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.

 

Is capitalism the best system on offer?

“In place of the old bourgeois society, with its classes and class antagonisms, we shall have an association, in which the free development of each is the condition for the free development of all” – Karl Marx

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This is the text of a talk given by David McMullen at the Monthly Argument on Wednesday October 19, at The Royal Oak Hotel, Fitzroy. David is the author of Bright Future.

Is capitalism the best system on offer?

As you are well aware we presently live under the capitalist system where the means of production are owned primarily by a small ruling class. Now is this system the best on offer? My answer to the question is no. However, the journey to the better alternative is going to be a tortuous process. This alternative is the very opposite of capitalism. It is a classless society where the means of production are socially owned, and it has usually been called communism.

Now how does this alternative claim to be better? It claims to be better than capitalism on the grounds that it would allow the individual to fully develop and thrive under conditions of mutual regard rather than the dog eat dog world of capitalism.

However, for such a society two things are required. These are (1) a very high level of economic development and (2) the successful completion of a rocky period of revolutionary transition during which we fundamentally transform ourselves and our relations with each other.

The first of these – a very high level of economic development – allows us to eliminate poverty and toil, and this is absolutely critical if we are going to dispense with the profit motive. This is because it opens up the possibility of 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 prosperity. While it is possible to imagine people sharing prosperity and enjoyable work, it is not possible to imagine people sharing poverty and toil. The Middle Ages shows us that it only requires a small band of thugs who would prefer to have a lot more than everybody else and you have a very nasty class society. Also the experience of the Soviet Union, and the various regimes derived from it, shows what happens when you try and go beyond capitalism under backward economic conditions.

In the rich countries we have reached an economic level where it is possible to imagine everyone enjoying something approaching toil free prosperity. However, what about the rest of the world where most people live? What are the prospects there? The middle income countries such as China and India should start approaching fair levels of development in a generation or so if they maintain a reasonable growth rate. On the other hand the poorest countries where most people live will need to begin, and sustain, a growth takeoff similar to India and China in order to get to out of their present poverty later this century.

Many raise doubts about the possibility of achieving global economic prosperity. They either say that everyone having high and increasing living standards is impossible because of resource limits to growth or because capitalism’s disregard for the environment will lead to ecological collapse and a very bleak future.

The limits to growth view is based on a number of notions: (1) that minerals become too difficult to extract as we have to dig deeper or rely on lower grades of mineral ore. As a result capital becomes increasingly devoted to extraction and this leaves less and less for the rest of the economy. (2) Economic growth necessarily creates an increasing waste stream that the natural environment can no longer cope with. (3) Increasing food production will ultimately deplete the soil. I think there is ample evidence technological advances can solve those sort of problems. I dealt with this issue at length at the debate in June. It is available online as is this talk.

Now is capitalism going to completely trash the environment because of its shortsighted search for profits? I think we can expect quite a lot of trashing of forests and pollution of air and water as the poorer countries develop. However, countering that is the fact that newer technologies tend to be cleaner and as countries get richer there is increasing political pressure to reduce environmental damage and remedy past damage.

As for CO2 emissions. They are very unlikely to be brought down to the levels that people are talking about. We are pretending to do something while achieving very little. The Europeans have made a lot of noise but are reneging on all their promises. India and China are continuing to build coal power plants at a cracking pace. China is also building quite a few in other countries. Germany and Japan are building more coal power plants because of their stupid decision to get out of nuclear power.

There are two strategies for significantly reducing CO2. The first would involve a massive total switch to renewable and nuclear power in coming decades. However, because these technologies are far more expensive than fossil fuels it is not going to happen. Keep in mind that it would require massive subsidies to the less developed countries who have made it clear that they are not going to abandon much cheaper fossil fuels unless compensated. These countries are already consuming more than half the world’s energy and the percentage will soon be a lot higher.

The second strategy is to to implement a massive research and development program aimed at providing energy options that greatly close the cost gap with fossil fuels. This would be far cheaper than the first strategy. And it is a strategy that Bill Gates is promoting with only modest success. And it is the strategy I support.

For the moment I am noncommittal on the level of threat to the environment that is posed by capitalism’s failure to act on CO2 emissions. Views on the subject range from little impact to a runaway greenhouse effect that would put the human race in a very sticky position.

Now on that rather uncertain note, let’s move on to the second requirement if we are to achieve a classless, collectively owned society. As said at the beginning, we have to complete a very rocky period of revolutionary transition during which we fundamentally transform ourselves and our relations with each other.

While getting rid of the capitalists and installing a revolutionary government will be a protracted and tortuous business, it will not be enough. We also require an entire historical period of struggle to make the transition from a society based on profit to one based on mutual regard. This will have many ups and downs and may possibly include major defeats.

The central thing here is a struggle with a new bourgeoisie that is bound to emerge after the revolution because you can’t immediately eliminate the old division of labor. For some time society will still have a lot of hierarchy, and all levels of government including the very top will be full of phonies pretending to be revolutionaries and also revolutionaries who become corrupted by power. This new group proved irresistible in the Soviet Union and its derivative regimes. To counter this it will be critical to have a revolutionary mass movement that can push back against it.

There is also a struggle with people at all levels of society who are slow to adopt the behavior and thinking of mutual regard. This will require people to have the moral courage, self-confidence and social skills to stand up to problematic behavior. At the moment we tend to knuckle under or run away from a problem. The principle of mutual regard can be summed up as – I will go out of my way for others and others do likewise, and we all share in the better outcome that results. It is enlightened self-interest because our welfare depends on the welfare of others. And we mustn’t forget the direct satisfaction that we get from helping others and contributing to the general good.

I rather like this paragraph from the Communist Manifesto dealing with this subject:

In place of the old bourgeois society, with its classes and class antagonisms, we shall have an association, in which the free development of each is the condition for the free development of all.

