I’m having another go at opening comments on the Fabianism post below. I think the problem is that the ideology under discussion is objectionable to my spam filters, not for political reasons but because it contains the name of a well-known treatment for male performance problems.
Anyway, if you have comments, you should be able to post them here, but try to avoid the text string in question.
John Quiggin 
Mr Quiggin,
As a relative newcomer to your blog I had you picked as a true Fabian Socialist. Given that you are so easily prepared to say that socialism still remains the best hope for the future why would you then choose to refer to yourself as social democratic. What are the key differences between the position you state as holding and true socialism being what you believe in?
A good question, Hank. I prefer “social democratic” because it clearly refers to the set of policies implemented and advocated by social democrats in the second half of the 20th century, including a mixed economy, an active welfare state, government responsibility for full employment and so on.
By contrast, socialism is less well defined. It can mean comprehensive public ownership, which I don’t support, or it can be just a general statement of values and aspirations, consistent with social democracy.
My reference to the best hope for the future was a bit ambiguous. I meant it to refer to the socialist tradition as it is embodied in social democracy.
Socialism has let us face it ‘baggage’.
Much more important for the left is explain what does it stand for.
Does it stand for the interests of well organised victim groups & ethnic groups?
Whilst I think the answer to that question is no. It has a ethos that is more than representing the interst of such groups. In practice it would be hard to defend the left from the charge.
Does the left believe in supporting subsidising special interest industry sectors.
Government responsibility for full employment is a good test case for development of a left ethos that can resonate with electors.
What can I expect from a left government in the way of policies demonstrating government responsibility for full employment that would be significantly different from the policies being used now.
What insight into achieving full employment by government action has the left got that is different from the neo-conservatives.
Of course one could ask does the left exist anymore?
What are the real political difference between people? The Latham question. (my apologies for mentioning the name of the devil in leftist circles I hope it does not give you trouble with your spam filter again).
to be a fabian is to be well red
In the below I will replace the “i” in the subject word with ! to get around the filter. No other intent should be read into it.
The problem that democratic soc!al!sm has (IMHO) never really dealt with is the inherent contradictions between the aims of full employment, “social justice” and the freedoms of liberal democracy. To me at least it is clear you can never have all three – and even two together are tricky. This, to me, is why the soc!al!st movements are losing steam and favour.
The problem is that the goal of social justice normally means either or both of two things – a minimum wage where the minimum is above the productive capacity of some members of society, resulting in persistent under- or unemployment; and / or a strong welfare state, where the resulting high tax rates and / or intrusion into the citizen’s lives becomes increasingly incompatible with the goals of liberal democracy.
If anyone can convince me that all three are not mutually incompatible I would like to hear it, but I have not seen any evidence where it has worked for any decent length of time.
I agree that some reference to socialism or at least social democracy needs to be retained. With the changes proposed, one could see the society becoming a haven for refugees from the Democrats.
But I think you need to be clear whether you really want collective ownership of all resources. I don’t mind having restrictions on various kinds of private property rights; and I want outright state ownership in certain areas. On the other hand, I’m not in a hurry to start nationalising the banks or anything like that. So I’d need to know whether that was a core objective.
Also, objective ‘a’ in your own proposal is rather indigestible. Can’t it be broken down a little?
Why is Fabianism, which I would regard as basically the same thing as Democratic Socialism anyway, slipping unde the radar as a viable option for the arrangement of human affairs?
Firstly, consumer capitalism has produced to much that occupies the public’s limited mentality else where. Diversions range from the war on tourism to Jennifer Lopez’ latest cosmetic surgery, to stuffing oneself full of junk food that has probably cost enough resources to deny half a dozen third world people a good feed.
Secondly, we need to consider the related point of overtly political propaganda and the propaganda machine, something being denied this very day by Sen.Coonan. In a nutshell, too much Janet Albrechtsen, Ray Martin, Gerard Henderson and Ted Lapkin and not enough genuine and well-presented current affairs at the right time.
Finally, the problem of leadership and communication. Beazley, Bracks, Blair, McClelland and so forth themselves are all closet socially conservatives. Their factions have captive the only large scale organisations capapable of mediating and moderating neo liberalism and Globalisation- Labo(u)r parties.
The Beazley idiocy over compulsory Australian (Addams Family?) “Values” Declarations by Muslim visitors is a case in point. Rather than demanding that Howard actually lead by example and do the difficult part; the PRACTICING of “values” and rather than asking what these nebulous “values” are, he reinforces neo-con ideology of an actual war on terrorism, that justifies the indeterminate relegation of genuinely serious social issues and debates.
The writer is well-aware that bloggers have commented on the difficulties of legislating morality, etc- especially when it comes to the scandalous “problem” of “stealing” from the wealthy, through a bit of tax, to put a bit back into the world these have usually so assiduosly pillaged, that so generously sustained them.
