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PAN Discussion Group TUESDAY March 27th 2007
Subject: Alternatives to Capitalism
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Location: Athenaum Theater -ish RSVP for details
Time: 7pm to 10pm - ish
Bring drinks and snacks to share
Lots of articles came in this month so I had to do some liberal hacking to get things down to size. Lots of stuff was about the historical context, why Capitalism is now king and why the others fell to the wayside, but there was also a strong theme of what is wrong with capitalism and the nature of the “Third Way”
General:
The articles are the basis for the discussion and reading them helps give us some common ground and focus for the discussion, especially where we would otherwise be ignorant of the issues. The discussions are not intended as debates or arguments, rather they should be a chance to explore ideas and issues in a constructive forum. Feel free to bring along other stuff you've read on this, related subjects or on topics the group might be interested in for future meetings.
GROUND RULES:
* Temper the urge to speak with the discipline to listen and leave space for others
* Balance the desire to teach with a passion to learn
* Hear what is said and listen for what is meant
* Marry your certainties with others' possibilities
* Reserve judgment until you can claim the understanding we seek
Any problems let me know...
847-963-1254
Colin
tysoe2@yahoo.com
The Articles:
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First up a quick and easy review of capitalism
http://www.commondreams.org/views07/0305-27.htm
Capitalism 104 by Larry Beinhart
In Capitalism 101 we learned that capitalism was good. It beats communism, any day, hands down, out and out. It also beats socialism which is soft core communism and leads to degeneracy. Really, it does. We all know that profit motivates people to work hard. And fear of becoming destitute is the most efficient of whips. Whereas in a planned economy, which provides security, workers lose their motivation, and their fear and just sit around and jerk off.It also beats all the other isms. Mercantilism (whatever that was),
fascism and feudalism, to name a few.
In Capitalism 102 we learned that capitalism easily gives way to excesses.It can be manipulated by monopolies and cartels. Fraud and deception can run wild. So can desperate hope and hopeless desperation. Capitalists can hire armies, police forces, goons and thugs to increase their profits. Fraud and deceit may run wild. Capitalists will sell shoddy, poisonous, destructive and even murderous products. It goes from booms to busts. And some of those busts – also called panics, recessions and depressions – can be so severe that they upset the body politic and cause society to run to one of the other isms – communism and fascism mostly – run by dictators and strong men.
A few relatively bright people came up with the idea of keeping capitalism while trying to get rid of the excesses!That meant regulations.Markets were regulated. Products were checked. Monopolies were restricted. Cartels and collusion among businesses were forbidden. It meant government insurance. For both people and businesses. People
in America got unemployment insurance, workman’s compensation, welfare and
social security. Meantime, bank deposits were insured and so were pensions.
It meant government support of unions.It also meant progressive taxation.All this was quite successful.
In Capitalism 103 we learned that capitalism is sacred.A lot of people who only took Capitalism 101 already thought that.Although the failures of capitalism happened before their eyes – or in recent history – and the success of New Deal reforms and mixed economies of Europe, Japan and other Asian nations were present in their growing wealth and security, a fair number of people were convinced that unrestricted capitalism would have done even better and if those restrictions and regulations and supports and government insurance were removed, things would get better still.
The reason they believed that was that Adam Smith, a great though loquacious philosopher and economist, came up with a metaphor about an invisible hand. People pursuing their own individual gain would also often create other good things – the wealth of nations (to steal his title) – without even thinking about it, as if by an invisible hand.
As we all know, there’s only one other person who guides all things to the greatest good with an invisible hand.Nobody was around to say to those folks, “It’s just a metaphor! Note the ‘as if by.’ It’s not an actual invisible hand that belongs to an invisible being
who watches over us all and sees every sparrow that falls and makes sure that it falls into someone’s cooking pot. It’s not Him.”So while the mixed economy was cooking along a group of economists starting preaching neo-free market economics. Led by Milton Freidman, who won the Nobel Prize in economics and is considered to be the most influential economist in (at least) the 2nd half of the 20th Century.
Rich people and big business loved Friedman and the Chicago school of economics. Money flowed into think tanks and universities that supported his ideas. Pro-free market economists and MBAs were far more likely to be hired by corporations than people who thought that the common good was important. When banana republics and other Third World nations fell into bankruptcy, the World Bank made them adopt Chicago school policies in order to get loans. It was the economics that was going to come into its fullest
flower in post-Saddam Iraq. It came to completely dominate all economic thinking in the US. It came to dominate our public and political dialogue, almost to the exclusion of
all other approaches. Free markets became a trinity with patriotism and religion. Generally, where you find fundamentalist Christianity, you will find equally fervent
beliefs in country and capitalism, with the same sort of excesses.
Capitalism 104 is a new course. It begins today.It takes off from what we have learned in our previous courses. Capitalism is good. History demonstrates that clearly and
unequivocally. But it is not an invisible hand (attached to an invisible God) that makes it
great. It is Random Stupidity Theory. Everyone is stupid sometimes. Some people are stupid a lot of the time and a few, all the time. If one person is in charge of everything, then his or her stupidity affects everything. That’s the seed of the failure of planned economies. But in a capitalist society – at it’s best – if someone has a stupid idea
and convinces some people to invest in it, only he and his investors lose. It’s also important to remember the random part, because we are in a changing world, and the ideas that won last year may turn out to be stupid for this year’s world.
Meantime, some random number of ideas will be good ones. If they are well presented and well run and attract enough start-up capital, they may well succeed.
To Be Continued:
PART II – What Capitalism does well and what it does badly and why
PART III – How Capitalism 103 economics can make lots of money out of a bad economy.
An ( edited –historical stuff ) article on the middle road alternative that most people seem to be looking towards…
Ethan B. Kapstein, "A Global Third Way Social Justice and the World Economy," World Policy Journal, Vol. XV, No. 4 (Winter 1998/99)
MAJOR EDIT
The end of the gold standard by Richard Nixon in August, 197 led to the collapse of the Bretton Woods system,capital becomes mobile, international finance grows, globalization etc ….
… All these developments placed finance at the epicenter of the world economy, and its interests trumped those of other societal groups, particularly immobile labor. With increasing capital mobility, governments found themselves in a potential "race to the bottom" against other nations in which they had to lower taxes and cut spending to attract investors and maintain economic confidence. The hegemony of international finance received a varnish of academic respectability under the guise of neoliberalism, which touted the benefits of free trade, free capital flows, and floating exchange rates.
Greener Pastures
Yet all was not well with this new world order. With mobile finance calling the economic policy tune, the postwar bargain of equitable growth between capital and labor began to founder. States had to reward capital holders, lest they flee to greener pastures. Under the administration of Ronald Reagan, taxes were slashed for the wealthiest Americans, with the promise that their gains would "trickle down" to the working stiff. Instead, income inequality began to increase sharply, as those who held financial assets grew immensely richer in comparison to those who lived on their wages.
In Western Europe, the effort to maintain a greater degree of income equality, or social cohesion as the French call it, was paid for with double-digit levels of unemployment. There, workers who kept their jobs earned relatively good wages, but companies simply stopped hiring new employees. The result has been a lost generation of youth, sacrificed on the altar of fiscal responsibility. European elites are asserting that the single currency, the euro, will mean a turning of the tide toward greater economic growth and job creation, and an end to financial instability. But as companies restructure and privatize in the face of the single market, it is likely that the job toll will only increase.
