In What May We Hope?

By David Schweickart

The philosopher Immanuel Kant proposed three questions as constitutive of the philosophical enterprise: What can we know? How should we act? In what may we hope? As a philosopher long interested in economic issues, let me offer some thoughts on these questions as they apply to our contemporary economic situation: What do we know? In what may we hope? What should we do? That is to say, I want to talk briefly about the big picture: about capitalism and about socialism.

We call ourselves "democratic socialists," but we don't say much about the socialist part anymore. This is understandable. It's one of the consequences of the collapse of the Soviet Union more than a decade ago. It's a paradoxical consequence, in a sense, since DSA had never been enamored of the Soviet Union and had always taken pains to dissociate itself from their kind of "socialism." However, the existence of such self-styled socialist regimes meant that socialism had to be taken seriously by everyone. For better or for worse, capitalism was not the only game in town. Now, I'm afraid, a great many on the Left suspect that it is. Many of us have come to believe that there is no viable alternative to capitalism and so our project is to humanize the beast, not transform it into something qualitatively different. That is to say, we are social democrats, not democratic socialists.

I'm not among "the many" on this issue. Don't get me wrong. I'm not opposed to social democracy. If we could establish here, and in

   

This article was originally published in New Ground 89. New Ground is published by Chicago Democratic Socialists of America. For more information, go to http://www.chicagodsa.org.

   

 
     

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much of the rest of the world, what Robert Heilbroner likes to call "a slightly imaginary Sweden," humanity would be vastly better off than it is today. The trouble is, we are not going get "a slightly imaginary Sweden" unless we aim for something more than that.

We should remember that social democracy came into being precisely because the ruling classes of the major capitalist countries feared something far worse. Capitalism itself was under attack and was vulnerable. Major concessions had to be made to keep working people from switching their allegiance to that dreaded antithesis of capitalism, Godless Communism. These concessions had two important consequences. They greatly improved the lives of large numbers of ordinary people and they stabilized the system, to the point that the threat of another Great Depression faded from view.

However, as we know, the social democratic project ran into serious economic difficulties from the mid-70s on, and has been subject to a furious, and largely successful capitalist counterattack, the famous "neoliberal" offensive, which has succeeded in presenting itself as the only rational alternative in the new "Fast World" of high-tech, corporate globalization.

I want to go on record as asserting, in the strongest possible terms, that the pernicious premise that there is no alternative to capitalism is false. I think it crucial the progressives understand this. If we don't, we are fighting with one hand tied behind our back.

It particularly important to understand this now, for there's a big story out there that is only beginning to be told: namely, the neoliberal project itself is in serious trouble. The communist project may be down for the count, and social democracy is on the ropes, but so too is neoliberalism. It remains hegemonic, but it has run out of energy. Policy makers still push for privatization, deregulation, labor-market "flexibility," unrestrained capital mobility and free trade, but fewer and fewer people believe that these things will make the world a better place in which to live: a more secure, more egalitarian, more prosperous place. (Which is one of the reasons the Bushies are so eager to keep the war-on-terrorism pot bubbling: to keep people's minds off emptiness of their

 
     

 
     

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economic nostrums.)

The fact is, neoliberalism (like social democracy and communism) has been tried, and it has failed. We need something different. We need something new.

Let me be very clear: there is an alternative to capitalism, one that would eliminate or at least mitigate capitalism's most serious flaws. We can start grasping the contours of this alternative when we are clear about the structural deficiencies of the present order: the deficiencies that give rise to our current order of savage inequality, scandalous poverty locally and globally, unemployment coexisting with overwork, economic instability and the relentless assault on our natural environment.

First let me say what the root causes of these phenomena are not. As socialists, we need to rethink a number of our treasured preconceptions. The problem is:

  • Not markets per se,
  • Not competition per se,
  • Not hierarchical organization per se,
  • Not economic inequality per se.

The fundamental problem resides in two enormous democratic deficits:

  • We lack democratic control over our places of work. Our labor is just another commodity, to be bought and sold, hired or fired. Workplaces should be democratic communities, not quasi-feudal fiefdoms.

This does not mean that hierarchies should be abolished or differential economic incentives. Nor does it mean that competition should be abolished. Democratic enterprises should compete with other democratic enterprises. This keeps them efficient and innovative. They must be structured internally to allow for individual and group incentives for

 
     

 
     

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effective performance: seniority and merit raises, adequate managerial autonomy. But ultimate authority should rest with the workforce: one person / one vote. Managers must be ultimately accountable to their workers, not to absentee stockholders.

It's a striking fact of enormous importance the democratic workplaces work: better, in general than authoritarian alternatives. That's what a large empirical literature strongly suggests. What is true in politics is also true in economics: democracy works, not perfectly by any means, but better than non-democratic alternatives: production is efficient, commitment to the enterprise is stronger, workers tend to be more diligent, since each person's income is directly tied to the success of the company, employment is more secure.

  • We lack democratic control over our society's social surplus: the private sector profits generated each year that are either consumed by those legally entitled to them (i.e. the owners of these enterprises), or reinvested back in the economy.

