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.

Like ping-pong, you might say. “Don’t worry, be happy/things will get better naturally”.

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.

Jean-Luc Mélenchon and Saul Alinsky. The necessity of conflict

I have belatedly come across a New Statesman interview in December with French Front de Gauche leader Jean-Luc Mélenchon. What struck me was how much he sounded like the dead American community organiser, Saul Alinsky. Mélenchon, unmistakably echoing Alinsky, spoke of how conflict was essential to a healthy democracy.

“Democracy is not consensus,” he said. “It's a mode of regulating conflict and difference. And to deny conflict in society is as dangerous as it is to mental health to deny the conflicts that we experience as human beings.”

“Conflict,” said Alinsky in his 1971 book, Rules for Radicals, “is the essential core of a free and open society … Change means movement. Movement means friction. Only in the frictionless vacuum of a non-existent abstract world can movement or change occur without that abrasive friction of conflict.”

Conflict, not to be confused with hatred or violence, is the source of creation and progress to both Alinsky and Mélenchon.

The parlous state of freedom and democracy is Britain is partly due to a neurotic fear of conflict. When Labour party leader Ed Miliband took the inadequate and contradictory step of attacking “predatory capitalism” in 2011 he was immediately criticised by the Blairites, not just for the concept, but for the fact that he didn’t enlist any business leaders in support. His sin was to open a small rivulet of conflict.

Conflict is seen as inimical to economic growth and a harbinger of discord between capital and labour. But you can’t, despite the beliefs of British politicians, eradicate conflict. You can repress it and change its form, but it will reappear. It’s far healthier, as Mélenchon realises, in personal life as in politics, not to deny conflict, but to accept it.

“I don’t agree with you” is one of the most creative sentences you can utter.

"There is no central authority". Review of After Capitalism. Part 3.1

So what, then, is the alternative? So far I have examined, dispassionately I hope, the flaws in capitalism as well as its attractions. Schweickart’s fundamental claim – the point of After Capitalism – is that TINA is a self-imposed intellectual constraint. There is a feasible alternative, a different economic system that substantially reduces or eliminates capitalism’s flaws without replacing them with more virulent pathologies.

This is not a magical transformation, an instant gateway into nirvana. Problems will not miraculously disappear, says Schweickart, “but intractable problems will become tractable”.

He calls this alternative model “Economic Democracy”, which I will refer to as ED for short. Wage labour will be abolished for most enterprises (small businesses like restaurants will be excluded). Most enterprises will be run democratically through one member, one vote and general assemblies of all employees. This is in contrast to the hierarchical, capitalist manner in which employees are hired and are simply tools of production.

“When you join [a firm under ED] you receive the rights of full citizenship; you are granted an equal voice, namely, an equal vote in the community,” writes Schweickart. And you get an equal share of the profits made.

Some form of economic democracy, as an alternative to capitalism, has attracted a growing number of advocates recently, including Richard Wolff, Dan Hind, and even Lenin’s Tomb blogger and SWP member, Richard Seymour.

This is not what has traditionally been thought of as socialism. There is no central planning or state control of the commanding heights of the economy in Schweickart’s conception of economic democracy, though he still describes it as socialism. “Economic democracy is a decentralized market economy,” writes Schweickart. “There is no central authority dictating consumption, production or employment.”

If anything, ED is reminiscent of syndicalism, which had its heyday before the First World War.

In many ways, ED is rapidly crystallising into the post-Communist and post-social democracy alternative to dysfunctional capitalism. So in analysing and criticising Schweickart’s ED model, I’m also looking at this larger trend.

The best way to do this is to revisit the flaws of capitalism, outlined in parts 2.1 and 2.2 and see how, if at all, economic democracy will remedy them. And them to look at the question of markets. Can a non-capitalist market work? Is this really a cure for capitalism, or just capitalism in another form?

1 Inequality

Inequality is an intractable problem of capitalism. It is acute and worsening. Schweickart’s ED seems to attack this problem at source and very effectively. The Mondragon collective of co-operatives in Northern Spain, which Schweickart repeatedly cites and says is of “world historical” importance, has a rule that the pay ratio between the highest and lowest paid, should not exceed 6.5-1. By comparison, the pay ratio in Anglo-Saxon corporations is, on average, more than 300-1.

It is possible that scarcity of certain skills and the cultural influence of senior managers, which in grossly magnified in current society, could expand that ratio even under system of economic democracy. But, as a remedy for inequality, ED is far more persuasive than currently touted “solutions” such as a high pay commission and workers represented on remuneration committees.

Cure for Capitalism rating: 8 out of 10

2 Lack of meaningful democracy

Schweickart says that, under capitalism, we live in polyarchies. There are free elections and a choice of candidates, but not real democracy.

