Cooperatives and Socialism

We have been looking at the way work and pay are organized in our society. In this section we shift our focus somewhat from what “is” to look at alternative “caves”, different ways of organizing work and pay based on different assumptions about what’s True/truths. The readings for these two sessions also look outside the U.S. Cooperatives are a form of organization that challenges the assumption that owners and workers are two distinct categories of organizational actors. For a good summary of the history of coopearatives in the United States, check out this website from the University of Wisconsin, Madison. Also check out the seven minute set of slides (great, clear), “How Worker Cooperatives Work”, and the website of the National Cooperative Business Association, including their “Co-op Principles” page.In the U.S. cooperatives have been a major part of life in rural areas to the present day, for the purchase of inputs, the marketing of goods and finance. The height of the agricultural cooperative movement occurred in the 1920s-30s (again, see the University of Wisconsin site. Today, while cooperatives continue to be very important in agricultural areas they also function in many other sectors. According to the National Cooperative Business Association there are now 48,000 cooperatives in the U.S., including student-owned cooperatives such as those at UMASS Amherst. The Benello reading describes the history of the Mondragon cooperative. Mondragon is (probably? I’m not sure) the largest private cooperative in the world. It is notable not only for its size and financial success but also for its conglomerate-like organizational structure. One of the major challenges facing a cooperative business in the U.S. is getting financing. Most bank officers do not have much experience dealing with cooperatives (which seem to be operating outside of “normal”) and may be skeptical about their viability. Mondragon dealt with this problem by creating its own bank! (In the U.S. cooperatives are trying to create similar financing bodies). The website for Mondragon is in English. You can find a variety of statistics and graphs that suggest their success. Take a look at the website for an update to the Benello reading.Socialism is a form of organizing the economy and society that is very unfamiliar to most of us. In this course we don’t have the opportunity to examine it in depth. Consider this a very small and superficial taste of one experience in socialism. Note: As you read this material, please try to consider the ideas with as few preconceptions as possible. Some of us are accustomed to running a “socialism = communism = dictatorships = anti-Americanism” kind of tape in our heads. Our goal is to look at as many different ways of understanding business and its environment as possible. We are not well-served if we assume that we already understand other people’s ideas. Throughout the 19th and the first half of the 20th century, Cuba had very strong ties to the U.S. In fact, it was occupied by the Marines twice. The Cuban economy was a monoculture based on the production of sugar cane. There was also a very strong casino and nightclub culture in Havana, which was frequented by people from the U.S. (think Ricky Ricardo in I Love Lucy… you’ve got to watch him sing!) The vast majority of Cubans lived in desperate poverty, without access to healthcare or education. The government was controlled by the U.S. backed President, Fulgencio Batista, who took power from the elected president in a military coup. For much of the 1950s, Batista exercised absolute control over the political system, promoted U.S. investment interests and had close ties to U.S. organized crime. U.S. and other foreign investors controlled the economy, owning about 75 percent of the arable land, 90 percent of the essential services, and 40 percent of the sugar production.The Cuban Revolution came to power in 1959 (see this 4-minute video from the History channel for a short summary of the Revolutionary war). One of the key leaders of the Revolutionary war was Che Guevara, an Argentine medical doctor. See the Wikipedia link for more biographical information on CheAfter Batista was overthrown Che became the chief of the Industrial Department of the National Institute of Agrarian Reform, president of the National Bank of Cuba, and Minister of Industry. In those capacities he designed and promoted systems that were meant to move Cuba from monoculture and underdevelopment to a diversified economy that also provided a higher standard of living for the majority of people. Che was very clear that the ultimate goal of the Revolution was socialism and then communism, in which markets (especially markets for labor) would be unnecessary. Part of the goal was the establishment of new norms of behavior (a new “normal”), and of a “New Man”. However, Che was equally clear that this was a long term goal, that new organizing patterns (I’m substituting in our class’ vocabulary here) required different cultures, and that new cultures developed slowly and only with great effort. The Mallott article on voluntary work describes some of the systems for organizing work and pay that Che instituted in Cuba. These systems were designed to eliminate what Che saw as gross inefficiencies of the existing systems as well as to promote the kinds of behaviors and norms that were deemed necessary to the development of the new society, including voluntary work (see 30 second clip) of Che himself describing the role of voluntary work in the “new society”. As you consider these systems, it is important to remember that under socialism – and even in the nascent socialism of Cuba in the early 1960s – the state is responsible for providing basic goods and services such as health care and education. This is an important assumption underlying Che’s vision: that individual salaries would not have to be dedicated to purchasing much of what we consider market goods. In 1966, Che left Cuba and went to Bolivia to help mobilize an armed revolutionary movement in that country. On Oct. 8, 1967, the group was almost annihilated by a special detachment of the Bolivian Army that included members of the C.I.A. Guevara was captured after being wounded and was shot soon afterward………Please respond to the following: 1) What are the characteristics of the Mondragon cooperatives that you find most different from businesses with more familiar organizational forms? 2) What assumptions seem to underlie the Mondragon? 3) What do you think about these characteristics and assumptions?

