The literature on worker cooperatives is dominated by explanations of why they do not work and why, accordingly, they are so rare. This article presents a case study of a large worker cooperative in South India that has worked well for a long time. This cooperative illustrates, among other things, that worker control and worker democracy are not necessarily inconsistent with the degree of hierarchy and delegation that may be essential to effective operation. The cooperative has been able to compete despite paying wages and benefits that are dramatically higher than those paid by its competitors, while at the same time providing far better working conditions. How it has been able to do this is something of a puzzle. Part of the explanation is good fortune at its inceptoin in attracting effective, honest, and dedicated managers and, subsequently, in avoiding government involvement and in being able to ignore cumbersome and unsuitable legal rules. Perhaps more important is the workplace culture and the ability to harness froms of mutual monitoring not available to competitors. At the end of the day, it is unclear how much of the success of the cooperative is a function of its cooperative nature and how much is a product of its unique circumstances. Still, the story of this enterprise offers useful lessons in the organization of economic activity, particularly in the importance of nonlegal mechanisms for maximizing individual cooperative productivity.
Mitu Gulati et al., When a Workers’ Cooperative Works: The Case of Kerala Dinesh Beedi, 49 UCLA Law Review 1417-1454 (2002)