Friday, 3 March 2017

Ernest Everhard, Do You Even Socialist, Bro?

Do you even socialist, bro?
"Ernest Everhard" - my personal meme stash and blogging page on Facebook, named for the Marxist protagonist in Jack London's dystopian classic, The Iron Heel, received the following message earlier today:
"Also, do you think you could establish a doctrine beyond just anti SJW? You say you a communist but in your policy you are a social democrat. Are you a revolutionary socialist?"
Fair question and fair point, though I do think I'm more than merely anti SJW.  I'm against closed, manichean systems of thought, of which intersectional feminism is one.  Revolutionary socialism is another, so I guess that answers that question.

I think there's a great deal to be said for Marxist materialism as a means of analyzing the economic structure of a given society.  I like it enough to do a blog series on it, actually.  But my messenger makes a good point: for someone who so insists that part of how leftism has gone wrong recently is its neglect of economics in favor of cultural issues, I do tend to neglect economics in favor of cultural issues.  Physician, heal thyself!

So here goes ...

Marxist materialism was a work of genius for its time.  But it hasn't aged well, obviously.  Marx wrote at a time when early industrial capitalism still had an almost feudal character to it.  Some top-hat and tails tycoon - think any antagonist from Charles Dickens novel or Sir Topham Hatt - owned the textile mill, sewing floor or whatever.  Whatever was left over after all of his expenses were paid was his, straight out, unless he was indebted to a bank or other patron.

For reasons too complex to detail here, Marx thought this system doomed to fail.  Capital would amass into fewer and fewer hands and downward pressure on wages, and hence demand, would contrast with increased productivity, and therefore supply, driving the whole thing to collapse like a house of cards.  His famous predictions of a dictatorship of the proletariat and eventual rise of communism are, of course, well known.  To this day, the mystique of "worker controlled" economies continues to enamor idealists.  Perhaps had things remained that way, Marx's predictions would have come to pass by now.  In my experience, workers aren't that interested in worker's control.  Worker's control actually entails more work.  Best to leave it to professional managers, That's what they're paid the big bucks for, is the general attitude.

The emergence of the joint-stock corporation in the mid 19th century changed things.  Somewhat.  Larger industrial concerns - steel mills and the like, became too costly for all but the most obscenely wealthy people to afford.  Joint-stock made it possible for somewhat less obscenely wealthy people to get in on the action as well.  Now, instead of one Sir Topham Hat, many could go in together as shareholders, who would elect a Board of Directors to run the organization.  In most models of corporate governance, the Board hires a CEO to manage things on a day-to-day basis.  This model had the effect of separating the managers from the owners - profits accrued to the shareholders, and the board/CEO were salaried employees much like the workers themselves were, albeit more generously compensated.

Of course, the same downward pressure on wages remained, since profit still amounted to the difference between income and expense.  But the countervailing measures we're all familiar with began to emerge: the rise of organized labor, government regulation of wage levels and working conditions, and progressive income tax schemes used to fund social programs for the benefit of the needy - the basic planks of social democracy.  Once these measures were in place, however, capitalism was allowed to remain.  Back in the USSR (bonus points if you read that in Paul McCartney's voice), capitalism was abolished entirely, and Lenin and his successors would try out actual socialism in earnest.

History has generally not been kind to either the socialist or the social democratic ideals.  I'll consider the reasons below:

Places where capitalism was done away with entirely encountered varying degrees of bad results.  The reasons included lack of competition and lack of profit incentives stifling innovation and productivity, and the economic calculation problem - when markets are not used to allocate goods, price fluctuations are not able to signal increases or decreases in demand.  What really kills socialism, though, resides in Marx's theory of surplus value.  The assumption at all profit = exploitation and that therefore the whole value of labor should accrue to the workers or the state results in an absence of capital markets.  You see, not all of those profits went towards top hats and tails.  Of course, a lot of it did and obscene differences in wealth emerged and continue to emerge.  But a lot of it was reinvested too, and this allowed economic growth and jobs to increase.  Where capital markets cannot exist; where stocks and bonds cannot be issued, this becomes much more difficult.  This, I suspect, is why thoroughly socialized economies tend to descend into stagnation and failure.