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Behavior and Soclol Issues, Fall/Winter 1992, Vol 2, Number 2
Maria E. Malott
Malott & Associates
ABSTRACT: In a period of about 30 years, tbe Cubans dramatically improved tbeir wall-being aud
attempted to develop the ultimate hwnanitarian society, one where people’s actions are main)ymotivated
by tbe well,belng of humanity, witbout support of individual material incentives. An analysis is made
of tbeir efforta to keep sight of tbe wall-being of humanity as tbeir ultimate goal aud to OITange cultural
contingencies that generate behavior competible witb that goal. It is argued that (a) such a
humanitarian society will not evolve randomly witbout tbe intervention of cultural desigoers; (b) netursl
contingencies often generate behavior incompatible with the well-being of humanity, therefore, the
development of a humaultarlau society requires tha desigo and implementation of
performance-management contingencies; (c) a society geared to tbe wall-being of humanity must not be
confused with a society free of aversive control; and (d) to use money as an incentive in addition to moral
incentives does not necessarlly oowtteract the development of a humanitarian socieo/, the important
issue is the contingent relationship between performance and incentives.
I am not a commtmist nor a socialist; I make my living as an organizational
behavioral co,nsultant for capitalist profit-making organizations, and I was skeptical
of the Cuban regime.. However, my view of Cuba changed after visiting Havana
with a group of behaviorists in 1991 (Morrow & Work, 1991). Several features of
the Cuban culture inlpressed me and inspired this paper: (a) the success Cuba has
had in inlproving the well-being of the Cuban people; (b) the debate on moral
incentives vs. material incentives; and (c) the large number of pay-for-performance
systems implemented in what is considered a commtmist/socialist welfare state.
These features are somewhat independent but also somewhat related. From a
behavioral systems-analysis perspective, I will consider the inlplication of these
features of the Cuban experinlent.
While several features of contemporary Cuba inlpress me, I am not addressing
the inlportant and controversial issues of the relative strengths and weakness of the
commtmist, socialist, and capitalist systems; totalitarianism and democracy; various
judicial systems; or freedom of speech and the press. These inlportant concerns are
beyond my area of professional expertise and beyond the scope of this paper.
Autbor’s Note:
Please address further correspondence to: Maria E. Mallot, 8971 West KL Ave., Kalamazoo, MI 49009.

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Although Cuba has been criticized on many grounds, few objective observers
would deny that the well-being of most Cubans has dramatically improved since the
revolution of 1958. In about 80 years, the life expectancy of the Cubans increased
from 62 to 76 years and now is the highest in Latin America, similar to that of the
United States. Mother mortality decreased from 118 to 81 per 100,000 births.
Infant mortality decreased from 60 to 10.7 per 1,000 births (Castro, 1991; Rodriguez,
1988; World Population Profile, 1989). Although the infant mortality rate has
decreased significantly in all Latin American countries, todey Cuba has the lowest
infant mortality rate among them (Sheahan, 1987). It is even lower than the
United States (12.6 per 1,000 births; World Population Profile, 1989).
In today’s Cuba, still a third world country, there is no malnutrition, slthough
80% to 40% of the people in the cities and over 60% of the people in rursl areas
were malnourished before 1959 (Benjamin, 1990). In contrast, malnutrition in the
third world continues to be the number-one killer of young children (Benjamin,
Collins, & Scott, 1989). It affects as many as 500 million people in the world
(Sadlk, 1992) and between 80 to 100 million people in Latin America (Castro, 1991).
