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Tuesday, August 24, 2010


Well, it looks as though there is a good deal of work to do before these once familiar ideas are again part of the public discourse. Let me reply to the various comments one point at a time.

1. Balanced growth has absolutely nothing whatsoever to do with what happens to someone's portfolio. When an economy grows, what happens is that more goods [and services] are produced. Now, much of what is thus produced is used, in the next cycle of production, as input into further production. Even if the market value of the produced goods increases, the mix of actual physical goods and actual services [not the portfolio of financial instruments supposedly representing those goods and services] may not match whist is required in order to expand production. There may be too much steel produced, and not enough aluminum. There may be too many new homes built and not enough vegetables or clothing produced. In short, the growth may not be balanced. In that case, there are bubbles, bottlenecks, shortfalls, excesses, warehouses piling up with the wrong goods, etc etc. Too many arbitragers, not enough elementary school teachers. Marx observed, and experience has shown, that capitalists, responding to market cues, routinely create booms and busts because of the unbalanced nature of the explosive growth that capitalism engenders. That is what I was talking about. Today, I heard the news that new home sales fell 27%, the largest drop ever recorded. That is a case in point.

2. Contradictions, to use Marx's term, have nothing to do with the fact that people have conflicting interests. A contradiction is a structural situation that results in self-defeating actions, in actions that produce precisely the results that are NOT desired. For example, to use once again a famous example from the MANIFESTO, capitalists, seeking to increase productivity, bring workers out of their crofts and cottages and into factories, where they can be put to work on steam driven machines and move intermediate products [flax spun into thread, etc.] quickly and efficiently to the next stage of production But the unintended consequence is that workers see one another, meet one another, and begin to learn that they have common interests, which in turn leads to labor organizing. Because capitalists are in competition with one another, each of them cannot afford simply to go on in the old way, because if he does, he will not be able to sell his wares as cheaply as the next factory owner. And so forth and so on. These are contradictions, a term Marx [unfortunately] takes over from Hegel. The purpose of socialism is to arrive at social decisions about investment and growth by collective deliberation [and disagreement, of course] rather than by the haphazard accumulation of large numbers of private and independent decisions by particular capitalists. There is nothing pie in the sky about this at all. It is what happens every day that Congress is in session. It is called democracy.

3. The economic crashes that occurred before governments were bailing out corporations were just as terrible, and wreaked havoc just as surely with the lives of the defenseless millions. Please try to get a little historical perspective on these matters.

4. No, my position is not at all close to the Free Market libertarians. They are like people who say that they are all in favor of jumping off a forty story building and enjoying the ride down for the first thirty nine floors, but that they have ideological objections to that last fifteen feet. To preserve a micro-sized free market economy and not allow it to grow ineluctably into the world we now live in would require the exercise of a degree and scope of state power that would make totalitarianism look like a walk in the park. They are in the grip of a fantasy. They might just as usefully say that they really like the upswings of a seesaw but don't agree with the downswings. Let us please try to be serious about this. It is important.

5. Yes, of course, workers need factories and raw materials and tools in order to produce goods. But they don't need capitalists. What do capitalists do? Simple. Since they own the tools and factories and raw materials, and employ soldiers [the police] to protect their ownership, they must be persuaded to allow the workers to work. They do this, quite gracefully, by paying them as little as they can get away with and taking for themselves the lion's share of what the workers produce. How very kind of them. Some of the capitalists also work as managers, a useful function, for which they are, or can be, paid a reasonable salary. But profits are net of the salaries of managers as well as of the wages of workers. The capitalists, per se, perform no useful function at all!


Mike said...

That was helpful. So if I read you right, some of your objections to capitalism are that capitalist economies:
(1) are not maximally efficient, on account of bubbles, bottlenecks, etc.
(2) tend to produce self-defeating actions, which, I take it, is another kind of inefficiency.

It is hard to argue with these points, but I don’t yet see how they get us to the conclusion that capitalism is unsatisfactory. Moreover, it’s hard to believe that collective decision making would be maximally efficient, or even more efficient than capitalist decision making, and that it wouldn’t produce self-defeating actions. We’ve all seen democracy in action, and it isn’t pretty. You might say that the tendency of collective decision making to produce self-defeating actions wouldn’t be structural, but that seems largely irrelevant.

I’d like to ask you something about your claim that capitalists per se perform no useful social function. Suppose that my body were a kind of factory. I hire workers to make special meals which, because of some digestive anomaly, my body is able to transform into a valuable commodity which I then sell on the open market. In this case I would be providing the means of production (my body), hiring labor, paying the lowest possible wage, etc., and so I would be engaged in standard capitalist practice. Would you say, though, that, qua capitalist, I would not be providing any useful social function? If not, then I suspect that your dismissal of what capitalists contribute is not based on the idea that their contribution lacks social value but on the idea that they don’t legitimately own that from which they profit. The idea would be that, because I own my body, I am entitled to whatever profits it can generate, but I am not entitled to the profits that, say, my factory generates because am not its legitimate owner. Is that close to your view?

