Review Essay from LLR 8 (Winter 1989-1990) by Jon Bekken

The Decline of the American Economy, by Bertrand Bellon and Jorge Niosi. Black
Rose Books, 1988. $16.95
Fields, Factories and Workshops Tomorrow, by Peter Kropotkin (edited by Colin
Ward). Freedom Press, 1985.
“The Wage System” by Peter Kropotkin; in Vernon Richards, ed., Why Work?
Arguments for the Leisure Society. Freedom Press, 1983.

A casual observer of the anarchist movement, restricted to contemporary writings, could be forgiven for concluding that anarchists have no conception of economics. A serious debate recently was carried out in the pages of the British anarchist monthly, Freedom, arguing that all wealth comes from agriculture – that the working class is merely a burden the peasants and other agricultural workers are compelled to shoulder. The only possible conclusion from this line of reasoning is that we should dismantle the cities and factories and all return to agrarian pursuits. One suspects that farmers – suddenly deprived of tractors, books and other useful manufactured items and confronted with thousands of starving city dwellers cluttering up perfectly good farmland that could otherwise be growing crops-might take a somewhat different point of view.
Bertrand Bellon and Jorge Niosi – who nowhere claim to be anarchists, despite the fact that their book is published by the foremost North American anarchist publisher – provide a better-argued, academic analysis that, in the end, is no less absurd. In the course of arguing that the U.S. economy has irretrievably lost its dominant position (and arguing for a new world economic order based upon tight-knit, highly integrated blocs characterized by heavy state intervention in capitalist economies), they make it quite clear that for them the primary economic actors are not classes or corporations but nation-states! Questions like unionization and wage levels are reduced to economic factors influencing the relative economic competitiveness of countries and regions. Indeed, for them the working class would appear to be increasingly irrelevant as we move into a post-industrial age. (Though they are critical of U.S. corporate management for their short-sighted and inept policies, and of the military build-up which is consuming our resources.)
Nor are class struggles permitted to intrude into this tidy economic picture.
Bellon and Niosi blithely inform us, on page 70, that industrial relocation is a
negligible factor in the economic decline confronting the U.S.’s northern industrial
region. Instead, they assure us, the problem is the decline of certain
manufacturing industries on which this area has depended. Yet the world has
not stopped building or consuming cars, steel, clothing or shoes. Rather, the
employing class has chosen to relocate production to regions and countries where
workers can be compelled to work harder for less, and to automate and speed up
production in order to reduce payroll. These are not natural phenomena, nor are
these developments inevitable. They could be changed by an organized working
class determined to wield its economic power in its own behalf.
Notions of power, social transformation, or the impact of the policies they advocate on workers in the real world never occur to Bellon and Niosi. Theirs is the highly abstract world of government policy, which in practice rapidly boils down to capitulation to the demands of capital, and to massive giveaways to our corporate masters.
An anarchist economics would look very different indeed. Although anarchists are of necessity interested in the workings of the capitalist economies, our attention is focussed on the class struggle, not on the battle between nations (in any event a sideshow, as the bosses have no country). An anarchist economics might study the theft of our labor by the bosses, the squandering of social resources by the state, and the channels through which the bosses manipulate markets, finance and production to increase their profits and to pit workers in different parts of the world against each other. Similarly, an anarchist economics would address itself to the problems of maintaining economic life in a revolutionary situation, and to the sort of economic arrangements which might function in a free society.
These are the questions Kropotkin addresses in the two works cited above, and which our Spanish comrades addressed in practice during the Spanish Revolution (efforts which are chronicled in Sam Dolgoff’s The Anarchist Collectives and Gaston Leval’s Collectives in the Spanish Revolution). In Fields, Factories and Workshops, Kropotkin addresses himself to the practical problems of making a revolution – how we are to maintain production and distribution of necessary goods and services in the heat of, and following, a social revolution. In the process he established that, even in his day, a decentralized, self-managed economy could easily meet the needs of the population, and with much greater
efficiency than under the prevailing capitalist (mis)organization. Those who believe that we will somehow be able to eliminate the need for work following the revolution will have little use for Kropotkin’s invaluable study, for he (like nearly all of our fellow workers) had no time to waste on such nonsense. Those interested in a genuine process of social transformation, however, will find much of value here. The Freedom Press edition is condensed from the original, with notes by Colin Ward that help to bring the original up to date.

Kropotkin’s essay on the wage system conclusively demonstrates that a free society must necessarily abolish the wage system and money if it is to remain true to its principles.
Yet while Freedom Press has performed an invaluable service in keeping these works in print (and in affordable editions), our movement stands sorely in need of a more contemporary look at these issues.

by Abraham Guillen (translated by Jeff Stein)

This is the final installment in this three-part series. Part I ran in LLR #14, Part II in LLR #15.

Information and Self-government

A self-managed economy will have to rationally organize the branches of industry and, within each one, integrate the small and medium enterprises with the big enterprises to constitute a unified whole. For example, in the branch of industry of domestic electronics, which seems to have no relationship with the construction industry, it may be suitable to control home heating and cooling not with individual refrigeration and individual furnaces but centrally, with the goal of saving energy. In this sense, the construction industry, to construct new housings, would build them to work in the manner of hotels, with all included services, so the worker would live similar to a present day bourgeois in a great hotel. For this to happen it would be necessary to increase the productivity of labor in the primary and secondary sectors, so that each worker in agriculture and in industry would be capable of producing for many people so that, in compensation, they would proportion him the necessary services of a sort of social hotel, as we have indicated. But for this to happen will require a great revolution in culture and technology, investing much in Research and Development.

The self-managed economy will have to invest a good portion of the national income in the production of both consumer and capital goods, particularly in its first years of operation, so that the productivity of the labor is increased to unprecedented levels. In this order of ideas, economic growth, with libertarian socialism, would be greater than with private capitalism or State capitalism, since the surplus-value wasted on the parasitic classes under capitalism would be invested instead. Consequently, it wouldn’t be necessary to harshly tighten the belts of the workers, as did Stalin; instead the gross national or social income would increase annually in greater proportion than under industrialized capitalism or bureaucratic socialism (which wastes too much in armaments, in salaries of unproductive officials, and slows economic growth to no greater a pace than that of the developing capitalist countries).

By means of the application of information and of computer networks, well supplied with all types of data, the Federative Council of the Economy would have the actual information for each branch of production or of services. Therefore, the economic integration of branches of production and of service would be a positive science, which would know everything necessary in order to avoid crisis of disproportional of growth in those branches, without the production of excesses of personal, of goods not sold, or of raw materials, since it would be known, at each moment, the amount necessary to produce, to distribute or invest so that the social economy has a law of harmonious development.

For example, the central computers of the Federative Council of Economy, with informative contributions of the computer terminals in local factories, provincial and regional, would make known what was everyone’s production, reserves and shipments to the self-managed market. In the case of the industry for manufacturing of paper containers, the central computer would register the number of establishments, the personnel employed in each one of them, total of work-hours, cost of the personnel in stable monetary units, electric power consumed in the process of production, value of the fuels and gas used, value of the consumed raw materials, general expenses, taxes, value of the total production, value of the employed labor, amounts destined to pay debts and for new investments. In sum: programming the economy would be simple, without need of bureaucrats, of capitalist managers or of technocrats.

When we speak of taxes we don’t refer to the tribute of the western capitalist type nor to the business taxes (mainly figured as a business expense usurped from the enterprises by the State in the USSR and in the “popular republics that made up the COMECON), but to the delivery of a pre-determined quota of the economic surplus, extracted by the self-managed enterprises, transferred to the self-governments, responsible for returning those transfers to society in social and public services according to their ability: sanitation, hygiene, paving of streets, highways, roads, ports, railroads, education, public health and other responsibilities of the self-governments which would be too great to enumerate.

Labor-Value Money

In this case we would attempt to strengthen the economy of the free self-managed municipality, not in the traditionally Roman [state-citizen] nor modern bureaucratic sense, but as the social and public enterprise of the citizens; as well as the industrial, agricultural, of research enterprise or certain global services which would constitute the task of the associated workers with their means of production, self-organized into Worker Councils of Self-Management and in Basic Units of Associated Labor, where the economic accounting should be automated by means of computers and take as their unit of calculation, the labor-hour (LH). It would have thus a monetary equivalence of the same value, if the money is intended to remain stable. The LH would circulate monetarily in the form of ticket which would give the right to consume reasonably, always leaving an important portion in order to invest more capital than wornout during a year, so that libertarian socialism would enlarge the social capital, with the goal of progressing more with self-management than under the dominance of capitalists or of bureaucrats.

The LH, as labor-money, wouldn’t lead to monetary inflation like capitalist money or like the soviet ruble, which conceal by being the money of cass, the parasitical incomes of the western bourgeoisie, or of the eastern bureaucracy, inflating the growth of the gross national product (GNP), with salaries of officials or unproductive technocrats, or with dividends, interests, rents and surplus values received by the capitalists, according to the western economic model, where each day there exist a growing parasitical class at the expense of productive workers. Every project of investment would be calculated in hours of labor (LH), as well as in terms of personal and public consumption required. It would be monitored that neither would be excessive in the carrying on of a libertarian, self-managed society, of direct associative democracy, so that a part of the global economic surplus would be invested in achieving a greater automation of industrial production and of agricultural production. It would thus be possible to continue reducing the working day to a range which would allow a more leisure time, so that all the citizens could occupy their time in more relaxation and, above all, in better scientific, cultural and technological preparation.

The LH, as labor-money and as a quantification of the economy, having a stable monetary value would program the economy: to account it; to establish the costs of the goods and services; programming the integrated branches of the division of the labor and correct disharmonies between them; quantifying in the products the cost of raw, energy, amortization of the capital, value of the work, economic contributions to the local self-governments and to the national co-government, etc. All of this would function within a libertarian socialism of a self-managed market, without speculators, hoarders or merchants, in order that competition benefit the workers and the consumers, the cooperative groups and self-managed enterprises, in the manner similar to the way the market functioned in the Spanish libertarian collectives during the Spanish Revolution of 1936-39. The goal would be to avoid the bureaucracy of a centrally planned economy, such as occurred in the USSR and China, where the officials decided everything and the people participated in nothing. As if that were socialism, however much they try to introduce it thus by means of a totalitarian propaganda, as if lies could be converted into truths by force of repeating them as the only truth, thanks to the state monopoly of the radio, the press, the television, the universities, the schools, so that Power regulates knowledge according to their political convenience.

In a libertarian economy, labor-money wouldn’t be money in the capitalist sense such as we understand it and need it today, since it wouldn’t allow the individual accumulation of capital in order to exploit the labor of other people and obtain a surplus value. Rather it would be intended to facilitate the exchange of goods and service, in a self-managed market, where these exchange at their true labor value, so that it fulfill economically the law of equal exchange in equality of condition for all the integrated branches of the social division of the labor and the law of the cooperation of those same branches or federations of production and of service. If, on the other hand, there were no free operation of the self-managed market, things would fall into economic chaos, by trying to centrally plan everything. Prices and their economic calculation, as well as the market that really forms them (without maintaining bureaucratic costs) are only possible within an indicative global programming, but which leave the day-to-day market free, so that all the enterprises are able to produce the best and most economically, about which the consumers must ultimately decide. From this method, there is an invisible hand which self-regulates the social economy, better than thousands of officials and technocrats equipped with thousands of computers who without liberty, order disorganization by being poorly informed or because of the self-interests of the totalitarian bureaucracy, who manage more like inquisitors or cruel police (as happened in the USSR and China).

If the LH, the unit of labor-money, would have, for example, an purchasing power of 1 hour of average social-labor and this were equivalent, roughly speaking, to one dollar, one could establish, among others, the following calculation of economic-accounts:

Calculation in (LH) of an Industrial Enterprise

• Costs of machinery = $1000 = 1000 LH
• Raw materials, energy, etc. = $50,000 = 50,000 LH
• Hours worked in production = 50,000 LH
• Total of LH = 101,000 LH
• Units produced during the period of work = 100

Dividing the total number of LH, spent in the process of production, and the total of units produced in that time of work which could be daily, monthly, or yearly, we would have an average of labor value for unit produced of 1.010 of LH or of labor-money.

Now then, as no money could be absolutely stable, since if the productivity of the labor increases, due to improvements in machines, education of the workers and more efficient methods, it would result that the LH will end up having less value of exchange, increasing its value of use, driving this economic process toward an economy of abundance where, overcoming venal value, the value of use would only remain. Consequently, having reached this stage in the economy and technology, with most of the work automated, the value of the produced goods wouldn’t be based much on living labor, but almost everything would be labor of the past (accumulated capital), which would determine thereby a self-regulated production of abundance. Then the wonderful time will have arrived of overcoming finally both money and the commodity, each man receiving according to his necessity, although he only contributes according to his unequal capacity, or in other words, that it would make possible the economic equality between the men: libertarian communism, rationally and scientifically, economically possible, without which it must considered as a beautiful utopia.

Only a self-managed economy, rational and objective, based on scientific laws, from the commencement of the establishment of libertarian socialism, avoiding the fall into one phase or another, into either the socialism of group property, into forms of corporatism or of narrow syndicalism, but towards a condition of always placing the general interest above the particular interest of the professional or work groups.

The Libertarian Society

On the subject of the future of a libertarian and self-managed society, Kropotkin warned and advised:

We are convinced that the mitigated individualism of the collectivist system will not exist alongside the partial communism of possession of all of the soil and of the instruments of labor. A new form of production will not maintain the old form of redistribution. A new form of production will not maintain the old form of consumption, just as it will not accommodate the old forms of political organization.

In this order of ideas, explains Kropotkin, the private ownership the capital and of the earth are attributes of capitalism. Those conditions were consistent with the bourgeoisie as a dominant class, although the public [state] ownership of capital and of the earth is consistent with the capitalism of the soviet-State, which elevates the totalitarian bureaucracy as a new dominant class.

The private ownership of the means of production and of exchange created capitalism as a mode of production and the bourgeoisie as dominant class.

