Why Capitalist Firms Outnumber Labor-Managed Firms

Abstract

Orthodox economists argue that capitalist firms outnumber labor-managed firms (LMFs) because capitalist firms are more efficient. This paper reviews the literature on the economics of LMFs and argues that efficiency has very little to do with the dominance of capitalist firms. Capitalist firms outnumber LMFs because LMFs are disadvantaged in capitalist economies and because of ideological bias against LMFs. The principal obstacles faced by LMFs are: cultural and social backgrounds, workers' educational experience, worker risk aversion, financial discrimination, forces inducing degeneration and ideological bias. The importance of `shelter organizations' and a cooperative culture in supporting LMFs are discussed.

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