Finally, a very important point to make is that the less that capitalism has modernized societies the harder the task of transition will be. Pre-capitalist societies are really awful and people’s heads are full of even more crap than modern people. In these societies the average person is ignorant and uneducated. They are servile and accepting of the idea that some people are superior to others, and have a right to push everyone else around. There is no conception of democracy or individual liberty. The individual is tied down by obligations and loyalties to groups such as extended family, clan and tribe. And women are completely subordinate to men. It is virtually impossible to imagine creating a classless society on the basis of this kind of culture.

So to sum up.

Firstly, a society more advanced than capitalism requires a high level of economic development, what is sometimes called post-scarcity.
Secondly, this new society requires more than simply installing a revolutionary government and dispossessing the capitalists. There is an entire historical period when ordinary people will have to push back against the opponents of the revolution and thoroughly internalize the new morality of mutual regard.
And thirdly, on a more mundane note, there needs to be a massive increase in research and development spending in order to develop the new energy technologies that economic growth requires.

Freedom from want and toil – and the capitalist social revolution

From the Communist Manifesto Project‘s pamphlet: Rescuing the Message.

 

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Freedom from want and toil

The industrial revolution that began over two centuries ago is transforming the material conditions of life in ways that make capitalism obsolete. In the most developed regions of the world it is providing something approaching a modest level of material abundance and removing much of the necessary toil from work. These conditions make it possible to contemplate social ownership where the motivation is no longer profit, or some reward derived from it, but rather mutual regard and the satisfaction obtained from labor.

At the moment, the rich countries are home to only 15-20 per cent of the world’s population. However, the middle income countries such as China, India, Mexico, Turkey and Brazil could well achieve high levels of development over the next two or three generations, while the poorer half of the world should catch up later this century or early in the next. The pace of development will depend on a range of factors including the prevalence of political crises, wars and economic depressions.

With increasing productivity under capitalism, a stage is reached where an equal share of the social product ceases to be shared poverty. Under less developed conditions, the prospect of shared hunger and distress impels those who are in a position to do so to exploit others through plunder, slavery, serfdom or the ownership of the means of production. However, as the average share begins to promise an increasing degree of prosperity, the imperative to fare better than others diminishes. Marx and Engels make this point in part II, section 5 of The German  Ideology:

… this development of productive forces … is an absolutely necessary practical premise, because without it privation, want is merely made general, and with want the struggle for necessities would begin again, and all the old filthy business would necessarily be restored …

Under developed capitalism, mechanization and automation have done much to reduce the odious or toilsome nature of work. Pick and shovel work and carrying heavy loads are things of the past and much of the remaining menial and routine work in the manufacturing and service sectors will be automated in the next generation. The work we are left with will be primarily intellectual in nature and potentially interesting and challenging.

“With increasing productivity under capitalism, a stage is reached where an equal share of the social product ceases to be shared poverty.”

Some doubt the ability of workers to keep up with the requirements of the new work. Certainly capitalism leaves a lot of workers behind and on the scrap heap. Nevertheless, the level of training of workers is higher than ever and should increase over time. In developed countries about a quarter of young proletarians graduate from university and a similar proportion have other forms of training.

We can also expect improved ability to perform complex work in a future communist society as many of the conditions that cause stunted development are eliminated. These include lack of family support, peer pressure to under-perform and an inadequate education system. Social ownership will end the isolation of education from production and other activities, so uniting learning and doing. Workers will help each other to learn. We will also benefit from an increasing understanding of human development and what causes learning difficulties. And over the longer term we can expect to see artificial improvements through mind-enhancing drugs, genetic engineering (induced evolution) and brain link-ups to computers.

The Capitalist Social Revolution

The dominance of capitalist market relations brings a social as well as an industrial revolution. The outcome is frightful in many ways but vastly better than what it replaces. In particular, the revolution casts off many ancient shackles and replaces them with weaker capitalist ones.

Proletarians are employees not slaves or serfs. As wage workers they only have a contractual arrangement for part of the day with their capitalist master and are free to move from one job to another. Their boss, unlike the peasants’ lord, is probably not the local political chief or magistrate.

Their position in the labor market also frees them from subordination to the extended family, tribe or local community. It provides economic independence and the opportunity to physically escape from these sources of oppression and conservatism.

“Their position in the labor market also frees them from subordination to the extended family, tribe or local community. It provides economic independence and the opportunity to physically escape from these sources of oppression and conservatism.”

The new market-based class relations also raise women from their age old subordinate position. The nuclear family replaces the extended family as the economic unit so that women only have to deal with their freely chosen husband and not his relatives. Then comes the independence of employment for a wage. The changing conditions plus struggles by women lead to the removal of legal discrimination, new divorce laws and various forms of government child support. Even the nuclear family becomes optional. These changes cut away much, although not all, of the legacies of women’s oppression and create the conditions where men and women can begin to understand their differences and similarities, and better meet their mutual needs.

The emergence of capitalism has been accompanied by the bourgeois democratic revolution that brings equality before the law, freedom of speech and assembly, due process and constitutional rule. People now expect these political conditions and feel aggrieved by their absence. They could not imagine being ruled by the bejewelled thugs of earlier times. This provides space for the proletariat to organize itself and for a revolutionary movement to emerge and develop. Although when the capitalists feel sufficiently threatened they dispense with these arrangements. This may involve goons and death squads, a state of emergency,  a military coup or the coming to power of a fascist tyrant. However, such drastic measures cannot permanently put the genie back in the bottle and they are bound to provoke resistance.

Overcoming both submissive and oppressive behavior will be at the core of the struggle for communism.  Individuals will require the boldness to stand up to people who act in a harmful manner either to them or to others, while expecting other people to submit to you is completely at odds with a culture of mutual regard. Overcoming the submissive and oppressive forms of behavior found under capitalism will prove difficult enough. Having to at the same time overcome their far more extreme pre-capitalist forms would be unimaginably difficult.

