"I think the Alda model can easily be taken up pretty much anywhere" Alda, Iceland, interview. Part Two

In the second part of the interview with Hjalti Hrafn Hafthorsson of Alda, we discuss the post-crash situation in Iceland, Alda’s plans for the future and how present society might change.

I suppose the story that’s emerged from Iceland since the crash of 2008 is that the state didn’t bail-out insolvent banks because it didn’t have the money, and as result the Icelandic economy is recovering and the depredations of austerity have been avoided. Is that an accurate summary or does it miss something?

The three big banks in Iceland were nationalized during the crash. Two of them were almost immediately given over to stakeholders; no-one seems to know who owns them today. There are plans to re-privatise the third one. The government took on a lot of debt but the bankers weren’t bailed out, at least not the high profile Icelandic bankers. Like I said, no-one seems to know who owns these banks today. There were considerable austerity measures, the recession has been felt by everyone. The government claims that the economy is recovering but since there have been no structural reforms in the economic model we are working in all that really means is that the rich are again getting richer and the rest of us must wait for the money to trickle down.   

There was a large-scale constitutional reform process in Iceland in 2012. Could you say a bit about that process and what Alda’s input was?

An elected committee of 25 individuals was given mandate to write a new constitution. The election was ruled to be illegal because of a technicality but the parliament chose to form the comity anyways. Alda turned in very detailed suggestions for constitutional reforms but it was very difficult to get feedback on whether they were even read by the committee. None of them made it into the constitution bill in any recognizable form. The new constitution bill is in many ways progressive but it is being opposed by some very powerful interest groups, namely the fishing industry, and now it seems likely that it will be held up in the parliament until elections come this spring. Constitution changes need to be accepted by two parliaments so if the bill isn’t voted on before elections we can forget about any constitution reforms for at least four more years, probably just altogether. 

Alda wants a welfare system that maintains the foundations of civil society, offering equal access to education, health-care and a pension. What, in practice, does this involve?

Pretty much what it involves now: people and companies paying taxes which are put to use running the infrastructure of a healthy society. Alda has a topic group working on reforming the education system in very fundamental ways and some of the versions of unconditional basic income we have talked about require comprehensive revision of the welfare system.

What advice would you give to people in other countries struggling against endless corporate bail-outs, government-imposed austerity and economic stagnation or collapse? What should they do?

Start where you are. Use what you have. Do what you can. I think the Alda model is good for promoting social change and I think it can easily be taken up pretty much anywhere. 

What does the future hold for Alda? What are your immediate aims?

We have a lot of projects going on. Elections are coming up, so we are holding a randomly selected citizens assembly to set the tone for the political parties on what the people want to see happen during next term. We are working on getting a bill through parliament about laws for co-operatives. We are working with the labour unions to get a shorter work day on the agenda. We are working two schools on democratic education programmes. We are starting an eco-village in collaboration with other groups. We have more topic groups working than I can recall at the top of my head. In the future I hope we will do just what we have been doing, get people involved in finding solutions to problems and then agitate for those solutions. 

One recurring question is how current society will change. A large scale, oppositional movement seems indispensable. Do you have any ideas about what is necessary to build that movement?

It might take a large scale movement but I think change is better brought about by many smaller ones. There is a vast variety of groups and ideologies out there working on different fronts. That has great advantages as well as disadvantages. I am not sure that a unified big movement would be better, that kind of vision for change almost always involves heavy top down, authoritative organization. The spontaneous organization of smaller groups trying to influence and affect social change through diverse methods is more likely to lead to a happy society in the end.

There is also the question on how change should take form. Some believe that change cannot occur except in a sweeping revolution, others are content with any progress in the right direction. Both visions have merits and I think there must be a little bit of both. There is a lot of build-up to any revolution.

"We set out to provide radical but viable alternatives to the current social organization." Interview with a board member of the Icelandic group, Alda. Part One

The 2008 financial crisis was more extreme and far-reaching in Iceland than elsewhere. As a result, many new grassroots organisations and political parties were formed. One of them was Alda – The Association for Sustainability and Democracy. Alda’s goal is introduce new ideas about how to deepen democracy and re-think the nature of the economy into public debate. What follows is the first of a two-part interview with Hjalti Hrafn Hafthorsson, an elected member of Alda’s managing board. In this part, we discuss economic democracy, a shortened work-day and the concept of randomly selected citizen assemblies.

Why and when was Alda formed and what are its aims?

Alda was formed in 2009. This is in post-bank collapse Iceland, and in some ways Alda was formed as a response to the social awakening that happened after the bank collapse and the demands for political and economic reforms. There were very loud voices in Icelandic society that were critical of the whole political and economic infrastructure but very few proposed any changes. We set out to provide radical but viable alternatives to the current social organization.

Alda is an association for sustainability and democracy. At the founding of Alda its aims were to promote an organization of society that empowers individuals and is sustainable in the long run. Environmental issues and democracy are still our main themes but we have, in the past three years, expanded to dealing with a whole range of other issues. Asylum seekers, shorter work day, gender issues, for example.

The reason for this expansion lies in how Alda is organized and how that organization unexpectedly began to change how Alda could function. Being believers in direct and participatory democracy we decided at the start that all Alda meetings should be open and anyone attending a meeting would have the right to speak and to vote on any statement put forth by the meeting. The first meetings we held dealt with new ideas - like economic democracy - and how they might work in Iceland. It turned out that by holding open meetings to brainstorm about political subjects was a very good idea.

