What might a post-capitalist future look like?
That is the question David Schweickart has been writing about for a quarter century, most recently in his book After Capitalism (Rowman & Littlefield). Schweickartâ€™s vision of an economy that democratizes both work and investment is a model of clarity and comprehensiveness - and might yet help inspire a genuinely democratic future. Schweickart, who teaches philosophy at Loyola University Chicago, spoke to Dollars & Sense following a recent speech to progressive activists in Boston.
TW: Why has the term "capitalism" almost disappeared from our everyday lexicon, even among many progressives? Why is it important to put term on the table?
DS: The disappearance of the term "capitalism" is one of the great ideological victories of capitalism. It is striking that even major progressive critics of the existing state of the world economy, people like Amartya Sen and Joseph Stiglitz, almost never use the word. Neither the word, nor the concept, which is why their positive proposals often turn out to be disappointing. You simply have got to look at deep structures, but to talk about those, you've got to use the term capitalism.
The ideological trick is to substitute "market economy" for "capitalism." This is deceptive, for there are alternatives to capitalism that are also market economies, alternatives which have structural differences that mitigate the worst features of capitalism. The one I have been elaborating and defending over the years, which I call "Economic Democracy," is precisely such an alternative. It is a socialist market economy.
When we talk about market economies, there's a tendency to conflate three different markets. There's a competitive market for goods and services, but there's also a labor market, and a market for capital. In my view, the deep problems with capitalism are not located in the competitive market for goods and services. There are problems with that market, but they can be handled by social democratic regulatory mechanisms. The deep structural problems with capitalism are to be found in those other markets: the labor market and capital market.
This insight really comes from Marx. If you go back and read Capital, you will notice that for Marx the fundamental distinguishing characteristic of capitalism is wage labor, not "the market." As Marx notes, the market long antedated capitalism. For Marx wage labor is the key defining characteristic of capitalism: individuals having to sell their capacity to work to someone who owns the means of production. (It is interesting that almost no one, scholar or layperson, when asked to define capitalism, seizes on wage labor as the key characteristic. Few mention it at all.)
TW: What's your vision of the alternative to capitalism?
If wage labor is key, then those who want to construct a viable alternative to capitalism have to look at the wage-labor relationship and ask, "How might that be changed?" But once you ask that question, an obvious answer suggests itself: instead of enterprises being comprised of two sets of people, employers and employees, they ought to be organized as democratic communities. But replacing authoritarian production with democratic production strikes at the heart of capitalism. It moves us beyond capitalism.
This is the first component of what I call â€œEconomic Democracy.â€ The labor market is replaced by worker-self-management.
You then have to look at that other problematic marketâ€”the capital market. This, of course, is the market that's least intelligible to ordinary people. What the stock and bond markets do, what the currency and derivative markets are all aboutâ€”these are things that people sense are important to their lives, but don't have a clue as to how they work. Replacing these mystifying entities with more transparent and rational institutions is the other dimension of Economic Democracy.
To see how this might be done, it is again helpful to go back to Marx and to ask, with him, the basic question, "What is capital?" What is this "thing" that plays such an important role in our lives? Marx gives two answers. A) Capital is the embodied labor of past workers. B) Capital is a social relation.
To make sense of this dual definition, you come to see that the key to understanding "capital" is the concept of â€œsurplus valueâ€â€”the source of profit and interest and dividends and all those other elements of property income. This "surplus value" is created by workers working longer hours than they would have to work merely to replenish the goods they consume. They give to society more than they receive. This surplus labor is embodied in things, but these â€œthingsâ€ belong to the capitalists, in virtue of their ownership of the means of production. The key insight is this: This surplus is created by workers, yet workers have no control over its disposition. Yet the allocation of this surplus in society is absolutely crucial to the growth trajectory of the society, in both its qualitative and quantitative dimensions. So we have to ask, what institutional alternative would allow workers the control they lack under capitalism?
