Show Notes
Go to work, follow orders all day, and your living standards will rise. That is the deal behind the capitalist economy. In his forthcoming book, Cooperatives in the twenty-first century, Francesco Caselli (LSE, CEPR) argues that the deal has been broken for two generations. Pay at the top keeps climbing. Pay in the middle and at the bottom has barely moved. The usual fixes for spiralling inequality are higher taxes on the rich and stronger unions. Francesco's answer is to change who owns the firm. In a worker cooperative there are no outside shareholders, so the profits stay with the people who produce them. In conversation with Tim Phillips, he explains which of the economic objections to cooperatives are red herrings, and which ones are more serious. The research behind this episode: Caselli, Francesco. 2026. "Worker-Managed Firms Can Curb Inequality and Protect Free Markets." VoxEU.org, 7 October. Caselli, Francesco. Forthcoming. Cooperatives in the Twenty-First Century: How Worker-Managed Companies Can Curb Inequality and Support Free Markets. Cambridge, MA: Harvard University Press. To cite this episode: Phillips, Tim, and Francesco Caselli. 2026. "Cooperatives in the 21st century." VoxTalks Economics (podcast).
About the guest
Francesco Caselli is Norman Sosnow Professor of Economics at the London School of Economics and Director of the Macroeconomics and Growth Programme at the Centre for Economic Policy Research. He is a Fellow of the British Academy and of the Econometric Society. His research spans growth, technical change and inequality, the sources of economic development, the economic and political effects of natural resource wealth, and how voters select politicians. Research cited in this episode
The labour share. The labour share is the part of national income paid to workers as wages; the rest goes to the owners of capital as profit. Caselli's point is that profits flow mostly to people at the top of the income distribution, so when the labour share falls, inequality rises even if pay within firms stays the same. That is why he argues ownership, not executive pay, is the bigger part of the story. Wealth taxes. Tim raises Thomas Piketty, who argues for higher taxes on top incomes and on wealth. Caselli agrees in principle, but says any victory is temporary because concentrated wealth funds the campaign to reverse it. For evidence on how people respond to a wealth tax in practice, listen to Marius Brulhart on Switzerland's cantons, linked below. Worker bargaining power. The other standard fix, associated with labour economists such as Suresh Naidu of Columbia University, is to strengthen unions and give workers more power to bargain. Caselli puts it in the same category as wealth taxes; desirable, but vulnerable to the same political erosion. Mondragon. The Mondragon group of cooperatives in the Basque Country of Spain is the best known example of worker ownership at scale. Caselli cites its rules that let members keep a stake in the returns to investment after they leave, which answers the worry that departing workers will vote against investing in a future they will not share. WBO Italcables. When the owners of a steel wire plant in Caivano, on the outskirts of Naples, gave up on it, the workers bought it and ran it as a cooperative. Il Manifesto reported its reopening in December 2015. Caselli says the firm has since grown, invested in new equipment and exports worldwide, and uses it to question whether closures are always healthy creative destruction. The residual claimant. The residual claimant keeps whatever is left after the bills are paid. In a conventional firm that is the shareholder; in a cooperative it is the workers. Armen Alchian and Harold Demsetz (1972) used the idea to explain why firms have owners who monitor effort. Caselli turns it round: when a slacking colleague costs you money, you watch your colleagues. The compensating differential. A compensating differential is the pay people will g
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