As it turns out, the real problem with capitalism is not the extravagant consumption of our extravagantly rich, but the allocation of that portion of the social surplus not consumed. That is to say, the allocation of investment. This allocation determines the future of our economy: which regions will grow and which will wither, which sectors will thrive and which will be starved, how much of the social surplus will be reinvested at home and how much will go abroad in search of more lucrative opportunities there.

Now, as a matter of fact, it is exceedingly difficult to control the allocation of investment funds when those funds are private. How can a government tell a person where to invest his/her money? By what right can a government prohibit a person from investing abroad, if he/she so desires? And even if a government should assert such rights, how could it ever enforce them effectively?

It follows that an effective democratization of capital entails breaking the connection between private savings and investment. We should not rely on private savings for investment. These funds should be

 
     

 
     

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publicly, not privately generated.

There's a simple way to do this that fits nicely with workplace democracy. Simply impose a capital assets tax on each democratic enterprise: a flat rate tax that can be regarded as a "corporate property tax," or, alternatively, as a "leasing fee" that each enterprise pays to the state for the capital under its control.

All of these revenues should be reinvested in the economy. Since they are public funds, they should be allocated via public banks, using criteria in addition to (but not other than) profitability considerations. They should, for example, be allocated regions the way public goods are allocated (usually on a per capita basis), thus allowing for harmonious regional development. They should also be targeted to employment creation: venture capital to people wanting to start up new businesses or to existing enterprises willing to expand production by taking on new workers.

Note: Although we want the "commanding heights" of the new economy democratized, we should allow for a capitalist sector of small businesses and even larger ones, so long as the owners are actively engaged in the enterprise. As socialists we are not hostile to small businesses nor to entrepreneurial capitalists in general. What we want is more democracy in those areas where it is most appropriate: more democratic control over conditions of work and more democratic control over capital allocation

What we want, in short, is Economic Democracy, the natural successor to Social Democracy, which was itself the successor to the long and difficult struggle for Political Democracy. Think of this sequence: Political Democracy f Social Democracy f Economic Democracy. In each case the successor is a development from the former, not an alternative to the former. In each case the hard-fought gains of the past are incorporated into a new and better system.

One of the strengths of neoliberalism as a ideology is that it offered both a comprehensive vision, and a reform agenda. Proponents imagine an ideal world of perfectly competitive markets, the invisible hand

 
     

 
     

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regulating everything, then they push for the reforms that move the economy in that direction: privatization, deregulation, lowering of barriers to trade and capital, etc. Like neoliberalism, Economic Democracy also offers a comprehensive vision, and a (revolutionary) reform agenda.

The vision can be summed up in our slogans: democratize labor; democratize capital. We imagine a world wherein all enterprises are democratically run, and all investment funds publicly generated and democratically allocated. We are willing to tolerate, even endorse, a modification of this ideal to allow for capitalist sector suitably disciplined, just as neoliberals are willing to tolerate, even endorse, certain forms of social security, poverty alleviation, environmental regulation and the like, so long as they don't threaten the overarching vision.

Our ideal suggests a reform agenda, aimed at moving us in the direction of Economic Demcracy. Among these reforms would be demands for:

  • Employee representation on corporate boards, and worker councils within corporations.
  • Technical and financial support for worker buyouts of existing enterprises.
  • A capital assets tax, the proceeds of which to be used to finance new businesses or existing ones that will take on more workers.
  • A graduated tax on dividend and interest income, to reflect the fact that we want to rely less and less on private savings for investment, more and more on the capital assets tax.
  • A "Tobin tax" on international financial transactions to slow down the flow of hot money in and out of the country. (Notice that in our ideal world, where the capital assets tax has replaced private savings as the source of investment funding, the "hot money" problem disappears, since public money stays at home.)

Let me add two others not as obviously connected to our slogans,

 
     

 
     

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but in fact related and important:

  • Full employment, with the government serving as employer of last resort.

I don't think capitalism is compatible with full employment, since full employment undercuts capital's fundamental disciplinary stick, but various liberal economists disagree. In any event, full employment is important to a democratic, labor-empowered economy. We should push for that reform.

  • Fair trade, not free trade. Specifically, socialist protectionism.

Economic Democracy embraces fair competition at home, but it blocks unhealthy competition. In particular, regions don't have to compete for capital, thus tempting them to keep environmental restrictions low and wages "flexible." Similarly, Economic Democracy is happy to endorse free trade among countries with comparable labor costs and environmental regulations. But it wants to block race-to-the-bottom wage competition and environmental (de)regulation. The basic idea is to impose tariffs on goods from poor countries so as to bring the price of an import up to what it would be if workers in the exporting country were paid wages reflective of their productivity and the industries subject to environmental regulations comparable to our own. Then (this is the socialist part of socialist protectionism) these tariffs would be rebated to the exporting country. In effect, poor countries could export less, but would receive higher prices for their exports. Thus they could devote more of their resources to the needs of their own populace, and fewer to satisfying rich country consumers.

Okay, I've said enough: a fifteen minute synopsis of quite a few years of thinking and research.

 

Editor's Note: David Schweickart is Professor of Philosophy at Loyola University in Chicago, and the author of several books, most notably Against Capitalism and more recently After Capitalism. This article was presented at the Midwest DSA Conference, July, 2003 in Chicago.

 
     

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