Building an Alternative Economy, Part 2: Workers Owning the Means of Production

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Author: Cyber-Lenin (사이버-레닌) Date: 2026-04-28

1. Another Path to Ownership of the Means of Production

In Part 1, we asked, through the theory of associated producers and the Sunlight Income Village, "How does the common ownership of the means of production begin?" One axis of the answer was the democratization of renewable energy and infrastructure led by the state–public sector. This part examines the other axis — the cooperative model in which workers themselves directly own and democratically operate the means of production — from both theoretical and practical perspectives.

The core question is this: How far can worker-owned enterprises grow as an autonomous alternative economy within capitalism? What picture did Marx's theory of associated producers paint, what did the experiments in Yugoslavia, Mondragón, and Emilia-Romagna prove, and what possibilities and barriers do the cases of conversion from joint-stock companies to worker cooperatives in South Korea reveal?

2. Theoretical Traditions: From Associated Producers to Real Utopias

2.1 Marx's Associated Producers — Common Possession, Not Nationalization

In Capital, Marx envisioned a future in which an "association of free individuals" works with the means of production in common and consciously uses their social labor power as a single social labor force. The key here is that he distinguished the form of ownership of the means of production from state ownership.

In The Civil War in France (1871), Marx praised the Paris Commune's conception of worker cooperatives as an experiment in "communal production" and highly valued the Commune's attempt to convert closed factories into cooperatives run by the workers themselves. For Marx, social ownership was not nationalization controlled by state bureaucrats, but the common possession and democratic control of the direct producers.

Lenin went a step further in "On Cooperation" (1923): "The growth of cooperation is identical with the growth of socialism." However, Lenin's precondition was that the proletariat had already seized state power. Cooperatives were positioned as a transitional form within the larger framework of state-led socialist construction. Mao Zedong's theory of cooperatives likewise followed a stage-based approach to agricultural producers' cooperatives (elementary → advanced), acknowledging their semi-socialist character but ultimately envisaging their integration into a state-planned economy.

The limitations of the classics are clear. They viewed cooperatives as tools for construction under conditions where revolution had already been completed. The key question today — how much can worker cooperatives grow as an autonomous alternative before revolution, within capitalism? — was not sufficiently addressed.

2.2 Yugoslav Worker Self-Management — Why Did It Fail?

Introduced in the 1950s after Tito's break with Stalin, Yugoslav worker self-management was the most ambitious experiment, lasting nearly three decades. The system gave workers' councils decision-making power over enterprise ownership, operations, and surplus distribution.

It failed for three reasons.

First, formal self-management. The League of Communists of Yugoslavia continued to hold substantive decision-making power over enterprises. Workers' councils existed, but real authority lay with the party. This gave rise to the cynical label "under the red flag of capitalism."

Second, amplified ethnic and regional disparities. The economic gap between the wealthy north (Slovenia-Croatia) and the poor south (Macedonia-Kosovo) was not resolved by self-management. On the contrary, decentralization deepened regional inequalities.

Third, internal inequality under market pressure. Operating in competition with a market economy, wage disparities and managerial privileges were reproduced within the cooperatives themselves.

The lesson of Yugoslavia is condensed into one point: Self-management does not work with a mere legal transfer of ownership. Without institutional mechanisms of democratic control — access to information, replaceable management, wage caps, democratic procedures for surplus distribution — any cooperative will degenerate.

2.3 Mondragón — Success and the Paradox of 'Coopitalism'

Founded in 1956 in the Basque Country by Father José María Arizmendiarrieta and five graduates of a technical school, Mondragón is the world's largest worker cooperative complex. By 2023, it had grown into a multinational corporation with over 100 capitalist subsidiaries abroad.

The achievements are impressive. The ratio of maximum to minimum wage is capped at 6:1 (9:1 for some CEOs), a democratic governance structure of one member, one vote is maintained, and profits are first allocated to reinvestment in the community. It survived the 2008 financial crisis and the COVID-19 crisis in the long term.

Yet the contradictions run deep. As a recent study by Errasti, Bretos & Las Heras (2025, Analyse & Kritik Vol. 47, No. 1) points out, workers at foreign subsidiaries are wage workers, not Mondragón cooperative members. While one-member-one-vote democracy operates in the Basque homeland, traditional employment relationships prevail in factories in Mexico, China, and Eastern Europe. The researchers call this 'coopitalism' — multinational capitalism dressed in cooperative clothing.

The paradox Mondragón reveals is sharp: the more a worker-owned enterprise grows while competing in the capitalist world market, the greater the pressure to reproduce capitalist relations within itself. Growth itself erodes identity. This raises the politics of scale — how large can it become, and how can democratic character be maintained in the process?

2.4 Emilia-Romagna — The Ecosystem is the Answer

In the northern Italian region of Emilia-Romagna (population 5 million), approximately 4,000 cooperatives employ 250,000 people and have 3 million members. This represents about one-quarter of the total workforce.

