Deglobalisation is not a synonym for withdrawing from the world economy.  It means a process of restructuring the world economic and political system so that the latter builds the capacity of local and national economies instead of degrading it.  Deglobalisation means the transformation of a global economy from one integrated around the needs of transnational corporations to one integrated around the needs of peoples, nations, and communities.

We cannot talk about construction without deconstruction, reintegration without disintegration.  Today there are many experiments in alternative economics, for example local currency systems, participatory budgeting such as that practised in Porto Alegre, or ecological communities like Gaviotas in Colombia.   The reigning god, however, is a jealous one that will not take lightly challenges to its hegemony.   Even the smallest experiment or alternative to the dominant model is stopped, weakened, or co-opted. Peaceful coexistence between different systems, a pro-corporate one and a pro-people one, is, unfortunately, not an option.

Thus the deglobalisation project must have two prongs, two logics that are in synergy: deconstruction and reconstruction or recreation.

Deconstruction
Deconstruction refers to dismantling, paralysing, or drastically reducing the power of the current institutions of global governance.  This task is necessary in order to provide space for alternatives.  Specifically this targets the World Trade Organization, International Monetary Fund, World Bank, regional development banks such as the Asian Development Bank, transnational corporations, and finance capital.  This strategic objective must, however, be pursued via campaigns around demands or goals that are adapted to existing political conditions but which essentially lead to the same strategic goal. For instance, a campaign to ensure that no new round of negotiations emerges from the Fifth Ministerial of the World Trade Organization in Cancun in September 2003 would be a big blow that could reverse the liberalization process globally.

Reconstruction
Hand in hand with the deconstruction campaign must unfold the reconstruction or re-creation process or the enterprise to set up an alternative system of national and global economic and political governance.

There is a crying need for alternative systems of national and global economic and political governance.  The idea is floating around that thinking about an alternative system of local and national economic governance is a task that for the most part is still in a primeval state.  In fact, many or most of the basic or broad principles for an alternative order have already been articulated, and it is really a question of specifying these broad principles to concrete societies in ways that respect the diversity of societies.

Work on alternatives has been a collective past and present effort, one to which many South and North initiatives have contributed.  The key points of this collective effort might be synthesized as a double movement of “deglobalisation” of the national economy and the construction of a multi-layered, pluralist system of global economic and political governance.

The context for the discussion of deglobalisation is the increasing evidence not only of the poverty, inequality, exploitation, and economic stagnation that have accompanied the spread of globalized systems of production but also of their fragility and unsustainability.   The International Forum on Globalisation (IFG) points out, for instance, that “the average plate of food eaten in western industrial food-importing nations is likely to have traveled 2,000 miles from source to plate.  Each one of those miles contributes to the environmental and social crises of our times.  Shortening the distance between producer and consumer has to be one of the crucial reform goals of any transition away from industrial agriculture.”  Or as one writer claims, so much industrial production has been out-sourced to a few areas like Taiwan that had the earthquake of 21 September, 1999 experienced by that island been “a few tenths of a point stronger, or centred a few miles closer to the vital Hsinchu industrial park, great swathes of the world economy could have been paralyzed for months.”

Deglobalized economies would be structured differently.

While the following paradigm is derived principally from the experience of societies in the South, it has relevance as well to the economies of the North.

Deglobalisation, as noted earlier, is not about withdrawing from the international economy.

●       It is about reorienting economies from the emphasis on production for export to production for the local market;

●       producing goods and services that respond to people’s needs rather than to the demands created by a corporate-driven consumer culture;

●       producing with technologies that enhance rather than destroy the community, the environment, and life itself;

●       drawing most of a country’s financial resources for development from within rather than becoming dependent on foreign investment and foreign financial markets;

●       carrying out the long-postponed measures of income redistribution and land redistribution to create an internal market that would be the anchor of the economy and create the financial resources for investment;

●       deemphasizing growth and maximizing equity in order to radically reduce environmental disequilibrium;

●       adopting accounting systems that reflect real gains and losses or tradeoffs between environment and the economy, so as to promote environmentally compatible/ sustainable/sound/stabilizing economic policies;

●       acknowledging and reflecting in economic policies and frameworks–including accounting systems–the centrality of women’s contributions in both  production and reproduction of the economic and  social systems;

●       ending the urban-rural divide endemic to capitalist development by revalorizing agriculture, agricultural communities and agricultural economies;

●       subjecting strategic economic decisions to democratic choice and not leaving them to the market;

●       subjecting the private sector to effective legally sanctioned state regulation, and subjecting both the private sector and the state to popular, democratic control;

●       creating a new production, exchange, and distribution complex that includes community cooperatives, private enterprises, and state enterprises, and excludes TNCs and where the operation of the market is subordinated to the common interest;

●       enshrining the principle of subsidiarity in economic life by encouraging production of goods and services to take place at the community and national level if it can be done so at reasonable cost in order to preserve community;

●       promoting economic arrangements that uphold human rights and the right to self-determination, and support rather than undermine cultural and political diversity.

This is, moreover, about an approach that consciously subordinates the logic of the market, the pursuit of cost efficiency to the values of ecological sustainability, security, equity, and social solidarity. This is, to use the language of the great social democratic scholar Karl Polanyi, about re-embedding the economy in society, rather than having society driven by the economy.
True, efficiency in the narrow terms of constant reduction of unit costs may well suffer, but what will be gained—perhaps the more appropriate term is “regained”—are the conditions for the development of community, greater and more democracy, sustainability, and equity.  This will involve a transition from a market-driven economy that puts the primacy on profitability–in the process creating severe class inequalities and sectoral imbalances such as the rural-urban divide–to a nature- and people-oriented economy that puts the emphasis on secure livelihoods, decent employment, and improved well-being based on social justice and dignity, gender equity, and ecological equilibrium.

All this adds up to a profound social, economic, and political transformation, where capitalism and the market are strictly regulated, individualist consumption patterns give way to more cooperative forms, corporations are dislodged from production, agriculture is revalorized, dignity is restored to labor, and an equilibrium is established between community and the environment.

Thus, deglobalisation is likely to be a process marked by severe conflict.  To be realized, it must be hitched to political strategies that produce a break in the existing relations of economic and political power—that is, local forces and interests that benefit from the globalisation project must be effectively disempowered.  The staying power of these elites is impressive, and this is largely a function of the support they have from the dominant global elites.   Disempowering these globalized factions of the local elite should not, however, translate into support for those factions that exploit nationalist and anti-globalisation rhetoric for their opportunistic ends.

Moreover, deglobalisation or the re-empowerment of the local and national can only succeed if it takes place within an alternative system of national and ultimately global economic governance—that is, deglobalisation at the global level.

The emergence of such a system is, of course, dependent on greatly reducing the power of the western corporations that are the main drivers of globalisation and the political and military hegemony of the states—particularly the United States—that protects them.  But even as we devise strategies to erode the power of the corporations and the dominant states, we need to envision and start laying the groundwork for an alternative system of global economic governance.

What are the contours of such a world economic order? The answer to this is suggested by our critique of the Bretton Woods cum World Trade Organisation (WTO) system as a monolithic system of universal rules imposed by highly centralized institutions to further the interests of transnational corporations and finance capital.  To try to supplant this with another centralized global system of rules and institutions, though these may be premised on different principles, is likely to reproduce the same Jurassic trap that ensnared organizations as different as IBM, the IMF, and the Soviet state, and this is the inability to tolerate and profit from diversity.  Incidentally, the notion that there is a need for one central set of global rules and that the challenge is to replace the neo-liberal rules with social democratic ones is a remnant of a techno-optimist variant of Marxism that infuses both the Social Democratic and Leninist visions of the world, producing what Indian author Arundathi Roy, among others, calls the predilection for “gigantism.”

Today’s need is not another centralized global institution but the deconcentration and decentralization of institutional power and the creation of a pluralistic system of state and non-state institutions and organizations interacting with one another, guided by broad and flexible agreements and understandings, which receive their authority and legitimacy from below.

This is not something completely new.  For it was under such a more pluralistic system of global economic governance, where hegemonic power was still far from institutionalized in a set of all-encompassing and powerful multilateral organizations and institutions that a number of Latin American and Asian countries were able to achieve a modicum of industrial development in the period from 1950 to 1970. It was under such a pluralistic system, under a General Agreement on Tariffs and Trade (GATT) that was limited in its power, flexible, and less antagonistic to the special status of developing countries, that the East and Southeast Asian countries were able to become newly industrializing countries through activist state trade and industrial policies that departed significantly from the free-market biases that were later enshrined in the WTO.   They were, in many ways, simply replicating the use of trade policy for development by earlier successful industrializers like the US, Germany, and Japan. National controls on trade and development policies were even more marked in China and India, which also experienced significant economic growth during the same period.

Of course, economic relations among countries before the attempt to institutionalize one global free market system via the imposition of structural adjustment policies beginning in the early 1980′s were not ideal, nor were the Third World economies that resulted ideal.  Though some like Korea and Taiwan had some income and asset redistribution, they were not pro-people economic regimes.  Moreover, the quid pro quo for their room for maneuver in economic policy was subservience to the Cold War military and political strategy of the hegemonic power, the United States.

The situation elucidated above, which prevailed prior to the founding of the World Trade Organization in 1995, underlines the fact that the alternative to an economic Pax Americana built around the World Bank-International Monetary Fund (IMF)-WTO system is not anarchy.  The reality of international relations in a world marked by a multiplicity of international and regional institutions that check one another is a far cry from the propaganda image of a “nasty” and “brutish” world the partisans of the WTO evoked in order to stampede the developing country governments to ratify the WTO in 1994.

Of course, the threat of unilateral action by the powerful is ever present in a world without multilateral trading rules.  But the strong engage in unilateralism even where there is a multilateral regime. And the worst kind of world for the marginalized is where the hegemonic powers can cynically employ both unilateralism and multilateralism to achieve their ends, as the US does today.
US political and economic power, and to a lesser degree that of the European Union and other developed countries, are today strongly institutionalized in the WTO and the Bretton Woods institutions.  Thus, what developing countries and inter-national civil society should aim at is not to reform the WTO and Bretton Woods institutions, but, through a combination of passive and active measures, to either decommission them or radically reduce their powers and turn them into just another set of actors coexisting with and being checked by other international organizations, agreements, and regional groupings. This strategy would include strengthening while reforming diverse actors and institutions as UNCTAD, multilateral environmental agreements, the Inter-national Labor Organization, and regional economic blocks.

Regional blocks in the South would be an important agent of deglobalisation. But regionalism will have to transcend its current manifestations in the European Union, Mercosur in Latin America and ASEAN (Association of Southeast Asian Nations) in Southeast Asia.  While there are differences among these existing regional associations, they have crucial similarities that must be avoided.
These bodies, for one, are driven by the dynamics of global competition.  A progressive regional block must buffer its members from global competition.  Moreover, it must provide the framework for devolving economic and political power to national economies and communities.

Within the current regional associations, trade continues to be disconnected from development, and its benefits are evaluated mainly in neo-classical economic terms of achieving efficiency by constantly reducing unit costs.  In the “new regionalism,” trade expansion and neo-classical trade efficiency would be supplanted as the key rationale of economic Cupertino by the development, deepening, and strengthening of sustainable and equitable economies and regional security.  That is, trade would have to be reoriented from its present dynamics of locking communities and countries into a division of labour that straitjackets or diminishes their capabilities in the name of “comparative advantage” and “interdependence.”  It must be transformed into a process that enhances the capacities of communities, that ensures that cleavages that develop owing to initial division-of-labour agreements do not congeal into permanent cleavages, and which has mechanisms, including income, capital, and technology-sharing arrangements that prevent exploitative arrangements from developing among trading communities.

Needless to say, the formation of such regional blocs must involve not only government and business but also peoples’ and citizens’ organizations.  Indeed, the agenda of people-oriented sustainable development can only succeed if it is evolved democratically rather than imposed from above by regional elites, as was the case with the European Union, Mercosur, and ASEAN.  Regional integration has increasingly become an essential condition for national development, but it can only be effective if it is carried out as a project of economic union from below.

Regionalization from below is a critical step in bringing about a different global system.  But it must be supplemented with other measures.  The distortions that hamper the development of the countries of the South have been developed historically through colonial exploitation, unequal trade, ecological destruction, and hegemonic rule.  Thus rectifying North-South relations must take this dimension into account, which means going beyond such static solutions as “special and differential treatment” to incorporate such as measures as debt cancellation and reparations for past colonial and racist practices and ecological exploitation.

Deglobalisation & Security
Deglobalisation cannot come about without a change in the current global political and military system, which ensures the reproduction of the current global economic power structure.  The lynchpin of this system is US ideological, political and military power.  Increasingly, Washing-ton’s ideological hegemony is being eroded, forcing Washington to resort principally to the threat or employment of coercive military power to protect the structures and dynamics of global capitalism.  The US has no peer militarily, its might resting on its possession of weapons of mass destruction, weapons delivery and intelligence systems based on the latest developments in information and other technologies, a global network of bases for rapid power projection, and state-sponsored terrorism.  Nonetheless, its increasing unilateralism is generating global opposition, and the challenge is to consolidate a climate of moral opinion, via existing international bodies, alliances, and mechanisms to isolate the United States, delegitimize its use of force, and eventually erode its will to resort to military means to impose its hegemony.