Although 18% of Cuba’s rural population used to die of typhoid and 14% of
tuberculosis (Benjan’iin et a!., 1989), they no longer die of these causes. Now,
Cubans die of causes similar to those in developed countries – heart diseases,
malignant tumors, cerebrovascular diseases, and accidents (Santana, 1987; Tablada,
1991a). It seems plausible to attribute at least part of Cuba’s success in achieving
good health statistics to its concurrent attainment of a large health-care profession:
Cuba has more medical doctors per population than any country in the American
continents, including the United States and Canada (Comite Estatsl de Estadisticas,
The rate of illiteracy has decreased from 42% before 1961 (Rodriguez, 1987)
to 1.9% in 1991. At the present time the rate of illiteracy is 17% in the rest of
Latin America. Cuba’s rate of illiteracy is even lower than that of the United States
and is comparable to those of the industrialized countries of Germany and Japan
(Tablada, 1991a).
Possibly some of Cuba’s success in achieving a high literacy rate is due to its
concurrent achievement of educations! participation: Approximately hslf the
children between six and eleven years of age were not attending school in the 1950s,
but nearly all are today. Between 1958 and 1976, the percentage of workers with
secondary education increased from 8.1% to 25% and the percentage of those with
semi-specialized or higher education increased from 8. 7% to 9.4% (Acosta, 1987).
After Argentina, Cuba has the highest ratio of professors to students in Latin
America (Comite Estatsl de Estadisticas, 1986).
Cuba has one of the lowest rates of violent crime in the world (Benjamin et
a!., 1989). There are no beggars in Havana today, although there were at least
5,000 in 1958 (Benjamin et al., 1989). “There are 30 million homeless children in
Latin America’s streets” (Castro, 1991, p. 55). Of the 430 million inhabitants of
Latin America, 260 million people live below the poverty line. However, according
to Tablada “not a single Cuban lives in such conditions of hopelessness, hunger, and
disease” (cited in Staff, “1,000 hear,” 1991, p. 4).
At least some of Cuba’s success in eliminating such extreme poverty might
have resulted from Cuba’s concurrent elimination of unemployment: In 1958, 12.5%
of the adult population was unemployed (Zuaznabar, 1989); 700,000 working Cubans
were out of work for most of the year. But there was almost no unemplayment in
Cuba (Steif, 1983) until the economic crisis that began with a decrease in oil
shipments in 1990. Nevertheless, those whose hours have been cut and those
whose jobs have been temporarily suspended still receive a partial salary, pay lower
rent, receive free health care and education, and are assured of equal food supplies.
In the rest of Latin America, from 30% to 40% of the work force is unemployed or
underemployed (Castro, 1991).
Improving the well·being of humanity was the goal Cuba’s leaders claimed
inspired the revolution. (Malott & Garcia (1987) argue that this goal should be the
ultimate goal of all human systems.) Cuba’s leaders promised to abolish hunger
and misery and reduce economic and social inequities: “Our fll”st goal is to assure
that no one goes hungry, then see that everyone eats daily. Afterward we should
assure decent living conditions for everyone. This would be followed by free medical
assistance and education” (Guevara, 1964/1969c, p. 236). In spite of many economic,
political, and social difficulties, the Cubans have not abandoned these goals.
Be~amin et a1. (1989) stated it this way:
But we should never lose sight of the fact that the Cuban revolution declarod, from the
outset, that no ~ne should go malnourished. No disappointment in food production, no
failed economic take-off, no shock wave from world economic crisis ·has deterred Cuba
fioom freeing itself fioom the suffering and shame of a single wasted chlld or an eldarly
person ignominiously subsisting on pet food. No other countcy in this hemisphere,
including the United States, can make this claim. (p. 189)
I experienced these sentiments in some casual encounters during my visit,
suggesting that the well-being of humanity might not only be a goal of the Cuban
leaders but that of the Cuban people. For instance, I met a Cuban in the street
who responded to my disappointment at not fmding a single photocopy machine
anywhere in Havana by saying, “there is no reason to be upset because now this
country has priorities other than paper. We have to take care of our energy crisis
and basic needs fll”st; then we can think about photocopy machines.” I found
similar reactions from a newspaper salesperson, a taxi driver, a person wandering
in a park, and professionals from the University of Havana. Of course, there were
exceptions, like the few people near the hotel who wanted to buy dollars in the
black market, showing no concern for the Cuban economy.
