Are property rights essential to prosperity and liberty? The ‘No’ case.

This is a presentation by socialist economist David McMullen at a Melbourne Argument debate at the Royal Oak Hotel, North Fitzroy, Melbourne, on February 8, 2017. His opponent was Ted Lapkin, a former adviser in the Abbott government.

Private Property Rights are Essential not only to Economic Prosperity but to Political Liberty – The No Case

February 12, 2017 via Different Wavelength

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When looking at economic prosperity and political liberty, the private property rights we are concerned about are the ownership rights of the capitalist class over the means of production or productive assets. We are not arguing about private property rights over items of consumption. So I acknowledge everyone’s right to their own toothbrush.

What I want to contend is that in the future we will get by very nicely without private ownership of the means of production. We will do this by creating a class free society where the means of production are socially rather than privately owned. This will free the economy of the many shackles placed on it by capitalism and at the same time create a society that requires the fullest political freedom for its proper functioning.This future system is generally referred to as communism.

OK why do I take this singularly unpopular position which everyone knows has been totally discredited? Well, I subscribe to the Marxist view that capitalism creates the conditions for this new more advanced system.In a nutshell, capitalism eliminates the need for the profit motive and hence the need for its own existence. It does this through the creation of modern industry and technology which open up the prospect of universal prosperity, and of robots and computers doing all the work that we really don’t want to do. Under these new conditions we can begin to imagine people working because they like what they are doing and they want to contribute, while at the same time being happy with an equal share of an increasing level of prosperity. In other words we can see social ownership having a totally different and better form of motivation than the profit motive that is associated with private ownership.

This means that what was previously impossible becomes possible.Past history already tells us that sharing poverty and laborious work is impossible. You cannot create equality under those conditions. It is a utopian dream. For example, as the Middle Ages illustrate it only requires a small band of thugs who would prefer to live off everybody else’s hard work and you end up with a very nasty class society. Also when assessing the experience of the Soviet Union, and the various regimes derived from it, it is important to keep in mind their backward economic conditions as a factor in determining how things turned out there.

Now, favorable economic conditions presently only exist in the rich countries where less than 20 per cent of the world’s people reside. What about the rest of the world? It looks like it is going to take a number of generations for them to develop. It is hard to be any more definite than that. However, I would suggest that the prospects are best if there is a healthy global economy and a willingness to provide well directed economic aid and also to offer diplomatic and military assistance to those resisting the forces of tyranny and corruption.

Anyway, why do I consider that social ownership will bring greater economic prosperity and progress? There are five reasons that strike me as being particularly important.

  1. Firstly capitalist firms cannot match the work performance that would be achieved where workers unprompted want to do the job to the best of their ability.Capitalist firms have to apply various rewards and penalties to get their employees to do their bidding. However, if a job is in any way complex it becomes difficult to correctly assess how well people are doing their job. And jobs are becoming increasingly complex so this is becoming more and more of a problem.
  2. Secondly once we get rid of private ownership and private debt we will also get rid of economic crises, stock market crashes, bank collapses and extended periods of depressions or recessions that lead to unemployment and reduced production.
  3. Thirdly we will get rid of the waste of human labor that Marx called pauperization where a large number of people are thrown on the scrap heap and survive on welfare. They are not equipped to develop work skills or they are psychologically maimed from living in this society.
  4. Fourthly, we will not have capitalism’s sluggishness in terms of what are arguably the main drivers of economic progress, namely,science, research and development, and technological innovation. There are a number of reasons for capitalism’s lack of vigor in this area. If I can beg your indulgence I will list six that I am aware of. Firstly, capitalists are not interested in major technological breakthroughs that will make their present investments less valuable or even obsolete. They just want incremental improvements that increase their value. Secondly, benefits from spending on R&D are long term but capitalists tend to have a short term perspective. Thirdly because of the public good nature of new knowledge, firms cannot capture all the benefits and so underspend on it. Fourthly, where intellectual property right laws are applied, access to knowledge is restricted. Fifthly, government funding for R&D is the first thing to go when there are government budget cuts. And also there is huge wastage as researchers game the funding system and personal prestige and career take precedence over outcomes. And sixthly, capitalism generates an anti-technology and anti-science attitude among the alienated masses. People see the modern industry created by capitalism as the problem rather than capitalism itself. We have people whose livelihood is threatened by new technologies. And there are the greenies who have a romantic view of the pre-industrial past.
  5. Now the last but by no means least on my list of capitalism’s economic problems that will be overcome under communism is what economists like to call government failure.Capitalism tolerates a lot of bureaucracy and regulation.Much of it is devoted to catering to the needs of vested interests in ways that harm the economy. Vested interest is just another term for private property. And as well as this there is of course empire building by career minded bureaucrats.

OK those are my arguments for why I think that private ownership of the means of production is a fetter on the economy. Now I want to address what I think are the two main arguments against what I’ve been saying. Firstly, we are told that social ownership would require excessive centralization and secondly that you can’t change human nature.