In essence we are talking here about controlling society's "investment fund," the key component of surplus value. It is useful to ask at this point, how is the investment fund generated and distributed under capitalism? Mainstream economists will tell you that the investment fund comes from the savings of private individuals. Individuals are enticed, by offering them interest on their savings, to consume less than they are entitled to consume, in order that there be funds available for investment. People are, in effect, bribed not to consume.
When you start thinking about this seriously, you realize that this is a rather odd set-up. You understand that once upon a time the need to generate large amounts of capital may have required something like this arrangement, but now there is a much simpler way to generate the investment fund. To get those with excess cash to consume less, thereâ€™s no need to bribe them. Simply tax them. We are talking about consuming less for the common good, after all. Why should people be bribed to do their duty?
But as you push this logic a little bit, you realize that you don't need to tax individuals. It makes better sense, both politically and economically, to tax the capital assets of enterprises. This tax may be regarded as a leasing fee. The productive assets of society belong to society as a whole. Enterprises that use them pay a leasing fee, a flat-rate capital assets tax. Of course this tax is passed on to consumers, so that we all pay it in the end, but in proportion to our consumption, which seems fair enough.
The capital assets tax is a surrogate interest rate. The tax on capital plays the same role in a democratic economy that the interest rate plays under capitalism. Rather than pay interest to private banks, or dividends to private investors, enterprises pay a tax to the government. These revenues are dedicated to investment. They are all plowed back into the economy.
If you generate your investment funds by taxing capital assets rather than by bribing people to save, then your investment funds are public funds, and hence come under democratic control. Firms wanting funds for investment get them from public banks, not from private financial markets.
TW: So in theory they would not be allowed to accumulate capital from within, out of their own profits? How would that work?
DS: The model that I've sketched so far is the stripped-down, pure model. In this model enterprises are run democratically, but they don't own their own capital. They lease it from society at large. The capital assets tax is the leasing fee.
Society â€œownsâ€ an enterpriseâ€™s assets, but it does not control them. Workers in an enterprise are free to organize production in any way they see fit: what they produce, how they produce it, what they charge for their products. These worker-run enterprises exist in a market economy, so they must compete with other enterprises. The incomes of all workers are profit shares, not wages (not necessarily equal shares), so all are motivated to organize production efficiently and design products that meet consumer demand.
But since the capital assets under their control are public property, they must not be squandered nor allowed to run down. The enterprise is obligated to maintain a depreciation fund so that the value of those assets under their control is maintained. Now these funds can be reinvested any way the enterprise wants. But if an enterprise wants to expand its asset base, then it must go to a public bank to get additional funds. Workers are not permitted to cut their own incomes so as to have more to invest in the company. We want healthy competition, not â€œrace-to-the-bottomâ€ competition.
TW: One wrinkle in your proposal is that you have an explicit role for entrepreneurs, which might be seen as an unexpected part of a proposed socialist economy.
DS: There's an important distinction to be made between entrepreneur and capitalist, which shows up, interestingly enough, in the standard model of neoclassical economics. The capitalist is the supplier of capital; the entrepreneur gets capital from the capitalist, labor from the workers, land from the landowners, and puts them all together in order to produce a marketable commodity. This active function is something you're going to want in any healthy society. It's the passive function of supplying capital that is the problematic dimension of capitalism. That latter function, clearly, we can dispose of; we can generate capital through a capital assets tax. The active function is another matter.
So it might well be desirable to allow for a class of capitalist entrepreneurs in a socialist society, individuals who can also get their capital from our public banks, but are free to set up their own enterprises and hire wage labor. This class need not pose a serious threat to the socialist character of the society, since it is easy enough to put in place a simple structural mechanism that blocks the transition of the entrepreneurial capitalist to the passive capitalist. Simply require that, when the entrepreneurial capitalist decides to get out of the business, he must sell his business to another entrepreneurial capitalist or to the state. No passing it on to heirs. No keeping any â€œsharesâ€ of the company, which entitle one to income or control. If sold to the state, the enterprise can then be converted into a democratic enterprise. The transition from a capitalist enterprise to a democratic one should not be difficult, especially if the government provides some technical assistance.