ED would fairly obviously enhance and render meaningful democracy, because it would be applied to the one huge area where it is commonly now banished: the work-place. When a person joins an enterprise under ED, they become a citizen not merely an employee.

The democratic advantage of ED over central planning socialism is that it is decentralised. Employment is not monopolised by one entity, the state, with lethal consequences for democracy and freedom of expression.

But Schweickart also advocates social control of investment. The destination for new investment, 10 to 15% of GDP, would not be decided by banks, stock markets or boards of directors, but by public meetings, open to everybody. This democratic control of investment plays a similar role that participating budgeting does for public spending. In this way, the public would be able to influence the pattern of consumption and the way society develops, beyond the limited and skewed capitalist of way just voting with their feet or wallets.

Another democratic enhancement of ED is that, because huge profits do not accrue to small minorities of wealthy people and large corporations, the political system would not be perverted by the influence of money. Against this, it should be remembered that even worker-directed firms have interests which may conflict with those of the wider community. The “red priest”, José María Arizmendiarrieta, who founded the Mondragon co-op movement, warned of the danger of co-operatives becoming “collective egoists” (which Schweickart quotes in After Capitalism). So the problem of lobbying and the pursuit of institutional selfishness are not banished by ED.

Also, ED does not affect wider political decisions and how these are made. ED enshrines direct democracy in the realm of the enterprise where people spend their working lives. But, by definition, it is silent about the wider political realm.

Cure for Capitalism rating: 6.5/10

3 Environmental degradation

The environmental flaw in capitalism is that it grows, exhausting natural resources and causing poisonous side-effects of production, such as carbon emissions. At first glance, it is difficult to see how ED would be any different. Enterprises would, as Schweickart freely concedes, compete for market share and to satisfy their consumers. The difference, he argues, is that worker directed enterprises do not have the same growth dynamic as their capitalist counterparts. A capitalist company exists to maximise profit, but an economic democracy enterprise exists to secure profit per worker. As result ED enterprises are less likely to seek growth because profit will have to be shared among a growing work-force. A bog standard capitalist company does not have the same internal limit to growth because workers are merely a tool of production, and do not receive profits.

As a consequence, ED firms are compatible with low or zero growth, says Schweickart.

The other way in that ED is less harmful to the environment is that new investment is more geographically spread out. Money for new investment is generated by a tax on all enterprises, which is distributed to regions on a per head basis, a method Schweickart calls “social control of investment”. At present, capital and thus jobs, concentrate in certain areas (such as London in the UK) creating mega-cities and putting an intolerable strain on the surrounding environment. The same damaging concentration of people and resources would not occur under ED.

I can see Schweickart’s arguments but I’m not completely convinced that ED enterprises would so readily eschew growth. I have to conclude, with regard to environmental degradation, case unproven. For example, it has been argued by another economic democracy advocate, Richard Wolff, that worker self-directed enterprises would not pollute because the workers would suffer from the results and they won’t want to harm themselves or their families. But what about pollution, such as carbon emissions, whose effects may be felt on the other side of the world? It’s also apparent that enterprises in a market seek growth, not just to maximise profit, but also to head off competition and protect market share. This condition applies to worker directed enterprises, as much as their capitalist equivalents.

Cure for Capitalism rating: 5.5/10

4 Unemployment

This is a distinctly mixed picture. Under ED there is no desire or need for unemployment to discipline the workforce, no requirement for a reserve army of the unemployed. If anything, the opposite is true. A prime aim, says Schweickart, of ED is the creation of employment, whereas under capitalism, it is merely a by-product. Job creation is an explicit goal of the Mondragon collective of cooperatives in the Basque country, which Schweickart believes, demonstrates how a non-capitalist economy can work.

In fact, says Schweickart, there is an intrinsic bias against employment in capitalism. Capitalist enterprises are more inclined to replace workers with machines (partly because payroll taxes fall on each individual worker, whereas under ED they would be replaced with an enterprise tax) in order to maximise profit. ED enterprises, more dedicated to securing durable employment, would be less prone to mechanisation. But this in itself creates a looming problem. Because ED enterprises aim to create employment, they would be more likely to not develop or even suppress technologies that render labour redundant. In this way society would artificially hold back the development of technology for the sake of preserving paid jobs.

Not only is this, like King Canute trying to hold back the tide, impossible, it tries to defer facing how society is going to deal with the fact that in the future there will simply be less demand for labour because of the advance of technology. We can’t all, nor should we, all have 5 day a week jobs. In 1930, John Maynard Keynes believed that in a century’ time, people would work 15 hour weeks. Schweickart simply does not deal with this issue and I believe it is a major lacuna in his alternative model. The absence of a central authority, or a corrective to the free workings of markets, just incubates a vast problem.

