A BIT MORE

The comments have been extremely interesting, but if I tried to respond to each one of them I would really get lost in the weeds so let me try to say some more general things that might address a number of the comments without connecting each thing I say to one of them.

 

The totality of goods and services produced anywhere in a large capitalist economy like that of the United States is the collective consequence all of the work done by those who in any way participate in their production. Most of this collective product either takes the form of final consumption by the people in the society or goes for the replacement of inputs, depreciation, and so forth. The remainder is profit, appropriated by the owners of capital and invested in expanded levels of production or retained in the form of financial holdings. There are two problems with this way of managing things (among many other problems): the first is that those who produce the social surplus do not get to decide what is done with it. The second is that the allocation of capital resources is skewed by private decisions of profitability unrelated to social desires or needs. Thus it is that at the moment it is profitable to produce nicely designed, well-made cheap clothing and luxury housing. Consequently, millions of people in America are well dressed and ill housed. Nevertheless even in a capitalist economy these days decisions about the allocation of some of the surplus are made collectively in the form of socially funded schooling, socially funded old age insurance, and socially funded medical care, for example.

 

A modern capitalist economy is enormously productive. Out of curiosity, I looked up the gross domestic product in the United States for 2019 and divided it by the number of households in America in 2019. The result was approximately $175,000. That is almost 3 times the median household income for 2019. Simply depriving the superrich of the annual increase in their wealth could go a long way to giving everybody in the United States a decent standard of living.

 

How exactly would socialism work? What would it look like? I do not know. Collective ownership of the means of production would have to grow organically out of the present set of circumstances as a consequence of the mobilization of many scores of millions of Americans. Do I think this likely? Of course not. At the moment, this country is trying to decide whether to be ruled by a fascist white supremacist party with the support of at least 30% or more of the American electorate. All our energies must be devoted to making as sure as we can that that does not happen. It seems to me that the 2022 and 2024 elections will go a long way to deciding whether this country remains even as much of a functioning democracy as it now is, which is not saying very much.

 

That is why, when I wrote a paper entitled “the future of socialism” some years ago, I began by observing wryly that the title was a little bit like “Betamax: the technology whose time has come.”

 

 

AND NOW ANOTHER ONE

So now it is Elise Stefanik, who will shortly take over Liz Cheney’s position as the number three in the Republican House caucus, who is a graduate of Harvard. How many of these right wing fascists does the Ivy League have to produce before we start having some serious doubts about whether they are the greatest educational institutions in the world?

TO CONTINUE

The systematic divorce of ownership from managerial control of productive resources, a process growing organically within capitalism as it develops, makes it possible for the first time to think seriously about collective ownership of the means of production. The first question that arises is: what about the surplus? Capitalism is ideally organized to extract a surplus from the annual production and consumption of commodities and to vest ownership of that surplus in private hands. But no matter who owns it, the question naturally arises, what to do with it.

 

Let us be clear: one portion of what might be considered the surplus is actually required by ongoing depreciation to replace productive inputs that are used up or worn out. That is not really surplus at all. One portion of the genuine surplus can be set aside to expand production in such a way as to meet the needs of a steadily expanding population. This is not required. The present generation could perfectly well choose to deprive its children and grandchildren of the comfortable life that the present generation enjoys, but let us suppose that parental sentiment and common decency lead the people of America, once they have taken possession of the means of production, to expand output to take account of a growing population. It is of course also possible for the present generation to deprive itself in order to expand production sufficiently to raise the standard of living of future generations. Since I have in many ways and for many years been critical of the work of John Rawls, this would be a good time to point out that he is the only moral philosopher of any note whom I have ever read who considers the choice of an appropriate rate of social savings to be an important question for social and political philosophy.

 

But there are other choices for the allocation of the social surplus, some of which modern capitalist societies have been making for some generations, even though it may not have been obvious that that was what was going on. First of all, childhood can be extended into young adulthood a before generation is required to go to work. Some of this delay is of course required for more complicated job preparation in the form of further schooling but some of it is simply a way of spending the social surplus. Secondly, a portion of the social surplus can be devoted to improving the lives of those who have become too old to work productively. Medicare and Social Security in the United States have transformed the life circumstances of the old. What was once a time of impoverished dependency on children and grandchildren has now become the golden years of retirement. A third possible allocation of a portion of the social surplus is its use to shorten the number of years that men and women are required to work before they retire. The United States by and large has not chosen to devote its social surplus to this but many countries in Europe have. And finally, of course, a portion of what is at any time considered surplus can be devoted to raising the standard of living of those who are productively employed, which after a while will come to be considered a necessary expenditure for subsistence, rather than a desirable but unnecessary allocation for luxury expenditures. (Those who have read my book on the economic theories of the classical economists and Marx will recall my citation of Ricardo’s observations about living conditions in Ireland.)

