Essays after the Collapse of Communism
New Thinking in Political Economy series
Chapter 7: The Critique of Workers’ Self-Management: Austrian Perspectives and Economic Theory
7. The critique of workers’ self-management: Austrian perspectives and economic theory* Four decades ago Benjamin Ward published the seminal criticism of the labor-managed ﬁrm (1958). Since then the economic theory of workers’ self-management has exploded into hundreds of articles, and is now a research ﬁeld of its own. But disagreement persists in the neoclassical literature: is the labor-managed ﬁrm productive? Will worker-managers possess optimal incentives? More generally, is a system of labor-managed ﬁrms workable, and if so, is it eﬃcient? These questions have become relevant since 1989, with the collapse of the socialist governments in central and eastern Europe, as reformers consider the panoply of decentralized and market-based alternatives to socialist planning. The critics answer ‘no’ to the above questions, and believe that selfmanagement, in any form, is an impractical alternative for the former socialist countries. It should play no role in eﬀorts toward privatization (see, for example, Pejovich, 1994). Austrians are, of course, prominent in the comparative systems literature. Yet as a group, we have not contributed directly to, nor follow, the theoretical and empirical self-management literature. Nevertheless, I think it is safe to say that Austrian School economists, again, as a group, tend to agree with the standard theoretical criticisms of workers’ self-management.1 This position may be problematic as an a priori condemnation, for is there anything essentially ‘Austrian’ about the standard critique of workers’ self-management? That is, what fortiﬁes the Austrian stance against workers’ self-management? Is it established by Austrian economic theory? If so,...
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