8 p. Political Democracy without Economic Democracy is Hollow
THIRD OF A SERIES ADDRESSING SOCIETY’S ILLS. From a book by Richard D. Wolff, written in 2016. Economic alternatives that could cure much of INEQUALITY.
THIS POST IS SUPPORTIVE TO THE PREVIOUS TWO. Basically, we’ve already described one scenario of what it takes to change our system.
Most often Why Not Think writes about the philosophy of running our own life, or how to get along with family and community. That’s because these can be very practical articles that can be applied and tested in life immediately. But very often writing about the greater economy or politics has no light at the end of the tunnel. It is only a darkness. This series points directly to a practical alternative, called Economic Democracy. See if you don’t agree?
We pretty well explained it in article one and two of this series.
In the first we said in the “private ownership model”, owners hate any suggestion that they could be excluded from controlling life’s necessities, (aka by socialism and communism.) So they claim that there is no alternative to their model of the economy.
In the second article we said that any new system that has to be introduced gradually, has to be compatible with the present system (no matter how unjust it is). Wolff defined worker coops as a kind of socialism. I don’t see it that way, worker owned enterprises are capitalist, with the shareholders also being employed by the enterprise. Therefore, the interests of the owners and the employees are the same, that of worker benefits, community enhancements, and of course the enterprise longevity. (It is Economic Democracy.)
There is actually more to it than that. You also need Financial Democracy, which I propose is a local parallel currency. But that I will have to treat in another article.
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“Capitalism”, (as we know it), has built-in traits that are actually detrimental to most people, and highly lucrative to a very few people. Bailing out large financial and other corporations with borrowed money has been the almost universal government plan for coping with the recurring global capitalist crisis. The result—rising government deficits and debts—is followed by “austerity policies” to reduce those deficits and debts. After suffering a crisis and then the bailouts that bypassed them to favor major corporations, people now face austerity cutbacks of government jobs and services to offset the bailouts’ costs.
All urban societies are based on people having employment, and using their salaries to fulfill their needs through supply chains. It never works out that salaries are enough to buy all the goods and services. (I wrote about it before as the Deflationary Gap.) So something has to be continually added to the economy. It’s Growth; we call it investment. Investment in capitalist economies is totally dependent on the euphemism called “Investor Confidence”. Investor confidence is merely the latest fad that billionaires use to “game the system” with. For instance, it is said that Larry Fink has $ 10 Trillion assets-under-management, AUM at Blackrock. If he buys your stock your value will go up, but then you are screwed. Because if you don’t do exactly what he says, then he’ll dump your stock and your company will tank. He’ll profit immensely by selling-short your paper. You have lost control of your own company.
There are two ways out of capitalism’s deep cycles. One is bailouts and then austerity (to pay for them), which is preferred by the billionaires. The other is Keynesianism (expansionary state economic intervention, after John Maynard Keynes's work in 1930s Britain). Keynesianism also frustrates crisis mechanisms that discipline workers to capitalists’ advantage. Rising unemployment makes worried jobholders accept reduced wages, reduced benefits, and less job security: good news for employers. As falling wages reduce costs for surviving capitalists, they anticipate rising profit opportunities. Keynesian government spending lessens unemployment, and thus slows or prevents falling wages and benefits.
Societies where capitalist economic systems prevail today confront government gridlock. Facing serious and deepening economic problems, even when their leaders can sometimes agree on particular policies, the policies are frequently inadequate to solve the problems. Therefore, questions challenging capitalism occur now more often and more influentially than they have for many decades.
Transitions to traditional socialism and fascism have historically been the major different, alternative forms of systemic solutions. Neither has yet proved a durable solution. Modern societies have returned from fascist or traditional socialist periods, back to forms of capitalism that reestablished a greater distance between enterprises and the state. Yet those forms of capitalism keep generating business cycles and inequalities that eventually become the serious problems that bring yet another turn toward traditional socialism or fascism.
The state destroys or displaces the traditional leftist political parties and labor unions (often with violence, imprisonment, and exile). It then substitutes various combinations of its own agencies (usually in the leading roles) supported by, and integrated with nationalist and socially conservative parties and movements. Government leaders then organize close relationships with leading private capitalist groups to coordinate an “organic” direction to the nation’s economic and social development. Those close, collaborative relationships organize full employment at wage levels that effectively guarantee capitalists’ profits and government revenues.
Traditional socialists understood that a change of ownership of the means of production is a central definition and component of socialism. Socialist state officials thus replaced the capitalist enterprises’ boards of directors formerly elected by private owners of the means of production. German fascism lasted twelve years, while Italian fascism endured twice as long. The Soviet Union lasted seventy years until its traditional socialism collapsed in 1989, while the PRC continues in its seventy-fifth year.
Capitalism was born and developed first in those areas where it concentrated its production and distribution facilities, from the 1750s to the 1970s. That capitalism condemned the “Third World” to struggle for centuries to escape the awful effects of its global division of labor and consumption. By the 1970s, jet travel and modern telecommunications enabled the profitable relocation of capitalist enterprises from Western Europe, North America, and Japan to the much lower wage nations in Asia; Latin America, and Africa. The jobs, benefits, security of employment, and wage incomes in the former regions are falling, while they are rising in the latter regions. The combined result is a global decline in labor's share of total income, record corporate profits, and stock market booms alongside deepening economic inequality and problems for Western Europe, North America, and Japan. Exemplifying this historic process in the starkest terms, Detroit, once the showplace of Western capitalism, is now a largely abandoned economic wasteland. It lost well over half the population it had in the 1960s and is undergoing the largest urban bankruptcy in US history.
