The $400 Question: Getting by after 50 years of economic stagnation

from ASR 67

The $400 Question

by Jon Bekken

The Federal Reserve Bank’s annual “Report on the Economic Well-Being of U.S. Households” (released in May 2016) reports that 31 percent of Americans say they are “just getting by” or “struggling”; 22 percent have been forced to take a second job; and 46 percent would be thrown into financial crisis by an unexpected expense of just $400 – forced to borrow money (likely from a payday lender, at usurious rates) or sell something. This, the central bankers report, represents improved economic well-being.

Fifteen percent of the U.S. population is officially poor, and in their new book, $2.00 a Day: Living on Almost Nothing in America, Kathryn Edin and H. Luke Shaefer report that nearly 1.5 million American households receive less than $2 a day in cash income. That figure has nearly doubled since 1996 – the year Bill Clinton and a Republican Congress agreed on a major welfare “reform” bill that tied cash benefits to strict work or training requirements and limited how long benefits could be received.

Pundits and polytricksters proclaimed the reforms a wild success. Many people did get jobs, typically part-time gigs that paid wages too low to support even a single person with any measure of comfort. Because there aren’t enough jobs at the bottom of the labor market to go around, it’s difficult to find full-time jobs, and even more difficult to pair one part-time job with another given the rise of just-in-time scheduling.

As corporations have consolidated, increasing the dominance of  handful of players in most industries, the newly empowered bosses have slashed wages and benefits – pocketing much of the savings for themselves, but also passing it along in the form of higher profits. In transportation and warehousing, for example, the 50 largest firms increased their share of industry revenue by 11.4 percent over the last 15 years, and slashed the share of income going to workers by 7.6 percent. In health care, where concentration rates declined slightly, workers saw an extremely modest 1.8 percent increase over those 15 years. So the better off the bosses are, the worse off the rest of us – at least in relative terms.

“Party Like It’s 1973.” That’s how Business Week headlined a May 2016 piece heralding the return of prosperity, as indicated by the fact that first-time unemployment claims had fallen to their lowest level since November 1973. Actually, they hadn’t: as the graph that followed showed, the current figure is 2.1 million, compared to 1.8 million in 1973. A series of statistics meant to reassure us that times are good followed; all making 1973 look good. The official unemployment rate is higher (though it’s since fallen to 1973 levels, but only because millions of people have given up looking for work), payroll growth was twice as strong in 1973, inflation-adjusted hourly wages were higher, and annual GDP growth was two-and-a-half times higher.

This is I suppose encouraging news for mainstream economists, but it reinforces the point made in ASR 64 about how workers are no better off today than we were 50 years ago. We said it a year ago, and now Business Week concedes the point. They seem to think this is a good thing, but while we’re invited to wax nostalgic for 1970s salaries and fashions (don’t even think about the benefits) the bosses are reveling in the Roaring ’20s, with unprecedented income disparity and so much money rolling around that some parasites can think of nothing better to do with their stolen wealth than to eat it (in the form of gold sprinkled on their food – it’s flavorless and has no nutritional value [quite the opposite], but makes a statement of a sort).

The U.S. Bureau of Labor Statistics says workers have set a new record for the percentage still working in our not-so-golden years. Some 20 percent of people aged 65 and up are still working, the highest level since they started counting many decades ago. (The proportion would likely be much higher were it not for those forced to take early retirement during the great recession, and now unable to claw their way back into the labor market.) A Bloomberg report conceded that the main reason workers are postponing retirement is simply that they can’t afford it, but ended on the cheery note that maybe retirement just isn’t as much fun as it used to be. And, of course, if you had to refinance your home to keep afloat, lost your pension in the recession, and face the prospect of privatized Medicare, retiring may well not look too attractive. But a study by the Employee Research Institute found that while overall satisfaction with retirement is indeed declining, the wealthier you are the more you enjoy retirement. Indeed, the super-rich find retirement so much fun that some are starting in their 40s.

Payday lenders and other “nontraditional” financial services firms see opportunity in all this, of course. Once limited to pawn shops, credit cards and high-interest mortgages, there are now a host of financial instruments designed to part the unwary from their money – and steal their cars, homes and paychecks (or at least anything the cops didn’t seize first through asset forfeiture and high-fee probation programs) in the process.

Rather than adopt measures that would get the government out of the union-busting business, the Obama administration is proposing regulations on the industry that would take effect next year: making sure borrowers are able to pay off a two-week loan in two weeks, that loans can’t be endlessly rolled over to generate new fees, and that a borrower can’t take another payday loan if he or she paid one off less than 30 days ago. (This, of course, would do nothing to address the desperation that forced workers to turn to the loan sharks in the first place; it will simply incentivize the vultures to find new schemes to take advantage of them.)

And many are desperate indeed. Average U.S. life expectancy has dropped in recent years, driven by drug overdoses and suicide. As income has stagnated and the cost of living has continued to climb, many workers have slipped into debt. One study says the average U.S. household with credit card debt is now $15,762 in the hole, with no conceivable way of digging out. (Add in car and student loans, and there are lots of workers who couldn’t clear their debt in five years even if they devoted 100 percent of their income to debt payments.) And since the average household with debt pays $6,658 in interest per year, they inevitably fall deeper into debt with each year that passes.

In today’s mail I see an appeal from Habitat for Humanity which begins, “Did you know there is no county in the entire United States where a family with two minimum wage incomes can afford to pay the rent? Not one!” Some of these families are homeless, others couch surf, a lucky few live in (often dilapidated) public housing, and many are crowded into tiny apartments, always a step or two from eviction. If they manage to find a place where they can manage the rent, it’s probably run-down, likely poisoning their children with lead paint, in a dangerous part of town, far from jobs and quality food and decent schools. Financial catastrophe is always knocking at the door – a couple days home from work sick (or with a sick kid), a car repair, an emergency room visit or a dental bill. That leads to the $400 question.

As organized labor has collapsed, an extreme individualism has stepped in as the alternative – a go-it-alone perspective narrowly focused on getting an education or specialized training, going to where the jobs are (what does it matter if you have a family?), and pulling yourself up by your bootstraps. Of course, there’s no support to make this possible, and growing numbers of our fellow workers find themselves mired in an economy of contract work, low pay, and few, if any, benefits.

We are told that our problems are individual failures, and our successes the result of hard work or, perhaps, a reward from god. But hard work has nothing to do with it. Very few of those pulling down million dollar salaries work anywhere near as hard as the low wage workers whose labor supports them. Developing skills or getting an education only helps you get ahead as long as the boss can’t find a way to outsource or automate the work, and even then only as long as those particular skills are in short supply. Many of those who were persuaded to get degrees in information technology, for example, find themselves on the industrial scrapheap as soon as a new software program comes along or the boss finds workers (perhaps halfway across the globe) who can do the work for half the cost.