In both the old and new worlds, union membership has dropped precipitously. Both Ronald Reagan and his British contemporary Margaret Thatcher turned union bashing into an art form. Not surprisingly, the sorts of welfare state policies that labor had fought for since the end of the Second World War came under sharp attack. The Bretton Woods order, which coupled free multilateralism with social safety nets, now revealed a monstrous aspect: rather than a beatific visage of peace and prosperity, what workers faced was increasing import competition, higher taxes, lower wages, greater job insecurity, and fewer assistance programs.
For the developing countries, the new system has proved overwhelming. Lacking a well-developed financial sector and capable regulatory authorities, their banks have crashed in the face of global and domestic currency instability. Ever since the late 1970s they have been buffeted by successive waves of financial crises that, in the absence of social insurance of any kind, have left millions of working people destitute. In the postcommunist transition economies of Eastern Europe and the former Soviet Union, the coming of global capitalism has similarly meant rising poverty and unemployment. The plain fact is that these "emerging economies" never possessed the political institutions that provide the necessary foundation for successful market economies.
Liberalism--Too Much or Not Enough?
That is the present conundrum that has led to calls for reform of the international financial system from every corner of economic life. For conservatives, the underlying problem is not that there is too much liberalism but that there is not enough of it; in short, states still play too large a role in the world marketplace. Only with the complete removal of all barriers to the movement of capital, goods, and investment (note that labor is generally not included here) will the postwar dream of a peaceful and prosperous global economy be realized. As painful and disruptive as this liberalization process must be, they say, we have no choice but to press onward.
For liberals, the solution must, on the contrary, be found in a return to the activist state. Liberals believe that states have lost the will rather than the capacity to manage their interaction with the global economy, and that more restrictions, especially on capital flows, would be to society's benefit. Further, they argue, governments can reorient their spending so as to fully fund or even expand welfare state programs. In short, the state retains considerable room for maneuver.
Between these two perspectives is the "third way" of Tony Blair and Bill Clinton, who believe that since the globalization train cannot be stopped, governments should focus on reforming the welfare state, making it friendlier to holders of mobile capital. That means emphasizing such programs as "workfare," "upskilling," and "retraining," which will allegedly create a more productive labor force.
But this option is incomplete, for so long as capital can flee the welfare state and its tax policies, social safety nets will necessarily be pared back. In almost every country the tax burden on workers is growing, while that on capital is shrinking. What this means is that if we wish to create a third way, redressing the balance between mobile capital and immobile labor, it must be done on the basis of international cooperation, rather than by states acting on their own. If any lesson is clear from the successive waves of recent financial crises, it should be this one.
The Third Way
Reflecting the intellectual hegemony of economic reasoning, contemporary debates over public policy usually revolve around the steps that governments must take in order to increase the efficient use of scarce national resources, including capital and labor. From this it follows that markets must be liberalized, since that is the only way to achieve an efficient allocation. But the problem of increasing efficiency, as Harvard philosopher John Rawls taught us in A Theory of Justice (1971), represents only one societal concern among others. Equality and justice are of even greater consequence, and they must be taken into account by policymakers, since an economic system that is widely viewed as unjust cannot, should not, endure.
The starting point for this discussion of the third way draws on that insight and begins with the premise that the purpose of economic policy is to provide an environment in which every individual is able to realize his or her talents to the fullest extent possible, compatible with similar liberties for all other individuals. This proposition represents not just softhearted moral philosophy, but hardheaded economics as well.
The logic is simply this: to the extent that all individuals have the opportunity to expand their horizons and increase their productivity--for example, through better access to education and health care--societies will generate greater wealth and enjoy domestic peace in return. And when individuals enjoy some security with respect to their old age and in the event of hard times, they are more likely to provide political support for the economic system, since it is in their long-run interest to do so. That, in a nutshell, is the underlying philosophy of the democratic welfare state.
Now as we think about third-way strategies, let us imagine the existence of a would-be reformer who wishes to promote a more equitable economy. This reformer will naturally wish to launch policies and programs on behalf of the least-advantaged citizens. The expansion of educational opportunities and retraining facilities, and the provision of income transfers, health care, and social safety nets, would be typical of such an approach.
Taxes will be needed to pay for these social goods. But in a world of mobile capital, potential investors will likely quit this reformer's regime. With government revenues falling, the reformer will face increasing budgetary pressures, and ultimately the IMF may be called in to provide emergency assistance. In return for a loan, it will demand cuts in public spending, increasing taxation of labor (which will often take the regressive form of, say, higher sales taxes), and a speeding of the process of economic liberalization. As a result, programs for the most vulnerable will likely get pared back. In a word, economic policy becomes perverse.
Our Collective Plight
This single, hypothetical case is suggestive of our collective plight. In the current financial environment, every country is feeling similar pressures in varying degrees. The welfare states of the industrial world are shrinking, while in the developing world they never had the chance to emerge. Leaders are flailing at solutions in the interest of domestic peace and prosperity, yet their record is not promising. Economic instability, income inequality, unemployment, and poverty are becoming increasingly associated with globalization. Even in the United States, with its enviable record of economic growth and job creation, the number of working poor, who usually lack health or pension benefits of any kind, is increasing.
To be sure, many economic problems are to be found within societies themselves. Corruption, overregulation, and discrimination are among the maladies that can only impoverish a country. At the same time, welfare policies that reward slackers must eventually undermine broad public support for social safety nets. The obvious point here is that globalization cannot be blamed for all of a nation's ills; to the contrary, it often penalizes bad policymaking.
But this should not blind us to the fundamental conflict that so troubles the entire international system, namely that between mobile capital and the welfare state. Those who seek to end the conflict must act quickly, for the state itself is being captured. Increasingly, governments are becoming instruments for capital holders, rather than institutions that are broadly representative of domestic politics. Reining in mobile capital and putting it to work on behalf of a just economic policy must be at the heart of any third-way strategy, and this can only be done on a multilateral basis. National governments, acting unilaterally, will inevitably fall short.
In contemplating what must be done, it is tempting to turn back the clock and call for a return to the original Bretton Woods system. Some prominent economists and politicians would go back even further, to a renewed gold standard. This nostalgia for international stability is understandable, but in that past we can find no future. No country today dominates the world economy, as did Great Britain in the nineteenth century or the United States after the Second World War, moments when the entire wheel of globalization revolved around their hegemonic leadership. The orders they created reflected the particular circumstances of those times, and the one we design now must do the same.
A progressive third-way strategy must focus on two, interrelated problems: the renegade and destabilizing nature of mobile capital and the erosion of social safety nets. This suggests the need for two, interrelated solutions. First, mobile capital must pay its fair share for the goods provided by governments. Second, a substantial share of those revenues must be devoted to social policy, which should be at the core rather than the periphery of our economic concerns. Taken together, these two measures will mean a strengthening of the two Bretton Woods institutions, the International Monetary Fund and the World Bank.
If mobile capital can escape taxation at the national level, it should be fenced in by multilateral action. This means that political leaders must contemplate the coordination of tax policy, an idea that is already being floated by some international bureaucrats. IMF official Vito Tanzi is perhaps the most prominent advocate of this idea, and he asserts that greater cooperation represents the only way for states to avoid a race to the bottom in terms of capital taxation. The purpose of such efforts to coordinate tax policy, which should be based in the IMF, would be to reach agreement on what constitutes an acceptable, minimal level of taxation, of course allowing states that are so able to extract even more at the national level. By way of analogy, the federal government of the United States has its own corporate tax rate, but that does not prevent the individual states from establishing local revenue codes. An international agreement on taxation would bring a halt to the damaging competition among states that has enabled mobile capital to avoid paying its share of social dues.