The US has tried to deflect attention from its power politics by asserting that terrorism is the principal problem of the world today.  True, terrorism, or violence inflicted on civilians, must be strongly condemned.  But the most dangerous and rampant form of terrorism is state-sponsored terrorism, the principal practitioners of which include the US and Israel.  Moreover, much of the smaller-scale terrorism engaged in by non-state actors are efforts, however misguided they are, to rectify historical injustices perpetuated and institutionalized by the US and other great powers. While this does not justify these deeds, it nevertheless places them in perspective.
A positive context for deglobalisation cannot, however, come from simply defanging the United States. Ultimately, global denuclearization and demilitarization is a necessity, as is a sea change in people’s perception of what constitutes real security –that is, from a sense that it is rooted in the possession of armies and weapons to a belief that it ultimate stems from justice, equality, shared prosperity, and mutual respect.

Multilateralism, as currently practised, is not the answer to the unilateralism of the United States, for multilateralism in world politics is much like multilateralism in the global economy: an alliance of the strong powers—mainly the United States and its European Union allies–to police and keep the weak in their place.  True multilateralism would build on but go beyond the United Nations to create a framework that institutionalizes the resolution of conflicts by diplomacy among multiple actors operating as free and equal partners in an atmosphere free of great power blackmail and protection.  The UN Security Council’s “multilateralism” on the Iraq question exemplifies the kind of multilateralism-under-coercion that can be just as destabilizing and dangerous as outright unilateralism.

Building a new international order to guarantee peace, security, and justice will also necessitate going beyond multilateralism based on the nation-state.   Today, there is no set of domestic institutions apart from the nation-state complex that can more effectively protect the interests of people and communities from external threats like the United States.  However, the dangers stemming from nationalism have to be kept in mind.  Nationalism can be positive and constructive.  But nationalism is also the ideology of the extreme right, of many religious fundamentalist groups; it can take on regressive, militaristic, and chauvinist forms.  Moreover, national security has often become a rationale for domestic repression.  So while national governments in the South need to be supported in their protection of national sovereignty against external powers, peoples’ and citizens’ organizations must oppose them when they justify external expansion and domestic repression on the basis of national security and nationalist ideology.

Deglobalisation & Cultural Diversity
Corporate-driven globalisation has been accompanied by the diffusion of a culture of consumption that is geared to continually expand global demand for commodities; a political culture of formal democracy that sings paeans to freedom and democracy while in practice promoting unfreedom and inequality and subverting the values of diversity, community, and social solidarity; and deeply rooted prejudices of the superiority of western values and the western cultural experience.

Deglobalisation must be accompanied by a revalorization of local and national cultures in an effort to reverse homogenization and institutionalize cultural diversity globally.  This is not, however, a simple process, for there are retrograde elements to all cultures that must not be valorized.  These include cultural chauvinism; caste, race, and gender discrimination; and religious fundamentalism.  Not only are such attitudes and values destructive of human community in themselves but, in paradoxical combinations with some western beliefs and philosophies, their negative impact is sometimes magnified.  In the contemporary Indian state, for instance, Hindu cultural chauvinism and religious fundamentalism has combined with neo-liberal economic policies propagated by western institutions to create the worst of all possible worlds for the masses of people: a political crisis and economic crisis exploited by religious demagogues.  Another dangerous paradox is seen in the way Hindu fundamentalists, Muslim fundamentalists, Christian fundamentalists, and promoters of “Asian Values” ideology stridently support the American political scientist Samuel Huntington, and his thesis about the irreducible incompatibility of “civilizations” in order to advance their politics of hatred of  ‘the Other.’

Struggle against retrograde cultural features must thus be an essential element of the valorization and revalorization of cultures and the promotion of that global cultural diversity that provides the most conducive context for the deglobalisation project.  So must the diffusion of values and practices that reflect the universal values of equity, democracy, gender equality, and ecological sustainability.

In creating this context, it is important to support self-determination by indigenous communities.

The Challenge
In conclusion, many of the elements of a pluralist system of global economic and political governance already exist but, undoubtedly, others need to be established.  Here the emphasis must be on the formation of international and regional economic, political, and cultural institutions that would be dedicated to creating and protecting the space for devolving the greater part of production, trade, economic, and political decision-making to the regional, national, and community level.
More space, more flexibility, more genuine international cooperation–these are among the key features of a deglobalized world—of a truly international economy and political order.  It is in such a more fluid, less structured, multi-layered, more pluralistic world, with multiple checks and balances, that the nations and communities of the South—and the North–will be able to carve out the space to develop based on their values, their rhythms, and the strategies of their choice.

Source: http://www.popularresistance.org/strategy-for-deglobalization/

Therefore, the tasks of the working class in the Russian Revolutions of 1905 and 1917 will only be touched upon and I will concentrate instead on the Marxist theory of the state. Lenin and the Bolsheviks successfully applied this theory in their day and were able to overthrow the capitalist ruling class and its supporters in Russia and surrounding areas and to found the Soviet Union in 1922. How should we understand this theory today as we struggle to advance the interests of working people around the world in their effort to free themselves from capitalist exploitation and oppression (including the workers of the former socialist countries)?

I will begin with a few remarks about Lenin’s “Preface” to the first edition of SR. First, Lenin’s characterization of the state is as accurate today as it was when he wrote his preface: The “oppression of the working people by the state which is merging more and more with the all- powerful capitalist associations, is becoming increasingly monstrous.”

Capitalist states have by now practically completed the merge. In the US  the present economic depression initiated, among other reasons, by fraudulent lending practices and other illegal activities by banks and big corporations has seen the state bailing out the big capitalist firms while leaving the working people, the victims of the depression, to fend for themselves. The state has recently cut food stamps and unemployment  insurance benefits for the working people while giving subsidies to big agricultural and energy interests. There is no doubt whose interest the state serves.

In European countries the state is either imposing regimes of extreme austerity on the working population in order to extract wealth to be turned over to bond holders and banks or pushing through measures to revamp the labor laws and retirement plans of the workers to their disadvantage in order that the corporations may more easily fire people and will not have their taxes increased to support social programs.

In the Third World from Bangladesh, Cambodia, and Indonesia, to Mexico, Haiti and Africa, and points in between, we see the state allied with commercial interests and using its police and military to break up strikes and work stoppages in support of the owners of capital.

Lenin also pointed out that those who claim to be champions of the working class, especially so-called “socialist” leaders have sided with the capitalist class against the workers of their own countries, but also internationally. The French socialist government, for example, openly supports the most reactionary elements of the US ruling class in its international quest to dominate Third World countries. This is in line with Lenin’s observation that “the majority of the so-called Great Powers have long been exploiting and enslaving  a whole number of small and weak nations.” Is the world any different today?

One of the most effective ways the capitalist class keeps the workers in thrall and off balance is by appeals to patriotism (USA! USA!) and by pitting the workers of one country against those of another (“Buy made in America!”). The idea that the state is somehow class neutral or can be made to champion the workers against the financial and industrial interests is seen by Lenin as an obstacle to mobilizing the working people to struggle for THEIR interests rather than the interests of the exploiters. Lenin uses the term “opportunism” to describe working class leaders who work to achieve narrow short term and temporary gains at the expense of the long term interests of the working class. Opportunism is not the same as reformism which brings about substantive long term changes under capitalism which will strengthen working class consciousness (such as the struggle for civil and political rights.)

Struggles for reform increase class consciousness in the working class, while opportunism decreases it. This is why Lenin thinks understanding the nature of the state is of vital importance. “The struggle to free the working people from the influence of the bourgeoisie in general, and the imperialist bourgeoisie in particular, is impossible without a struggle against opportunistic prejudices concerning the ‘state’”.

Up to this point I think the ideas expressed by Lenin in his preface are still applicable today. However, there are three issues that I now turn to which have questionable merit today:

1. “The world proletarian revolution is clearly maturing.” This was an overly optimistic, if understandable, position in 1917. But subsequent events actually led to the derailment of the “world proletarian revolution” which shows no sign of getting back on tract anytime soon. However, events in North America and Europe, Cuba and South America, as well as Africa and the Middle East are indicative of a general malaise of the international capitalist order the outcome of which is not now predictable.

2. While there are many lessons to be learned from the Russian Revolution, Lenin was incorrect, I think, in seeing it as the first link in a chain of revolutions which would overthrow capitalism. Capitalism ultimately overthrew it, hopefully for the nonce.

3. The emphasis on refuting the ideas of Karl Kautsky, while essential in the era of WWI, are no longer as relevant as they were in light of the developments in Marxist theory attributable to Gramsci, Trotsky, Mao and others.

Finally, Lenin ends the preface with the following words regarding the understanding of the nature of the state and its relation to the struggle for socialism which he says “is a most urgent problem of the day, the problem of explaining to the masses what they will have to do before long to free themselves from capitalist tyranny.” Well, it’s a long time since Lenin’s “before long” but the problem is still urgent and the explanation must still be made.

Read the book here

Source: http://www.opednews.com/articles/Lenin-s-State-and-Revoluti-by-Thomas-Riggins-Capitalism_Class_Consciousness_Lenin-140112-871.html

The state’s current approach to intellectual property has come under scrutiny of late, as its disconnect from anything that might have once legitimated it has become more and more obvious. The activities of rent-seeking patent trolls, who accumulate patents solely for the purpose of filing lawsuits, have been highlighted by National Public Radio’s “Planet Money” program. And the absurdities of strict copyright enforcement are apparent in the life-destroying legal judgments leveled against small-time downloaders — $220,000 against Mille Lacs Band of Ojibwe employee Jammie Thomas-Rasset for twenty-four songs, $675,000 against college student Joel Tenenbaum for thirty.

Faced with these outrages, it’s tempting to demand the immediate destruction of the entire edifice of patent and copyright protection. All the more since intellectual property compounds the general socialist discomfort with private property, because the right it encodes is such an expansive one. No longer just the right to control a particular physical space or object, it abstracts the property form into the control of patterns and processes, wherever and whenever they appear. Instead of owning a book or a factory, the intellectually propertied class controls all copies of the book, and all implementations of the production process within the factory.

This issue of Jacobin includes a pair of essays that explain the origins and implications of this new property form. Sean Andrews traces IP to the laws of seventeenth- and eighteenth-century England and the ideas of John Locke, showing how intellectual property protections go back to the beginnings of capitalism itself. It is the scope of these laws, and their relative economic importance, that has changed in recent years.

Anne Elizabeth Moore gives a more contemporary reading, as she describes the patent and copyright regimes in detail and explores their spread around the world. She makes the point that intellectual property, no less than the material kind, supports a system of class power that is both bourgeois and patriarchal. Gendered conceptions of credit and reward are written into the structures of the property laws themselves, from the range of things that can be covered by it (novels, but not recipes) to who can claim control over it.

Both of these essays demonstrate the absurdities and injustices of a strengthening IP regime. Yet each, in a different way, shows that simply denouncing all intellectual property is inadequate, as are the political battle lines that are often drawn today. On one side, we find pirates and free-culture advocates, insisting that “information wants to be free” and that any attempt to enclose the copying of patterns within legal restrictions is an affront and an inanity. This view unites a sort of Left-Right coalition that can encompass the libertarian economist David K. Levine and the amorphous rebellion of Europe’s Pirate parties. Arrayed against them are those who may acknowledge the corporate corruption of the patent and copyright systems, but who nevertheless hold up a reformed IP system as a bulwark against the depredations of a “sharing economy” that all too often amounts to a handful of Internet monopolists profiting from the uncompensated labor of creative workers. Jaron Lanier, author of the recent Who Owns the Future?, is one of the more strident proponents of this view.

We have here something a bit like the old “reform or revolution” dichotomy, which arrays the advocates of smashing the existing system against the timid meliorism of those who only want to make it more humane. But the contrast fails here just as it did in the larger drama of twentieth-century socialism, where revolution and reform both ultimately led back to capitalist restoration and neoliberal retrenchment. We need another path — one that recognizes the necessity of reformist struggles within capitalist institutions, while still attempting to move toward a break with the system and the creation of a fundamentally new kind of economy and society. André Gorz called this the “non-reformist reform”: a project of “reforms which advance toward a radical transformation of society” by making a “modification of the relations of power” which could “serve to weaken capitalism and to shake its joints.”

What would constitute a non-reformist reform of intellectual property? The revolutionary overthrow of all intellectual property, even if it were possible, leaves unanswered the question of how to ensure that those who create knowledge and culture are provided for, and how to control the exploitation of the cultural commons by digital capitalists. The anarchist championing of online piracy only allows for some resistance around the edges, without posing a fundamental challenge to the system. And yet the idea of reforming IP into something better and more egalitarian, something that truly rewards all who participate in the work of creation, seems like another iteration of the naïve dream of a just and democratic capitalism.

Anne Elizabeth Moore and Sean Andrews approach this bundle of contradictions in different ways. For Moore, the central point is that IP is now and has always been gendered, and therefore any path toward its transformation and abolition must explicitly work toward addressing inequities that are embedded in our notions of culture, even if that sometimes means more IP rather than less. “An across-the-board loosening of IP protection,” she fears, would “lead to the increased piracy of those cultural productions already less protected, worsening the economic gender gap.” The task is to “correct for generations of cultural misogyny,” which entails fundamentally rethinking what counts as IP, beyond an isolated male inventor in his study, the image of whom forms the explicit or implicit basis of much of our current regime.

Insofar as the socialist perspective is taken to be hostile to the existence of intellectual property and private property more generally, Moore’s argument might be taken as a challenge to it. But this is to confuse a socialist approach with a libertarian one. The libertarian absolutist case against IP is consistent with the movement’s anti-statist trappings, and depends on the inference that because intellectual property is a debased, false form of property, it therefore does not fall within the purview of the state’s property-defending mission.