The occasional wage slave can escape, but for workers as a whole our lot is simply to toil and to die. Escape is possible, but only if we work together to make it happen. Our problems are not individual problems; they are the inevitable result of our present social and economic arrangements. The solution also is not individual – it will require organization, concerted action, solidarity. Until we come together to make a new world, too many of our fellow workers will remain $400 from financial catastrophe.

Principles of Libertarian Economics pt 2

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).

 

A booming economy?

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.

The Collectivist Transition

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.)

Anarchist Economics

compiled by Jon Bekken

A casual observer of the anarchist movement, restricted to contemporary writings, could be forgiven for concluding that anarchists have no conception of economics. Several years ago a serious debate was carried out in the pages of the British anarchist paper Freedom in which it was argued that all wealth comes from agriculture – that the working class is merely a burden that 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 – deprived of tractors, books and other useful items and confronted with millions of starving city dwellers cluttering up perfectly good farmland that could otherwise be growing crops – might take a somewhat different point of view.

On this side of the Atlantic, countless trees have been killed in furtherance of “arguments” for abolishing work, abandoning technology and turning to a barter economy (or, alternately, to local currencies) both as a strategy for escaping (I hesitate to use the word overthrowing) capitalism and as a principle for reorganizing economic life in a free society. Such approaches may have a certain appeal for lifestylists whose aim is more to reduce the extent to which capital impinges on their personal existence (a rather futile enterprise) than to abolish its tyranny over society, but they are simply irrelevant to those of us truly committed to building a free society.

Although anarchists are of necessity interested in the workings of capitalist economies, our attention is focused on the class struggle. 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. And, most importantly, an anarchist economics would address itself to the problems of maintaining economic activity in a revolutionary situation, and to the sort of economic arrangements which might support a free society.

We have been attempting such a study in the columns of our journal for several years. In our Winter 1991 issue (#10), Libertarian Labor Review (now Anarcho-Syndicalist Review) announced the anarchist economics project which continues to this day. As we said then:

Far too many anarchists nowadays have underestimated the importance of economics in their vision of social change, but this was not always the case. The classical anarchists, who always considered themselves part of the socialist movement, recognized the new economic arrangements created by the social revolution would determine its success or failure. Thus they were forced to create an economic “science,” which although sometimes in agreement with capitalist or marxist economics on various points, must diverge from them to the same extent that it differed in its goals. The notion of a political anarchist who was an economic marxist or economic capitalist – a notion one runs across all too often today – would have struck the original anarchist thinkers as an absurd impossibility. It is our hope that this series will help to show why this is so, as well as to help bring anarchist economics up to date with current developments.So far we expect the series to include discussions of the contributions made by Proudhon, Bakunin and the First International Workers Association, Kropotkin, the Spanish Anarchists and their practical experiences in the Spanish Revolution, as well as those of less-well-known anarchists. We also hope to add to this critiques of Marxist economics and modern capitalist economists such as Keynes and his neo-classical critics. Finally we will look at contributions made by modern economists such as E.F. Schumacher and the appropriate technologists, whose views have converged with those of the anarchist movement in several ways.
Due to the scope of the projected series, we are hoping to get contributions of articles and letters from outside our small collective. We extend an open invitation to all in our movement who are interested in taking part in this series along the lines we have mentioned to get in touch with us…

To date we have published articles on the economic theories advanced by Proudhon, Bakunin and Kropotkin; a translation of a major article by Abraham Guillen; a critique of Marxism; an analysis of the Mondragon cooperatives; and several articles on contemporary economic issues. Our plans for the future include critiques of neo-Marxist and Keynesian economics, and a series of articles building on the anarchist economic tradition to suggest ways in which we might organize production, distribution and consumption in a free society.

Economics is fundamentally the study of how to organize production and consumption to meet human needs most efficiently and satisfactorily. As such, it is inextricably bound up with questions of human values – with our sense of who we are, how we wish to relate to our fellow human beings and to our planet, and how we wish to live our lives. Bourgeois economists have made the mistake of confusing their (fundamentally anti-human) values with economic laws, asserting against all evidence the necessity and efficiency of mechanisms such as markets, wages and (in an earlier day) chattel slavery. Marx similarly seized on bourgeois economists’ claims that the price of commodities is determined by the amount of labor socially necessary to their production for his Labor Theory of Value, a quasi-religious doctrine which cannot hold up to the slightest empirical scrutiny. Wage levels, like the price of all commodities, are set not by their cost of production or the amount of labor they require (though there are of course material constraints; few workers will be paid more than the revenues they make possible or less than it takes to feed them), but by the relative economic, military and social power held by the respective parties. Kropotkin’s research demonstrated that shortages, economic crises and general distress are endemic to capitalism, but are wholly unnecessary. The means to meet all of society’s needs were already at hand a century ago, but instead of doing so capitalism creates a perverse set of incentives encouraging chronic underproduction and deprivation.

Kropotkin argued for restructuring production to decentralize agriculture and industry, arguing that economies of scale and specialization are largely illusory. At the same time, he rejected the notion that it was possible to reduce labor to the individual – to isolate any one worker’s contribution to social production. The simple act of manufacturing a shirt necessitates thousands of workers, from the farmers who grow the cotton (or the chemists who fabricate the nylon), to the makers of the sewing machines (and of the raw materials from which they are manufactured), to the sewing machine operators, to those maintaining the vast economic infrastructure (energy, roads, water, etc.) necessary to production. All production is social. We enrich each other – not only spiritually, but materially as well – as we work, think and play together; and without the efforts of society as a whole no one prospers.

Anarchist economics should begin not from the standpoint of production, but rather from the standpoint of consumption – of human needs. Needs should govern production; the purpose of anarchist economics is not so much to understand the workings of the capitalist economy but rather to study human needs and determine how they might be best satisfied. Every kind of human activity should begin from what is local and immediate, and should link in a cooperative network with no center and no directing agency (federation). Nor is it enough merely to meet people’s material needs – we must also have the means to pursue our artistic, intellectual and aesthetic interests. These are not luxuries, but necessities.