“They were”, says Kropotkin, “the necessary condition for the development of the capitalist production; it will die with her, although some may try disguising it under form of a ‘labor bonus’. The common possession of the instruments of labor will bring necessarily the common enjoyment of the fruits of the common labor.” (The Conquest of Bread, p.28)

If upon changing the mode of production and of distribution, daily life doesn’t change, including distribution, consumption, education, the political system, the legal and social, in the sense that one dominant classes are not substituted by other, then, really, nothing essentially has changed. Thus it happened in the Soviet Union, where the economic categories and the economic laws of the capitalism were hardly modified, with the result that the economic dictatorship of the bourgeoisie was replaced with the political and economic dictatorship of the bureaucracy and, in consequence, private or anonymous capitalism for the capitalism of State. A revolution like this, although it is called socialist, constitutes a great swindle to the detriment of working people, for whom in the majority of cases, it has not meant more than a change of master or of a saddle, to the unfortunate beast of burden. So instead of being the proletarian of the bourgeois, they have a new Patron, that is to say, the technocrat and the bureaucrat. In our way of thinking, the alternative to capitalism is not Marxism Leninism, but libertarian socialism.

The True Social Revolution

For a revolution to be true, in the sense of emancipating working people from the oppression and exploitation of the dominant classes, it has to establish a new mode of production, exchange, distribution and consumption and create new social relationships; new and more powerful productive forces; new political forms of popular direct participation; new legal institutions having as their basis the popular jury, new universities and technical schools integrated with industries, agriculture, mining, energy, fishing, the forests and other sectors; new philosophic, political,social, artistic, and cultural doctrines; new conceptions of national and social defense based more on the people in arms (than on a bureaucratic professional army, expensive and wasteful) in order to defend the society, as much inside as outside of it. It is necessary to affirm the system of popular self-defense, since without which there couldn’t be a guarantee that self-management will be accepted by a professional army, the latter always having tendencies to stage a “coup” in order to take Power.

On the other hand, in order to avoid the coming to power of a one-Party-state, which is the worst and greatest single political wrong, as happened in the USSR, there will need to be created a participatory socialism. This would entail a respect for the free personality within the collective, the self-determination of the local governments within a federalism which coherently maintains a unified market, the social and national self-defense, diplomatic relations with the exterior, the socio-economic system as a relatively homogeneous regime. A federalism which keeps a national and social accounting system in order to estimate and program the authentic valuation of the national or social global income, making it possible to know where we have been and toward where we are going economically, socially, politically, scientifically and technologically.

But a new economic system, based on self-managed socialism, will have to have another way of estimating the annual economic growth on the basis of short, medium and long term plans, constructing a macro-economic picture of the national and social economy, departing from the known figures and projecting toward figures to be attained in the next trimesters, semesters, years. Thus the future, in certain manner, will be anticipated by having a Federative Council of the Economy, where each federation of production or of services knows that which it has and that which it wants, in accordance with the effective demand of the self-managed market. Libertarian socialism, if it wants to distinguish itself from authoritarian soviet communism, must respect the law of the supply and demand, without falling into bourgeois liberalism, since in the self-managed market the federations of production and of social and public services act competitively. Because if the market is suppressed, and with it the law of labor-value, the law of economic competition, the law of formation of just prices in the market, it would not be possible establish a rational economy of costs and prices, necessary investments and appropriate consumption. In its place would be a centralized and bureaucratic planning which places the total-State above the oppressed, exploited Society, as happened in the USSR under a planning of economic decrees, without respect for objective economic laws.

On the other hand, libertarian socialism has to respect the pluralism of ideas, although it wouldn’t provide a space for byzantine struggles. People would be self-organized in their own interest in self-managed enterprises, mutual cooperatives, local self-governments and all types of socio-economic and political forms of direct participation. Politics would be deprofessionalized, abolishing the political class and the political parties as expression of antagonistic interests, since each citizen or worker will participate in their enterprise, local self-government, federation, daily, without falling into the trap of electoralism, where they only participate for a day to elect a government worse than another.

Traps of Bourgeois Economics

Libertarian socialism will have to create a new economic doctrine and a new system of estimating the national or social income. Actually, the concept of gross national product (GNP), of which there is so much talk and is so little understood, counts in unstable monetary units, the total of the goods and services obtained by economic activity: agriculture, industry, services, as large integrated sectors of the national economy.

If the GNP, the way it is constituted in the bourgeois economy, were estimated in monetary units of constant purchasing power, thus deflating the official figures, it is possible that it actually diminishes instead of increasing. On the other hand, the GNP, in its bourgeois form, includes the economic participation of the unproductive “tertiary” and “quaternary” sectors, in the sense not that this should be concealed, but that the GNP shows “growth” when it may have diminished materially, in effective production. Thus, for example, in many countries which are diminishing their industrial and agricultural production during some years, but if salaries increase and the number of tertiaries in the state bureaucracy, commerce, the banks, and in social and public services grow, it is said that the GNP has grown, for example, an annual 3%, when the reality is that this macro-economic figure only represents salaries, incomes without effective work, surplus values taken, parasitic income , etc.

Libertarian socialism, creating a social economy based on truthful figures, would have to estimate the GNP in a different manner than the capitalists. It is necessary to give to the concept of social income, units which are measured or concrete and in constant money based on material output: agriculture, cattle raising, forests, fishing, energy, mining, industry, or whatever is actual production. As for the “services”, only transportation, railroads, trucking, marine and air would be included in the concrete estimate of the effective or material income, since although transportation doesn’t add production, it transports it from one side to another and, in consequence, it should be included in the concrete income of one year to another.

Adding the concrete income alongside gross income (administrative “services”, commerce, banks and other social and public services), it would be seen if these take too great a percentage in the total income by having too many unproductive personal who, in order to not drain the social economy, would have to be recycled as productive personnel. Now then, in the “services” which could be considered as productive, would be included the personnel destined for Research and Development (R &D), without whose presence an economy will stagnate for lack of economic and technological progress; but the personnel of R&D should be, besides in the Institutes or Centers (which tend to be bureaucratic and technocratic), directly in the industrial enterprises, agricultural, energy, forests, mining, fishing, etc., since science and technique should be united directly to labor as immediate factors of production and not as though the ostentation of an academic title should make one a technocrat.

In sum, the net income of a country would have to be estimated, in a libertarian socialism, at costs determined in relatively stable physical and monetary units which don’t mislead, deducting the necessary investments of social capital in order to enlarge production and not simple reproduction as happens to the bourgeois economy in a crisis.

The estimate of the national and social income must be transparent: from the total of the wealth created in a year must be deducted the material consumption of people and that of self-administration (where there should not be much bureaucracy, by reason of better information) and to deduct, set aside or remove the social or national saving destined for investment in order to increase the reproduction of effective wealth, create new enterprises, design improved and more productive machines, carry on scientific investigation, automate industrial production and public services, and mechanize and electrify agriculture.

Liberation of the Working People

In sum, the libertarian economy should liberate the worker from their old employers, either private managers or from the State as Manager, to end that the workers, by means of their Self-Management Enterprise Councils, direct the economy which they create with their labor upon the means of production associated, from the bottom up, by means of the federations of production and of social services composed in a Federative Council of the Economy; only thus could there be planning and liberty, an associative democracy of full participation of the working people, a self-managed socialist society, avoiding any form of totalitarian communism (which, as a matter of fact, is capitalism of the State).

Without economic liberty there can’t be political liberty; since with capitalism there is an economic dictatorship of a plutocratic minority over the majority of working people; and with capitalism of the State, in the soviet manner, the State exploits and oppresses Society by means of the one-Party which is a bad one for the majority and a good one for the bureaucratic, oppressive and exploitive minority. The solution is: neither totalitarian communism nor capitalism but self-management, direct democracy, federalism and socialism.

An Afterword by the Translator

by Jeff Stein

Abraham Guillen has given us some useful concepts for analyzing the economic systems of state-socialist and corporate capitalist countries. Although these economies are no longer dominated by individual capitalist owner-managers, they remain exploitive, class systems. According to Guillen, ownership of the means of production is now collective, spread across a stratum of “techno-bureaucrats.” These techno-bureaucrats are just as much concerned with accumulating capital through exploitation of workers, as the old “robber baron” capitalists. However, the surplus of the system is shared (although not on an equal basis) within the techno-bureaucratic class. Under these systems, legal ownership means less than one’s position in the state or corporate hierarchy. Only a system of worker self-management of their own workplaces, can eliminate this exploitation by the techno-bureaucracy.

This does not mean Guillen’s theory is without problems. His proposals for a “market without capitalists” and the establishment of “labor-money” are built open the assumption that the labor theory of value can provide the basis for a libertarian socialist economy. The labor theory of value provides a powerful argument for the elimination of capitalists and bureaucrats, since their incomes represent an unnecessary drag on the economy. However, in a self-managed economy inequalities having nothing to do with labor productivity would arise between self-managed enterprises, giving some a competitive advantage over others. For instance, the size of the enterprise, the availability of scarce raw materials, the presence or absence of strict environmental regulation by the local municipality, etc., would all come into play, and these are not always factors which are easily calculated in labor-hours.

Augustin Souchy, another anarcho-syndicalist who made extensive studies of various attempts at establishing workers self- management, observed that:

working hours as the only value determinant is unrealistic. Experience shows that the lack of raw material, rarity of quality, differences of consumer goods, highly qualified services, etc. are equally vague determinants. These factors will not change in a socialist economy.” (Beware! Anarchist!, Chicago, 1992. p.42)

One factor which is becoming increasingly important in determining production costs is energy. As the amount of labor decreases due to automation, the amount of energy in terms of fossil fuels, electricity required, etc., increases. This means that while the labor value of many products is going down, their energy value is going up. As long as energy is cheap and abundant, this does not necessarily present a problem. However, in the future, as the southern hemisphere becomes increasingly industrialized and there is a greater demand for energy, and as fossil fuel supplies dwindle, a purely labor-based system of economic accounting would collapse. Energy would either have to be rationed, or some sort of global federation would have to set a tax on energy. Either way, the labor-exchange economy would be forced away from an unregulated market system. On the other hand, the sort of energy accounting based system proposed by some “green” economists is not adequate either, since the energy theory of value does not take into account the qualitative difference between human energy (labor) and non-human energy.

There is no such thing as a perfectly, objective theory of economic value. Each theory has its own hidden biases which will tend to skew the results of any accounting system (this includes the bourgeois scarcity-value system, which favors those who own capital and scarce resources). The best a labor theory of value can do is identify that part of a thing’s (a good or service) value, which is the result of social production. The rest of a thing’s value is contributed by energy, nature, the social infrastructure, and a host of other variables. In a libertarian, self-managed economy, the accounting of these non-labor costs and the distribution of these benefits, therefore needs to go beyond the individual workplaces and their labor accounts. An economic role must be played by the free municipalities (communes), who must set democratic controls over energy, environmental standards, and scarce resources, in order to make sure that those exchanges which take place do not undermine social equality or the capacity of the earth to sustain itself. Therefore, contrary to Guillen, we should insist that whatever exchange or currency system exists in the future, it provide for greater community control and allow all citizens a voice as to how value should be determined.

by Abraham Guillen (translated by Jeff Stein)

As part of our continuing efforts to present anarchist economic theory, we offer this translation from Abraham Guillen’s book, Economia Libertaria. Because of its length, we are publishing it in three parts. The first part was in LLR #14, the conclusion will be in LLR #16.

The Demystification of Politics

The experience of more than half a century of “velvet socialist” [ie. social democrat], Christian democrat and liberal governments practicing Keynesian economics in the West, as well as the totalitarian communist governments of the East with centralized planning, has been that the workers remain wage slaves either way, building up surplus value for the private or State owner. They are exploited as much on one side of the world as another, whether under the governments of Olaf Palme, of Kohl or Honecker, of Thatcher or Reagan, of Gorbachev or Yeltsin.

From this it can be deduced that “state socialism” is neither socialism nor communism, but is instead the collective ownership, usufruct, of the totalitarian bureaucracy over the surplus value extracted by the State. This bureaucratic socialism is the formal critic of private capitalism, but allows it to be transformed in the West into multinational capitalism, and in the East allows capitalism to be restored. Consequently, this leaves “libertarian socialism,” essentially anarchism, as the rational and necessary critic of both private capitalism and of state socialism as bourgeois socialism.

But if libertarian socialism wants to be an alternative to the bourgeois socialism of the West and the social-economic chaos of the East, it must be able to make the beauty and seduction of anarchist utopia compatible with a realistic economic, social and scientific vision of the world, consistent with our time. It must present a social-economic program which overcomes the crises in economy, society, politics, ecology, demographics, energy, of moral and intellectual value. It must seek to harmonize natural resources and human resources in a new social-economic order in which all people have the right to labor and education, in a way that overcomes definitively the old division of manual and intellectual work.

“Is it necessary,” asked Bakunin, “to repeat the irrefutable arguments of socialism, which no bourgeois economist has yet succeeded in disproving? What is property, what is capital in their present form? For the capitalist and the property owner they mean the power and the right, guaranteed by the State, to live without working. And since neither property nor capital produces anything when not fertilized by labor, that means the power and the right to live by exploiting the work of someone else, the right to exploit the work of those who possess neither property nor capital and who are thus forced to sell their productive power to the lucky owners of one or the other.” (Obras. Volume III, p.191)

But let us again insist that the workers, within a self-managed economy where the means of production and exchange are socialized, without either bourgeois owners, or technocrats and bureaucrats of centralized state economic planning, would be capable of conducting the economy themselves.

Now then, a libertarian economy of the self-managed type has to be capable of producing an economic surplus greater than under private or state capitalism; of converting a large part of this surplus to the reproduction of social capital, improving the productivity of labor. Therefore the workers will achieve a higher rate of growth in productive forces than private or state capitalism. There will be, thus, better and greater production with less expense of human effort and greater and better use of automated machinery. This is because only the automation of labor makes it possible to create the technical basis for libertarian communism. Socialism or communism can be justified neither economically, politically nor socially as popular misery. A dominant class backlash would be justified as necessary if the workers eat all their capital without replacing it, or without increasing it more than the soviet bureaucracy or the western bourgeoisie.