The experience of constant flux experienced under capitalism is also important for communism. Pre-capitalist societies are static. The way of life in your old age is the same as that in your youth. In keeping with this there are set and unchanging ways of thinking and general acceptance of how things are. Under capitalism there is constant change and increasing uncertainty in the conditions of life and the prevailing ways of thinking. It then becomes possible for people to look at where they are and where they are going. This is expressed well in The Communist Manifesto as follows:

All fixed, fast-frozen relationships, with their train of venerable ideas and opinions, are swept away, all new-formed ones become obsolete before they can ossify. All that is solid melts into air, all that is holy is profaned, and men at last are forced to face with sober senses the real conditions of their lives and their relations with their fellow men.

Brexit, Trumpism, Sanders, and the Decrepit State of Capitalism: Against Political Determinism

images capitalism
“Neo-liberalism” has become an excuse by many who self-identify as left-wing to avoid confronting the reality of capitalism as the source of economic stagnation. It’s as though a return to Keynesianism is some kind of answer. There’s nothing new in this situation, as leftists influenced by Marxism have always rejected social democratic (in the sense of labour parties) efforts to keep the zombie system alive.

The following article is a good one for making this point but also for discussion and debate.

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The following article by  Michael Rectenwald is published with permission of With Sober Senses, the on-line publication of Marxist Humanist Initiative.

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There’s a basic article of faith in leftist thought, held especially dearly by most among the U.S. left. It is so entrenched and so seldom challenged that it has attained the status of myth, an unquestioned origin story on par with the Book of Genesis, as the latter must have been regarded within Christendom during the Middle Ages.

The myth goes like this: During the 1980s, Ronald Reagan and Margaret Thatcher, two arch right-wing and highly potent politicians, rose to power in their respective nations, the U.S. and the U.K. They thereafter began to institute what was for the vast majority a vile and destructive political and economic scheme: “neoliberalism.” Previous to the instalment of this neoliberal scheme, the working class had experienced relative economic improvement, and capitalists seemed happy too (as if we care). But suddenly, and seemingly without cause (although the failure of Keynesianism was apparent in the unprecedented stagflation of the 1970s), these evil political twins, prompted by wizards who formalized the approach, introduced the nefarious ideology of neoliberalism to the world. As cruel and heartless representatives of the capitalist class (which, indeed, they were), they and their supporters caused the Fall from the supposed Paradise of Keynesian reformism that had preceded them. In this mythological version of reality, neoliberalism is understood merely as a set of essentially unwarranted and unusually brutal policies, an ideological and political formation that was hatched in the brains of evil masterminds conspiring in right-wing think tanks, concocted to dupe and punish the vast majority for the benefit of the rich and powerful.

This narrative sounds cartoonish or religious in character, but only because it is – not because I have made it so. It is a typical leftist personification of world-historical forces in lieu of an actual analysis within political economy. It amounts to what I have elsewhere called “political reductionism,” which is similar to whatAndrew Kliman has referred to as “political determinism.” Kliman describes political determinism as such: “They [Keynesians and social democrats] think that the capitalists [and/or their political representatives] control capitalism––not the other way around––so that the system can become something it’s not once different people with different priorities assume control of it.” Thus, if only such people as Reagan and Thatcher had never been elected, or better yet, had never been born …

The mythological version of neoliberalism is invoked daily, and most recently in response to such events and political developments as Brexit, Trumpism, and the unprecedented political (albeit thwarted) success of the “socialist” Bernie Sanders. According to journalist Glenn Greenwald, the “leave” outcome of the Brexit referendum registers what should be an expected response to decades of neoliberal policies foisted on the masses by the EU and the British political elite. Along the same lines, Michael Hudson argues, “the whole withdrawal from Europe means withdrawing from austerity… The rejection of eurozone austerity is, essentially, a rejection of the neoliberal plan that the TTIP is supposed to be the capstone of.” Similarly, in the U.S., the appeal of Donald Trump is due at least partially to his feigned and misleading championing of U.S. working-class interests, a working class which, Trump suggests, has been made redundant by lopsided and globalist trade deals and outsourcing/off-shoring, and reduced to the precarity of part-time and/or Uberized piece-meal work or permanent unemployment. As Trump, Sanders, and the left blogosphere see it, these dire consequences are all due to the choices of neoliberal politicos, especially Reagan, the Bushes, and Bill and Hillary Clinton. Indeed, Bernie Sanders’s entire presidential campaign can be summed up simply as: “just say no to neoliberalism.” The “political revolution” that he heralds effectively amounts to a reversal of neoliberal policies and their replacement by progressive ones. According to Sanders, the entire economic fiasco that we have been enduring has been the result of a series of political and policy decisions that have been disastrous for working Americans.

What’s the problem with this narrative, you ask? After all, didn’t Reagan actually begin the defeat of unionism with the breaking of the Professional Air Traffic Controllers Organization’s strike on August 5, 1981, thereby effectively inaugurating the long period of neoliberalism that we have been enduring ever since? Didn’t Bill Clinton, the arch neoliberal Democrat, sign NAFTA into law in 1993, a trade agreement that eviscerated labor and environmental protections, while costing millions their jobs? Didn’t Clinton also repeal the Glass–Steagall Act in 1999, thereby supposedly eventuating the massive financial crisis of 2008, the effects of which we are still reeling from to this day? In short, didn’t political agents actually institute neoliberal policies, policies that continue to disenfranchise and oppress us? And shouldn’t we elect as President someone like Bernie Sanders, Jill Stein, or another leftist, who would reverse these policies? Finally (this part of the story is optional in some circles), hasn’t the capitalist class made a killing over the past forty-plus years, while they simply ignored (or some may say, enjoyed) the stagnant wages of the vast majority, the widening gap in income, and the rising tide of poverty? Isn’t there a huge and growing pie from which the majority simply have been excluded to a greater and greater extent? In the short term, don’t we simply need to get a bigger slice and then (perhaps) talk about the whole pie later on?