It seems to me that any anarchist economics must begin from certain basic premises:

    • No Markets: Everyone above all has the right to live, and so a free society must share the means of existence among all, without exception. All goods and services should be provided free of charge to all. Those available in abundance should be available without limit, those in short supply should be rationed on the basis of need.
    • No Wages: The notion that people will not work without compulsion is provably false. Far from shirking work when they do not receive a wage, when people work cooperatively for the good of all they achieve feats of productivity never realizable through coercion. Efforts to arrive at “just wages” are necessarily artificial and arbitrary. Labor vouchers, consumption credits and similar schemes are nothing more than attempts to maintain the reality of the wage system while changing its name.
    • What Work and Why? Despite dramatic increases in productivity over the last century, we work as many (and often more) hours as ever, while millions of our fellow workers languish without the means to support themselves. Enormous effort is squandered tracking the flow of money, encouraging people to consume, and making products designed to wear out quickly. Meanwhile, vitally important social needs go unmet. Many jobs can be eliminated, but other jobs (for example, cleaning up the environment or building a viable public transport system to replace our current auto-intensive one) will be created. Some effort will have to go to material assistance to our fellow workers in other parts of the globe to develop economies capable of sustaining themselves and the planet (this is a matter not only of human solidarity, but also of our own self-interest). Nonetheless, there is no reason why we cannot dramatically reduce the number of hours we spend at work, while simultaneously making that time less alienating and better meeting human needs.
    • Self-Management: Under current conditions, too many workers spend long hours doing boring work under unhealthy conditions, while others have no work at all or do work that serves no socially useful purpose. Over-specialization, repetitive drudgery and the separation of manual and mental labor must be replaced with self-managed, cooperative labor.

Self-management necessarily implies federalist economic arrangements. Where “libertarian Marxists” such as Michael Albert and Robin Hahnel suggest a centralized economic planning bureaucracy (albeit under some form of democratic oversight) which would inevitably lead to a dictatorship of the “facilitator” class, an anarchist economics would clearly devolve most decisions to the local level and rely on free agreements to handle coordination. (Of course, difficult issues of how to balance, for example, ecological concerns with production and consumption needs would remain, and some method would have to be developed for addressing them in a way that simultaneously upholds the rights of those most directly impacted by the decisions and the broader social issues at stake.)

Expropriation, direct action, federalism and self-management are the means for making the social revolution and reconstructing society. Ultimately, only the free distribution of necessities, in all their variety, on the basis not of position or productivity, but of need, is compatible with a free society.

As Kropotkin noted a century ago, production and exchange are so complicated that no government would be capable of organizing production unless the workers themselves took charge, “for in all production there arises daily thousands of difficulties that no government can hope to foresee … only the efforts of thousands of intelligences working on problems can cooperate in the development of the new social system and find solutions for the thousands of local problems.” (quoted in Dolgoff, Relevance of Anarchism to Modern Society)

The society we hope to build must necessarily be built on the basis of what presently exists – seizing the existing industries and goods to meet immediate needs, and as the building blocks from which we will construct a free society. To think otherwise is to build castles in the air. As Sam Dolgoff notes, “Anarchy or no anarchy, the people must eat and be provided with the other necessities of life. The cities must be provisioned and vital services cannot be disrupted. Even if poorly served, the people in their own interests would not allow us or anyone else to disrupt these services unless and until they are reorganized in a better way…” So we need to think about how we would manage the transition from what is to what we want (it seems to me that revolutionary unions offer the best prospects). While it is not possible to spell out in every detail how a free society might operate, it is important to think about its general outlines in advance, so that we might build with a vision of where we are trying to go.

Published to Date in our Anarchist Economics Series:

Jeff Stein, “Proudhon’s Economic Legacy,” LLR 10 (Winter 1991), pp. 8-13.

Jon Bekken, “Capitalism is Criminal,” LLR 10 (Winter 1991), pp. 14-19.

Jon Beken, “Kropotkin’s Anarchist Critique of Capitalism,” LLR 11 (Summer 1991), pp. 19-24.

Etcetera, “Dispersed Fordism and the New Organization of Labor,” LLR 12 (Winter 1992), pp. 16-18. Translated by Mike Hargis.

Jon Bekken, “Peter Kropotkin’s Anarchist Communism,” LLR 12 (Winter 1992), pp. 19-24.

Jeff Stein, Revew: “Looking Forward,” LLR 12 (Winter 1992), pp. 25-28.

Jon Bekken, “North American Free Trade,” LLR 13 (Summer 1992), pp. 18-19.

Jeff Stein, “The Collectivist Tradition,” LLR 13 (Summer 1992), pp. 24-29.

Jeff Stein, Review: “Market Anarchism? Caveat Emptor,” LLR 13 (Summer 1992), pp. 33-34.

Michael Bakunin, “The Capitalist System,” Champaign: Libertarian Labor Review, 1993, 15 pp. Translated by G.P. Maximoff and Jeff Stein.

Abraham Guillen, “Principles of Libertarian Economics,” in three parts: LLR 14 (Winter 1993), pp. 20-25; LLR 15 (Summer 1993), pp. 24-30; LLR 16 (Winter 1994), pp. 18-23. Translated and with an afterword by Jeff Stein.

Mike Hargis, “The Myth of the Vanishing Working Class,” LLR 16 (Winter 1994), pp. 2-3.

Jon Bekken, “The American Health Care Crisis: Capitalism,” LLR 16 (Winter 1994), pp. 10-14.

Harald Beyer-Arnesen, “From Production-Links to Human Relations,” LLR 17 (Summer 1994), pp. 13-14.

Jeff Stein, “Marxism: The Negation of Communism,” LLR 17 (Summer 1994), pp. 20-26.

Noam Chomsky, “The “New’ Corporate World Economic Order,” LLR 18 (Spring 1995), pp. 6-11.

Mike Long, “The Mondragon Co-operative Federation: A Model for Our Times?” LLR 19 (Winter 1996), pp. 19-36. With a commentary by Mike Hargis.

Jon Bekken, “The Limits of “Self’-Management Under Capitalism,” LLR 21 (Winter 1997), pp. 29-33.

Rene Berthier, “Crisis of Work, or Crisis of Capital?” LLR 23 (Summer 1998), pp. 19-24. Translated by Mike Hargis.

Jeff Stein, “The Tragedy of the Markets,” LLR 23 (Summer 1998), pp. 30-37.

Jeff Stein, “Scamming the Welfare State,” LLR 24 (Winter 1998-99), pp. 14-18.

Jeff Stein, “Freedom and Industry: The Syndicalism of Christian Cornelissen,” ASR 28 (Spring 2000), pp. 13-19.

Jon Bekken, Review: “Campaigning for a Living Wage,” ASR 28 (Spring 2000), p. 31.

Brian Oliver Sheppard, “Anarchism vs. Right-Wing ‘Anti-Statism,'” ASR 31 (Spring 2001), pp. 23-25.

