Beyond Capitalism

Umair Haque has an interesting post up at the Harvard Business Review asking whether Marx was in fact correct about capitalism – not about communism mind you, but about capitalism. Marx, after all, did not simply prescribe a solution, he also put forth a critique of capitalism that Haque thinks might be more applicable to the modern era than we would expect. He approaches this from six of Marx’s prophetic angles: immiseration, crisis, stagnation, alienation, false consciousness, and commodity fetishism.

The long and short of it is fairly straightforward: American workers have seen their wages stagnate even as productivity has increased rapidly, while overall labor’s share of income has fallen drastically compared to those at the top. Meanwhile, capitalism “would be prone to chronic, perpetual crises of overproduction — for they wouldn’t have the means to purchase or invest in enough goods to keep the economy humming.” See, e.g. the last ten or twenty or thirty years, but especially the last ten and the growing debt the dwindling middle class has wracked up.

Then comes stagnation:

Here’s Marx’s most controversial — and most curious — prediction. That as economies stagnated, real rates of profit would fall. How does this one hold up? On first glance, it seems to have been totally discredited: corporate profits have broken through the roof and into the stratosphere. But think about it again, in economic terms: Marx’s prediction concerned “real profit,” not just the mystery-meat numbers served up by beancounters, and chewed over with gusto by “analysts.” When seen in those terms, Marx might be said to have been onto something: though corporations book nominal profits, I’d suggest a significant component of that “profit” is artificial, earned by transferring value, rather than creating it (just ask mega-banks, Big Energy, or Big Food). I’ve termed this “thin value” and Michael Porter has described it as a failure to create “shared value.”

While the economy stagnates and real wages fall, workers begin to feel alienated, lacking meaning or purpose in their work. To make matters worse, even though wages have stagnated, inequality has increased, and workers are alienated we all still operate under the pall of false consciousness, unaware of their own exploitation. Haque asks: “How’s Marx doing on this score? You tell me. I’ll merely point out: America’s largest private employer is Walmart. America’s second largest employer is McDonald’s.”

The whole thing is worth a read.

So if Marx is right about capitalism – not necessarily free markets, mind, but we don’t and probably never will have a truly free market system – but if he’s right about capitalism as it is in practice then what’s to be done? Marxist communism is about as likely as a truly free market society, so that’s out. As I noted recently, some writers are looking to get past the notion of jobs and wage labor altogether (or as much as possible). This isn’t a bad idea, especially given that we’ve been in a long hiring recession that predates the current crisis.

Which brings us to the question of how? How do we go beyond capitalism, or beyond jobs? How do we devise a society that is less immiserating, less alienating, but also not economic suicide?

My problem with the libertarian answer – further deregulation, less government, etc. – is fairly simple. It is unlikely that we can become very much more libertarian as a society, and quite likely that starving the beast even further will simply starve its good parts rather than the bad. In other words, we’ll get the Tea Party vision of America: privatized schools, slashed public benefits, and a really big military and police force, plus more government in the bedroom. I say this is the likely outcome of libertarianism not because this is what libertarianism actually stands for, but simply because it’s the only real example we have of a libertarian movement that goes beyond the general neoliberal push of the last thirty or so years.

That push was a mixed bag, I think. Doing away with wage and price controls is a net good. Doing away with the social safety net seems to be the work-in-progress, however, and I imagine that will end badly.

I guess my thinking is headed in this direction: keep working to free markets, end stupid licensing programs, end the war on drugs, etc. All this stuff is broadly “libertarian” or civil libertarian. All of this is on the one hand.

On the other hand, work to radically improve the welfare state. I don’t mean just make it more efficient, I mean make it much better, more expansive, more redistributive. Go toward something reminiscent of the social democracies of northern Europe. Make work less important to wellbeing. Give workers more autonomy and more agency. Give people more dignity through programs that allow them more time with their kids, more time outside, etc.. Longer maternity and paternity leave, universal healthcare, non-car transportation options, and so forth. A forty hour work week instead of an eighty hour work week.

The question will of course be “What do you think people are entitled to?” and the libertarian answer is predictable. Libertarians believe, to various extents, that taxation is theft or coercion and that any wealth transfer is tantamount to state-sanctioned robbery. The “winners” are being punished by the government, their hard-gotten property transferred at gunpoint to the “losers”.

My answer is this: Society is a compromise. We elect to stay here instead of fashioning Galt’s Gulch in the sea because we are compromising with our democratic peers, electing to stumble through the democratic process. So we pay taxes on things both good and bad and then stumble through the democratic process yet again to make things a tiny bit better. Or much worse, depending on how we bungle democracy. And we do bungle it, very frequently. We bungle other systems worse because they tend to have even more systemic risk.

In any case, it doesn’t matter what people are entitled to, and we’ll never agree on that anyways. In the great democratic compromises that fashion society we make choices about what is best and most practical and most humane. To me this means we do our best to end harmful policies first, but also to craft helpful policies second. So end the war on drugs, but also work toward a society that frees us “from the domination of poverty, violence, culture, prejudice, hunger, ignorance, exploitation and so on and so forth.” Free markets vs. command and control is a false choice.

There is a debate ongoing between various liberal bloggers about the best way forward to achieve this goal. There is the globalize-grow-give sort of neoliberalism approach on the one hand, and the anti-pity-charity pro-labor liberalism on the other. I confess, I’m not sure this division is nearly so cut and dry as I once thought. It strikes me that if we are to really achieve at once a prosperous and egalitarian society you basically need to do both. The middle class needs to grow alongside the rest of the economy. Wages need to grow alongside corporate profits. If we want an economy less centered on jobs, with more opportunity to exit wage labor and stay home with the kids or work in the gig economy or whatever you want to call it, we’ll need a much more robust safety net. We’ll need to create positive labor scarcity, as Ned Resnikoff has argued. Again, this is going back to the ‘market socialism’ concept, and the idea that you can use both public institutions and markets to achieve stated goals.

The economic horizon is gloomy, even beyond the recession. While some goods and services will become cheaper, the nature of our economy will change so that on one end the rich are wealthier and more politically powerful than ever and on the other end the service workers exist in a sort of bread and circuses economy of their own; and very little in the way of a middle class will exist in between. Middle class professional jobs are just the latest to ship overseas or become replaced by technology. As noted above, the largest employers in the country are now Walmart and McDonalds. I don’t think this is a sustainable long-term economic agenda.

In response to this I think there is a strong case that alongside a reasonably free market we need a combination of public welfare programs, public institutions, and middle-class government jobs to strengthen and bolster the long-term viability of the middle class. Inequality will always be with us, but if we hope to avoid the sort of inequality that leads to social unrest, the redistributive state is a necessity. Why is this a bad deal? Why is this a worse deal than the status quo and its web of corporate subsidies, war-making policies, and wealth transfers to the rich? I propose freer markets than the ones we have, an economy as deregulated as say…Denmark or Singapore. Meanwhile, let’s copy some of the social welfare concepts from Denmark and Singapore and make our welfare state more humane.

In short, let’s quit thinking only in terms of productivity and growth, and start thinking about how we invest in human beings. This isn’t to say that productivity and growth are unimportant – quite the contrary – but they are not the only considerations, and I think sometimes our hyper focus on growth, on profits, on the immediate, obscures longer horizons.

Once again, I don’t pretend to have the answers here so much as I have a lot of questions. If a lot of this feels more like intuition than a well-researched-exposition on a New Way forward, that’s because I’m still very much in the weeds.