It may be objected that countries should have the right to impose zero tax rates on mobile capital if they wish, and that tax policy lies squarely within the domestic purview. The problem here is that tax policies have spillover effects on other countries and on the global economy as a whole. In essence, these states are cheating on the system, just like countries with lax pollution codes. To the extent that social safety nets contribute to global political and economic stability, every economic agent, no matter where located, should contribute to them.
Beyond establishing some minimum tax rate, multilateral tax cooperation would have other purposes as well. It would certainly provide a forum for studying the feasibility of taxing speculative, cross-border financial transactions when they occur, as proposed by the Nobel prize-winning economist James Tobin. The idea underlying this suggestion is that a small tax on such transactions would have the practical effect of reducing short-term capital flows, since trading profits would be cut by tax payments. Chile, where investors must pay a heavy penalty tax if they withdraw their funds from the country after less than one year, provides a possible model. Overall, the international system has an interest in creating a tax regime that motivates capital to make long-term investments in the real economy, rather than one that rewards speculators for destabilizing currency markets.
Why not attack the problem of capital mobility directly and impose capital controls? This might make sense for some countries at particular moments in their development, but as a general rule it would do considerable harm to the world economy. It would freeze a good share of trade and investment flows, lowering growth rates and creating new sources of conflict. It would also offer up new opportunities for corruption, as officials make markets in offshore vehicles that enable capital holders to export their savings; Russia provides a good example of all these ills. Again we should recall that our objective is to harness mobile capital rather than destroy it, and the best way to do that is through taxation.
It would be fitting for the European Union to take the leading role in calling for a conference to consider this proposal for greater tax cooperation. After all, as the single market proceeds, the EU itself will inevitably face the problem of establishing some acceptable minimum tax level on mobile capital within its own domain. It should invite other countries to enter these discussions, forming the basis for a broad multi-lateral agreement.
On one level it may seem strange that no major world figure has yet called for an international tax conference, since it seems to be such an obvious and necessary way of increasing government revenues. But on another level we cannot be surprised, for it obviously goes against the interests of the capital holders who are currently so prominent in economic policy circles. Instead, they have naturally focused on the need for domestic reforms, which inevitably places the brunt of the adjustment burden on those with the least political voice, namely the poor.
Racing to the Top
An international tax agreement, however, represents but one cornerstone of a multilateral third-way strategy. Since the purpose of tax cooperation is to increase the revenues available for social safety nets, a second needs to be built around social policy. And while it is neither feasible nor desirable to determine an international minimum wage or levels of unemployment insurance or health care, there is a more effective way of attacking the problem globally.
That would be for some international organization, say the World Bank, to request each member state to define what constitutes an acceptable social minimum within its borders. The bank would then perform an annual social policy review, in the same way that the IMF surveys macroeconomic performance, focusing on gaps between stated policies and social reality. This would have the useful effect of spurring a "race to the top" among countries, since the reputation effects associated with having a poor social policy review can hardly be conducive to garnering fresh investment. Again, the American experience may provide some guidance here, in that states that have used revenues to improve schools, public safety, and the environment have tended to be more successful than those that have narrowly focused on cutting taxes.
These social policy reviews could also help identify priorities for foreign assistance; and indeed both the World Bank and the IMF should be tasked by their members to insure that safety nets are bolstered rather than slashed by official lending programs. Placing social welfare rather than macro-economic stability at the center of every reform package would provide a useful corrective to their current way of doing business, though this would entail significant reforms within these organizations, not just in the countries they are meant to serve. Again, the recent financial catastrophes in Indonesia and Russia remind us that the costs are borne by the most vulnerable citizens.
As we contemplate the third way, then, we see that our challenge is to join mobile capital to a broader social purpose. For a decade or more capital has ruled the roost, and it has arrogantly told us that states alone are responsible for their economic ills, with the cure being found in balanced budgets and low inflation. Current events have overwhelmed that prescription, and today we see that the world economy has again become a cruel affair for millions of working people.
If we are to pursue a third-way strategy, we must accept that far from being inimical to globalization, the welfare state is its necessary companion. That was the great insight of the postwar leaders, who recognized that without social peace there could be no prosperity. And while the machine they built has now become a museum piece, it remains a source of wonder and inspiration. It demonstrates that we can have a future that combines growth with justice, so long as we possess the political will to create it.
Of course not everyone is convinced by the Third Way or at least by how it is defined…
Liberalism After Socialism
Some have long wanted to blend socialism and liberalism in a "third way";
that idea now is in ruins. But the alternative to a socialist liberalism
need not be conservative. There is a liberalism that is serious, realistic,
and where necessary even radical
By Paul Starr Issue American Prospect 09.21.91
Over the past century, many reformers and critics in the West have believed that liberal democratic capitalism was evolving, inexorably and appropriately, toward a socialist, planned economy. Liberalism even in its modern form has seemed to them transitional and incomplete, outdated in its individualism, unsatisfying in its conception of the good life and the good society, inadequate to the demands of justice. Socialism would take civilization to a higher stage; it would fulfill ideals that liberalism professed but failed to honor, as well as ideals that liberalism failed even to profess.
Those who have taken this view have not necessarily been Marxists. Most have been devoted to movements of reform rather than revolution and sought an alternative system that they hoped would achieve the best of both worlds, preserving the political freedoms of liberal democracy while introducing the economic planning, public ownership, and economic equality of socialism. This is the synthesis that many European socialists and American progressives have held up as an ideal -- liberal democracy reconstructed into a benign and democratic socialism, a "third way" between communism and capitalism.
-- EDIT --
Today, this criticism of the limitations of capitalism continues -- as it should -- but the solution that so many had in mind has lost its plausibility. The socialist economic project, consisting fundamentally of national planning and extensive public ownership, has been thoroughly discredited as a means of economic growth. It has no better reputation as a means of reducing alienation and restoring community. The case for eco-socialism has suffered as well with the growing recognition that communist governments in the East have polluted on a far greater scale than have the capitalist countries of the West.
To the advocates of a third way, it seems a cruel irony and intellectual injustice that democratic socialism should lose its plausibility because of the bankruptcy of Soviet communism. But there are four good reasons why socialism even with a human face no longer looks appealing:
First, the sheer magnitude of the communist collapse has had a devastating impact on evaluations of the performance of command economies. It is now indisputable that communism impoverished the people who lived under it, and it is not clear how or why a more democratically planned socialist economy would do much better -- or that such a system is feasible at all.
Second, repeated efforts to reform communism from within, to make it both more responsive and more efficient, came to naught. Once a window of political light opened, those who lived under communism sought to escape altogether. If there is a third way, they have pretty much given up hope of discovering it.
Third, the record of socialism in Africa and Latin America has been equally disastrous. Socialism in the Third World is undergoing as severe a crisis of belief as communism in Eastern Europe and the Soviet Union. This shift reflects not only indigenous experiences, but also the withdrawal of Soviet support, the changing political winds from the West and from international agencies, and the example of East Asia. To be sure, the economic successes of East Asian capitalism are no vindication of laissez faire, but socialism was not their inspiration, either.
Finally, the Western European countries that have had Socialist and Labour parties in power have drifted progressively further away from a commitment to socialism. Soon after World War II, if not before, most Western socialists gave up the goal of replacing capitalism, and instead adopted programs that called for limited nationalization and the extension of welfare-state measures first introduced by earlier authoritarian, corporatist, and liberal governments. In recent years, however, Socialist parties have even given up nationalizing industry when in power and threatening to nationalize industry when out; indeed, some nominally Socialist governments have been actively privatizing public enterprises. Where firms have remained under public ownership, as in France, socialists have been operating them on a thoroughly commercial basis. Similarly, either the idea of a planned national economy has been abandoned or planning of limited scope has accommodated the basic contours of capitalism. Although European social democrats have Marxist grandparents on their family tree, they have largely outgrown not just Marxism, but socialism itself, and accepted -- wisely, I believe -- political ideals and social and economic institutions that have a more liberal character.