In short, ED does deal with the problem of capitalist unemployment but in a way that generates problems of its own.

Cure for Capitalism rating: 5/10

I realise this is already quite long. So, for those that are following this saga, I will write the final part soon and examine whether ED can eradicate capitalist instability and overwork. And then consider the broader question of markets.

I was going to include a clip of Schweickart speaking but I’ve run out, so this will have to do.

The most fortunate people that have ever lived? Capitalism and its contents. Review of After Capitalism, Part 2.3

It’s an amazing state of affairs when you stop and think about it. Almost everyone in the West enjoys lives which would be envy of any Roman Emperor or Pharoah of ancient history, remarks John Lanchester, in his book about the financial crisis, Whoops!  Whether we appreciate it or not, we live in the best societies that have ever existed.

Because of our wealth, we are the most fortunate humans that have ever lived, says Lanchester.

Do you feel lucky, punk?

Anti-austerity journalist Polly Toynbee was a mere seven years ago eulogising current society as an overlooked golden age. There has never been a better time to be alive, she said, despite the mood of pessimism. Supermarkets were “modern miracles of splendour and choice … Unimaginable luxuries and choices are now standard - mobile phones sending pictures everywhere, accessing the universe on the internet and iPods with all the world's music in your ear.”

In previous centuries, most children died before they reached maturity, epidemics and malnutrition were rife, most people did not survive past forty and women bore so many children, they were used up and exhausted by their thirties.

Larry Elliot, economics editor of the Guardian newspaper, recently told the same story in economic terms. “Before new and more efficient production methods for agriculture and industry were developed in the 18th century, per capita incomes in the west had risen at a glacial pace for more than 1,000 years,” he wrote. “Modern industrial capitalism generated surpluses and it was this that differentiated it from the subsistence model.”

Is not, therefore, modern industrial capitalism responsible for our “unimaginable luxuries” and the blessings of wealth? Should we not be thankful?

“The reality of the world resists us”

If you are searching for a reason why a pervasive sense of dissatisfaction has not led to a more widespread alienation from capitalism, I think it’s because of an unconscious fear of killing the troublesome goose (and its incurable troubles were laid bare in Parts 2.1 and 2.2) that lays the golden eggs.

As an example, take foreign holidays. More and more people, and young people in particular, experience them as a matter of course. In the 1970s neoliberal think-tanks in the UK asserted that secretaries flying off on holiday to the Greek islands was a standing refutation of the Left. In the film La Guerre Est Finie Yves Montand, a Spanish Communist, says, “14 million tourists vacation in Spain every year. The reality of the world resists us.”

Here is the appeal of capitalism in all its seductive glory, its ability to achieve technological advancement and satisfy consumer desires. Yes the same ability is inescapably linked to its faculty to eat up resources and destroy the natural environment. Capitalism's failings may bring it down and “us with it” said investment manager Jeremy Grantham last year.

Consumerism was and still is the glue that binds people most tightly to the system. Everyone, says US economist Richard Wolff, from economists, to advertisers, business, the media but also trade unions and left movements bought into this idea. Modern economics was built on the assumption that labour was the burden for which consumption, enabled by wages, was the compensation.

Rising wages became the gold standard for what they could buy but consumerism has been entrenched at the expense of other, possible advancements of human freedom and welfare. Roads, not less traveled, but not traveled at all. Wolff describes consumerism as a deal. Though he is speaking of the US, what he says is true of any western country.

“The deal might have collapsed at any time if US workers rebelled against the organization of production in the US. This could have occurred if rising wages did not suffice to make them ignore the growing inequality of US life, or if they rejected subordination to ever more automated, exhausting work disciplines, or if they refused to deliver ever more wealth to every fewer corporate boards of directors of immense corporations ever further removed from them in power, wealth and access to culture.”

Of course, now, one part of the consumerist deal – rising wages – is falling apart. The golden age seems definitely over. Young people may be able to fly to Barcelona but they are also sinking further into debt to in order to pay for the education to get jobs that don’t exist.

Yes the glue has retained most of it stickiness up to now.

You can’t always get what you want

But I want to argue that capitalism’s ability to deliver utility, to provide satisfaction to consumers – the choice of multi-national food, the EasyJet flight to Prague for the cost of a pub lunch is (setting aside externalities like climate change) more than matched by its capacity to create dis-utility. And both come from the same source.

