Risk Financing in Labour Managed Economics: The Commitment Problem

Labour managed firms face some serious problems with regard to the
provision of capital, especially of risk-bearing capital. These
difficulties are discussed in the first part of the paper.
Subsequently it is argued that these problems are rooted in the
fact that the workers are insufficiently committed to the long run
well-being of the labour managed firm, i.e. in the lacking of a
sufficient commitment mechanism. An interchange of the roles which
capital and labour play under capitalism would require tradable job
rights, an arrangement which is not feasible. It is concluded
therefrom that any workable labour managed economy needs a special
commitment mechanism. A high rate of unemployment might serve for
this purpose, or, more attractively, a reduction of labour mobility
through appropriate incentives like seniority-dependent
remuneration schemes.