Jeff Stein, Review: “The Irrational in Capitalism,” ASR 31 (Spring 2001), pp. 26-27.

Brian Oliver Sheppard, “Anarcho-Syndicalist Answer to Corporate Globalization,” ASR 33 (Winter 2001/02), pp. 11-15.

Jeff Stein, Review: “After Capitalism,” ASR 37 (Spring 2003), pp. 33-34.

Jon Bekken, Review Essay: “Work Without End, or Time to Live?” ASR 38 (Winter 2003/04), pp. 23-29.

Also of Relevance:

Frank Adams, “Worker Ownership: Anarchism in Action?” LLR 5 (Summer 1988), pp. 24-26.

Jon Bekken, Review Essay: “In the Shell of the Old?” LLR 5 (Summer 1988), pp. 36-39.

Sam Dolgoff, editor, The Anarchist Collectives: Workers’ Self-Management in the Spanish Revolution. Montreal: Black Rose Books.

Sam Dolgoff, “The Role of Marxism in the International Labor Movement,” LLR 5 (Summer 1988), pp. 27-35.

Sam Dolgoff, The Relevance of Anarchism to Modern Society. Chicago: Charles H. Kerr, 1989.

Peter Kropotkin, Fields Factories and Workshops . New Brunswick: Transaction. A condensed and annotated edition edited by Colin Ward is also available from Freedom Press under the title Fields, Factories and Workshops Tomorrow.

Peter Kropotkin, The Conquest of Bread . New York: New York University Press.

Gaston Leval, Collectives in the Spanish Revolution . London: Freedom Press.

Mike Long, “A Tale of Two Strikes: Education Workers in Hawai’i,” ASR 33 (Winter 2001/02), pp. 19-30.

Mike Long, Review Essay: “Mondragon and Other Co-ops: For & Against,” ASR 29 (Summer 2000), pp. 15-28.

G.P. Maximoff, Program of Anarcho-Syndicalism. (extract from his Constructive Anarchism, published in English in 1952; this section is not included in the only edition of the work now in print.) Sydney: Monty Miller Press, 1985

Pierre Proudhon, What Is Property? (B. Tucker, translator). New York: Dover.

Pierre Proudhon, General Idea of the Revolution in the Nineteenth Century (J. Robinson, translator). London: Pluto Press.

Graham Purchase, “After the Revolution” (Review of D.A. Santillan’s After The Revolution: Economic Reconstruction in Spain Today), LLR 20 (Summer 1996), pp. 38-39.

Jeff Stein, “The Tragedy of the Markets” (Review), LLR 23 (Summer 1998)

Jeff Stein, “Freedom and Industry: The Syndicalism of Christian Cornelissen,” ASR 28 (Winter 2000)

Jon Bekken, “Capitalism and its Economics” (Review) ASR 31 (Spring 2001)

Jon Bekken, “Work without end, or time to live? Fighting over time” (Review Essay), ASR 38 (Winter 2003-04)

Jon Bekken, “The Impossibility of Just Prices” (Review), ASR 41 (Summer 2005)

Iain McKay, “Would cutting wages really reduce unemployment?” ASR 50 (Winter 20

Iain McKay, “On Paul Krugman’s Nobel prize in economics: Class, power & “free” markets,” ASR 51 (Winter 2009)

Iain McKay, “The economics of anarchy,” ASR 53 (Winter 2010)
Iain McKay, “Reforming health care,” ASR 53 (Winter 2010)

Jon Bekken, “The Economics of Freedom,” ASR 54 (Summer 2010)

Iain McKay, “Radical Economics & Labor” (Review), ASR 57 (Winter 2012)

Iain McKay, “Pay Inequality: Where it comes from and what to do about it,” ASR 58 (Summer 2012)

Eric Chester, “The Crisis of Capitalism,” ASR 59 (Winter 2013)

Wayne Price, “Workers’ Self-Directed Enterprises: A Revolutionary Program,” ASR 61 (Winter 2014), pp. 21-24.
Iain McKay, “Anarchist Economics,” ASR 61 (Winter 2014), pp. 25-28.
Brian Martin, “Prosperity Through Self-Management,” ASR 61 (Winter 2014), pp. 39-43.
Jeff Stein, “The Irrational in Economics  (Review), ASR 61 (Winter 2014), pp. 44-47.

Jon Bekken, “(barely) Staying Alive: The US Economy Since the ’70s (50 Years of Economic Crisis),” ASR 64/5 (Summer 2015), pp. 13-16.
Brian Martin, “From Capitalism To Commons,” ASR 64/5 (Summer 2015),  pp. 17-20.

Iain McKay, “Poor Adam Smith,” ASR 66 (Winter 2016),  pp. 21-22.
Iain McKay, “Proudhon, Property & Possession,” ASR 66 (Winter 2016), pp. 23-25.
Jeff Stein, “The Realities of Self-Management” (Review), ASR 66 (Winter 2016), pp. 32-34.

The Crisis of Capitalism

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.

Book Review: Looking Forward

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.

Bakunin: The Collectivist Tradition

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, ie. 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.)

Market Anarchism? Caveat Emptor!

In A Structured Anarchism, John Griffin argues that an anarchist communist society, while a desirable goal in the distant future, is not practical in the short-term. This is because 1) people accustomed to a capitalist society aren’t culturally prepared for it, and 2) the modern economy is too complicated to organize without the “self-regulation” of a market system. Therefore Griffin calls for a series of short term compromises to be made with classical liberal economics, and dubs this “collectivist anarchism.”

Griffin, unfortunately, doesn’t understand collectivism nor economics in general. He manages to garble and lump together the views of Proudhon, Bakunin, and Malatesta. Bakunin was the only collectivist of the three. Proudhon was a mutualist and Malatesta, an anarchist communist. Besides mistakenly lumping them all as “collectivists,” Griffin makes an even bigger error by equating collectivism with “market anarchism.” Collectivism, however, was not based on a market economy, but on a federally coordinated system of “honest exchange” of products at their labor cost. In a market system the prices of products are determined according to their relative scarcity (ie. the “law of supply and demand”). These are not the same thing. Time and again, whether on the issue of markets or money, Griffin proves he is in no position to lecture other anarchists about their shaky grasp of economics. For instance, on page 22 he writes, “The extraction of large amounts of unearned income by the capitalists is a source of inflation, since too much money is generated to buy the available goods, thus encouraging price rises. Any inflation in a collectivist [sic] economy will not be aggravated by this spurious money growth, since those who operate it are remunerated only for work done.”

