a capitalist enterprise would expect, while still being above zero. The problem of competing with capitalist enterprises who can run at a loss to try and put you out of business is a real problem, but there are a few ways to look at that. For one, good, let them, you are eating up their capital. The second being, you have other ways to compete, such as marketing as a more ethical alternative. Consumers have shown some willingness to pay a premium for business practices. e.g. "support minority-owned/local business" or "fair trade" products and so on.
I think the main thing would be targeting an market that would be difficult for capitalists to undercut you, and then as you build up a seed fund or and endowment, then you can fund second/subsidiary non-profit to use the same kind of "run at a loss" tactics to run the capitalists out of business.
Ok here are my thoughts, I don't claim to be any sort of economics expert.
If you're breaking even you won't have any capital to invest. You can't expand at all and your production costs would probably end up higher than your competitors'. I'm thinking of how smaller businesses spend more per item on manufacturing because they can't afford to mass produce.
It's the same thing as why you're forced to sell labor to capitalists like they keep getting richer because they have the money to own everything and then the profit they get from that gives them more money to invest.
The specifically capitalist mode of production, the development of the productive power of labour corresponding to it, and the change thence resulting in the organic composition of capital, do not merely keep pace with the advance of accumulation, or with the growth of social wealth. They develop at a much quicker rate, because mere accumulation, the absolute increase of the total social capital, is accompanied by the centralisation of the individual capitals of which that total is made up; and because the change in the technological composition of the additional capital goes hand in hand with a similar change in the technological composition of the original capital. With the advance of accumulation, therefore, the proportion of constant to variable capital changes. If it was originally say 1:1, it now becomes successively 2:1, 3:1, 4:1, 5:1, 7:1, &c., so that, as the capital increases, instead of ½ of its total value, only 1/3, 1/4, 1/5, 1/6, 1/8, &c., is transformed into labour-power, and, on the other hand, 2/3, 3/4, 4/5, 5/6, 7/8 into means of production.
https://www.marxists.org/archive/marx/works/1867-c1/ch25.htm
Basically the rich get richer and you'll never be able to compete if you're paying the workers for the value they create. :p
If you are just literally breaking even, then no you would never have any capital. In a non-profit, it can take on a slightly different meaning. If you include growth as a business expense, then you could still have no profits but still have accumulated surpluses. The way you would be able to out-compete the capitalists is by running smaller surpluses than they run profit margins. It's a bit of an unusual way to think of a non-profit, which you usually think of in terms of donations rather than sellings goods and services. (a few big exceptions that come time mind are some hospitals and universities)
A higher production cost isn't necessarily prohibitive if you are offering higher-quality goods and services, or can market them in such a way that consumers will pay a premium for them, or such that workers are willing to accept a bit less pay in exchange for the "perks" of being part of a non-profit worker cooperative.
It’s the same thing as why you’re forced to sell labor to capitalists like they keep getting richer because they have the money to own everything and then the profit they get from that gives them more money to invest.
Well, they keep getting richer because they are keeping a big chunk of the labor value you create for themselves. The worker cooperative model eliminates that, and allows the workers to keep all of their labor value. Adding "non-profit" to the model means than they no longer keep all of the labor value, they are accepting a market rate of pay (which is less than their labor value), but the surplus, rather than going to a capitalist as profit, would be going to a non-profit fund chartered to expand other non-profit worker cooperatives.
There could be some capitalist rent-seeking if you decided to take out loans or issue bonds, in the form of interest paid back. But that would only be necessary to get things going. And it might be rough-going at first, but I think once you had some successful enterprise up and running, and you have put back a reasonable fund, or if you got lucky on some kind receiving some kind of endowment from some dying rich guy facing a crisis of conscience, you are in pretty good territory. Even if your 2nd enterprise fails, you can regroup and try again. Nothing is really lost by trying except the jobs created, since there is no real "investment" in the first place, just opportunity cost. I think the key would be to start in a service sector where it's mostly labor, not a lot of capital (no brick and mortar stores), like some kind of online services, or selling art (whether that's commercial art or developing a video game, etc.) You might even initially fund it through some kind of kickstarter type of thing.
But once you had 2 going, then you can start benefiting from exponential gains, as both enterprises then could start working on the revenue to fund new enterprises, so you'd have 4, then 8, then 16, in just a few generations of expansion, you could really make a dent, even with a high failure rate. If you ever got to the big leagues where you had 100's of millions or billions in your funds, you could start buying out capitalist enterprises and converting them to your model, or buying up controlling shares of a company and converting them. And that's another thing, non-profits can own investments in capitalist enterprises. So you could just buy financial instruments to grow your seed fund. Hoist capitalism on its own petard, as they say.
