Cooperative Enterprise and Market Economy: Chapter 15

Introduction & Preface | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | Chapter 12 | Chapter 13 | Chapter 14

Translator’s note:

What is the market? How does our concept of the market shape our understanding of the market economy and our relations to it as cooperativists?

In this chapter, Razeto makes use of a concept that is one of Antonio Gramsci’s most important theoretical contributions – the “determined market” (mercado determinado).1 The determined market is inherently social and political, grounded in social relations and particular historical conjunctures. As Gramsci defined it, it is “a determined relation of social forces in a determined structure of the productive apparatus, this relationship being guaranteed (that is, rendered permanent) by a determined political, moral and juridical superstructure.”

In standard economic theory, the market is presented as an automatic and mechanical process, the scene and mechanism of “perfect competition,” the equally unrealistic, abstract and apolitical concept we meet in Chapter 8. (I remember how refreshing it was when I first read economic history, the realism, specificity, and relevance to social dynamics were utterly unlike the theoretical framework of mainstream economics.)

Because the “standard” of standard economics is capitalism, “the market” – with some amendments – may be useful for analyzing capitalist economies and the behavior of agents in them, but it fails to provide the necessary tools for understanding cooperative and other non-capitalist enterprises and movements.

For Razeto, the determined market is at once a more concrete and more general concept, well suited to the understanding cooperative enterprise, the cooperative sector, and cooperativism as a movement and their contributions they can make to social-economic transformation.

(Gramsci’s writings, particularly his prison notebooks, of which there are multiple editions, pose a challenge to translators. The widely read Selections from the Prison Notebooks, translated by Quentin Hoare and Geoffrey Nowell Smith in 1971, have been superseded by the more recent compilation and translation of the complete Prison Notebooks by Joseph Buttigieg (Columbia, 2011). I have noted the differences in the footnotes. Razeto works from the Italian edition of the Notebooks (Einaudi 1977) compiled and edited by Valentino Gerratana, which more closely resembles the Selections.)

- Matt Noyes
 

Section Four

Cooperativism and Democratization of the Market and the State
 

Chapter 15

The Concept of Markets in Economics and its Limits. Toward a Reformulation of the Concept.

1. - In the first three sections of this study we have analyzed the cooperative enterprise in its various forms, as an economic unit, as the elemental cell of a sector that is economically integrated, and as the base for a social movement capable of operating with its own personality. In this last section we will focus on how cooperativism relates with the rest of the economy and with society as a whole. Our objective is to understand the presence and participation of this type of enterprise in the market and the potential role it can play in a process of transformation of the economy and of society in general.

In the introduction we stressed that the cooperative phenomenon is not only an economic reality but a complex system of action with an inseparable social, political, and cultural dimension. We observed that its pursuit of social transformation and redemption for those in the popular sectors living in conditions of marginality and subordination is decisive for the definition and understanding of the cooperative phenomenon and its development. Nonetheless, the economic element is central and determinant because cooperatives are organized around economic activities and functions. Thus, the scientific understanding of the cooperative phenomenon must start with the economy.

Already, in its very mode of economic activity and organization we encounter human, social, and cultural dimensions that transcend the strictly economic, and demand to be taken into account from the outset. Precisely for this reason it was necessary for us to start the economic analysis with a reformulation of the concept of the enterprise, such that it could include a variety of enterprises, including those which place labor and community at the center of their organization and development, instead of capital.

A similar theoretical operation imposes itself on us now as we enter into the study of the dynamic relations between cooperactivism and society. As enterprises that basically carry out economic activities, cooperatives enter into relation with society first and fundamentally through the market. Workers enterprises have a specific mode of “doing economics” that leads them to establish a particular type of market relations, revealing dimensions of reality in the market that normally are not considered by economic science and thus remain hidden.

As occurred with the concept “enterprise,” the cooperative phenomenon poses a challenge to economics with regard to the equally crucial concept “market,” asking it to open and expand its focus and perspectives. Above all, because economic theory does not appear to have developed the conceptual and methodological instruments necessary for understanding the behavior of the diverse and specific economic subject that is the cooperative, there is a need to accede to a level of analysis that is more concrete, differentiated and complex.

