While Mill saw large-scale Communism as a distant possibility, he identified the rise of worker-owned co-operatives as the most important and promising social development of his time. He dedicated a chapter to “the Probable Futurity of the Labouring Classes,” where he outlined this vision.

3.1. The Future of the Laboring Class

Mill was convinced that the fundamental division of society into “employers and employed” was a temporary state of affairs that could not be “permanently maintained” as civilization advanced. He predicted that “the relation of masters and work-people will be gradually superseded by partnership” in one of two forms: either an association between laborers and the capitalist, or an association of laborers among themselves.

3.2. The Ultimate Goal: Association of Laborers

Mill saw the second form as the ultimate and most desirable goal of industrial progress. He described it as:

…the association of the labourers themselves on terms of equality, collectively owning the capital with which they carry on their operations, and working under managers elected and removable by themselves.

— Principles, Book IV, Ch. VII, p. 199

He was deeply impressed by the real-world examples of worker co-operatives that emerged in Paris after the 1848 revolution. He praised the workers’ “capacity of exertion and self-denial” in forming successful businesses with little or no starting capital, proving that such a system was not merely a utopian dream.

3.3. The Moral and Economic Revolution

Mill argued that the co-operative model offered transformative benefits on two levels.

1. The Economic Benefit: Co-operatives would dramatically increase the productiveness of labor. By giving every worker a direct stake in the success of the enterprise, they would be motivated to do their “utmost, instead of the least possible,” ending the inefficiency inherent in the wage-labor system.
2. The Moral Benefit (which Mill saw as more important): This was the “moral revolution” that would result from co-operation. It would heal the “standing feud between capital and labour,” bring about an “elevation of the dignity of labour,” and, most importantly, convert daily work from a source of conflict into a “school of the social sympathies and the practical intelligence.”

This “moral revolution” was not just an abstract benefit; it was the practical education in self-government and social responsibility that Mill believed necessary to make any form of association compatible with individual liberty.

Mill’s vision of co-operative enterprise seems to place him firmly in the socialist camp. Yet, his unwavering commitment to progress led him to a conclusion that put him at odds with most socialists: a staunch defense of competition.