Proudhon, quoted by Guerin, concerning the self-managed economic regime, said: “The classes…must merge into one and the same association of producers.” [Would self-management succeed?] “On the reply to this …depends the whole future of the workers. If it is affirmative an entire new world will open up for humanity; if it is negative the proletarian can take it as certain….There is no hope for him in this poor world.” (Daniel Guerin, Anarchism, p.48)

In sum, there is no need to lament, there is a need to educate, to become the protagonist of the future; to prepare oneself to improve things and to make revolutionary changes; to understand the sciences, sociology, economy, and revolutionary strategy; since without a successful revolution, there can be no liberation of the workers, an outcome which cannot delegated to others but must come from the exertion of their own self-powers.

Planning and Self-Management

The planned economy has been praised by the technocrats and bureaucrats of socialism, East and West, as the rationalization and codification of national economies, with the goal of giving them a harmonious law of development, both economic and technological. According to this scheme, all the sectors of production and services will be coordinated so that none of them advances ahead or falls behind so much that it causes a crisis of disproportional development between the branches of industry, agriculture and services. However this supposed “law of harmonious development of national economies” directed by an army of bureaucrats and technocrats has in reality only introduced alongside private capitalism the capitalism of the State, leaving the workers, as always, as dependent wage workers. In both cases the workers are wage slaves that produce surplus value for the capitalist enterprenuers or the State-enterprenuer.

Apologizing for the planned economy, as the scientific economy par excellence which can predict the future with rigorous calculations, able to conduct national economies according to prior objectives based upon macroeconomic calculations, to guide the desired economic development with the help of “control equations” for the month, year, four-year, five-year, all the economic science which was the hallmark of central-planning, was declared as vulgar economic science. Particularly has this been the case in the Soviet Union, although now Yeltsin under the IMF has discovered capitalism, pure and simple, as a new “democratic” economy, even though it impoverishes the workers.

But after many years of centralized planning the national economies have revealed a crisis of underproduction, or undersupply of the market and a crisis of disproportional and unequal development between industry and agriculture, in the USSR and all the countries of the ruble zone. Indicative planning, as advocated in the West by the techno-bureaucratic thought of Keynes, Schumpeter, Galbraith and Burnham, was an economic doctrine, of center and left and including some of the right, taken up by the parties of the social-democrats, socialists, christian-democrats and neo-liberals. These parties mobilize the politicians of the middle class professionals, who aspire to a State-benefactor where, as the first enterprise of all, the technocrats are the directors more than the capitalists properly speaking.

By means of the welfare-State the reformist middle class, from right to left, comes robbing the usufruct of the government. Thanks to the sector of nationalized enterprises, of social security insurance, of public services, and the nationalization of many banks, a “bureaucratic-technocratic bourgeoisie” is created, more solid, if possible, than the old bourgeoisie. Thereafter, if their businesses register a deficit, there is no one who will cancel it, or even less keep account of credits and debtsor if things go bad force the enterprise into bankruptcy. On the contrary, the abundant existence of nationalized enterprises in the West has created a whole series of directors, executives and “businessmen” with inflated salaries, regardless of whether their enterprises can show benefits greater than losses. This “bourgeoisie of the State” is shoving aside the classic bourgeoisie, since the former has political parties monopolizing the State, the nationalized banks, the machinery to print inflated money and to tax with discretion. The only beneficiary from the growing productivity of labor, growing like a foam on the waves, is not a private owning class, but those who indirectly own public property in the form of State property, as a political class.

Accordingly, indicative planning or centralized planning, which aspires to impose a balanced national economic development, has distorted the law of harmonious social division of labor. The welfare State expands the unproductive sector (middle class functionaries, bureaucrats and technocrats), while increasing the productivity of labor in industry and agriculture. This creates an aberrant economy of inflation of the unproductive population which sterilely devours the wealth of societies and nations. It can lead to a total economic crisis, of systematic nature, since in order to resolve it requires more than simply changing leaders. Instead a corrupt, contradictory and antagonistic socio-economic regime of multi-national capitalist monopolies opposed to the general interest must be replaced with universal libertarian socialism.

The economists and politicians of the middle class parties, including in their ranks the reformist union bureaucrats, the professional politicians, the phoney savants (political, economic, and technical), would submit to a social economy, as much in the East as in the West, of a dictatorship of the techno-bureaucracy as “new dominant class.” The bourgeoisie, due to the centralization of capital in both large and small enterprises, diminishes in statistical number, according to the law of mercantile competition, liquidating in the market those capitalists who are smaller and thus equipped with less productive machines which produce at a higher cost. But, in contrast, the bureaucracy, the technocracy, the professional of all types, are augmented more by the very same thing that diminishes the bourgeoisie annihilated by economic competition, the centralization of capital in the multinationals.

The Totalitarian State

In this sense, the State tends to convert itself into the largest of all business enterprises in the West, and as the only business in the East, that is to say, the enterprise which owns all the nationalized enterprises. And thus, under these conditions, the State which owns everything also is the master of all persons who by virtue of their political alienation see the State as God- protector, although the State as sole protector of Society takes from them by taxes, charges or low salaries more than it gives in return. Meanwhile the poor people are hoping that the State is a benefactor, and that a middle class political party will offer to save them in return for their votes. Each day things go from bad to worse, because the countless bureaucrats consume from above the capital which is needed below to maintain full employment in industry and agriculture.

Without debureaucratization and debourgeoisfication there is no way out of the growing economic and social crisis which is caused by the excessive economic waste involved in the sterile consumption of the parasitic classes: the bureaucratic apparatus of the State, the superfluous institutions filled with supernumerous personnel, the administrations of enterprises which have begun to have more “white collars” than productive workers, and finally, a whole series of “tertiary” and “quaternary” services that spend without contributing much to the social wealth. And we are not saying that this happens only in the capitalist countries, but that this affects equally badly the so-called “socialist” countries. By means of centralized bureaucratic planning of their economies, all social capital, labor, national income and economic power is placed in the hands of a techno-bureaucracy of planning, for whom workers and their products are only ciphers in five-year plans.

In this way they create social relations between those who have Power and those who suffer as wage workers not essentially different than those existing in the capitalist countries. So it is that the worker continues as the producer of surplus value, whether for the State or private businesses. Meanwhile the workers do not have the right to self-manage their own workplaces, to democratically decide its organization and the economic surplus produced, nor to elect their own workplace councils by direct and secret vote. Without these rights, centralized planning creates a bureaucracy based upon state property instead of social property, and endeavors to substitute State capitalism for private capitalism. Thus eventually it ends up by alienating into an external power outside of the wage workers, whether under the western capitalist or the soviet model.

The large western capitalist enterprise, national or multi- national, when it concentrates multi-millions in capital and exploits monopolies in production and thousands of workers (for example Fiat, Siemens, I.C.I., General Motors, Unilever, Nestle, Hitachi, or nationalized industrial complexes like IRI, British Steel and INI) leads to a bureaucratic and totalitarian condition within the enterprise. The workers neither know nor elect the administrative councils of these gigantic corporations, anymore than the workers in the former USSR. The directors are forced upon them from above, just as in other ages the mandarins and satraps were designated in the regimes of Asian despotism.

For the Soviet regime to have qualified as socialist, not just semantically but in reality, it would have had as its economic basis the social ownership of the means of production and exchange, the direct democracy of the people instead of the bureaucratic dictatorship of the single Party, the decentralization of power (economic, political and administrative) by the means of a federalism which would have assured the popular participation at all levels of decision-making, political, economic, social, cultural, informational and self-defense. In this way a self- managed, libertarian, self-organized society, would have replaced the dictatorship of the bureaucracy, in which society was regimented and watched-over by the State-employer, all-powerful permanent leaders and the political police of the KGB.

It could be argued that a vision of such nature is utopian or too good to be true, but historical experience shows that centralism cannot create more productive forces than can decentralization and federalism. Centralism is always bureaucratism and consequently consumes unproductively in the salaries of supernumerous personnel. In our epoch computer networks–if they are well programmed, if their memory is updated and constantly renewed, if they register all the fundamental data of a country, a society, an enterprise, a locality, district and region–are more efficient and cheaper for the management of the enterprise or society than the professional politicians or technocrats and bureaucrats of all types.

If the State is given too much power, as under the Soviet model or under the western welfare-State, it will tend towards state control over capital, labor, technology, science, information, industry, of social security and public services. Therefore this absolute power will create a totalitarian State, even though disguised as a parliamentary regime, symbolically under the Soviet model and rhetorically but not in practice in the West. In either case, the totalitarian bureaucracy or the pseudo- democratic political class collectively controls the business of the State as its business, but parasitically as a cancer on Society.

Popular Self-Government

In our school of thought, economic growth, the right of work for all, economic, cultural and technological progress, are developed with fewer obstacles in a libertarian society than in a society under the totalitarian dictatorship of large capitalist monopolies or the capitalism of the State. In both cases, given the great progress realized by our society, the dictatorships of private capital or State capital can be overcome. A self-managed society can be established with social ownership of the means of production and exchange, uniting capital, labor and technology without antagonism over classes or forms of property. This would create an egalitarian society in culture, economics and technology, thanks to an economy of abundance.

It is possible to the give power of self-government to the local communities, districts, provinces and regions, by means of an economic federalism and self-administration which would be integrated into a Supreme Economic Council. This would not be a Gosplan as in the former USSR, but a co-government of things by means of federations of production and services. These federations would function democratically and be self-managed, with the goal of the total process having a law of harmony of development without economic crises of disproportionality between all the branches of production and services. In other words, they would function without relative crises of underproduction or overproduction as occurs, respectively, under State capitalism or private capitalism.

For this to happen, it is necessary to have democracy and economic growth, with an increased productivity of labor. This would also require the full employment of the active population, along with the full participation of all in the decisions and the knowledge for this within reach of everyone. It is necessary to create a libertarian society, in which the elites of power and knowledge and social estates of every type, would be transcended in work, science, capital and technology, by means of effective self- management, the real participation of the people. Thus it would be possible to abolish all class domination, whether that of the bourgeois State and its capitalist economy or that of the bureaucratic, totalitarian State and its centrally planned economy. It is necessary, therefore, to liberate oneself ideologically from parliamentary socialism, from totalitarian communism, from bourgeois democracy which is economic dictatorship, from corporatism of every type–and establishing in their place a democracy of association, self-managed and libertarian, where everyone would be equal in rights and responsibilities, with privileges for no one. Only this type of self-government is government of the people, by the people and for the people.

Federations of Production and Services

The planning of economic, cultural and technological development must arise from the putting of social wealth in common and not under the domination of the State and its techno- bureaucracy. The first case involves a program of harmonizing the proportion of growth of the branches of production and services with full participation from bottom to top, based on a libertarian and federative socialism. The second, the concentration of all power in the hands of the State, leads to centralized planning from top to bottom, without popular participation, so that the workers are more objects than subjects, so many ciphers in the Gosplan, according to the soviet model.

If the worker remains separated from worker by means of private property or State property, there must be between capital and labor a power of domination over those who labor for a wage. The working people can never be emancipated within this mode. Emancipation can not be won individually but only collectively, although each may have free will. The realization of full liberty and personality for the worker requires a self-organized society without the need for State oppression, whether it is called right or left, bourgeois or bureaucratic, conservative or revolutionary. Without self-managed socialism, social property and self- government, all systems are the same.

The salvation of humanity is collective and not individual, because the human is a social being, solidaric, with the aim of self-defense from other species since the paleolithic period. It is the class division of humanity, in the wake of private property and the State, which makes possible the exploitation of man by man, of the proletarian by the proprietor. Along these lines, Bakunin said to his friend Reichel: “All our philosophy starts from a false premise. This is that it begins by always considering man as an individual and not, as it must, as a being who belongs to a collective.” (Oeuvres, Volume II, p.60)

On this sentiment, Proudhon agreed with Bakunin to the extent that man is a social being, needing community and solidarity: “All that reason knows and affirms–leads us to say–that the human being, just the same as an idea, is part of a group… All that exists is in groups; all that form the group are one, and consequently, what is …Outside the group are no more than abstractions, phantasms. By this concept, the human being in general…is from that which I am able to prove positive reality.” (Philosophie du progress, Obras, Volume XX, pp. 36-38)

The human being, in reality, does not exist outside the society from which he/she has appeared as a free subject; but at the same time solidarity with others in daily life, at work, in education, in self-defense, particularly at the beginning of humanity, “mutual aid” was the basis of existence of man associated to man, even though under capitalism man is possessed by an appetite for wealth and the cult of the money-god.

Developing the doctrine of “mutual aid,” Kropotkin, who studied the behavior of many animal species, predicted that this would evolve in a future society:

Society would be composed of a multitude of associations united among themselves for everything which would require their common effort: federations of producers in all branches of production, agricultural, industrial, intellectual, artistic; communities for consumption, entrusted to provide to all everything related to housing, lighting, heating, nutrition, sanitation, etc.; federations of communities between themselves; federations of communities of production groups; groupings even wider still, which would encompass a whole country or including various countries; groupings of people dedicated to work in common for the satisfaction of their economic, intellectual, artistic needs, which are not limited by territorial boundaries. All these associated groups would combine freely their efforts by means of a reciprocal alliance (…); and a complete liberty would preside over the unfolding of new forms of production, of research and of self- organization; individual initiative, not withstanding, would be encouraged and all tendencies towards uniformity and centralization, combatted. (Alrededor de una vida, p. 140)

By means of this federalism based upon libertarian socialism, the economy, the natural and human resources, the balance of natural ecosystems, the full employment of available labor, the leisure and education time at all levels of knowledge, the social- economic and cultural life of locality, district, province, region, nation or the world, can be programmed with the participation of everyone in everything, without creating a great deal of confusion. On the contrary, the local and the universal, the individual and the society, the particular and the general, would be understood perfectly by reason of complete information from computer networks which would register all the important data to accomplish at the end a perfect database. By virtue of this, everyone would know all, avoiding thus a condition in which those with knowledge have the power, as occurs in the totalitarian, bureaucratic, centrally planned countries, where the people are ignored.