The problem with this story is that while grossly exaggerating the impact of policies and trade agreements, it excludes a key underlying and primary causative factor of the current instability and malaise. This key factor is necessary not only for diagnosing but also for addressing the conditions that we face today. Keynesian reformers and social democrats, including Bernie Sanders, are either utterly unaware of, attempt to blithely ignore, or otherwise contest this factor. But its existence and effects are undeniable and its implications are enormous. That is, excluded from the standard leftist narrative of neoliberalism is the following: the underlying, decrepit state of capitalism over the past forty-plus years, and the unlikely prospects for a return to robust economic growth in the foreseeable future.

Few thinkers, even among Marxists, seem willing to tell the working class this fundamental fact, and it surely is not going to be acknowledged by major political office holders or campaigners, whose careers depend upon the belief that their particular nostrums or plans will remedy the crisis. Yet neither Trump with his protectionism nor Sanders with his so-called socialism can restore the economy (in the U.S. or beyond) to post-war levels of growth, the kind of growth upon which their promises depend. Likewise, their policies and plans would not ameliorate the conditions of the vast majority. As long as the economic system is capitalism, profit will be the driving factor, and the predicament of capitalism has precisely to do with a loss of confidence in the profitability of investment.

In 1973, an already sluggish world economy bore the immediate effects of the oil-price hike. Although the rate of profit temporarily rose as a result of the inflation brought about by the rise in the price of oil, it resumed its longer-term downward trend after a few years. That trend has continued, with spikes and dips in the interim, to this day. Marx’s law of the tendency of the rate of profit to fall had always been in effect since the inception of industrial capitalism, but since this point in history, insufficient countervailing factors have been available to offset the tendency. Because profit is the driving force of capitalist production, the only incentive for undertaking it and the only long-term source of funds for productive investment, we face unstable and grim economic conditions and prospects. Given the low yields in profit, an effective productive investment boycott has ensued, and since the mid-70s, the worldwide rate of growth has been approximately halved. While there have been relative booms and busts in the interim, these have been due largely to short-term, financially-driven bubbles, and perhaps the introduction of new markets and newly super-exploited labor forces. Nevertheless, the economy has never returned to post-war boom levels.

 

Rectenwald article graph, rvsd, 7.4.16

 

The decades after World War II and those after 1975 reveal strikingly different situations for the world economy, and thus utterly different prospects for Keynesian or social-democratic interventions. Since the mid-70s, as Kliman notes, “the rate of investment (capital accumulation) has fallen and never recovered, debt burdens have increased markedly relative to income, growth of GDP, industrial production, employees’ compensation, and public infrastructure investment were all much slower than during the postwar boom, the average duration of unemployment was higher and the problem of workers dropping out of the labor market was more serious, and there were many, many more burst bubbles and banking, debt, and currency crises.”

Ignoring or blithely unaware of this economic reality, leftists mistakenly imagine that “neoliberalism” has merely been the desideratum of wicked politicians, who under the influence of their Wall Street and corporate donors, have maliciously manufactured current economic conditions. But the reverse is actually the case; neoliberalism is a set of policies and an ideology that the ruling class and their political proxies developed in response to the underlying and enduring economic malaise of capitalism. That is, underlying economic conditions have been the driving force of neoliberalism, not politics and ideology. And neoliberalism has not solved the problems that it inherited from Keynesianism. Indeed, history has illustrated time and time again that the various rightist and leftist reformist political or policy programs formulated to resolve the problems produced by capitalism are inadequate to the task.

Unfortunately, for sundry reasons, what has happened in the ideological ambit of left politics amounts to a divorce, a divorce of the “political” from the “economy” in the field of political economy. Rather than the so-called “vulgar Marxist” economic determinism of yore, what we have today has been aptly termed political determinism. Political determinism is the belief that the economy is driven by politics and ideology, rather than the other way around. As long as political determinism prevails on the left, the left’s vision will be myopic and its recommendations will be utterly flawed and useless. Isn’t it about time to tell the working class the truth?

* * * *

*Michael Rectenwald is a professor in Global Liberal Studies at New York University. He is the author ofNineteenth-Century British Secularism: Science, Religion and Literature (Palgrave Macmillan, 2016), primary editor of Global Secularisms in a Post-Secular Age (De Gruyter, 2015), and primary author ofAcademic Writing, Real World Topics (Broadview Press, 2015). His essays have appeared in numerous periodicals and anthologies, including the British Journal for the History of Science, Endevour, and George Eliot in Context (Cambridge University Press, 2013).

Role of PPPs (Public Private Partnerships) in Transition ( by Arthur Dent)

Guest post by Arthur Dent via Bill Kerr blogspot .

The need that has not been acted on is investment having become generally paralysed by world economic crisis. Not just traditional infrastructure but all kinds of large scale fixed capital construction projects are needed. The essence of transition from capitalism under such a scenario is that it is partially public and partially private.

* * * *

PPP = Public Private Partnerships

A scenario for transition from capitalism with socialized investment following another Great Depression and its (im)plausibility is discussed elsewhere.

For present purposes those assumptions are as arbitrary as the selection of some hypothetical specific PPP infrastructure project to pitch to some hypothetical target audience.

The need that has not been acted on is investment having become generally paralysed by world economic crisis. Not just traditional infrastructure but all kinds of large scale fixed capital construction projects are needed.

The essence of transition from capitalism under such a scenario is that it is partially public and partially private.

PPPs would be used for all major fixed capital construction projects that are significant for planning resumption of economic growth and ending mass unemployment. Buildings and plant that were previously (not) being privately financed, by single enterprises or project finance, not just the closely related “utilities”. Public institutions would also initially be largely untransformed, so public procurement of a traditional public utility infrastructure facility by a public agency would be subsumed under PPP arrangements as just another private participant that happens to be a public agency.

Public financial and economic planning and management organizations would be involved either as sponsors or minor participants in many types of build, own and operate projects, often taking substantial financial positions in both debt and equity based on the expropriated funds they are now able to invest as well as making ordinary commercial PPP arrangements with private participants.