What of social democracy, then?  Traditionally social democratic mixed economies tend to be top performers in the world economy, so social democracy is the horse to bet on, is it not?  While it is superior to either Sir Topham Hat capitalism or communism, it's not without limitations.  Limitations that have grown harder to get around as the economy has become more globalized, though wiggle-room still exists and governments, particularly neoliberal ones, are as likely to use these factors to rationalize giving away the store to corporate interests as they are to face these factors as true constraints.

The main problems are investment strike and capital flight.  Those with the capital to do so simply don't invest and therefore fewer jobs, less credit and reduced growth long term.  This article in the great Jacobin magazine illustrates the pressures that international investors can bring to bear upon governments in order to erode social democratic protections.  These result in reduced taxes on high incomes, weakened unions, working class taxpayers shelling out for bail-outs, job losses due to free trade deals, taxpayers shelling out for startup costs, weakened consumer, shareholder, labor and environmental protection legislation and everything else that excite Thatcherites and Reaganites.

The competitive nature of capitalism and the drive for ever reduced costs and increased profits drive transnational corporations to exert these pressures on governments.  This is how Bill Clintons and Tony Blairs happen.  We are back to where we were before we considered socialism and social democracy to begin with.

So what can be done?

The core problem seems to be that revolutionary socialism goes too far while social democracy doesn't go far enough.  I believe the answer is to go back to the basic corporate model of ownership and governance, and work with rather than against market forces.  If tax or wage increases eat into net income and therefore disincentivize further investment, then we can achieve the desired results - increased incomes for the working class and revenues for the state to then spend on social welfare - through increased state and/or worker ownership of shares in the publicly traded corporations.

To achieve this, I would make the following proposals:

  • That a public investment authority be created in order to establish sovereign wealth funds.  This has been done with some success in other places - the Norwegians did it with their oil industry and have been quite successful.  Doing this would require the state to begin acquiring shares in publicly traded corporations at home (preferably) and abroad.
  • All citizens receive a capital endowment upon reaching a certain age.  This endowment would take the form of a non-transferable share in the aforementioned sovereign wealth fund.  This share would naturally be equal in size only to every other share that every other citizen likewise receives.  So one share of millions.  Plus, the state would not divest the entire value of its sovereign wealth fund in this manner.  The state would retain a sizable share, and reinvest the profits as well as use some of the income so generated for public finance.  All told, not enough to put anyone on easy street, but should help with those "pay the rent vs. feed the kids" conundrums that the underclasses contend with.
  • The entirety of the nation's publicly traded stock would not be nationalized in this manner.  A capital market would continue to be permitted to exist.  No single person or entity would be permitted a complete controlling interest in any corporation.
And yet the basic corporate model of governance and operation remains.  Except that the shareholders entitled to vote at annual shareholder meetings are now much of the population, or at least trust companies, banks or investment firms retained by much of the population to manage their investments, should they so choose.  This means partial, if not majority votes to the board of directors.  Which would still be required by its fiduciary duties to maximize shareholder value, but could also be restrained by limitations imposed by the shareholders.  

The obscene and ridiculous American habit of allowing the Chair of the Board to also serve as the Chief Executive Officer could be made against the corporate charter or bylaws, for example, though this should simply be outlawed by fiat.  In other regards, regulation of the corporation would thus be as much a matter of internal governance as compliance with government legislation.

Beyond this, social democratic measures would be vastly easier to implement, though they'd likely be less necessary since the above measures deal with the structural inequalities of capitalism.  This will be especially important as advances in artificial intelligence and robotics kill ever more jobs.  Fully automated luxury communism just might be possible after all!

Still, utilities and essential services would still be best delivered by crown corporations and universal social programs.  Social safety nets, a negative income tax, a basic income or even a job guarantee would still be worth considering.  Unions would still be a part of things, both as a means of codetermination - representing company staff on corporate boards of directors (like they do in Germany) and standard collective bargaining roles more generally.  

Well, it is seizing the means of production, in a manner of speaking, is it not?

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