Tuesday, May 16, 2017

And this is the best you could do?

Over the last thirty to forty years, capitalism leveraged the developing Internet and a rapidly-industrialising Far-East to reorganise itself on a thoroughly global basis. It's just a fading memory now, the latter part of the twentieth century with its industrially-based national capitalisms, first-world manufacturing and millions of production-workers in secure, well-paid and unionised jobs with prospects.

The advent of globalisation coincided with massive overproduction in manufacturing (cf the car industry, steel)  so that the smart money moved into finance. Bailed out in the aftermath of 2008, and with a dearth of profitable investment opportunities, the global elite continue to enjoy their luxuries while the masses stagnate .. and wonder where their lives are going.

We all know something about globalisation and many of us want our politicians to fix it. Part one of Tony Smith's book reviews the leading proposals for reform.

Amazon link


As I mentioned in a previous post, I learned a lot from Tony Smith. Here is how he begins: the quotes below are taken from his chapter 8, "A Marxian Model of Socialist Globalisation".
"The various models of globalisation examined in part one are designed to ... provide a spur to reform existing institutions and practices.

  1. Proponents of the social state call for a renewed state commitment to social welfare and full employment. 

  2. Neoliberals advocate increased free trade and capital liberalisation, along with the dismantling of 'crony capitalism'. 

  3. Defenders of the catalytic state insist that public authorities must aggressively and comprehensively provide the necessary preconditions for a region's successful participation in the global economy. 

  4. Democratic-cosmopolitan theorists propose a global social charter guaranteeing the material preconditions for autonomy and substantive equality of opportunity."

Smith has little difficulty in establishing that all four schools of thought (since they accept the continuing existence of capitalism) fail to propose realistic measures which put a 'democratic' control of economic activity ahead of relentless global profit maximisation.


There is, of course, no end to the list of critics of capitalism. But the socialist alternatives are completely tarnished, are they not? By the disastrous experience of 'soviet communism'?

Smith tackles this issue with commendable rigour and honesty:
"A wide variety of objections have been proposed against Soviet-style bureaucratic central planning, widely taken to be either the only form of socialism or the form to which all others degenerate. I shall first list what I take to be the eight most significant criticisms of this framework. ..."
Smith's case against state bureaucratic-socialism is familiar:
"(i) Ownership of the means of production lies in the same hands as control of the coercive state apparatus. While this arrangement may not make the worst forms of totalitarianism inevitable, no one familiar with the historical record could deny its close association with authoritarian regimes.

(ii) Ownership by everyone in general is equivalent to a lack of ownership by anyone in particular. When private property rights to capital goods are not defined, no one has an incentive to use them efficiently.

(iii) Product quality tends to be poor. It is far easier for planners to formulate, implement, and monitor plans in quantitative than qualitative terms. The lack of an effective feedback mechanism connecting producers and users/consumers also leads to a neglect of product quality.

(iv) The informational burdens placed on bureaucratic central planning are now almost universally acknowledged to result in economic inefficiency. Central planners cannot appropriate adequate information regarding all potential inputs, all potential outputs, and all potential social wants and needs, when possible inputs, outputs, and wants and needs are all changing over time.

(v) If we take planners as 'principals' and managers of enterprises as their 'agents', centralised bureaucratic planning necessarily tends to generate severe principal/agent problems. Collective ownership leads managers to distort the information they pass on to central planners, underestimating the output their enterprises are capable of producing while overestimating the inputs required to produce any given level of output.

(vi) Authoritarian central planning is not able to develop successfully in areas where personal initiative and creative responses to unforeseen problems are important. Ordinary workers feel dehumanised and cynical, with pernicious economic effects.

(vii) State ownership of the means of production and centralised planning by a bureaucratic caste cannot match the technological dynamism of capitalism. In certain circumstances, bureaucratic central planning is able to attain considerable extensive growth, that is, growth resulting from the mobilisation of greater and greater inputs. And, in certain sectors where mass resources could be devoted and where success or failure was relatively easily measured (for example, space, military, heavy industry), significant accomplishments were in fact attained in the Soviet Union and elsewhere.