The federations of production and services, dividing into natural associations, from the bottom to the top, create the democratic conditions for a planning with liberty. Unlike what happened in soviet Russia, the economic planning would not be entrusted to a dictatorship of technocrats who want to substitute themselves for the old bourgeoisie. To be employed by the total State instead of by an individual boss does not change the condition of dependency and alienation for the worker, except to make the situation worse; since this makes the law into a fraud, a law that does not limit the absolute powers of the State, which corrupts absolutely the few who govern absolutely, the few oppressors and exploiters written in the lists of the “Nomenclature.” To change, therefore, private capitalism for State capitalism from a western pseudo-democratic bourgeoisie to a totalitarian bureaucracy is a poor trade for the wage workers since they do not cease to be what they are, the producers of surplus value for the bourgeoisie or bureaucracy, for the private boss or for the State.

In consequence, as the founders of the IWA put it, “the emancipation of the workers is the task of the workers themselves.” From this point of view, working people can only emancipate themselves by the means of a libertarian socialism of self- management where “the chaos of production would not reign,” but instead there would prevail a planning with liberty, with the participation of workers and citizens at all levels of political and economic decision-making; of information, culture, science and technology; of information processing, gathering, classification, and computerization of data, economic, demographic, political, social, scientific, technical, natural resources, etc.

A social-economic program, with continual popular participation (not indirectly through municipal, regional or national elections), must be by the means of federations in industry, agriculture, and services, integrated into a Federative Council of the Economy, in which all the federations producing goods and services must be represented. By way of example, this “Federative Council of the Economy” would have to integrate, among others, the following federations: Fruits and horticultural products; Cereals; Feed for livestock; Food industry, including imports; Hostelry and Tourism; Wine, beer, and alcoholic beverages; Oils and greases from vegetable and animals; Fishing: boats and canning; Textiles; Furs and leather; Timber and cork; Paper and graphic arts; Chemicals; Construction; Glass and ceramics; Metal machining; Steel; Non-ferrous minerals: metals and alloys; Energy: petroleum, coal, gas, electricity, and atomic energy; Information and the construction of computers, integrated micro-circuits, and semi-conductors; Electronics: numerical controlled machines; Biotechnology; Aero-space; Research and Development, uniting technology with work.

This list of industrial federations does not include all the social and public services, which would be too tedious to number but would have to be represented in the Federative Council of the Economy as well. By example, commerce, banking, sanitation, security and social security, which are enormous, would have to be reorganized, since these entail much unproductive work that would have to be reduced. The goal must be that concrete production is not exceeded by unproductive work, since this would restrain or slow real economic growth. In other words, there must be no false increase in the Gross Internal Product, which occurs when it is incremented solely by services and not in the branches of industry, in either the primary sector (agriculture, fishing, livestock, lumber, minerals, etc.) or the secondary sector (industry of diverse types).

The U.S. economy is booming, at least as measured by the stock market and CEO pay levels. Both the S&P 500 and the Dow Jones indexes hit record highs this Spring, though both are slightly below their pre-Crash highs in inflation-adjusted dollars.

Corporate profits are at record highs, notes the Economic Policy Institute, and top executives are being lavishly rewarded. In 2012, the average CEO of a top-350 American-based corporation pulled in $14.1 million, up 37.4 percent since 2009. From 1978 to 2012, CEO compensation increased 875 percent, more than double stock market growth – the average CEO now earns 273 times as much as the average worker (up from 20 times as much in 1965).

According to the Royal Bank of Canada, the total wealth of the world’s millionaires (the bank includes only liquid assets in its calculations) has risen 14 percent since 2007, right before the Crash. The wealthiest of the wealthy – those with more than $30 million – make up less than 1 percent of millionaires. But they hold over a third, 35.2 percent, of their wealth.

According to the Royal Bank of Canada, the total wealth of the world’s millionaires (the bank includes only liquid assets in its calculations) has risen 14 percent since 2007, right before the Crash. The wealthiest of the wealthy – those with more than $30 million – make up less than 1 percent of millionaires. But they hold over a third, 35.2 percent, of their wealth.

The Washington Post’s Wonkblog (May 28) declares that “The economy is holding up surprisingly well.” So some people are doing very well indeed.

But can we afford all this prosperity?

Stock prices are up 16 percent so far this year, housing prices are on the upswing, but average weekly wages fell 1 percent last year. “Average” pay is creeping up over the longer term, according to Bureau of Labor Statistics figures, but it is creeping up very, very slowly (about 5 percent in the past three decades) – well below increases in productivity, corporate profits, and management pay.

That average conceals much more than it reveals; inflation-adjusted median pay (half make more, half less) has fallen in the past 40 years, and the decline is particularly pronounced at the bottom pay scales. (Median household income is up somewhat, but that’s because more people are working, and working longer hours.) Wages fall, and work-time grows, even as our productivity reaches such heights that our planet is choking to death with the stuff we make. That’s because we have an economy engineered to send money to the top, and to make everyone else bear the costs.

The wealthiest 1 percent of Americans now rake in nearly a quarter of income, and control 40 percent of total wealth. The bottom 80 percent own just 7 percent of the wealth. Governments were created by the rich (despite their incessant grumblings about their taxes) precisely to preserve this state of affairs.

So wages are stagnant at best, and falling for many. Millions are unemployed. Millions more are forced into part-time work, unable to find a job where they can do more than merely subsist. To combat the costs of this social misery, unemployment benefits are being axed, food stamps gutted, schools closed, and social services decimated. We’re producing more than enough to go around, but the only thing in abundance is exploiters.

Some would have us believe that the solution is more job training or better education. It’s true that more-educated people do better economically (and, of course, true education is a social good in itself), but even those with college degrees are seeing lower pay as more graduates are forced into jobs that once required only a high school diploma, or not even that, and ever more jobs are transformed from steady gigs with benefits into contract work and other “flexible” schemes. Indeed, more than 27 percent of college graduates under age 25 are now officially unemployed or under-employed (BLS figures count only involuntary part-time work; adding those forced to accept jobs that do not require their level of education or provide a living wage would surely more than double the figure). So while individual workers might benefit from more education (leaving aside the question of the crushing debt burden facing many recent graduates), this is hardly the solution to our collective economic woes.

Increasingly, we hear employers whining about how difficult it is to find qualified workers (and so they either want the right to import indentured labor from abroad or government subsidies for new hires or training programs). There’s not the slightest evidence to support such claims. Unemployed workers outnumber available jobs in every category, according to BLS statistics (which substantially undercount unemployment). To the extent that bosses are unable to fill openings, it’s because of starvation wages or, increasingly, computer programs that filter out applicants with “too much” experience, a history of receiving a living wage, or who might need a couple of days’ training on a particular software package to get up to speed.

Things are of course much worse across Europe, and everywhere the austerity-peddlers have had their way.

Even some mainstream economists recognize that this economy does not work for the vast majority, even if they hope to salvage it by tinkering at the margins. Writing in the March 8 New York Times, Paul Krugman writes:

We are, in effect, dealing with priests who demand human sacrifices to appease their angry gods – but who actually have no insight whatsoever into what those gods actually want, and are simply projecting their own preferences onto the alleged mind of the market.

This demand for human sacrifice  –  for cuts to workers’ retirement benefits and to food stamps and other welfare programs, for even stingier health care services for those who work for a living, for anything that make life under this capitalist system a little more bearable – is bipartisan. The Obama administration offers up cuts to Medicare and food stamps, and proposes to “fix” the way inflation is calculated to leave Social Security benefits lagging the actual cost of living even more. The Republicans counter with proposals to subcontract retirement and health benefits to for-profit providers, and to sell off students to the lowest bidders.

Both sides are dogmatic supporters of the market and of capitalism (as is Krugman, who simply argues that it needs to be regulated, lest its brutal logic lead to horrors beyond our capacity to absorb), but markets are fundamentally inhuman. We trust our prosperity, our lives, our very planet, to them at our peril.

There is, as we have argued in these pages in the past, more than enough capacity to produce abundant lives for all, should we organize to make that happen. We could (and used to) do far better even under capitalism, by organizing to enforce demands for shorter hours, better conditions, and a more humane society. But if we are content to allow the capitalists and their government lackeys to organize the economy, and more broadly our society, then the current “recovery” is about as good as we can hope for.

by Jeff Stein

Anarchist economics began with Proudhon but eventually developed into two schools of thought: anarcho-syndicalism with its emphasis on mass production industries in an urban environment, and anarchist-communism with its emphasis on egalitarian distribution and small-scale communities. Both these theories developed out of anarcho-collectivism, a radical economic federalism developed by the libertarian elements of the (First) International Workingmen’s Association. Its principal advocates were Michael Bakunin and James Guillaume, but the real credit for the theory of collectivism should go to the workers belonging to the International, who took the various socialist and trade union economic ideas of the time and modified them in light of their own experience.

The Limits of Proudhonian Economics

The collectivists shared a number of ideas with the followers of Proudhon in the International, in particular the concepts of workers self-management of industry and economic federalism. On the other hand they saw a need to go beyond the sort of utopian thinking that led the Proudhonists to believe capitalism might be transformed by the growth of worker cooperatives and mutualist credit. By the time the International was formed in 1864, worker cooperatives had been experimented with for several decades and by now were floundering. In the last years of his life, even Proudhon was forced to admit the cooperative movement was not developing as he had hoped:

Not many years later, in 1857, he severely criticized the existing workers’ associations; inspired by naive, utopian illusions, they had paid the price of their lack of experience. They had become narrow and exclusive, had functioned as collective employers, and had been carried away by hierarchical and managerial concepts. All the abuses of capitalist companies “were exaggerated further in these so-called brotherhoods.” They had been torn by discord, rivalry, defections, and betrayals. Once their managers had learned the business concerned, they retired to “set up as bourgeois employers on their own account.” In other instances, the members had insisted on dividing up the resources. In 1848 several hundred workers’ associations had been set up; nine years later only twenty remained. (Guerin, pp. 47-48)

These same observations were made by the members of the International:

The English section reported on cooperatives. Without denying the usefulness of cooperative organizations, it indicated a dangerous tendency noticeable in a majority of such bodies in England, which were beginning to develop into purely commercial and capitalist institutions, thus creating the opportunity for the birth of a new class – the working bourgeoisie. (Maximoff, p. 47)

The small, isolated, under-capitalized worker cooperatives could barely survive in competition with their better established capitalist rivals. The few cooperatives that prospered, often betrayed their working class supporters and began to operate as though their facilities were their own private property, aided and abetted by the laws and existing capitalist businesses. The failings of the cooperatives had raised the thorny issue of how to turn the socialization of the means of production from an ideal into a practical reality. The solution suggested by the collectivists was to expropriate the means of production from the capitalists and for the workers’ associations to own these “collectively,” no longer recognizing any individual ownership rights to divide up and sell them. The third Congress of the International accordingly passed a resolution that the main purpose of the cooperatives must go beyond narrow self-interest. Instead their purpose must be support the struggle “to wrench from the hands of the capitalists the means of production and return them to their rightful owners, the workers themselves.” (Guillaume, p. 70)

As we have seen, in The Principle of Federation (1863), Proudhon began to sketch the outlines of a sort of economic federalism before he died. This did not, however, prevent his mutualist followers from trying to defend his earlier ideas. At the 1869 Basel Congress of the International, a dispute arose over a resolution calling for the collectivization of the land. The Proudhonists held out for the right of small farmers to own land privately, as long as they did not rent out the land for others to work. Tolain, speaking for the mutualists, suggested the resolution be changed to read,

The Congress declares that, to realize the emancipation of the worker, it must transform the leases of farmland…to contracts of sale: so that ownership, continually in circulation, ceases to be abusive in itself; and consequently [by ensuring the individual worker the right to the product of his labors]…safeguards the liberty of the individual groups. (Guillaume, p. 197)

Bakunin, speaking for the collectivists, disputed the notion that private property, even in a limited form, was justified as a means for safeguarding individual rights.

…the individual is a product of society, and without society man is nothing. All productive labor is above all social labor; “production is only possible through the combination of the labor of past generations with the present generation, there is not ever labor that can be called individual labor.” He [Bakunin] is thus a supporter of collective property, not only of the soil, but of all social wealth. As for the organization of agricultural production, it is concluded by the solidarization of the communes, as proposed by the majority of the commission, all the more willingly that this solidarization implies the organization of society from the bottom upwards, while the proposition of the minority presupposes a State [to guarantee and enforce the terms of sale]. (Guillaume, p. 197)

To be fair to Proudhon and the mutualists, their waffling on the issue of private property was not so much due to ambivalence about collective ownership, as an example of the extremes they were prepared to go to avoid a revolutionary confrontation. Mutualist credit was intended to produce “a new economic arrangement” which would somehow avoid the “shock” of violent confrontation with the capitalists over their property rights. To the collectivists, who were veterans of bitter labor strikes and insurrections, this was hopelessly idealistic. Capitalism had not originated out of a peaceful, democratic debate as to how to organize production to ensure economic justice and well-being for all, but was the product of centuries of fraud, theft, and State-sponsored violence. Proudhon often ignored that these activities were as much a part of the functioning of the existing economy as was the official market side of capitalism. The State and the capitalists would not disappear with a new set of rules, since they, more often than not, did not play by their own rules.