The fact of the matter is, it's easier to democratize an existing firm than to set up a democratic firm from scratch. So if a capitalist is performing an entrepreneurial function, heâ€™s doing something useful. He can be amply rewarded. The firm's profits belong to him. Moreover, that person can cash out, have the firm "go public"â€”in the literal sense of the word. When he wants to sell it, the state stands ready to buy itâ€”then turn it over to the workers. Under such an arrangement society would enjoy the fruits of these entrepreneurial skills without subjecting the democratic structure of the economy to serious threat.
TW: You talk about democratizing labor, and you talk about democratizing capital. Obviously the third big leg is democratizing the political structure. How would this system enhance political democracy? And how could you make sure that this entire system is in fact under meaningful democratic control, as opposed to control by a bunch of apparatchiks, or a class of bureaucrats that play an insider game?
DS: The model Iâ€™ve proposed is presumed to operate within a democratic political structure like our own. But our own political system is not truly democratic, not because our political institutions are inherently defective, but because they are dominated by a minority class. This class, the capitalist class, finances the political campaigns, owns the mass media, sets up institutes and think-tanks to create and garner support for model legislation that advances their interests, employs an army of lobbyists, and, if all else fails, can engage in an investment strike that will bring down an uncooperative government.
Economic Democracy will thus be vastly more democratic than our current system. Not only will democracy be extended into areas currently off limits (the workplace and investment), but it will allow our political system to more closely approximate true â€œrule of and by and for the people.â€
There remains, of course, the concern that you express, that enlarging the role of the state with regard to the investment fund opens the door to both corruption and bureaucratic inefficiency. Letâ€™s think that through, one step at a time.
First, thereâ€™s the capital assets tax. Thereâ€™s not much room for corruption or bureaucratic inefficiency here. The capital assets tax is voted on by the national legislature. This is a clear and transparent issue. Were there enough investment funds last year? We can leave the tax rate as is. Was there a shortage? We can raise the tax. Was there too much? Lower the tax. This is a public decision, not a bureaucratic one, perfectly suited to the democratic process.
Secondly, thereâ€™s the allocation of these tax revenues. In my model this is not done by a bureaucracy, but by formula. In Economic Democracy each region has a prima facie entitlement to its per capita share of the investment fund. Your state has X% of the nationâ€™s population; you get X% of the investment fund.
Now, a congressperson might say, â€œWe need to make an exception here; my region is underdeveloped and really needs more than its per capita share.â€ Such exceptions can be made. These sorts of issues lend themselves to public discussion, public debate. Whatâ€™s at stake is clear - if you give more to this region, you will give less to other regions. Perhaps this is right, given the circumstances. In any event, the exceptions would have to be revisited each year. But this is not like contemporary budgetary battles, so rife with pork-barrel projects. One cannot just add on funds, or take from one governmental agency to give to another. This is strictly about allocating the money raised by the capital assets tax. Itâ€™s a zero-sum game with a prima-facie commitment to per capita equality.
Once funds are allocated to regions, a similar process takes place regarding allocation to cities, counties, townships, etc. The presumption again is per capita allocation. Deviations must be justified, and passed by the regional legislatures.
The only place bureaucracy really enters in is with the banks themselves, which have to make decisions about how to give out investment money to the enterprises in their regions. These banks are public institutions, charged with allocating public money. Is there here a danger of favoritism, or possible corruption? I suppose. But firms arenâ€™t likely to be clamoring for funds. The grants they are given add to their capital base, and hence to their tax obligation. Unless they can be put to productive use, funds wonâ€™t be sought.
Moreover, since the banks are public institutions (unlike banks under capitalism), their books are public. There's plenty of opportunity for citizen monitoring. In fact community oversight should be built into the model. Bank officials are, after all, public employees, and will be evaluated as to how well they succeed in meeting the goals the community has set itself concerning regional employment and general prosperity. Doubtless mistakes will be made. Grants will be given for projects that donâ€™t pan out. There may be some corruption. Weâ€™re dealing with human beings, after all. But it seems to me that we have had enough experience with checks and balances and public oversight to avoid catastrophic problems. There would be no Enrons under Economic Democracy.
