Socialism and ‘saving capitalism from itself’ – A response to Nigel Farndale

above:   the red-flag in a characteristically Australian context

The following is the first-ever post for 'ALP Socialist Left Forum'. To 'kick off debate' this article comprises discussion of British author Nigel Farndale's call for moves to 'save capitalism from itself'. What are your views?   What is the relevance of this debate for how we see ourselves on the Left; and for our policy agenda?   We welcome opinions across the spectrum of the ALP Left - whether more radical or relatively moderate.

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In the midst of the worst global economic crisis since the Great Depression, British author Nigel Farndale has had published in the Sydney Morning Herald an interesting article exploring the means in which capitalism might be reformed – perhaps ‘to save it from itself’.

 Farndale considers two economic movements in the context of his article. 

Firstly, he considers the ‘decroissance’ (ie: ‘decrease’) movement in France.  This movement denies the centrality of General Domestic Product (GDP) to ‘economic success’ – pursuing ‘quality’ for all rather than mere ‘quantity’. Hence Farndale quotes UBS chief-economist, George Magnus on “the need for a happiness index, or an economic and social well-being index”. Crucially, this perspective seems also to recognise environmental constraints for certain kinds of growth – capitalist or socialist. 

Secondly, Farndale mentions the “PARECON” movement – which promotes ‘participatory economics’ – with worker’s self-management and solidarity, and greater equality for people in their status as consumers as well as workers.  But although otherwise sympathetic, Farndale dismisses the concerns of this movement for equality in terms of economic power as “back to basics communism”.

 Farndale argues that capitalism is a dynamic and evolving system.  Indeed, he contends that ‘capitalism is to thank’ for the welfare state. He seems to argue that only capitalism – through competition and enterprise – can provide growth and recovery. After all – what alternative is there if capitalism ‘has been [with us] through antiquity, feudalism” and so on? And if capitalism is reducible to the existence of markets surely it is inevitable in one form or another…

In response to Farndale, it is important to challenge his conception of both modern capitalism and socialism.

For Marx modern capitalism meant more than the existence of private ownership and markets.  Under the modern capitalism identified by Marx production for profit, and the rise and dominance of a specifically capital-owning bourgeois class came to eclipse the remains of feudalism. It also saw the demise of artisanship and craft labour and the marginalisation of old forms of self-employment.  In their place capitalism brought mass production, mechanisation, deskilling, and an unprecedented commodification of labour.

During this early period wage labour was a matter of subsistence with workers realising little of the increased productivity for themselves. And unlike with artisanship and the craft economy, the product of the worker did not belong to him/her, but was expropriated for sale by the capitalist. (Hence for workers there was – and still remains - a degree of unpaid labour time and effort) This was in addition to the alienation resulting from brutally demanding and unsafe work practices, involving men, women and children on 14 hour days, with night labour, and worse.

 Increasingly, however, the capitalists who expropriated surplus from these workers were seen to develop into a ‘rentier’ class: who by virtue of their wealth could simply delegate matters of management. Of course it wasn’t all like this: there were innovators and visionaries (as there are today); and there were the small capitalists who worked as hard as anyone. These people often went bust in the face of competition; and more particularly in the face of increasing monopolisation. (which meant they could not compete)  While Marxists such as Karl Kautsky appealed to the small-capitalist middle classes that socialism would provide them with security, Conservative, fascist or economically-liberal forces (a mixed bunch) tried to turn their attention against the organised working class as a threat to their survival in the capitalist context.

But the boom and bust cycle – and capitalist crisis more generally - was more than the ultimately ‘creative destruction’ Farndale refers to. There arose structural and functional unemployment – with a ‘reserve army of labour’ exploited to inhibit working class organisation; driving down wages and conditions, as well as inhibiting employment security. There was immense waste as competition forced the premature and continuous modernisation of the means of production - even when existing machinery had not yet been sufficiently utilised.

Only the monopolists with huge reserves of capital could survive in this environment – hastening the concentration of ownership AND power. In the event of cyclical crises immense amounts of capital and produce were destroyed because unprofitable in the marketplace– even where there was massive unmet human demand and need. Inequality of wealth amongst consumers narrowed the market and thus actually inhibited the system.  

Farndale is right, though, that capitalism has evolved. In different guises it survived the 20^th Century in the sense of becoming a HYBRID system.

 On the one hand - From laissez-faire origins and the age of the individual entrepreneur there emerged the joint-stock company, the trust, the rise and interpenetration of industrial and banking capital. There arose what ‘Austro-Marxist’ Rudolf Hilferding called ‘Finance Capital’ – with unprecedented centralisation of ownership, control, and hence political-economic power. Capitalism evolved with the rise of imperialism, and the competition between nation-states and their constituent capitalist classes for control of markets. At various times capitalism has adopted an ‘organised’ form: especially under conditions of total war.

