You’ve heard often and perhaps recently that socialism is defeated and that capitalism is therefore triumphant, as if economic history were a basketball match. Yet socialism, by which one today generally means Soviet Communism, fell for internal reasons. The anti-Communists predictably have taken the credit, in the manner of all chauvinists, but this raises certain questions: what about capitalism? – is it really triumphant? Should it be?
First we ought to clarify what is meant by capitalism. Capitalism here designates exclusive private ownership of productive property, such as factories and telecommunications infrastructure. Property may be thought of as the tools by which wealth is created, and private property as a form of ownership which places economic power and benefits in the hands of the individual as opposed to the state. This, of course, is the main distinction to be made between capitalism and socialism, both of which may be industrial and statist. Capitalism is the ideology of capital; it puts wealth, and not the demos or even the president, in charge.
Wealth as such does not have power. When the capitalist extols the rights of property, it is the rights of those who own the property he has in mind. At the bottom of capitalism you find the proposition, rarely stated, that the rich are specially suited to run things. The argument is almost never put so baldly because capitalists (of the American variety at least) tend to affect a democratic outlook. ‘Meritocracy,’ meaning the rule of the Best and Brightest, expresses the capitalist’s fond belief that America is a level playing field. The best and the brightest, after all, had to work their way up to the top. So the idea that the rich should run things is tempered by the observation that their wealth was fairly amassed, through their effort and according to the rules of the game. Bootstrap democracy distinguishes American ruling-class apology from its aristocratic relations.
Political ideologies are all based upon self-justifying fictions. Democracy flatters the common man, and capitalism flatters those with capital. In the end, someone must rule and someone must be ruled. The fictions qualify prevailing arrangements; rarely do they lead to them. It’s the arrangements themselves that concern us here and not the ideologies. Of the latter we need only note that rarely is one so good as his PR asserts, nor so wicked as claim his adversaries. In this instance, what is true of the capitalist is also true of capitalism. It produces, as does any economic and social system, mixed results. But though the results are mixed, they are not arbitrary. Capitalism establishes certain relationships and trends. The apologists recognise this when they attribute all successes to the Free Market. Their boasts would be meaningless if capitalism didn’t in fact produce a certain predictable kind of outcome.
What, then, is the outcome? Capitalism produces a society which is dynamic and varied. You will find the ultra-rich and the ultra-poor. You will also find extraordinary energy and productive capacity, both of which are organised around effective demand rather than human need. The difference between the two tells us something essential about capitalism. Mere hunger is a human need, but a hungry person with money and the intention to spend it constitutes effective demand. Capitalism will satisfy hunger as demand while ignoring hunger as need. In other words, human needs as such are external to the capitalist system. It is the effective demand that is all-important. What matters are the production and distribution of effective demand-fulfilling consumer goods, and to this end the social, economic, and political systems of capitalist countries tend to be organised. I stress ‘tend’ because in most capitalist countries, including Canada and the US, capitalism competes with other ideologies like democracy. It is thereby limited. A pure-capitalist country (such a thing has never existed, but some so-called developing nations come close) would be indifferent to human need, need being an extra-economic matter.
This is an extraordinary fact of capitalism and thereby deserves careful qualification. I’m not suggesting that capitalism is actively cruel. The point is it is active only as capitalism, active only when it is engaged in exchanges of value and the accumulation of capital. Remove money from capitalism and capitalism is no more. The system collapses; it cannot feed the hungry or clothe the naked or put the unemployed to work. In a well-functioning capitalist economy need is translated into effective demand by paid work or credit. Even in the best of times, however, capitalism is unable to lift millions of people out of poverty; something else inevitably must do the job, and that is socialist democracy.
Here I have suddenly abandoned the term ‘socialism.’ That is because I wish to make a case for social democracy, by which I mean public ownership of public goods and the organisation of human activity around human need. This, I admit, is a weak definition, but it is not inane. We should get over the propagandist’s conception of all socialisms, including social democracy, as Big Brother, and so on. Of course, pure socialism (i.e. abolition of private property) has lead to Big Brother, and it is consequently quite impossible today to discuss statist socialism without considering some very unpleasant facts, such as that it has never worked well for ordinary people. And yet social democracy (as practiced in Norway, for instance) has not fallen, or collapsed, or whatever term you prefer. Indeed, it works quite well. As for Big Brother, let’s consider the capitalists’ fearful prate about ‘managed economies’ and how evil they are, then ask ourselves whether General Motors is not a huge bureaucracy with a centralised, vertically integrated, economy. No, socialist democracy is above all else the temperance of capitalist social relations. Temperance is necessary because the corporate form of governance gets us no closer to economic democracy than does Stalinism. It does however greatly facilitate the mobilisation of capital, which was one of its historic purposes. Nor was the corporation originally designed to suit capital, but rather social needs. Here we encounter both the strength and the Achilles’ heel of modern-contemporary capitalism, the corporation.
The corporation was in the beginning a restricted legal entity, granted specific rights and privileges by state governments. The earliest corporations were constituted to achieve specific public goals requiring extraordinary amounts of capital, such as canal or road construction. Once the project was completed, the corporation was dissolved. Incorporation enabled governments to amass large amounts of capital while protecting individual investors from any losses that may occur. In other words, the public corporation was a useful and necessary instrument for achieving public goals.
Gradually the corporation moved away from its traditional, public function. Investors began to use the corporation to deepen and extend their economic power. Ironically, the demise of the public corporation was hastened by the Jacksonian Democrats, who discerned in the corporation, perhaps correctly, the beginnings of excessive and tyrannical state power. Joined by groups representing wealthy private investors, the Jacksonians successfully advocated the retreat of the corporation from public activities. Corporations were gradually granted new private rights at the same time that they were relieved of public responsibilities. This trend culminated in the early-20th-century decision to grant corporations the rights of persons, specifically freedom of speech and of expression. Unlike persons, however, the corporation would be able to exist eternally, accumulating wealth and power generation after generation. Once a temporary institution with limited powers and a specific public mandate, the corporation became an eternal person with extraordinary economic power and a private mandate to maximise profits.
To date, this arrangement has been tolerated by the public. The increasing influence and even dominance of transnational corporations over the economic and social affairs of the world’s nation-states is nonetheless repugnant to many millions of people. The demos will not long allow corporate capital to practice laissez-faire cannibalism. At some point in the future, citizens will insist that economic arrangements bear a meaningful relation to basic human needs; in other words, they will rediscover economic and social democracy. If the term socialist democracy disturbs you, by all means call it something else. It will be impossible for the plutocrats to resist democracy indefinitely, though goodness knows they will as always try mightily. Once again, a bargain will be struck between capital and the people – but in all likelihood not until a painful, protracted historical lesson is yet again learned, that capitalism on its own does not work. [-August 1998]