It’s almost a truism to note, although still worth noting, that capitalism’s ability to satisfy consumer desire is a by-product. “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest,” said Adam Smith. You are not given the choice to buy a new Smart Phone by the pure, unadulterated desire of Apple to enhance human communication, but by that corporation’s need to make a profit.

But, just as intrinsic to capitalism, although less frequently observed, is that it is an accumulative system. “Every year,” writes David Schweickart, “enormous quantities of commodities are produced that, when sold at anticipated prices, generate enormous profits, a large fraction of which are reinvested back into the economy in anticipation of still greater production and still more profits.”

For capitalism to function smoothly, this money must find somewhere to go. That it can’t find somewhere to go – corporations in the UK are sitting on £750bn – is one reason why it’s not functioning smoothly. But the use and re-use of money is at the heart of capitalism. That’s why it’s called capitalism – money becomes capital by virtue of the fact that it is employed to make more money. This explains why it grows but also why there is unrelenting pressure to find outlets for investment. An alternative name, given by one economist to capitalism, is 'the profits system'.

There is no conscious choice in this. It is why Apple don’t respond to consumer desires so much as think of products and then try to get consumers to want them (which they seem to be very good at. Steve Jobs, said one journalist “anticipated technological desires you didn’t even know you had”).  The idea of voluntary choice is the basic error of writers like Lanchester. He argues that, despite the credit crunch, he could discern no general desire to slow down. Actually I think this desire does exist but it can’t be translated into tangible action.

If you feel like you are on a treadmill, that’s because you are.

I can’t get no satisfaction

This inherent characteristic of capitalism, its machine-like ability to create profit which then needs to be re-invested to create more money, explains why it manufactures dis-utility as much as utility.

The credit crunch and subsequent economic depression are a prime example of dis-utility. Banks seeking profits lent to consumers who eventually couldn’t pay back. Those same banks created asset-backed securities as a means of making more money, thus spreading the credit crunch around the world. “The crisis was generated by the system itself,” in George Soros’ words. The same system that generates Tesco and Ryan Air.

The fact that now many businesses cannot get credit from the institutions – banks – that in any rational economic arrangement are supposed to supply credit as a matter of course, is another example of mammoth dis-utility.

The pharmaceutical industry is another case of dis-utility. In France, it has been estimated that over half of prescription drugs are either useless or dangerous. Why is this happening? Because of the overriding need of pharmaceutical companies to use their profits to produce more drugs for sale. The consumer – which capitalist genius is to suppose to satisfy – does not benefit from this need. The opposite is true.

Public services are now a major destination for private investment and thus dis-utility. The director of the British Confederation of British Industry, John Cridland, states in one breath that only business can create jobs, and in the next that a third of public spending should be opened up to competition from business.

In other words, public services should provide an outlet for the investment of private funds.

That this will create spiraling dis-utility is shown by recent history. In Britain, the Private Finance Initiative has seen new hospitals built by private companies, which they then own. It has resulted, on average, in a 30% drop in the number of beds in PFI hospitals compared to ordinary public hospitals. Thus, there has been a large increase in the ‘through-put’ of patients using the reduced number of beds, a major cause of the spread of the lethal MRSA virus. Capitalism in health services has resulted in mammoth dis-utility for “consumers” of hospital services, as well as being more expensive for the taxpayer.

The management theorist, Peter Drucker said in 1939 that the Great Depression revealed capitalism as a system that didn’t serve any purpose but it’s own. That is becoming increasingly apparent again.

Virtuous consumerism

Is it possible to have an economic system that does not spurn consumer desires as inherently worthless and strives, within reason, to satisfy them, but one that avoids the glaring systemic flaws and downsides of capitalism?

David Schweickart would say that you can – through a largely market economy made up of worker, not capitalist, controlled enterprises. He argues you can have a market without that becoming a capitalist market and that makes all the difference in the world. But thinkers throughout history, from Aristotle to Karl Polanyi and Murray Bookchin, have criticised markets as inherently destructive of human solidarity and the environment, and the ‘market economy’ is frequently used as a synonym for capitalism. It is to this question of markets, good or bad, that we turn in the last part of this review.

It's the System, Stupid. Review of After Capitalism, part 2.2

Welcome to Part 2.2 of your quick guide to capitalism and its ruinous consequences. I can see the next immutable feature of capitalism itching to reveal itself so let’s draw back the curtain and begin …

Unemployment

Yes, welcome unemployment. Or perhaps not. Full employment, as Schweickart says, is, outside of wartime, a textbook fantasy. The guilty secret is that unemployment is desired by the rulers of our society. Full employment leads to large wage rises (a seller’s market), which eat into profit as well as causing inflation, as the much lower unemployment rates in the 1960s and ‘70s, showed. Capitalists know this and they want the discipline of potential unemployment so employees are never completely secure in their jobs. “Economics is the method,” said Margaret Thatcher. “The object is to change the soul.”