 

All of these choices, even the last courtesy of union organizing  and strikes for higher wages, are decisions that have been made within existing capitalist economies, decisions made possible by the development of capitalism into its present form. This is what I mean by the new order growing in the womb of the old.

 

But none of this yet touches the central question, which is: how shall private ownership of the means of production give way to collective ownership of the means of production? Like Marx, whose practice is my model in these matters, I am more inclined to analyze the society and economy in which we live than to make idle speculations about how to make changes some time in the future, but I will end this post by suggesting some things that come to mind.

 

The best way to end patrimonial capitalism, it seems to me, is to do away with the patrimony. Confiscatory inheritance taxes that would require transferring to the state ownership of accumulations of capital in the hands of those who pass away would over time result in a massive transfer of ownership from private hands to the public. I am not talking about taxing away several hundred thousand dollars in corporate shares that have been accumulated by a grandfather or grandmother and which are left in a will to the children and grandchildren. I am talking about the tens and hundreds and thousands of millions of dollars of capital that the rich leave to their children. Sam Walton died superrich, thanks to the success of Walmart. There is no reason at all why Sam Walton’s children should inherit those shares.

 

Note, it would be destructively counterproductive to require the estate of the dead billionaire to attempt to sell the shares on the market so that the cash could be turned over to the government. That would simply have the effect of crashing the market so that a large portion of the wealth would evaporate. Rather, I am suggesting that the accumulated shares simply be turned over to public ownership. Over the course of a generation, a large portion of the capital accumulation in an economy like the United States would come to be owned by the state.

 

So many objections to this proposal spring to mind that I think I should wait until tomorrow to address them.

A FIRST STAB AT ANWERING MY BIG SISTER

Let us think about this in the way that Marx would, by trying to identify actually existing structural tendencies that are altering the character of capitalism. I can see three, one of which was already apparent in Marx’s day (and no, robots are not one of them.) The first is the internationalization of capitalism; the second is the almost complete divorce of management from ownership of capitalist enterprises (Jeff Bezos and Elon Musk to the contrary notwithstanding); and the third is the financialization of capital.

 

It is the second of these on which I wish to concentrate in this post.  In the 19^th century English capitalism at which Marx was looking, capitalist enterprises were small firms owned for the most part by those who managed them or at least directly oversaw them. By the early 20^th century this was ceasing to be the case, as Adolph Berle and Gardner Means showed us in their classic book. Almost a century later the transformation is complete. Save in the rarest of cases, ownership of capital takes the form of shares of stock which are traded endlessly on markets completely divorced from direction and management of the firms whose legal ownership takes the form of those shares of stock. Leaving to one side the legalized and celebrated theft by which managers regularly pocket a portion of the profits of the firms they manage in the form of inflated salaries and benefits, what we see now is in some sense the ultimate perfection of capitalism: depersonalized capital buying production inputs, hiring labor, paying for commodity innovation and invention all almost completely divorced from any genuine connection to the people who own the capital and have a legal right to the profits it generates.

 

This certainly looks very much like the new order growing in the womb of the old, as Marx said of the development of capitalism in late feudal Europe.

 

If for the purposes of this discussion we consider socialism simply to be collective ownership of the means of production, then the divorce of ownership from management does very much seem to be a step in that direction.  What could collective ownership of the means of production look like in the present stage of development of capitalism? Clearly not mom-and-pop stores, or sandals and candles collectives engaging in light industry, or even relatively large scale cooperatives. Those would all correspond to the shrubbery and ferns and little plants crouching in the shade below the gigantic trees of a rainforest.  At the very least, collective ownership of the means of production must mean collective social ownership of the major accumulations of capital that we find in great multinational corporations. Is there anything at all that we can find in the world in which we live that looks as though it is a new order growing in the womb of capitalism?

 

Collective ownership, social ownership, surely must mean government ownership, ownership responsible by way of the political process to the people of the nation. Well, the roads on which we drive are socially owned, the schools at least through high school  are socially owned, despite the efforts of Betsy DeVos, the entire healthcare system is on the way to being socially owned in the United States and is much further down that road elsewhere in the world, so that is a start. What about automobile production, light and heavy industry, trucking, mass distribution like that carried out by Walmart or Amazon?

 

The principal drawback to collective ownership of these means of production is not in their routine management – that can be handled as efficiently by a collectively owned enterprise as by a privately owned enterprise. But what of risk, innovation, the introduction of new techniques, new commodities, new conceptualizations of commodities? Could an economy in which the means of production are collectively owned be a vibrant, living, changing, growing, innovating economy or would it exhibit all those characteristics that we summarize dismissively and negatively as “bureaucratic?”