The extraction of value by the capitalist out of the workers’ gross product has nothing whatsoever to do with the money supply, since the capitalist does not print his/her own money. (In effect, Griffin is saying that a robber creates money when he steals your purse.) If what Griffin was saying were true, the history of capitalism would be one long inflationary spiral, without periodic economic depressions. On the contrary, capitalism, if not interfered with by the state, tends towards economic depressions (which cause deflation), since its constant drive to reduce workers to low wages and unemployment has a depressive effect.

In reality, the individual capitalist has very little control over the money supply, which is a source of constant consternation to the pro-laissez faire monetarists, like Hayek and Milton Friedman, so oddly respected by Griffin (p.23). The monetarists, however, do not suggest that the money supply be set according to what has been produced, since according to them only the market can determine the “true” value of these products anyway. What the monetarists argue is that the state should increase the money supply at a constant rate, so the capitalists can plan ahead without having to worry about whether the state economic planners will overreact to some minor market “adjustment.” According to classical laissez faire theory, business cycles are inevitable and the market eventually corrects itself. As for the effects these cycles have on working people and the poor in the meantime, Hayek and Friedman could bloody well care less. We should not forget the role of the “Chicago Boys” (a group of Friedman’s disciples) in running the economy of the ruthless Pinochet regime in Chile. Griffin should freely choose his mentors more carefully.

The state has always played a key role in the capitalist market and monetary systems. First its role was as a defender of private property, strike breaker of last resort, and as a foundation of a (somewhat) stable currency. More recently it has acted as a “pump primer,” business subsidizer, and money lender of the last resort. The so-called “Keynesian revolution” in capitalist economics was not the beginning of the state’s role in the economy, just an attempt to better play that role in hopes of making a more smooth running system and to stave off its collapse. Griffin himself admits that “the manipulation of the market by both the State and the Capitalists make the so-called ‘free market’ unfree.” (p.24)

Yet by making this admission, Griffin has inadvertently undermined one of his own arguments. On the one hand he attacks the anarchist communist position because “it lacks empirical justification from modern technological societies: it is not enough in my view to dwell on its great ethical strength, and gloss over organizational problems.” (p.24) But on the other, he doesn’t hold his own doctrine up to the same standard. It may be true that the market system “works” (perhaps in the since that the inhabitants of Europe and North America haven’t all starved to death so far), but as he admits it is not a “free market,” and thus cannot be used to accurately predict what might happen in an anarchist version. What of the many problems which would result when the state no longer plays even its “limited” role in the laissez faire sense? Who, for instance, would issue money in his anarcho-market economy and guarantee its value? Although Griffin cites Malatesta to back-up his claim for the necessity of money during the transition towards an anarchist economy, he apparently missed the Malatesta’s admonition that “one should seek a way to ensure that money truly represents the useful work by its possessors…” (Malatesta: Life and Ideas, edited by Richards, p. 101). Griffin, in spite of his enthusiasm for money, doesn’t address this problem.

Unlike the anarchist communists, what Griffin lacks in empirical evidence and practical concern for organizational problems, he can not make up for with “ethical strength.” For in his conciliatory approach towards market economics, he is prepared to sacrifice even the most basic anarchist principles, including the abolition of wage slavery and an end to the private ownership of the means of production: “I think we have to face up to the fact that if some people want to be employed and others want to employ them, then wage labor will continue. Recourse to coercion by anarchists not involved should in my view be regarded as a ‘cure’ which is worse than the disease. As long as libertarian cultures constitute the dominant socializing force, I do not think that the presence of small scale capitalist enterprises is very important.” (p.30)

Perhaps Griffin does not understand the implications of what he has written. We are not talking about economic individualism, self-employment or family businesses (which as long as they don’t employ non-family members, are not capitalist). The only reason workers want to be employed by capitalists is because they have no other means for making a living, no access to the means of production other than by selling themselves. For a capitalist sector to exist there must be some form of private ownership of productive resources, and a scarcity of alternatives. The workers must be in a condition of economic desperation for them to be willing to give up an equal voice in the management of their daily affairs and accept a boss. Wage labor would not be tolerated in an anarchist society anymore than extortion or blackmail, no matter how much the perpetrator might claim the victims “asked for it.” It would not take any “coercion” to get rid of wage labor either, as long as the condition for possession of any productive property is that all workers be given an equal voice in management. If not, the facility in question is given to some other group that will run things democratically.

To the extent that A Structured Anarchism was meant to stir controversy, it has succeeded. If it was meant to lay the foundation for a more practical anarchist economic alternative, it is a botched attempt. Griffin’s “collectivism” might more accurately be described as watered-down mutualism mixed with laissez faire liberal ideology.

–Jeff Stein

Bakunin on The Capitalist System

This pamphlet is an excerpt from The Knouto-Germanic Empire and the Social Revolution and included in The Complete Works of Michael Bakunin under the title “Fragment.”
This, the first complete English translation of this text, was published by ASR in 1993. It continues to be available from us as a pamphlet.
Parts of the text were originally translated into English by G.P. Maximoff for his anthology of Bakunin’s writings, with missing paragraphs translated by Jeff Stein from the Spanish edition, Diego Abad de Santillan, trans. (Buenos Aires 1926) vol. III, pp. 181-196.