But this sort of social order is unable to generate intensive growth based on the more efficient use of inputs. The lack of incentives for managers to engage in risky activities like innovative behaviour is surely a significant factor. Managers appropriate few of the fruits of such activities when they are successful, and may suffer significant penalties when they are not.

(viii) A lack of hard budget constraints allows inefficient firms to continue in production and even expand over time.

Taking all of these factors into account, most observers conclude, it should have come as no surprise that bureaucratic central planning with state ownership of the means of production eventually generated vast material and spiritual stagnation."
It's surprising how many nostalgic communists and left social-democrats have still not taken these forceful (and thoroughly correct and legitimate) points on board.
"These considerations appear to justify the conclusion that there is simply no feasible alternative to capitalist markets with private ownership of the means of production. Market competition appears to provide private owners with incentives to ensure a level of efficiency and dynamism unattainable in either bureaucratic socialism or market socialism.

"One can accept this conclusion without having to deny that capitalism brings with it profound social costs. Financial crises, environmental crises, extreme levels of economic and political inequalities, and so on, are not likely to ever be entirely eliminated. But the harms they inflict can be lessened over time.

"If there is no feasible and normatively attractive alternative to a capitalist framework, lessening these harms must be our goal, and the failed project of collective ownership of the means of production must be unequivocally abandoned.

"In the present historical context, the burden of proof lies entirely with those who continue to call for the socialisation of the means of production [my emphasis]. Meeting this burden requires developing an alternative model of socialism capable of avoiding the fundamental structural flaws listed above."

You can imagine at this point how excited I was that such an incisive and profound thinker was about to unveil a model of post-capitalist economics and politics which might actually work!
"I shall adopt the model of economic democracy developed by David Schweickart, adding three modifications to make it a more adequate alternative form of globalisation."
David Schweickart's book is called "After Capitalism" (2002) by the way: I haven't read it.
"The model Schweickart defends has the following essential elements:

(i) Production and distribution are primarily undertaken within worker collectives. Workers are not hired as wage-labourers by capital; they instead join worker collectives as fellow members. There is a basic right to employment, with state enterprises providing jobs for those unable to find positions in collectives."
Hiring is the easy bit. Smith does a fair amount of hand-wringing later in the chapter when he considers how you might have to get around to actually firing workers.
"(ii) Managers of worker collectives are democratically accountable to those over whom they exercise authority, either through direct elections or through appointment by a workers' council that is itself directly elected. These enterprises are required to have representatives from a range of social movements (environmental groups, consumer groups, feminist groups, and so on) on their boards of directors, accountable to those movements."
Given the intellectual coherence and balanced judgement observed in radical social movements in the real world, I think you can guarantee that they would wreck any otherwise-viable economic enterprise. I might also mention the ample opportunities for rent-seeking and intimidation.
"(iii) Worker collectives produce public goods, inputs into the production process, or final consumption goods. Funds for the first are directly allocated to collectives by the relevant planning agencies (see below). The latter two categories of products are offered for sale in producer and consumer markets.

"In Schweickart's view, attempts to centrally plan all inputs and outputs in a top-down fashion are simply not feasible, at least not in a complex and dynamic economy. But it does not follow that capitalist market societies are the only acceptable forms of economic organisation.

It is possible to imagine a feasible and normatively attractive society combining markets with the socialisation of the means of production, that is, a society making use of producer and consumer markets after abolishing both capital markets and labour markets."
This doesn't pass the innovation test. Would Steve Jobs have got the funds he needed from the relevant 'planning agency'?
"(iv) Workers in enterprises are granted use rights to facilities and other means of production. But ultimate ownership rights remain with the local community. Workers cannot use their enterprise as a cash cow and then walk away; they have a legal duty to maintain the value of the community's investments. If sufficient depreciation funds cannot be appropriated from revenues to maintain the value of these investments, it is the responsibility of community banks to shut down an enterprise."
Shutting down a community enterprise? Yes, that's going to happen. To be fair, Smith himself worries about that but his Pollyanna assumptions that everyone would 'do the best thing' are unfortunately just so much pie-in-the-sky.
"Once depreciated funds have been deducted, the remainder of the revenues from public allocations or sales in consumer/producer markets (apart from the taxes to be considered below) are then distributed among the members of the collective according to formulae set by the democratically accountable management."
Incidentally, this focus on local communities is endearingly Victorian but hopelessly anachronistic. Modern globalised industry (which Smith agrees is a productivity advance that post-capitalism needs to build upon, not roll-back) increasingly organises both production and employee-allocation globally. Localised, and presumably small-scale communities are simply not the scale at which state-of-the-art enterprises operate at.
"(v) The origin of funds for new investment and public goods is a flat tax on the non-labour assets of all enterprises. In Schweickart's proposal, the rate of this tax is initially set by a democratically elected legislature, operating on the national level. This legislature also decides on the appropriate division of revenues between funding for national public goods and funds that are allocated to democratically elected regional and local legislative bodies.

