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Monday, February 4, 2019


Jerry Fresia recently made the following comment:  “I'm hung up on how socialists will "banish" the exploitation of workers. Will it be made illegal for the entrepreneurial minded to control the work lives of others?”  This brief remark raises the vexing question of how the socialism we all talk about would actually work.  This is indeed the question if, like me, you think capitalism should be superseded by socialism.  I trust it will surprise no one when I confess that I do not have a snappy answer suitable for being put on a bumper sticker – or even in a fat scholarly tome.  But I think I can say a few things that may help us along the way. 

As I see it, there are really four distinct questions for which we need answers, and a fifth that is a no-brainer but has exercised some people mightily [notably Bob Nozick.]  The four real questions are these:

First:  How will socialism do away with the grotesque inequality of wealth?, a question highlighted by someone’s calculation that currently 23 billionaires have as much wealth as 3.8 billion people.

Second:  How will socialism do away with the very great and seemingly permanent inequality of income that characterizes advanced capitalist economies such as America’s?

Third:  [Jerry’s question]  How will manifestly useful and socially productive entrepreneurial activity be encouraged in a socialist economy without simply setting in motion a reproduction of the inequality of wealth and income done away with by our fantasied socialist revolution?

Fourth:  How will a socialist society keep those charged with managing the economy from looting it to gratify their own greed, thereby realizing Orwell’s dystopian fear that under socialism, some of the animals will be more equal than others?

And finally, the non-question made famous by Nozick’s Anarchy, State, and Utopia:  Should we stop fans from voluntarily heaping great wealth on Wilt Chamberlain?  [or LeBron James, or Lady Gaga, or whoever is the latest hot star]?  Only people who are not serious about socialism [or capitalism, for that matter] ask dumb questions like this.  The answer is, Of course not!  Heap away.  Each of us has his or her favorites.  I would rather heap riches on Paul O’Dette than Vin Diesel [although I kind of like Vin Diesel], but that is neither here nor there.  The adoration of fans has nothing to do with socialism, or capitalism, or feudalism, or slavery.  A sensible and attractive socialist society has plenty of room for its sports stars, music stars, movie stars, and television stars, all living the high life, to the delight of their fans.  Socialism need not be puritanical, though it sometimes sounds that way.  Live a little!

Now let me say something very preliminary about each of the four serious questions.

First, the grotesque inequality of wealth.  This inequality arises from three causes:  First, the unstoppable tendency for capital to accumulate over time, making those who own it richer and richer; Second, the conversion of a portion of the profits of capitalist enterprises into huge salaries going to people who are ostensibly employees, a process made possible by the divorce of legal ownership of corporations from de facto day to day control of the corporations; and Third, the inheritance of large accumulations of wealth, which passes into the hands of those who themselves have neither overseen its accumulation as capitalists nor appropriated it in the form of inflated compensation.

If the capital is collectively or socially owned, its natural expansion will accrue to the benefit of all, not to the benefit of a select few who have legal ownership of it.  That, after all, is the central point of socialism.  As for the covert conversion of accumulating capital into excessive salaries for managers, there would have to be strict laws regulating the determination of those salaries and a vigorous, independent press and communications medium to ride herd on the inevitable attempts by those with a public trust to turn it into a private piggy bank.  It is easy to say this, but extremely hard to carry it out in practice.

Second, the steep and seemingly unassailable income pyramid.  This, I believe, is the greatest threat to a successful socialism, and I am nowhere near being able to say how it can be changed and then kept from recreating itself.  A few observations to get a discussion started.  One: In my younger days the pyramid was much less steep.  The compensation of senior managers of ordinary big corporations [as opposed to the flashy name brand corporations still run by their founders, like FaceBook and Amazon] has soared since the ‘50s, when those corporations were quite profitable and as well run as they are now.  Simply going back to those days would be a vast improvement.  Two:  the best really big corporate organization in the United States is the U. S. Military, whatever you think about what it does in the world.  The pay structure for senior officers is pitiful by comparison with the corporate pay structure.  Three:  As I have observed here recently, the marginal product justification for the salaries of upper middle class workers, like professors, doctors, et al., is nonsense.  So is the claim that those salaries are necessary compensation for the costs of a college education.  The pay differentials required to draw folks into what we used to call white collar jobs, if indeed any differentials at all are required to get the right people in the right jobs, are nowhere near as large as those that now exist.  Well, there is much more to be said here.