A socialist, however, can recognize that law and the state are contested terrain, and that replacing the regime of capitalist private property requires erecting, at least in the interim, an alternative form of socialized property, in order to defend the commons against the persistent efforts of the capitalist class to enclose and appropriate it. The struggle over traditional physical property provides many examples of this. Land trusts that are available to the public are an alternative to private ownership. Worker coooperatives and B Corporations, which are dedicated to a social purpose rather than only maximizing profit, are being pursued as alternatives to the traditional corporate form.

This is an appealing model for a potentially non-capitalist approach to the cultural commons that isn’t simply hostile to the legal system, but attempts to use it as a mechanism for contesting the narrow capitalist definition of property. But as we attempt to forge new property forms, new contradictions and unintended consequences will arise. In embracing a superficially appealing new licensing model, we could end up accidentally imprisoning ourselves in something just as bad as or worse than what we have now.

Take, for example, a project that Andrews mentions, the Creative Commons license. This is, as he notes, a legal property form just as much as traditional copyright. However, where copyright gives an owner the right to keep knowledge closed, Creative Commons is designed to facilitate creators who want to ensure their creations remain open, while at the same time making sure that they receive credit for them. One of the more common versions is the CC BY license, which allows unlimited distribution and repurposing as long as the original creator receives credit in any new version or copy. Another, CC BY-SA, adds the provision that those who redistribute or remix something must “license their new creations under the identical terms,” a provision with the potential to virally spread Creative Commons protection to other non-covered work. Going further in a superficially anti-capitalist direction, CC BY-NC-SA also prohibits commercial use, while CC BY-NC-ND also prohibits the creation of modified and derivative works.

These licenses might seem like a promising ways to protect the rights of creators and keep work out of the hands of corporate content monopolists. But they also pose contradictions and compromises for those who would like the commons to be as open and accessible as possible, but who recognize that a short-run strategy of total IP rejectionism is susceptible to exploitation by capitalist interests. Creative Commons demonstrates this, as does the simpler GNU Public License (GPL) for software.

The attribution and share-alike components of Creative Commons are the least problematic, since they enforce an ethic of author credit and mutual sharing that is fundamental to the operation of a non-capitalist commons. The non-commercial and no-derivatives provisions, however, turn out to have some problematic unintended consequences, as explained in a set of twocritiques published by the Free Culture Foundation. Marking a work for non-commercial use sounds like just a way to draw a line between capitalist exploitation and socialist sharing, and the no-derivatives clause can be defended as a way of protecting the integrity of a creator’s work. But NC licenses don’t distinguish between a small-time DJ sampling a song and a massive streaming service making millions from advertising. Moreover, they replicate traditional copyright’s grant of a commercial monopoly to the original creator. The ban on derivative works, meanwhile, is only justified if IP law is regarded as a safeguard on the natural rights of the creator, rather than a utilitarian and pragmatic mechanism for ensuring a free and open cultural commons.

Another issue is that new licenses and property forms may not take into account all of the people who have a need for rights with respect to a given cultural object. Several years ago, a Texas family sued the Creative Commons Corporation along with Virgin Mobile Australia, charging them with libel and invasion of privacy. Virgin had found a CC-licensed image taken by a youth counselor, which included an image of the family’s teenage daughter, and used it in an advertising campaign without the family’s permissions. In this case, the CC license replicated a problem that Anne Elizabeth Moore identifies in traditional copyright: the rights of (disproportionately male) creators of images are protected, while the (more often female) people who become the content of the image are not.

The tensions inherent in new intellectual property forms are closely related to a tension running through all discussions of intellectual production — and indeed, production generally — between the rights of the producer and the rights of the user or consumer. In a recent essay on the tech guru Tim O’Reilly, Evgeny Morozov explains how this distinction plays out in the world of software development, in the late-nineties split between the free softwareconcept developed by Richard Stallman and the Free Software Foundation and the rival notion of open source software promoted by the libertarian Eric Raymond. Stallman was and is preoccupied with the rights of users to examine and modify the software they use; Raymond, in contrast, was more interested in protecting the rights of developers to control the terms on which their software is distributed.

The distinction between the rights of the user and the rights of the developer resembles, but does not neatly map onto, a more traditional political distinction between the rights of consumers and the rights of producers. The analogy is not exact, because users who modify and repurpose software can also be thought of as producers, and because the category “developers of software” is ambiguous between the software engineers who actually write the code and the capitalist enterprises that frequently employ them and retain the licenses to the software they produce. A similar ambiguity exists in the contrast between the creators and consumers of cultural objects like books or songs.

In considering various “copyleft” alternatives to the existing IP regime, there is a danger of being seduced by a facile identification with the moral priority of creators over consumers. It’s the same impulse that leads to the slippage between emancipatory critiques of capitalism and a more politically ambiguous producerism, which attempts to divert society’s bounty away from unproductive parasites and toward those who are allegedly the direct producers.

But the point of defending the commons isn’t that producers and creators are better than users and consumers — a moral economy more suited to Ayn Rand than Karl Marx. Rather, it is that we are simultaneously creators and consumers, and that we should strive for legal forms that keep us from being exploited or manipulated in either role.

by Peter Frase

Source: http://jacobinmag.com/2013/09/property-and-theft/

Five years ago next month Lehman Brothers filed for the largest bankruptcy in US history. Its collapse was to signal the beginning of the Great Recession – the most substantial world historic crisis of capitalism since the second world war. How should we understand the fundamentals of this system now in crisis? And, as it wages war on working people under the guise of austerity, how can we imagine a world beyond it? 

Few have been as influential in answering these questions as Marxist geographer David Harvey. He spoke to Ronan Burtenshaw and Aubrey Robinson about these problems earlier this summer.

You’re working on a new book at the moment, The Seventeen Contradictions of Capitalism. Why focus on its contradictions?

David Harvey: The analysis of capitalism suggests that there are significant and foundational contradictions. Periodically those contradictions get out of hand and they generate a crisis. We’ve just been through a crisis and I think it’s important to ask, what were the contradictions that led us into it? How can we analyse the crisis in terms of contradictions? One of Marx’s great sayings was that a crisis is always the result of the underlying contradictions. Therefore we have to deal with those themselves rather than their results.

One of the contradictions you focus on is that between the use and exchange value of a commodity. Why is this contradiction so fundamental to capitalism, and why do you use housing to illustrate it?

All commodities have to be understood as having a use value and exchange value. If I have a steak the use value is that I can eat it and the exchange value is how much I had to pay for it.

But housing is very interesting in this way because as a use value you can understand it as shelter, privacy, a world of affective relations with people, a big list of things you use a house for. But then there is the question of how you get the house. At one time houses were built by people themselves and there was no exchange value at all. Then from the 18th century onwards you got speculative house building – Georgian terraces which were built and sold later on. Then houses became exchange values for consumers in the form of saving. If I buy a house and I pay down the mortgage on it, I can end up owning the house. So I have an asset. I therefore become very concerned about the nature of the asset. This generates interesting politics – ‘not in my backyard’, ‘I don’t want people moving in next door who don’t look like me’. So you start to get segregation in housing markets because people want to protect the value of their savings.

Then about thirty years ago people began to use housing as a form of speculative gain. You could get a house and ‘flip’ it – you buy a house for £200,000, after a year you get £250,000 for it. You earned £50,000, so why not do it? The exchange value took over. And so you get this speculative boom. In 2000 after the collapse of global stock markets the surplus capital started to flow into housing. It’s an interesting kind of market. If I buy a house then housing prices go up, and you say ‘housing prices are going up, I should buy a house’, and then somebody else comes in. You get a housing bubble. People get pulled in and it explodes. Then all of a sudden a lot of people find they can’t have the use value of the housing anymore because the exchange value system has destroyed it.

Which raises the question, is it a good idea to allow use value in housing, which is crucial to people, be delivered by a crazy exchange value system? This is not only a problem with housing but with things like education and healthcare. In many of these we’ve released the exchange value dynamics in the theory that it’s going to provide the use value but frequently what it does is it screws up the use values and people don’t end up getting good healthcare, education or housing. This is why I think it’s very important to look at that distinction between use and exchange value.

Another contradiction you describe involves a process of switching over time between supply-side emphases on production and demand-side emphases on consumption in capitalism. Could you talk about how that manifested itself in the twentieth century and why it’s so important?

One of the big issues is keeping an adequate market demand, so that you can absorb whatever it is that capital is producing. The other is creating the conditions under which capital can produce profitably.

Those conditions of profitable production usually mean suppressing labour. To the degree that you engage in wage repression – paying lower and lower wages – the profit rate goes up. So, from the production side, you want to squeeze labour down as much as you possibly can. That gives you high profits. But then the question arises, who is going to buy the product? If labour is being squeezed, where is your market? If you squeeze labour too much you end up with a crisis because there’s not enough demand in the market to absorb the product.

It was broadly interpreted after a while that the problem in the crisis of the 1930s was lack of demand. There was therefore a shift to state-led investments in building new roads, the WPA [public works under the New Deal] and all that. They said ‘we will revitalise the economy by debt-financed demand’ and, in doing so, turned to Keynesian theory. So you came out of the 1930s with a very strong capacity for managing demand with a lot of state involvement in the economy. As a result of that you get very high growth rates, but the high growth rates are accompanied by an empowerment of the working-class with rising wages and stronger unions.

Strong unions and high wages mean the profit rate starts to come down. Capital is in crisis because it’s not repressing labour enough, and so you get the switch. In the 1970s they turned to Milton Friedman and the Chicago School. That became dominant in economic theory and people began paying attention to the supply-side – particularly wages. You get wage repression, which begins in the 1970s. Ronald Reagan attacks the air traffic controllers, Margaret Thatcher goes after the miners, Pinochet kills people on the left. You get an attack on labour – which raises the profit rate. By the time you get to the 1980s the profit rate has jumped up because wages are being repressed and capital is doing well. But then there comes the problem of where are you going to sell the stuff.

In the 1990s that is really covered by the debt economy. You started to encourage people to borrow a lot – you started to create a credit card economy and a high mortgage-financed economy in housing. That covered the fact that there wasn’t real demand out there. But eventually that blows up in 2007-8.

Capital has this question, ‘do you work on the supply side or the demand side?’ My view of an anticapitalist world is that you should unify that. We should return to use value. What use values do people need and how to we organise production in such a way that it matches these?

It would seem that we are in a supply-side crisis, and yet austerity is an attempt to find a supply-side resolution. How do we square that?

You have to differentiate between the interests of capitalism as a whole and what is specifically in the interests of the capitalist class, or a section of it. During this crisis, by-and-large, the capitalist class have done very well. Some of them got burned but for the most part they have done extremely well. According to recent studies of the OECD countries social inequality has increased quite significantly since the onset of the crisis, which means that the benefits of the crisis have been flowing to the upper classes. In other words, they don’t want to get out of the crisis because they are doing very well out of it.

The population as a whole is suffering, capitalism as a whole is not healthy but the capitalist class – particularly an oligarchy within it – has been doing extremely well. There are many situations where individual capitalists operating in their own class interests can actually do things which are very damaging to the capitalist system as a whole. I think we are in that kind of situation right now.

You have said often recently that one of the things we should be doing on the left is engaging our postcapitalist imagination, starting to ask the question of what a postcapitalist world would look like. Why is that so important? And, in your view, what would a postcapitalist world look like?

It is important because it has been drummed into our heads for a considerable period of time that there is no alternative. One of the first things we have to do is to think about the alternative in order to move towards its creation.

The left has become so complicitous with neoliberalism that you can’t really tell its political parties from right-wing ones except on national or social issues. In political economy there is not much difference. We’ve got to find an alternative political economy to how capitalism works, and there are some principles. That’s why contradictions are interesting. You look at each one of them like, for instance, the use and exchange value contradiction and say – ‘the alternative world would be one where we deliver use values’. So we concentrate on use values and try to diminish the role of exchange values.

Or on the monetary question – we need money to circulate commodities, no question about it. But the problem with money is that it can be appropriated by private persons. It becomes a form of personal power and then a fetish desire. People mobilise their lives around searching for this money even when nobody knows that it is. So we’ve got to change the monetary system – either tax away any surpluses people are beginning to get or come up with a monetary system which dissolves and cannot be stored, like air miles.

But in order to do that you’ve also got to overcome the private property-state dichotomy and come to a common property regime. And, at a certain point, you need to generate a basic income for people because if you have a form of money that is anti-saving then you need to guarantee people. You need to say, ‘you don’t need to save for a rainy day because you’ll always be getting this basic income no matter what’. You’ve got to give people security that way rather than private, personal savings.

By changing each one of these contradictory things you end up with a different kind of society, which is much more rational than the one we’ve got. What happens right now is that we produce things and then we try to persuade consumers to consume whatever we’ve produced, whether they really want it or need it. Whereas we should be finding out what people’s basic wants and desires are and then mobilising the production system to produce that. By eliminating the exchange value dynamic you can reorganise the whole system in a different kind of way. We can imagine the direction that a socialist alternative would move in as it breaks from this dominant form of capital accumulation, which runs everything today.

The full transcript of this interview will be available in the autumn edition of the Irish Left Review

Source: http://www.redpepper.org.uk/david-harvey-interview-the-importance-of-postcapitalist-imagination/

Thus, to the present day there remains a gulf at the European level between the citizens’ opinion- and will-formation, on the one hand, and the policies actually adopted to solve the pressing problems, on the other. This also explains why conceptions of the European Union and ideas of its future development have remained diffuse among the general population. Informed opinions and articulated positions are for the most part the monopoly of professional politicians, economic elites, and scholars with relevant interests; not even public intellectuals who generally participate in debates on burning issues have made this issue their own.[1] What unite the European citizens today are the Eurosceptical mindsets that have become more pronounced in all of the member countries during the crisis, albeit in each country for different and rather polarizing reasons. This trend may be an important fact for the political elites to take into account; but the growing resistance is not really decisive for the actual course of European policy-making which is largely uncoupled from the national arenas. The actual course of the crisis management is pushed and implemented in the first place by the large camp of pragmatic politicians  who pursue an incrementalist agenda but lack a comprehensive perspective. They are  oriented towards “More Europe” because they want to avoid the far more dramatic and presumably costly alternative of abandoning the euro.

