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Friday, April 21, 2017

Social Democracy and Capitalism : A Critique





originally written for a Fabian Society Forum ; Melbourne ; 19/4/2017

A finalised version of this will be submitted to ALP policy development bodies for consideration ; PLS provide feedback if you think it may help me improve the final version...

Restoring 'a traditional social democratic mixed economy' is part of the solution to current economic maladies ; but at the same time it is only the beginning of the journey...

by Dr Tristan Ewins , April 2017



Capitalism and its benefits



1)     Capitalism is an economic system based on the private ownership of the means of production, exploitation of labour by Capital, and markets as vehicles for distribution and exchange.  



2)     Capitalism has benefits and failures ; which can be maximised or ameliorated via economic policy, and by the struggles of ordinary people for justice



3)     Capitalism as we know it has the benefit of promoting innovation through the dynamics of competition ; The competitive market system drives capitalists to innovate and respond to the intricacies of consumer demand.  It also leads to the development of the means of production.



4)     Capitalism also has the benefit of driving efficiency and productivity gains via those same dynamics of competition





Capitalism’s Flaws





5)     But Capitalism’s failures include the following



Canadian economist Jim Stanford estimates that ‘the capitalist class’ of top owners and management dominates control of the economy despite only comprising about 2 per cent of the population.  This has implications for the viability and meaningfulness of democracy.



Capitalism has also always involved a ‘business cycle’ ; characterised by fluctuations in consumer demand and investor confidence. This could be sparked by the collapse of investment bubbles and the spread of ‘bad debts’; and in response to the use of interest rates to contain inflation , or because of ‘supply shocks’. (eg: the Oil Shocks of the 1970s)   And these crises spread in the context of world capitalism because of increasing global economic interdependence.  At its worst this has occurred in the context of Depression , and more recently with the Global Financial Crisis.  These were only eventually overcome in the context of stimulus , government guarantees and other interventions , and in the past (eg: WWII and post-war reconstruction) also because of the ‘boost’ provided by rearmament and war.   The Great Depression put paid to the economic Liberal argument that ‘perfectly free markets’ ensured the full mobilisation of all ‘factors of production’. Arguably the right kinds of stimulus, intervention and regulation can reduce the severity and duration of the associated downturns.   This includes what Keynesians call ‘demand management’.  Downturns are a good time to invest in infrastructure, for instance ; though there are arguments to invest in productivity and quality-of-life enhancing infrastructure outside of that context as well.  Indeed stimulus can create ‘a multiplier effect’, creating jobs indirectly as well as directly.  But government (or ‘the people’) should not shoulder all the costs and risks, here ; with little in return.  Some of the concerns socialised to restore stability during the GFC should arguably have remained socialised.



6)      Left to its own logic capitalism leads to economic monopolisation or oligopolism – which in turn can lead to the abuse of market power.  It also leads to systemic inequality.  Though this can be ameliorated through labour activism , labour market regulation , progressive tax , and the social wage and welfare systems.  And also by competition policy ; or enforcement of competition via Government Business Enterprises with charters on promoting competition. Again, though, the ‘capitalist class’ as such comprises only 2 per cent of the population ; and yet has the power directly or indirectly to veto any public policy through destabilisation and/or a ‘capital strike’.  Unless ‘the people’ are sufficiently conscious and organised to oppose those strategies.



7)     Nation States also pursue their economic interests attempting to extend their economic sphere of influence through control of – and access to -markets in other countries (including key strategic resources) ; or in the past through more direct expansionism.  This can involve military force or economic and cultural pressure ; and was described by the British liberal social theorist John.A.Hobson as “Imperialism” ; a term which was then seized upon by Vladimir Ilyich Lenin to explain the First World War.



8)     Marxists once believed in ‘absolute pauperisation’  and ‘absolute bifurcation’  under capitalism; with the destruction of the middle classes through the dominance of monopoly capital and the inability of small business to compete.  In reality the ‘middle classes’ have re-emerged in diverse forms.  Via the professional classes ; via emerging small businesses in new industries where monopolies have not yet consolidated ; and more recently as contractors who compete against each other to provide goods and services for monopoly capital , or in other contexts via small jobs for private consumers and households. Meanwhile, the working class generally includes all wage labourers – skilled and unskilled, manual and mental.  The wealthy , and Ideological economic Liberals and capitalists, try to play the middle classes off  against the working classes and the disadvantaged.  As well as playing the working classes off against the most vulnerable with ‘anti-welfare’ narratives ; and using narratives around ‘political correctness’ as a wedge against the progressive liberal, social democratic and socialist Left.  Also capitalists try and play manual labourers against intellectual labourers ; appealing to intellectual labourers that they are ‘middle class’. (and hence do not share the same interests)  In democracies the challenge is to build a stable progressive electoral bloc to fight this.  Swedish sociological theorist Walter Korpi referred to a ‘democratic class struggle’. Arguably Labor could do better to consolidate its support bases around the working classes and the vulnerable by playing more directly to their interests and challenging dominant Ideological themes; while maintaining the support of middle class liberals.