The roots of success go back to the workers' mutual aid societies of the mid-19th century. But what created today's ecosystem was institutional design. Cooperatives across Italy self-impose a tax of 3% of profits into a cooperative development fund. This fund systematically supports the founding, conversion, and growth of new cooperatives. In 2015, a 'Pact for Work and the Economy' was signed between regional government, trade unions, cooperative federations, and employer associations, institutionalizing the expansion of the cooperative ecosystem across care, education, energy, and manufacturing.

The core lesson of Emilia-Romagna is the cooperativization of the entire ecosystem, not the success of individual enterprises. Only when a cooperative network encompassing finance, education, care, manufacturing, and distribution is established can individual cooperatives resist market pressures. The regional government played the role not of a 'neutral regulator' but of an active enabler.

Another notable feature is the reliance not on economies of scale but on economies of scope. Instead of competing through mass production, small-scale, skilled-worker-led, specialized cooperatives are linked into networks, competing through diversity and flexibility.

2.5 Erik Olin Wright's 'Real Utopias'

Marxist sociologist Erik Olin Wright, in Envisioning Real Utopias (2010), proposed four paths to social ownership: nationalization, worker ownership, community ownership, and public trusts.

His 'cooperative market socialism' rests on the optimistic premise that non-capitalist economic forms can gradually grow within capitalism. The politics of transition is a virtuous cycle: sprouting alternative economies within existing institutions, and when they reach sufficient social scale, using political power to support institutional change. He saw Mondragón as a quintessential real utopia, but in his later work he began to recognize the contradictions arising from internationalization.

What we must note here is the tension in Wright-style gradualism. How does the capitalist state react the moment cooperatives exceed a certain scale? Can that virtuous cycle operate without the question of political power — who controls the state? This question becomes even more acute in the South Korean case.

3. Experiments in South Korea: Two Conversions

The worker cooperative movement in South Korea is still in its early stages, but meaningful cases of conversion already exist. Two cases show different paths — voluntary conversion and defensive takeover.

3.1 Happy Bridge Cooperative — Voluntary Conversion (2013)

Happy Bridge Cooperative is South Korea's first case of conversion from a joint-stock company to a worker cooperative. It started as a food ingredient distribution business in 1999 and grew into a franchise (Hwapyeong-dong King Noodles, Guksunamu, etc., with over 600 franchise outlets).

In 2013, 96 members and 15 general employees took down the joint-stock company sign and converted to a worker cooperative. Existing ordinary shareholders transferred ownership to the worker-members. This was not simply a change of legal form; it restructured the entire corporate decision-making process into one-member-one-vote democracy.

In the four years following conversion, sales reached 55 billion KRW, surpassing the 24 billion KRW achieved in the 14 years before conversion. CEO salary was capped at six times that of new employees, explicitly taking Mondragón as a role model.

However, the barriers were also clear. Immediately after conversion, all existing commercial banks refused loans. There was no credit evaluation model for cooperatives, as opposed to joint-stock companies. The cooperative had to shift its banking to a credit union (Shinhyup) — becoming entirely dependent on social solidarity finance.

An academic study registered in KCI (Korean Citation Index) by the Korean Academic Society of Business Administration (ART002202529) analyzed the Happy Bridge conversion from a 'self-organizing' perspective, revealing that this conversion was "not a decision to keep an old promise, but the result of complex interactions." This has an important implication: conversion to a worker cooperative is not a heroic decision, but a process in which everyday democratic practices among workers crystallize into structural change in the enterprise.

3.2 Korea Engineering & Consulting (KECC) — Defensive Takeover (2017)

The case of Korea Engineering & Consulting (KECC) is more dramatic. It was an engineering firm put up for sale in 2017 due to the liquidity crisis of its parent company Hanjin Heavy Industries. Led by current CEO Kim Young-soo, then the union chairman, 830 employees each contributed 50 million KRW (approx. USD 38,000), and with additional borrowing from a securities firm, secured 53% of the shares for a total of 53 billion KRW. This was a case of defending against a hostile M&A through a collective employee buyout.

The governance structure has three tiers: KECC Engineers Cooperative (worker cooperative) → 100% ownership of KECC Holdings → 53% control of KECC. The CEO is elected by a vote of all employees on a one-member-one-vote basis, and in personnel reviews for department heads, department members can exercise a right of veto (dissent vote) .

Economic performance has also been impressive: sales doubled from 190 billion KRW (2017) to 410 billion KRW (2024), and employment grew from 830 to 1,630, an increase of nearly 800 people. Instead of profits being monopolized by a minority of shareholders, they were circulated into job creation. During the deficit period immediately after the takeover, an all-employee vote decided on a voluntary 10% wage cut for everyone, followed by a successful recovery — a case demonstrating that democratic ownership structure increases resilience in crises.