Starting with the roadmap that the European institutions have designed for developing a Genuine Economic and Monetary Union, I will first explain the probable technocratic dilemma in which this project becomes entangled (I). In the second part of my lecture I would like to expose alternative steps towards a supranational democracy in the core of Europe and the obstacles we would have to remove on that road (II). The major hindrance, the lack of solidarity, leads me in the last and philosophical part to a clarification of this difficult, yet genuinely political concept (III).

                           I

The Commission, the Presidency of the Council, and the European Central Bank — known in Brussels parlance as “the institutions” –  are least subject to legitimation pressures because of their relative distance from the national public spheres. So it was up them to present in December 2012 the first more detailed document in which the European Union develops a perspective for reforms in the medium and long term that go beyond the present, more or less dilatory reactions to critical symptoms.[2] Within this expanded timescale the attention is no longer focussed on the cluster of the recent causes that since 2010 have connected the global banking crisis with the vicious circle of over-indebted European states and undercapitalized banks refinancing each other. The important and since long overdue Blueprint, as it is called, directs attention to long-term structural causes inherent in the Monetary Union itself.

The Economic and Monetary Union took shape during the 1990s in accordance with the ordoliberal ideas of the Stability and Growth Pact. The Monetary Union was conceived as a supporting pillar of an economic constitution that stimulates free competition among market players across national borders, and it is organized in accordance with general rules binding on all member states.[3] Even without the instrument of devaluing national currencies that is not available in a monetary union, the differences in levels of competitiveness among the national economies were supposed to even out of their own accord. But the assumption that permitting unrestrained competition in accordance with fair rules would lead to similar unit labor costs and equal levels of prosperity, thereby obviating the need for joint decision-making on financial, economic and social policies, has proved to be false. Because the optimal conditions for a single currency in the euro zone are not satisfied, the structural imbalances between the national economies that existed from the start have become more acute; and they will become even more acute as long as the European policy pattern  does not break with the principle that each member state makes sovereign decisions within the relevant policy fields without taking other member states into consideration, in other words, exclusively from its own national perspective.[4] In spite of some concessions, however, until now the German Federal Government has clung steadfastly to this dogma.

It is to the credit of the Commission and the Presidency of the Council that they have addressed the actual cause of the crisis —namely, the faulty design of a monetary union that nevertheless holds fast to the political self-understanding of an alliance of sovereign states (as the “Herren der Verträge”). According to the aforementioned reform proposal, the so-called Blueprint, three essential, though vaguely defined, objectives are to be realized at the end of a path projected to last five years: First, joint political decision-making at the EU level on “integrated guidelines” for coordinating the fiscal, budget, and economic policies of the individual states.[5]This would call for an agreement that prevents the economic policy of one member state from having negative external effects on the economy of another member state. Furthermore, an EU budget based on the right to levy taxes with a European financial administration is envisaged for the purpose of country-specific stimulus programs. This would generate scope for selectively focused public investments through which the structural imbalances within the Monetary Union can be combated. Finally, euro bonds and a debt repayment fund are supposed to make possible a partial collectivization of state debts. This would relieve the European Central Bank of the task of preventing speculation against individual states in the euro zone that it has currently assumed on an informal basis.

These objectives could be realized only if cross-border transfer payments with the corresponding transnational redistribution effects were to be accepted. From the perspective of the constitutionally required legitimation, therefore, the Monetary Union would have to be expanded into a real Political Union. The report of the Commission naturally proposes the European Parliament for this purpose and correctly states that closer “inter-parliamentary cooperation as such does not … ensure democratic legitimacy for EU decisions.”[6] On the other hand, the Commission takes into consideration the reservations of the heads of state and adheres so radically to the principle of exhausting the present legal basis of the Lisbon Treaty that it conceives of the transfer of competences from the national to the European level occuring only in a rather gradual and inconspicuous way.[7]

The obvious aim is to postpone a revision of the treaties to the very end. The Commission accords the expansion of steering capacities priority in the short and the medium term over a  corresponding enlargement of the basis of legitimation. Thus the ultimate democratization is presented as a promise like a light at the end of the tunnel. Supranational democracy remains the declared long term goal on paper. But postponing democracy is a rather dangerous move. If the economic constraints by the markets happily meet the flexibility of a free-floating European technocracy, there arise the immediate risk that the gradual unification process which is planned for, but not by the people will grind to a halt before the proclaimed goal of rebalancing the executive and the parliamentary branches is reached. Uncoupled from democratically enacted law and without feedback from the pressing dynamics of a mobilized political public sphere and civil society, political management lacks the impulse and the strength  to contain and redirect the profit-oriented imperatives of investment capital into socially compatible channels. As we can observe already to-day, the authorities would more and more yield to the neoliberal pattern of politics. A technocracy without democratic roots would not have the motivation to accord sufficient weight to the demands of the electorate for a just distribution of income and property, for status security, public services, and collective goods when these conflicted with the systemic demands for competitiveness and economic growth.[8]

Summarizing the analysis, we are trapped in the dilemma between, on the one side, the economic policies required to preserve the euro and, on the other, the political steps to closer integration. The steps that are necessary to achieve this objective are unpopular and meet with spontaneous popular resistance. The Commission’s plans reflect the temptation to bridge, in a technocratic manner, this gulf between what is economically required and what seems to be politically achievable only apart from the people. This approach harbors the danger of a growing gap between consolidating regulatory competences, on the one hand, and the need to legitimize these increased powers in a democratic fashion, on the other. Under the pull of this technocratic dynamic, the European Union would approach the dubious ideal of a market-conforming democracy that would be even more helplessly exposed to the imperatives of the markets because it lacked an anchor in a politically irritable and excitable civil society. Instead, the steering capacities which are lacking at present, though they are functionally necessary for any monetary union, could and should be centralized only within the framework of an equally supranational and democratic political community.

                             II   

But what is the alternative to a further integration on the present model of executive federalism? Let us first consider those path breaking decisions that would have to be taken at the very beginning of the route leading to a supranational democracy in Europe. What is necessary in the first place is a consistent decision to expand the European Monetary Union into a Political Union (that would remain open, of course, to the accession of other EU member states, in particular Poland). This step would for the first time signify a serious differentiation of the Union into a core and a periphery. The feasibility of necessary changes in the European treaties would depend essentially on the consent of countries preferring to stay out. In the worst case a principled resistance had to be overcome only by a re-foundation of the Union (based on the existing institutions).

The decision for such a core Europe would amount to more than merely a further evolutionary step in the transfer of particular sovereign rights. With the establishment of a common economic government the red line of the classical understanding of sovereignty would be crossed. The idea that the nation states are “the sovereign subjects of the treaties” would have to be abandoned. On the other hand, the step to supranational democracy need not be conceived as a transition to a “United States of Europe.” “Confederation” versus “Federal state” is a false alternative (and a specific legacy of the constitutional discussion in 19^th century Germany).[9] The nation states can well preserve their integrity as states within a supranational democracy by retaining both their roles of the implementing administration and the final custodian of civil liberties.[10]

At the procedural level the dethronement of the European Council would mean switching over from intergovernmentalism to the community method. As long as the ordinary legislative procedure in which the Parliament and the Council participate on an equal footing has not become the general rule, the European Union shares a deficiency in legitimation with all international organizations that are founded on treaties between states. This deficiency is explained by the asymmetry between the scope of the democratic mandate of each single member state and the encompassing reach of competences of the organization exercised by all of member states in concert.[11] As national citizens see it, their political fate is determined by foreign governments who represent the interests of other nations, rather than by a government that is bound only by their own democratic vote. This deficit in accountability is intensified further by the fact that the negotiations of the European Council are conducted out of the public eye.

The community method is preferable not only for this normative reason, but for reason of enhancing efficiency, too. It helps to overcome national particularisms. In the Council, but also in inter-parliamentary committees, representatives who are obligated to defend national interests must just bargain compromises between obstinate positions. By contrast, the deputies in the European Parliament, which is divided up into parliamentary groups, are elected from the perspective of party affiliation. This is why, to the extent that a European party system is taking shape, political decision-making in the European Parliament can already be conducted on the basis of interests that were generalized across national borders.

These are the fundamental decisions necessary for transforming the Monetary Union into a Political Union that will not fall into the trap of technocracy. That would require, however, to overcome the high, almost insurmountable institutional hurdle of a change in primary law. The first step, namely calling for a convention which is authorized to revise the treaties, must be expected from the European Council, hence from the very institution that is least suited to making smooth cooperative resolutions. That would not be an easy decision for the members of the European Council who are at the same time heads of national governments. On the one hand, the thought of their reelection already leads them to recoil before this unpopular step; moreover, they do not have any interest in disempowering themselves either. On the other hand, they will not be able to ignore indefinitely the economic constraints that will sooner or later require further integration or at least a manifest choice between painful alternatives. For the present the German government is insisting that priority be accorded to stabilizing the budgets of the individual states by national administrations, mainly at the expense of their social security systems, of public services and collective goods. Along with a handful of smaller “donor countries,” it is vetoing the demand of the rest of the members for targeted investment programs and for a form of joint financial liability that would lower the interest rates of the government bonds of the crisis-hit countries.

In this situation, the German government holds the key to the fate of the European Union in its hand. If there is one government among the member states capable of taking the initiative to revise the treaties then it is the German government. Of course, the other governments could demand assistance on grounds of solidarity only if they themselves were ready to accept the complementary step of transferring required sovereignty rights to the European level. Otherwise, any assistance founded on solidarity would violate the democratic principle that the legislature that levies the taxes has also a say in the decision on how to allocate the funds and for whose benefit to use them. So the main question is, whether Germany not only is in a position to take the initiative, but also whether it could have an interest in doing so. In particular, I am looking for a specifically German interest that goes beyond the kind of interests shared by all the member states (such as the interest in the economic benefits of stabilizing the monetary union or the interest in preserving European influence on the international political agenda in the emerging multicultural world society, an influence which is in any case diminishing).[12]

In the wake of the shock of the defeat of 1945 and the moral catastrophe of the Holocaust, prudential reasons of regaining the international reputation destroyed by its own actions already made it imperative for the Federal Republic of Germany to promote an alliance with France and to pursue European unification. In addition, being embedded in a context of neighboring European countries under the hegemonic protection of the United States provided the context in which the German population at large could develop a liberal self-understanding for the first time. This arduous transformation of a political mentality, which in the old Federal Republic remained captive to fateful continuities for decades, can not be taken for granted. That shift in mindset occurred in tandem with a cautiously cooperative promotion of European unification. Moreover, the success of this policy was an important precondition for solving a more long-standing historical problem that I am concerned with in the first place.

After the foundation of the German Empire in 1871, Germany assumed a fatal “semi-hegemonic status” in Europe — in Ludwig Dehios’s words, it was “too weak to dominate the continent, but too strong to bring itself into line.”[13] It is in Germany’s interest to avoid a revival of this dilemma that was overcome only thanks to European unification. This is why the European question, which has been intensified by the crisis, also involves a domestic political challenge for Germans. The leadership role that falls to Germany today for demographic and economic reasons is not only awakening historical ghosts all around us but also tempts us to choose a unilateral national course, or even to succumb to power fantasies of a “German Europe” instead of a “Germanyin Europe”. We Germans should have learned from the catastrophes of the first half of the twentieth century that it is in our national interest to avoid permanently the dilemma of a semi-hegemonic status that can hardly held up without sliding into conflicts. Helmut Kohl’s achievement is not the reunification and the reestablishment of a certain national normality per se, but the fact that this happy event was coupled with the consistent promotion of a policy that binds Germany tightly into Europe.

Germany not only has an interest in a policy of solidarity; I would propose that it has even a corresponding normative obligation. Claus Offe tries to defend this thesis with three contested arguments. To date, Germany has derived the greatest benefit from the single currency through the increase in its exports. Because of these export surpluses Germany furthermore contributes to aggravating the economic imbalances within the monetary union and, in its role as a contributory cause, is part of the problem. Finally, Germany itself is even profiting from the crisis, because the increase in interest rates for the government bonds of the crisis-hit countries is matched by a decrease in the interest rates on German government bonds.[14] Even if we accept the arguments, the normative premise that these asymmetric effects of the politically unregulated interdependencies between the national economies entail an obligation to act in solidarity is not quite easy to explain.

                           III

This leads me to the final and philosophical question: What does it mean to show solidarity, and when are we entitled to appeal to solidarity? With a little exercise in conceptual analysis I intend to exonerate appeals to solidarity of accusations of moral stuffiness or misplaced good intentions that the “realists” are wont to level against them. Moreover, showing solidarity is a political act and by no means a form of moral selflessness that were misplaced in political contexts. Solidarity looses the false appearance of being unpolitical, once we learn how to distinguish obligations to show solidarity from both moral and legal obligations. “Solidarity” is not synonymous with “justice”, be it in the moral or the legal sense of the term.