Third, the need to encourage and elicit entrepreneurial energy, talent, imagination, and effort [Jerry’s concern.]  I do not know the answer to this, but I think it may well be necessary to make socialism compatible with major rewards to entrepreneurship.  This will inevitably create a moneyed class [as well as some losers, of course.]  There will thus be some significant inequality in a healthy socialist economy.  But if ownership of the means of production is not inheritable, then private capital accumulation will be limited.   So maybe Jeff Bezos will become incredibly rich, but neither his children [does he have any?] nor anyone else will come into ownership of when he dies.  I think we socialists can live with that.

And finally Four:  How do we keep the whole system from turning into a kleptocracy?  Lord knows, capitalism is, as was feudalism before it.  I no more believe in the incorruptible nobility of Socialist Man than I believe in the incorruptibility of those washed in the blood of the Savior.  Eternal vigilance will be called for, I imagine.  It certainly is now.

Well, my back trouble has returned, so I shall bring this to a close and lie down.


howard b said...

Trying to solve the problems of the world armed with nothing but a theory- I think Oakshott called that rationalism. That's the squirrel eating up the engine of your intelligently designed argument.
You put your faith in untested, a priori analysis,
What's your plan B? Tell me why socialism in America won't look like socialism in Cuba or Venezuela.
I'm just saying this, first because of inherent plausibility and second because Thrasymachus would raise these objections and Socrates would probably find himself in agreement

Dean said...

Paul O'Dette, the lutenist? Seconded!

Jerry Brown said...

The US military might be a well run organization, but it gets to play by different rules than most of us would tolerate from private corporations. I mean I'm not even sure if 'employee rights' have any meaning there. And there is wide agreement that the military consumes an awful lot of resources, but a lot of disagreement about how useful the final product they end up producing is. Or even what that product is. The military is not a good example to make a case for socialism. Many people might oppose socialism precisely because they fear society might end up like military service.

s. wallerstein said...

Howard B.

Venezuela doesn't have a socialist economy in the least. When the economy was functioning, it was a huge welfare state based on oil revenues. There is lots of private enterprise there still.

Socialism in the U.S. isn't likely to be like that in Cuba because first of all, the U.S. is at another stage of economic and social development than Cuba was at the time of the Cuban revolution. In addition, the U.S. has a long history of democratic government (with many many imperfections) which Cuba did not have at the time of the revolution. Socialism in the U.S. may have many problems and defects, but I doubt that it will repeat those of Cuba.

David Palmeter said...

Jerry Brown--Prof Wolff can speak for himself, but I read him to mean that the managerial responsibilities of high ranking military officers is at least as high, if not higher, than those of managers of private corporations. I suspect that the total salary and benefits of, say, the regional manager of a large super market chain is more than that of a four star general or even the Chair of the Joint Chiefs of Staff. The military doesn’t lack ambitious people competing vigorously for the top jobs, and pay clearly is not the overriding source of their motivation. That must mean that there are other rewards besides money that motivate them. If they can be motivated by something else, why bit super market executives?

David Palmeter said...

“And always keep a-hold of Nurse
For fear of finding something worse.”

How would socialism create the “creative destruction of capitalism” that allows for progress?

Take for example a once ubiquitous machine that is now essentially extinct--the typewriter. When I was growing up in Upstate New York, there were typewriter plants all over the landscape: Royal, Underwood, L.C Smith-Corona, Remington Rand--where my father, his brother, his brother-in-law and his father all worked. Those plants are long gone. The towns are devastated. Some producers did not survive the competition with IBM’s electric typewriter. But the devastating blow was the development of the machine I’m using right now--a computer (and before that, the dedicated word processor).