But there is another reason for unemployment which Schweickart doesn’t talk about. Regardless of its usefulness in disciplining workers, there is a structural reason for unemployment. The Conservatives in Britain have made immense political capital from proclaiming the existence of a ‘structural deficit’ – government over-spending that is over and above the extra spending resulting from the economic downturn. But they – and all mainstream political parties – are silent about the structural character of much unemployment – the joblessness that would be there even without a recessionary economic climate. This is a feature they can never admit.

In the UK, from 1950-73, unemployment averaged 1.6%. Post-1980 it has averaged 7.8%, and frequently been higher. Even at pre-crisis levels, unemployment was high enough to have fatally wounded governments in the ‘60s and ‘70s. Now it is seen as fact of life, when in reality, it is a fact of capitalism. John Maynard Keynes spoke about technological unemployment as early as the 1930s, and technological development, spurred on by the desire to reduce costs and increase profit, has rendered, under this system, a significant proportion of the population economically superfluous.

The economist Harry Shutt has written about this systemic problem. The scarcity of the means of subsistence, he says, has greatly diminished since the Industrial Revolution, but the scarcity of work opportunities has correspondingly grown. “Yet it remains true,” he writes, “that for the vast majority of the world’s people the sale of their labour is their only potential source of income”.

The Obama economic adviser, Laurence Summer, has said that high levels of unemployment are now a structural feature of the US economy, regardless of the presence or absence of economic crisis (which seems to be the new normal anyway). “No matter how hard we try, the current economic system needs fewer and fewer of us,” says the writer Dan Hind.

The structural nature of unemployment results in a situation where a majority of people work very hard, but a significant minority don’t work at all, or are under-employed, and live in poverty. The employed are employed because they contribute to profit, the remainder do not. Under capitalism, employment largely depends, not on meeting social needs, but being needed to generate profit. A great many jobs are, under any rational judgement, socially useless.

Overwork

Here we confront a paradox of the system. Capitalism is technologically prolific. It produces a wondrous variety of commodities and this explains a large part of its appeal, an attraction we will consider in the next part. But the technological advances the system makes, while theoretically reducing the need for toil and promising to ‘save labour’, actually makes work more intense.

“A visitor from another planet would be perplexed to discover that in a purportedly free and rational society there are millions of people who want to work more, living in close proximity to millions who want to work less,” writes Schweickart. “The visitor would be even more perplexed to learn that new technologies allow us to produce ever more goods with ever less labour, and yet the intensity of work – for those who have work – has increased.”

Working hours have increased in the US and Britain in the last twenty years, despite technological advance. Between 1998 and 2005, the number of people in Britain working more than 48 hours a week more than doubled. And one in six now works more than 60 hours.

In 1999, research by the Joseph Rowntree Foundation found that nearly two-thirds of British workers had experienced an increase in the speed or intensity of work over the previous five years.

Some great minds of the recent past thought that technological advance would have precisely the opposite effect. John Maynard Keynes believed that people in the first half of the 21^st century would work 3 hour days and fifteen hour weeks. Keynes, one of the most famous economists in history, was grossly mistaken.

According to the theory of conventional economics if people desire more leisure, they will automatically get what they want, trading income for more free time (Conventional economics is all about desire – if you want a coffee-maker the market will provide one). But, in practice, it doesn’t work like that. Work hours are set, or implicitly set because they are required to get work done and employees can rarely negotiate more leisure, despite the rhetoric of ‘work-life balance’.

The reason, as Schweickart points out, is that consumption is the lifeblood of business but leisure is often its antithesis. “Any kind of cultural shift that emphasizes leisure over consumption bodes ill for business,” he writes. “To be sure individual businesses [like an airline] catering to the increase in leisure that people would have might profit, but if this leisure comes at the expense of income, overall aggregate demand will fall, profits will decline, the economy will stagnate or slip into recession.”

It can be argued that overwork is not an immutable feature of capitalism. Work hours declined, because of government and trade union action, in the latter part of the nineteenth and for much of the twentieth century. In France, a 35 hour week was introduced in 2000. Theoretically, the EU has a 48 hour week. But these external restraints on capitalism have proved very hard to make stick. The French 35 hour week has been incrementally eaten away at since its introduction.

Instability

This last feature is not one included by Schweickart, although in the latest edition of After Capitalism, which I don’t have, there is a section on instability.

