Socialism Gone Wild

There’s an awful lot of talk about socialism these days. Bernie Sanders’s Presidential campaign has put socialism into the discourse of mainstream American politics in a way that hasn’t been seen since the end of the Cold War. The Green Party’s National Committee is discussing a proposal to make the anti-capitalist nature of the Party – long a more-or-less unspoken if generally accepted principle – an explicit feature of our platform and our values – in a word, to make the Green Party more socialist.

The problem, though, is that no one can seem to agree on what any of that means. Higher taxes and more benefits? To some, including, seemingly, Bernie Sanders, that’s socialism. Complete nationalization of all productive assets, and 100% state ownership of everything? For others, that’s the core definition of socialism (after all, it was the Union of Soviet Socialist Republics, wasn’t it?) Doesn’t socialism mean the elimination of democracy? No, no and no. There’s a whole lot more at stake than just “socialism good” or “socialism bad”, but because of that simplification, a whole lot of people end up blurring things together.  It’s REALLY important to distinguish between three entirely different concepts, that too often get confused or equated or blurred together in discussions like these.

Also, please note that this is not meant to weigh in on the value of the proposal under discussion by the GP National Committee, or as a value judgment on Sanders or his campaign. It’s just my attempt to wade through the clutter that makes public discussions of socialism so problematic.

1. Structure of ownership. Are businesses – the productive assets of a society more generally – owned by private equity shareholders? Then what you have is capitalism. There’s no such thing as a purely capitalist society, because there’s always *something* that’s provided by the government outside of just public safety, courts and national defense. Postal services, education and roads come to mind in that regard; it’s hard to imagine that these couldn’t be considered “productive assets”, but even in the US they’re provided at least in part by the government.

If, on the other hand, those assets are owned collectively, that’s socialism. They can be owned by the national government, in which case we might call that state socialism; that’s the sort that has been most commonly observed in the world (or at least that’s the most widely publicized).

Finally, those assets could be owned collectively but directly by the people who work there, by the community/ies in which the firms are located, or some combination of the two. That type of system has yet to be tried at a national level, although there are plenty of examples of it in practice at smaller-scale levels. The Mondragon community in Spain is one geographically concentrated model; co-ops and other forms of worker ownership are common in the US, as are credit unions, which are owned by their depositors. What the Green Party proposal envisions is trying to promote the latter version on a nationwide scale.

1a. Within that, there’s the question of how decisions get made with regard to the management of those firms. Right now, we have a quasi-democratic system, shareholder democracy, which is premised on the “one share, one vote” model. Shareholders decide based on how much of the company they own, and the larger the company, the more shareholders tend to defer most management decisions to hired employees – CEOs and so on – to make all but the highest-level strategic decisions for the firm. At smaller scales, and especially in non-publicy-traded firms, ownership – and therefore control – tend to be concentrated in the hands of the founders (or their heirs). The co-op model places decision making power democratically in the hands of the people who make up the pool of “stakeholders”, whether it’s workers, neighbors, or some combination, on a one person one vote basis. This is why we (and just about everyone else who talks about it) refer to it as “workplace democracy” – the democratic management of the productive assets of the society by the people who work for the firms, not by the private equity shareholders of those firms.

In capitalism, the proceeds of the firms – the profits – are distributed according to the decisions made by shareholders. They could be returned in the form of dividends, where shareholders get a direct, per-share cash payment, they could be held as reserves (usually in some other investment vehicle), used to acquire other companies, or reinvested in the firm – by expanding or upgrading production facilities, raising workers’ pay, raising managers’ pay, buying back stock shares (to drive up stock price, and simultaneously concentrate control), etc. In socialism, those proceeds go back to the owners too, either the state in state socialist models, or to the workers/communities in true collective ownership models.

2. Distribution of goods and services. Are goods and services distributed according to principles of supply and demand, where the price of a good, and the amount produced, are theproduct of the interchange of many autonomously acting producers and consumers? Then you have a market system. If the amount and cost of goods is determined by some kind of institution, then you have a planned system. Note that this says nothing about the ownership structure. You can have either kind of distribution system in any kind of ownership system. Capitalism + markets is the (ideal type of) the American system, albeit with some degree of regulation (and some degree of manipulation in many industries such that those markets are not entirely free). Capitalism + planning is what you typically saw in the fascist states like Italy, Nazi Germany and Franco’s Spain, where firms were privately owned, and the proceeds of those firms returned to shareholders, but price and output levels were generally determined by the state. (State) Socialism + planning is the system that we think of when we think of the Communist states of the former Soviet Union and its Eastern European allies. Socialism + markets are best exemplified by the Chinese system today – where goods and services are produced in something that is beginning to approximate a competitive market, but most large industrial firms and all banking is still owned by the state.

3. National (and sub-national) government structure. None of the above has anything necessarily to do with how governments are chosen, although some combinations of economic systems tend to be associated with certain kinds of political systems. Planning, whether in capitalism or socialism, tends to require a high degree of coercion in order to implement the plans and to make sure that firms follow the plans; to make sure that raw materials producers only sell their products to official manufacturers, and to allocate labor according to the needs of the state (not necessarily what jobs pay the best, or what workers are most suited for, or personal taste, or whatever other reason people may have for picking one job over another). The level of coercion needed for planned systems tend to make them incompatible with democratic systems of government. But there’s nothing inherently more or less democratic about any of the other types of systems; it’s all a question of how they are implemented.

The chief problem with capitalism in this regard is the tendency of wealth to become concentrated in fewer and fewer hands. Without some kind of redistributive intervention, over time the average marginal rate of return to capital will always be higher than the average marginal rate of return to labor (if you pay your workers more than your revenue, you’ll go out of business). But since not every business always makes a profit, there’s always some degree of turnover between the pool of owners and the pool of workers (and with the rise of worker stock plans, and 401(k) retirement plans and whatnot, there’s some degree of blurring as well). But the tendency is for more and more assets in fewer and fewer hands. And since in capitalism, wealth ownership is the key to power, that leads to fewer and fewer people having more and more say in the selection of political leaders even while the outward form remains democratic.

TL;DR: DO NOT confuse political regime type with economic system structure, just because a few major historical examples make it seem like a logical necessity. And DO NOT confuse distribution system with ownership structure. And lastly, I apologize for sounding so long-winded.


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