Economists argue that all this well-intentioned motivation would come to very little because an economy based on social ownership has an inherent economic calculation problem: in the absence of market transactions between enterprises it could not have a properly functioning price system. And as a consequence social ownership would require clumsy centralized resource allocation of the kind that existed in the Soviet Union. I am not going to speculate on how economic decisions will be made in the future under communism. However, we can say that there is nothing about the non-market transfers of custody over components from producer to user enterprises that would prevent them from making decentralized decisions based on prices. Furthermore, we could hardly do a worse job of allocating investment funds than do highly fluctuating interest rates and exchange rates produced by capitalist finance. Indeed, there are good reasons for thinking that economic decision-making would be far superior to that under capitalism. To begin with, because of the absence of ownership barriers, there would be far more scope for coordination, and less scope for secrecy and deception.

Human nature and mutual regard

Now what about human nature? A society based on social ownership requires far more than simply state ownership, although that is a prerequisite. There need to fundamental changes in people’s behavior and abilities.

The behavior change can be best summed up in the expression ‘mutual regard’.You do the right thing because you want to contribute and you know that your efforts are not futile because a large and increasing section of society is doing likewise. As well as being the basis of morality and what is considered honorable it is also enlightened self-interest. By everybody serving others we are all served. This altruism is not the self-denial that Ayn Rand made it out to be.

Many would doubt the ability of rank and file workers to do the complex kinds of work required in the future. However, I would suggest that people have greatly untapped potential. There are many ways that they are presently held back or find themselves unchallenged.

The kinds of changes we are talking about here will not happen overnight. There will have to be a transition period that will take a generation or more and is generally referred to as socialism. It will take time to totally eliminate private ownership, starting with the big fish, and it will take time to move completely away from the old capitalist work incentives. And it won’t be smooth sailing. Good behavior will only win out once the good majority gain the confidence and moral courage to stand up to those who behave badly. And there will be lots of old management types trying to run things in the old way and convincing workers that the new ways are futile. So it will be touch and go for a while and we may need more than one stab at it.

Now let’s look at political liberty

With the emergence of capitalism we have seen for the first time a degree of political liberty. We have constitutions limiting the power of government, we have elections, the separation of powers, habeas corpus. These would have been unimaginable in the Middle Ages or in any other pre-capitalist society.

The main problem however is that the capitalist system tends to abandon political liberty in times of crisis. Also a big test of political freedom is our freedom to confiscate the means of production from the capitalists and convert them into social property. In the face of a serious revolutionary movement one would expect to see states of emergency, unofficial death squads, and well-resourced propaganda campaigns spreading fascism and xenophobia.

Historical accidents

What conclusions should we draw about the lack of democracy in the so-called communist bloc countries? The Soviet Union etc? The first thing to note is that we dealing with an historical accident. By virtue of some rather specific or contingent circumstances,communists found themselves in charge in countries that with few exceptions were economically and socially backward, and totally unsuited to undertaking a communist revolution. Also, the regimes did not arise as a result of popular support for communism. In the revolutions in the Soviet Union and China the primary concern of the peasant masses was nothing more than land reform. In Eastern Europe the regimes were due to the arrival of the Soviet Red Army at the end of WWII rather than popular revolutions. So I think it is safe to say that these regimes would not have survived if they had been democratic.

However, it is important to keep in mind the alternative in most cases was right-wing tyranny rather than democracy. And of course these regimes eventually lost the minimal revolutionary content they may have originally had.So their authoritarian nature could no longer be blamed on communists. Instead we just had phonies like Vladimir Putin who pretended to be communists until the collapse of the Soviet Union and we presently have people like Xi Jinping in China who still pretend to be communists. The take-home message here is that the conditions were very different from what we would expect in the future when revolutionary regimes come to power in highly developed societies on the back of widespread support for their political program.

Freedom of speech

Now, the economist Milton Friedman famously argued that freedom of speech and the emergence of diverse political groups require the decentralization of resource ownership that only capitalism can deliver.He argued that under capitalism you have the possibility of finding a rich patron. Marx and Frederick Engels and the Bolsheviks received money from anonymous benefactors as well as from robbing banks. Under social ownership, however, resources would be centralized in the hands of the very authorities that you may want to criticize. However, I would argue that with everyone having very high disposable incomes and access to the Internet you would not have to rely on central authorities providing resources. Also I do not see any insurmountable obstacles to ensuring open access for various resources needed for a vibrant political life.

I do not want to paint too rosy a picture.A revolutionary government during its initial phase may have to declare a state of emergency if there is a rebellion by supporters of the old order. Their rebellion could take the form of civil war, terrorism and sabotage, and dealing with it will not be easy. At the same time, for success, we will need the freedom to criticize those in positions of authority when they display incompetence or lack of revolutionary politics. Bottom up supervision will be a critical part of the system. Indeed, a social system that relies on people taking the initiative without external prompting, could not function if people are not able to say what they think is wrong and what they think should be done about it.

Summing up

I will now make two points to briefly sum up.

Firstly, capitalism creates the very economic conditions required for a more advanced classless society that will be based on social ownership of the means of production.

Secondly, a primary task for the present period is ensuring economic and political progress in the more backward regions of the world. For this we need a liberal global economic order, well directed economic aid, and diplomatic and military support in fighting the battle for democracy. And critical to this is beating back the nationalist anti-globalist wind that is blowing at the moment.



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