Anyway, capitalism is a peculiarly unstable economic system, and its instability is generated internally, not by uncontrollable outside factors. All the talk pre-2007 about an “end to boom and bust”, “the Great Moderation” and the “Goldilocks’ economy” (everything just right, not too hot or too cold), proved to be errant propaganda. In the UK, prior to the Great Recession, there were two severe economic downturns in the last thirty years (1980-82 and 1990-92). Millions of people were made unemployed, thousands of business collapsed, home repossessions and evictions soared. And now this.

Ha-Joon Chang in 23 Things they don’t tell you about Capitalism has shown that the number of countries experiencing a banking crisis shot up after the beginning of the 1980s. 20% of countries experienced a banking crisis in the mid nineties, and 35% did following the 2007-8 global financial crisis.

If, for whatever reason, investors lose confidence, says Schweickart, they will stop investing, businesses will stop selling goods and the economy will slump. What we are experiencing now is a chronic loss of confidence in the ability of businesses to sell products as shown by enormous pile of money, estimated at £750bn in the UK, that corporations are sitting on and not using.

Keynesian economists, Chang included, would argue that, while instability is a feature of capitalism, it can be overcome. Restraints on finance and banking, exchange controls which don’t allow capital to leave countries, and encouraging labour to receive more of a share of profits, can achieve this. The economist Hyman Minsky said in 1982: “The most significant economic event of the era since World War 2 is something that has not happened: there has not been a deep and long-lasting depression.” But actually, the Keynesian era did end in a recession, in 1974. So Keynesianism was not able to eradicate capitalist instability.

Many economists now believe that another financial crisis is just waiting to happen

The consequences of this recurring instability can be seen in interrupted careers, destroyed relationships and life chances, evictions, home repossessions, and social unrest. The economic historian Karl Polanyi, writing during the Second World War, described capitalism’s strange ability to create “unheard of material welfare” but a simultaneous “catastrophic dislocation of the lives of the common people”.

The systemic instability of capitalism is the cause of the current and prolonged economic downturn and government budget deficits. “Capitalism went into the toilet” is how the American economist Richard Wolff expressed the situation in very technical language. It is not the result of poor people being profligate, immigrants, government over-spending, the EU (although the Euro may have exacerbated the problem) or selfish human nature in general. But while capitalism is the cause that cannot be seen as the cause, for the consequences of that cause and effect equation are unacceptable to the rulers of our society, other culprits have to be located. Hence this

This element of capitalist instability is quite apart from the everyday instability it involves: the speculation, for example, that pushes the price of essentials, such as cereals, beyond the reach of ordinary people in poor countries and causes hunger.

The best of all possible worlds

The above characteristics provide a corrective to the constant drip of capitalist celebration to the effect that the world we live in is the best imaginable. But others, not simple capitalist apologists, claim that capitalist amounts to the best achievable world and is far better than any humanity has experienced before.

John Lanchester in his book about the financial crisis, Whoops!, says he believes that western liberal democracies [all capitalist after all] are best societies that have ever existed, “which is not the same thing as saying they are perfect. Citizens of those societies are, on aggregate, the most fortunate people who have ever lived.”

The foundations of this belief will be examined in the next part. With capitalism, does the good ultimately outweigh the bad?

Why capitalism can't save us. Review of 'After Capitalism'. Part 2.1

2.6 billion people are living on less than $2 a day, many major cities are surrounded by sprawling slums of misery, carbon emissions are rising faster than they were in 1990, Arctic sea ice is melting more rapidly than anyone anticipated and unemployment and poverty are rife in many countries. A list of bad things happening in the world is not difficult to compile. But why are these manifestations of present and future suffering the responsibility of the economic system – capitalism – now predominant across the globe? Are they not, as is commonly argued, regrettable but inevitable facets of life arising from flawed human nature?

You can’t persuasively criticise capitalism by waving your arms and saying how awful things are. As Schweickart says, to be convincing you have to show a causal connection between the structures that define capitalism and these bad features. “A serious critique,” he writes in After Capitalism, “must show that these negative features would not be present or would at least be far less prominent, if certain structural elements of capitalism were altered and that such alterations would not have other worse consequences.”

I want to examine five such negative features of capitalism that Schweickart highlights in his book. I will add a sixth. The features are examined from the point of view of some living in a developed, democratic capitalist country. That’s not intended to pass over the often far worse circumstances of poorer countries. It’s simply what I know most about and have experience of.

I also want to talk about the positives of capitalism. Why, beyond the quiescence of careerism or powerlessness, it still commands a grudging adherence. I was going to do that in this post but it would be too long, so it will appear in a following post, shortly.

Here is Schweickart in debate (and he does, as the presenter says, have amazing eyebrows):

First, the negatives.