9)      Current emphasis on ‘no real wage rises without productivity improvements’ leaves some labour-intensive professions (eg: cleaners) with little or no prospect of a real wage rise, ever.  That is: without increases in the intensity of labour – a disturbing notion given we are already talking about some people who are engaged in hard and demanding physical work. Hence the creation of effective poverty traps. Workers in other areas like Primary and Secondary Teaching would also be hard pressed to achieve ‘productivity gains’.  It also leads to absurd scenarios ; for example in higher education ; with academics measured by  their ‘academic output’ ; often excluding deep thought and study of particular areas ; and getting in the way of good teaching.



The Imperative of Capitalist Expansion ; and the Associated Waste


10) Capitalism involves a dynamic of expansion ; Its survival depends on it.  Waste at various points in the production process means capitalism must continually expand into new markets – or more thoroughly exploit old markets - to remain viable.  That waste includes cost structure duplication because of competition, and also the cost of continual revolutionisation of the means of production to maintain competitiveness.  There are also areas of unnecessary costs in areas such as marketing, dividends, executive salaries, and so on.  Getting rid of this waste and duplication could arguably be qualitatively good for the economy, and for consumers : freeing resources to be deployed elsewhere.  Decisions need to be made as to where natural public monopolies are viable (eg: transport and communications infrastructure) ; as well as where existing corporate competition (eg: Samsung versus Apple) actually does drive innovation which improves peoples’ lives.



11) There is also extensive waste in other areas.  For example the fast food industry involves enormous waste ; and domestic food consumption alone also involves $8 billion of waste every year.   But approximately 2 million Australians depend on food aid every year.  Also there is the spectre of planned obsolescence (for instance white goods and electricals): that is, things are not made to last because that ‘would be bad for business’.  This might warrant some kind of regulation re: minimum warrantee length for said electricals, whitegoods and so on.



12) But also there are limits to how far capitalism can succeed by extending its reach into new markets or more thoroughly exploiting old ones ; Over the past century capitalism has driven greater labour market participation: for instance that of women.  It has integrated most of the world economy also.  Now capitalists are demanding changes which grate against social democratic principles, interests and values.  This led to what social theorist Jurgen Habermas called a ‘Legitimation Crisis’.  That is, capitalism could not or would not deliver any longer on the post-WWII social democratic historic compromise.  This was dealt with in the form of attacks of social democratic Ideology ; that is – convincing people to renounce their own social and industrial rights on the basis that neo-liberalism, greater inequality, privatisation, and austerity were ‘natural’, ‘inevitable’ and according to Margaret Thatcher that ‘There is no Alternative’. (‘TINA’)  This also involved twisted Ideological narratives of individualism and meritocracy which ‘naturalised’ and justified inequality and exploitation.



13) In response to the systemic imperative to expand into new markets – or more thoroughly exploit old ones - capitalists are demanding increases in labour intensity, longer working lives, and longer working days.  Capitalists are also pushing down on wages, conditions, welfare, the social wage and so on – to ‘create room’ for profits.

 

14) But this creates as many problems as it solves. Cutting welfare, the social wage, and so on may provide a short, local boost to profits of particular enterprises.  But it also reduces consumer demand and consumer confidence , and probably increases the costs of crime.  As well there is an intensification of inequality, and a hit to quality of life.  We are producing more on this planet than ever; and yet we are told we most work longer and harder ; and not simply enjoy the benefits of greatly improved productivity in some areas.  Also capitalist measures of production (eg: GDP) often take no account of social capital, and the benefits of voluntary work, and ‘intangibles’ (to capitalism) such as free time, happiness and the environment.



15) Left to its own logic capitalism creates great inequality. Certain social democratic policies can ameliorate this without a full transition to a qualitatively different economic system or mode of production.  (which is not currently an option)  Though we should not feel inhibited in imagining alternatives ; and discussing where current problems could ultimately lead.