The Cuban leaders seem to have lived up to their promises of not abandoning
the goal of the well-being of their people. However, like most human systems,
sometimes the leaders have followed steps inconsistent with this goal. Cuba’s
health system is one of the best state-run health systems in the world (Health,
1990), and its success in providing medical assistance and improving hygiene
standards is undeniable. However, mortality rates due to heart disease (fwst cause
of death), malignant tumors, cerebrovascular disease, and pneumonia (Santana,
1987) have significantzy increased This is probably related to the consumption of
tobacco products. Todsy it is well known that tobacco causes higher risk of heart
disease, stroke, hypertension, angina, and other health hazards. It is also known
that smoking is the most preventable single cause of death (Pritikin & McGrady,
1979; U.S. Surgeon General, 1989).
Cuba produces more tobacco and cigarettes per capita than any other country
in Latin America, though not nearly as much tobacco per capita as Belgium, and
not nearly as many cigarettes per capita as the United States, Canada, Korea, and
European countries like Yugoslavia, Germany, Belgium, and Bulgaria (Comite
Estatal de Estadisticas, 1986). The decrease in tobacco crops from 6% to 8%
between 1946 and 1980 resulted from crop diseases and weather difficulties
(Beliamin et al., 1989), rather tban a connnitment to the well-being of humanity.
Although Castro stopped smoking as example for the Cubans, he did not stop the
manufacturing process. Cuban tobacco not only harms the health of its people but
also the health of the world: Tobacco exports have significantly increased since 1958,
and now tobacco is Cuba’s second most important agricultural export crop (Stubbs,
1987). (Similar analyses could be made of Cuba’s production of refmed sugar and
!’ .

Furthermore, the pursuit of long-term humanitarian goals does not prevent
the Cubans from experiencing other systems pitfalls, like deficient delivery of
services, massive inefficiencies and waste, and lack of basic goods (Fletcher, 1991;
Zimbalist, 1990). I was shocked that I could not find iodine in several pharmacies
in Havana. And when I did find it, it took half an hour to buy it, although there
were eight employees at the counter and three clients in that pharmacy. I was also
amazed to see several shops. with block-long lines of people, waiting for single
products (e.g., ice cream, rum, coffee, and pizza); or to eat cold meals almost every
dey in one of the best hotels in Havana because there was not enough gas. Also
it was nearly impossible to get a taxi in Havana; our group had no choice but to
walk forty blocks one dey.
Cuba’s problems are far more complex than a question of prioritized goals;
they involve complicated political, managerial, and distribution issues the ans1ysis
of which is beyond the scope of this paper. (For details on the nature of economic
difUculties in Cuba, see Fitzgerald, 1989; Mazarr, 1989; Ritter, 1990; Zimbalist,
For the Cuban leaders, improving the well-being ofhUll1lUlity not only involves
providing basic resources to all but it also involves transforming human beings and
their social relations (Tabl!tds, 1989, 1991b). ‘l’hese leaders sought the development
of the so called communist man, the new man (Le., the humanitarian person for
whom the betterment of others would be an important reinforcer that controls
much of his or her actions). Such altruistic persons, who behave according to a
humanitarian ethic, would be the basis of the so<:ial system. Guevara said, "A socialist economy without conuilunist moral values does not interest me. We fight poverty, but also we fight alienation. A fundamental aim of Marxism is to eliminate material interest, the factor of 'individual self-interest,' and profit from man's psychological motivations" (cited in Tablada, 1989, p. 215). For more than SO years, Cubans have been debating the pros and cons of · moral and material incentives. Moral incentives "connote workers being motivated by a concept of goodness for the commonwealth... Material incentives take the form of wage and salary differentiation, piece-rate payments, bonuses for meeting certain goals, and profit sharing" (Zimbslist, 1989, p. 66). Wben designing cultural contingencies, the distinction between incentives and contingen<:ies is often ignored. Incentive is "the reinforcer or aversive condition that follows a response" (Malott, Whaley, & Malott, 1998, p. 162). Two conditions m•e needed for an incentive to control behavior. First, the incentive must be both sizeable and probable. So, even though violating industrial safety procedures could produce severe injury (sizeable incentive), the negative incentive of injury does not control safe behavior effectively because injury rarely follows unsafe behavior. Second, the incentive must be contingent on behavior. Therefore, we should not expect pay bestowed independently of work performance to affect that perf01'Dlllllce. (For a similar analysis, see Gilbert, 1978; Morrow, 1988; Rakos, 1991; and for empirical demonstrations, see Kelly & Stokes, 1982; Pierce & Risley, 1974.) Incidentally, it is in connection with moral incentives that the term social consciousness is used (Ulman, 1991). The popular use of this term implies that awareness (Le., stating verbs! rules) causes people to behave in