Market Neutrality and the Failure of Co-operatives

Among the arguments that have featured in the recent revival of libertarian thinking is one purporting to show that a free market economy, protected by a minimal state – or even no state at all – is neutral as between capitalism and a certain form of socialism. The argument runs as follows. The market places no limits on the manner in which people may associate for purposes of economic activity. They may choose capitalist forms of organization, in which case those who become owners of capital assume a greater degree of risk and responsibility and stand to gain correspondingly higher rewards, or they may choose co-operative forms, where groups of producers supply their own capital and share the profits between them. If capitalist forms are overwhelmingly favoured, as the historical evidence shows, this reveals something about the preference structure of the population as a whole. Either the bulk of the population actively wish to avoid the risks and anxieties of capital ownership, and so willingly transfer these responsibilities to the few willing to bear them; or the efficiency of the capitalist firm is such that it can pay wages high enough to compensate the work force for their loss of autonomy in comparison with the co-operative alternative.