Is it necessary to repeat here 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 thus are forced to sell their productive power to the lucky owners of both.
Note that I have left out of account altogether the following question: In what way did property and capital ever fall into the hands of their present owners? This is a question which, when envisaged from the points of view of history, logic, and justice, cannot be answered in any other way but one which would serve as an indictment against the present owners. I shall therefore confine myself here to the statement that property owners and capitalists, inasmuch as they live not by their own productive labor but by getting land rent, house rent, interest upon their capital, or by speculation on land, buildings, and capital, or by the commercial and industrial exploitation of the manual labor of the proletariat, all live at the expense of the proletariat. (Speculation and exploitation no doubt also constitute a sort of labor, but altogether non-productive labor.)
I know only too well that this mode of life is highly esteemed in all civilized countries, that it is expressly and tenderly protected by all the States, and that the States, religions, and all the juridical laws, both criminal and civil, and all the political governments, monarchies and republican — with their immense judicial and police apparatuses and their standing armies — have no other mission but to consecrate and protect such practices. In the presence of these powerful and respectable authorities I cannot even permit myself to ask whether this mode of life is legitimate from the point of view of human justice, liberty, human equality, and fraternity. I simply ask myself: Under such conditions, are fraternity and equality possible between the exploiter and the exploited, are justice and freedom possible for the exploited?
Let us even suppose, as it is being maintained by the bourgeois economists and with them all the lawyers, all the worshippers and believers in the juridical right, all the priests of the civil and criminal code — let us suppose that this economic relationship between the exploiter and the exploited is altogether legitimate, that it is the inevitable consequence, the product of an eternal, indestructible social law, yet still it will always be true that exploitation precludes brotherhood and equality.
It goes without saying that it precludes economic equality. Suppose I am your worker and you are my employer. If I offer my labor at the lowest price, if I consent to have you live off my labor, it is certainly not because of devotion or brotherly love for you. And no bourgeois economist would dare to say that it was, however idyllic and naive their reasoning becomes when they begin to speak about reciprocal affections and mutual relations which should exist between employers and employees. No, I do it because my family and I would starve to death if I did not work for an employer. Thus I am forced to sell you my labor at the lowest possible price, and I am forced to do it by the threat of hunger.
But — the economists tell us — the property owners, the capitalists, the employers, are likewise forced to seek out and purchase the labor of the proletariat. Yes, it is true, they are forced to do it, but not in the same measure. Had there been equality between those who offer their labor and those who purchase it, between the necessity of selling one’s labor and the necessity of buying it, the slavery and misery of the proletariat would not exist. But then there would be neither capitalists, nor property owners, nor the proletariat, nor rich, nor poor: there would only be workers. It is precisely because such equality does not exist that we have and are bound to have exploiters.
This equality does not exist because in modern society where wealth is produced by the intervention of capital paying wages to labor, the growth of the population outstrips the growth of production, which results in the supply of labor necessarily surpassing the demand and leading to a relative sinking of the level of wages. Production thus constituted, monopolized, exploited by bourgeois capital, is pushed on the one hand by the mutual competition of the capitalists to concentrate evermore in the hands of an ever diminishing number of powerful capitalists, or in the hands of joint-stock companies which, owing to the merging of their capital, are more powerful than the biggest isolated capitalists. (And the small and medium-sized capitalists, not being able to produce at the same price as the big capitalists, naturally succumb in the deadly struggle.) On the other hand, all enterprises are forced by the same competition to sell their products at the lowest possible price. It [capitalist monopoly] can attain this two-fold result only by forcing out an ever-growing number of small or medium-sized capitalists, speculators, merchants, or industrialists, from the world of exploiters into the world of the exploited proletariat, and at the same time squeezing out ever greater savings from the wages of the same proletariat.
On the other hand, the mass of the proletariat, growing as a result of the general increase of the population — which, as we know, not even poverty can stop effectively — and through the increasing proletarianization of the petty-bourgeoisie, ex-owners, capitalists, merchants, and industrialists — growing, as I have said, at a much more rapid rate than the productive capacities of an economy that is exploited by bourgeois capital — this growing mass of the proletariat is placed in a condition wherein the workers are forced into disastrous competition against one another.
For since they possess no other means of existence but their own manual labor, they are driven, by the fear of seeing themselves replaced by others, to sell it at the lowest price. This tendency of the workers, or rather the necessity to which they are condemned by their own poverty, combined with the tendency of the employers to sell the products of their workers, and consequently buy their labor, at the lowest price, constantly reproduces and consolidates the poverty of the proletariat. Since he finds himself in a state of poverty, the worker is compelled to sell his labor for almost nothing, and because he sells that product for almost nothing, he sinks into ever greater poverty.
Yes, greater misery, indeed! For in this galley-slave labor the productive force of the workers, abused, ruthlessly exploited, excessively wasted and underfed, is rapidly used up. And once used up, what can be its value on the market, of what worth is this sole commodity which he possesses and upon the daily sale of which he depends for a livelihood? Nothing! And then? Then nothing is left for the worker but to die.
What, in a given country, is the lowest possible wage? It is the price of that which is considered by the proletarians of that country as absolutely necessary to keep oneself alive. All the bourgeois economists are in agreement on this point. Turgot, who saw fit to call himself the ‘virtuous minister’ of Louis XVI, and really was an honest man, said:
“The simple worker who owns nothing more than his hands, has nothing else to sell than his labor. He sells it more or less expensively; but its price whether high or low, does not depend on him alone: it depends on an agreement with whoever will pay for his labor. The employer pays as little as possible; when given the choice between a great number of workers, the employer prefers the one who works cheap. The workers are, then, forced to lower their price in competition each against the other. In all types of labor, it necessarily follows that the salary of the worker is limited to what is necessary for survival.” (Reflexions sur la formation et la distribution des richesses)
J.B. Say, the true father of bourgeois economists in France also said: “Wages are much higher when more demand exists for labor and less if offered, and are lowered accordingly when more labor is offered and less demanded. It is the relation between supply and demand which regulates the price of this merchandise called the workers’ labor, as are regulated all other public services. When wages rise a little higher than the price necessary for the workers’ families to maintain themselves, their children multiply and a larger supply soon develops in proportion with the greater demand. When, on the contrary, the demand for workers is less than the quantity of people offering to work, their gains decline back to the price necessary for the class to maintain itself at the same number. The families more burdened with children disappear; from them forward the supply of labor declines, and with less labor being offered, the price rises… In such a way it is difficult for the wages of the laborer to rise above or fall below the price necessary to maintain the class (the workers, the proletariat) in the number required.” (Cours complet d’ economie politique)
After citing Turgot and J.B. Say, Proudhon cries: “The price, as compared to the value (in real social economy) is something essentially mobile, consequently, essentially variable, and that in its variations, it is not regulated more than by the concurrence, concurrence, let us not forget, that as Turgot and Say agree, has the necessary effect not to give to wages to the worker more than enough to barely prevent death by starvation, and maintain the class in the numbers needed.”1