The relatively small amount of economic and management expertise fully supportive of transition available to an inexperienced government would be heavily focused on the preparation, procurement and contract management/implementation of PPPs. They would have to structure the contracts so the private participants use their know how to maximize the public benefit in their own commercial interests. This would be very difficult and error prone, but not as implausible as simultaneously taking over all existing large economic institutions without enough skills to actually manage them in the public interest.

The much wider role of PPPs requires much better resourced public institutions responsible for PPPs. The relatively small numbers of government decision makers with adequate skills must supervise and structure appropriate incentives to motivate, much larger number of employees and consultants recruited from the private sector for their know how, despite their lack of support for transition.

Currently known “best practices” for PPPs would be generally applicable. There is no point in listing them. But the assumption of quite different circumstances imply many new lessons could only be learned from experience with at least the following differences from the usual circumstances.

1. Much greater transparency and much less corruption would be imposed on both the public and private participants as part of the broader social changes involved in transition.

2. Greater flexibility for detailed renegotiations would be necessitated by the circumstances of economic crisis and the more dynamic situations arising from transition.

3. Political, foreign exchange and national macroeconomic risks (interest rates etc) would be exclusively borne by the public participants and corresponding contingent liabilities and hedging or insurance costs appear openly on the central balance sheets. The public institutions responsible for exchange rates and macroeconomic stability would be closely involved in understanding the financial flows and risks they are assuming and the prices they require for asuming those risks and any hedging arrangements they may be able to make separately. Both international and local private participants would not need to make separate judgments or their own hedging arrangements for particular projects but only apply the sovereign risk ratings assessed uniformly by their own trusted ratings agencies.

4. Land use and resource management public agencies would likewise manage and appropriately price the responsibilities for land acquisition, site and regulatory risks.

5. Design, operations, construction, completion and maintenance performance risks would be exclusively borne by the private parties directly responsible for each aspect with detailed incentives tailored to reward overperformance and penalize underperformance. They would be carefully separated according to the expected and actual costs and risks borne by the participants engaged in each aspect and related global, national and sectoral statistical indexes.

6. Allocation of upside and downside market risks for supply of inputs and sale of outputs would be significantly more complex since the expropriation of private wealth for public investment in PPPs was made necessary by lack of profitable investment outlets in the prevailing market conditions of economic crisis.

The aspect for which each private participant is responsible must be commercially viable to that participant at the low competitive rates of return prevailing under crisis conditions. But the overall project need only be value for money to the public participants based on accepting an even lower (or even negative) return on their investment in order to achieve planned economic growth and rapid recovery from mass unemployment.

Transition from Capitalism (by Arthur Dent)

Guest post by Arthur Dent via Bill Kerr blogspot.

Any transition from capitalism in advanced capitalist countries as a result of another Great Depression would involve:

Inexperienced left governments required to urgently get the economy moving again and end mass unemployment because previous governments, whether claiming to be left or right, had been unable to do so.

Some level of rapid expropriation of privately owned wealth that was immobilized by the crisis now made available for socialized investment in new fixed capital construction projects to get the economy moving again and absorb unemployment.

The day after a change in government would be similar to the day before. The same social relations based on money, wage labor and capital, the same social institutions such as globalized large corporations, and national and local large, medium and small enterprises and bureaucratic government departments and agencies, and the same economic paralysis.

* * * *

This article is a placeholder for an introduction to a series of articles on various aspects of economic policy to be advocated before, and implemented during, the early stages of, a transition from capitalism in advanced capitalist countries under various different possible scenarios.

I am nowhere near ready to write any such articles, even as tentative drafts, so I cannot write an actual introduction.

Meanwhile one of the courses I am studying to become able to write such tentative drafts is a MOOC on “Public Private Partnerships” by the World Bank.

This requires as a final project for the policy and procedures track, publication of a “digital artefact” plus a description of the target audience in one hundred words.

I have published as my “digital artefact” the eight hundred word article on “Role of PPPs in Transition” [which will be published later – c21styork):

The key requirement is:
“Topic: Identify an infrastructure need that could be developed as a PPP. This could be a project that is in process of development, one on a country’s PPP project lists, or a need that has not been acted on. Think about the key facts or ideas you wish to convey by answering the following questions:
What is the infrastructure problem that the PPP is trying to solve?
What services are to be provided and are these services affordable?
What are the reasons that the private sector would want to participate?
How should these risks be allocated? Consider the country context in judging the risks and who should take them.”

I have identified as a “need that has not been acted on” the general paralysis of investment resulting in prolonged mass unemployment in another Great Depression worse than the 1930s following a financial crisis worse than 2008.

Such a worse financial crisis than 2008 does not seem to be entirely implausible since the last one seems to have been merely postponed rather than resolved by the extraordinary measures taken. Nor does another Great Depression worse than the 1930s seem entirely implausible following such a worse financial crisis.

The need is for all the infrastructure required to resume economic growth, not just traditional infrastructure like existing public utilities. The problem that has to be solved is that there are no profitable outlets for private investment in crisis conditions so investment must be socialized rather than left up to private investors.

This would require some form of state capitalism either as a transition back to “normal” private capitalism or as a transition away from capitalism.

The absence of any significant left in advanced capitalist countries, at least in the english speaking ones I am familiar with, makes any transition away from capitalism seem completely implausible. But then the continued absence of any significant left under the conditions of prolonged mass unemployment and economic paralysis seems even more implausible.

There are already important changes in the political climate of countries like Greece, Spain and Iceland that could become precursors of something much bigger. These countries are peripheral rather than central to the advanced capitalist world, but they are part of it and they are already facing serious economic and political crisis situations.

So I am writing for the target audience described at the end of this introduction, in the conceivable scenario described below.

The services to be provided are not traditional public utilities but the ending of prolonged mass unemployment through resumption of economic growth.

These services are affordable because prolonged mass unemployment is not affordable and both labor and capital are cheap in depression conditions. What is missing is profitability, not affordability.

The private sector would not particularly want to participate, but would not have better options available. Corporations would still want whatever contracts are available at the best returns they can competitively get for the benefit of their shareholders, whether or not some of their shares that used to belong to wealthy private individuals now belong to public institutions. Board members and senior managers who no longer wanted to participate because their incentives had been expropriated would be replaced by board members and managers willing to work for the owners, old and new, under the incentives currently being offered.