Such a capitalist history provokes questions and challenges to capitalism. Piecemeal reforms, marginal electoral shifts, and reformulated monetary and fiscal policies seem too little and too late for problems that go to the heart of capitalism as a system. In the United States, larger capitalists increasingly buy the two major political parties, their apparatuses and their candidates, and make office holders dependent on armies of their lobbyists and their immense public relations budgets. A gradual merger of capitalists and government is thereby coming into being, one that may formalize new leading institutions to overcome capitalism's current problems (not the people’s problems). The biggest problem for such a new fascistic formation would be the mass base it would need to cultivate, organize, and sustain. Fundamentalist religions might play such a role.
Given the trillions now hoarded by businesses unwilling to invest in a crisis-ridden economy, no great fall in business investment would result from taxing them more. If you own a $100,000 house, an annual property tax is required, but if you sell it and buy $100,000 in stocks, no property tax is required. This property tax system favors the tiny minority of US citizens who own the majority ~ of stocks and bonds.
With East Germany, a repressive regime collapsed amid promises of liberty and prosperity. The GDR’s lack of personal liberties, consumer goods, and political freedoms, built indifference and hostility to its socialist experiment.
That happened across much of Eastern Europe. Yet liberty and prosperity mostly proved elusive to achieve or keep. Where freedom ushered capitalism back in, capitalism quickly took over and imposed its heavy burdens. Euphoria, like springtime, never lasted. Reintegrating into European capitalism through German reunification has not been the blessing so many Germans imagined back in 1989. They gave up secure jobs, incomes, and generous social services. The global capitalism that surged then depended on unsustainable debt bubbles and sharply deepened wealth and income inequalities. The 2008 global collapse and subsequent austerity is shredding social safety nets everywhere. Ever-harsher versions of capitalism provoke mass movements with powerful currents critical of capitalism.
Europe’s transition from feudalism to capitalism took centuries and involved many experiments that dissolved (“revolutions” followed by “restorations’). Eventually, evolving conditions—and lessons drawn from earlier, failed capitalist experiments—enabled experiments that succeeded and grew into today’s capitalism. The transition from capitalism to socialism might well display comparable fits and starts.
One lesson to draw from the GDR’s, East Germany’s, history is that if socialist societies are to be run by, of, and for the people, then the people have to be in charge and that includes within the economy. Democracies (both capitalist and socialist) will remain merely formal when the economy continues to be run by small self-selecting minorities (in capitalism, major shareholders and the boards of directors they select, and in socialism, state officials). Those minorities will dominate until they are overthrown.
Traditional socialism proves thinly rhetorical and symbolic. Audiences offered traditional socialist visions have increasingly responded with skeptical indifference translatable as “been there, done that.” Many have formed the judgment that traditional socialisms, where it was achieved, exhibited too many shortcomings, were unsustainable, or both. It mattered little that those examples had many worthwhile social achievements. After socialists took power (through revolutions or elections) inside enterprises, just a few people still functioned much as private capitalist boards of directors had before. Those few still made the key decisions about what the enterprise produced, how and where, and what was done with its profits. Workers inside state enterprises in actually existing socialisms produced the surplus that was received and disposed of by others, as had been the case in capitalism. But those others were now state officials.
Even socialists who then attacked “austerity policies” to win elections (revealing yet again their disinclination to oppose capitalism as a system), retreated merely to less harsh versions of austerity once in power.
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Worker self-directed enterprises (WSDEs), a centuries-old idea has been revived, redesigned, and applied to go well beyond traditional socialism. The result is a new vision of an alternative to capitalism that could help mobilize a new left. The use of any enterprise’s net revenues to fund political parties, politicians, lobbying efforts, and think tanks would now reflect its workers’ democratic decisions. A key structural feature of capitalism—capital’s dictatorship inside enterprises—always generated the incentives and provided the resources for capitalists to bend government to the service of capital against labor. In contrast, a WSDE-based economy would abolish that dictatorship and thus its political effects.
Traditional socialisms’ overemphasis on macro-level differences from capitalism, (substituting state-regulated or state-owned for private property and state planning for market exchanges) would be radically corrected by the micro-level transformation of enterprise organization from capitalist to WSDE.
First, socialists need to recognize and accept that the classic socialist focus on macro-level institutional change—from private to social ownership of productive assets and from markets to planning—is insufficient conceptually and strategically.
For WSDEs, increasing enterprise surpluses or profits becomes merely one of many objectives. Local health conditions, workers’ family relationships, friendships, community solidarities, and the enterprise's relation to the natural environment are also objectives. Unlike capitalist enterprises’ drive to maximize one objective, profit, “the bottom line”, at the expense of such other objectives, WSDEs would proceed differently. Their decisions would be driven by democratic compromises weighing all the ways that enterprise activities interact with people.
A socialism that includes and emphasizes WSDEs entails workers transforming their lives. Such a socialism finally places the basic economic power (producing and distributing the surplus) in the workers’ hands. It is a formidable barrier to the undemocratic minority power that has haunted all capitalism and socialism over the last 150 years. It is necessary, if merely formal political democracy is ever to mature beyond corrupt and ritualized elections into a reality.
Here you can read more from this book by Wolff.
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