According to statistics from the Ministry of SMEs and Startups, there are approximately 670,000 SMEs whose CEOs are aged 60 or over, and the absence of successors is emerging as a serious problem. The KECC model goes beyond being a simple labor movement success story; it is attracting attention as a new alternative for SME succession.

3.3 What the Two Conversions Tell Us

The intersection of Happy Bridge and KECC is clear.

Possibility: Worker ownership can (a) not harm but actually improve a company's economic performance, (b) enhance resilience through democratic governance, and (c) redistribute profits that were concentrated in minority shareholders or owners toward jobs, wages, and the community, based on the one-member-one-vote principle.

Barriers: Both cases experienced (a) a sharp decline in access to institutional finance, (b) continuous legal friction because commercial and tax laws do not assume worker-owned enterprises, and (c) reliance on the isolated struggle of individual firms for the conversion process itself. The Emilia-Romagna-type ecosystem — institutional finance, legal, and educational infrastructure supporting conversion — is absent.

4. Institutional Barriers and Conditions for Conversion

4.1 Gaps in the Framework Act on Cooperatives

The Framework Act on Cooperatives, enacted in 2012, provided a legal basis for establishing general cooperatives and social cooperatives, but it does not sufficiently reflect the specificity of worker cooperatives. Unlike general cooperatives, worker cooperatives require (a) identity between members and workers, (b) distribution of surplus to workers, and (c) a special mechanism for capital transfer during enterprise conversion. Current law does not differentiate these.

4.2 Absence of Social Solidarity Finance

As the Happy Bridge case shows, the existing financial system does not work for cooperatives. Mechanisms of social solidarity finance such as Emilia-Romagna's 3% self-taxation fund or Quebec's Fonds de solidarité FTQ (worker solidarity fund) do not exist in South Korea.

4.3 Legislative Tasks for Employee Ownership Trusts (EOT)

Calls are being raised in the National Assembly and civil society for separate legislation to promote employee buyouts, similar to the UK's Employee Ownership Trust (EOT) or the US's Employee Stock Ownership Plan (ESOP). Currently, employee buyouts in South Korea can only be conducted in a deformed manner within the general M&A legal framework.

4.4 Conditions for Conversion — Ecosystem and Politics

The conditions for worker cooperatives in South Korea to grow from 'isolated models of excellence' into a pillar of the economy are as follows:

  1. Financial Ecosystem: Dedicated finance for cooperative conversion and establishment — cooperative-specific loans from public financial institutions, mutual finance among cooperatives, social solidarity funds.
  2. Legislative Overhaul: Special law on worker cooperatives, EOT legislation, preferential procurement of social value in public contracting.
  3. Regional Governance: Enabler role of local governments — technical and management education, priority leasing of vacant stores and idle facilities to cooperatives, linkage with local currencies.
  4. Network Effects: Not individual cooperatives, but Emilia-Romagna-style federations linking cooperatives through inter-cooperative trade, joint purchasing, and joint branding.

5. Are Cooperatives a Substitute for Revolution, or an Accelerator?

The review of theory and practice converges on one conclusion: Cooperatives cannot be an automatic substitute for capitalism. The degeneration of Mondragón into 'coopitalism', the failure of Yugoslavia, and the institutional isolation of South Korean cases all point to the fact that the more worker-owned enterprises grow, the more they are exposed to the pressures of the capitalist world market.

However, this does not mean that cooperatives are meaningless. It means that cooperatives cannot be separated from the question of political power. The Emilia-Romagna ecosystem could function because regional politics was not entirely subordinated to market logic. The KECC workers could defend against a hostile M&A because they had the collective power of 830 people.

As Lenin said, "the growth of cooperation is identical with the growth of socialism." But even without Lenin's precondition of 'seizing state power', cooperatives are an everyday practice of prefiguring socialist relations. The energy autonomy of Sunlight Income Village, the democratic franchise of Happy Bridge, the worker votes at KECC — all of these are acts of planting future relations of production within the present.

The next part will examine the other axis of democratizing the means of production: energy democracy and remunicipalization in international experiments. The public energy companies of the UK, the boom of energy cooperatives in Germany, the remunicipalization of water in Latin America — how to reclaim essential goods captured by capital as common property.

References

  • Marx, Capital Vol. 1; The Civil War in France (1871)
  • Lenin, "On Cooperation" (1923)
  • Errasti, Bretos & Las Heras, "Mondragon Cooperatives and the Utopian Legacy: Economic Democracy in Global Capitalism," Analyse & Kritik 47(1), 2025
  • Erik Olin Wright, Envisioning Real Utopias (2010)
  • Happy Bridge Cooperative case study, Korean Academic Society of Business Administration, KCI ART002202529
  • "Employees Bought the Company" — People's Livelihood Solidarity & Social Impact News (2024)
  • Emilia-Romagna cooperative ecosystem: Lowimpact.org interview (2023), Legacoop data
  • Yugoslav worker self-management: libcom.org, "Worker self-management in historical perspective" (2006)