TW: A skeptic might ask, if Economic Democracy is such a great idea, how come only a handful of people are talking about it? Why hasn't it caught on yet?
DS: (Laughs). I would argue that, while the overall model has not yet been put in place anywhere, there are all kinds of reform proposals now being discussed that point in that direction. An important current of organizational theory argues that enterprises must align the interests of employees more closely with the interests of the company if they want â€œhigh performance.â€ You need to allow workers to participate in decision making, you need profit-sharing. Well, workplace democracy is the logical endpoint of such reforms. If you push participation to its logical conclusion, you don't just participate, you govern democratically. You don't just share the profits with investors, you get all of the profits. You really don't need the capitalists anymore.
Of course there are alternative managerial strategies, â€œlow roadâ€ strategies aimed at keeping labor weak and divided and wages down. But there are major tendencies in the opposite direction as well, particularly since the low-road strategies run into the Keynesian problem. If wages are low, how do we keep effective demand high? Whoâ€™s going to buy all those goods being produced? A real dilemma for the capitalist class.
As for democratic control of investment, the other pillar of Economic Democracy, it is becoming more and more apparent that there is something bizarre and dysfunctional about letting the market control capital. The neoliberal experiments, which are premised on precisely that notion, have failed everywhere. The notion that some kind of control has to be put on capital, since investment funds are so critical to stability and development, is widespread.
Like any historical movement, there's going to be major resistance. For the clear implication of the model is that we don't need capitalists anymoreâ€”at least not the passive capitalists who supply us with investment funds. Obviously the class of people whose income derives from their ownership of capital are going to resist this implication, and there certainly will be a struggle. It comes as no surprise to a Marxist that ideas contrary to capitalism are not widely accepted in a capitalist society. But these ideas are present. If, as Marx suggests, the ruling class ultimately shows itself to be unfit to rule, if it suffers a real crisis of legitimacy, wellâ€”who know what might happen? One shouldnâ€™t be wholly pessimistic.
Thereâ€™s a quote from an unlikely source that pops into my head whenever your question come up:
That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.
This is Milton Friedman, from the 1982 preface to the twentieth anniversary edition of his conservative manifesto, Capitalism and Freedom. Heâ€™s reflecting on the ideological shift that had occurred, which moved him from the fringes of respectability to the intellectual and political mainstream in less than two decades.
TW: Can you have economic democracy in one country? Does this model require a certain level of political and economic development, or could take this model and adapt it to a country like Venezuela or Brazil?
DS: Your first question is easy â€“ can you have economic democracy in one country? Yes, if that country is an advanced industrial society. Thatâ€™s the case Iâ€™ve been arguing for years. Such an economy would be both economically viable and ethically preferable to capitalism.
But if it were tried in one country, would other capitalist countries intervene? Thatâ€™s a separate question. And of course one canâ€™t be certain, but frankly, I don't think other capitalist countries could do much about such an experiment, however uneasy it might make their ruling classes. Especially if the transition were a peaceful one - which is quite possible. What are they going to do? Go to war against an advanced industrialized country that has decided to democratize workplaces and generate its investment by taxation? Against a democratic country that still has an entrepreneurial capitalist class? How would a ruling class sell such a war to its population?
Suppose Sweden revived its â€œMeidner Plan,â€ using a portion of enterprise profits to buy out these enterprises over time. Suppose it turned these enterprises over to their employees, to be run democratically. Suppose it then instituted a capital assets tax to generate investment funds. Why wouldnâ€™t this work? I think it would. Would the United States go to war against Sweden? It was hard enough selling the American people on a war with Iraqâ€”a country ruled by a scary dictator sitting on a honey pot of oil. Would the United States engage in an economic embargo? What would be the justification?