Now if government had owned the means of production, and had located typewriter plants in Elmira and Cortland and Ilion, New York, those plants would have been closed over the dead bodies of their congressional representatives, the governors and the rest. You can see something similar going on whenever the military wants to close a base, or USPS wants to close an unprofitable rural post office, or when Amtrak wants to abandon unprofitable lines and concentrate investment in the profitable Northeast Corridor. Congress won’t stand for it, despite the fact that Congress insists that both USPS and Amtrak “operate like a business.”

How does a socialist system--not Sandersite Welfare Capitalism, but real socialism with government ownership of the means of production--allow technological progress to occur at the cost of existing jobs?

Jerry Brown said...

David Palmeter @8:22- Yup, I agree. And as far as your comment @ 9:02- I also agree and don't know the answer either. I suppose when all the typewriters start piling up because no one wants to buy them even the politicians would have to realize something was off. Maybe.

What if you had a system more like the Canadian government health care system. I'm no expert on that but I think it works by having private sector firms (doctors) who still have to compete to some extent for customers, but the government pays rather than the patient. If there are no customers any more, then the doctors just will have to find something else to do with their time. Or sit around and not get paid. It is not exactly socialism I guess. It's not really capitalism. I'm not sure what it would be called. What would it be called?

David Palmeter said...

Jerry Brown: The typewriters wouldn't keep piling up. Buyers would have no other choice. Computer production would have been spiked.

s. wallerstein said...

Buyers would have the choice of computers made in China or in Europe, etc.

Workers in the typewriter factories would have to be retrained and guaranteed new jobs with equal wages.

The whole process of "creative destruction" might be a bit slower than it is today, but that would be fine with me and maybe a lot saner for most of us. Email and internet are huge technological advances for everyone, but there is a lot of calculated planned obsolescence involved. I've had to upgrade my computer I don't recall how many times, because they keep adding new features, new things to click on everywhere which I don't care about and my older computers were too slow. That means more plastics polluting the environment, more consumer neurosis, etc. Maybe we could learn to live a bit slower and more sanely.

David Palmeter said...

A socialist system could not permit unfettered free trade. It would disrupt the necessary planning. Governments would have to decide what to import, how much, from where. The need to import what cannot be produced domestically would have to be financed with planned exports to other economies. I think this would be difficult, and a socialist economy would have to strive to be as self-sufficient as possible.

s. wallerstein said...

David Palmeter,

What you say about a socialist system not permitting unfettered free trade is probably true, but once China or Germany start to produce cheap personal computers, not only consumers but also business enterprises in the U.S. (in order to compete) are going to start screaming for them. I assume that socialism is not going to be North Korean style, that people are going to have free access to information, to travel and to see that in other countries people and business enterprises are no longer using typewriters and are using personal computers. Given that, the socialist typewriter companies are going to have to convert to making personal computers, guaranteeing, as I noted above, job retraining and future jobs with the same salary for their workers (which might be subsidized by the central government of course).

The process might be slower than it is now, but the changes will be come about. We're in too much of a hurry these days, in my opinion and in the opinion of countless columns about mental health which you can read in periodicals like The Guardian, etc.

David Palmeter said...

S. Wallerstein

Would there be "business enterprises" in a socialist country? Government officials who run the government-owned enterprises may want the foreign computers, but getting them would require foreign exchange, something that is likely to be scarce in a socialist economy. The need for foreign exchange also will impede peoples' ability to travel.

Because things would be slower in a socialist economy, innovation would be greater in the capitalist economies--and they would be the ones producing what the rest world wants, not the socialists. I think that's pretty much what happened economically with the Soviet bloc from the end of WWII to the the fall of the Berlin wall. Technologically, the Soviets were superb where they wanted to be--weapons and space exploration. But the civilian economy lagged far behind the capitalist economies. To this day, I can't think of a thing Russia produces--other than vodka--that the rest the world wants to buy.

s. wallerstein said...