As a result, the synthesis of liberalism and socialism that once excited imaginations now seems almost drained of content. Much of what socialism once promised to bring to a synthesis, socialists with the experience of government no longer defend. Yet many who once dreamed of a third way are not ready to accept the economic framework of capitalism, much less capitalist civilization in the larger sense. They continue to hold out the idea of some sort of synthesis or a transcendent socialist alternative to liberalism, often now conceived as a more decentralized economy with a communitarian ethos.
This reluctance to let go of socialism, in the hope of finding some new, untried form in which it can still be defended as an ideal, is, I think, deeply mistaken. Liberals ought to continue striving to reform capitalism -- to eradicate poverty, to overcome racism, to protect the integrity of the environment, in short to achieve a variety of humane and democratic objectives. But it is time, I will argue, to give up on the idea of a grand synthesis or a third way, if by that is meant some system mid-way between capitalism and socialism or an alternative altogether "beyond" them. Reform capitalism, yes; replace it, no -- just as in the East many have concluded: Reform communism, no; replace it, yes.
There is, moreover, a need for clarity about intellectual premises as well as ultimate political objectives. In opposing evils like racism and poverty, reformers can find the grounds of justification and persuasion in liberal principles. They have no philosophical need to appeal to the socialist tradition, and in the United States no conceivable political rationale for doing so. Indeed, instead of softening or erasing the distinction between liberalism and socialism, as many have long hoped to do, liberals should be redrawing that distinction in their own minds and in public perception. Whatever the party of reform once may have had to learn from the ideas of socialism, it has already absorbed; indeed, some of what it learned, it ought to unlearn. Those who have believed socialism to be a higher stage of liberalism now need to take to heart, not the great vision of socialist theory, but the bitter disappointment of the practice. They need not conclude, however, that the only alternative to a socialist liberalism is a conservative liberalism. There is a liberalism that is serious, realistic, and where necessary even radical about liberal principles. That tradition is waiting for them to invoke and reclaim.
Points of Departure
Before making this argument, I need the help of a few definitions. Perhaps
nothing makes it more difficult to talk about liberalism and socialism than
the likelihood that different people hear different things in those words.
This is a problem, not of loose language, but of a messy world and complex
history. A great variety of thinkers, movements, and parties have called
themselves liberal and socialist. In different parts of the world, they have
evolved in distinctive, even contradictory directions. Since there is no way
to establish who holds proper title to the names, the best that we can do is
to make clear what each of us means by them.
By "socialist" I mean a party or program that gives highest priority to equality of economic condition and calls for replacing private ownership with public ownership in the sphere of production and substituting some form of public control for the market as the principal mechanism for allocating investment. Socialist programs vary, of course, in how comprehensive a transformation they envision. At the extreme, some have called for, or even tried, eliminating a money economy and private property in all its forms, while others have sought to nationalize only the "commanding heights" of industry.
Let us leave aside the pure communist project of eradicating private property. Socialism in the twentieth century has been mainly about socializing industrial production and investment. The theory has been that these measures, supplemented by social insurance, socialist education, and other influences, would eliminate the irrationalities and inequities of capitalism, producing a world of plenty, an equal and just distribution of income and life chances, greater social harmony, and a transformation of the human personality, away from an alienated "possessive individualism" toward a more cooperative spirit.
Some prefer to define socialism solely in terms of one or another of these aspirations, particularly equality. I believe, however, socialism ought to be defined in part by the measures that socialists have characteristically called for, rather than solely by the aims that they have hoped to achieve. The relation between means and results is a hypothesis, and history has shown it to be a doubtful one. Socialist aspirations, particularly for a classless society, are distinctive, but socialism consists of more than aspirations. To define socialism now only by its aspirations, rather than its actual practice, is not just a theoretical choice; it is an evasion of the burden of socialist experience.
As the concept of socialism is deeply contested, so, too, is the concept of liberalism. Indeed, the problem of definition is, if anything, more difficult. The key premises of socialism are economic; socialism cannot be separated from economics. But liberalism can be defined on either an economic or political basis, and a major question arises as to which has priority. Here a distinction is helpful. Economic liberalism identifies private property and reliance upon the market as the defining elements of liberalism; in this view, liberalism is joined indissolubly with capitalism and opposed to socialism. Political liberalism, on the other hand, maintains that what is essential to liberalism is the constitutional limitation of power and guarantee of individual civil and political rights.
In speaking of liberalism, I generally have in mind the political rather than the economic conception of liberalism. This choice agrees with current usage in the United States, where economic liberalism is identified with political conservativism. Political liberalism is also the relevant conception in a discussion of any potential synthesis or reconciliation between liberalism and socialism. For as the economic liberals have conceived it, liberalism is antithetical to socialism. They have insisted that the political institutions of liberal democracy depend upon a free-market economy and private property. Political liberalism, on the other hand, is open to the possibility that liberal democracy is compatible with varying economic arrangements. In short, while economic liberalism necessarily excludes socialism, political liberalism does not -- at least in principle.
Those who subscribe to what I am calling the political conception of liberalism differ greatly among themselves in how they conceive liberal political principles and what may be derived from them. Of greatest relevance here is that they differ on how universal and how comprehensive a democracy liberalism implies. At the risk of multiplying terms to the point of confusion, I want to call by the name of democratic liberalism the tradition that has been committed to extending democracy more universally and broadening it to wider spheres of social life. Democratic capitalism has a built-in tension between its capitalist and democratic elements; economic liberals favor the former, democratic liberals the latter. From the "new liberalism" of L.T. Hobhouse in late nineteenth- and early twentieth-century Great Britain, through the liberalism of the New Deal and Great Society in the United States, this tradition of democratic liberalism creates the greatest ambiguity about the boundaries of liberalism on the left. When I suggested earlier that European social democracy has evolved into a kind of liberalism, this is the kind I meant.
Ever since their emergence as self-conscious movements and systems of thought in the nineteenth century, liberalism and socialism have been divided in their responses to the other. Some on each side have been polarizers: anxious to insist upon the opposition and incompatibility of the two. In this regard, Leninists and economic liberals have much in common. Others in both camps have been reconcilers, more open-minded and willing to accept lessons from the other side.
--EDIT
If the economic world were not only simple but stationary, a democratically planned economy might be manageable. Change, however, is devastating. The reasons for the failure of the planned economy lie fundamentally in its inability to generate innovation or to deal with fundamental shifts in markets and technologies. In theory, socialist governments should be able to set prices in line with marginal costs; the socialist planner, as the economist Oskar Lange argued in the 1930s, should be capable of taking into account all costs and consequently be less resistant than the private entrepreneur to technological progress that devalues existing capital investments. But, in practice, the difficulties in securing information and maintaining political legitimacy, as well as the privileges of elites with a stake in protected economic sectors, prevent socialist planners from readily adjusting prices or promoting technical change. The concentration of economic responsibilities on the state makes it difficult to impose the economic cruelties of higher consumer prices, factory shutdowns, occupational displacement, and social dislocation that innovation and growth typically require. Over time, prices typically get drastically out of line with costs; public enterprises become sinkholes of public subsidy; and the planned economy becomes a backwater of development. More democratic economic planning, far from solving these problems, quite likely would aggravate them, since it would be even harder to carry out the changes that development requires.