In economic theory, the term market designates the concrete organization of exchanges of goods and services between sellers and buyers, using a determinate system of prices, in a determinate society. The market is made up of many connected markets for distinct goods, services, and productive factors.

Understanding the market in this way, theoretical economists are fundamentally concerned, in their analysis, with two categories of persons related through the market: consumers and business owners. Economists try to formalize the rational behavior of these persons, distinguishing between two great economic forces, demand and supply, whose variable relations shape the formation of prices and the regulation of processes of production and distribution. When economic science later tries to understand and quantitatively measure the overall functioning of the economy in circuits of production, circulation, and consumption, it defines a series of economic sectors (families, enterprises, public administration, and “everyone else”) and variables (private consumption, investment, exports, imports, etc.) that make it possible to organize multiple data in rational groups which can be handled statistically and mathematically. This enables economic analysis to provide a general and differentiated framework of the market with general variables like Gross and Net National Product at market prices, Gross and Net National Income at factor costs, etc., or, more specifically, variables like dependent labor income, employer income, rent, interest, business profit, taxes on added value and on income, current transfers, etc. Finally, by examining the systems of prices, supply and demand of the distinct factors and goods, and in general the variations experienced by the aforementioned abstract variables, economic science is in a position to identify and measure tendencies of expansion and recession, inflationary and deflationary phenomena, levels and rates of development of the economy in its distinct sectors and branches, the impact of each variable on these tendencies, etc.

This conception of the market has an undeniable validity at a certain level of analysis of economic processes; but it also has intrinsic limits linked to the degree of abstraction and simplification that it imposes on reality.

While this concept or theoretical model of the market identifies it in terms of variables and tendencies; the reality of the market is constituted in exchange, by subjects and by forces.

Of course, economic variables are nothing but an abstract representation of homogeneous groups of actors, and the tendencies identified are nothing but a representation of the paths defined by the confluence of real forces. But the “spirit of abstraction,” so present in economic science, usually leads to severance of theory from the reality it represents. On its own, theory operates only on the level of abstraction, converting variables and tendencies into things while considering the market to be subjectively neutral. This is what led Oskar Morgenstern to exclaim, in relation to the concept of competition:

Competition means struggle, fight, maneuvering, bluff, hiding of information – and precisely that word is used to describe a situation in which no one has any influence on anything, where there is ni gain, ni perte, where everyone faces fixed conditions, given prices, and has only to adapt himself to them so as to attain an individual maximum which may even be zero as in the case of profits. Yet this is what most economic theorists and their textbooks are primarily concerned with!2

Recognizing in a certain way its subjective and conflictual dimensions, theoretical economists have enriched the concept of market. To the idea that a market is the organization of exchanges between sellers and buyers, and a mechanism of regulation of supply and demand, they add the idea that the market is the principal mechanism for allocation of resources and distribution of revenues, in an economy of free trade. In effect, insofar as it regulates exchanges, the market determines which and how many resources and revenues are allocated to, and used by, the different subjects who form part of a given economy. Taking another step in the same direction, economists have conceived of the market as a mechanism of coordination of economic decisions.

These additions to the concept of market get us closer to a realistic comprehension of the market inasmuch as they incorporate some decisive elements that were obscured by the previous conception: the allocation of resources and distribution of revenues, are, in effect, social processes that imply subjective forces engaged in struggle over limited resources and given revenues. In the same way, by framing economic relations in terms of decisions that are coordinated in the market, it becomes obvious that we are dealing with the will of subjects who act with a certain degree of unpredictability in the face of the alternatives they confront.

As formulated, the concept is still insufficient because it does not make explicit the social and subjective conflict present in the functioning of the market, but instead tends to use the expression “mechanism,” which suggests an automatic and objective process.