The current price of primary necessities constitutes the prevailing constant level above which workers’ wages can never rise for a very long time, but beneath which they drop very often, which constantly results in inanition, sickness, and death, until a sufficient number of workers disappear to equalize again the supply of and demand for labor. What the economists call equalized supply and demand does not constitute real equality between those who offer their labor for sale and those who purchase it. Suppose that I, a manufacturer, need a hundred workers and that exactly a hundred workers present themselves in the market — only one hundred, for if more came, the supply would exceed demand, resulting in lowered wages. But since only one hundred appear, and since I, the manufacturer, need only that number — neither more nor less — it would seem at first that complete equality was established; that supply and demand being equal in number, they should likewise be equal in other respects. Does it follow that the workers can demand from me a wage and conditions of work assuring them of a truly free, dignified, and human existence? Not at all! If I grant them those conditions and those wages, I, the capitalist, shall not gain thereby any more than they will. But then, why should I have to plague myself and become ruined by offering them the profits of my capital? If I want to work myself as workers do, I will invest my capital somewhere else, wherever I can get the highest interest, and will offer my labor for sale to some capitalist just as my workers do.
If, profiting by the powerful initiative afforded me by my capital, I ask those hundred workers to fertilize that capital with their labor, it is not because of my sympathy for their sufferings, nor because of a spirit of justice, nor because of love for humanity. The capitalists are by no means philanthropists; they would be ruined if they practiced philanthropy. It is because I hope to draw from the labor of the workers sufficient profit to be able to live comfortably, even richly, while at the same time increasing my capital — and all that without having to work myself. Of course I shall work too, but my work will be of an altogether different kind and I will be remunerated at a much higher rate than the workers. It will not be the work of production but that of administration and exploitation.
But isn’t administrative work also productive work? No doubt it is, for lacking a good and an intelligent administration, manual labor will not produce anything or it will produce very little and very badly. But from the point of view of justice and the needs of production itself, it is not at all necessary that this work should be monopolized in my hands, nor, above all, that I should be compensated at a rate so much higher than manual labor. The cooperative associations already have proven that workers are quite capable of administering industrial enterprises, that it can be done by workers elected from their midst and who receive the same wage. Therefore if I concentrate in my hands the administrative power, it is not because the interests of production demand it, but in order to serve my own ends, the ends of exploitation. As the absolute boss of my establishment I get for my labor ten or twenty times more than my workers get for theirs, and this is true despite the fact that my labor is incomparably less painful than theirs.
But the capitalist, the business owner, runs risks, they say, while the worker risks nothing. This is not true, because when seen from his side, all the disadvantages are on the part of the worker. The business owner can conduct his affairs poorly, he can be wiped out in a bad deal, or be a victim of a commercial crisis, or by an unforeseen catastrophe; in a word he can ruin himself. This is true. But does ruin mean from the bourgeois point of view to be reduced to the same level of misery as those who die of hunger, or to be forced among the ranks of the common laborers? This so rarely happens, that we might as well say never. Afterwards it is rare that the capitalist does not retain something, despite the appearance of ruin. Nowadays all bankruptcies are more or less fraudulent. But if absolutely nothing is saved, there are always family ties, and social relations, who, with help from the business skills learned which they pass to their children, permit them to get positions for themselves and their children in the higher ranks of labor, in management; to be a state functionary, to be an executive in a commercial or industrial business, to end up, although dependent, with an income superior to what they paid their former workers.
The risks of the worker are infinitely greater. After all, if the establishment in which he is employed goes bankrupt, he must go several days and sometimes several weeks without work, and for him it is more than ruin, it is death; because he eats everyday what he earns. The savings of workers are fairy tales invented by bourgeois economists to lull their weak sentiment of justice, the remorse that is awakened by chance in the bosom of their class. This ridiculous and hateful myth will never soothe the anguish of the worker. He knows the expense of satisfying the daily needs of his large family. If he had savings, he would not send his poor children, from the age of six, to wither away, to grow weak, to be murdered physically and morally in the factories, where they are forced to work night and day, a working day of twelve and fourteen hours.
If it happens sometimes that the worker makes a small savings, it is quickly consumed by the inevitable periods of unemployment which often cruelly interrupt his work, as well as by the unforeseen accidents and illnesses which befall his family. The accidents and illnesses that can overtake him constitute a risk that makes all the risks of the employer nothing in comparison: because for the worker debilitating illness can destroy his productive ability, his labor power. Over all, prolonged illness is the most terrible bankruptcy, a bankruptcy that means for him and his children, hunger and death.
I know full well that under these conditions that if I were a capitalist, who needs a hundred workers to fertilize my capital, that on employing these workers, all the advantages are for me, all the disadvantages for them. I propose nothing more nor less than to exploit them, and if you wish me to be sincere about it, and promise to guard me well, I will tell them:
“Look, my children, I have some capital which by itself cannot produce anything, because a dead thing cannot produce anything. I have nothing productive without labor. As it goes, I cannot benefit from consuming it unproductively, since having consumed it, I would be left with nothing. But thanks to the social and political institutions which rule over us and are all in my favor, in the existing economy my capital is supposed to be a producer as well: it earns me interest. From whom this interest must be taken — and it must be from someone, since in reality by itself it produces absolutely nothing — this does not concern you. It is enough for you to know that it renders interest. Alone this interest is insufficient to cover my expenses. I am not an ordinary man as you. I cannot be, nor do I want to be, content with little. I want to live, to inhabit a beautiful house, to eat and drink well, to ride in a carriage, to maintain a good appearance, in short, to have all the good things in life. I also want to give a good education to my children, to make them into gentlemen, and send them away to study, and afterwards, having become much more educated than you, they can dominate you one day as I dominate you today. And as education alone is not enough, I want to give them a grand inheritance, so that divided between them they will be left almost as rich as I. Consequently, besides all the good things in life I want to give myself, I also want to increase my capital. How will I achieve this goal? Armed with this capital I propose to exploit you, and I propose that you permit me to exploit you. You will work and I will collect and appropriate and sell for my own behalf the product of your labor, without giving you more than a portion which is absolutely necessary to keep you from dying of hunger today, so that at the end of tomorrow you will still work for me in the same conditions; and when you have been exhausted, I will throw you out, and replace you with others. Know it well, I will pay you a salary as small, and impose on you a working day as long, working conditions as severe, as despotic, as harsh as possible; not from wickedness — not from a motive of hatred towards you, nor an intent to do you harm — but from the love of wealth and to get rich quick; because the less I pay you and the more you work, the more I will gain.”
This is what is said implicitly by every capitalist, every industrialist, every business owner, every employer who demands the labor power of the workers they hire.
But since supply and demand are equal, why do the workers accept the conditions laid down by the employer? If the capitalist stands in just as great a need of employing the workers as the one hundred workers do of being employed by him, does it not follow that both sides are in an equal position? Do not both meet at the market as two equal merchants — from the juridical point of view at least — one bringing a commodity called a daily wage, to be exchanged for the daily labor of the worker on the basis of so many hours per day; and the other bringing his own labor as his commodity to be exchanged for the wage offered by the capitalist? Since, in our supposition, the demand is for a hundred workers and the supply is likewise that of a hundred persons, it may seem that both sides are in an equal position.