It's not so different from the idea of a social wealth fund, except instead of being funded by the government, it's funded by the workers doing jobs they'd need to have anyway. It's not doing away with capitalism, but rather exploiting capitalism. Even if you took over 100% of enterprises, you would still have a capitalist system, just with all the capital owned by a non-profit NGO's rather than capitalists. Maybe a kind of market-syndicalism? Not ideal, but better.
We are trying to do that right now and our biggest hurdle is always investment.
No one wants to just have their loan paid back, everyone wants shares in the coop and we want to keep it democratic. It's hard to do so within the profit motive.
I think it's doable if we were able to raise some startup capital online, but we are still collecting media for that.
Couldn't you do it such that every worker is an investor? Like there's a buy in to work at the spot and the workers as a block have the option to let it snowball? As you're going for expansion new employ also being fresh funding
Idk
We do that too, actually. We just don't have many people willing to invest, then work for free for the foreseeable future.
We have a couple short term goals that we think will help us with that but we will see.
Rad.
I've always wondered how to setup the most ethical business. Always figured worker owned is the way.
Wonder if something like - hey rather than full pay we all take 80% knowing full well the rest is getting reinvested.
It's challenging for sure.
Another problem is that co-ops tend to sell out after a few decades when most of the people employed weren't involved in building the company and don't have an attachment.
Nothing would prevent it. But a non-profit could also use the same kind of tactic. Perhaps not the first such enterprise to be founded, but if you built up a business in a market segment that would be hard to undercut (I guess not welding!), once you had a big enough war chest, then you could use the same kind of tactic to try and put the capitalists out of business.
I also think you would have a special appeal to a certain percentage of left-wing workers who would be willing to work for less money to support the business model, especially if you have workplace democracy. Not enough to monopolize every industry, but perhaps enough to gain your footing and start accumulating a war chest. I don't know how much welders make but I would consider accepting 15-20% less money to work for a non-profit worker cooperative, wouldn't you?
I did this in engineering in Sweden, and in South Korea. It worked perfectly from a business sense. Many advantages from a normal startup. I can post more about it tomorrow when I'm not that busy.
Businesses use their profits to grow. Without profit, your business can't grow unless someone invests money into it, and they have no incentive to do so if they don't make money from the investment.
Plus you can break even on every transaction but lose money overall, if you don't sell every unit you produce.
Well, this really depends on where you put expanding the business on the ledger. If you consider expansion a business expense, then you could still put money to that without having "profit". A non-profit can have earnings, they just can't distribute those earnings to the owners as a "profit". A non-profit can end up with very large surpluses which they can do various things with, including fund other non-profits, or expanding the enterprise.
There was one person with the correct Marxist analysis. I'd like to add three points.
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to be a company in capitalism that competes on the market means you have to exploit your workers and not pay them for their work, this means your business will remain no stepping stone away from capitalism, but being part of the sphere of circulation
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you forget state force (and capitalist forces). We have 800 years of examples that show when people try to be non capitalist oriented or suffer from its connected discriminations, that if they become politically dangerous or it is profitable and expedient, that their property gets taken away and / or they get crushed.
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you might be interested in Mondragon
Yes, absolutely, you would still be a capitalist enterprise operating under capitalism.
The idea here is a bit like "copyleft" which uses copyright law to "infect" any derivative works with the same copyleft license. So you are free to take the work (which may be worth many thousands of hours of labor value) and use it in some project or add to or modify it. But your modifications have to be released under the same license.
So in this case, the original work generates a seed fund, instead of profits to capitalists, the derivative works would be the new enterprises created from the capital in the seed fund. Which they would then go on to have to build their own seed fund. This is all a trick of law. Using the non-profit law to charter a non-profit that functions this way, and any derivatives would have to adopt the same kind of charter.
The state is the real killer here, because it could always modify the law to make such a scheme impossible. But it's hard for me to imagine how they could require businesses to operate for-profit without regulating either wages or prices. And in either case, I would argue that is a good outcome for the project!
Mondragon was part of the inspiration for the idea. Though Mondragon is not a non-profit. That is the secret sauce, at least from my understanding of US business law. I think Mondragon is a great example of what can be done within the limits of capitalism, but the non-profit model goes one step further.
i remember Mondragon from the Mars trilogy. it's like a worker owned megacorp
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