Socialisation  and the Welfare State could still  ‘Save Capitalism from Itself’


16) Firstly, a bigger public sector can actually be ‘good for capitalism’ to a significant degree.   Reversion to natural public monopolies in several areas could reduce cost structures, creating efficiencies which flow on to the broader economy.  This includes in communications, transport infrastructure, energy, water, and potentially with a single public-sector job search and welfare agency.  Cost structures would be reduced because of a cut in waste, duplication and unnecessary or inappropriate competition (eg: in energy) ; as well as because of a superior cost of borrowing for Government.  Again there are some areas (eg: energy) where ‘competition’ is ‘anti-intuitive’ for consumers ; and confusion leads to abuse of market power by energy retailers.  For policy makers there is also the danger of nepotism through the privatisation process ; including Public Private Partnerships which facilitate the ‘fleecing’ of consumers.



17) Secondly ; while capitalism needs to expand into new markets to survive, at the same time it undermines itself insofar as in its current form it is failing to create full time work for all those who want it. It is also failing to create full employment for all who want it; and indeed depends on ‘a reserve army of labour’ to discipline workers into accepting its demands on wages and conditions.  Proactive industry policies should endeavour to create full employment , and full-time employment for all who want it.  This involves the more thorough exploitation of old markets and well as taking advantage of new ones.  And with real creativity government can act as ‘employer of last resort’ through programs which provide for genuine social goods ; not merely pointless schemes ‘painting rocks’ and the like.



18) Further, strategic government business enterprises in areas like banking, general insurance, medical insurance – could counter attempts by private oligopolies to exploit their market power and fleece consumers.  That would mean more disposable income for average consumers upon whose demand the economy depends.



19) Finally, as the Nordics have shown , growing the social wage and welfare state is also good for people ; good for the economy. Greater equality can mean greater happiness ; and also greater consumer demand – as those on lower incomes spend a greater portion of their income.

Through these strategies capitalism can be made ‘more survivable, more fair, and more stable’.  These do not provide a final answer for capitalist instability and injustice.  But ‘with no way out’ for now to a qualitatively better system of production the amelioration provided by such responses is crucial for those who will have to live and work under capitalism.

Better Outcomes for Consumers, Workers, Taxpayers…



20) The Social Wage and Welfare State can also contribute to happiness and well-being by providing a living income for the disadvantaged and vulnerable , and support for carers.  The social wage, welfare state, and other areas of state provision (eg: infrastructure) can also provide a vehicle for ‘collective consumption’ by taxpayers via the tax system – providing much better value for money than were the associated goods and services purchased by atomised, private consumers.  As already alluded to ; the same applies in relation to ‘collective consumption’ with regard natural public monopolies re: certain infrastructure and services ; and in areas of health, education and so on.  Even if people pay more tax over the short term, they end up better off – with more disposable income after non-negotiable needs are provided for. 



The social wage and welfare state demand higher taxes as a proportion of the economy ; but for the reasons stated actually tend to leave most people materially-better-off.  And with more choice ; that is, more purchasing power – not less - after essentials are provided for.



Democratic Socialists and Social Democrats must look to the best tax mix also. The overall tax mix must be progressively structured.  Arguably for fairness corporations and the wealthy must pay more ; as far as it can be sustained. If there are consumption taxes, for example (perhaps to prevent tax evasion), the bad distributive effects of this must be fully offset through progressive taxes and social wage measures elsewhere.  A bigger role for progressive income taxes, taxes on dividends, taxes on wealth and capital – is desirable.  Social security, welfare and the social wage (perhaps including a guaranteed minimum income) must raise the ‘floor’ of inequality as high as can be fairly sustained. (that is, higher minimum wages, including the effect of the social wage)  Currently there is exploitation of the low paid and unreasonable inequality in the labour market and in wealth ownership ; but there are arguments that reasonable reward for effort, unpleasant labour, past study and skill - should be factored in. (as most people accept)  There should be much less inequality ; but some inequality is justified even under democratic socialism.



Tax can also comprise a ‘lever’ for gradual socialisation over the long term in strategic areas of the economy.

Finally the broad Left and Centre-Left cannot morally abide by a system which uses the threat of descent into an ‘underclass’, or classes of ‘utterly destitute’ and ‘working poor’ – as a way of ‘disciplining’ other workers. Neither can we tolerate ‘middle income’ demographics having their material living standards (interpreted here as material consumption) rest upon exploitation of the working poor. What is needed is broader solidarity to the point where there is no class of working poor or utterly destitute. 