ways compatible with the well-being of the culture. Though awareness might be needed for some rules to govern behavior, it is not sul:llcient. The critical element of control is the contingency. Different contingencies control what people say (i.e., awareness) vs. what people do (Skinner, 1969). The term moral incentives implies that actions that help humanity would be automatically or intrinsically reinforced, and actions that harm humanity would be automatically or intrinsically punished. "'ntrinsically controlled behavior is simply 108 MALOTI' behavior maintained by consequences that are the natural and automatic results of responding" (Dickinson, 1989, p. 2). By intrinsically I mean that engaging in humanitarian behavior would be sufficiently reinforcing in itself, such that no additional, performance-management contingencies involving material incentives would be needed. And engaging in behavior that hurts humanity in itself would be sufficiently aversive as to decrease that behavior. Here is the question that summarizes for me the debate over moral vs. material incentives: Can we build a society in which its citizens' actions are "intrinsically'' motivated by moral incentives (i.e., the well-being of others), without need for additional material contingencies? In trying to answer this question, I will frame my position within what Malott (1992a) has called the three-contingency model of performance management. This model involves an analysis of three types of contingencies: natural contingencies, performance-management contingencies, and theoretical contingencies. ARRANGING EFFECTIVE CULTURAL CONTINGENCIES I I Noturol Contincencies ! I! ' i! i Can a random configuration of naturally occurring contingencies cause people compatible with the well-being of others? I believe not: to behave in a Natural, direct-acting contingencies of reinforcement and punishment often cause people to act in ways that are counter-productive to long-term humanitarian objectives even though they value those objectives (Malott, 1984, 1986, 1988; Malott et al., 1998). Direct-acting contingencies involve sizeable, probable, and immediate outcomes tllat directly reinforce the causal response. 2 For instance, eating (behavior) will be reinforced by the consumption of food (an immediate, sizeable, and probable outcome), if that person is food deprived (establishing operation).' For such a person, it is "natural" to eat the food when available and to Ignore the well-being of others. Also, experimental data show that the opportunity to engage in aggressive behavior acts as a reinforcer for an organism exposed to aversive stimulation regardless of the well-being of the species (Hutchinson, 1977; Skinner, 1969). The point- is that so-called "human nature" (i.e., behavior controlled by natural, direct-acting .contingencies) does not always generate behavior geared to the well-being of humanity. Direct-acting contingencies must be distinguished from those that are not direct acting; these include outcomes that are too delayed, too improbable, or too small and only of cumulative significance. (See Flgnre 1.) Though the outcomes of these contingencies do not directly reinforce or punish the causal response, the contingencies could control behavior. When they do, they are called indirect-acting contingencies. They involve delayed, though sizable and probable outcomes. With manner 1 ,'II ;i I I 104 DESIGNING A HUMANITARIAN CULTURE verbal human beings, a delay does not prevent the contingency from effectively controlling behavior, even though that contingency does not directly reinforce or pnnish that behavior. BEHAVIORAL CONTINGENCIES DIRECT-ACTING NOT DIRECT-ACTING I Outcomes are: sizable, probable, and Immediate (eating _,.._taste) I INEFFECTIVE I Outcomes are: small and improbable (work __ ,.._well-being) INDIRECT-ACTING Outcomes are: Sizable, probable, and delayed (work _,_vacation) Figure 1. Analysis of behavioral contingencies. When contingencies do not control behavior, they are ineffective. They are ineffective because their outcomes are improbable or too small (although perhaps of cumulative significance) (Malott, 1992b; Malott & Malott, 1991; Malott et a!., 1993). Most truant workers would probably show up to work reliably if one day's absence meant the end of humanity. But usually, working a whole day (behavior) will have an insignificant effect on the well-being of humanity (outcome). By itself this contingency is so ineffective that it will allow procrastination to the point that work attendance might never take place. It is relatively easy to get people to lend a band during times of crisis; but it is relatively hard to get those same people to reliably do the daily chores needed to keep things functioning well. Furthermore, this ineffective contingency will compete with direct-acting contingencies (direct-acting contingencies are effective by defmition), like the one specified in the following rule: Going to work today (behavior) will cause the 105 II I! 1: ! r MALOTI' worker much effort (aversive outcome). This direct-acting contingency would decrease the likelihood of going to work. Altruistic values (i.e., being reinforced by the well-being of others) should be distinguished from contingencies that generate altruistic behavior. It ... Purchase answer to see full attachment

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