The supposedly “automatic” character of the process of regulation, allocation, and distribution, and the coordination of decisions, is widely postulated by economists. And it is precisely because of this supposed mechanical and automatic quality of the market, in the sense that it does not imply subjective controls or interventions (by the State, in particular), that the market has come to be conceived as the mechanism by which resources are allocated, revenues are distributed and decisions coordinated, only in those economies with free trade and limited State intervention. On this basis, they have distinguished between “market economies” and “regulated” or “planned” economies.

Now, it is not hard to see that in this conception of the market we still find some of the limits that we highlighted when referring to the idea of the market as the “place” and organization of exchanges: objectification of a subjective reality, insufficient recognition of the conflict between social subjects and forces, and unjustified generalization of a particular form of market as if it expressed the reality of the market in general.

Nonetheless, we already have the elements we need to formulate a concept that will be at once more general and more concrete and thus have a greater capacity of comprehension and analysis of the determined market.

Competition is struggle, and the market is a system of relations of force. As Gramsci defines it: “‘Determined market’ is […] a ‘determined relation of social forces in a determined structure of the productive apparatus,’ this relationship being guaranteed (that is, rendered permanent) by a determined political, moral and juridical superstructure.”3

The market does not present itself solely as the organization of exchange relations between business owners and consumers, nor simply as the “mechanism” by which resources are allocated, revenues distributed, and economic decisions coordinated. Rather, and more concretely, it appears as a complex system of interrelations and relations of force among all the individual and collective subjects (enterprises, institutions, stores, public bodies, associations, various organizations, families, intermediate groups, etc.) that occupy different places in the social-economic structure. These subjects perform different functions and participate with different goals and interests in a determined, relatively integrated economic circuit, that is, they form part of a certain political-economic formation and, in relation to its processes of production and exchange, pursue the satisfaction of their own needs and interests.

Each of the individual and collective subjects active in the market deploys its own forces in it with the object of participating in the distribution of socially produced goods and services and obtaining some portion of the available resources, in the broadest form possible. It is a system of relations of forces because the distinct subjects interrelated in it struggle for resources, goods and services. In the process of this struggle, the various subjects can act independently or in association, establishing alliances, seeking protection, acting ethically, engaging in trickery, or playing dirty.

The processes and tendencies of the market are expressions of this struggle and this relation of forces. Inflation, for example, is not a simple phenomenon of prices, but more deeply a process of redistribution of social wealth, and it expresses in that sense a shift or a change in the correlation of the distinct social forces. International trade and the fluctuations of exchange rates of different currencies within it also express the interaction and struggle between States and different national groups.

The market, on the other hand, is not just economic; the subjects who act within it are social forces that strengthen their positions by organizing, acquiring ideological and cultural coherence, becoming conscious of their own interests and possibilities, and acting politically on society and the State to obtain more leverage and power of direction. The juridical and political “superstructure” regulates the range of action of the different social and economic subjects, guaranteeing the rights and duties of each, establishing limits and possibilities of legitimate participation, favoring some social sectors over others, etc.

Understood in this way, every society constitutes a market that can be organized in different ways: with more or less control and interference by the State, with more or less liberty of individual initiative, with more or less social equality, with more or less rational procedures for distribution of wealth, goods, and services, with more or less social conflict or integration, with different degrees of oligarchical concentration or democratic participation, and with different degrees of autonomy of the various economic and social actors. But in no case are we dealing with an “automatic mechanism;” it is always a question of relations of force among active social subjects.

That which appears in capitalist economies to be an “automatic mechanism” is in reality a mode of relations of force among social subjects.

Gramsci himself explained this in the following terms:

Concept and fact of determined market: i.e. the scientific discovery that specific decisive and permanent forces have risen historically and that the operation of these forces presents itself with a certain "automatism" [...]

