Sunday, 13 January 2013

Is this a market I see before me? Review of 'After Capitalism'. Final part.

If memory serves we were up to number 5.

5 Overwork

ED (economic democracy) should be able to do something about both the length of work and its intensity. Workers in control of an enterprise, if they desire a healthier balance between leisure and work, have it within their power to institute just that. “Work-life balance” would become a reality as opposed to possessing, as it does now, the status of an abstract choice.

Work could also become more varied. In the co-operative complex of Mondragon in Northern Spain, work tasks are rotated every two hours as a way of enhancing the mental health and productivity of the worker-owners.

But it is questionable whether, in a market, ED would be able to do everything about overwork. The imperative of any enterprise in a market is to survive and if other work-controlled enterprises chose to prioritise work over leisure and increase production and sales as a result, it seems likely that fellow worker-controlled enterprises would have to follow suit whether they wanted to or not.

Cure for Capitalism rating: 6/10

6 Instability

Capitalism’s instability stems from what (Keynesian and Marxist) economists call the business cycle. An immense and growing amount of goods and services are produced which eventually glut the market and become too much for consumers to absorb. Recession results and, in time, the process begins again.

In addition, capitalism, in the last thirty years, has become more volatile. It has suffered more frequent downturns and financial crises. This, it seems, is due to attempts to postpone a full-blown depression by bolstering people’s flagging incomes with consumer debt, and thus, because of spiralling interest payments, creating far more money at the top of society which just ends up in speculation.

“The ever-present danger to the system is deficient demand,” says Schweickart. “When supply outstrips demand, the economy falters. If goods can’t be sold, production is cut back, workers are laid off, and demand declines further.”

Would ED abolish the business cycle? I have to admit I’m not entirely sure. ED would undoubtedly abolish, or drastically reduce, wage-labour - the material dependence workers have, under capitalism, on how much money they can negotiate by selling their labour. Workers in ED enterprises would not be exploited. They would own and direct their work-places and receive a full share of profits. Labour would not be another “cost” of production. Because of this, the income of worker-consumers should be far more stable.

Whether ED enterprises would accumulate profits and use that capital to produce more goods, eventually glutting the market, I’m not certain. From what I can gather ED would substantially ease the business cycle, if not abolish it outright.

Cure for Capitalism rating: 7/10

Is this a market I see before me?

ED, compared to traditional socialism, embodies an alien trinity – profits, competition and markets. ED enterprises make profits and they compete with each other in a market economy. Historically, the Left has regarded the “market economy” as the problem, never the solution. It is, in many leftist eyes, from Friedrich Engels to Murray Bookchin, synonymous with capitalism and its myriad injustices.

But ED is unashamedly, a market economy. The “counterfoil” to the market lies in the practice of social control of investment – the destination of up to 15% of new investment is determined democratically through public meetings. But the bulk of the economy takes place in a market.

ED is, as Schweickart says, decentralised. It avoids the deformations of Communism. “There is no central authority,” he writes, “dictating consumption, production or employment.” But at what costs are these defects, this fatal centralisation of political and economic power, avoided? Does ED “socialism” cut off its nose to spite its face?

ED is based on the assumption that our most pressing economic problems stem, not from the fact that enterprises interact in a market, but the way production is organised. A hypothetical Martian landing on earth, mused the economist Herbert Simon, would conclude that human beings live in an organisational economy, rather than a market economy. Most economic activity takes place within the boundaries of firms rather than through market transactions between those firms. ED wants to radically change how these firms are internally organised.

You can, theoretically, utterly change the way Tesco is organised as a business, without altering its place in a market competing with other supermarkets

Light and Dark

But markets have inescapable defects. Organisations operating within them are forced to be institutionally selfish and have little regard to the people outside the boundaries of their precious organisation. They become egotistical competitors and, even if organised democratically, can become in Arizmendietta’s fear, “collective egotists.” Worker-controlled enterprises can and probably would be selfish in much the same way that trade unions currently are. Unions do, to some extent, represent the general interest but in a sense if you are not a member of a particular union, you don’t count.