These difficulties do not necessarily appear in the short term or under conditions of national crisis. That is why command-and-control planning can be successful in wartime or in the initial stages of a revolution, especially if a regime is able to transplant technologies developed elsewhere. But as time wears on, the planned economy's slowness to innovate and its resistance to what Joseph Schumpeter called capitalism's "gales of creative destruction" bring about a long-term deterioration.
I am not suggesting that the human costs of economic and technological change should be of no political concern. On the contrary, cushioning the losses and insecurities of economic upheaval is one of the principal interests of the liberal state, in part to ensure that the costs and benefits of change are fairly distributed and that progress does not founder because of resistance from those who would otherwise be the losers. But it has proved far more advantageous to release the transformative powers of capitalism and spread the gains, than to try to preserve the stakes of the weak in the status quo.
I also do not wish to suggest that the difficulties of economic planning on the command-and-control model extend to every other type of state intervention. The problems arise specifically from micro-management of the economy and suppression of the price system. Planning and public ownership, especially when combined, simultaneously suppress information (market signals) and demand continuously replenished information of minute detail. Both the basis for economic decisions and the mechanisms for correcting them are fatally weakened. This is not so of the use of fiscal and monetary instruments in macroeconomic policy. Nor does it apply to social insurance and other income-transfer programs, to government planning in the management of a limited public sector, to planning of public investments in human capital and physical infrastructure, and other areas where the term "planning" merely stands for the making of policy in line with longer-term objectives and projections of trends. Indeed, without national economic planning of the kind envisioned by socialists, we have achieved at least some of the social control of economic life that Dewey and others half a century ago wanted. But we do so -- and, in some areas, ought to do more -- without the detailed management of finance and industry that the socialist critics of capitalism thought necessary.
Marxists and other socialist critics earlier in this century, and even some today, have repeatedly underestimated the capacities of capitalist democracies for adaptation, stability, redistribution, and growth. But, of course, many defenders of capitalism have thought its requirements to be equally rigid. The tradition represented by Mill, in contrast, saw that capitalism could be drastically altered by law and government and was compatible with radical advances in equality and democratization, including a more just distribution of income, diminished status differences, and an altered hierarchy in the firm. This recognition that capitalism is not governed by iron laws of motion, as Marx believed, but can be modified politically and culturally lies at the foundation of the tradition of democratic liberalism. For Dewey and others to have believed half a century ago that capitalism needed to be transformed into socialism to realize liberal values was perhaps understandable, given what they knew of the two systems. But that was, in a sense, before socialism, at least before we had accumulated much experience of socialism.
The socialist experiment has now been run in many variations. Governments professing socialism have come to power by armed force and exercised dictatorial power; others have come to power through elections and exercised power more democratically. Some regimes, initially totalitarian, have tried to reform themselves from within. Nonetheless, we have yet to see the socialist economic model succeed in practice. It is evidently as hard for human beings to enter the kingdom of socialism as it is for a camel to pass through the eye of a needle. If socialism is so difficult to get right, people are justifiably skeptical of the democratic socialists among us who say that it has yet to be tried.
Now we know what we could not have known when socialism was a theory, and liberalism after socialism can never be the same. The task before us is plainly not to synthesize liberal political values with socialist economics. Neither is it to reconceive socialism on a more democratic, decentralized basis; the idea of a decentralized socialism bears even less relevance to economic realities today than the model of central planning whose bad odor socialist theorists are trying to escape. Socialism is simply not our appointed historical destiny. Indeed, the great irony is that while theorists have vexed themselves over the much-anticipated transition from capitalism to socialism, the great task in Eastern Europe and the Soviet Union is the reverse: how to build liberal societies after socialism has done such great damage to their economies, civil life, and even the legitimacy of their states.
Democratic Liberalism
The socialist critique of liberalism and its program for the reconstruction
of society had other aspects besides those I have mentioned. To give a full
assessment of those arguments, or of communitarianism -- which might be
thought of socialism without the embarrassment of socialist economics -- is
more than I can attempt here. By way of conclusion, let me spell out some
elements of a realistic democratic liberalism, as I see it.
Like all versions of political liberalism, democratic liberalism rests on a foundation of constitutionalism and guarantees of individual political and civil liberty. These rights are primary; they take priority over property rights where they come into conflict, and the most fundamental of them cannot be sacrificed or compromised for prudential reasons, except in cases of rare and compelling state interest. Since the capacity to hold leaders accountable is essential to the limitation of power, the protection of liberty requires democracy. And as Dewey properly argued, liberal values require democracy as a thoroughgoing social practice, a way of life. But where Dewey and others were mistaken was in asking too much of democracy, particularly by expecting that the economy as a whole could be directly subjected to democratic rule. "Economic democracy," appealing as a slogan, makes sense only in the immediate environment of the firm, and even there within limits. For the economy as a whole, collective interests require collective political restraint.
The choice is not between "market" and "plan," as so many theorists have put it. For even for those committed to reliance on the market, the question remains, "What market?" Markets do not exist in nature; they are institutions that have a design, based first of all in law. The realistic, democratic alternative to socialist planning lies primarily in the design of markets and other institutions: the shaping of the rules of the game. Banks and other financial institutions, broadcasting stations, school systems, health care services, agriculture -- these institutions all require a framework of legal rules that influence what they do, whom they serve, how they are controlled. In the shaping of the framework, not in the active management of those institutions, lies the principal point of liberal influence. To be sure, choices in institutional design are not as grand and inspiring as the great ideological struggle between capitalism and socialism. But those choices are where the big public decisions of our time lie.
Unlike socialism, which has held up an impractical vision of a classless society and total equality in all spheres, liberalism has a vision of equality that is more restricted, but less likely to be perennially disappointed, liberalism has often been accused of failing to extend its egalitarian ideals beyond the civil and political spheres. But there is good reason for holding back from organizing the economy according to the same rules as the polity. Political and civil liberty imply political and civil equality: equality before the law, equal rights of political participation. But even the strong, affirmative efforts necessary to create the institutions and conditions for civil and political liberty do not require an equalization of wealth and income or eradication of class differences. In matters of income distribution and material well-being/the objective should be, above all, to eliminate poverty and maintain a minimum floor of decency to enable individuals to carry out their own life plans.
What that floor entails is a distinctly social judgment; it will likely rise over time. Since the support of that floor will be a political decision, policies must be designed to maintain not only the floor, but the political support beneath it. As a result, the evaluation of policies and programs, even from the standpoint of distributive justice, cannot be separated from the overall task of constructing democratic majorities. And that imperative will often mean support for programs that provide universal benefits to all groups, including the middle class as well as the poor and majorities as well as minority groups.
Moreover, the long-term tasks of nation-building and of fostering a common culture and a sense of shared citizenship also strongly argue for public and universal schooling, old-age pensions, and other services that serve an integrative as well as egalitarian purpose. In a few cases, particularly those involving insurance, the universal alternative is also simply more efficient because of endemic market failures.
But the universalism of liberal democratic policies is limited to particular spheres of social life; it is not a stepping stone to generalized equality of economic condition, if only because of the inevitable conflict, which socialists hardly anticipated, between democracy and equality. The level of redistribution required to achieve the socialist vision of a classless society is so vast that it is unlikely ever to command majority support. It is difficult enough, and often impossible, to secure democratic approval even for the more limited equality that liberals favor. This problem must be taken, not as a temporary obstacle arising from false consciousness, but as a permanent problem arising from rational voter hesitations about losses of income and the role of the state.