But the social system would not yet have been changed and risks and incentives would still have to be allocated in the context of an advanced capitalist country in crisis that is merely beginning a transition from capitalism, not one that has completed such a transition. So many of the same principles would have to still apply and new ones could only be understood and evolved over time.

Scenario

Any transition from capitalism in advanced capitalist countries as a result of another Great Depression would involve:

Inexperienced left governments required to urgently get the economy moving again and end mass unemployment because previous governments, whether claiming to be left or right, had been unable to do so.

Some level of rapid expropriation of privately owned wealth that was immobilized by the crisis now made available for socialized investment in new fixed capital construction projects to get the economy moving again and absorb unemployment.

The day after a change in government would be similar to the day before. The same social relations based on money, wage labor and capital, the same social institutions such as globalized large corporations, and national and local large, medium and small enterprises and bureaucratic government departments and agencies, and the same economic paralysis.

To simplify things I further assume a “simple” scenario with:

Expropriation narrowly targeted to take all and only the excess wealth of the top 1% of nationals.

This results in substantial investment funds becoming available to governments starting transition but most of the capital in each such country would still be held privately and by foreigners.

The most important capitalist countries such as the USA, China, Japan, and Germany would not be the first to start making the transition. But international financial and investment flows as well as trade continues.

Many top layers of management in most social institutions would be quite hostile to transition but there are enough supporters capable of supervising or replacing them.

Some of these assumptions may not look very plausible. But advocating measures based on such a “simple” case, would place the responsibility for different policies firmly with those who might prevent the policies discussed for this scenario by resorting to the breakup of international financial investment and trade flows, and civil and international wars.

Target Audience

I am studying economics, finance and other subjects to understand how capitalism works and become able to propose economic policies for transition from capitalism in advanced capitalist countries. Currently there is no significant left movement in such countries, but I am drafting tentative ideas for a wider future audience of prospective government policy makers expected when a financial crisis like 2008 eventually becomes another Great Depression like the 1930s. They are not concerned with some specific PPP project. I am conveying one possible policy option for managing partially socialized and partially still private investment projects using PPPs.

If the Dalai Lama is Marxist, then so was Leo X111.

jetsons

Last month at a university lecture in Kolkata, India, the Dalai Lama declared that, when it comes to “socio-economic theory”, he is a Marxist. His reasoning was as follows:

“In capitalist countries, there is an increasing gap between the rich and the poor. In Marxism, there is emphasis on equal distribution.”

The Dalai Lama joins a growing list of religious leaders, including Pope Francis, and other global celebrities, to declare an affinity with the notion of ‘equal distribution of wealth’, an idea that is widely (but wrongly) regarded as being Marxist. A leftist influenced by Marxism does not ask, “How can wealth be distributed more equitably?” but rather “Who produces the wealth in the first place?” And: “Why does socially produced wealth end up in the hands of the owners of the means of producing it (machines, factories, raw materials, etc) rather than in the hands of those without whom it could not have been generated?”

The positive side of the publicity is that Marxism is of international interest again, as a theory that helps to understand the dynamics of capitalism. This is happening  at a time when, in the advanced economies, capitalism isn’t delivering the promised goods any more and growing numbers of people are pissed off.

But, one must feel some sympathy for old Karl. His exasperation with those who adopted the brand without understanding the content led him to declare 150 years ago that “If anything is certain, it is that I myself am not a Marxist”. Marxism is not, and has never been, about the equal distribution of wealth.

‘To each according to his contribution’: Marx’s Critique of the Gotha Programme

In his Critique of the Gotha Programme, written as a letter in 1875 in response to the draft platform of the German Social Democratic Workers Party (SDAP), Marx pulled no punches when he described the idea of “fair distribution” being proposed by the SDAP as “obsolete verbal rubbish”, which ‘perverted a realistic outlook’.

He first tackles the proposal in the draft platform that “the proceeds of labor belong undiminished with equal right to all members of society” and asks: “’To all members of society’? To those who do not work as well? What remains then of the ‘undiminished’ proceeds of labor? Only to those members of society who work? What remains then of the ‘equal right’ of all members of society?”

Marx then dissects the notion of “proceeds of labor” in the sense of “a product of labor” with the co-operative proceeds “the total social product”.

“From this”, he points out, “must now be deducted: First, cover for replacement of the means of production used up. Second, additional portion for expansion of production. Third, reserve or insurance funds to provide against accidents, dislocations caused by natural calamities, etc. These deductions from the ‘undiminished’ proceeds of labor are an economic necessity, and their magnitude is to be determined according to available means and forces, and partly by computation of probabilities, but they are in no way calculable by equity”.

He continues: “There remains the other part of the total product, intended to serve as means of consumption. Before this is divided among the individuals, there has to be deducted again, from it: First, the general costs of administration not belonging to production. This part will, from the outset, be very considerably restricted in comparison with present-day society, and it diminishes in proportion as the new society develops. Second, that which is intended for the common satisfaction of needs, such as schools, health services, etc. From the outset, this part grows considerably in comparison with present-day society, and it grows in proportion as the new society develops. Third, funds for those unable to work, etc., in short, for what is included under so-called official poor relief today. Only now do we come to the ‘distribution’… to that part of the means of consumption which is divided among the individual producers of the co-operative society”.

As Marx notes, the “undiminished” proceeds of labor in the draft have now become converted into the “diminished” proceeds, “although what the producer is deprived of in his capacity as a private individual benefits him directly or indirectly in his capacity as a member of society”.