We call moral and legal norms “just” when they regulate practices that are in the equal interest of all those affected. Just norms secure equal freedoms for all and equal respect for everyone. Of course, there are also special duties. Relatives, neighbors, or colleagues can in certain situations expect more, or a different kind of help from each other than from strangers. Such special duties also hold in general for certain social relations. For example, parents violate their duty of care when they neglect the health of their children. The extent of these positive duties is often indeterminate, of course; it varies according to the kind, frequency, and importance of the corresponding social relations. When a distant relative contacts his surprised cousin once again after decades and confronts her with a request for a large financial contribution because he is facing an emergency situation, he can hardly appeal to a moral obligation but at most to a tie of an “ethical” kind founded on family relations (in Hegel’s terminology one, rooted in “Sittlichkeit” or “ethical life”). Belonging to an extended family will justify prima facie a duty to help, but only in cases when the actual relation gives rise to the expectation that e.g. the cousin can count on the support of her relative in turn in a similar situation.

Thus it is the trust-founding Sittlichkeit of informal social relations that, under the condition of predictable reciprocity, requires that the one individual “vouches” for the others. Such “ethical” obligations rooted in ties ofan antecedently existing community, typically family ties, exhibit three features. They ground exacting or supererogatory claims that go beyond moral or legal obligations. On the other hand, when it comes to the required motivation the claim to solidarity is less exacting than the categorical force of a moral duty; nor does it coincide with the coercive character of law either. Moral commands should be obeyed out of respect for the underlying norm itself without regard to the compliance of other persons, whereas the citizen’s obedience to the law is conditional on the fact that the sanctioning power of the state ensures general compliance. Fulfilling anethical obligation, by contrast, can neither be enforced nor is it categorically required. It depends instead on the expectations of reciprocal favors — and on the confidence in this reciprocity over time.

In this respect, unenforceable ethical behavior also coincides with one’s own medium- or long-term interest. And it is precisely this aspect that Sittlichkeit shares with solidarity. However, the latter can not rely on pre-political communities such as the family but only on political associations or shared political interests. Conduct based on solidarity presupposes political contexts of life, hence contexts that are legally organized and in this sense artificial ones.[15] This explains why the credit of trust presupposed by solidarity is less robust than in the case of ethical conduct because this credit is not secured through the mere existence of a quasi-naturalcommunity. What is missing in the case of solidarity, is the moment of conventionality in antecedently existing ethical relations.

What lends solidarity moreover a special character is, second, the offensive character of pressing or even struggling for discharging the promise which is invested in the legitimacy claim of any political order. This forward-looking character becomes particularly clear when solidarity is required in the course of social and economic modernization, in order to adjust the overstretched capacities of an existing political framework, that is to adjust eroding political institutions to the indirect force of encompassing systemic, mainly economic interdependencies that are felt as constraints on what should be in the reach of the political control of democratic citizens. This offensive semantic feature of ‘solidarity’, over and above the reference to politics, can be elucidated by turning from an unhistorical conceptual clarification to the history of that concept.

The concept of solidarity first appeared in a situation in which revolutionaries were suing for solidarity in the sense of a redemptive reconstruction of relations of reciprocal support that were familiar but had become hollowed out by the surpassing processes of modernization.[16] Whereas “justice” and “injustice” where already the focus of controversies in the first literate civilizations, the concept of solidarity is an astonishingly recent one. Although the term can be traced back to the Roman law of debts, only since the French Revolution of 1789 did it slowly acquire a political meaning, albeit initially in connection with the slogan of “fraternity.”

The battle cry of “fraternité” is a product of the humanist generalization of a specific pattern of thought engendered by all of the major world religions – namely, of the intuition that one’s own local community is part of a universal community of all faithful believers. This is the background of ‘fraternity’ as the key concept of the secularized religion of humanity that was radicalized and fused with the concept of solidarity during the first half of the nineteenth century by early socialism and Catholic social teachings. Even Heinrich Heine had still used the concepts “fraternity” and “solidarity” more or less synonymously.[17] The two concepts became separated in the course of the social upheavals of approaching industrial capitalism and the nascent workers movement. The legacy of the Judeo-Christian ethics of fraternity was fused, in the concept of solidarity, with the republicanism of Roman origin. The orientation toward salvation or emancipation became amalgamated with that toward legal and political freedom.[18]

By the midst of the 19^th century, an accelerated functional differentiation of society gave rise to extensive interdependencies behind the back of a paternalistic, still largely corporative and occupationally stratified every-day-world. Under the pressure of these reciprocal functional dependencies the older forms of social integration broke down and led to the rise of class antagonisms which were finally contained only within the extended forms of political integration of the nation state. The appeals to “solidarity” had their historical origin in the dynamic of the new class struggles. The organizations of the workers movement with their well-founded appeals to solidarity reacted to the occasion provided by the fact that the systemic, mainly economic constraints had outstripped the old relations of solidarity. The socially uprooted journeymen, workers, employees, and day laborers were supposed to form an alliance beyond the systemically generated competitive relations on the labor market. The opposition between the social classes of industrial capitalism was finally institutionalized within the framework of the democratically constituted nation states.

These European states assumed their present-day form of welfare states only after the catastrophes of the two world wars. In the course of economic globalization, these states find themselves in turn exposed to the explosive pressure of economic interdependencies that now tacitly permeate national borders. Systemic constraints again shatter the established relations of solidarity and compel us to reconstruct the challenged forms of political integration of the nation state. This time, the uncontrolled systemic contingencies of a form of capitalism driven by unrestrained financial markets are transformed into tensions between the member states of the European Monetary Union. If one wants to preserve the Monetary Union, it is no longer enough, given the structural imbalances between the national economies, to provide loans to over-indebted states so that each should improve its competitiveness by its own efforts. What is required is solidarity instead, a cooperative effortfrom a shared political perspective to promote growth and competitiveness in the euro zone as a whole.

Such an effort would require Germany and several other countries to accept short- and medium-term negative redistribution effects in its own longer-term self-interest — a classic example of solidarity, at least on the conceptual analysis I have presented.

The basic premise of neoliberalism – that “free markets” lead to better growth, higher prosperity and even more equality – was always fiction. As Cambridge economist Ha-Joon Chang has repeatedly pointed out, there is no such thing as a free market. Nor is there any example of a country that has developed by following the neoliberal tenets of privatization, liberalization and budget cuts. Instead countries have traditionally used some mix of subsidies, tariffs, and debt-financed investment to prop up industries and shift comparative advantage to higher-end goods.

Despite the history, neoliberals argue that markets alone should determine things like wages, and that corporations and their owners should be able to operate however they like. Developed countries that adopted neoliberal tenets post-1980 saw wages stagnate almost as quickly as corporate profits skyrocketed.

In the developing world it was much worse. Africa suffered two decades of economic stagnation as a direct result of being forced to follow these policies, with Latin Americans and Asians doing not much better. The past decade has seen some improvement, but the global community is still well behind where it should be in terms of eradicating things like hunger and preventable disease.

But the neoliberal era may finally be nearing its long-awaited end. Here’s why.

1) The IMF has admitted that budget cuts are not always the answer.

The IMF has for over three decades forced countries to restructure their economies to be in line with neoliberal tenets. In particular, they have forced indebted countries to cut budgets before they can borrow from capital markets to pay off creditors. The phrases bureaucrats and politicians invented to sell this ideology are by now clichés. “Governments can’t spend more than they earn,” “We all need to tighten our belts,” etc. etc. By cutting government spending, the story goes, countries make room for increased private sector spending, and the economy grows.

Though earlier IMF studies had come to similar conclusions, it wasn’t until January 2013 that the IMF’s chief economist published what amounts to a “mea culpa”. Turns out that decreasing public investment is actually a pretty good way to hurt prospects for economic growth rather than increase them. Oops.

And there’s another twist in the story. For the last few years, decision makers have been citing a paper by Harvard economists that ostensibly highlights the dangers of countries borrowing too much in order to finance public expenditures. The paper specifically suggested a cutoff – when the debt hits 90% of GDP – beyond which economies would suffer for their overspending ways. The paper has been cited by public officials around the globe to justify budget cuts. But it turns out that the paper’s conclusions were a result of a series of errors, one of which was forgetting to update a calculation on an Excel spreadsheet. When the correct data is put in place, the conclusions more or less disappear.

Double oops.

2) The Doha development round is dead 

In November, 2001 the World Trade Organization launched its “Doha development round”. Despite its name, the Doha round was about anything but development. High on the agenda were things like removing social and environmental protections, eliminating subsidies for poor farmers, and ensuring that big pharmaceutical companies could maintain patents on (and greatly increase the cost of) life-saving medicines.

With the help of progressive activists from Seattle to Hong Kong, and due to the huge uprising of developing countries in the WTO’s Cancun ministerial, Doha is more-or-less dead and the WTO is at a standstill. That’s great news for those who want to see fair trade as opposed to “free trade” and trade deals that put development and human rights first. The challenge now is to come up with a framework (and maybe even a mechanism) for multilateral regulation of global trade that prioritizes human rights over corporate profits.

3) Countries are increasingly trading in local currencies

Apart from the IMF, one way for the U.S. to maintain its control over the global economic system is the supremacy of the U.S. dollar. Certain transactions must be done in U.S. dollars – buying petroleum for example – and the U.S. dollar is still seen as the safest global currency. The result is that the dollar’s value remains artificially high, increasing the purchasing power of U.S. consumers and the desire of everyone else to sell to the U.S.

This deal benefits almost no one (not even U.S. consumers) and some governments have begun to look for alternatives. Agreements to begin to trade in local currencies have been negotiated between Brazil and China, Turkey and Iran, China and Japan, and the BRICS countries. Though some of these agreements are just taking off, if implemented they represent a significant challenge to the status quo.

4) 2007-08 proved beyond a doubt that markets don’t regulate themselves. And Iceland proved that there is another way.

The financial crisis of 2007-08 is far from the first financial crisis of the neoliberal era; in fact it would also be accurate to call the neoliberal era the “era of financial crisis”. From Mexico in 1982, to other countries in Latin America soon after that, to the U.S. stock market collapse in 1987, to Japan in 1990, to the Asian financial crisis of 1997, to Russia and Brazil in 1998-99, to Turkey and Argentina in 2000-2002, to the collapse of the dot com bubble, there has hardly been a moment since 1980 when there is not a financial crisis happening somewhere. What usually happens in such times is that governments take measures to protect the elites (usually the bankers who actually caused the crisis) and shift the burden of paying for the costs to the general public. The current crisis is a good case in point.

But unlike previous crises there are indications that this time we might be looking at a system change. The first of these is just the scale of the crisis. The collapsed U.S. housing bubble represented about $8 trillion USD in artificial wealth. That’s more than 11% of global GDP, and that’s not counting the housing bubbles that collapsed in Europe and elsewhere. This is market failure on a massive scale.

This time there’s also an example of a country that protected its citizens, jailed its bankers and is doing much better as a result. The country, Iceland, joins Argentina as one of the only countries to default on debts as a result of financial crisis. The disasters that “everyone” was expecting (no access to currency markets, investors blacklisting Iceland, etc) never materialized, showing that even small countries can stand up to the international creditor cartel and live to tell the tale.

Iceland demonstrates that there’s nothing natural about neoliberalism. The decision to protect elites from the effects of markets while using those same markets to punish everyone else is a political injustice, not a natural law.

And it is this injustice which ensures that neoliberalism will go the way of the dodo. Ultimately markets are just a social contract, like marriage. And just as the move towards marriage equality now seems inevitable, drastic reform of the way we relate to markets is on the way.

by SAMEER DOSSANI

Sameer Dossani is Advocacy Coordinator, Reshaping Global Power with ActionAid International, a global anti-poverty organization. As an activist, Sameer has campaigned against neoliberal policies since 1996 in the U.S., Canada, India and the Philippines. Views expressed here do not necessarily represent those of ActionAid International. 

Source: http://www.counterpunch.org/2013/04/22/four-signs-neoliberalism-is-almost-dead/

This RSA Animate was taken from a lecture given as part of the RSA’s free public lecture programme.

What’s efficiency got to do with capitalism? The short answer is little or nothing. Economic and social collapses in Detroit, Cleveland and many other US cities did not happen because production was inefficient there. Efficiency problems did not cause the longer-term economic declines troubling the US and western Europe.

Capitalist corporations decided to relocate production: first, away from such cities, and now, away from those regions. It has done so to serve the priorities of their major shareholders and boards of directors. Higher profits, business growth, and market share drive those decisions. As I say, efficiency has little or nothing to do with it.

Many goods and services once made in the US and western Europe for those markets are now produced elsewhere and transported back to them. That wastes resources spent on the costly relocation and consequent return transportation. The pollution (of air, sea and soil) associated with vast transportation networks – and the eventual cleaning up of that pollution – only enlarges that waste.

The factories, offices and stores abandoned by departing capitalist corporations increase the waste of resources and of workers’ lives. In the surrounding communities, tax bases eroded by capitalists’ departures mean reduced social services, public spaces, and qualities of life for all but the richest. Those vast wastes of resources and damages to lives offset whatever small efficiency gains corporate relocations only sometimes achieve.

Corporations rarely count, let alone compensate for, the resources and lives wasted because of their relocation decisions. They only count the benefits to their profits, growth, and market share from moving. Moving is advantageous for them; they neither worry about nor count whether moving is efficient for the economy or society at large.

They simply calculate that they will do better elsewhere than in the US and western Europe. Wages elsewhere are far lower. Levels of pollution are allowed that save corporations the environment-protection costs required in Europe and the US. Bribes or political “contributions” cost less and/or buy more favors, tax breaks, and subsidies there than back home. Efficiency for the economy or society has nothing to do with it: advantage for them is all that matters to them.

That is how the system works.

