The chief executive's office at the MacBody textile factory looks normal enough. It has the big desk and faux-leather chair, a large computer screen and prints of successful advertising campaigns across the wall. The only thing that's missing is the chief executive himself. He left … five years ago.

Ramón Díaz, a former salesman for the Argentinian clothing firm, now occupies his seat. The former salesman is there by the popular vote of his fellow workers. MacBody makes business decisions in a similar way, by a show of hands, he adds. "We hold general meetings every Friday. If we're all at the table for lunch, then we do it there rather than lose time later in the day."

MacBody is one of more than 300 so-called "recovered factories" operating in Argentina. Emerging during a major economic decline in the late 1990s, these unorthodox businesses began proliferating after a sovereign debt default in December 2001 that pushed many companies to the wall and left millions of workers jobless.

In the case of MacBody, the owners faced fraud charges and "simply disappeared". That's how Díaz tells it anyway. Rather than lose their jobs, he and his fellow employees decided to continue working. So the next day, they entered the $20m clothing factory as usual – only this time as their own bosses.

"At the beginning it was very difficult. We lost many of our clients. We didn't have a bank account. We couldn't access credit. You could say we were in intensive care for a while," he says. MacBody fortunately avoided any violent confrontations with police, a common feature of the early recovery movement as bankrupt owners sought to regain their assets.

An emergency extension of credit from the government and two timely short-term loans from La Base, a grant-making non-profit, saw the company through its early months. Under a municipal expropriation law passed in the wake of the 2001 crisis, they also gained provisional legal status for their new enterprise.

Worker-led management

Emerging out of a decade of rabid privatisation, the leaders of Argentina's recovered factory movement advocate a different way of doing business. Among the most important principles are equal employee ownership and horizontal management. At MacBody, for example, executive positions are rotated every two years and everyone receives the same salary at the end of the month.

"When you're used to wearing blinkers for 20 years, then it's not always easy to start making decisions for yourself", admits Díaz. On the plus side, he says his job is now more flexible and varied. "We all exchange tasks, so one day I can be working on the cutting table, another I might be going to the bank and another I could be on the road selling our products."

Eduardo Murúa echoes the same sentiment. A spokesperson for metallurgy firm IMPA, Argentina's very first recovered factory, says worker attitudes have gone through a "360 degree turnaround" since the firm's expropriation. Accidents among the 47-member workforce have dropped, as have machine breakages. "Before working efficiently and increasing the profitability of the company didn't matter to us. Now it does," he states.

"We work without anyone pushing us from behind. These days, we do the work, but we do it at our pace ... If we are exploited, it's because we have decided to exploit ourselves, not someone else. That's the big difference … If you ask anyone here if they would return to work with a boss, no-one would", he says.

Not all is rosy. The Mayor of Buenos Aires recently vetoed the expropriation law for his jurisdiction, throwing the capital city's 30 or so recovered factories back into legal limbo. In the case of IMPA, its ownership status is now subject to a case in the supreme court.

Money worries have not gone away either. IMPA, which has contracts with cable television company Direct TV among others, is exceptional in paying wages over the market rate. Back at MacBody, Díaz's salary has dropped by one third. Lack of business administrative expertise and investment capital represent other major shortcomings.

Yet if they can survive the "intensive care" period, then most tend to stay in business, notes Julian Massaldi of La Base: "The difficulties are huge, and there are flaws in the way that they manage themselves, but over the long-run they are improving rather than decaying."

State support

The longevity of the recovered factory model is partly thanks to government support. The current administration, led by left-leaning president Cristina Fernández, operates a public works programme called Plan Argentina Trabaja (Argentina Works Plan). By issuing co-operatives with public contracts rather than issuing unemployment handouts, the government hopes to galvanise growth while also reducing its social benefit burden.

In principle, it's a good idea. Díaz certainly thinks so. But then he would. Last year, MacBody was given a contract to produce all the security bibs for the police. La Base's Massaldi is less certain. By depending on the state, recovered factories are in danger of reinforcing a popular prejudice of being unsustainable, uncompetitive and – worst of all – "needing political contacts to survive". The walls of the MacBody factory are covered with party political campaign literature, which suggests he might have a point.

IMPA's Murúa is adamant that the recovered factory movement retains its autonomy and independence. A trade union activist by background, he sees the movement as a tool for political change and a step towards a "post-capitalist system", not just an alternative in management. "Sure, we got rid of the boss that we knew, the one in the factory. But there are still bosses – the bosses behind the global system of production, namely imperialism, and the large monopolistic companies that set the rules", he argues.

Arguments over the political role of the movement have led to endless internecine battles between recovered factories, which are now split into multiple federations and other representative bodies.

Over at Bauen Hotel, a favourite hangout of Carlos Menem, the former president and driving force of the 1990s privatisation boom, the bickering is being put aside for a moment. Preparations are under way for the 10th anniversary of the expropriation of the hotel, located in the very centre of Buenos Aires. "We are going to cut off three rows of traffic and have a street party," says Guillermo Pflüger, one of the "first 30" workers responsible for Bauen's recovery.

Pflüger, who doubles as the hotel's pianist and sound manager, recently commissioned a children's book on Bauen's story called Dwarves of Dignity, which he's trying to turn into an animated feature film. Stills from the book line his office wall. The largest depicts the king fleeing with his courtiers, while the cheering dwarves look on. "While the worst is unfolding", the caption reads, "the battle was liberating."

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