Could a mutual based economy be viable?

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One of the doctrines amongst my circle is the solution to the inefficient behemoths of state socialism and the unaccountable behemoths of invester-owned bodies as the worker co-operative, the mutual organisation and the credit union. The idea that I hear a lot is the state should prod and tease  both public and private companies towards "worker-owned" democratic enterprises that would take all necessary credit from credit unions that only raise interest enough to cover the overhead costs. This is presented as the ideal society as it allows the free market mechanism and individual private property ownership without the excesses of the current system.

But of course, one should never settle on an orthodoxy for too long without probing its flaws. What assumptions am I making that would cause such a system to be disadvantageous?

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I don't think a cooperative necessarily has to be small-scale. There are plenty of large national chains etc thst run in cooperative models. Rails of course are a bit different due to being natural monoplies, I guess, but I still don't really see any logistical reason why co-operatives can't run a railway, especially with modern speedy communication.