 

It is important to recall that these days it is rarely if ever the case that creative, imaginative, daring, innovative men and women actually risk their own capital on the enterprises they establish. What happens instead is that they borrow capital from venture capitalists who themselves do not innovate or imagine creatively but simply take a chance on those who claim to be doing so. The venture capitalists manage the accumulated capital placed in their hands by private individuals who have come into possession one way or another of large amounts of capital for which they have no other use.

 

Could these functions be performed by representatives of the people whose job it is to risk accumulations of socially owned capital on new ventures? If the answer is yes, then there is no reason to place the ownership of that capital in private hands and then suffer the ever worsening inequalities of income and wealth that are the inevitable consequences of private ownership of the means of production.

 

Marx described capitalism as the most revolutionary economic system ever to appear in history, but capitalism has become institutionalized. What the world needs now is not a revolution but rather more like something that Max Weber in a different context called the routinization of charisma.

 

I will have more to say about this tomorrow.

A VERY PERSONAL NOTE

Before I make a preliminary effort to answer my big sister’s question, there is something I would like to talk about on this blog, something quite personal which for a very long time I have hesitated to bring into this medium. Fifteen months ago I was diagnosed with the early stages of Parkinson’s disease. The original symptom was a tremor in my left hand and also micrographia so bad that I can no longer read my own handwriting and have turned to this splendid program put out by Dragon as a substitute. A second very troubling symptom is something with the odd name “festination.” Sometimes, about two miles or so into my morning walk I start to walk faster and faster as though my feet were running after something despite my efforts to slow down. In general my walking has become more afflicted with a kind of stumbling which is especially noticeable around the apartment but this uncontrollable faster and faster walking is rather scary and threatens to make me fall. Parkinson’s is a progressive and incurable disease, of course, and living here in a retirement community I have seen several people in advanced stages of it who seem, to put it as cruelly as I can, like zombies. Since I am 87, which is late to come down with this disease, there is no telling how long I will live or indeed how long it will be before I am simply confined to a wheelchair. The optimistic projection, I suppose, is that I will die of something else before I reach that point. My mind is clear, or at least as clear as it has always been, my memory is unimpaired, and happily my politics do not pose a threat to my health, so at this point I plan to go on as I have for as long as I can.

 

I would like all of you to do me a favor. Please do not express the sympathy that I know a great many of you will feel and do not tell me stories about people you have known (or even about yourselves) with Parkinson’s. I have never been one to put my business out in the street, as my colleagues in the Afro-American studies department would have said, and I do not want to start now but I simply felt that I could not go on talking with you every day while keeping quiet about something that so deeply concerns me.

 

Thank you for listening. I will post this and later today talk about something much more interesting, namely what tendencies in mature capitalism offer the possibility of a transition to socialism.

A REPLY TO MY BIG SISTER

I was the second child in our family. The first was a little girl named Barbara Claire. By the time I was born she was known as Bobs and although I was named Robert Paul I could not really be called Bob, so to my family and my relatives I became Rob   as I am to them to this day. My big sister was 3 ½ years older than I (and, given the way these things go, still is.) I looked up to her even after I got a little bit taller than she. Bobs was a spectacular student and she actually taught me to read, because when she wanted to play school I was the only available pupil. She was a great dancer and taught me both to Foxtrot and to Lindy as well as to folk dance. All my life she has been my big sister and when there was something she wanted I felt it was a command that had to be obeyed. She just sent me the following email message:

 

“So far, you haven’t said anything about how you would design a system that was not built on the exploitation of labor.  Clearly the two countries that tried it failed.  Are you going to tell us?”

 

I have got to say something to my big sister and, by the way, to the rest of you. In answering these questions Marx is virtually no help at all. He must have written more than 5000 pages about capitalism but if you cobbled together everything you could find that he wrote about socialism I do not think it would come to as much as 100 pages. He came to believe, in contradistinction to the 19^th century writers whom he called Utopian Socialists, that each stage in the historical development of economy and society grows organically out of the preceding stage through the development of the forces and social relations of production in ways that, although clearly deliberate and the consequence of human choices, are systemic and not really amenable to armchair planning. He certainly would not have thought it possible that a system based on the collective ownership of the means of production could emerge through revolutionary action from a late feudal economy, as in Russia, or, Lord knows, from a peasant society, as in China.