But the rule of law and spirit of justice worked for a while under Keynesianism, and we must remember that “globalisation ” is only Capitalism’s sly attempt to side step Democracy by going multi-national. Now, more than ever Fabianism and social democracy are needed, rather than being obsolete ( a black propaganda notion), for obvious reasons involving the maintainence of democracy
when I went to join the Fabians last year Race Matthews told me by email you had to be a member of the alp – so long as that joke of a party monopolises the brand I’ll have nought to do with them.
Just quickly – re: the supposed incompatibility of socialism and liberal democracy – For me, the core tenets of liberalism include: equality before the law; freedom of speech, assembly and association; a consequent pluralism, and a balance of legislative and constitutional arrangements and power that defends these core liberties from the arbitrary exercise of power.
Now, some will say that liberalism implies ‘getting goverment out of people’s lives’, ‘low tax, small government’ etc. In the US, the opposite is the case, where liberalism is commonly seen as another term for what the rest of the world knows as social democracy. For me, so long as one retains a commitment to civil liberties, then that is at the core of the liberal ideology – and one who combines such values and beliefs with a socialist commitment to either – at one side of the spectrum – sweeping social ownership or – at the other – a mixed democratic economy – can legitimately call themselves a ‘liberal socialist’.
The socialism I espouse is one of a ‘democratic mixed economy’ that combines wage earner funds with mutalism, co-operativism and public infrastructure, collective consumption and services, and Government Business Enterprises. (GBEs) I don’t see this as being incompatible with liberal democracy, and I believe that a ‘mixed democratic economy’ leaves plenty of room for an independent and diverse civil society and public sphere – and a thriving private sector – as in Sweden, Finland, Denmark etc. It also leaves plenty of room for pluralism, and checks and balances defending core liberties. I don’t think we need to choose: liberalism OR socialism – the Italian anti-fascist demonstrated this with a determined commitment to liberal socialism – and a landmark book on the topic.
On the other hand – I do concede there may be some restrictions on pluralism by encoding social rights constitutionally as I would prefer. But, to be fair, a liberal constitution excludes absolutist ambitions – and why ought social rights – eg: to education, health, aged care, employment, freedom from poverty – be seen as secondary to liberal rights?
I suppose you could just as easily call me a social democrat as a democratic socialist. For me, really, it’s a false dichotomy anyway: an opposition that made sense during and after the First World War – but which doesn’t make sense given the plurality of socialist position today, and the loss of any illusion that communism on a grand worldwide scale is possible. When the battle to reconstruct political language is, for me, a key struggle – a struggle to re-radicalise the idea and culture of social democracy – and smash the outdate opposition beteen social democracy and socialism.
Anyway – what is happening in the Fabian society is really the dissolution of democratic socialism and social democracy – the same movement in my opinion – into a kind of liberalism: and only a ‘kind’ of liberalism – because the society increasingly accomodates the full spectrum of Labor ideology – and not all Labor ideologues are liberal by any stretch of the imagination. I see this as a potential setback for the social democratic/democratic socialist movement – as I think I say – a narrowing of the political field with a consequent impoverishment of the public sphere/civil society.
Anyway – I look forward to further debate here, and thank John for being so kind as to publish my article on his website.
sincerely,
Tristan
oops – I forgot to mention which Italian anti-fascist I was talking about – I meant to say Carlo Rosselli – if anyone’s interested. Thanks.
Tristan,
It is those “social rights” that are the dispute – are they rights, properly so called, that any and every member of our society is entitled to? For an adult member of our society, is there a right to education? Is there a right to health? Is there a right to aged care? Is there a right to employment? Is there a right to freedom from poverty?
These are, for an adult, in a fundamentally different class (IMHO) to the right to freedom of conscience, the right to participate in the democratic process (etcetera) which I presume you count as the “liberal” rights.
If, as an adult, I have the right to be employed, is that in the same class as the right to life? I breathe, therefore give me work?
To me, the (as you term them) liberal rights are rights, properly so called, which should only be limited insofar as they unduly impinge on others ability to enjoy the same rights and only removed or further limited by the actions of a court of law.
The other “rights” identified must be further limited than that – removing them (again, IMHO) from the class of “rights” altogether, making them merely privileges at best, to be added to, reduced or removed as needed or desired by the society as a whole, through a democratic process.
Psst! Anyone wanna buy some Cialis?
So what is the role of capitalism in all of this then?
I’m interpreting the advocacy here of a “mixed economy” is in some way singing capitalisms praises and being a virtual admission of socialism not being able to work.
Or was this discussion topic just a quest for claiming the middle ground?
“I’m interpreting the advocacy here of a “mixed economyâ€? is in some way singing capitalisms praises and being a virtual admission of socialism not being able to work.”
Or equally, singing socialism’s praises and a virtual admission of capitalism not being able to work. As the name implies, the mixed economy is a mixture of the two, the idea being to ge the best of both. As you say, it occupies the middle ground, which helps t why voters throughout the developed world like it so much.