Now Alda functions very much as an open think-tank lobby group. Anyone who proposes an issue in a general meeting can start a topic group. Topic groups discuss the problem or idea at hand and come up with proposals for solutions. A general meeting then accepts the proposal as an official statement of Alda. This process we go through gives statements or proposals form Alda greater legitimacy than for example an individual writing the same thing. There is power in numbers and an association of many people coming up with ideas in an open, accessible, transparent process is something that is more difficult to ignore than an individual. 

How big is Alda?     

I don’t have the member count but last time I heard we had around 400 registered members. I’d say there are about 50 who are actively participating in meetings.

What intellectual inspirations do you draw on?

I can honestly say that there are members of Alda reading anything from Marx to Friedman and everything in between. After Capitalism by David Schweickhart and Envisioning Real Utopias by Erik Olin Wright were two books that really inspired some of us to try to find and implement alternative social, political, and economic ideas. Those two books were very much discussed within Alda and have been read by many members. Personally I have drawn much from political philosophers like Hannah Arendt, Rawls, Habermas, Chomsky, Beauvoir, Foucault, Marx etc.

One of Alda’s core beliefs is that the economy should be democratised – corporations and companies should be governed by their employees of the basis of one person one vote. How would this new economic system be organised and what difference would it make?

Not just governed by employees but collectively owned by employees as well. We are essentially arguing for an economy of workers co-operatives rather than a capitalist economy. There are many issues in this picture that aren’t clear and there isn’t necessarily any one answer to the questions that arise. I don’t believe that an economic system can really be effectively organized from above so many of the issues in regard to organization would simply have to evolve as the system emerged. In Alda, we have focused more on finding ways to help co-operatives form and help capitalist companies reform into co-operatives.

The difference is of course that we wouldn’t have capitalism anymore. Wealth would be more equally distributed, workers would have greater empowerment over crucial aspects of their lives, companies would have stronger ties into communities and emphasis might shift from pure profit to more substantial things.  

Economic democracy, under your vision, would still be a market economy. Is that true?

Yes, democratic companies would produce commodities that are bought and sold on a regulated free market. Democratic companies fail if there is no demand for their commodities and new companies are started when new innovations appear or demand shifts. A democratic economy thus has the flexibility and drive towards innovation that a capitalist economy has. There is however a strong consensus within Alda that the market should be regulated. Trading commodities is fine, but we would see an end to derivative trading and finance markets and so on. Shares in companies could, for example, not be traded. The only way to own a share is to work in that company.

But you argue that competition would no longer result in monopoly under economic democracy. Why is this?

That is one reason to regulate markets to a degree. One might also speculate that given the different social dynamic of democratic companies there would be less drive to form monopolies. Companies are today legally obligated to generate profit for shareholders and this creates a strong drive towards monopolies. Most people with a day job are more concerned with simply living a comfortable life - getting decent wages is one thing and profit at all costs is quite another. I tend to believe that if working people were voting on some of the decisions made by corporate executives today many of those decisions would be overruled because people in general have values that aren’t measured in dollars or pounds.

“Economic Democracy” has been criticised from the Left on the grounds all citizens have an interest in what enterprises do, the amount of investment they receive, their prices and their treatment of their workers, not just the current work-force. And the voices of citizens in general, under economic democracy, have no way to be heard. Do you think this is a valid objection?

Citizens in general have very limited means of being heard in the capitalist economy as it is. At least economic democracy empowers those people most affected by a company, its employees, to participate in decisions regarding their livelihood. For citizens in general to have influence over companies would require a very top down authoritative approach to the economy which I do not think would be beneficial and in the end not really conducive to the freedom, autonomy and well-being of anyone. 

Alda also believes in the achievement of “full employment”. Do you think, given technological advance and that many current jobs under present-day capitalism are ‘socially useless’ that full employment is realisable in a different economic set-up? What do you think of the idea of a basic income, payable unconditionally to everybody?

I think full employment may be achievable but it would require a shift from capitalist economy where the price of labour is driven down by having a certain degree of unemployment. A capitalist economy therefore always stabilizes at a certain percentage of unemployment. Most models for sustainable economy would avoid this. I don’t think, however, that work should necessarily be as big a part of our lives as it currently is. One of the most active topic groups in Alda is a group dealing with shortening the work day. There is also a topic group working on unconditional basic income proposals. Though Alda has not formally adopted suggestions for unconditional basic income I think I can safely say that we are in favour of it.

In politics, Alda promotes the concept of randomly selected citizen assemblies. I think you have argued part of the Icelandic Parliament should be reserved for randomly selected citizens. How would random selection work and what advantages does it have over conventional political parties and elected representatives?

A randomly selected group represents a cross section of a population. Studies show that randomly selected representatives are more likely to consider themselves to represent the interests of the whole population rather than the interests of a political party. It is also a way of getting individuals in minority groups involved in the political process, individuals who might otherwise not have stepped up. It could be used to equalize racial or gender ratios within a democratic assembly. I certainly think that it would shake up the very entrenched and corrupt party politics in Iceland if a third of the MPs were randomly selected. Also, random selection is simply a very incorruptible process, unlike elections which are usually won with money.

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.