"Each of these assemblies, in turn, must also decide upon the level of funding for public goods to be supplied in the relevant geographical area vis-à-vis the level of funds set aside for distribution to the level below it. These legislative bodies can also set aside a percentage of funds for investment in areas of pressing social needs."
It's touching that Smith thinks that allocations of resources in the billions of dollars are going to be somehow resistant to powerful lobbying, rent-seeking and every form of power-play. Plainly the human nature that Smith sees is not the same as most of us observe.
"(vi) After all decisions have been made regarding the general level of new investment and the order of social priorities, and after funds required for public goods on the national, regional, and local levels have been allocated, the remaining revenues are distributed to local communities on a per capita basis (at least this should be the presumption in the absence of compelling reasons to do otherwise, such as the need to temporarily favour historically disadvantaged regions).

"Community banks would then undertake the actual allocation of new investment funds to worker collectives. The boards of directors of these banks would include representatives of a broad range of social groups affected by the banks' decisions. New enterprises would be formed, and existing ones expanded, through allocations by community banks rather than private capital markets."
Still this idea that 'local communities' are the essential unit of future social organisation. Leading edge corporations today operate globally and have to raise resources on global financial markets. Any socialist alternative is going to have to recognise that global is not simply the additive sum of hundreds or thousands of local community banks.
"(vii) When allocating investment funds for new worker collectives and the expansion of existing ones, community banks must take three main questions into account. Is there likely to be sufficient demand for the output of the given enterprise for it to maintain the value of the community's investment and provide adequate income for its members? Will the investment provide stable employment? And is the investment consistent with the set of social priorities democratically affirmed on the national, regional and local levels?

"Extensive external financial and social audits can be regularly imposed on all enterprises and community banks to assess their performances in terms of these criteria. These independent social audits are a crucial component of the socialist version of the principle of transparency, institutionalising a level of accountability and transparency far beyond the limited neoliberal version of the principle.

"Community banks can then be ranked on the basis of the results of these audits. The level of income of the staff of a particular bank, and the amount of funds allocated to this bank for distribution in the future, are determined by the bank's place in this ranking."
I think we're looking at an impenetrable veto-network here. How many crucial innovations were funded by capitalists taking a punt? There will be precious few punts in the above arrangements.
"(viii) In Schweickart's model, there are no markets for capital assets, and so there will be no capital flight in the form of cross-border investments in capital assets. There will also be little foreign direct investment, since worker collectives are unlikely to outsource their own jobs, and community banks are assessed according to the extent they create employment in their own communities. But there will still be trade across borders.

"For a period of time, this may include trade with regions that have not institutionalised a version of economic democracy. In such circumstances, regions committed to socialist globalisation should follow the principle of fair trade rather than 'free' trade. To ensure that this occurs, Schweickart calls for a 'social tariff'." If oppressive labour practices hold down wage levels in a given region, the prices of imports from that region will be raised to what they would have been had worker income been comparable to the level prevailing in the importing country.

"A social tariff will also be imposed to compensate for a lack of adequate spending on the environment, worker health and safety, or social welfare in the exporting nation. The revenues collected by this tariff will then be distributed to the groups in the exporting country with the best record of effectively implementing anti-poverty programmes, whether or not they are agencies of the government."
A touching faith in (chronically ineffectual) do-gooding organisations and a complete lack of insight into the intractable developmental issues in the third world, particularly sub-Saharan Africa.
"I believe that three additions to this framework should be made:

"(ix) Schweickart does not investigate the monetary dimension of international trade in his model. I believe that the proposals made by Paul Davidson discussed in the last chapter are incompatible with capitalist social relations, but quite feasible if socialist production relations are established. In the latter set of circumstances, it would be possible to have something like Davidson's International Monetary Clearing Units serve as the sole form of world money. It would also be feasible to establish a set of rules that ensure that excessive trade imbalances do not persist, and that the burdens of adjusting to the imbalances that do arise are not disproportionately imposed on the most vulnerable regions of the global economy.