Capitalism’s last 250 years in Europe and the US repeatedly devastated the natural environment and imposed horrific conditions on working people. Multinational corporations are now reproducing that history elsewhere around the globe. China displays some of the most polluted industrial cities on the planet, alongside another “gilded age” of new millionaires. India and Russia display equally stunning inequalities. And so on.

We can and should do better than this kind of global “economic development”.

Throughout capitalism’s history, major decisions were justified by claims and promises that capitalism failed to realize. When new machinery automated production – saved on labor costs – the gains went chiefly to profits, while the workers, their families, and their communities suffered “technological” unemployment. When capitalists settled into communities “bringing jobs”, there followed years of threatening those communities that they would leave if not given tax breaks, subsidies, loans, etc – no matter their costs to the local population. When capitalists dumped toxic wastes into the air, water, and soil – often for generations – massive clean-up costs later were socialized, made everyone’s responsibility, while the profits from dumping stayed largely in private hands.

Efficiency was often claimed as the cause or result of capitalist decisions. We heard that greater “efficiency” would mean less labor for the mass of workers. Yet, today, US workers, for example, do more hours of paid labor per year than the workers of any other country. Their average real wages have declined over the last 35 years. Their average standard of living stopped rising since 2007 and only rose during the generation before that because of rising household debt.

Efficiency did not and does not deliver what its supporters claim. That is because efficiency was not and is not what drives capitalists’ decisions. The structure of a capitalist economy – exclusive power in the hands of major shareholders and boards of directors, competitions, tensions, and unequal resources among enterprises, shareholders, directors, managers, and workers – drives the decisions made by shareholders and directors. Those decisions primarily advance capitalists’ interests in greater profits, growth and market shares.

A chief defense of capitalists’ decisions – that they “bring economic development” to poor countries and regions – is easily rebutted. First, the economic underdevelopment in the former third world was and is partly the result of the colonialism and neocolonialism practiced by capitalists and their governments in Europe, the US and Japan. Second, the kind of development now being installed in the former third world replicates the colossal wastes, inequalities, and inhumanities that attended capitalist development in Europe, the US and Japan.

Third, a far better approach would be to reorganize western economies so that they yield far lower inequalities of wealth and income and far less waste of resources than are associated with capitalism. The resulting huge savings could support a different kind of economic development in poorer regions of the world – with, likewise, far lower inequalities of wealth and income, far less waste of resources, and far less inhumanity.

Less inequality among and within societies and increased efficiency that benefits everyone with less work and more or different output: these goals require confronting the capitalist system. The particular capitalist way of organizing how goods and services get produced and distributed and who makes the key decisions is the problem.

What, how and where to produce and how to use the profits are those key decisions. To serve most people, those decisions must be made by most people. To do that requires converting capitalist into co-operative enterprises where workers become their own collective board of directors. Workers self-directed enterprises would be far less likely to relocate production, far less likely to distribute profits among workers in extremely unequal ways, and far less likely to install technologies with negative impacts on the environment in which they, their families, and their communities live.

Democratizing the economy in this way can yield the kinds of economic and social results that capitalism has long promised – but increasingly fails to deliver.

by Richard Wolff

Source: http://www.rdwolff.com/content/capitalism-efficient-we-can-do-so-much-better

Why, then, are radicals so hesitant to talk about what a different system might look like? One of the oldest and most influential objections to such talk comes from Marx, with his oft-quoted scorn toward utopian “recipes” for the “cookshops of the future.” The moral of the quote, supposedly, is that a future society must emerge from the spontaneous dynamics of history, not from the isolated imaginings of some scribbler. This isn’t without some irony, since two years later Marx the scribbler wrote his own little cookshop recipe in his Critique of the Gotha Program — it involved labor tokens, storehouses of goods, and an accounting system to determine how much workers would get paid.

As it happens, Marx’s comment was a riposte to a negative review he’d received in a Paris newspaper run by devotees of the philosopher Auguste Comte, criticizing Marx for offering no concrete alternative to the social system he condemned. (That’s why, in the original quote, he asks wryly if the recipes the reviewers had hoped to see happened to be “Comtist” ones.) To grasp the context, you have to understand that like many utopian writers of the era, Comte proffered scenarios for a future society that were marked by an almost deranged grandiosity, featuring precise and fantastically detailed instructions on practically every facet of daily life. It was this obsessive kind of future-painting that Marx was really taking aim at.

A related cause for reticence is the feeling that to spell out ideas for future social institutions amounts to a sort of technocratic elitism that stifles the utopian élan of the people-in-motion. Great social change never happens without multitudes becoming inspired to heroic acts of enthusiasm, and patient attempts to grapple realistically with the material problems of a functioning society are rarely so inspiring. This is by no means a trivial objection; one of the oldest fallacies on the Left is the illusion that change happens when someone comes along with a brilliant ten-point plan and manages to convince everyone of its genius.

Still, a successful radical project has to appeal to every emotional register: not just those ecstatic moments when history opens up and everything seems possible, but also those pensive and critical moods when even inveterate optimists-of-the-will find doubt and reflection taking over. Even a struggle as epic and impassioned as the movement for the eight-hour day – which “seemed one of the most striking utopias of revolutionary socialism” at the time, as Elie Halévy remembered – was, in the end, about a bureaucratic measure, enforced by legal directives and factory inspectors.

Maybe the most fundamental reason the Left has been suspicious of such visions is that they have so often been presented as historical endpoints – and endpoints will always be disappointing. The notion that history will reach some final destination where social conflict will disappear and politics come to a close has been a misguided fantasy on the Left since its genesis. Scenarios for the future must never be thought of as final, or even irreversible; rather than regard them as blueprints for some future destination, it would be better to see them simply as maps sketching possible routes out of a maze. Once we exit the labyrinth, it’s up to us to decide what to do next.

In this essay, I start from the common socialist assumption that capitalism’s central defects arise from the conflict between the pursuit of private profit and the satisfaction of human needs. Then I sketch some of the considerations that would have to be taken into account in any attempt to remedy those defects.

What I’m not concerned with here is achieving some final and total harmony between the interests of each and the interests of all, or with cleansing humanity of conflict or egotism. I seek the shortest possible step from the society we have now to a society where most productive property is owned in common – not in order to rule out more radical change, but precisely in order to rule it in.

There is nothing wrong with thinking concretely and practically about how we can free ourselves from social institutions that place such confining limits on the kind of society we are able to have. Because of one thing we can be certain: the present system will either be replaced or it will go on forever.

Radicals responded to the end of “really existing socialism” mainly in two ways. Most stopped talking about a world after capitalism at all, retreating to a modest politics of piecemeal reform, or localism, or personal growth.

The other response was exactly the opposite — an escape forward into the purest and most uncompromising visions of social reconstruction. In certain radical circles, this impulse has lately heightened the appeal of a leap toward a world with no states or markets, and thus no money, wages, or prices: a system in which goods would be freely produced and freely taken, where the economy would be governed entirely by the maxim “from each according to his abilities, to each according to his needs.”

Whenever such ideas are considered, debate seems to focus immediately on big philosophical questions about human nature. Skeptics scoff that people are too selfish for such a system to work. Optimists argue that humans are a naturally cooperative species. Evidence is adduced for both sides of the argument. But it’s best to leave that debate to the side. It’s safe to assume that humans display a mixture of cooperation and selfishness, in proportions that change according to circumstances.

The lofty vision of a stateless, marketless world faces obstacles that are not moral but technical, and it’s important to grasp exactly what they are.

We have to assume that we would not want to regress to some sharply lower stage of economic development in the future; we would want to experience at least the same material comforts that we have under capitalism. On aqualitative level, of course, all sorts of things ought to change so that production better satisfies real human and ecological needs. But we would not want to see an overall decline in our productive powers.

But the kind of production of which we are now capable requires a vast and complex division of labor. This presents a tricky problem. To get a concrete sense of what it means, think of the way Americans lived at the time of the American Revolution, when the typical citizen worked on a small, relatively isolated family farm. Such households largely produced what they consumed and consumed what they produced. If they found themselves with a modest surplus of farm produce, they might sell it to others nearby, and with the money they earned they could buy a few luxuries. For the most part, though, they did not rely on other people to provide them with the things they needed to live.

Compare that situation with our own. Not only do we rely on others for our goods, but the sheer number of people we rely on has increased to staggering proportions.

Look around the room you’re sitting in and think of your possessions. Now try to think of how many people were directly involved in their production. The laptop I’m typing on, for example, has a monitor, a case, a DVD player, and a microprocessor. Each was likely made in a separate factory, possibly in different countries, by various companies employing hundreds or thousands of workers. Then think of the raw plastic, metal, and rubber that went into those component parts, and all the people involved in producing them. Add the makers of the fuel that fired the factories and the ship crews and trucking fleets that got the computer to its destination.  It’s not hard to imagine millions of people participating in the production of just those items now sitting on my desk. And out of the millions of tasks involved, each individual performed only a tiny set of discrete steps.

How did they each know what to do? Of course, most of these people were employees, and their bosses told them what to do. But how did their bosses know how much plastic to produce? And how did they know to send the weaker, softer kind of plastic to the computer company, even though it would have been happy to take the sturdier, high-quality plastic reserved for the hospital equipment makers? And how did these manufacturers judge whether it was worth the extra resources to make laptops with nice LCD monitors, rather than being frugal and making  old, simpler cathode ray models?

The total number of such dilemmas is practically infinite for a modern economy with millions of different products and billions of workers and consumers. And they must all be resolved in a way that is globally consistent, because at any given moment there are only so many workers and machines to go around, so making more of one thing means making less of another. Resources can be combined in an almost infinite number of possible permutations; some might satisfy society’s material needs and desires fairly well, while others would be disastrous, involving huge quantities of unwanted production and lots of desirable things going unmade. In theory, any degree of success is possible.

This is the problem of economic calculation. In a market economy, prices perform this function. And the reason prices can work is that they convey systematic information concerning how much of one thing people are willing to give up to get another thing, under a given set of circumstances. Only by requiring people to give up one thing to get another, in some ratio, can quantitative information be generated about how much, in relative terms, people value those things. And only by knowing how much relative value people place on millions of different things can producers embedded in this vast network make rational decisions about what their minute contribution to the overall system ought to be.

None of this means that calculation can be accomplished through prices alone, or that the prices generated in a market are somehow ideal or optimal. But there is no way a decentralized system could continually generate and broadcast so much quantitative information without the use of prices in some form. Of course, we don’t have to have a decentralized system. We could have a centrally planned economy, in which all or most of society’s production decisions are delegated to professional planners with computers. Their task would be extremely complex and their performance uncertain. But at least such a system would provide some method for economic calculation: the planners would try to gather all the necessary information into their central department and then figure out what everyone needs to do.

So something needs to perform the economic calculation function that prices do for a market system and planners do for a centrally planned system. As it happens, an attempt has been made to spell out exactly what would be required for economic calculation in a world with no states or markets. The anarchist activist Michael Albert and the economist Robin Hahnel have devised a system they call Participatory Economics in which every individual’s freely made decisions about production and consumption would be coordinated by means of a vast society-wide plan formulated through a “participatory” process with no central bureaucracy.

Parecon, as it’s called, is an interesting exercise for our purposes, because it rigorously works out exactly what would be needed to run such an “anarchist” economy. And the answer is roughly as follows: At the beginning of each year, everyone must write out a list of every item he or she plans to consume over the course of the year, along with the quantity of each item. In writing these lists, everyone consults a tentative list of prices for every product in the economy (keep in mind there are more than two million products in Amazon.com’s “kitchen and dining” category alone), and the total value of a person’s requests may not exceed his or her personal “budget,” which is determined by how much he or she promises to work that year.

Since the initial prices are only tentative estimates, a network of direct-democratic councils must feed everyone’s consumption lists and work pledges into computers, in order to generate an improved set of prices that will bring planned levels of production and consumption (supply and demand) closer to balance. This improved price list is then published, which kicks off a second “iteration” of the process: now everyone has to rewrite their consumption requests and work pledges all over again, according to the new prices. The whole procedure is repeated several times until supply and demand are finally balanced. Eventually, everyone votes to choose between several possible plans.

In their speaking and writing, Albert and Hahnel narrate this remarkable process to show how attractive and feasible their system would be. But for many people – I would include myself in this group – the effect is exactly the opposite. It comes off instead as a precise demonstration of why economic calculation in the absence of markets or state planning would be, if perhaps not impossible in theory, at least impossible to imagine working in a way that most people could live with in practice. And Parecon is itself a compromise from the purist’s point of view, since it violates the principle “from each according to ability, to each according to need” — individuals’ consumption requests are not allowed to exceed their work pledges. But of course without that stipulation, the plans wouldn’t add up at all.

The point is not that a large-scale stateless, marketless economy “wouldn’t work.” It’s that, in the absence of some coordinating mechanism like Albert and Hahnel’s, it simply wouldn’t exist in the first place. The problem of economic calculation, therefore, is something we have to take seriously if we want to contemplate something better than the status quo.

But what about the other alternative? Why not a centrally planned economy where the job of economic calculation is handed over to information-gathering experts — democratically accountable ones, hopefully. We actually have historical examples of this kind of system, though of course they were far from democratic. Centrally planned economies registered some accomplishments: when Communism came to poor, rural countries like Bulgaria or Romania they were able to industrialize quickly, wipe out illiteracy, raise education levels, modernize gender roles, and eventually ensure that most people had basic housing and health care. The system could also raise per capita production pretty quickly from, say, the level of today’s Laos to that of today’s Bosnia; or from the level of Yemen to that of Egypt.