Although Proudhon had discovered many of the contradictions of capitalist economics, his non-confrontational solutions were just too out of touch with reality. What the anarchists needed was to base their economics less on moral arguments than on a positivist materialism. As Bakunin put it:

…Proudhon remained an incorrigible idealist all his life, swayed at one moment by the Bible and at the next by Roman Law …His great misfortune was that he never studied natural science and adopted its methods….As a thinker Marx is on the right path. He has set up the principle that all religious, political and legal developments in history are not the cause but the effect of economic developments. Many others before him had a hand in the unveiling of it and even expressed it in part, but in the last resort credit is due to him for having developed the idea scientifically and having made it the basis of his whole scientific teaching. On the other hand, Proudhon understood the idea of freedom better than Marx. (Jackson, pp. 128-129)

Collectivism and Marxism

The criticism Bakunin made of Proudhon’s idealism was perhaps a kinder version of the same criticism Marx had made in The Poverty of Philosophy. It is on the basis of such statements, as well as his praise for Marx’s Capital, that some argue that Bakunin shared the economic views of Marx. In reality Bakunin and his fellow collectivists differed with Marx on economic grounds as well as on political matters. Bakunin did begin a translation of Capital into Russian, but never completed it. Had his enthusiasm for the work been as overwhelming as some claim, he would no doubt have finished it and collected the remainder of the sum agreed upon by the Russian publishing house (instead of getting expelled at the Hague Congress of the International for allegedly threatening the publisher in order to get out of the deal). A closer look at what Bakunin thought about Capital reveals his real reason for admiring the work:

…nothing, that I know of, contains an analysis so profound, so luminous, so scientific, so decisive and if I can express it thus, so merciless an expose of the formation of bourgeois capital and the systematic and cruel exploitation that capital continues exercising over the work of the proletariat. The only defect of this work…is that it has been written, in part, in a style excessively metaphysical and abstract…which makes it difficult to explain and nearly unapproachable for the majority of workers. (Bakunin, p. 195)

Bakunin, more the revolutionary than the economist, admired Capital as a great piece of revolutionary propaganda. Marx, drawing his facts and figures out of British government documents and parliamentary debates, had hoisted the capitalists by their own petards. This does not mean he endorsed it verbatim. Bakunin had earlier translated The Communist Manifesto into Russian and made no bones about his disagreements with Marx and Engels over their proposals for a centralized state socialist economy.

I am not a communist because communism concentrates and absorbs all the powers of society into the state, because it necessarily ends in the centralization of property in the hands of the state…I want society and collective property to be organized from the bottom upwards by means of free association and not from the top downwards by means of some form of authority…it is in this sense that I am a collectivist. (quoted in Cahm, p. 36)

Rather than a State or a market determining the allocation of resources and the distribution of products, the workers would decide these things themselves by free agreements among the associations. These agreements would be monitored by the communes, and industrial federations to make sure that labor was not exploited. Bakunin, however, recognized that any system of free exchange of products still held the danger of monopoly and private accumulation of wealth, particularly by the self-employed farmer or artisan, who tried to pass on land or equipment to his children. Thus he also called for the abolition of inheritance to prevent the rise of a new working class bourgeoisie.

The International debated the subject of inheritance at its Basel Congress in 1869. Marx was opposed to the International taking a position on the subject of inheritance on the grounds that once the private ownership of the means of production had been abolished (and expropriated by the workers’ government), there would be nothing left to inherit. Even worse, it implied the International would support something other than the state communism of Marx. As Eccarius, speaking for Marx, put it,

the abolition of the right of inheritance can not be the point of departure for the same social transformation: it would be too absurd to require the abolition of the law of supply and demand while continuing the state of conditions of exchange; it would be a reactionary theory in practice. By treating the laws of inheritance, we suppose necessarily that individual ownership of the means of production would continue to exist. (Guillaume, p. 201)

Eccarius was half right. Bakunin and the other collectivists intended that something other than the state ownership of the means of production and central control would exist, but it would not necessarily be capitalist ownership nor a market economy. The full collectivization of the economy would not be carried out by a single decree, but over a generation. Abolition of wage labor by the collectivization of the capitalist employers would be the first step, but the right of the self-employed, particularly the small farmer, to their means of livelihood would be respected. To recognize this right of possession to the tools needed for one’s own labor, however, was not to recognize an ownership right that could be bought and sold or passed on to one’s children. This was the meaning behind the collectivist demand for the abolition of inheritance.

If after having proclaimed the social liquidation, we attempted to dispossess by decree millions of small farmers, they would necessarily be thrown onto the side of reaction, and in order for them to submit to the revolution, it would be necessary to employ force against them…It would be well then to leave them possessors in fact of those small parcels of which they are proprietors. But if you don’t abolish the right of inheritance what would happen? They would transfer their holdings to their children…

If, to the contrary, at the same time that you would make the social liquidation… you abolish the right of inheritance what would remain with the peasants? Nothing but defacto possession, and that possession… no longer sheltered by the protective power of the state, would easily be transformed under the pressure of events and of revolutionary forces. (Bakunin, quoted by Guillaume, p. 203)

The Collectivist Economic Doctrine

Collectivism, unlike Proudhon’s Mutualism or Marxism, was not a well developed theory, the product of a single mind. Its principal advocates were socialist revolutionaries and workers caught up in the events of the time: the upheavals of 1848 which occurred throughout Europe, the birth of the labor unions, and the Paris Commune of 1871. As far as they could tell, a social revolution was not an abstract goal looming far off in the distance, but something that had to be prepared for right away. Some sort of workable economic program had to be agreed upon by the labor movement, which had broad appeal to the various socialist and labor groupings that made up the International, without locking everyone into something they might regret later. This explains why collectivism often was so sketchy in details, and some of its advocates disagreed among themselves over various points.

The closest thing to a “definitive” statement of collectivism is an essay written by James Guillaume in 1874, “Ideas on Social Organization” (see Dolgoff, pp. 356-379). Guillaume begins by emphasizing that there can be no “blueprint” for social revolution, since it must be left up to the workers themselves to decide how best to organize themselves in their own areas. However, having said that, he begins to make various suggestions about the collectivist approach. First the system of wage labor will be abolished by the workers “taking possession” of all capital and tools of production, i.e. the collectivization of property. The self-employed and the owners of family businesses are to be left alone to operate as they wish, but with this important exception: “his former hired hands, if he had any, will become his partners and share with him the products which their common labor extracts from the land.” (Dolgoff, p. 359)

The internal organization of the worker collectives, working conditions, hours, distribution of responsibilities, and share of income, etc., are to be left in the hands of their members: “Each workshop, each factory, will organize itself into an association of workers who will be free to administer production and organize their work as they think best, provided that the rights of each worker are safeguarded and the principles of equality and justice are observed.” (Dolgoff, p. 363, my emphasis)

However the fact that the collectivists were willing to tolerate those groups which decided to distribute income according to hours worked, does not mean the collectivists believed in the principle, “to each according to their work.” As Guillaume makes clear, this is only justified (where it is practiced) as a temporary expedient, to discourage over-consumption during the transition period when capitalist conditions of scarcity will not yet have been overcome.

In some communities remuneration will be in proportion to hours worked; in others payment will be measured by both the hours of work and the kind of work performed; still other systems will be experimented with to see how they work out. The problem of property having been resolved, and there being no capitalists placing a tax on the labor of the masses, the question of types of distribution and remuneration become secondary. We should to the greatest possible extent institute and be guided by the principle From each according to his ability, to each according to his need. When, thanks to the progress of scientific industry and agriculture, production comes to outstrip consumption, and this will be attained some years after the Revolution, it will no longer be necessary to stingily dole out each worker’s share of goods… (Dolgoff, p. 361)

Although collectivism promotes the greatest autonomy for the worker associations, it should not be confused with a market economy. The goods produced by the collectivized factories and workshops are exchanged not according to highest price that can be wrung from consumers, but according to their actual production costs. The determination of these honest prices is to be by a “Bank of Exchange” in each community (obviously an idea borrowed from Proudhon).

…the [labor] value of the commodities having been established in advance by a contractual agreement between the regional cooperative federations [ie. industrial unions] and the various communes, who will also furnish statistics to the Banks of Exchange. The Bank of Exchange will remit to the producers negotiable vouchers representing the value of their products; these vouchers will be accepted throughout the territory included in the federation of communes. (Dolgoff, p. 366) The Bank of Exchange …[will] arrange to procure goods which the commune is obliged to get from outside sources, such as certain foodstuffs, fuels, manufactured products, etc. These outside products will be featured side by side with local goods…and all goods will be uniformly priced. [Since similar goods all have the same average labor value.] (Dolgoff, p. 367)

Although this scheme bears a strong resemblance to Proudhonian “People’s Banking,” it should be noted that the Banks of Exchange, along with a “Communal Statistical Commission,” are intended to have a planning function as well.

…each Bank of Exchange makes sure in advance that these products are in demand [in order to risk] nothing by immediately issuing payment vouchers to the producers. (p. 367) ….By means of statistics gathered from all the communes in a region, it will be possible to scientifically balance production and consumption. In line with these statistics, it will also be possible to add more help in industries where production is insufficient and reduce the number of men where there is a surplus of production. (Dolgoff, p. 370)

As conditions permit, the exchange functions of the communal banks are to be gradually replaced by the distribution of goods “in accordance with the needs of the consumers.” (p. 368) Until that point is reached, the local community has the responsibility for providing certain basic needs for everyone without regard for production done by that particular individual. Among these essential needs to be distributed freely are education, housing, health, personal security and fire protection, disaster relief, and food services. The worker collectives engaged in these essential communal services will not be required to exchange them for their “labor value,” but “will receive from the commune vouchers enabling them to acquire all commodities necessary for the decent maintenance of their members.” (Dolgoff, p. 365)

Therefore each “commune” is to provide a basic standard of living for all its members during the transitional period leading towards economic abundance. Those people desiring a higher income will be given the right of access to the means of production in order to produce goods both for themselves and for exchange. Each worker collective, however, will not have to shift for itself but will receive assistance from the communes, and local and regional industry associations.

…social organization is completed, on the one hand by the establishment of regional corporative federations comprising all the groups of workers in the same industry; and on the other by the establishment of a federation of communes….The corporative federations will unite all the workers in the same industry; they will no longer unite to protect their wages and working conditions against the onslaughts of their employers, but primarily to guarantee mutual use of the tools of production which are the property of each of these groups and which will by a reciprocal contract become the collective property of the whole corporative federation. In this way, the federation of groups will be able to exercise constant control over production, and regulate the rate of production to meet the fluctuating consumer needs of society….The statistics of production, coordinated by the statistical bureaus of every a rational manner of the hours of labor, the cost price of products and their exchange value, and the quantities in which these products should be produced to meet the needs of consumers. (Dolgoff, pp. 376-377)

A Limited Form of Communism

In his essay, “Must We Apply Ourselves with an Examination of the Ideal of a Future System?”, Peter Kropotkin pointed out that the anarcho-collectivism advocated by Bakunin, Guillaume, and the anarchists in the First International, was actually a variety of anarchist communism, but “in an altered and limited form” (Miller, p. 59). The anarcho-collectivists felt that full communism, ie. the free distribution of all goods and services, would have to wait until the economy had been reorganized and the scarcity artificially created by the capitalist market had been overcome. Until then much of production would be according to the principle of “to each workplace according to their product.” This is not the same as the state collectivists who argued for “to each worker according to their work,” and called for elaborate schemes of income hierarchy. The worst that can be said about the anarcho- collectivists, is that they were willing to tolerate income differences at various workplaces for the sake of giving each collective the autonomy to decide for themselves. This was, however, not their ideal. Even for the transition period, the anarcho-collectivist principle was income equality for all working in the same collective.

Do not the manager’s superior training and greater responsibilities entitle him to more pay and privileges than manual workers? Is not administrative work just as necessary to production as is manual labor – if not more so? Of course, production would be badly crippled, if not altogether suspended, without efficient and intelligent management. But from the standpoint of elementary justice and even efficiency, the management of production need not be exclusively monopolized by one or several individuals. And the managers are not at all entitled to more pay… (Bakunin, quoted in Dolgoff, p. 424)

A much more serious problem for collectivism is the inequality which would inevitably arise between workers due to the exchange of products. The collectivists sought to ameliorate this to a certain extent by giving the investment arm of the communes, the Banks of Exchange, a more activist role in economic planning, and by putting an income floor under all workers by providing free housing, food, and public services. However, this creates further possible sources of inequality, since the communal service workers are supposed to work in return for meeting all their needs regardless of their productivity. Thus a possible source of conflict arises between a communist service sector and an exchange-based production sector. If the production goes well, the communal workers may resent the higher incomes gained by the production workers. If production goes poorly, the production workers may resent the income security of the service workers.

For the collectivists these problems were seen as minor, if recognized at all. Guillaume, for instance, assumed that the material abundance developed during the transitional period would bring about a blossoming of morality, which would soon make the exchange economy irrelevant. Unfortunately, this begs the question, since he did not bother to define what “abundance” is and how we are to know when we have achieved it. We can safely predict that in any future economy there is virtually no limit to human desires for material goods, while there will always be limits to what society and the ecology are able to provide without causing a breakdown. “Abundance” means different things to different people. The danger is that by leaving this point of development undefined, those who may be the economic”winners” of the transitional period, may be unwilling to make the next step.

The Collectivist Legacy

The main contribution of the collectivists to anarchist economics was their attempt to anticipate many of the problems which would be encountered during the revolutionary transition from capitalism to stateless communism, and their emphasis on the need for finding a balance between ultimate goals and day-to-day realities. These methods contributed enormously to the early successes of the 1936 revolution in Spain, where the anarchist movement retained a strong collectivist tradition. The specific proposals made by Guillaume and others, while useful as an example of applying anarchist principles to existing conditions, have lost most of their relevance. We do not live in 19th century europe nor 1930s Spain, but in a high-tech economy threatened by environmental exhaustion. In most industries, technology has developed well beyond the point needed for “abundance” in 19th century terms. This makes the question of defining the minimum level of abundance all the more important for modern anarchists, as well as the more practical problem of how to go beyond a crude exchange economy during the transition.

Bibliography

Bakunin, M. Obras Completas , Volume III. Translated by Santillan, Buenos Aires, 1926.

Cahm, Caroline. Kropotkin and the Rise of Revolutionary Anarchism 1872 – 1886 . Cambridge University Press, 1989.

Dolgoff, Sam. Bakunin on Anarchism. Black Rose Books, Montreal, 1980.