21)  As well the social wage and welfare state can provide the following:  High quality, comprehensive universal health care for all ; Providing  high quality Education for all – including education for personal growth, political literacy,  and hence preparation for active and informed citizenship; as well as education to meet the demands of the economy and the labour market.  Other important areas include public and social housing, legal aid , child care, financial services, access to information and communications services and technology , assistance for equity groups , Public sector media such as ABC and SBS with charters to maximise participation, support extensive pluralism, support local culture ; Broader support for diverse local culture, recreation, sport, and so on.  Creating ‘the good society’ involves more than ‘hands off’ and ‘leave it to the market’. New needs are also always arising as the economy and technology develop.



22) Further ; there is a growing push for a ‘guaranteed minimum income’ for all ; which makes sense given the looming problem of distributing the productivity gains of future automation ; But also providing a ‘basic floor’ below which no citizen will be allowed to fall.



Automation is inevitable and governments must intervene to ensure the full economic benefits are passed on to workers and consumers.



23) The emerging economy should provide flexibility where possible on workers’ terms.  Again ; Those wanting part-time work should be so provided.  And those wanting full-time work should be so provided.  All people should have the prospect of a fulfilling life ; with a mix of varied manual and intellectual labour.  There should be scope to devote time to personal growth ; including creative labour , study and recreation.  Industry and labour market policies must aim to update skills, and also strive to nurture new industries which draw on existing skill sets where jobs have been lost. 



24) As Professor Andrew Scott explains in his work ‘Northern Lights’, the Danes have a policy they call ‘flexicurity’. Rather than focusing narrowly on 'flexibility for employers to dismiss workers', the Danes also emphasised 'the provision of generous unemployment benefits for those who lose their jobs' and 'the provision of substantial and effective Active Labour Market Programmes (ALMPs), [with] quality training to help unemployed people gain new skills for new jobs …'  (Andrew Scott, p. 135, (pp. 152, 154-55).  By contrast Australia suffers 'the lowest level of unemployment benefits  in the OECD for a single person recently unemployed.'  Furthermore, ‘Work for the Dole’ programmes are punitive and provide little in the way of relevant skills for job placement. (Andrew Scott ; pp. 136-38).  Denmark’s active labour market programmes are expensive says Scott, but are worth the investment in radically higher workforce participation.   Achieving an economy which operates at ‘full bore’ – as the Swedes achieved for a significant time - also means more revenue for social programs.  Industry policies ensuring more high wage employment also enhanced those outcomes.





25) The Housing Affordability Crisis is driving an economic wedge between Housing Market Investors, Home Owners, and those struggling to (or unable to) purchase their own homes.   Simply releasing new land (the traditional Liberal ‘solution’) is not a viable answer unless services and infrastructure investment matches it.  Large public and social housing investments in growth and transport corridors could increase supply, however, and if introduced in phases may be able to ‘deflate’ the boom without a ‘crash’.   Labor’s negative gearing policies would also mean less competition between first  home buyers and housing portfolio investors.  Again , Combined with increased investment in public housing, and implemented properly, it should be possible to ‘deflate’ the bubble without a crash.   Public housing construction should  involve expansion of ( largely ‘non-clustered’) public housing stock to at least 10% of total  stock over several terms of Labor Government. ‘Non clustered’ stock aims to avoid traditional stigma against public housing, as well as the creation of poverty ghettos. Though there is the opposing argument that (implemented properly ; with the right infrastructure and services) clustered housing can create thriving communities.



26) There are those who argue capitalism cannot deal with looming environmental crises.  As a system based upon growth and the production of ever-more consumer goods, with a ‘growing environmental footprint’ , there are reasons to take these claims seriously.  That said: renewable technologies are advancing.  And information, culture and service industries – if emphasised – could involve much less of an ‘environmental footprint’.   A guided shift of emphasis to those industries could be key to environmental sustainability.  At the same time, though, we want to remain an economy which ‘makes things’.  Manufacturing will remain necessary ; and working conditions in manufacturing tend to assist the organisation of labour.  But we do not know yet just how far automation will go.  Automation could be good for people in their capacity as consumers, but bad for organised labour.



The Big Picture and ‘The Good Society’



27) Finally, Labor needs a vision of ‘the good society’  which includes redistribution and rights of labour – including labour market regulation (with an increased minimum wage) ; But at the same time goes further.  Marxism involved an implied moral critique of exploitation. But also of what was called ‘alienation’ ; That is, the impact of physically onerous, repetitive and/or mentally punishing labour.  And the lack of creative control workers enjoyed over their labours, and the products of their labours.  This ‘alienation’ could be addressed partly through increased free time for workers in such demanding areas.  And increased opportunities to explore such diverse areas as philosophy,  science, art, and leisure.  Though Marx also envisaged a time when fulfilling labour would ‘become life’s prime want’.   ‘Automation’ could actually create opportunities here IF implemented properly.