1 Inequality

This feature would not, perhaps, have occupied such a stellar position twenty years ago. It was once believed that eventually everyone in the world would live like a middle class American, says Schweickart. “No-one believes that now.” Now, not even middle class Americans live like middle class Americans. In 1960, the US, the average pay of chief executives compared to all workers was 42-1. In 2007 it was 344-1. At Walmart, the US’s biggest employer, it’s 900-1. In the 1970s, Britain was one of the developed world’s most equal countries, now it is one of the most unequal. Inequality between rich and poor countries is even more extreme and worsening.

Capitalism has always involved great economic inequality. After the Second World War this characteristic was restrained, in western countries, by high taxation of wealth and collective bargaining. But both those elements have waned.

Schweickart asks a basic question. What’s wrong with inequality? Let all the children grow tall and some taller than others, Margaret Thatcher used to say. A rising tide lifts all boats was the mantra of the Right in the ‘80s and ‘90s. The trouble is that the tide isn’t rising. It is, literally rising, but not in a wealth sense. Wages have been stagnating in the US for 30 years and have been dropping in the UK since 2003.

The problem, says Schweickart, is that the structures that generate this inequality also generate desperate poverty and compromise democracy. Great and concentrated wealth at the top of society enables those that have it to skew the political process in their interests.

But we can add that inequality has two other effects. One is that, as the book The Spirit Level showed, problems, such as mental ill-health, incarceration, obesity and violence, increase in intensity the more unequal a society becomes. Secondly, inequality played a big part in causing the economic paralysis afflicting the US and Europe. A “wall of money” at the top of society has been used for destructive speculation. While inadequate income in society at large has both caused the crisis (the original credit crunch was precipitated by Americans not being able to meet mortgage repayments) and made exiting recession very difficult.

2 Democracy (lack thereof)

We, in the West, have free elections and a choice of parties to vote for. If enough people want to form anti-capitalist parties and seek votes, no-one will forcibly stop them. In France they have them in name. Therefore, we live in democracies.

Not so fast. The formal accoutrements of (representative) democracy does not mean we have democracy in content. Schweickart says we live in polyarchies.

A polyarchy exists where a country has free elections and a multi-party system but one class is dominant and its view and needs predominate. These views are propagated through party funding, lobbying, and the use of think tanks that create and mould public opinion.

But there is a deeper reason for the constrained democracies we live in. That is the formidable economic power of the owners of the economy and everyone else’s material dependence on maintaining their confidence. “A capitalist economy is ingenuously structured,” says Schweickart. “Almost everyone has an interest in maintaining the spirits of its ruling class …. So long as the basic institutions of capitalism remain in place, it is in the rational self-interest of almost everyone to keep the capitalists happy.”

And when the capitalists aren’t happy they can indicate their displeasure in very powerful ways. In August 2012, UK Conservative chancellor George Osborne reversed a £2 billion tax rise on the oil industry after companies responded to the rise by cutting production by 18%, and thus revenues to the UK Treasury. 

The writer Dan Hind has said the public is only audible when it echoes governing assumptions. If people think unemployment benefits are too high, they entrench government policy. But if they think tax should not be cut for the rich, they are instantly mute.

Even at its theoretical best, capitalist democracy only applies to the political system. The economy can only be influenced indirectly. Under Schweickart’s plan for worker controlled enterprises and social control of investment, democracy is extended to the workplace.

3 Environmental Degradation

“Only a madman or an economist could believe that exponential growth can go on forever in a finite world,” so spoke the late economist Kenneth Boulding who is quoted in After Capitalism. But capitalism believes, if it 'believes' anything, just that.

This is the inherent environmental flaw in capitalism. It grows. “Capitalism is enormously productive,” says Schweickart. “Every year, enormous quantities of commodities are produced that, when sold at anticipated prices, generate enormous profits, a large fraction of which are reinvested back into the economy in anticipation of still greater production and still more profits.”

The ever increasing consumption required by this process has been made possible in recent decades by consumer borrowing. Of course, as we are painfully aware now, capitalism doesn’t automatically grow and this tendency, in its environmental implications, will be considered shortly. But the significant point is that capitalism is a system without internal limits. In 2007, a British professor of engineering worked out that, based on an economy growing at three per cent a year, we would consume resources equivalent to all those we have consumed since the emergence of humanity by 2040.

  

This growth is manifested through the gradual exhaustion of natural resources, the steady encroachment of physical development into rural areas (happening now in the UK through the erosion of the “green belt”), and the release toxic by-products of production and consumption such as carbon emissions and nitrogen-based fertilisers used in farming.