After having established the character of these decisive and permanent forces and their spontaneous automatism (i.e. their relative independence from individual choices and from arbitrary government interventions), the scientist [the economist] has, by way of hypothesis, rendered the automatism absolute; he has isolated the merely economic facts from the combinations of varying importance in which they present themselves in reality; he has established relations of cause and effect, of premises and conclusions; and he has thus produced an abstract scheme of a determined economic society. […]

It is from these considerations that one must start in order to establish what is meant by "regularity", "law", "automatism" in historical facts. It is not a question of "discovering" a metaphysical law of "determinism", or even of establishing a "general" law of causality. It is a question of bringing out how in historical evolution relatively permanent forces are constituted which operate with a certain regularity and automatism.4

Gramsci thus clarifies that those operations which appear to be “automatically” generated by an objective “mechanism” subject to laws of regularity, are, in reality, relatively constant subjective economic behaviors. There are no objective universal economic laws. What we are dealing with is the process of formation of domination and consensus, a key element in the consolidation of determinate systems of power relations. If the capitalist market functions “automatically” it is not because it is guided by objective laws but because certain organizing groups in the economy impose their behavioral logic on the multitudes, who then act in conformity with determinate models of action produced and induced by the ruling classes in a determinate politico-ethical climate.5

This is a concept of the market that we can consider concrete and at the same time general. Concrete, because its reality is not replaced nor simplified by the abstraction of globalizing variables and tendencies; general because it encompasses the market’s various potential forms and does not reduce it to its capitalist expression alone.

Economic theory constructs the concept of an automatic and mechanical market by abstracting the principal constitutive elements from one of the particular forms of the market – its capitalist form – objectifying its guiding forces in the form of variables, categories, and tendencies that it treats as absolute and permanent. That concept permits one to the understand the functioning and dynamics of the capitalist market (while bolstering it by contributing theoretical coherence and practical orientation); but it shows itself to be insufficient when the system of relations of force that make it up undergo a substantial change (e.g., a socialist market) or when we try to understand the behavior of different subjects of economic action such as cooperative organizations.

In contrast, the concrete and general concept of market that we have presented, insofar as it refers to the different specific economic and social subjects without indiscriminately subsuming them under abstract categories, and conceives of them in their complexity as an economic, social, political and cultural system, not only enables us to identify the specific behavior of cooperatives, the cooperative sector, and cooperativism as a movement, it also allows us to adequately formulate the problem of the potential contributions that this and other forms of self-managed enterprise can make to the democratic transformation of the market and society. It is to this subject that we turn in the next chapters.

• 1

  Luis Razeto Migliaro devoted himself to the study of the works of Antonio Gramsci during his exile in Italy after the 1973 US-backed military coup in Chile. Razeto co-wrote and published several books with filmmaker and Gramsci scholar Pascuale Misuraca, including: Sociología y marxismo en la crítica de Gramsci (1978), Política y Partidos en la Crítica de Gramsci (1978), and the two volume La Travesía (2009, 2010).

• 2

  Oskar Morgenstern, Thirteen Critical Points in Contemporary Economic Theory: An Interpretation. Journal of Economic Literature, Vol. 10, No. 4 (Dec., 1972), pp. 1163-1189

• 3

  Antonio Gramsci, Selections from the Prison Notebooks, p. 410. Trans. Quintin Hoare and Geoffrey Nowell Smith, International Publishers, 1971. The same passage, in the newer English translation of the Prison Notebooks by Joseph Buttigieg, reads: “‘Determined market’ can therefore be said to be a ‘determined relation of social forces in a determined structure of the productive apparatus’ that is guaranteed by a determined juridical superstructure.” Prison Notebooks, Vol. III, Notebook 8 #128 Economic Science. Columbia University Press, 2011. But the Italian text, edited by Gerratana, on which Buttigieg relies, is the same as that quoted here. - MN

• 4

  Selections from the Prison Notebooks, p. 410-411. Op. cit. While the Buttigieg version omits the second paragraph quoted here, it is present in Gerratana, Quaderni del Cacere, Volume secondo, Quaderno 11, nota 52. Einaudi, 1977.

• 5

  Incomplete footnote in the Razeto text: “A more complete explanation of the meaning of market automatisms and laws, the […]” - MN