Make no mistake. Economic Democracy is a dangerous idea. If it should be tried somewhere and it works, the idea will spread. Existing ruling classes may be powerless to stop it. (Remember 1989, how the people of those Eastern European countries toppled their rulers, one by one. These rulers had the guns, controlled the press, had informers everywhere - but could not stand against the tide.)
What about its implementation in a less developed country? Clearly there are many countries in the world right now consciously searching for an alternative to the neoliberal model that is everywhere failing. Is Economic Democracy such an alternative?
Iâ€™m not sure. There are empirical questions that have not yet been settled. Certainly these countries need to regain some control over capital flows and over the investment process generally. They all know that. There are elements of Economic Democracy in this impulse.
What about workplace democracy? Is workplace democracy a viable option? How educated does a workforce have to be, and how experienced in democratic processes, to govern itself effectively? I don't know the answer to this important question. It is a focus of my current research, but that research is still quite preliminary.
It's a huge question right now in China. In China there are workers' councils in a great many enterprises. But in most cases they have little real authority. I am convinced that their power should be expanded, but there should perhaps be a phase that is participatory but not fully democratic. What concrete structures should be put in place so as to enable workers to have ultimate authority over the firm, while preserving sufficient managerial autonomy for effective decision-making? We should be clear. â€œDemocracyâ€ is no panacea, neither at the workplace nor in society at large. Democracy has to be realized in concrete structures, with appropriate checks and balances, to insure governance that is both effective and accountable.
Concrete experiments need to be undertaken. And they will be. Workers are taking over factories in Argentina and elsewhere. The experiments are underway. We know a lot already about worker ownership and worker participation in advanced capitalist parts of the world. We are going to know more soon enough about what works and what doesnâ€™t in poorer parts of the planet.
TW: What would the grand coalition on behalf of Economic Democracy look like? Who are the key social actors in your view?
DS: As far as the economic model is concerned, clearly working people are key. The labor movement is absolutely central here. We need a revitalized labor movement with a comprehensive vision of what we want for the future. This means that labor must be more than merely oppositional, more than a movement trying to provide high wages and good benefits for its members. It must be willing to say, we want to run things, and willing to think about what that entails in terms of developing the skills of its members. In Economic Democracy, workers are not just concerned about income and benefits. They are responsible for the firm itselfâ€“being efficient, producing products, satisfying customers, as well as creating a meaningful environment within to work.
Labor is the main constituency for the economic agenda Iâ€™ve set out. But let me be clear. I donâ€™t see Economic Democracy as a self-contained project. I see it as only one facet of a much larger project, what I like to call â€œthe counterproject.â€ Just as globalizing capitalism is about more than just economics, so is resistance to this â€œnew world order.â€ There are myriads progressive struggles going on around the world right now - for economic justice, but also for ecological sanity, for the preservation of indigenous cultures, for peace and freedom, against racism, sexism, homophobia, militarism. I think we need to see all these struggles as part of a global struggle for human emancipation. The point is to create a world wherein every single person on the planet has a real opportunity for a healthy, happy life. Getting the economic structure right is crucial, though it is not the whole story. After all, a worker-self-managed economy could still be rife with racism, sexism, consumerism. Economic Democracy does not solve all problems - although it does make currently intractable problems tractable.
TW: Whatâ€™s been the reception to your work?
DS: Iâ€™m gratified by the reception these ideas receive when presented to non-specialist audiences, in the classroom or at public presentations. This gives me a certain confidence that these ideas are not crazy. When articulated, they often strike people as common sense. People often say, why isnâ€™t anyone else talking about this? Why havenâ€™t I heard this before? A â€œradicalâ€ transformation of society thatâ€™s not scary to contemplate, one that would leave most things unchanged - and yet youâ€™d have more control over your work, more job security, you wouldnâ€™t have to worry about your job moving to Mexico or about a financial crisis destroying the economy. A different world.