Where socialism imagined transforming things "private" into things "public," liberalism seeks to maintain the public-private distinction and to enrich the forces of civil society, not in opposition to the state, but in partnership with it. The state has a comparative advantage in performing certain functions; for example, it can collect taxes more reliably and efficiently than can charities raise voluntary contributions. But it is not always best able to produce or deliver the services it finances. Through the devolution of functions to the independent associations and agencies of civil society, liberal policy provides a genuine way to limit governmental bureaucracy. In addition, the cultivation and strengthening of civil society reflects a commitment, not to some mythical idea of a single community but to the many and various communities that must exist peaceably and tolerantly along with each other in a liberal society.
As I have said nothing about international affairs and foreign policy, about the problems of moral authority, education, and the family, and countless other matters, this can scarcely be counted a general discussion of the problems facing liberalism. What I have tried to argue is that we need to draw, more sharply than we have, the distinction between liberalism and socialism. In everyday American politics, liberalism is now identified with a commitment to expanding public social programs, and this link is partly the cause of the general confusion of liberalism and socialism, which to many people appear to stand for the same thing.
Why American conservatives conflate liberalism and socialism is clear since, in their eyes, any defense of positive government counts as statism. What is less understandable is the confusion of American "progressives" -- a term which itself serves to obscure the difference between liberal and socialist positions. "Progressive," now the label of choice on the left, has the function of avoiding any overt ideological commitment and minimizing potential divisions; in some contexts, it has become the contemporary linguistic form of the Popular Front.
But while the house of liberalism in America has many rooms, it should not be allowed to become the last refuge of a defeated and disappointed socialism. When socialism was young and full of fervor, some liberals were understandably infatuated and thought of marrying their political values to socialist economics. But the romance should be over once and for all.
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Some commentarys on changes that can /should be made to the current system
Taming Global Capitalism Anew
A Progressive Response to Globalization
JOSEPH E. STIGLITZ
Globalization is often viewed as posing a major threat to "capitalism with a human face." Trade liberalization puts downward pressure on unskilled wages (and increasingly even skilled wages), increasing inequality in more developed countries. Countries trying to compete are repeatedly told to increase labor-market flexibility, code words for lowering the minimum wage and weakening worker protections. Competition for business puts pressure to reduce taxes on corporate income and on capital more generally, decreasing funds available for supporting basic investments in people and the safety net. And international agreements, such as Chapter 11 of NAFTA and the intellectual property provisions of the Uruguay Round of trade talks, have been used to short-circuit national democratic processes.
Yet Sweden and the other Scandinavian countries have shown that there is an alternative way to cope with globalization. These countries are highly integrated into the global economy; but they are highly successful economies that still provide strong social protections and make high levels of investments in people. They have been successful in part because of these policies, not in spite of them. Full employment and strong safety nets enable individuals to undertake more risk (with the commensurate high rewards) without unduly worrying about the downside of failure. These countries have not abandoned the welfare state but have fine-tuned it to meet globalization's new demands. We should do the same.
At the same time, we must temper globalization itself--not by withdrawing behind protectionist borders and not by trying to enhance the well-being of our citizens at the expense of those abroad who are even poorer. Rather, we should reshape globalization to make it more democratic, and we should moderate its pace to give countries more time to cope. There will still be losers in a reshaped globalization, but the vast majority of citizens in both the North and the South will be better off with the right policies.
Coping with globalization entails recognizing both the consequences of globalization and the limitations in the standard responses. Increased education is important, but it is not enough. At this time we should make taxation more progressive in order to offset the economic forces increasing inequality, not decrease the degree of progressivity as we have done in the past five years. We should strengthen our safety nets, not weaken them. The United States has one of the worst unemployment insurance programs in the advanced industrial countries. A redesign of our social insurance program to make it more of an integrated lifetime social insurance program, along the lines of the provident funds of Singapore, could provide substantially more complete insurance coverage without weakening economic incentives.
Most important, we should have a true commitment to full employment. The high priests of the financial markets have convinced many of the dangers of even moderate inflation, contending that even slight increases in inflation are very costly, especially to the poor, and that the costs of reversing inflation are extremely high. This is all nonsense, as we demonstrated in successive issues of the Economic Report of the President while I was chair of the Council of Economic Advisers. Today we should be worried not about inflation but about our lackluster growth, which leaves a large "jobs deficit." Full employment is the most important social protection. And even moderate unemployment, even of the disguised kind (discouraged workers, increased numbers on disability and large numbers who work part-time involuntarily), puts downward pressure on wages, exacerbating the problems brought on by globalization.
There are two other elements of a progressive agenda that are sometimes not given sufficient attention. The first is enhancing savings among lower-income individuals, including by matching grants (for example, by cashable tax credits). Some conservatives have embraced the concept of the ownership society--by which they too often mean simply that those who own more get to own still more. But it is important for individuals of modest means to have a cushion to protect themselves against the vagaries of the market.
The second is enhancing investment in research, strengthening our competitive advantages, so necessary if we are to maintain robust growth. Today, a disproportionate amount of our nation's research budget is spent on military objectives; funds for basic science, or even advances in applied technology that would improve living standards and help us protect the environment, are scarce.
Globalization's advocates often portray it as presenting unprecedented opportunities. For those committed to creating a society based on principles of social justice, it is also presenting unprecedented challenges. These are some of the elements of the progressive response to these challenges.
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Re-creating Public-Interest Politics
WILL HUTTON
Looked at from Europe and Asia, the US economy has emerged as a formidable global competitor with the leading brands, the leading technologies and a careful strategy of producing low-value-added goods in Asia while nurturing high technology at home. If American blue-collar jobs have been lost in mass-production manufacturing, they have been created in distribution, transportation and services--and also in the high-value-added "knowledge economy."
Thus American blue-collar workers are split into four components: those under direct competition from Asia, those working in the blue-collar service sector, those directly or indirectly benefiting from high-value-added knowledge work and those who work in the public sector. Each component is in very different circumstances--and even in the public sector, the appeal of trade unions and collective action is fading. Democrats have allowed too many of these new categories of workers to be recruited to the Republican cause with their redefinition of the public interest as private. The repercussions for the battle of ideas have been global.
The first task in any rebirth of liberal politics is to recognize contemporary realities--the primacy of a highly individualized culture with a highly segmented working class with very different objective interests--and not hanker to re-create an order that is past. Liberals need to be clear-eyed about the extent to which the current world system benefits the United States; for example, Chinese goods are cheap, boost real incomes and create a disinflationary climate of low interest rates that has provided a massive economic stimulus. Protection might benefit one of the four components of the working class--those in direct competition with Asia--but it would hurt the other three, not to mention poverty-stricken Asian peasants now delighted to have the opportunity for self-improvement.
The second task is to understand that winning the argument at the big political level, as much as detailed policies, is a condition for winning power. In this regard, what has to be done is not to make the case for "government" or "collective" action, which goes against the contemporary grain of American political culture, but to recapture the idea of the public and the importance of the public institutions through which it is delivered. For example, American universities--among the country's great public institutions--are the envy of the world, but they have increasingly become the preserve of the children of a rich elite who can afford the stunning fees, with a consequent alarming reduction in social mobility. They must be reclaimed; even the top private universities recognize the "publicness" of their vocation and the degree to which the "public" is currently being corrupted. Social mobility is a public interest, and its decline is of public concern. The argument needs to be made in those terms.
