Worker buyouts
Wednesday, January 13th, 2010Worker buy-outs almost always fail. First of all, workers rarely own or can borrow sufficient money to buy the enterprise, much less to replace antiquated machinery. And they tend to be inexperienced in those areas in which businessmen specialise – borrowing money, issuing shares, insuring their company and marketing their products. Entrepreneurship is an unusual and demanding skill, and most workers – indeed most human beings – do not have that skill. So turning a company over to its workforce is often the cruelest strategy, because then the company dies a slow, lingering death as workers struggle to do something beyond their capabilities.
The same can be said of privatising companies to the current crop of cooperatives. Today these tend to be public sector enterprises, which have most of the shortcomings of other SLPEs. Of course, if cooperatives were converted into Mutually Aided Co-operative Societies and developed a proven track-record of commercial success, then they might well be equipped to rescue a former government-owned company.