But beyond that, the system ran into trouble. Here a prefatory note is in order: Because the neoliberal Right has habit of measuring a society’s success by the abundance of its consumer goods, the radical left is prone to slip into a posture of denying this sort of thing is politically relevant at all. This is a mistake. The problem with full supermarket shelves is that they’re not enough— not that they’re unwelcome or trivial. The citizens of Communist countries experienced the paucity, shoddiness and uniformity of their goods not merely as inconveniences; they experienced them as violations of their basic rights. As an anthropologist of Communist Hungary writes, “goods of state-socialist production…came to be seen as evidence of the failure of a state-socialist-generated modernity, but more importantly, of the regime’s negligent and even ‘inhumane’ treatment of its subjects.”

In fact, the shabbiness of consumer supply was popularly felt as a betrayal of the humanistic mission of socialism itself. A historian of East Germanyquotes the petitions that ordinary consumers addressed to the state: “It really is not in the spirit of the human being as the center of socialist society when I have to save up for years for a Trabant and then cannot use my car for more than a year because of a shortage of spare parts!” said one. Another wrote: “When you read in the socialist press ‘maximal satisfaction of the needs of the people and so on’ and … ‘everything for the benefit of the people,’ it makes me feel sick.” In different countries and languages across Eastern Europe, citizens used almost identical expressions to evoke the image of substandard goods being “thrown at” them.

Items that became unavailable in Hungary at various times due to planning failures included “the kitchen tool used to make Hungarian noodles,” “bath plugs that fit tubs in stock; cosmetics shelves; and the metal box necessary for electrical wiring in new apartment buildings.” As a local newspaper editorial complained in the 1960s, these things “don’t seem important until the moment one needs them, and suddenly they are very important!”

And at an aggregate level, the best estimates show the Communist countries steadily falling behind Western Europe: East German per capita income, which had been slightly higher than that of West German regions before World War II, never recovered in relative terms from the postwar occupation years and continually lost ground from 1960 onwards. By the late 1980s it stood at less than 40% of the West German level.

Unlike an imaginary economy with no states or markets, the Communist economies did have an economic calculation mechanism. It just didn’t work as advertised. What was the problem?

According to many Western economists, the answer was simple: the mechanism was too clumsy. In this telling, the problem had to do with the “invisible hand,” the phrase Adam Smith had used only in passing, but which later writers commandeered to reinterpret his insights about the role of prices, supply, and demand in allocating goods. Smith had originally invoked the price system to explain why market economies display a semblance of order at all, rather than chaos – why, for example, any desired commodity can usually be found conveniently for sale, even though there is no central authority seeing to it that it be produced.

But in the late nineteenth century, Smith’s ideas were formalized by the founders of neoclassical economics, a tradition whose explanatory ambitions were far grander. They wrote equations representing buyers and sellers as vectors of supply and demand: when supply exceeded demand in a particular market, the price dropped; when demand exceeded supply, it rose. And when supply and demand were equal, the market in question was said to be in “equilibrium” and the price was said to be the “equilibrium price.”

As for the economy as a whole, with its numberless, interlocking markets, it was not until 1954 that the future Nobel laureates Kenneth Arrow and Gérard Debreu made what was hailed as a momentous discovery in the theory of “general equilibrium” – a finding that, in the words of James Tobin, “lies at the very core of the scientific basis of economic theory.” They proved mathematically that under specified assumptions, free markets were guaranteed to generate a set of potential equilibrium prices that could balance supply and demand in all markets simultaneously — and the resulting allocation of goods would be, in one important sense, “optimal”: no one could be made better off without making someone else worse off.

The moral that could be extracted from this finding was that prices were not just a tool market economies used to create a degree of order and rationality. Rather, the prices that markets generated – if those markets were free and untrammeled — were optimal, and resulted in a maximally efficient allocation of resources. If the Communist system wasn’t working, then, it was because the clumsy and fallible mechanism of planning couldn’t arrive at this optimal solution.

This narrative resonated with the deepest instincts of the economics profession. The little just-so stories of economics textbooks explaining why minimum wages or rent controls ultimately make everyone worse off are meant to show that supply and demand dictate prices by a higher logic that mortals defy at their peril. These stories are “partial equilibrium” analyses – they only show what happens in an individual market artificially cut off from all the markets surrounding it. What Arrow and Debreu had supplied, the profession believed, was proof that this logic extends to the economy as a whole, with all its interlocking markets: a general equilibrium theory. In other words, it was proof that in the end, free-market prices will guide the economy as a whole to its optimum.

Thus, when Western economists descended on the former Soviet bloc after 1989 to help direct the transition out of socialism, their central mantra, endlessly repeated, was “Get Prices Right.”

But a great deal of contrary evidence had accumulated in the meantime. Around the time of the Soviet collapse, the economist Peter Murrell published an article in the Journal of Economic Perspectives reviewing empirical studies of efficiency in the socialist planned economies. These studies consistently failed to support the neoclassical analysis: virtually all of them found that by standard neoclassical measures of efficiency, the planned economies performed as well or better than market economies.

Murrell pleaded with readers to suspend their prejudices:

The consistency and tenor of the results will surprise many readers. I was, and am, surprised at the nature of these results. And given their inconsistency with received doctrines, there is a tendency to dismiss them on methodological grounds. However, such dismissal becomes increasingly hard when faced with a cumulation of consistent results from a variety of sources.

First he reviewed eighteen studies of technical efficiency: the degree to which a firm produces at its own maximum technological level. Matching studies of centrally planned firms with studies that examined capitalist firms using the same methodologies, he compared the results. One paper, for example, found a 90% level of technical efficiency in capitalist firms; another using the same method found a 93% level in Soviet firms. The results continued in the same way: 84% versus 86%, 87% versus 95%, and so on.

Then Murrell examined studies of allocative efficiency: the degree to which inputs are allocated among firms in a way that maximizes total output. One paper found that a fully optimal reallocation of inputs would increase total Soviet output by only 3%-4%. Another found that raising Soviet efficiency to U.S. standards would increase its GNP by all of 2%. A third produced a range of estimates as low as 1.5%. The highest number found in any of the Soviet studies was 10%. As Murrell notes, these were hardly amounts “likely to encourage the overthrow of a whole socio-economic system.” (Murell wasn’t the only economist to notice this anomaly: an article titled “Why Is the Soviet Economy Allocatively Efficient?” appeared in Soviet Studies around the same time.)

Two German microeconomists tested the “widely accepted” hypothesis that “prices in a planned economy are arbitrarily set exchange ratios without any relation to relative scarcities or economic valuations [whereas] capitalist market prices are close to equilibrium levels.” They employed a technique that analyzes the distribution of an economy’s inputs among industries to measure how far the pattern diverges from that which would be expected to prevail under perfectly optimal neoclassical prices. Examining East German and West German data from 1987, they arrived at an “astonishing result”: the divergence was 16.1% in the West and 16.5% in the East, a trivial difference. The gap in the West’s favor, they wrote, was greatest in the manufacturing sectors, where something like competitive conditions may have existed. But in the bulk of the West German economy – which was then being hailed globally as Modell Deutschland – monopolies, taxes, subsidies, and so on actually left its price structure further from the “efficient” optimum than in the moribund Communist system behind the Berlin Wall.

The neoclassical model also seemed belied by the largely failed experiments with more marketized versions of socialism in Eastern Europe. Beginning in the mid-1950s, reformist economists and intellectuals in the region had been pushing for the introduction of market mechanisms to rationalize production. Reforms were attempted in a number of countries with varying degrees of seriousness, including in the abortive Prague Spring. But the country that went furthest in this direction was Hungary, which inaugurated its “new economic mechanism” in 1968. Firms were still owned by the state, but now they were expected to buy and sell on the open market and maximize profits. The results were a disappointment. Although in the 1970s Hungary’s looser consumer economy earned it the foreign correspondent’s cliché “the happiest barracks in the Soviet bloc,” its dismal productivity growth did not improve and shortages were still common.

If all these facts and findings represented one reason to doubt the neoclassical narrative, there was a more fundamental reason: economists had discovered gaping holes in the theory itself. In the years since Arrow and Debreu had drafted their famous proof that free markets under the right conditions could generate optimal prices, theorists (including Debreu himself) had uncovered some disturbing features of the model. It turned out that such hypothetical economies generated multiple sets of possible equilibrium prices, and there was no mechanism to ensure that the economy would settle on any one of them without long or possibly endless cycles of chaotic trial-and-error. Even worse, the model’s results couldn’t withstand much relaxation of its patently unrealistic initial assumptions; for example, without perfectly competitive markets – which are virtually nonexistent in the real world – there was no reason to expect any equilibrium at all.

Even the liberal trope that government interventions are justified by “market failures” – specific anomalies that depart from the Arrow-Debreu model’s perfect-market assumptions – was undermined by another finding of the 1950s: the “general theory of the second best.” Introduced by Richard Lipsey and Kelvin Lancaster, the theorem proves that even if the idealized assumptions of the standard model are accepted, attempts to correct “market failures” and “distortions” (like tariffs, price controls, monopolies or externalities) areas likely to make things worse as to make them better, as long as any other market failures remain uncorrected — which will always be the case in a world of endemic imperfect competition and limited information.

In a wide-ranging review of “the failure of general equilibrium theory,” the economist Frank Ackerman^[1] concluded:

A story about Adam Smith, the invisible hand, and the merits of markets pervades introductory textbooks, classroom teaching, and contemporary political discourse. The intellectual foundation of this story rests on general equilibrium….  If the foundation of everyone’s favorite economics story is now known to be unsound…then the profession owes the world a bit of an explanation.

The point is this: If a deterministic story about free markets generating optimal prices, leading to maximum output was no longer viable, then the failure of planned economies could hardly be attributed to the absence of those features. As Communist systems were collapsing in Eastern Europe, economists who had lost faith in the neoclassical narrative began to argue that an alternative explanation was needed. The most prominent theorist in this group was Joseph Stiglitz, who had become famous for his work on the economics of information. His arguments dovetailed with those of other dissenters from the neoclassical approach, like the eminent Hungarian scholar of planned economies, János Kornai, and evolutionary economists like Peter Murrell.

They all pointed to a number of characteristics, largely ignored by the neoclassical school, that better accounted for the ability of market economies to avoid the problems plaguing centrally planned systems. The aspects they emphasized were disparate, but they all tended to arise from a single, rather simple fact:in market systems firms are autonomous.

That means that within the limits of the law, a firm may enter a market; choose its products and production methods; interact with other firms and individuals; and must close down if it cannot get by on its own resources. As a textbook on central planning put it, in market systems the presumption is “that an activity may be undertaken unless it is expressly prohibited,” whereas in planned systems “the prevailing presumption in most areas of economic life is that an activity may not be undertaken unless permission has been obtained from the appropriate authority.” The neoclassical fixation with ensuring that firms exercised this autonomy in a laissez-faire environment – that restrictions on voluntary exchange be minimized or eliminated — was essentially beside the point.

Thus, free entry and multiple autonomous sources of capital mean that anyone with novel production ideas can seek resources to implement their ideas and don’t face a single veto point within a planning apparatus. As a result, they stand a much greater chance of obtaining the resources to test out their ideas. This probably leads to more of the waste inherent in failed experiments — but also far greater scope for improved products and processes, and a constantly higher rate of technological improvement and productivity growth.

Firms’ autonomy to choose their products and production methods means they can communicate directly with customers and tailor their output to their needs — and with free entry customers can choose between the output of different producers: no agency needs to spell out what needs to be produced. To illustrate the relative informational efficiency of this kind of system, Stiglitz cited a Defense Department contract for the production of plain white t-shirts: in the tender for bidding, the physical description of the t-shirt desired ran to thirty small-print pages. In other words, a centralized agency could never learn and then specify every desired characteristic of every product.

Meanwhile, East European economists realized that an essential precondition for firms to be truly autonomous was the existence of a capital market – and this helped explain the failure of Hungary’s market-oriented reforms. In seeking an explanation for the persistence of shortages under the new market system, the Hungarian economist János Kornai had identified a phenomenon that he called the “soft budget constraint” — a situation where the state continually transfers resources to loss-making firms to prevent them from failing. This phenomenon, he argued, was what lay behind the shortage problem in Hungary: expecting that they would always be prevented from going bankrupt, firms operated in practice without a budget constraint, and thus exerted limitless demand for materials and capital goods, causing chronic production bottlenecks.

But why did the state keep bailing out the troubled firms? It’s not as if the Hungarian authorities were opposed to firm failures on principle. In fact, when bankruptcies did happen, the Communist leadership treated them as public relations events, to demonstrate their commitment to a rational economic system.

The ultimate answer was the absence of a capital market. In a market economy, a troubled firm can sell part or all of its operations to another firm. Or it can seek capital from lenders or investors, if it can convince them it has the potential to improve its performance. But in the absence of a capital market, the only practical options are bankruptcy or bailouts. Constant bailouts were the price the Hungarian leadership was forced to pay to avoid extremely high and wasteful rates of firm failures. In other words, capital markets provide a rational way to deal with the turbulence caused by the hard budget constraints of market systems: when a firm needs to spend more than its income, it can turn to lenders and investors. Without a capital market, that option is foreclosed.

As resistance against Communism rose, those in Eastern Europe who wished to avoid a turn to capitalism drew the appropriate lessons. In 1989, the dissident Polish reform economists Włodzimierz Brus and Kazimierz  Łaski — both convinced socialists and disciples of the distinguished Marxist-Keynesian Michał Kalecki — published a book examining the prospects for East European reform. Both had been influential proponents of democratic reforms and socialist market mechanisms since the 1950s.