The model of business enterprise seems to work fairly well. In a socialist economy I imagine that the workers would own the company and that the central and local governments could be shareholders as well. I'm a big believer in checks and balances, so the fact that the government and the workers are all voting shareholders means that it would be more difficult for either party to control the enterprise for ends which are contrary to the public good. If the workers had a third of the shares, the central government another third and the local government still another third, then no important decisions could be taken without two of the three parties concurring.

By the way, I'm not an expert on this at all. I'm improvising. That's probably clear to anyone reading this.

The Soviet Union is not a good analogy. It's a one party state, far less economically advanced than the U.S. today, without a democratic tradition, with censorship, with a gulag, etc.

A socialist country would have foreign exchange because it exports good or services. The U.S. makes the world's most popular movies, TV programs and pop music. The U.S. has a very vibrant pop culture, some of the best universities in the world and a culture which
prizes and rewards innovation and originality (unlike the Soviet Union), so I don't see it declining onto third world status with a socialist system. By the way, a country with the natural wonders of the U.S. attracts tourists and foreign exchange.

Now would the U.S. still be super-power with a socialist system? Maybe not. Who cares?

Would the U.S. still be home to most of the world's billionaires with a socialist system?
No. Who cares besides the billionaires?

The U.S. with a socialist system might well become more modest, less narcissistic, less arrogant, less pushy, certainly less imperialistic, maybe no longer the richest economy in the world (but still a rich one). People might have more time for their families, for friendship, for poetry, for philosophy, for practicing sports, for calmly walking down a quiet street.

william u. said...

Concerning the definition of socialism, which is germane to the entrepreneurship question: I would define socialism as a system in which capital is collectively owned. This leaves a lot of freedom in the concrete implementation. A centrally planned economy is the most obvious realization, especially as it has been pursued historically in various places and times, with mixed -- but, on balance, negative -- results. However, there are alternatives that are compatible with the definition. Matt Bruenig has been writing a lot of good, popularly accessible stuff about wealth fund socialism. I've also looked into the Yale economist John Roemer, but a lot of his work is mathematical economics that I find inaccessible (for now); Bruenig is nicely filling the gap between Roemer and the educated lay public.

In a modern economy, the separation of ownership (the shareholders) and management makes the transition from capitalism to market socialism "almost" painless. (Yeah, sure, expropriation of the capitalists is going to be very painful.) That's not to say that capitalist firms and socialist firms will be run in the same way, i.e., with an eye towards minimising labor income and maximising shareholder profit: I think social ownership will lead to a qualitative transformation here. What about entrepreneurship, you ask? Where are the innovative new firms going to come from? Well: what do Silicon Valley entrepreneurs want today? In the short term, they want to attract venture capital; in the long term, they want to go public or sell to the likes of Google. Now, replace the venture capitalists and the IPO buyers with managers of social wealth funds, and replace Google with.... well, the publicly owned version of Google. The entrepreneur, after his successful IPO or sale, can either retire to a well-earned life of leisure (although not as leisurely as now -- maybe mere millions instead of hundreds of millions), stay on as manager, or start his next firm.

This won't satisfy the market abolitionists looking to banish the value-form, or those who dream of a fully automated cybernetic planned economy, but it's definitely a socialism of the possible, and it's easy to see it as the next step beyond social-democratic reforms. Some might object that this leaves workers with too little autonomy, preferring cooperative management. Fine: make the publicly owned firms worker-managed cooperatives, and allow the start-ups to stay as little dictatorships that attract workers willing to give up self-management for wage premiums.

Achieving some sort of socialism -- socialization of capital -- is maybe easier than a lot of us think.

william u. said...

(Because I can't resist, a small technical detail on making the publicly owned firms worker-managed: of course, there needs to be some accountability to the shareholders, i.e., the social wealth funds that own that firm. In Germany, labor elects part of the boards of large firms. In the market socialist economy, a firm's workers can elect half the board and the shareholders can elect the other half.

I should stop here because I am not going to anticipate and solve every problem in a market socialist economy in a blog comment.)

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