Guerin, Daniel. Anarchism. Monthly Review Press, 1970.

Guillaume, James. L’Internationale : Documents et Souvenirs (1864 – 1878) . Paris, 1905. 4 volumes.

Jackson,J. Marx, Proudhon and European Socialism. Collier, New York, 1966.

Maximoff, G.P. Constructive Anarchism. Chicago, 1952.

Miller, Martin A. Selected Writings on Anarchism and Revolution: P.A. Kropotkin. M.I.T. Press, 1970.

(I would like to thank Nan DiBello for her assistance with this article.)

By Eric Chester, ASR 59

The global economy is mired in the worst crisis since the Great Depression of the 1930s, and yet capitalism has always been characterized by instability and insecurity. An economic system that operates without an overall plan, and in which powerful economic forces act on the basis of maximizing short-run profits, is a system that is inherently unstable. Marx predicted a collapse of capitalism leading to a revolutionary upsurge as early as the 1850s.1 This would appear to be a prediction that has been contradicted by the course of history, but in fact the global economy has been plunged into one crisis after another.
The unpleasant reality we confront today is that although capitalism is constantly changing, the impact of these changes is, on balance, overwhelmingly destructive. Indeed, as capitalism grows and expands, it destroys everything in its path. As the system unravels, more and more workers become permanently displaced from the workforce; income and wealth differentials widen within the already industrialized societies, as an increasing number of countries are added to the list of “failed” nations; and ecological catastrophe threatens the continued existence of the planet as we know it. We are at a crossroads. Either the working class acts as a class and wrests power from the capitalist class, or the system will disintegrate into a catastrophic freefall.
The Business Cycle
Capitalism has always been marked by short-run business cycles in which times of prosperity are followed by harsh times. To some extent, these short-run cycles are self-regulating. Unplanned growth leads to overproduction in certain sectors and investors pull back. Bankruptcies ripple through the economy, allowing venture capitalists to purchase existing assets at bargain prices. Lower prices, and, more importantly, even lower wages, create opportunities for new investment, and the cycle begins again.
Capitalism has also experienced several severe downturns when its continued existence was called into question. Frequently, an economic boom is accompanied by a period of frenzied speculation. When the bubble bursts and speculators go bankrupt, the crisis spreads rapidly through the entire economy, with banks and financial institutions the hardest hit. Investment banks play a vital role in directing investment into new sectors, the dynamic growth sectors. Once confidence in the financial sector has been lost investment spirals downward and the entire economic system confronts a total collapse.
Although a decline in the price of capital goods might help to overcome the down phase of the usual short-run business cycle, the opposite is the case when bankruptcies occur as the result of a sustained and precipitous slump, such as the current one. Firms coming out of administration initiate massive layoffs as venture capitalists squeeze a greatly reduced workforce in a desperate search for profits. In the end, the spiral of bankruptcies that ensues in the course of an economic crisis only reinforces the pervasive collapse in investor confidence, thus making it even more difficult to spur the economy back into sustained growth.
Bailouts and Total War
When the system reaches the point of catastrophic collapse at the onset of a crisis of confidence, the most powerful capitalist interests usually intervene, often in conjunction with the state, bailing out the banks in order to avert a disastrous crash. This happened in the fall of 2008 and into the spring of 2009, with the support of both Presidents Bush and Obama. Confronted with the imminent possibility of a precipitous fall in output, and in stock market prices, the rich and powerful abandoned their distaste for planning and government intervention and agreed to a massive rescue of bankrupt financial institutions, as well as the auto industry. The recent bailout is not the only time that such a crisis intervention has occurred during a financial panic.
An imminent economic collapse is not the only moment of crisis when the government can rapidly assert a dominant role in the economy. The planned mobilization of a nation’s resources when fighting a total war is the other circumstance. During both world wars, the governments of the combatant nations commanded vast resources, becoming the predominant factor in the economy. In some cases, key industries were nationalized, and the rudiments of a national economic plan were put into practice. Segments of the Left, especially mainstream social democrats, viewed these developments as significant steps toward a socialist economy. The move toward a more planned economy was cited as a further proof that a socialist transformation was inevitable. Furthermore, it was argued, the inefficiencies of an unplanned economy were so glaring that even segments of the capitalist class understood the need for a regulated economy, with a substantial public sector that included key industries.
These arguments were advanced by some influential socialists in the United States during World War I, only to quickly be proven totally mistaken. Once the war ended, there was a concerted corporate onslaught designed to ensure that the capitalist class regained its hegemonic control of the economy. The entire network of railroads had been taken over by the federal government during the war, but the railroads were returned to their owners soon after the war came to an end. Public sector spending was sharply curtailed, and any hint of government planning was abandoned. After World War II, the anti-Communist hysteria provided a convenient rationale for dismantling wartime planning, along with the social reforms of the New Deal.
The dire threats arising from a total war provide a temporary crisis situation in which the government displaces the capitalist class as the prime factor in determining investment. In a very different context, a pending economic collapse has the same effect. In both cases, the role of the state as the determining factor in the economy has proven to be a temporary phenomenon. As the crisis passes, the pendulum soon swings back, and the government is forced to retreat.
The Limits of Deficit Financing
The capitalist economy is not self-regulating. Furthermore, emergency bailouts of bankrupt banks and corporations can prevent a rapid and total collapse, but they don’t resolve the crisis, which continues as economic stagnation threatens to deepen into a downward freefall.
Keynesian economists recognize this and argue for active government intervention as an effective means of stabilizing the system. In “normal” times, Keynesian economics can act to provide a certain balance, smoothing out the cycle. Higher interest rates can check the tendency to high inflation rates during the boom years. Deficit financing can enable the government to stimulate output and employment during the downturn. Only a few years ago, many mainstream economists were convinced that counter-cyclical government intervention assured the continued stability of the system. The current crisis has proven that this forecast was nothing more than an ideological rationale for the capitalist system.
In fact, once an immediate crisis situation has been passed, the traditional resistance to government intervention, and, indeed, to any kind of broader plan, reasserts itself. This resistance represents more than an adherence to the ideology of “free markets.” Indeed, the powerful corporate interests that backed the bailout did so in pragmatic disregard for “free market” dogma. One of the essential mechanisms of control held by the capitalist class is its ability to determine how much of its savings it will invest, and in which industries it will invest. To permit the government to become the primary channel for the flow of investment funds is to strip capitalists of a key component of the economic power they control as the ruling class.
It is easy for the wealthy to bring pressure on the government because a rapidly growing debt will lead bondholders to become more fearful of a default. With an increasing public debt to government budget ratio, or public debt to output ratio, interest on the debt starts rising as a proportion of total spending. This can not continue indefinitely since some types of expenditures are viewed as critically important, and thus are extremely difficult to cut. Thus, aside from upholding the interests of the capitalists as the ruling class, bondholders have real concerns that the state will default on interest payments as debt ratios increase. Deficit financing by its nature can only act as a short-term means of stimulating the economy.
Keynesian Economics and the 1930s
These underlying factors produce the curious paradox that Keynesian policies only work in “normal” times to smooth the short-run fluctuations of the business cycle, and not in a time of crisis when the system is threatened with collapse. Yet Keynes developed his General Theory in the 1930s with the express purpose of countering the Great Depression. He was convinced that his policies would enable the industrialized countries to overcome the Great Depression, and to avoid further slides into mass unemployment. Both predictions have proven to be false. Once the “animal spirits”2 of investors have totally soured, as the wealthy few lose confidence in the growth potential of the economy, deficit spending will not succeed in moving the economy back on track.
The experience of the United States in the 1930s provides an interesting case to examine. President Franklin Roosevelt was surrounded by advisers who viewed themselves as social reformers, and who were open to Keynesian economics. The federal government deliberately expanded its expenditures on social services, through deficit financing, with the explicit intention of stimulating economic growth and returning the country to prosperity. These policies were followed from the time FDR was inaugurated in March 1933 until June 1937.
When Roosevelt became president in March 1933, the United States had already experienced four years of economic collapse, during which President Hoover had done virtually nothing to counter the crash. Estimates of unemployment indicate that one out of four workers could not find a job, and millions wandered the country looking to survive.3  This was a catastrophic disaster, one requiring drastic measures.
Roosevelt had no overriding strategy, but he was prepared to take immediate action to counter the crisis. Legislation creating the Civilian Conservation Corps was rapidly enacted by Congress, creating jobs for hundreds of thousands to create nature trails and buildings in national parks, as well as building and repairing basic infrastructure. In 1935, the Works Progress Administration was launched, pump-priming the economy on a large scale with a wide variety of projects that employed a total of eight million workers over the eight years of its existence.4
New Deal programs were funded through deficit financing. Historians have estimated that the unemployment rate fell from 24% in 1933 to 14% in 1937. This was an improvement, but hardly an impressive one. The United States was still bogged down in an economic depression, with millions of workers confronting long periods of unemployment, with little hope for the future.
In early 1937, President Roosevelt’s administration came under heavy attack from corporate interests. The national debt had been rapidly rising, and bondholders were becoming skittish. Furthermore, CIO unions had organized militant strikes and occupations in the automobile industry, as well as other key industries. A spike in unemployment might dampen the militancy of an aroused rank and file.
Roosevelt had always viewed deficit financing as a temporary measure, a brief exception to the norm of a balanced budget. In June 1937, he proposed a drastic cut of three billion dollars in the funding of New Deal programs, with the Works Progress Administration and the Civilian Conservation Corps absorbing most of the cuts.5
The result was a profound shock to the system, with the downturn even more precipitous than that of 1929, at the start of the Great Depression. In the ten months following June 1937, total output fell by 12%, while industrial output dropped by one-third. Estimates of the unemployment rate indicate a jump from 14% in 1937 to 19% in 1938, with 10.4 million workers out of work.6
Roosevelt’s advisors pleaded with him to restore the cuts, but he refused until the spring of 1938, when funding was partially restored. A further collapse was averted, but the economy continued to sputter until the fall of 1939, when military production began to escalate as the European countries prepared for World War II.7
Keynesian policies did not succeed in overcoming the economic crisis of the 1930s, although the technical analysis underlining the policy recommendations was shown to be true. Government spending when not counterbalanced by taxes on the working class has a significant multiplier effect on output, income and employment. Nevertheless, Keynes did not take into account the overall context. First, unlike wartime, countering an economic downturn does not provide the government, even a very popular one such as that of FDR’s New Deal, with sufficient momentum to engage in the level of deficit spending required to counter the collapse in private investment. As a result, the economy remains stuck in the doldrums, although no longer at the trough of the cycle.
Second, Keynes’s analysis views pump priming as a temporary fix. The government gives the system a boost and then the economy returns to its previous course. In fact, during a severe downturn investor confidence does not respond to deficit financing. Once the government moves toward a balanced budget, usually by reducing spending on social services, output falls, moving back to the level where it was prior to the government intervention. The underlying problem, the refusal by the wealthy few to invest, has not been resolved.
The only way deficit financing could work in the midst of a severe economic downturn is if it were to be made a permanent feature of the economy, but this can never happen. Deficit financing can only be a temporary measure because the state is taking over an essential task in a capitalist economy, one reserved to the capitalist class. It follows that the rich and powerful will use all of their power to ensure that deficits are cut and they again become the driving force in the economy, determining the flow and direction of investment.
The experience of the United States in the 1930s provides an archetypical model. In spite of New Deal pump-priming, the Great Depression only came to an end with the start of World War II. Such a solution to the current economic crisis is no longer possible. Capitalism is a dynamic system in which certain innovations are fostered. The producers of armaments are always seeking deadlier weapons that require fewer soldiers to deploy them. Thus, a future total war would be over quickly and would leave the planet a radioactive wasteland. Smaller, localized wars of occupation do not necessitate a huge output of military weapons and do not involve enormous armies. Indeed, the United States was fighting two localized wars in 2008 and yet still experienced the worst economic downturn since the Great Depression. In the current context, the military can not provide the sustained demand needed to lift a country out of the mire of economic stagnation.
The Myth of Neo-Liberalism
In analyzing the failure of Keynesian economics to resolve the tendency of the capitalist economy to veer into an economic collapse, the emphasis has been on the underlying economics and class relations, and not on ideological dogma. The current “common wisdom” of the Left ascribes the defeat of Keynesian economics to the ascendancy of neo-liberal ideologues. This is a highly dubious explanation.
There is nothing new about the theory that the capitalist system is self-regulating, and that any government intervention can only make the situation worse by upsetting the automatic correcting mechanisms built into a market economy. Similar ideas were formulated by the Austrian school of economists in the late nineteenth century in response to the rise of a working class movement influenced by Marxism.
There is no doubt that this perspective has more traction now than even a few decades ago, but this is hardly because of its cogency or insights. The globalization of production has provided the objective basis for the rise of neo-liberalism. Corporations have outsourced their factories and mills to low-wage countries, thus destroying unions in the private sector. Unions provided the essential base of support for social democratic parties that legislated the welfare state in Western Europe, and for the liberal wing of the Democratic Party as well.
As transnational corporations create a global workforce, corporate bosses see no need to pay wages and benefits to workers in the previously industrialized countries that are higher than those paid to low-wage workers in Bangladesh, China or India. This drive to reduce wages is not a matter of ideology, but rather the pragmatic imperative of the bottom line. Globalization has substantially shifted the balance of class forces. The rightward tilt in the ideological debate reflects a more fundamental shift in the underlying balance of class forces.
This is not to deny that the rise of neo-liberal ideologues marks a meaningful change in the political terrain. In particular, in the United States, which has a long history of elections dominated by two corporate parties controlled by opportunistic politicians whose political perspective does not extend beyond a commitment to upholding the power of the capitalist class. The Tea Party has a program and an ideology that goes well beyond this, calling for the total dismantling of the welfare state reforms instituted during the New Deal. Its rapid rise in visibility has made a significant impact on the Republican Party, which has begun to present a distinct alternative to the pragmatic centrism of the Democrats.
As socialists, we can recognize that there are genuine differences between the pragmatic Obama Democrats and the Tea Party neo-liberal ideologues. Nevertheless, both approaches remain well within the constraints of mainstream capitalist politics. When leftists target neo-liberalism as the primary problem, they underscore their failure to understand the essential dynamic of the current crisis in their desire to exaggerate the differences between neo-liberals and their pragmatic opponents. This position is often followed by a call for a coalition of the broad Left against the rabid, dogmatic Right, as those on the Left subordinate their radical politics to defeat the perceived threat of a neo-liberal victory.
Global capitalism, not neo-liberalism, is the primary problem, and a rapid transition to a socialist society provides the only possible answer.
Globalization
Capitalism has always had an inherent tendency to expand. Of course, the drive to conquer others precedes the rise of the capitalist system, as imperial rulers have always fought to expand their domain. In the past, this would involve looting and pillaging. The empires that have arisen in modern times have certainly looted and pillaged, but this has been a secondary aspect of their rule.