Also Labor should have an appreciation both of the importance of constitutional liberal democracy ; but also of its limits.  Democracy needs to be extended into production and work.  This could involve support for diverse models of co-operative enterprise and mutualism – on both large and small scales. Not only would this model by-pass exploitation: it could also provide workers with creative control over their labours ; including the kind of intimate control and identification that may go with co-operative small businesses.  (eg: co-operative cafes)   Furthermore, mutualist and co-operative associations could contribute to full employment in a situation  driven by contextual human need , and not only ‘share value maximisation’ – which is the modus operandi for capitalism-as-we-know-it.



Large scale co-operative and mutualist associations could also occupy crucial points in the economy in areas like health, motor insurance, and general insurance, and  credit/banking.  Government could play a central role of ‘facilitation’, here) Strategic ‘multi-stakeholder’ co-operatives could also be created through co-operation between Government, Regions, and workers.   That model might have been applied in the case of SPC-Ardmona ; and may even have been applied (much more ambitiously) to save Australia’s car industry.  Ambitious ‘mutli-stakeholder co-operatives’ should be considered by Governments, Workers and Regions for the future.

Other options for economic democracy include: growing the public sector , promoting ‘democratic collective capital formation’ (for example, like the Swedish ‘Meidner wage earner funds plan’) – though perhaps inclusive of all citizens and not only workers.  As well as ‘co-determination’ (worker reps on company boards).  Sovereign Wealth Funds or Pension Funds also socialise wealth and investment, and could be crucial to fund expenditure and investments (eg: infrastructure) into the future. 



Superannuation is entrenched now, and provided for peoples’ retirement without the political problems of raising taxes. It was seen as having democratic potential ; but it also had problems of reinforcing inequality in retirement (also affecting women) ; requiring low income workers to make contributions they could not afford ; and reinforcing the capitalist focus on share value maximisation regardless of other need.  Arguably pensions need to be more generous and broad-based ; but the superannuation system may lead to the marginalisation of the Aged Pension into the future.

In conclusion ; We should talk of capitalism and not only ‘neo-liberalism’. Because to name capitalism is to make it relative.  And one day the way may open for something better to become possible.  At the end of the day all wealth does derive from labour and Nature: and now just as in ‘the Heyday of radical Social Democracy’ this implies a moral critique of capitalism and class.




Dr Tristan Ewins has been a  Labor activist for over 20 years. He has written for many publications including 'The Canberra Times' ; but most prolifically for 'On Line Opinion' ;  see:  http://www.onlineopinion.com.au/author.asp?id=208


References

Scott, Andrew,
  'Northern Lights: The Positive Policy Example of Sweden, Finland, Denmark and Norway',   Monash University Publishing, Melbourne, 2014

Stanford, Jim
  "Economics for Everyone - A Short Guide to the Economics of Capitalism" , Pluto Press, London, 2008



11 comments:

  1. A good read, Best of luck in getting these ideas implemented as ALP policy. We need to get our party back for sure but lets not abandon the socially and environmental leading light of the vanguard in doing so.

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  2. half a long lifetime ago,my rock ribbed conservative econ prof used to grouse,"the rich get what they spend,the rest of us spend what we get".in the living memory of many of us,the world was nearly plunged back into barbarism ,as the capitalist class attempted to maintain and expand that arrangement to the limits of its grotesque logic.in the usa ,Roosevelt was able to convince his capitalist friends ,including bankers and fascists ,that it was in their best interest to do the "amelioration " this article advocates-I don't see that happening this time,i hope i'm wrong-thanks for the article.

