Reference code: C25-01

Economist Richard Wolff has proposed replacing traditional corporations with workers’ cooperatives (“coops” for short). More specifically, he advocates for Workers’ Self-Directed Enterprises (WSDEs). These organizations aim to distribute wealth, particularly net profits, across a broader economic class of worker-owners, thereby reducing the concentration of capital among a small group of individuals. These objectives are commendable.

Supporters of workers’ cooperatives frequently highlight the Mondragón Corporación Cooperativa, commonly known as the Mondragon Corporation, as a successful example of this model. Mondragon deserves recognition for building a workers’ cooperative employing approximately 70,000–80,000 individuals. However, Mondragon also illustrates certain challenges inherent in cooperatives of such scale. First, advocates often struggle to identify another cooperative that rivals Mondragon in both size and reputation. Second, Mondragon’s employment levels have remained relatively static at the aforementioned range since 2017.

Commons Capitalism Entities

I propose that Commons Capitalism Entities (CCEs) could serve as a complement to workers’ cooperatives, primarily because of their capacity to replicate and expand to reach far larger numbers of workers. While cooperatives may employ tens of thousands, CCEs could employ tens of millions. These entities would emphasize premium wages and Nordic-style social benefits for employees. This approach represents a more impactful and equitable use of net profits than limiting equity distribution to a relatively small group of worker-owners.

Why Wages and Social Benefits Scale More Effectively

Within a CCE framework:

• Breadth of impact. Cash wages and benefits reach every employee directly through payroll or benefit enrollment. By contrast, equity typically accrues to a much smaller subset of worker-owners; even in “worker-owned” models, this often means tens of thousands rather than millions.
• Immediate poverty and instability reduction. Higher wages and comprehensive benefits (including healthcare, parental leave, robust pensions, and training opportunities) alleviate financial stress, reduce turnover, and improve living standards immediately rather than decades later when equity might become liquid.
• Simplicity and liquidity. Wages and benefits are straightforward to administer and use. Equity, on the other hand, is illiquid, administratively complex, and its value depends heavily on company valuations and exit events.
• Primary priority. Workers would be guaranteed a living wage aligned with market standards, supplemented by progressive premiums for lower pay bands.
• Allocation of net profits. A CCE would dedicate 25% of net profits to pensions, healthcare, and leave; 10% to education and training; and 50% to reinvestment and acquisitions.
• Competitiveness. Although sustained wage and benefit premiums increase unit labor costs, this is precisely the purpose of commons capitalism. A CCE need not maximize net profits; it only needs to achieve reasonable profitability. Freed from strict return-on-investment requirements, CCEs could outperform traditional corporations.
• Macroeconomic fairness. Redirecting corporate surplus into wages and benefits immediately shifts income from capital to labor, narrowing income and wealth disparities more directly than equity-based schemes that concentrate future capital gains.

Why Equity Appears Attractive to Some

• Ownership incentives. Proponents of cooperatives argue that ownership aligns incentives and gives workers a stake in long-term value creation. Yet similar alignment can be achieved without capital ownership through profit-sharing bonuses and annual cash pools tied to firm performance distributed to all employees.
• Wealth creation versus wage security. Equity tends to enrich a small minority while offering limited benefits to the majority. If the goal is broad economic security, wages combined with benefits provide a stronger foundation.

Raising Living Standards

The central aim of Commons Capitalism is to elevate living standards, reduce economic precarity, and narrow income gaps quickly and at scale. Premium wages, coupled with Nordic-style benefits, consistently deliver greater social value per dollar than equity distribution to a small group. Equity generates concentrated and speculative wealth, whereas wages and benefits foster widespread, durable improvements in people’s lives.