On the other hand post-war hybrid economies saw the introduction of the advanced welfare state; of labour market regulation and rights for organised labour; of the mixed economy – with emphasis on areas of ‘natural public sector monopoly’. In countries such as Sweden and the other Nordics there emerged some of the most extensive welfare states anywhere: where security was combined with efficiency to provide ‘the best of both worlds’. Innovative ideas also included collective capital formation and co-determination.

Even in 20^th Century Australia a compromise developed involving labour market regulation and strong unions, as well as socialised health-care, and ‘natural monopolies’ in energy, gas, water, communications, and other crucial infrastructure. Also there was strategic public ownership in areas like banking and insurance to actually maintain competition and provide for consumers otherwise excluded or discriminated against because of lack of market power. For a long time even political conservatives in Australia - in the Liberal Party and Democratic Labor Party - supported much of this compromise.

 In recent decades these variants have themselves been displaced by resurgent ‘laissez faire’ capitalism. Falling profits have been responded to with assaults on the rights of labour. Exploitation has intensified with a mix of ‘labour market deregulation’ and increasingly draconian limits on the industrial action available to workers. (so much for the ‘liberty’ held high by faux-liberals!) Various forms of ‘corporate welfare’ have emerged. This has involved an effective subsidy through maintained provision of infrastructure, education and training even in the context of corporate tax cuts, and increasingly regressive taxes for workers, consumers and citizens. But the myth of triumphant capitalism has remained partly through the effect of technological innovation on peoples’ lives; and partly because of enduring myths about socialism; and the reality of Stalinist implosion in the late 20^th Century.

 In the short to medium term capitalism must again hybridise if it is to survive, and if it is to provide security and happiness for citizens, consumers and workers it must again incorporate significant socialist aspects.

A mixed system including economic socialisation and democratisation, here, is one possible response. In Sweden socialists attempted to extract a greater share of democratic ownership in the economy as a trade-off for years of restrained wages; as compensation for resulting excess profits in some areas; and as a response to centralisation of private capital ownership. That effort (for ‘Meidner wage earner funds’) failed because it attempted too much too quickly – and because it promoted exclusively wage earner funds rather than funds controlled by ALL citizens. But many of its principles remain valid and instructive.

Many of the problems identified by Marx still exist for modern capitalism. There remains a tendency for profits to fall – though ameliorated by the countervailing impact of qualitative technological leaps in productivity and material living standards. Labour and Nature remain the sources of all material goods: and regardless of objectivist and subjective interpretations of value, the reality of surplus extraction remains – even if it cannot be nailed down with precision. (there is the question of fair return on investment; considering the deferred gratification of small investors; as well as return for innovation and initiative)  

 More recently, with rapidly evolving technologies there has emerged the practice of planned obsolescence: unnecessarily staggered release of technology intended to maximise sales.  

As well as demand management there is a need to capture the forces of innovation and efficiency that are unleashed by competition, while at the same time experimenting with more co-operative forms, and countering the effects of unnecessary and counter-productive cost-structure duplication, and private monopolistic abuse of market power.  Also there is a need to counter demand-crises rising from inequality, and other forms of excess and waste.  Hence strategic re-deployment of natural public monopoly and other appropriate forms of public sector extension.   Finally, collective consumption via the social wage and welfare state provide the most efficient and equitable means for citizens and consumers to access essential services in health, aged care, education, unemployment insurance, and other necessities.

Farndale condemns the idea of some ‘New Man’ he sees as embodied in the Marxism of Stalin and Mao. But for earlier moderate and democratic Marxists such as Karl Kautsky one of the most noble aims of socialism was to democratise culture – to bring culture to the people. Since then we have seen the rise of universal education including a critical element incorporating the humanities and social sciences.  Abundance that Marx could barely dream of has brought music, literature and new information technologies to the masses.   The aim of socialists today is to further that democratisation of culture – through further extension of critical participation in the humanities and social sciences; through a culture of active citizenship; through the development of a participatory media and public sphere.

In bringing our attention to the PARECON and ‘decroissance’ (‘decrease’) movements Farndale does readers a genuine service, however.  Though over the longer term there is still the dream of a more robust democratic socialism, these movements continue to demonstrate some of capitalism’s greatest failings; and show that current-day crises can only be fought off with compromise – with a HYRBID system – as much liberal democratic socialist as capitalist.

Tristan Ewins is a Politics PhD candidate, as well as a long-time freelance writer, having written for many publications including 'The Canberra Times' and the 'Journal of Australian Political Economy'.  He is also a long-term grassroots ALP Left activist.