And what of the obvious and natural inequality among individual workers?  “… one man is superior to another physically, or mentally, and supplies more labor in the same time, or can labor for a longer time; and labor, to serve as a measure, must be defined by its duration or intensity, otherwise it ceases to be a standard of measurement. This equal right is an unequal right for unequal labor. It recognizes no class differences, because everyone is only a worker like everyone else; but it tacitly recognizes unequal individual endowment, and thus productive capacity, as a natural privilege. It is, therefore, a right of inequality, in its content, like every right. Right, by its very nature, can consist only in the application of an equal standard; but unequal individuals (and they would not be different individuals if they were not unequal) are measurable only by an equal standard insofar as they are brought under an equal point of view, are taken from one definite side only — for instance, in the present case, are regarded only as workers and nothing more is seen in them, everything else being ignored. Further, one worker is married, another is not; one has more children than another, and so on and so forth. Thus, with an equal performance of labor, and hence an equal in the social consumption fund, one will in fact receive more than another, one will be richer than another, and so on. To avoid all these defects, right, instead of being equal, would have to be unequal”.

The Critique of the Gotha Programme is one of my favourite works by Marx. In it, he is thinking practically about how the future society based on socialism – ‘To each according to his contribution’ – and then communism – ‘From each according to his ability, to each according to his needs’ – might develop. A most important point is that the new socialist society emerges from the old capitalist one and will still be marked by the culture and habits of the past. It will not be a wholly new system simply because the old social relations have been overthrown.

Accordingly, argues Marx, the individual producer in socialist society receives back from society – after the deductions have been made – “exactly what he gives to it”. He continues: “What he has given to it is his individual quantum of labor…The same amount of labor which he has given to society in one form, he receives back in another”. Marx’s view of how this could be done involved certificates rather than money.

And, “the same principle prevails as that which regulates the exchange of commodities, as far as this is exchange of equal values… a given amount of labor in one form is exchanged for an equal amount of labor in another form. Hence, equal right here is still in principle – bourgeois right, although principle and practice are no longer at loggerheads, while the exchange of equivalents in commodity exchange exists only on the average and not in the individual case. In spite of this advance, this equal right is still constantly stigmatized by a bourgeois limitation. The right of the producers is proportional to the labor they supply; the equality consists in the fact that measurement is made with an equal standard, labor.”

Progressive taxation as a distributive measure

It is true that in the Communist Manifesto, Marx advocated a system of “heavy progressive or graduated income” taxation, which is the way wealth is redistributed by governments, and argued about, in capitalist societies today. But progressive taxation has now been part and parcel of capitalism for more than a century. It would be absurd to regard the Prussian government of 1891, when modern progressive taxation was first introduced, as Marxist; even if Emperor Wilhelm 11 did regard himself as “king of the mob”.

Progressive taxation imposes a greater rate of tax on the wealthier income-earners. In Australia, people who earn less than $18,200 per year pay no income tax, those who earn between $18,200 and $180,000 pay (an average of) 20%, while those who earn over $180,000 pay at a rate of 45%. It can be a way of redistributing wealth downwards, as in the case of funding the Welfare State, or upwards through subsidies and ‘bail-outs’ to the capitalist class. Labor parties, or right-wing social democratic parties, are particularly good at the latter. In Australia, under the former Labor government led by Prime Minister Gillard, subsidies amounting to hundreds of millions of dollars were handed out to the big capitalists. In 2012 alone, nearly $90 million went to General Motors Holden.

Mind you, the US experience shows that ‘right-wing’ parties, like the Republicans, are also extremely good at it too. Witness Bush jr’s $700 billion bail-outs to failed financial-services capitalists over there. It doesn’t matter whether it’s Democrats or Republicans, or Labor or Coalition, they will do what it takes with workers’ money to keep zombie capitalism going. Naturally, people become disenchanted with a political party system of that kind and it becomes common to hear phrases such as “No matter who you vote for, you end up with a politician”.

It cannot be disputed that progressive taxation occurs under capitalism and does not in any way challenge the basic set of social relations defining it.

Rerum Novarum, distributism and fascism

By the measure of the notion of fair wealth distribution, the Rerum Novarum of Pope Leo X111, which was formulated in 1891 as a Catholic conservative response to the ills of capitalism and the ascendancy of secular democracy and the growing interest in socialism among the working classes, might also be regarded as ‘Marxist’. Rerum Novarum advocated ‘distributism’, a system in which means of production and property are distributed throughout society as in medieval times, as an alternative to both capitalism and socialism. It was, and is, a desire to return to the era of the guild, an economy centred on small land holdings and artisan production, and based on class collaboration (ie, the peasants/workers ‘accepting their place’ in return for being exploited more nicely).

In Australia, the best known advocate of this system was B.A. Santamaria. In his book, The earth, our Mother (1945), the basis of the new small-scale distributive society was to be the family unit living as close to possible to self-sufficiency on the land. As in medieval times, prior to industrial capitalism, this society would be protected from the ‘corrupting’ influences of big cities and secular materialism by the unifying ‘higher’ spiritual values of the Church. The cooperation of owners and producers would also be cemented through the promotion of nationalism, adherence to custom and tradition, and ethnic solidarity (the folk or volk).

Much of this has resonance today in E. F. Schumacher’s Small is beautiful (1973) and the Green movement. The higher spiritual value from the viewpoint of green ideology is Gaia, or the idea of harmony with, and subservience to, Nature.

Not surprisingly, in the twentieth century, Rerum Novarum and distributism influenced fascist movements, including Italy’s with its corporatist form of tyranny under Mussolini. That influence is also seen in the right-wing social democratic and Christian Democratic commitment to systems of arbitration between workers and owners of means of production. Australia currently has one avowedly ‘distributionist’ parliamentary political party: the Democratic Labour Party. Appropriately, its representative in the federal Senate is a practitioner of one of the medieval era’s ‘mechanical arts’: blacksmithing.

Given that the medieval feudal past cannot – (and should not!) – return, then the quest for more equitable distribution of wealth ends up being a defence of the status quo, capitalism. To socialists influenced by Marxism, capitalism was a revolutionary leap forward from feudalism, because feudalism limited the capacity of individuals to expand their horizons and to be freer. It trapped people in what Marx called “rural idiocy”. At best, from a Marxist perspective, the issue of wealth distribution – the gap ‘between rich and poor’, as the media likes to put it – is useful because it can raise the real question of production rather than distribution, of how value is produced and how it is appropriated. And, from there, why the appropriators need to be expropriated.