 

It takes no brains at all to see that the private ownership of the means of production in a capitalist economy leads to endlessly greater accumulations of capital and ever greater social inequality. The lifecycle being what it is, and very few capitalists being Jeff Bezos or Bill Gates or Elon Musk, what Piketty in the French fashion calls patrimonial capitalism – what we would call inherited wealth – is fated to become an ever more prominent feature of capitalism as it continues to evolve. Separate from this, but of course deeply connected to it, is the grotesque inequality in annual income. Since the median household income these days is around $60,000, it follows that anybody making or inheriting $60 million is making or inheriting the equivalent of a millennium of household median incomes. Simply to think of it in this fashion is to exhibit clearly the utterly unjustifiable inequality that is a defining characteristic of modern capitalism.

 

What could be done? What am I to tell my big sister? I am a great believer in half measures and ad hoc improvements, so increased minimum wages, guaranteed annual incomes, punitively high marginal rates on obscene incomes, and confiscatory inheritance taxes are all to be enthusiastically encouraged. But the more money you put in the hands of working-class Americans, the more profits will be made by those who sell them what they buy with their money and hence the more capital will accumulate in private hands.

 

Not much of an answer for your big sister, is it?  Maybe tomorrow I can come up with something better, but do not cash in your 401(k) and make plans for a millennial celebration.

 

ONE LAST TIME

The comments indicate that there is still some confusion about the status of the Labor Theory of Value, so I am going to make another effort at clarifying this matter. As I indicated, nothing in Marx’s analysis of exploitation requires or indeed is even aided by his appeal to the distinction between labor power and labor. All of the important propositions he suggests concerning necessary labor and surplus labor, propositions that can be given a rigorous mathematical demonstration, can be replicated for the corresponding claims about surplus corn value or surplus iron value. The real explanation for exploitation, as Marx knows and demonstrates over many important pages, is that by a long historical process workers are deprived of ownership and control over land, tools, raw materials, and even their skills, leaving them unable to behave in the marketplace like the independent commodity producers that classical economic theory mystifyingly represents them as being.

 

But could there not be a system in which there was no surplus corn produced or surplus iron produced or surplus cloth produced but in which only surplus labor was produced, and would not such a system demonstrate that exploitation is, after all, the capitalists’ appropriation of that surplus labor under the guise of profit? The answer is that there could be a system, rather bizarre though it would be, in which the only surplus produced was surplus labor, but it would prove nothing of the sort. What would such a system look like?

 

Well, if we assume that the capitalists also perform the labor of management, which is of course essential to any successful capitalist enterprise, then we would have a system in which all of the necessary workers, including the managers who were also capitalists, would eat a modest working-class diet, wear modest working-class clothes, and live in modest working-class homes. The physical surplus in the society would all be used to feed, clothe, and house a group of servants would wait hand and foot on the capitalists but, be it noted, would be eating the same diet, wearing the same clothes, and living in the same sorts of homes. This, we may suppose somewhat comically, would be the choice of Puritan capitalists who shunned excess and display and luxury. Some surplus workers could serve as lawyers enforcing the laws that supported the exploitation carried out by the capitalists. Other surplus workers could serve as priests explaining each Sunday to the workers that it was God’s will that only the capitalists should have servants. There could even be a few surplus workers who would write philosophy books demonstrating rigorously that the sort of arrangements in force in the society were exactly those that rationally self-interested agents would choose behind a veil of ignorance.

 

The economy would not grow, of course, because the entire physical surplus would be directed to supporting the surplus workers in their modest lifestyle. Different choices by the capitalists could result in a surplus of corn, iron, and cloth that could then be used to expand the magnitude production in the society, drawing, as Marx observes, on the “reserve army of the unemployed.”

 

Notice, by the way, that in such a system the capitalists would have to work as managers because, surplus labor being the only surplus generated in the system, if the capitalists commanded their servants to cook them dinner the servants would have to reply that there was no corn to be had, and if the capitalists commanded their servants to make them new coats, the servants would have to reply that there was no surplus wool for their coats. So an economy that generated only surplus labor would be a rather odd state of affairs indeed but it is logically possible.

 

In this and every other economy that was generating any surplus anywhere in the system, it would, as can be mathematically demonstrated, be true that it took less than a unit of corn directly and indirectly to produce a unit of corn, less than a unit of iron directly or indirectly to produce a unit of iron, and so forth.

 

Marx did not realize this because he was so steeped in the doctrines of the classical political economists and because he lacked the mathematical tools that might have led him to a correct analysis, but his instincts were absolutely spot on. He identified the historical stripping from the peasants and early workers of the means of production as the essential precondition for the development of capitalism and he correctly stated that capitalism depends on the exploitation of the working class. If this last proposition strikes you as so obvious as not to be worth arguing about, seek out a friend who works in a modern Economics Department and see whether he or she will say, “oh yes, of course, everybody knows that.” Good luck!