One last point. My previous note about government bailouts was in response to your claim that economic crashes tend to harm ONLY the little guy. Obviously I’m aware that economic crashes occurred long before there were government bailouts and that these often hurt the defenseless masses. That, however, was unrelated to my point.

Chris said...

Mike, might I recommend the documentary 'The Take' by Naomi Klein and Avi Lewis? It's about an anarcho-syndaclist set up in Argentina, that entirely removes the bourgeoisie/capitalist element from industrial labor, while simultaneously maintaining quality performance, happy work environment, democrat work place, and fair wages. A federation of worker-taken-over industrial factories in Argentina have created the work environment many Marxist and Anarchist write about.

I merely offer this DVD as objective and observational proof that Capitalism has been replaced by something better.

Kevin Carson said...

"To preserve a micro-sized free market economy and not allow it to grow ineluctably into the world we now live in would require the exercise of a degree and scope of state power that would make totalitarianism look like a walk in the park."

I would argue that almost the complete reverse is true. The system of "actually existing capitalism" that emerged in recent centuries, and the corporate capitalism of the past century in particular, were the creations of near-totalitarian state power.

Separating workers from the means of production and eliminating self-employment as a source of competition with wage labor required massive state land expropriations.

Without the role of the American state in creating the railroad system and hammering together a single national market with artificially low distribution costs, electrical power would likely have been integrated into manufacturing on a craft model: general-purpose machinery, small batch production, frequent switches between products, and the gearing of production to local markets on a demand-pull basis. The mass-production model described by Chandler and Galbraith was possible only with state intervention to create large market areas, provide stability and predictability, and guarantee absorption of output. Absent such intervention, the national economy would likely have taken the form of a hundred or so Emilia-Romagnas.

Patents (especially the exchange and pooling of patents -- e.g. the Westinghouse-GE pooling arrangement and the role of the Bell Patent Association in creating the AT&T monopoly) have played a huge role in industrial cartelization.

The dominant players in the global corporate economy today all have business models heavily reliant on "intellectual property" (biotech, entertainment, software), direct subsidies (armaments, electronics, pharma), or both (agribusiness).

Corporate power results from a 150-year partnership between corporation and state.

I think it's more accurate to say that, absent continuing and massive near-totalitarian intervention by government on behalf of big business, the market would have the same effect on corporate power that salt has on a garden slug.

Mike said...


That sounds interesting. I'll put it in my Netflix queue. Let me just say, though, that I'm not at all skeptical that a factory can be run along the lines of a worker partnership. Rather, my worries are that having such arrangements won't eliminate the inefficiencies Dr. Wolff describes, and that, as these partnerships grow in size, they will become as dysfunctional as any large scale democratic enterprise. Each worker will have a vote, but because there will be so many of them, their individual votes will hardly matter.

In all, my suspicion is that a more productive system would be one in which a small number of people risked their own capital and thus had a strong incentive to get things right, rather than one in which everyone is an owner, but no one has much of an incentive to get things right because their ownership is so diluted. Just a suspicion, of course -- I may be way off.

Chris said...

What I'm curious about is why industrial efficiency is such a paramount value in our culture? It's not radical to point out GDP does not correlate to a happy populace, nor a safe and healthy one. Even if capitalism were to provide the most efficient productive system, so what? Furthermore, that increase of efficiency seems to have a causal relationship to seriously problematic externalities. Where as, a less efficient model, is better able to notice gradual external problems and therefore address them before a threshold is peaked. Once you consider this critique, it should point out that "capitalist" "getting things right" is a loaded statement.

On a side note, The Take will detail how separate workers co-ops dealt with the very problem you mentioned of inefficiency once 'too many' votes were implemented into the federal system.

Finally, keep in mind, your same critique of too many votes hindering efficiency can be applied to a totalitarian, monarchical, tyrannical, etc govt, versus a democratic one. Frankly, I'd think twice before I placed my values in the rule of the one/few over the populations being directly impacted.

Kevin Carson said...

Arguments over the industrial effiency of worker-managed enterprises generally start from some unwarranted technological assumptions.

Large-scale organization results mainly from the minimum scale permitted by production technology, and the expense of the machinery. The large firm and wage labor are both governance mechanisms that reflect a state of affairs in which affordable, general purpose artisan tools were replaced by expensive product-specific machinery.

The desktop revolution reversed that shift in the cultural and information realm. $1k or $2k worth of equipment can match quality previously requiring million dollar sound studios, printing presses or software firms.

The micromanufacturing is having the same effect in the physical realm. Open-source hardware hackers have come up with homebrew CNC routers, cutting tables, milling machines, lathes, 3-D printers, etc., and are making rapid advances in printable circuitry.

When a garage factory with $10k worth of homebrew machinery can produce most of the stuff that previously required a million-dollar plant (essentially a shift back to general-purpose artisan tools), the capital expense of the means of production is a lot less of a bottleneck. And the governance issues presented by large aggregations of capital become moot.