The revolutionary nature of capitalism in the nineteenth century

To Marx, capitalism was revolutionary in the way it overturned feudal claptrap and “at last” compelled people “to face with sober senses their real conditions of life and their relations with their kind”.

In the Communist Manifesto, he put it poetically:

“The bourgeoisie has disclosed how it came to pass that the brutal display of vigor in the Middle Ages, which reactionaries so much admire, found its fitting complement in the most slothful indolence. It has been the first to show what man’s activity can bring about. It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former exoduses of nations and crusades.

“The bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby the relations of production, and with them the whole relations of society. Conservation of the old modes of production in unaltered form, was, on the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air… “

Industrial capitalism created material conditions that cannot be unmade but only taken further, and social relations that can be overturned and transformed into something new and better.

Marxists are all for progress with a big ‘P’. It’s about the future, not yearning for a ‘small is beautiful’ rural past.

Distribution of wealth and relations of production

Under capitalism, with private ownership of means of production, and production for private profit, distribution of social wealth flows from the relations of production. The resultant scale of inequality can be no other way. Increases in inequality between rich and poor or, more to the point, between the owning class and the working class is part of the system of exploitation of wage labour itself, through which value is created.

In Wage Labour and Capital, Marx points out how,

“…even the most favorable situation for the working class, namely, the most rapid growth of capital, however much it may improve the material life of the worker, does not abolish the antagonism between his interests and the interests of the capitalist. Profit and wages remain as before, in inverse proportion. If capital grows rapidly, wages may rise, but the profit of capital rises disproportionately faster. The material position of the worker has improved, but at the cost of his social position. The social chasm that separates him from the capitalist has widened…

“Growth of productive capital and rise of wages, are they really so indissolubly united as the bourgeois economists maintain? We must not believe their mere words. We dare not believe them even when they claim that the fatter capital is the more will its slave be pampered. The bourgeoisie is too much enlightened, it keeps its accounts much too carefully, to share the prejudices of the feudal lord, who makes an ostentatious display of the magnificence of his retinue.”

On this last point, I think Marx would reconsider his position were he alive today. The ostentatiousness of the big bourgeoisie is sometimes astonishing – be it in the USA, the Russian Federation or China.

Marx would also be amazed at the material progress that has taken place, especially for the working class, but any great thinker from the nineteenth century would be the same. Marx acknowledged that the material conditions for the workers were improving even in his time. The important point is that the social chasm widens. (There are, of course, plenty of other reasons why capitalism sucks and has outlived its usefulness).

Labour theory of value: Marx meets the Jetsons!

The Marxist labour theory of value (LTV) explains how exchange value is created by labour’s interaction with nature and how, in the capitalist mode of production, wage labour is exploited. Bourgeois economists hate the theory because it lay at the heart of Marx’s analysis of the need for revolution. Capitalism reaches a point where it is a fetter on production – as we have seen for some decades now. Workers as a class without borders have nothing to lose by overthrowing this system based on their exploitation. Some real productivity can then occur, free from the constraints of production geared to the pursuit of private profit. For starters, we’ll be able to mass produce and have our own flying-cars!

I wanted to find a good summary of the theory that wasn’t too scant, and found the following at a non-Marxist economics blog called ‘Unlearning Economics’:

“Marx’s theory goes as follows: under capitalism, the value of commodities is determined by the ‘socially necessary’ amount of labour required to produce them (‘variable capital’), plus the current necessary cost of the capital used up in production (‘constant capital’). Fixed capital, such as machines, adds value at the same rate it depreciates, while raw commodities are used up completely and so add all of their value. Labour is generally paid less than the value it adds, and therefore is the sole source of profit.

“Here’s a brief mathematical example: say an hour of labour adds £1 of value, and a certain type of chair requires 8 hours of labour (‘labour-time’), uses £2 worth of wood and depreciates a saw worth £10 by 1/10th (i.e. after the saw is used 10 times it will break). It follows that, according to the LTV, the value of this chair is:

“(1/10)*£10 + (8*£1) + £2 = £11

“The only way the capitalist can make a profit is to pay the labourer less than the value he creates (for the most part, Marx suggested wages were determined by a social subsistence level). So if the wage is, say, £0.50, the capitalist will have £4 worth of profit. Contrary to what many think, this does not imply that capital-intensive industries will have lower rates of profit, as the rate of profit will tend to equalise between industries, ‘sharing out’ the total surplus value produced in the economy.

“The qualifiers of “necessary” costs and “socially necessary” labour are also important. It’s logically possible that a madman could purchase a saw for £100 for some reason, or that a lazy labourer could take 10 hours to make the chair, but this would do nothing to alter the resultant value of the chair. Marx was concerned with general rules, not specific cases, which could obviously fluctuate wildly as they are based on human behaviour.

“The main implication of this theory is that, since capitalists tend to use labour saving technology to increase productivity, over time they use relatively more constant capital – which cannot be a source of surplus – and this drives down the rate of profit: the Tendency of the Rate of Profit to Fall (TRPF). Though the first capitalist who uses the technology will be able to sell at the market price, and thus gain, once the technology is widely adopted, the value of the commodity will decrease – a ‘fallacy of composition’. Again, this may not be true in particular industries at any one time, but it holds true across the economy as a whole. The result will be intermittent crises as capitalists face lower profits and try to increase them by pushing down wages, devaluing their constant capital, or through technological progress. Marx never predicted capitalism would collapse in on itself, though he did suggest that the working class would revolt as their wages were pushed down”.

Conclusion

A shared prosperity can only spring from common ownership of the means of production. It is not possible under capitalism. The system would grind to a halt. The capitalist would not invest and they would have no incentive to force alienated workers to keep their noses to the grind stone. The system of distribution cannot be separated from the system of ownership.

 

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