What would defenders of capitalism say to the charge that the system is ecologically unsustainable? Firstly, and very loudly I imagine, they would point out that the environmental record of capitalism’s historical rival was terrible. Pollution under Communism was chronic. In the early 1980s, northern Bohemia in Communist Czechoslovakia had the worst air pollution in Europe. By 1983, 35% of all Czech forests were dead or dying and one third of all Czech watercourses were too polluted even for industrial use. Though the main environmental bane of Communism, it should be said, was pollution, not growth.

Secondly, a pro-capitalist would argue that, through capitalism’s association with liberalism and free elections, environmental activists can, externally, bring capitalism under control and make environmentally destructive behaviours unacceptable. Think of the film Erin Brockovich.

“Thanks to the efforts of determined environmental activists in virtually every advanced capitalist country, air quality is better now than it was two decades ago and rivers and lakes are cleaner,” writes Schweickart. “Environmental protection laws have been passed and “green” taxes and imposed in many countries.”

There are several points to make in response to the belief that capitalism is compatible with a flourishing environment.  Firstly, environmental activism can’t alter capitalism’s integral growth dynamic, it’s “grow or die” impulse, as the social ecologist Murray Bookchin put it. As a result the best environmentalism can do is ameliorate the worst effects. “Things getting worse at a slower rate”, is how the late environmental activist, Donella Meadows, described the situation.

Secondly, in the low or no growth world we are entering, environmental priorities are being sacrificed to meet the short-term need to revive growth. “We can’t be ambivalent about growth,” is how the UK government’s “planning” minister, Greg Clark, justified reducing regulations to make it much easier to approve building development in the countryside.

Thirdly, many polluting practices in western countries that have become culturally unacceptable have been exported to poorer countries, where people have less power to make their objections count.

Lastly, the experience of the 21^st century has shown that when environmental activism directly confronts huge capitalist industries like oil, automobiles and mining, it does not win. The 1987 Montreal Protocol was the last successful international agreement to change capitalist behaviour. The protocol called for strict restrictions on chemicals that deplete the ozone layer (chlorofluorcarbons) and the results have been impressive. But, says Schweickart, the industries affected had substitutes to hand, and the protocol “should not lull us into thinking capitalism can accommodate all sensible environmental solutions.”

With climate change and carbon emissions it has been a very different story. There are cleaner ways of generating energy than burning oil and cleaner way of transporting people than using cars, says Schweickart. “But it is hard to envisage the transition to these cleaner modes that preserves the status and income of these giant industries,” he says.

But the problem goes deeper than corporate resistance, he argues. Phasing out chlorofluorcarbons did not affect consumption habits. “A transition away from carbon-based energy almost certainly would”.

The consequence of the conflict between environmental sanity and profit has been that many capitalist countries – most notably the US – have been unable to change course to ameliorate climate change. Not only this, a political culture has developed that denies the existence of climate change even when its effects become harder and harder to ignore.

This seemingly intractable problem is intimately related to the fake democracy examined in section two. In a 2011 report, the head of Greenpeace International, Kumi Naidoo, said that governments don’t take action on climate change because they have “captured” by corporations responsible for it.

“These polluting corporations often exert their influence behind the scenes,” the report said, “employing a variety of techniques, including using trade associations and think tanks as front groups; confusing the public through climate denial or advertising campaigns; making corporate political donations; as well as making use of the "revolving door" between public servants and carbon-intensive corporations.”

Finally, what of the prospect that dysfunctional capitalism, an economic system that produces low or no growth, may, in an unintended way, be beneficial to the environment? Less destructive than a healthy capitalism that achieves growth of 3 or 4% a year. In 2009, because of the dramatic drop in economic activity, carbon emissions fell for only the fourth time in 50 years.

Less destructive, perhaps, but not less destructive enough. What western capitalist countries need, for ecological sustainability, is de-growth, not spluttering growth or GDP flat-lining. They need to reduce their consumption. And while growth proves elusive, politicians obsess about its resuscitation. Thus, environmental considerations lose any priority they possessed.

But equally significant is that a dysfunctional capitalism not sustainable. It was the end of economic growth in the 1980s and economic stagnation that doomed Soviet Communism. “If rich countries cease to grow,” writes Schweickart, “their own economies will implode – so will the economies of poor countries, increasing the level of poverty, increasing the level of environmental degradation that poverty entails, and decreasing the amount of funds available for environment damage control.”

Enough already

I realise this is enough for one post. In part 2.2, I will consider three other basic features of capitalism: Unemployment, overwork and instability.

In 1930, a very famous economist predicted that, in 100 years, inhabitants the US and Europe would work three hour days and fifteen hour weeks. Their main preoccupation would be how to occupy their abundant free time.

He could not have been more wrong.