Of course nothing of the kind is true. What is it that brings the capitalist to the market? It is the urge to get rich, to increase his capital, to gratify his ambitions and social vanities, to be able to indulge in all conceivable pleasures. And what brings the worker to the market? Hunger, the necessity of eating today and tomorrow. Thus, while being equal from the point of juridical fiction, the capitalist and the worker are anything but equal from the point of view of the economic situation, which is the real situation. The capitalist is not threatened with hunger when he comes to the market; he knows very well that if he does not find today the workers for whom he is looking, he will still have enough to eat for quite a long time, owing to the capital of which he is the happy possessor. If the workers whom he meets in the market present demands which seem excessive to him, because, far from enabling him to increase his wealth and improve even more his economic position, those proposals and conditions might, I do not say equalize, but bring the economic position of the workers somewhat close to his own — what does he do in that case? He turns down those proposals and waits. After all, he was not impelled by an urgent necessity, but by a desire to improve his position, which, compared to that of the workers, is already quite comfortable, and so he can wait. And he will wait, for his business experience has taught him that the resistance of workers who, possessing neither capital, nor comfort, nor any savings to speak of, are pressed by a relentless necessity, by hunger, that this resistance cannot last very long, and that finally he will be able to find the hundred workers for whom he is looking — for they will be forced to accept the conditions which he finds it profitable to impose upon them. If they refuse, others will come who will be only too happy to accept such conditions. That is how things are done daily with the knowledge and in full view of everyone.
If, as a consequence of the particular circumstances that constantly influence the market, the branch of industry in which he planned at first to employ his capital does not offer all the advantages that he had hoped, then he will shift his capital elsewhere; thus the bourgeois capitalist is not tied by nature to any specific industry, but tends to invest (as it is called by the economists — exploit is what we say) indifferently in all possible industries. Let’s suppose, finally, that learning of some industrial incapacity or misfortune, he decides not to invest in any industry; well, he will buy stocks and annuities; and if the interest and dividends seem insufficient, then he will engage in some occupation, or shall we say, sell his labor for a time, but in conditions much more lucrative than he had offered to his own workers.
The capitalist then comes to the market in the capacity, if not of an absolutely free agent, at least that of an infinitely freer agent than the worker. What happens in the market is a meeting between a drive for lucre and starvation, between master and slave. Juridically they are both equal; but economically the worker is the serf of the capitalist, even before the market transaction has been concluded whereby the worker sells his person and his liberty for a given time. The worker is in the position of a serf because this terrible threat of starvation which daily hangs over his head and over his family, will force him to accept any conditions imposed by the gainful calculations of the capitalist, the industrialist, the employer.
And once the contract has been negotiated, the serfdom of the workers is doubly increased; or to put it better, before the contract has been negotiated, goaded by hunger, he is only potentially a serf; after it is negotiated he becomes a serf in fact. Because what merchandise has he sold to his employer? It is his labor, his personal services, the productive forces of his body, mind, and spirit that are found in him and are inseparable from his person — it is therefore himself. From then on, the employer will watch over him, either directly or by means of overseers; everyday during working hours and under controlled conditions, the employer will be the owner of his actions and movements. When he is told: “Do this,” the worker is obligated to do it; or he is told: “Go there,” he must go. Is this not what is called a serf?
M. Karl Marx, the illustrious leader of German Communism, justly observed in his magnificent work Das Kapital 2 that if the contract freely entered into by the vendors of money —in the form of wages — and the vendors of their own labor —that is, between the employer and the workers — were concluded not for a definite and limited term only, but for one’s whole life, it would constitute real slavery. Concluded for a term only and reserving to the worker the right to quit his employer, this contract constitutes a sort of voluntary and transitory serfdom. Yes, transitory and voluntary from the juridical point of view, but nowise from the point of view of economic possibility. The worker always has the right to leave his employer, but has he the means to do so? And if he does quit him, is it in order to lead a free existence, in which he will have no master but himself? No, he does it in order to sell himself to another employer. He is driven to it by the same hunger which forced him to sell himself to the first employer. Thus the worker’s liberty, so much exalted by the economists, jurists, and bourgeois republicans, is only a theoretical freedom, lacking any means for its possible realization, and consequently it is only a fictitious liberty, an utter falsehood. The truth is that the whole life of the worker is simply a continuous and dismaying succession of terms of serfdom — voluntary from the juridical point of view but compulsory in the economic sense — broken up by momentarily brief interludes of freedom accompanied by starvation; in other words, it is real slavery.
This slavery manifests itself daily in all kinds of ways. Apart from the vexations and oppressive conditions of the contract which turn the worker into a subordinate, a passive and obedient servant, and the employer into a nearly absolute master — apart from all that, it is well known that there is hardly an industrial enterprise wherein the owner, impelled on the one hand by the two-fold instinct of an unappeasable lust for profits and absolute power, and on the other hand, profiting by the economic dependence of the worker, does not set aside the terms stipulated in the contract and wring some additional concessions in his own favor. Now he will demand more hours of work, that is, over and above those stipulated in the contract; now he will cut down wages on some pretext; now he will impose arbitrary fines, or he will treat the workers harshly, rudely, and insolently.
But, one may say, in that case the worker can quit. Easier said than done. At times the worker receives part of his wages in advance, or his wife or children may be sick, or perhaps his work is poorly paid throughout this particular industry. Other employers may be paying even less than his own employer, and after quitting this job he may not even be able to find another one. And to remain without a job spells death for him and his family. In addition, there is an understanding among all employers, and all of them resemble one another. All are almost equally irritating, unjust, and harsh.
Is this calumny? No, it is in the nature of things, and in the logical necessity of the relationship existing between the employers and their workers.

Notes:
1. Not having to hand the works mentioned, I took these quotes from la Histoire de la Revolution de 1848, by Louis Blanc. Mr. Blanc continues with these words: “We have been well alerted. Now we know, without room for doubt, that according to all the doctrines of the old political economy, wages cannot have any other basis than the regulation between supply and demand, although the result is that the remuneration of labor is reduced to what is strictly necessary to not perish by starvation. Very well, and let us do no more than repeat the words inadvertently spoken in sincerity by Adam Smith, the head of this school: It is small consolation for individuals who have no other means for existence than their labor.” (Bakunin)
2. Das Kapital, Kritik der politischen Oekonomie, by Karl Marx; Erster Band. This work will need to be translated into French, because 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… positivist in direction, based on a profound study of economic works, without admitting any logic other than the logic of the facts — the only defect, say, is that it has been written, in part, but only in part, in a style excessively metaphysical and abstract… which makes it difficult to explain and nearly unapproachable for the majority of workers, and it is principally the workers who must read it nevertheless. The bourgeois will never read it or, if they read it, they will never want to comprehend it, and if they comprehend it they will never say anything about it; this work being nothing other than a sentence of death, scientifically motivated and irrevocably pronounced, not against them as individuals, but against their class. (Bakunin)