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  3. That seems to be a good paper Tristan. The ideas are good, but are they workable, and would they be accepted in this bloody dreadful political climate? I have been of the opinion for some time (and no-one has taken any notice) that we ought to be tackling these extreme right winged ideas at their source i.e. the ring of right wing think tanks around the world funded by multi billionaires in secret. The Heritage Foundation in the United States seems to be the mother ship and the rest are often lesser important organizations whose job it is to spread the propaganda put out by organizations like the Heritage Foundation. The IPA in Australia is one such entity. They don't actually do much thinking. What they want is to make the world safer for extreme forms of Capitalism and of course by doing that they are digging their own graves in the long run. The shift to the right we have experienced in the West is quite deliberate and has been years in the making. What puzzles me is that the same techniques were used early in the 20th century in the US to spread Christian Fundamentalism. It was Oil Millionaires who commissioned the work "The Fundamentals" and had them delivered to churches throughout the USA. The rise of Christian Fundamentalism has had a huge negative political, social and educational effect in the USA . But it has also had the effect of tying Capitalism to a very warped version of religion and I suspect that might have been the aim. This is not to suggest that the Oil Millionaires were entirely responsible. Fundamentalism would not have developed if the conditions were not right. I suspect they just got behind it and helped it along. The question of how the Right Wing Think Tanks would be attacked is a thorny one. They have money. Lots of it. They have power and we working class individuals don't. have either money or power. We do have social media where there is a white wall of noise much of it comprising spurious lies and finding the path through that is quite a challenge. But their spurious ideas have to be challenged. The challenge so far has been fragmented and spotty to the point where it is virtually non existent for the purposes of helping people to understand what is happening let alone why.

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  4. Hi Tristan, a good article that raises important issues. I thought you captured some of the internal contradictions of capitalism well. I don’t however see social democracy as the answer to those contradictions. Rather it papers over them at best, or exacerbates them at worst (when it acts in the interests of capital much as the current and previous Labor governments have done).
    There is a reason why Labor under Hawke and Keating introduced neoliberalism here, why Blair was a soft Thatcherite, why in more recent times the ghost of SYRIZA hangs over all social democratic groups. It is the very nature of social democratic parties to manage capitalism, and the ALP with its links to the working class through the trade union bureaucracy can often introduce pro business anti-worker policies (painted as pro worker) through using those links.
    I think the elephant in the room is what Marx identified as the law of the tendency of the rate of profit to fall, something that flows from the very way capitalism is organised. As profit rates in the developed world began to fall in the late 60s and early 70s the move of all the mainstream parties was from Keynesianism to neoliberalism. Labor in Australia led the charge, for the reason mentioned above.
    Given the failure of neoliberalism to restore profits rates in many sectors to post war levels despite 30 to 40 years of trying, I think that means the economic base (but not the political base) for social democracy is dead.

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  5. (Part One) thanks John ; I’m aware of the tendency of the rate of profit to fall – though my understanding is a simple one I admit ; That is – that competition forces innovation of the means of production – driving increased productivity ; But as this investment in the means of production increases proportionately this leads to a fall in profits. Investment in the means of production reaches disproportionate levels. Surplus value comes from exploitation of labour ; and so as automation/mechanisation increases the rate of profit falls. That is I try and argue this in point 10.

    What follows will be less certain ; because it’s my own reasoning.

    Sorry there’s a fair bit of repetition from the article proper – which I realised after finishing this….

    Monopoly capital can try and hold profits up by fleecing consumers ; but even an oligopoly can upset this unless there is collusion. And even if there is collusion there’s the problem of what happens to the rest of the economy. If monopoly capital fleeces consumers to prop up the profit rate that affects the consumer base. Consumption is impacted in the broader economy. The reduction in overall demand impacts upon the profits of capitalists more broadly.

    So what can be done about all this?

    As I argue in the article capital can increase labour intensity. That’s one of the worst and most unacceptable strategies.

    Industry policy can capture a larger portion of the ‘high wage pie’ in the global economy – but *someone* has to do the low-wage jobs, and arguably there are only so many high wage jobs to go around.

    More acceptably structural efficiencies can be created through natural public monopolies ; and by disciplining the most parasitical businesses through competition – through competition policy – or through government business enterprises with competition charters. The US private health system, for example, is extremely parasitical in terms of the profits it extracts from its customers. (say compared with Medicare or the NHS)

    Industry Policy can also create full employment and increase the participation rate. That increases overall demand – an expansive influence which can bolster profits.

    We can also move towards a ‘hybrid economy’ ; again natural public monopolies and GBEs, but also mutuals and co-operatives. Natural Public Monopolies in Infrastructure especially can deliver structural efficiencies. The question is how much of this do you capture to fund the social wage – and how much do you ‘pass on’ to the broader economy? (Capital would like it ALL to be passed on) Mutuals and co-ops need to make enough of a ‘return’ to keep their operations viable. But don’t have to worry so much about delivering dividends and share value. Co-operatives and mutuals – especially multi-stakeholder co-ops – can comprise a ‘parallel/socialised sector’ even alongside the capitalist economy. Over time they can take over the market in areas like general and health insurance, credit and financial services…. Or exist alongside the public sector ; crowding out private businesses in some of those sectors. Co-operative small businesses can also offer fulfilment to its stakeholders even in instances where incomes are not especially high. (eg: in a co-operative café) And they can extend into areas which may be vulnerable because of share value pressures – But government, workers, regions can ‘step into the breach’ to save those jobs ; which may be relatively high wage jobs, also. (compared with what otherwise would take their place)

    Consumer co-ops can also force parasitical capital to offer a better deal. Bernstein talked about this. But all the better through ‘collective consumption via tax’.