Their conclusion now was that in order to have a rational market socialism, publicly-owned firms would have to be made autonomous — and this would require a socialized capital market. The authors made it clear that this would entail a fundamental reordering of the political economy of East European systems – and indeed of traditional notions of socialism. Writing on the eve of the upheavals that would bring down Communism, they set out their vision: “the role of the owner-state should be separated from the state as an authority in charge of administration….[E]nterprises…have to become separated not only from the state in its wider role but also from each other.”

The vision Brus and Łaski sketched was novel: a constellation of autonomous firms, financed by a multiplicity of autonomous banks or investment funds, all competing and interacting in a market — yet all nevertheless socially owned.

All of this lays the groundwork for raising the critical question of profit. There are two ways to think about the function of profits under capitalism. In the Marxist conception, capitalists’ restless search for profit drives the pace and shape of economic growth, making it the ultimate “motor of the system”– but it’s judged to be an erratic and arbitrary motor that ought to be replaced by something more rational and humane. In mainstream economics, on the other hand, profits are understood simply as a benign coordinating signal, broadcasting information to firms and entrepreneurs about how to satisfy society’s needs most efficiently.

Each of these versions contains some truth. Look at the mainstream account. Its logic is straightforward: a firm’s profit is the market value of the output it sells minus the market value of the inputs it buys. So the pursuit of profit leads firms to maximize their production of socially desired outputs while economizing on their use of scarce inputs. On this logic, profits are an ideal coordinating device.

But the logic only holds to the extent that that an item’s market value is actually a good measure of its social value. Does that assumption hold? Leftists know enough to scoff at that idea. The history of capitalism is a compendium of mis-valued goods. Not only do capitalists draw from a treasury of  tricks and maneuvers to inflate the market value of the outputs they sell (e.g., through advertising) and drive down the value of the inputs they have to buy (e.g., by deskilling labor). But capitalism itself systematically produces prices for crucial goods that bear little rational relation to their marginal social value: just think of health insurance, natural resources, interest rates, wages.

So if profit is a signal, it invariably comes mixed with a lot of noise. Still, there’s an important signal there. Most of the millions of goods in the economy aren’t like health insurance or natural resources; they’re more banal – like rubber bands, sheet metal, or flat-screen TVs. The relative prices of these goods do seem to function as decent guides to their relative marginal social values. When it comes to this portion of firms’ inputs and outputs — say, a steel company that buys iron and sells it manufactured as steel – profit-seeking really does make capitalists want to produce things people desire in the most efficient way possible. It’s those crucial mis-valued goods — labor, nature, information, finance, risk, and so on – that produce the irrationality of profit.

In other words, under capitalism firms can increase their profits by efficiently producing things people want. But they can also increase them by immiserating their workers, despoiling the environment, defrauding consumers, or indebting the populace. How do you obtain one without getting the other?

The standard answer to this dilemma is what you might call the social democratic solution: let firms pursue their private profits, but have the state intervene case by case to forbid them from doing so in socially harmful ways. Ban pollution, give rights to workers, forbid consumer fraud, repress speculation. This agenda is nothing to sneeze at. The social theorist Karl Polanyi saw it as part of what he called the long “double movement” that had been underway ever since the industrial revolution. Polanyi argued that liberal capitalism had always been pushed forward by a drive to turn everything into a commodity. Because it required that production be “organized through a self-regulating mechanism of barter and exchange,” it demanded that “man and nature must be brought into its orbit; they must be subject to supply and demand, that is, be dealt with as commodities, as goods produced for sale.”

But that commodifying drive had always produced its dialectical opposite, a countermovement from society below, seeking decommodification. Thus, Polanyi’s double movement was “the action of two organizing principles in society, each of them setting itself specific institutional aims, having the support of definite social forces and using its own distinctive methods”:

The one was the principle of economic liberalism, aiming at the establishment of a self-regulating market, relying on the support of the trading classes, and using largely laissez-faire and free trade as its methods; the other was the principle of social protection aiming at the conservation of man and nature as well as productive organization, relying on the varying support of those most immediately affected by the deleterious action of the market – primarily, but not exclusively, the working and the landed classes – and using protective legislation, restrictive associations, and other instruments of intervention as its methods.

After the Second World War, the pressure of the countermovement made decommodification the unacknowledged motor of domestic politics throughout the industrialized world. Parties of the working class, acutely vulnerable to pressure from below, were in government more than 40% of the time in the postwar decades – compared to about 10% in the interwar years, and almost never before that – and “contagion from the Left”  forced parties of the right into defensive acquiescence. Schooling, medical treatment, housing, retirement, leisure, child care, subsistence itself, but most importantly, wage-labor: these were to be gradually removed from the sphere of market pressure, transformed from goods requiring money, or articles bought and sold on the basis of supply and demand, into social rights and objects of democratic decision.

This, at least, was the maximal social-democratic program — and in certain times and places in the postwar era its achievements were dramatic.

But the social democratic solution is unstable — and this is where the Marxist conception comes in, with its stress on pursuit of profit as the motor of the capitalist system. There’s a fundamental contradiction between accepting that capitalists’ pursuit of profit will be the motor of the system,  and believing you can systematically tame and repress it through policies and regulations. In the classical Marxist account, the contradiction is straightforwardly economic: policies that reduce profit rates too much will lead to underinvestment and economic crisis. But the contradiction can also be political: profit-hungry capitalists will use their social power to obstruct the necessary policies. How can you have a system driven by individuals maximizing their profit cash-flows and still expect to maintain the profit-repressing norms, rules, laws, and regulations necessary to uphold the common welfare?

What is needed is a structure that allows autonomous firms to produce and trade goods for the market, aiming to generate a surplus of output over input — while keeping those firms public and preventing their surplus from being appropriated by a narrow class of capitalists. Under this type of system, workers can assume any degree of control they like over the management of their firms, and any “profits” can be socialized– that is, they can truly function as a signal, rather than as a motive force. But the precondition of such a system is the socialization of the means of production — structured in a way that preserves the existence of a capital market. How can all this be done?

Start with the basics. Private control over society’s productive infrastructure is ultimately a financial phenomenon. It is by financing the means of production that capitalists exercise control, as a class or as individuals. What’s needed, then, is a socialization of finance  — that is, a system of common, collective financing of the means of production and credit. But what does that mean in practice?

It might be said that people own two kinds of assets. “Personal” assets include houses, cars, or computers. But financial assets – claims on money flows, like stocks, bonds, and mutual funds — are what finance the productive infrastructure. Suppose a public common fund were established, to undertake what might be euphemistically called the “compulsory purchase” of all privately-owned financial assets. It would, for example, “buy” a person’s mutual fund shares at their market price, depositing payment in the person’s bank account. By the end of this process, the common fund would own all formerly privately-owned financial assets, while all the financial wealth of individuals would be converted into bank deposits (but with the banks in question now owned in common, since the common fund now owns all the shares).

No one has lost any wealth; they’ve simply cashed out their stocks and bonds. But there are far-reaching consequences. Society’s means of production and credit now constitute the assets of a public fund, while individuals’ financial wealth balances are now its liabilities. In other words, the job of intermediating between individuals’ money savings and society’s productive physical assets that used to be performed by capitalist banks, mutual funds, and so on, has been  socialized. The common fund can now reestablish a “tamed” capital market on a socialized basis, with a multiplicity of socialized banks and investment funds owning and allocating capital among the means of production.

The lesson here is that the transformation to a different system does not have to be catastrophic. Of course, the situation I’m describing would be a revolutionary one — but it wouldn’t have to involve the total collapse of the old society and the Promethean conjuring of something entirely unrecognizable in its place.

At the end of the process, firms no longer have individual owners who seek to maximize profits. Instead, they are owned by society as a whole, along with any surplus (“profits”) they might generate. Since firms still buy and sell in the market, they can still generate a surplus (or deficit) that can be used to judge their efficacy. But no individual owner actually pockets these surpluses, meaning that no one has any particular interest in perpetuating or exploiting the profit-driven mis-valuation of goods that is endemic under capitalism. The “social democratic solution” that was once a contradiction – selectively frustrating the profit motive to uphold the common good, while systematically relying on it as the engine of the system – can now be reconciled.

To the same end, the accrual of interest to individuals’ bank deposits can be capped at a certain threshold of wealth, and beyond that level it could be limited to simply compensate for inflation. (Or the social surplus could be divided up equally among everyone and just paid out as a social dividend.) This would yield not exactly the euthanasia of the rentier, but of the rentier “interest” in society. And while individuals could still be free to start businesses, once their firms reached a certain size, age and importance, they would have to “go public”: to be sold by their owners into the socialized capital market.

What I’m describing is, in one sense, the culmination of a trend that has been proceeding under capitalism for centuries: the growing separation of ownership from control. Already in the mid-nineteenth century, Marx marveled at the proliferation of what we now call corporations: “Stock companies in general – developed with the credit system – have an increasing tendency to separate this work of management as a function from the ownership of capital, be it self-owned or borrowed. Just as the development of bourgeois society witnessed a separation of the functions of judges and administrators from land-ownership, whose attributes they were in feudal times.” Marx thought this development highly significant: “It is the abolition of capital as private property within the framework of capitalist production itself.”

By the 1930s this “socialized private property” had become the dominant productive form in American capitalism, as Adolf Berle and Gardiner Means signaled in The Modern Corporation and Private Property. The managerial-corporate model seemed to face a challenge in the 1980s when capitalist owners, dissatisfied with languishing profit rates, launched an offensive against what they saw as lax and complacent corporate managers. This set off a titanic intra-class brawl for control of the corporation that lasted more than a decade. But by the late 1990s, the result was a self-serving compromise on both sides: CEOs retained their autonomy from the capital markets, but embraced the ideology of “shareholder value”; their stock packages were made more sensitive to the firm’s profit and stock-market performance, but also massively inflated. In reality, none of this technically resolved the problem of the separation of ownership and control, since the new pay schemes never came close to really aligning the pecuniary interests of the managers with the owners’. A comprehensive study of executive pay from 1936 to 2005 by MIT and Federal Reserve economists found that the correlation between firms’ performance and their executives’ total pay was negligible — not only in the era of mid-century managerialism, but throughout the whole period.

In other words, the laboratory of capitalism has been pursuing a centuries-long experiment to test whether an economic system can function when it severs the one-to-one link between the profits of an enterprise and the rewards that accrue to its controllers. The experiment has been a success. Contemporary capitalism, with its quite radical separation of ownership and control, has no shortage of defects and pathologies, but an inattention to profit has not been one of them.

How should these socialized firms actually be governed? A complete answer to that question lies far beyond the scope of an essay like this; minutely describing the charters and bylaws of imaginary enterprises is exactly the kind of Comtist cookshop recipe that Marx rightly ridiculed. But the basic point is clear enough: since these firms buy and sell in the market, their performance can be rationally judged. A firm could be controlled entirely by its workers, in which case they could simply collect its entire net income, after paying for the use of the capital.^[2] Or it could be “owned” by an entity in the socialized capital market, with a management selected by that entity and a strong system of worker co-determination to counterbalance it within the firm. Those managers and “owners” could be evaluated on the relative returns the firm generates, but they would have no private property rights over theabsolute mass of profits.^[3]  If expectations of future performance needed to be “objectively” judged in some way, that is something the socialized capital markets could do.

Such a program does not amount a utopia; it does not proclaim Year Zero or treat society as a blank slate. What it tries to do is sketch a rational economic mechanism that denies the pursuit of profit priority over the fulfillment of human needs. Nor does it rule out further, more basic changes in the way humans interact with each other and their environment – on the contrary, it lowers the barriers to further change.

In a tribute to Isaac Deutscher, the historian Ellen Meiksins-Wood praised his “measured vision of socialism, which recognized its promise for human emancipation without harboring romantic illusions that it would cure all human ills, miraculously making people ‘free’, in Shelley’s words, ‘from guilt or pain.’” Socialism, Deutscher had written, was not “evolution’s last and perfect product or the end of history, but in a sense only the beginning of history.” As long as the Left can retain this elemental basis of hope, it will keep a horizon beyond capitalism in its sights.

Almantas Samalavicius: Years ago when the countries of eastern Europe were struggling to “adjust” their political, social and economic mechanisms to those of Western capitalist economy and liberal democracy, you noted inGeopolitics and Geoculture that “False conclusions are being drawn in the (ex-)Communist world, where the magic of the market is supplanting the magic of planning, whereas the market will by and large be no more efficacious an instrument of economic welfare for these states that had been planning, since the primary economic difficulties of these states derived (and derive) not from their internal economic mechanisms but from their structural location in the capitalist world-economy.” More than twenty years after the collapse of Communism and dependency, the “magic of the market” seems to be less glorious than local economists and large sections of society had imagined in the glorious years of 1989-90. However, would you still explain the limited success of post-Soviet economy by referring to eastern Europe’s place in the structure of the world economy?

Immanuel Wallerstein: Yes, the fundamental explanation is their position in the structure of the world economy. Of course, in eastern Europe as anywhere else in the world, there are variations in how the government handles the situation. There are often countries that can maneuver better and improve their relative position. South Korea is a notable example. In the 1960s, their economic performance was no better, probably worse, than that of say Poland or even Lithuania in the 1990s. Yet today, as everyone has noticed, South Korea has a much, much stronger economic performance. No doubt in part this was due to many intelligent decisions on the part of the government. But it was also due to their geopolitical location and the interest of the United States in fortifying them (and therefore permitting them to do things against which the United States inveighed in other parts of the world). The crucial point is that, at any given time, there is room only for a few countries (out of a large list) to improve their world-economic position. Eastern Europe (and particularly the 1990s’ trio of Poland, Hungary, and the Czech Republic) thought they could be this “few”. They were wrong.