But markets also have, it seems to me, certain definite advantages. They signal consumer preferences to enterprises more effectively than any form of planning. You can have undemocratic planning – central planning, the way the old Soviet Union and its replica states were organised. And you can – though it never been implemented on a mass scale - have democratic planning. Participatory economics and social ecology both embody democratic planning. But if you want goods and services to be produced unconsciously   -- to be available merely because enterprises react to signals that what they produce or do is popular and has demand – then that means some form of market.

The dilemma, I think, is that the advantages of markets are intrinsically linked to their detriments. The advantages are that consumer desires don’t have to be consciously stated. The disadvantages are that markets only work if there is profit to be made, they have a conservative bent, are hostile to experimentation and they grow.

Mondragon has an entrepreneurial division that tries to find consumer niches to exploit.  It’s quite possible that worker-controlled firms may be too successful. The evidence (and we are in the realm of large bodies here) is that they are more efficient than their capitalist equivalents, so they may actually be better at exploiting and magnifying consumer desires, and thus growing.

Shutting your (market) butt down (in certain areas)

What is clear is that there are large areas of society that should be closed to markets, however organised. “Thinking that we can live by the market alone is like believing that we can live by eating only salt, because salt is vital for our survival,” says the anti-austerity but pro-capitalist economist Ha-Joon Chang.

Markets – whether worker-controlled or not – do not work in health, for example, and cause either over-treatment or no treatment at all. In the media, the field of the creation and propagation of ideas and interpretation of everything “out there”, solutions are now focusing on non-market solutions. Participatory commissioning, for example, eschews markets and concentrates on public funding of investigative reporting.

Or culture, cinema and TV. The English writer Mark Fisher has spoken of the “the cult of minimal variation” - the need to make a profit means the risk-taking essential to artistic and cultural innovation is hamstrung. “Since it is now clear,” he writes, “that a certain amount of stability is necessary for cultural vibrancy, the question to be asked is how can this stability be provided, and by what agencies?” Notice, he does not say state agencies. But neither does he say market agencies.

Richard Wolff, another advocate of economic democracy, says you can have the advantages of markets – that they respond to consumer desires – without their downsides automatically following in train. If an enterprise in a worker-controlled economy fails, new jobs or training should be offered to its workers, he says. They are not just left to fend for themselves.

I can’t give absolute approval to Schweickart’s ED plan. There are elements I like about it. It gives meaning to democracy when the current capitalist charade just does a not very plausible impersonation. It accepts the necessity of markets but doesn’t go far enough in adjusting to their limitations and downsides. There are articles that consider this issue more completely than I have. ED also, rather conventionally, regards employment creation as an absolute good, when we are moving towards a world where thanks to technology, work is changing.

But After Capitalism does debate capitalism as a system and looks it squarely in the eye.  “If the contradictions of capitalism are as serious as I argue they are, and if they become more, not less, acute, as almost surely they will, then we will witness another sustained challenge to this most peculiar economic order,” Schweickart wrote a decade ago.

The contradictions are becoming more acute and another sustained challenge is brewing. The contents of the intellectual backpack of this coming anti-capitalist movement are, therefore, of crucial importance.


  1. The most fundamental problem with "economic democracy" (workers' control) is that it assumes that workers are representative of the community as a whole - perhaps a hangover from primitive Marxist idealisation of the proletariat. Now more than ever that seems an absurd assumption, given the interest that all citizens have in decisions about investment, pricing etc. as well as level and conditions of employment.

    The article rightly notes the inevitable tension between planning and the market. There's no obvious solution to this but perhaps the best hope of resolving it would be in the context of highly decentralised structures of government in which enterprises and the economy could be managed more in the interests of local communities so that they receive most of the benefit of the value added produced rather than seeing it siphoned off elsewhere - the very antithesis of today's globalised Starbucks economy. This would not be problem-free but should be easier in the emerging post-capitalist economy where small-scale local production will be more in line with optimal market outcomes for consumers and the pressure to restrict trade over long distances.