Historically, a capitalist power has sought to create a distinctive link between the imperial center and the subject countries on its periphery. The British empire of the nineteenth century is the classic example. Industrial production was concentrated in the center, England and Scotland, while industry in the periphery was actively discouraged. The headquarters and coordinating functions of the finance sector were also centrally located in London. Conquered countries were limited to one primary economic role, providing cheap raw materials for the industries of the imperial power. This could entail the exploitation of scarce natural resources, with no regard for the environment, or the extreme exploitation of unskilled labor through the use of force.
In this context, the working class of the imperial power had a vested interest in maintaining the empire. Indeed, a century ago the more far-sighted strategists of the British Empire understood the utility of ensuring the loyalty of the British working class by providing limited social benefits and establishing a minimum wage. In the past, there had been a unique and defined set of economic relationships between the imperial power and its dependent colonies.
The outsourcing of industry and mining to the developing countries has devastated the traditional working class in the developed capitalist countries. Unions in the private sector have been virtually wiped out, and public sector unions have come under intensive attack. As a result, inequalities in income and wealth have significantly widened, thereby increasing the volatility of the system as well as its tendency to become mired in prolonged slumps. Globalization also increases the volatility of the system because it greatly restricts the ability of governments to regulate the economy, and to redistribute income through taxes. The interconnectedness of the global economy also increases the likelihood that a crisis triggered in one country will spread quickly throughout the globe.
Globalization makes the system more volatile, but it only accentuates the fundamental underlying problems. Indeed, the Great Depression of the 1930s occurred decades before corporations began shifting industrial production overseas. Still, globalization adds to the instability of the system, while making it more difficult to pull the economy out of a prolonged downturn.
Regulation
The Keynesian policy of deficit financing as a method of stimulating the economy constitutes one of an array of government programs designed to stabilize the system. Many on the Left are convinced that the deregulation of markets, as driven by the neo-liberals, provides the primary reason for the current global downturn. In their view, future disasters can only be avoided by strict regulation of the economy, especially the financial sector.
At the turn of the twentieth century, progressives pushed for government action to break up the trusts. They called for anti-trust legislation, hoping that the market economy would return to a mythical golden age when small firms, acting independently of each other, operated within competitive markets. This project proved to be a total failure, as large corporations discovered ingenious ways to evade anti-trust legislation in order to create ever more gigantic entities, and to act in collusion with other powerful firms in their market. Capitalist economies have always been dominated by a few large corporations that manipulate prices and outputs so as to maximize profits. These days, corporations span the globe, crossing national borders with ease.
During the New Deal, the focus of reform shifted from anti-trust legislation to the financial sector. The current crisis has led progressives, once again, to argue that strict regulation of the financial sector will be a critical element in a program that will allow the economy to overcome the current slump and prevent another one from occurring. In fact, such a policy is bound to fail.
To start with, a speculative frenzy only occurs when investors are confident of the future and are willing to take risks. The current situation is characterized by investor pessimism, and a reluctance to undertake risky projects. Indeed, investor confidence appears to be heading downward, with no imminent sign of any upswing. The current problem confronting capitalism is not how to curb an unbridled speculative frenzy. Quite the contrary, investors are following an extremely cautious path.
Even if the current crisis were to be overcome, it will be very difficult for any government to enforce strict regulations on the financial sector that inhibit speculative investments. The only time the economy can prosper is when investors are prepared to undertake investments in new sectors where, by definition, the future is unclear and the risks are high. Obviously, there are no gains to society from the kind of scam investments that brought the housing market to a standstill. Still, it is difficult to discern in the midst of a boom what are risky but still potentially worthwhile investments and what are elaborate frauds.
Furthermore, even the most skillful regulation does not touch the underlying problem. Capitalism generates more savings than can be matched by profitable investments. Globalization has further exacerbated this underlying problem by widening the gap between rich and poor. Regulating the financial sector will not add to effective demand, and, indeed, may well reduce it by dampening investment.
There is also little reason to believe that regulation of the financial sector will prove to be effective. Globalization has integrated the world’s financial markets, making it easy to shift funds from country to country. Financial institutions need no longer remain in New York or London, but rather can be relocated to any place that is connected to the internet. Restrictive legislation in the United States and Britain will just speed the rate at which financial institutions move offshore.
Finally, the impetus to enforce strict regulation dissipates as the crisis that spurred these actions fades in memory. As time goes on, enforcement becomes increasingly lax and banks, and financial institutions become more adept in evading the rules. Corporations use their enormous power to press the case for regulatory “reform,” insisting on the need for freeing financial institutions from “unnecessary” restrictive red tape.
This trajectory can be traced in the United States from the 1930s to the recent debacle. During the first days of the New Deal, the Glass-Steagall Banking Bill was passed with the goal of stabilizing the financial sector, in part by making it harder for banks to invest in high-risk loans. One aspect of this was the creation of a tight barrier between retail banks, those taking deposits from individuals and small businesses, and investment banks, which funnel large sums to fund mergers and new technologies, but also underwrite risky investment vehicles. Over the years, the tight separation of the two types of financial institutions was eroded, until legislation passed in 1999, during the Clinton Administration, junked the entire policy, permitting retail banks to merge with investment banks. The funneling of funds from retail banks to the high-risk investments of credit default swaps and real estate investment trusts was one factor facilitating the speculative frenzy in the housing market, which, when it collapsed, triggered the current crisis. It should be noted that this piece of deregulation was not formulated by neo-liberal ideologues, but rather by the pragmatic advisors of Bill Clinton who were enamored with the rapid spread of a global financial sector.
Capitalism is inherently unstable, and subject to extended periods of mass unemployment, bankruptcies and crisis. Government regulation will not prevent economic instability. Efforts to regulate the financial sector in order to prevent destructive speculative booms are bound to fail. These efforts represent yet another case of reformers fruitlessly trying to fix a system through piecemeal changes. Capitalism can not be reformed. It must be fundamentally transformed through a revolutionary process.
Obama and the Economic Crisis
Emergency bailouts of banks and bankrupt corporations can forestall a total collapse, but the economy remains mired in stagnation. The recent course of events in the United States is indicative of the depth of the problems confronting a capitalist system in decline.
President Barack Obama is, above all, a pragmatist. He has no ideological reluctance to using the state to intervene in the economy, and yet he also has no intention of confronting the capitalist class. Very much the corporate centrist, Obama’s economic policy has been marked by cautious timidity. A total collapse has been forestalled, but output remains stalled, and unemployment remains at high levels. The official unemployment rate fell from 10.0% in 2008 to 8.4% in 2011. These figures limit the count of the unemployed to those who are currently out of work, but who are actively seeking employment. A broader figure adds to the number of unemployed those who have become discouraged, as well as those “marginally” tied to the workforce, including older workers who reluctantly retired after finding that work was no longer available. Using this more accurate indicator, the unemployment rate fell from 15.2% in 2008 to 13.5% in 2011.
These statistics demonstrate that the United States remains stalled in the worst economic crisis since the 1930s, and the Administration has done little to overcome it. Obama’s approach to overcoming the crisis has been far more cautious than Roosevelt’s New Deal, as limited as that was. This reflects several factors. First, the bailout of 2008 was enormously expensive, adding significantly to the total debt, and thus making it more difficult to undertake deficit financing to spark a revival. Furthermore, globalization has led to the U.S. debt being held by wealthy individuals and financial institutions from around the world. It is all too easy for those currently holding U.S. bonds to sell them should they become concerned with the federal government’s increasing debt. Such a dumping would significantly increase the interest rate accruing to U.S. bonds, making it more expensive to borrow.
These factors are relevant, but secondary to the significant shifts in the objective situation since the 1930s. Globalization has undermined the strength of the working class in the previously industrialized countries. (In the United States, only 7% of those working in the private sector are union members.) With the working class in retreat, Obama has only agreed to implement a fiscal policy of economic stagnation. This is in contrast with the first years of the New Deal, when Roosevelt authorized deficit financing on a scale that led to lower unemployment rates, although unemployment still remained at depression levels. Globalization makes capitalism even more susceptible to severe economic downturns, while at the same time making it more difficult to recover.
Obama has also been eager to limit the scope of counter-cyclical spending to capital projects that can be viewed as emergency measures, while avoiding projects that widen the scope of projects undertaken by the public sector. New Deal plans to counter mass unemployment were quite different. The Civilian Conservation Corps constructed roads and buildings in wilderness areas that made natural parks more accessible and desirable, and thus stimulated the demand for increased funding for the park system that lasted well beyond the 1930s. The Works Progress Administration was given a broad mandate that led to a variety of projects such as the Federal Theater Project and the Federal Art Project8 that could only inspire working people to demand that the federal government do more than fund a vast military apparatus. The Obama administration has studiously avoided any creativity in envisioning pump-priming projects.
This difference in approach reflects the underlying shift in the balance of class forces. Roosevelt was worried that the working class in the United States might be attracted by Soviet Russia or Nazi Germany. He therefore sought to present a positive alternative, a welfare state which remained a capitalist market economy.
The change in approach to deficit financing also reflects the very different global context in which the United States finds itself. In the 1930s, most Americans believed that the Great Depression was merely a temporary downturn that would be followed by further periods of prosperity. Eighty years later, globalization has led to deindustrialization.
For three decades prior to the economic crisis of 2008, the working class has suffered through declining real wages and a deterioration in essential social services. Although Obama has pursued a fiscal policy of modest economic stimulus that has forestalled a total collapse, state and local governments have not been provided with funds from the federal treasury needed to counteract the precipitous drop in tax revenues at every level of government. As a result, there have been drastic cutbacks in education, health care and mass transit, compounding those that were already in place before the current crisis. Workers are constantly told that austerity is inevitable, and that they will have to live on less, not just now but in the future.
The Eurozone Debt Crisis
The sharp downturn in the global economy has led to a rapid increase in the debt owed by governments in most of the developed capitalist countries. Banks have been bailed out by governments anxious to avoid a collapse of the financial sector. Tax revenues have substantially declined, as output and incomes spiral downward. At the same time, some countries have pursued Keynesian pump-priming policies by increasing expenditures on infrastructure projects, such as roads, railroads, even prestige projects such as venues for the Olympics.
In several countries within the Eurozone, the rise in the national debt has led to a catastrophic collapse in the economy. Generally, these countries are among those with the weakest economies, having the lowest per capita incomes within Western Europe. Still, the crisis is deepening and spreading. Even France and Holland are threatened by the debt crisis, and the possibility that the European Union may disintegrate is very real.
Although several countries are approaching the economic abyss, their paths to this critical point have been strikingly different. Spain had a small debt to output ratio prior to 2008. The Spanish housing market boomed, but once the slump began, mortgages could not be repaid and the banks collapsed. In Greece, the debt to output ratio was high before 2008. The Greek government hoped that the richer EU countries, particularly Germany, would continue to funnel aid its way, permitting the Greeks to construct a network of social services that approached that of the wealthier countries of Western Europe. Once the global crisis hit, the shaky foundation of this fleeting prosperity was exposed, and the economy collapsed.
In both Spain and Greece, official unemployment rates stand at 25%, and interest rates on government bonds have risen to levels that cannot be sustained. Although the specific road to the debt crisis has varied, the results have been very similar. The economic crisis has led to a sharp fall in output and, as a result, tax revenues have fallen as well. As deficits increase, the countries are pressured into sharp cuts in social services, which produce even further cuts in output, and the downward spiral continues as the system spins out of control.
Bondholders observe debt to output ratios rapidly increasing in the weaker Eurozone countries, and they respond by shifting out of the bonds of those countries and into safe havens, such as U.S. government bonds. The increase in those wanting to sell leads to a fall in the price of the bonds of the beleaguered countries, and thus an increase in interest rates. Higher interest rates add to government expenditures, thus creating even larger government deficits, and a further twist in the downward spiral.
As interest rates on government bonds approach 7% per year, bondholders begin to panic, and bankruptcy looms. Interest rates for both Greece and Spain have begun to approach this critical point. To avoid a crisis, the European Union, that is primarily the German government, provides emergency funds to buy the bonds of the targeted country, demanding stringent repayment plans and further cutbacks. The emergency infusion of funds stabilizes the bond market for awhile, until the spiral begins again and the abyss approaches again.
In this situation, austerity measures are self-defeating. Cutting government spending only exacerbates the underlying problem. Still, stimulating the economy through deficit financing will not work either, given the readiness of bondholders to flee from the risk of default. Furthermore, the draconian cuts required to service the emergency loans virtually propel the working class into action, and the militancy of the popular resistance deters the government from fully implementing the austerity program demanded by the European Union and the International Monetary Fund.
There would appear to be only one way out of this impasse within the constraints of a capitalist market economy. The wealthy few must be heavily taxed, and the revenues thus generated used to fund vital social services. This would require a significant shift in the balance of class forces toward the working class. The recent decades have been characterized by the exactly contrary trend, as the gap between the rich and the poor widens even further.
Globalization not only undercuts the power of the working class in the previously industrialized societies, but it also makes it easier for the affluent to hide their incomes in the many tax havens that have sprung up around the world. The ability of nation states to effectively tax wealthy individuals or large corporations has been significantly undermined by globalization. Incomes and corporate profits would have to be taxed at the source, and this would require full and open transparency by corporations to become meaningful. A true accounting would necessitate a direct confrontation with international capital, triggering massive capital flight.
Immediately, the Eurozone countries confronting economic collapse can gain a breathing space by leaving the European Union and defaulting on sovereign debt. By being integrated into a currency zone dominated by Germany, less technologically advanced countries such as Spain and Greece have been saddled with overpriced exports. This has exacerbated the impact of the global downturn, and has been one factor contributing to the economic crisis in these countries. Nevertheless, leaving the Eurozone will not resolve the underlying problems. Investor confidence has been decimated, and a brief upsurge in exports is not likely to remedy the problem.
A Stark Choice
The choice is stark. Either countries such as Greece and Spain move rapidly to overthrow capitalism, and to establish a new society, or economic stability will be restored by quashing the working class, dismantling social services and slashing wages. This is a choice that can not be confined to one country. The revolutionary option will only succeed if it rapidly spreads. The current crisis can not be transcended through half-measures and limited reforms. We need to think in bold terms, to view our commitment to building a new society as an immediate strategic priority, not as a goal for some vaguely defined future.