I would go further still. The United States was colonized by the values of the Enlightenment and its commitment to reason, to checks and balances in government, and to the importance of a lively public sphere. It was these Enlightenment values interacting with the great nineteenth-century egalitarian tradition that gave the United States its dynamism as much as its go-getting capitalism. Now the values of the market and increasingly religion have been allowed to crowd out the vitality of the entire fabric of Enlightenment institutions. The liberal case surely has to be to reassert why these institutions are so important and to remake the case in today's context--hence the instinctive liberal support for open-sourcing, the public dissemination of knowledge and the fair distribution of access to information. I would also add the old progressive case against excessive corporate power and breathe life into the Sherman and Clayton acts. Trustbusting and taking on the creationists are essential parts of the story.
We also need to revive institutions of grassroots altruism and solidarity. Nowhere in the industrialized West has the progressive cause gone far without the support of organized labor; but the conventional trade union no longer captures the imagination or hearts of working people. Only when unions start growing with a much more clearheaded sense of what their members want and what can be delivered will there be a more secure political base.
But it all starts with associating liberals with the idea of the public in its best Enlightenment sense, showing how that has worked for the United States in the past and could work for it in the future.
Will Hutton, a British writer, is the author of A Declaration of Interdependence (Norton) and is completing a new book on China and the United States.
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Build the High Road Here
JOEL ROGERS
American progressives have lots of ideas on the alternative international rules and institutions in monetary policy, finance, trade, human rights and development needed to make globalization work better for the North and South. What we lack is the power to implement them. Under the "dictatorship of no alternatives" that defines current policy debates, it is important to propose one to the fraying "Washington Consensus" and seek allies, particularly in this NAFTA hemisphere, in its enactment. But we should not wait on international reform to build democratic power in this economy, starting from where we are right now. We should build a high-road--high-wage, low-waste, democratically accountable--economy right here. Doing so will give focus to domestic efforts, connect them practically to international ones and eventually yield the organization, experience and confident social base we want to contribute to global fights. Building the high road here should be at least half of any international strategy.
Of course, some progressives think internationalization already dooms this enterprise--that capital's mobility will defeat any attempt at increasing democratic control over the economy. But they're mistaken. Economies don't just slide around on a frictionless, flat world. They have gravity and traction. The economic importance of place hasn't been destroyed by internationalization but in many ways has increased. Capital markets are far from perfect, and capital is less mobile than commonly assumed. And some constraints on capital are actually a net gain to it, not a loss.
Around the country, hundreds of largely isolated projects are already showing this. They include worker-training and skill-certification programs that increase productivity while capturing it in income; the use of union pension funds to stabilize and grow distressed local economies while generating returns on investment; "smart growth" policies that reduce commuting times and lower real housing costs while improving the environment; living-wage and allied efforts to raise standards on company performance while increasing productivity; and the Apollo Alliance program for good jobs and energy independence. These efforts are considered by many progressives to be a sidebar to their main show and usually not even as a single class of activities. In fact, they are all examples of the high-road politics we should be pursuing.
This harnesses democracy as a force of production, a source of value, and not just values in the economy. It builds productive infrastructure (in part physical, in larger part institutional) that adds value, reduces waste and captures the benefits of doing both. Such infrastructure attracts capital by increasing its return but also grounds capital by its own immobility. And with capital's exit threats thus reduced, real bargaining can again begin. The essence of that bargaining is demanding more of capital than is now demanded by markets--less pollution, higher wages, better labor relations, more community investment--in exchange for the infrastructure that allows capital to meet the demands profitably under competitive conditions.
None of this is rocket science. We already know how to add value in places by improving education and worker training; increasing research and commercialization capacity; providing the marketing, financial and other business services that are beyond the capacities of individual firms; and helping to cluster firms to realize complementary strengths while enlisting workers in their upgrading. We know how to reduce waste by establishing markets and making direct investment in renewable energy and more resource-efficient--and, with accurate accounting, much cheaper--energy, housing, transportation and consumer durables. We know how to improve government efficiency by democratizing elections, applying the private sector's metrics revolution to its operations and engaging citizen organizations in open-source problem-solving and regulatory enforcement. Doing these things together improves living standards by strengthening democracy. It shows democracy as a solution in organizing daily life, not part of the problem.
This is not a new insight. Markets can't set rules for themselves, solve their collective-action problems or elicit wide voluntary citizen contribution. Democracy's ability to do them all is its signature strength, and there are no limits on their being done better and better--thus producing more wealth, more citizen engagement and wider freedom in future choice. This directly helps immobile workers, even under internationalization. Indeed, even in the "worst case" of perfect competition, with instantaneous capital adjustment to changes in expected after-tax rates of profit, all gains from such place-based democratic efficiency would go to the immobile workers who call those places home.
Neoliberalism declares unfettered business domination our best bet for material well-being. We should declare high-road democracy a better bet, and invite others to place it with us. We will not lack for takers in the United States. Americans are sick to death of "business as usual," and desperate for an alternative that works. And our working class wants more of government than death and taxes, more of life than their irrelevance, more of their "leaders" than fake empathy and real contempt. A role in constructing a better economy, and a society fit to live in, is what paving the high road provides.
Joel Rogers, a Nation contributing editor, teaches at the University of Wisconsin.
Enough tweaking of Capitalism. For a more radical view…
Many anarchists advocate the abolition of money, but others call for a replacement of it with new value systems, still others, such as Benjamin Tucker, want simply the end of the government money monopoly, i.e. privatization of minting and banking and the repeal of legal tender laws.
A labor theory of value (LTV) was notably advanced in different forms by David Ricardo and Karl Marx. Ricardo held that the relative prices of most reproduceable goods and services were proportional to the amount of present and past labor time required to obtain, manufacture, process, distribute, and transport them. Marx's "Law of Value" is often interpreted as an analytic device elucidating the ways in which capitalism as a whole distributes socially necessary abstract labour time, while revealing that an important characteristic of commodities and their value relations is commodity fetishism obscuring an underlying reality of exploitative social relations.
Recently, some local currencies have taken on LTV characteristics by having a currency based on time although participants are not primarily anarchists. Critics point out that in many of these Time-dollar based currencies, it is really easy to inflate the currency, that there is no way to ensure that people are not paid more than an HOUR per hour, and conversely it ignores factors like value-added work (work that incorporates past labor in order to perform, such as the time spent by a dentist in school). One of the reasons that the IRS has chosen not to tax local currencies is that they are used for charitable purposes, such as community-building.
Some anarchists are interested in LTV currency systems because they make complex free market, fair trade systems possible, although in their current practices they are not applicable for anything other than local (ie. town-sized) economies. Detractors argue that the definition of a free market precludes usage of a normative pricing system, but some anarchist point out that since participation in an LTV currency network is voluntary, any LTV system is merely another choice in a free market of markets.
The theory that all values can be evaluated in terms of joules. In the same vein as LTV, this is an attempt to make a normative basis for value by accounting for embodied energy. Accounting for such a system would be vastly more complex than current or other theoretical currency systems because all energy output of workers and energy expenditure on goods/services must be tracked (something that is thought impossible and useless by many anarchists).
One group that has advocated a system using energy is the Technocratic movement with a system based on energy-credits where energy is used to "buy" a product or service without being exchanged, so the effect is that products or services are distributed to the user without gain by the provider (who has the same amount of energy in his or her account regardless) so allegedly making profit impossible.
Utopia (sometimes known as Trialville) was an individualist anarchist colony begun in 1847, by Josiah Warren and associates, in the United States on a tract of land approximately 30 miles from Cincinnati, Ohio. see also: mutualism and Cincinnati Time Store.