"(x) David Held's proposals for democratic-cosmopolitan law are also incompatible with capitalist social relations, as Chapter 4 established. But they, too, would be feasible if socialist production relations were in place. More specifically, a level of global governance above the state should be established. This would include a representative assembly selected more democratically than the United Nations, a global social charter, an international court of justice, and so on."
Ah yes, world government through a beefed-up UN. presumably with a world army to enforce its decisions. That will go down well. If only we could all get along, like a vast ant colony of genetically-related and sterile individuals.
"(xi) Schweickart holds that local communities within a nation ought to receive new investment funds on a per capita basis. In this manner, the material preconditions for both individual autonomy and flourishing communities are furthered. The force of this argument extends to the global level. There should be a democratically accountable socialist international planning agency to ensure the provision of global public goods. It must also guarantee that regions across the planet have access to new investment funds in direct proportion to their population in the absence of special considerations (such as the need to temporarily favour previously disadvantaged regions of the global economy).

"This is an extension of Held's proposal for global social investment funds, but with these funds now replacing, rather than merely 'complementing', global capital markets. In this manner, the systematic tendency to uneven development that afflicts all possible forms of capitalism could be abolished."
We know how popular transfer payments are.
"This model of economic democracy undoubtedly needs to be greatly supplemented and modified, and compared and contrasted with other approaches with which it shares 'family resemblances'. Once again, however, the goal here is not to provide a fully fleshed-out blueprint of the single best form of socialism. If the model is developed enough to show that a feasible and normatively attractive socialist alternative is possible in principle, that is sufficient."
So you can see how unimpressed I was by Tony Smith's model of post-capitalism. A fantasy of infeasible cooperation and general niceness. To be fair, Smith recognises that not everyone will be thinking altruistically of the greater good of all humanity all of the time, but his architecture kinda presupposes that.

It's what happens when you ignore biology and your model assumes a human nature which would indeed work if almost everyone was a sterile clone.

Still, even if the solution is utterly unconvincing, the analysis isn't bad. I listened to Professor Smith lecturing for an hour last night - to a rather sparsely-attended class at Iowa State - and I was impressed by what he had to say about current global economic difficulties.

He comes across as a slightly manic Bernie Sanders.


I am still waiting for the Martian Marxist, the social scientist who simple analyses without confected, activist rage.

I am also of the opinion that a post-capitalist future will emerge from a capitalism which has automated away almost all routine jobs. Call me a fan of AI and robotics.

What happens when the few remaining jobs are at a level of skill and intelligence denied to, say, 95% of the workforce? Those 95% will insist on a radical reordering of things, one which is probably incompatible with the reproduction of capitalist relations of production.

But it will be better.

1 comment:

  1. I have now listened to the Tony Smith talk. Some points:
    (a) He mentions that there are four kinds of markets:
    (1) Consumer Markets (the Shops)
    (2) Producer Markets (business to business)
    (3) Labour Markets (the workers and their wages)
    (4) Capital Markets (the owners and their financial assets e.g. Shares)

    He wants to keep (1) and (2) - hence still Capitalist, but remove (3) and (4) hence Socialist.

    (b) His primary argument was that Innovation doesnt produce Economic Growth anymore because the world has too many Research Centres! Marginal research advantage no longer exists, unlike in the past.

    Schweickart was a mathematician who turned to Marxism and Philosophy - his second edition is from 2011 updated to include all the 2008 Crash details etc (viewed as partial confirmation of his 2002 ideas).

    "I am also of the opinion that a post-capitalist future will emerge from a capitalism which has automated away almost all routine jobs." This sounds like a hard sell. My own view is probably an even harder sell:

    "Further Science-Technology developments will be required to understand and develop the right sort of universal society."


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