Notes:
1.  In a letter to Engels written on September 25, 1856, Marx suggested that the crisis had “assumed European dimensions such as have never been seen before.” The two revolutionaries would not “be able to spend much longer here merely as spectators.” Karl Marx and Frederick Engels, Collected Works (London: Lawrence and Wishart, 1983), 40:72.
2.  John Maynard Keynes, The General Theory of Employment, Interest and Money (London: Macmillan, 1936), p. 161.
3.  The federal government did not collect statistics on unemployment during the 1930s, so economic historians have calculated rough estimates based on the available statistics concerning output and income. In 1940, the current system was initiated, based on monthly surveys of the labor force. The estimates of unemployment rates from the 1930s, therefore, are not comparable to the current statistics.
4.  Frank Knight, “The Economic Principles of the New Deal,” in Morton J. Frisch and Martin Diamond, The Thirties: Reconsideration in the Light of the American Political Tradition (De Kalb: Northern Illinois University Press, 1968), p. 92.
5.  William Leuchtenberg, Franklin D. Roosevelt and the New Deal, 1932-40 (New York: Harper and Row, 1963), p. 244.
6.  Richard Polenberg, “The Decline of the New Deal, 1937-1940,” in John Braeman, Robert H. Bremner and David Brody, eds., The New Deal: The National Level (Columbus: Ohio State University Press, p. 255.
7. Knight, “Economic Principles,” p. 94.
8.  Leuchtenberg, Roosevelt and the New Deal, pp. 125-8.

Looking Forward: Participatory Economic for the Twenty First Century by Michael Albert and Robin Hahnel. Boston, South End Press, 1991
Review by Jeff Stein [Published in Libertarian Labor Review No. 12]

The economy in the Soviet Union is a mess and always has been,” say Marxist theorists Michael Albert and Robin Hahnel. The problem isn’t with having a planned economy, but a matter of who is doing the planning. In the Soviet Union, economic planning was exclusively a power of an elite class of “coordinators” [i.e. the Communist bureaucrats]. Thus it should have come as no surprise whose interest the Soviet economy served. Instead of “coordinatorism” the authors propose a rough model of a system of economic planning in which all workers and consumers would have a voice.

The model proposed by the authors is based upon a sort of democratic bargaining in which yearly production proposals made by workplace councils are compared to yearly consumption request made by consumer councils. A series of “facilitation boards” tabulate all the proposals and revises the “prices” of goods and services in terms of additional labor required to meet consumer demands. Goods and services, for which supply is not expected to meet demands, go up in price and vice versa. The councils then revise their previous proposals based upon the new prices. This continues for several rounds or “iteration” of planning proposals until at some point an exact match is made between projected yearly production and consumption. In order to encourage a convergence towards a final plan, councils are limited by how much they can alter a previous proposal in the next round. Proposals leading in direction of convergence can be changed up to 50%. Proposals leading away from an agreement can only be changed by 25%.

To make sure that everyone benefits equally from their economic model, Albert and Hahnel propose that every worker receive an equal share of consumption and be required to work an equal number of hours. In the former case, this can be modified somewhat by local consumer councils, based upon individual needs. A local consumer council can decide to increase or decrease the share of individual members; as long as the council’s total consumption stays the same. In the case of the latter, the requirement to work an equal number of hours is accompanied by the requirement that the overall quality of working conditions also be equal for all workers. Thus every worker is required to have a “balanced job complex”, made up of an average amount of pleasant tasks and drudgery.

The idea of “balanced job complexes” comes from the traditional socialist rejection of the capitalist division of labor, which condemns most individuals to a life of dull, repetitive, often dangerous hand labor, in order to free up a minority for the more creative and artistic work. Unlike some socialists (principally other Marxists) who merely propose to ameliorate the bad side effects of the division of labor by complex wage schemes, etc., Albert and Hahnel insist on doing away with the division of labor entirely. They argue that the quality of work assignments determines the amount of power an individual worker has within the economy. People with more interesting and enjoyable jobs have more control. As the authors put it, “Classlessness and real rather than formal workplace democracy require that each worker has a job complex composed of comparably fulfilling responsibilities.the half dozen or so tasks that I regularly do must be roughly as empowering as the half dozen or so tasks that you regularly do if we are to participate as equals in council decision making.” (p.19, my emphasis)

I am sure many will find Looking Forward a thought-provoking read. However I am not so sure how useful a guide it is towards creating a self-managed social economy. The general idea of allowing everyone to take part in the planning process is good, although I don’t agree on their specific suggestions for how to implement it. I also think their suggestion for making economic planning into a sort of bargaining process through several sessions or “iterations” could be useful. However in many ways I thought their system to be far less decentralized and “participatory” than they claim it to be. The authors tend to be somewhat vague about the role of the government in enforcing their system. For instance what about a workplace council which finds the final plan so intolerable that they refuse to go along with it? Can they negotiate their own separate agreement, or will some higher authority lock them out of their facilities, cut their rations, or worse? The authors say nothing about the right to strike, not to mention the right of voluntary association, the basis of federalism.

The authors, being Marxists, still tend to be complacent about the potential for authoritarian abuses in their model. Their economic organization requires a large number of “facilitation boards”: CFCBs . “Collective Consumption Facilitation Boards,” CFBs . “Consumption Facilitation Boards”, EFBs . “Employment Facilitation Boards,” HFBs . “Housing Facilitation Boards,” IFBs . “Iteration Facilitation Boards,” PFBs . “Production Facilitation Boards,” and UFBs . “Updating Facilitation Boards.” Supposedly the facilitators have no power other than collecting information and communicating it back to society via computer networks. But there is a tremendous amount of power involved in the control of information and its flow, particularly when this information is presented as being “objective and unbiased” (even more so when it is presented as computer data . about which the authors suggest “computers never lie”). Albert and Hahnel argue that such power would not be abused since the facilitator would (theoretically) be limited to the same consumption levels as everyone else and would therefore have nothing to gain by cooking the data. The authors somehow can not envision any other reason for distorting data other than direct economic benefit, such as ideological bias or pursuit of political objectives.

It is not hard to imagine a “facilitatorism” developing if these boards do not have sufficient safeguards placed upon them. It is somewhat disturbing that Albert and Hahnel seem reluctant to insist upon even the most elementary safeguards, such as limiting the terms of board members, since [as they say] this might interfere with the need for “expertise” at facilitation. This is even more surprising considering that they see expertise in every other job as being so unnecessary that it doesn’t interfere with their “job complex” work rotation scheme at all. Apparently anybody can fly a passenger airline jet but it takes a special breed to “facilitate” society.

Even supposing the facilitator had to be changed once and a while (every four years?), however, “job complexing” would not necessarily end the division of labor. The point of doing away with divided labor is to help workers control their own work, to understand the full implications of their efforts by allowing them to play a role in the design of their products and organize their own jobs as they see fit. Thus the artificial separation between hand work and brain work, labor and management, is abolished. Albert and Hahnel, however, have devised more of a socialist job enrichment scheme in which workers would be required to move between several workplaces each week, doing one task here, one task there, as though the sum total of all these fragmented experiences would give them a sense of control over the entire economy. Spending a few hours each week picking apples will not give a construction worker a better understanding of either agriculture or the construction industry. Nor would it necessarily give farm workers more control of their industry. The influx of thousands of part-time workers with no particular knowledge of or interest in the industry, could make matters worse on the job if the part-timers had an equal vote in workplace matters and were played off against the regular workforce.

The division of labor is not negated by forcing workers to frequently change jobs. Instead of empowering workers, such a scheme could make them even more dependent on the few within industry who “facilitate” all the job rating and the rotation of work assignments. Proudhon made this point in reference to similar suggestions by utopian socialists, “As if to change ten, fifteen, twenty times a day from one kind of divided labor to another was to make labor synthetic.Even if such industrial vaulting was practicable . and it may be asserted in advance that it would disappear in the presence of making laborers responsible and therefore their functions personal . it would not change at all the physical, moral, and intellectual condition of the laborer; the dissipation would only be a surer guarantee of his incapacity and, consequently, his dependence.” (System of Economic Contradictions, Tucker, trans., p.186)

Job complexing could certainly work at the workplace level and may be desirable, but making it a strict requirement for shuffling workers between industries is incompatible with self-management. Albert and Hahnel have the relationship between power and desirable work reversed. People do not lack power at their workplaces because they do the lousy jobs; rather they do the lousy jobs because they lack power. It is far more important to discuss the distribution of decision-making within workplaces and industry, than to try to formulate an elaborate job-sharing scheme which should be left up to the workers themselves. Formal democracy hat hides an informal class system is a valid concern, but I suspect that wherever this exists it may have more to do with a minority having a monopoly on information and education and a “good ol’ boy” political network, than with the absence of a system for rating every job for some abstract enjoyment level.

Another problem with the Albert-Hahnel model is its use of the labor theory of value as a means for determining individual consumption levels. The authors are correct in making the simple observation that if society as a whole wants to consume more, that at any given technological level, some people will have to work more. It only seems fair that those who wish to do the extra consuming should have to do the extra working. A problem comes in determining exactly how much each individual’s labor is worth when production is a complex and interdependent social undertaking. Albert and Hahnel get around this problem with their “job complexing”. In theory, every hour of labor is equal to some average because every worker works at the same average level of intensity under the same average working conditions. (This certainly makes things easier for the statisticians.)

Yet even if it were possible to balance all jobs in society according to some average level (and ignoring the huge bureaucracy this might require), Albert and Hahnel sacrifice the most valid application of the labor theory of value, its connection to technological change, while they retain the theory’s negative side effect, its neglect of ecological devastation. One might say, they have kept the bath water and thrown out the baby.

Let’s take a look at the “baby”, the labor theory of value and its connection to technological change. If you wish to make goods and services more plentiful, you must economize and reduce the amount of labor required to reduce them. According to the Albert-Hahnel model, workers at workplaces who adopt more efficient labor-saving technologies would be “rewarded” by being forced to work the hours they saved at less desirable jobs in other industries. Although it is true that this is no worse than under capitalism where labor-saving technology “rewards” workers with unemployment and subsequent loss of income, the point is that under the Albert-Hahnel model workers would be reluctant to adopt new technology since they would not benefit directly. Under a socialist system it would seem that the best reward for improving productivity would be to allow workers to decrease their work hours with no loss of income.

Albert and Hahnel would probably argue that their system would still reward labor saving efforts by giving a collective benefit to all workers. If workplace A, for instance, cuts its labor needs by say five hours a week per worker, then all workers throughout society would experience some small fraction of that reduction spread out proportionally. So even though the workers at workplace A might have to work part of the time elsewhere, instead of the five hours, it might be only 4 hours and 45 minutes at the other job. Even supposing that is sufficient incentive to keep technological progress going, there still remains the problem of using labor time as a method of pricing commodities and services.

One of the criticisms used by the Marxists against any sort of market system for determining prices has been that the “law of supply and demand” creates”commodity fetishism”. Consumers only concerned with getting the most commodities for the lowest price, ignore the labor involved and that lowest price often is accompanied by maximum labor exploitation. Although a pricing system based on labor time, may make this more apparent to consumers, the labor theory of value ignores the ecological costs of goods: energy, raw materials, wastes generated, natural habitats destroyed, etc. These costs can’t be measured in labor units. Thus instead of “commodity fetishism”, Albert and Hahnel would create a “labor fetish”.

For an example of how their use of the labor theory of value ignores ecological costs, let’s use one of their own examples. In the chapter on “Participatory Allocation”, Albert and Hahnel pose the problem of an increased demand for milk. “Sometimes, however, changes will not balance so that the net increase, say, in milk demand must be communicated to milk producers, who then either produce more . by increasing work intensity, hours worked by each employee, or adding personnel . or refuse to increase production.’ (p.80) Clearly, the assumption is that increased production only requires additional human labor. But how about the cattle that actually produce this milk? How about the extra land that must be set aside to feed the cattle, perhaps wilderness and wetlands destroyed? How about the degraded water supply from the animal wastes in the run-off from feed lots or pastures? These ecological consequences can’t be factored into a labor pricing system, and therefore would not show up on the computer terminals of consumers voting on the yearly economic plan.

Looking Forward has been accused by more orthodox Marxists of being an anarcho-syndicalist inspired proposal. Unfortunately this is not so. Although the authors clearly would like to give local economic bodies some autonomy, there still lingers a central plan and a state authority in the background (one the authors claim will wither away as their system has less “need” for it). Some rather ambiguous remarks made towards that end about Cuba suggest that the authors haven’t strayed too far from the Marxist fold. At best the Albert-Hahnel model could be described as “central-planning by referendum”.

While terms like “councils” and “federations” and anarchist quotes litter the text, there is no clear understanding of these demonstrated by the authors. Looking Forward is a utopian Marxist proposal with little anarchism in it.