    And the public sector can claim a significant share of the property market by increasing its stake, say, to a minimum 10 per cent of stock. (more coming)

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  6. (Part Two) (Continuing) Full employment creates ‘economies of scale’ for capital as well as labour. Capital has a larger consumer base ; stimulating growth ; and keeping business viable. Labour can also ‘claim its share of this pie’ ; hence wages can increase.

    This is close to the example I like to think of ; of the ‘Rehn-Meidner’ model in Sweden (yet Rehn-Meidner involved some wage restraint too) ; though eventually this was upset by supply shocks (increases in the price of oil) ; and increase competition in high wage manufacturing markets.
    none of this solves all of capitalism’s problems. But it ameliorates them significantly for the workers, consumers, citizens – who will likely live their lives under capitalism whether we like it or not.

    John ; what I would like to know, though, is how can socialism put a permanent end to capitalist contradictions? How is it possible politically – because of the integrated global economy today? ; and because of political, economic, and ultimately military pressures?

    Also what would the effects be of removing the competition dynamic from the economic entirely?

    I tend to think in terms of socialising specific sectors ; and extending the socialised sector gradually – but leaving a significant sector to the capitalists. Because its practically impossible to expropriate those capitalists right now. And there is a shared interest in avoiding a conflict which hurts the system ; but does not lead to socialism ; which leads to the exhaustion of both capital and labour. (though historically in such ‘showdowns’ labour has lost often – think of the circumstances of the ALP’s formation) I think in terms of Korpi’s ‘democratic class struggle’ ; and also his ‘Power Resources Theory’.

    But again : does this provide a final answer? We may desire to cut the working week. But what happens to profits when we reduce the working week? Income tax revenue falls ; Corporate Tax revenue falls ; taxes must rise proportionately to maintain the social wage and welfare state. Consumption power falls…. But IF that consumption power is distributed more fairly this doesn’t have to mean the end of the world for everyone! In a far more egalitarian economy it is much more sustainable. This can be achieved through taxes on wealth, income, land and capital ; and also consumption. (but consumption taxes counter-weighted with progressive mechanisms elsewhere)

    But beyond this I don’t see ‘a definitive way out of capitalism’. Do you? We can be completely uncompromising – but where does that lead? (so long as a complete transition is politically, economically – and militarily impossible) If our aim is to be so disruptive that ‘capitalism fails’ – are we honest with workers that what they get in practice could be barbarism? Because we can disrupt – but politically and militarily we cannot enforce a transition.

    We need to be honest about it though ; and strive to organise and educate. Which means some people HAVE to be OPENLY RADICAL. Restoring a GLOBAL and ‘democratically disciplined’ Left – on the basis of a shared minimum platform and program – is the first step towards challenging those obstacles.

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  9. RedgumMay 29, 2017 at 6:10 PM

    Tristan's approach annoyed me some what. Finally at para 27 Tristan noted:

    "Labor needs a vision of ‘the good society’ which includes redistribution and rights of labour – including labour market regulation (with an increased minimum wage)"

    This should be the starting point, not the conclusion.

    I am not happy with concepts such as:

    "none of this solves all of capitalism’s problems. But it ameliorates them significantly for the workers, consumers, citizens – who will likely live their lives under capitalism whether we like it or not."

    We have no choice. It is capitalism that is driving down wages, creating alienation, and offers the token promises of social wage and welfare state expenditures.

    However Tristan does come close to a relevant socialist perspective. Certainly,

    "Large scale co-operative and mutualist associations could also occupy crucial points in the economy in areas like health, motor insurance, and general insurance, and credit/banking."

    but the missing (key) point here is that co-operative enterprises must not behave as capitalists within the wider community.

    Personally I see no problems with private ownership within cooperative, public or personal frameworks. Cooperatives need to own their buildings and machinery and purchase inputs which they must account for as an asset they own.

    A cooperative responsible for a railroad or school or hospital, can have ownership of the land, buildings and equipment but they must not use these to accumulate capital.

    It is the accumulation of capital through extraction of value from labour that is the problem. This is capitalism. If this is abolished you end up with some other form of economy - fuedalism, mechantilism, market socialism etc.

    So the real problem is in Tristan's para 1).