    1. I agree that whole citizens, not just a particular work-force, have an interest in decisions about investment, pricing etc. To an extent, Schweickart's Economic democracy vision does incorporate this through public meetings which decide the destination of new investment in a given region. But the rest of the ED market economy wouldn't. It seems, you're right, that there is an inevitable tension between planning and markets.

    2. (continued)
      You could have democratic planning, avoiding markets altogether, but that it seems to me would limit the amount of goods available. The 'list' of products couldn't be that long to reasonably plan. If you fully go for markets on the other hand, it is possible to have tribunals and the like controlling their behaviour, as Jake says below, but that would open the door to bureaucratisation. It's not a tension which is easy to resolve.

  2. I agree with above comment that there should be controls on companies beyond just control by their employees. They potentially affect a lot more people.

    Out of interest, does Schweickart address the issue of money/banks and who would control them? Since they can act as a 'disciplinary' force I think social control of finance institutions is very important.

    On the issue of the downsides of markets and the fact they could still, under economic democracy, force people to sacrifice their standard of living, I think there would have to be some regulating force on the market to keep a lid on that. For instance once could imagine a system of tribunals to ensure that competitive practices are either (a) producing better goods or (c) producing them through more efficient non-labour processes. A company/cooperative could take another to court if they suspected that company of driving down prices simply by driving down wages. This would require that organisations be transparent of course but I think they should be anyway. I think there are lots of ways to regulate markets in the social interest, and without it being done by a Central Command - that one is off the top of my head.

    1. On banks, yes Schweickart does talk a lot about that. He says there should be a tax on all enterprises (an assets tax, not a corporate income tax as you (theoretically) have now. The money gleaned should go to regions on a per head basis where public meeting and public investment banks (who owns them, he doesn't say)should decide where this new investment should go.

      What you say regarding a tribunal ensuring production of better goods and not driving down wages, is quite plausible though Schweickart doesn't address it. Such a system of regulation would not inhibit the exploitation of consumer desires and thus commodification and growth. I don't know how that can be done

  3. My vision of planning is much less structured and would start from a form of licensing within a given economic space (i.e. production / provision of a good or service would be licensed on a scale roughly commensurate with the estimated local market - and subject to compliance with strict standards on quality, price, labour, H&S etc.). This wouldn't necessarily preclude imports / exports from / to other regions but this would not be encouraged. Under what I understand should be feasible with emerging industrial technology (favouring small-scale rather than mass production) this should not necessarily put a severe limit on what can be economically produced locally.

    To make this work and assure maximum stability and minimum disruption it would be necessary to assure everyone an unconditional basic income, promote an ethos of cooperation rather than competition and minimise the drain of value added from the local economy, thus maximising what can be distributed within the region. Maximum transoarency / democratic accountability is a given.

    1. By the way Harry, could you give a brief definition of capitalism - you call it the 'profits system'? And how does your defintion differ from Schweickart's? -

  4. Without going back through your earlier blogs on Schweikart's book (which I haven't read myself) my impression is that I don't seriously disagree with his description of its defects. Where I think his approach is deficient is that he seems (despite the title of his book) to view capitalism as an economic model which, albeit clearly inadequate, can be modified so as to make it work for ordinary people. Equally he seems to share the common perception that capitalism is a system that has been consciously adopted at some point by society as the optimum – what I call the “creationist” view – rather than being part of an evolutionary continuum determined by the development of productive forces (see Marx /Engels, The Communist Manifesto). If the latter approach is valid, as I believe, then capitalism is destined to follow feudalism into total obsolescence in response to changing technology - and our analysis needs to start from that basis.

    To answer your question as succinctly as possible, to me the distinguishing features of capitalism are a) the profit motive (essential for a system based on private investment) and b) competition. These features – extolled by Adam Smith and effectively enshrined in the Companies Acts – are the ingredients of the destructive business cycle, to which no remedy has ever been found. Now that, additionally, the new tech revolution renders expanding capital investment more and more irrelevant – and indeed environmentally untenable – it behoves us to consider the possibilities now being opened up in a creative way while learning the sorry lessons of capitalist failure.