The anarchist collectives formed during the Spanish Civil War is the most famous example of an anarchist economy operating on a large scale. The collectives were formed under the influence of the anarcho-syndicalist union the CNT in rural and urban areas and successfully practised self-management for a number of years in extremely difficult economic and political circumstances. Other examples of self-management include the factory committee movement during the Russian Revolution and the workplace occupations in Argentina during its crisis at the turn of the 21st century. Attempts at forming co-operatives also appeared during the Paris Commune of 1871 and the Italian Factory Occupations of 1920.
It has also been sugested that Chiapas under Zapatista rule exercises a working anarcho-socialist economy.
Michael Albert and Robin Hahnel began to write about Parecon in the 1980's. This work builds on their earlier critiques of both market-based and centrally planned economies suggesting instead allocation by participatory planning created by the democratic interaction of a network of production and consumption councils. Parecon is a market abolitionist theory. Though not strictly an "anarchist" idea, its core features of decentralized democratic planning, institutions and remuneration based upon egalitarian norms and self-management, balanced job roles, environmental responsibility, and social efficiency, appeals to many anarchists.
Mutualism is a political and economic theory or system, largely associated with Pierre-Joseph Proudhon, based on a labor theory of value which holds that when labor or its product is sold, it ought to receive in exchange, an equal amount of labor or a product that required the same amount of labor to produce (receiving anything less is considered exploitation, theft of labor, or "usury"). Mutualists believe that a natural economic consequence of a truly laissez-faire economy, would be that income to individuals would be proportional to the amount of labor they exert. Mutualists oppose the idea of individuals receiving an income through loans, investments, and rent, as they believe these individuals are not laboring. They hold that that if state intervention ceased that these types of incomes would disappear.
A revision of LTV that incorporates information technology, cryptography, and open-source software to create a medium of exchange that precludes all forms of usury and thus requires no oversight or ideological guidance. In contrast to Parecon, there is no planned economy because users of the system will approve of labor that they feel is necessary and so production happens as people fill the labor market as they will.
Crucial to this system is the premise that money (credit for work done) can be improved with the addition of identity, information, and transparency, i.e. all credits created are associated with a particular individual (they are non-transferable), they inform users of the work done to create it, and can be viewed by any user on the system.
There are no specifications for how decisions are made within these Technological LTV Systems - each one is tasked to create its own ruleset. Joining such a network would be akin to signing a contract or EULA so revision of rulesets would resemble the open-source paradigm of updating software and having the user agree to a new ruleset. Decision making would then be implicit in any user's ability to participate in the revision of the system software, even though this approach could be elitist.
Prices on goods and services would be evaluated by the amount of credit earned by laborers involved--requiring that every individual item or service be tracked. Production then represents a mirror of the credit creation, so physical items would require their "negative" credit to be cancelled by a person wishing to own it. Since income distribution would be relatively flat in this system, it is hoped that most of the problems of capitalist accumulation and class structure will be avoided.
This is the theory that all alternative economic systems could exist simultaneously. Though it may imply accepting a greater complexity of day-to-day living, anarchists predicate this overlapping of systems on the removal of states and corporations, and the presence of multiple currency paradigms. In effect, this would be analogous, on an individual level, to having various subscriptions or club memberships--a level of complexity surpassed by the average American middle-class consumer that holds several credit cards with various debts, owes mortage and car payments, and so forth.
The motive to adopt a panarchist approach to economics is the theory that not all goods, services, or resources are best exchanged/regulated within a single system, i.e. energy production is best tracked in kilowatt-hours, but collectible items have highly subjective values and therefore require a different exchange medium. Even Parecon could be incorporated in this approach.
Separation of economics and State is the goal of anarcho-capitalists. They want an economy free from any coercive regulation or control. Anarcho-capitalists generally see the State as the cause of all monopoly. Anarcho-capitalists reject the labor theory of value as flawed and archaic. Thus, like most modern economists, they do not believe that there is any proper price for labor or goods other than what someone is willing to pay. Therefore, unlike anarcho-communists, they do not wish to abolish money, wages, and trade. According to Rothard, in an interview with New Banner, "capitalism is the fullest expression of anarchism, and anarchism is the fullest expression of capitalism."[1] The place of anarcho-capitalism within anarchism is hotly debated.
Some anti-capitalist anarchists believe that it is not radical political activity that will transform society, but radical economic activity that will make true change. They regard boycotts, consumer advocacy, and class-action lawsuits to be merely liberal actions that do not address the core problem which is capitalism itself.
Some anarchists believe that changing the nature of work itself is the crux of defeating capitalism. Parecon addresses the division of labor question by advocating balanced job complexes wherein all workers at a production facility share in all aspects of labor, i.e. everyone takes part in labor, management, maintenance, and all related work in order to ensure equality and that skills are shared amongst workers
Some anarchists believe that changing personal consumption habits to minimize (or eliminate entirely) involvement in the prevailing capitalist economy is essential to practicing anarchism in their lives. Withdrawing from the system by living on scavenged, stolen, or scammed resources is often touted by situationists, such as CrimethInc., as a viable means of survival and non-participation in the system. Many anarchists support counter-economics, that is, participating in the "black" illegal market.
Use of alternative currencies is growing, largely due to digital currencies offered on the internet, and availability of software to manage local currency systems like LETS.. Since States cannot collect taxes and revenue through use of alternative currencies they will theoretically lose power to the point of collapse. Some of these alternative currencies are designed to prevent usury, others are designed simply as alternatives to state-issued fiat money, as a hedge against inflation. Thus alternative currencies range from labor-time notes to specie-backed warehouse receipts. Three popular alternative currencies are: community currency, local currency, and time-based currency.
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A little bit more on Local Exchange Trading Systems or LETS
A LETS operates by Mutual Credit (ie currency is created by the members themselves as they transact) in a local currency equivalent to the national currency. A LETSystem is quite similar to commercial barter, but in a LETScheme the organisers work according to a co-operative self-help model. They publish Offers & Wants listings, arrange Events, and share the administrative tasks.
Fred does a task for Sue who pays him. Joe sells vegetables to Fred who spends some of his credit. NB the hourly rate may vary. The System Account which funds administrative tasks receives an input from the members in the form of subscriptions, transaction fees or commissions so that the system is self-supporting.
Note: In the LETsystem the sum of all accounts - and that includes the system account - is zero. No interest is charged for debit accounts, but a demurrage charge (for static accounts) is a theoretical option - rarely practised because it would require a more robust transaction system than most LETS have. A Community Chest may also receive regular tithing and occasional donations, to support help given to disabled members. The system account is not aware of transactions having occurred until they are recorded in member accounts.
How a Timebank works
The Timebank rewards members who do good deeds for themselves or the Community with Time Credits. Terminology is a little confusing here. The BBC Timebank issues a fiat currency expressed as hours to reward volunteering. The Timebanks UK model rewards members for engaging in community, teaching or learning activities, (eg in Chicago older kids can earn credit towards a home PC by helping to tutor younger kids) but also encourages "give and take" between the members: a paid "broker" responds to requests from members and matches them to those offering help.
Eg When Sue needs help she calls the Broker who arranges for Fred to do the task and later transfers time-credits to his account from her account. In theory Joe can't sell his vegetables as there is no way of recording their value, but if the Timebanks issues "vouchers" these begin to accrue a monetary value.
No system account is needed as the administration is paid for by external funding. Time-credits are created as required but require some form of "authority" to organise and approve the activities. The activities of members are known in advance to the Timebroker, and the organisation takes care over issues of identity, police-checking, insurance, access to vulnerable members, and keeping a record of what has taken place.
That’s all folks
Colin