    Capitalism is not:

    "an economic system based on the private ownership of the means of production, exploitation of labour by Capital, and markets as vehicles for distribution and exchange."

    It is:

    Accumulation of Capital through;

    - exploitation of labour by Capital

    - destruction of small and family business

    - plunder of foreign resources.


    Private ownership and markets exist without capitalism. Too many people are side tracked into criticising markets and ownership, without realising that these are just exaggerated symptoms of the underlying drive of Capital to procure its so-called "return".

    We need to ensure that our concept of socialism is both a "good society" and a "strong economy".

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  10. Thanks for your comments Chris ; not sure why Redgum deleted his comment... I agree that private ownership and markets can exist without capitalism. I have no illusions re: the nature of capitalism re: the expropriation of surplus value as a means to accumulation. But the question is: 'what is politically possible?' ; For instance Robert Owen had some brilliant ideas on a 'co-operative utopia' which could be built 'from the ground up' and with the assistance of the authorities of the day... Unfortunately, while his proposals had potential, the chances of their being realised was limited by the fact they did not take place within the context of the major class struggles of the time.

    The problems we face are manifold. Capitalism is global ; and the threats of capital mobility, isolation, destabilisation - are real. At the same time the working class is fractured with workers divided against each other on the basis of different identities. Debates around so called 'political correctness' have been deployed now over decades to divide the working class and distract from issues of class and distributive justice. Usually the Labor Party dares not venture anywhere these issues, also. Which is self-destructive over the longer term.

    So the problem is thus: is there any objective basis to suppose we can transcend capitalism on a large scale - and successfully and in a way which really improves peoples' lives over the short to medium term?

    That said: does it have to be 'all or nothing' for socialists? The welfare state and social wage have improved peoples' lives in meaningful and tangible ways over the decades ; as did the mixed economy ; and as did experiments in co-operativism - as in Mondragon in Spain. My point is not to succumb either to defeatism or to an all or nothing mentality. Because while an 'end point' matters (mind you I see no 'end to history' ; an 'end point' is always only a 'provisional' end point) ; so too do our arrangements, struggles, achievements over the interim also. These are the contexts in which people have led their entire lives. We may not be dealing with some 'negation of the negation' ie: final communist destination ; But every victory matters. How people live their lives in the here and now matters. And that's where the social wage, welfare state and mixed economy really matter.

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  11. Chris ; furthermore there is a problem that co-operative enterprise will operate within the broader capitalist context whether we like it or not. There are probably opportunities to transcend this ; for instance through mutual associations. But in the big picture co-ops will compete against banks, insurance companies, private sector manufacturers and so on. Where there's hope is in the following: those co-ops need not behave in a capitalist fashion in the sense of maximising share value. So long as the co-operative is viable it need not worry about those issues. Secondly, co-operatives can ameliorate alienation ; probably most profoundly in the case of small co-ops where workers have real, intimate creative control. Finally a problem co-ops have faced is that they do not always operate on the scale necessary to remain competitive ; and hence succumb to privatisation and capitalist investment in order to remain viable ; losing their very character on the way. What I am suggesting is that this can be overcome via 'multi-stakeholder co-ops' where government and regions contribute to keep co-ops viable and competitive.

    The kind of 'provisional utopia' I have in mind includes a big role for those co-operatives. But also for mutuals and consumer co-ops. The good side of the continuing competition is that there are ways in which this benefits consumers. Bernstein correctly pointed on in his criticisms of Lassalle that co-ops could develop a capitalist character ; and could even abuse their market power if they were monopolistic in nature. So while this context leaves co-ops partially in the context of capitalist contradictions - there is a 'good side' to it as well. Similarly to how a return to a mixed economy could drive outcomes for consumers through competition from government business enterprise acting to prevent collusion and abuse of market power.

    Finally over the long terms all these could be 'stepping stones' towards something more ambitious. I talk about a 'democratic mixed economy' and not only a 'mixed economy' because of the big role I have in mind for co-ops, mutuals, democratic collective capital formation, co-determination and so on. A 'democratic mixed economy' can ameliorate capitalist contradictions ; but interestingly we're talking about a context where capitalists are driven to accept strategic socialisation perhaps in some contexts as the precondition of their own short to medium term interests and survival.

    Problem is how to go further than these strategic compromises? Because while capitalism is a mess ; it's still strong Ideologically ; and even as it fails spectacularly (eg: GFC) that Ideology retains its grip. And capitalists retain their ability to 'discipline' governments through capital flight/mobility, destabilisation, propaganda and so on.

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