You know, itâ€™s a funny period weâ€™re living through right now. In terms of income and basic standard of living, most people in the United States are doing okay. But thereâ€™s deep anxiety about the future, certainly among college students. What kind of work am I going to have? Are there going to be jobs out there when I graduate? Are we going to have some sort of economic crisis? Are we headed for an ecological catastrophe? All this well-founded anxiety - and yet it wouldnâ€™t take that much in terms of structural changes to mitigate, if not eliminate, almost all of those problems.
When I make the case for Economic Democracy, there arenâ€™t many objections, not to the model. The doubts are more practical: Why dream such dreams? The existing order is too deeply entrenched. How can we even imagine changing things?
Itâ€™s in response to this recurring concern that Iâ€™ve begun to develop a story about how you might make the transition. Not a theory. Not a prediction. But I think we need to be able to at least imagine the transition. It wonâ€™t be a â€œrevolutionâ€ in the traditional sense. No storming of the White House. No guerilla armies coming down out of the hills. Not even a General Strike.
In fact the â€œrevolutionâ€ is not so hard to imagine, once we realize that capitalist property has become incredibly abstract. Itâ€™s not land anymore, or factories. Itâ€™s pieces of paper - less than that, numbers in your brokerâ€™s account that could plunge overnight.
So I can tell a story: An economic crisis causes stock and bond values to tank. People clamor for the government to do something. The old government hasnâ€™t a clue but the newly elected one does. It buys up those assets, offering a higher price than they are currently worth (which is almost nothing). It prints the money to pay for them, but doles it out over time. It also guarantees the pensions of all those whose retirement savings have been lost. Suddenly the commanding heights of the economy - all those publicly traded companies - belong to the government. They are then turned over to their employees, to be run democratically. Bingo. Economic Democracy.
There has been no â€œexpropriation.â€ The government has bought those near-worthless stocks and bonds at higher than market price. Whoâ€™s going to complain about that? The banks would have to be nationalized, but so what? Other countries have done that. No big deal. People would still have their jobs and pensions, and workers would get democracy to boot. Doesnâ€™t that sound good?
In such an economic crisis â€œthereâ€™s nothing to fear but fear itself.â€
As I said, this isnâ€™t a prediction. Itâ€™s just a story. But it highlights just how vulnerable, in some real sense, those passive capitalists really are.
I think people are hungry for new ideas. When is the last time the Republicans or Democrats had any? For awhile there was neoliberalism. Just deregulate, privatize, let the market work its magic. It was tried. It didnâ€™t work. Somethingâ€™s not right. The Cold War is over. Capitalism has been unopposed for fifteen years. Have things gotten better?
We know they havenâ€™t. Thereâ€™s more inequality, more instability, more economic anxiety. People donâ€™t understand. Why is this the case? Our technologies have gotten better. Why arenâ€™t we better off? Why donâ€™t these miracles make us more secure? Why hasnâ€™t the standard of living gone up for the vast majority? Thereâ€™s clearly something wrong here, isnâ€™t there?
TW: Many people have become engaged in this set of questions as you have by reading Marx or wrestling with what â€œsocialismâ€ might mean. Do you think this set of ideas is marketable to people for whom Marx is this crazy wild man? How would you go about talking to those folks?
DS: You donâ€™t need Marx to grasp these ideas. In most of my presentations I talk very little about Marx. Marx is the way I came to these ideas, but itâ€™s hardly the only way. I came to workplace democracy via Marxâ€™s concept of alienated labor - but workplace democracy could just as well be seen as an American idea. I mean, we vote for our mayors, governors, senators, representatives, presidents. Why canâ€™t we vote for our bosses? I mean, come on, what is this? We do believe in democracy, donâ€™t we?
Likewise with the idea of capital control. Why should our fate be harnessed to those financial markets that, as often as not, are manipulated by speculators and driven by mindless greed? Itâ€™s not hard to explain that it doesnâ€™t have to be this way. You donâ€™t need to appeal to Marx. Just to common sense.
Thad Williamson is an assistant professor of leadership at the University of Richmond, and a Dollars & Sense associate.
David Schweickart is on the Editorial Board of SolidarityEconomy.net
This interview originally appeared in the November/December issue of Dollars & Sense