I think it depends on what you mean by capitalism. Is capitalism any economy governed by private ownership of the means of production? Or is it only characterised by private ownership of the ‘commanding height’ of economic activity? Is it possible to have a world with private capital coexisiting with mutiple forms of social ownership, and still call this socialism? I think it is. I think the original objective of universal state ownership is too ambitious and cannot work. I do think, however, that ideally wage earner funds should control the ‘commanding height’ of economic activity along with mutual societies, co-operatives, public infrastructure and service, GBEs etc.
We are, however, a long way away from this, and as Bernstein recognised, socialism is not just a ‘final aim’ : it is a MOVEMENT. And, as a movement, socialism has the aim of eliminating exploitation and facilitating various forms of social redistribution and collective ownership. Whether or not seeing this as reaching a ‘final aim’ is dubious – as I don’t think we ought be outlawing private ownership of small business, or self-employment, and we cannot even realistically socialise the ‘commanding heights’ as is for fear of financial instability and capital flight. What we should be doing, however, is establishing support structures for co-operativism, including genernous tax incentives, and provide interest free loans for collectives seeking to take over their workplaces as co-operatives.
In the long term, however, we should still talk about socialising or democratising the ‘commanding heights’: especially as democratic wage earner funds get a solid grip on a national economy – and we should unite with the world democratic socialist/social democratic movement, to counter the destabilisation that may be caused by finance capital, and to establish an international strategy to resuscitate the idea of collective ownership, and put this strategy into practice. I think such strategies are definately socialist – but whether they are post-capitalist?? Well – they do not abolish private capital – the wage earner funds themselves would extract surplus value from workers in enterprises they own – so the scenario would not be without contradiction. But it still heralds a democratisation of the economy, and of broader society – and as a situation where a form of capitalism and a form of socialism co-exist – I think it is something worth fighting for.
Re: claiming the middle ground – I think the ‘middle ground’ is something we continuously define and contest, and the aim of any movement ought to be to contest and define the relative middle ground and ‘make it theirs’. In the post-war environment, Keynesianism was the mainstream economic ideology. I think, now, we need to fight to reconstruct the intellectual and ideological environment again – but this time also to fight for a radicalised social democracy that, like Sweden in the 1980s (I think) – attempts to take the battle for economic democracy ‘one step further’.
sincerely,
Tristan
Also – I’ve seen an argument that ‘liberal rights’ are rights, and ‘social rights’ are not – but what is it exactly that makes the right to a living wage, or to nutrition and shelter, less imporant than free speech? What is this other than bourgeois ideology? Rights are about creating ‘a good society’ – both for the individual and for social groups – and remember social groups and classes consist of individuals. Social rights are key to ‘creating a good society’. In a ‘good society’, the right to a living wage ought not be constructed as a ‘privilege’. I’d like to see more arguments about why exactly ‘liberal rights’ are superior to ‘social rights’ – or, on the other hand, why we ought consider them equal. (as I do)
Tristan
Tristan,
I think the answer lies in the fact that one set of these rights are genuine and one set is bogus.
On the capitalist side they speak of rights such as the right to live your own life, to earn your own living, to own what you earn, the right to think your own thoughts and the right to speak your mind.
On the socialist side there are rights to free medical care, education, a living wage, welfare, nutrition, shelter, and the right to be spoken of in sensitive terms.
Can you see the problem? All of these are completely incompatible and can’t all be rights.
The conundrum here is that if you believe these to all be rights then we venture into the realm of the concept of a right to violate rights. If everybody is supposed to have the same rights then this concept is of course ridiculous and solving which set of “rights” is bogus needs to be identified and agreed upon.
Well – what you call ‘capitalist rights’ are not necessarily ‘liberal rights’. True, some of the ‘rights’ you ascribe to capitalism are incompatible with social rights. But social rights are not incompatible with liberal rights – and this is how I come to insist on a liberal socialism. I believe both in strategic social ownership, a democratised economy, and in civil liberties.
Rights are constructed and contextual – not absolute – but we construct them as being absolute in order to better entrench and defend them. Personally, I do not believe that a person has the ‘right’ to all their income – and hence be free from tax – with the consequence that government, social services and welfare – collapse. Taxation and social expenditure are part of the social contract – and social redistribution and expenditure are fair so long as we have ‘no taxation without representation’. Leaving ‘the market to sort us out’ when it comes to health care, education – even whether or not we have decent nutrition and a roof over our heads – is fundamentally injust and inhumane. The ‘market’ does not have ‘magical’ properties that allow it to fairly and justly distribute life chances, life’s necessities and opportunities.
BTW, though – if you insist that we have the right to all the wealth we produce, then the consequence of this would be the abolition of capitalism – as last time I checked employment of labour still entailed the extraction of a surplus.
sincerely,
Tristan
Tristan,
By that last comment you seem to be straying into the territory of the labour theory of value. Do you mean to say that the contribution of land, capital and organisational ability to the productive process is of no value? The supposed “surplus” is (IMHO) a nonsence – without any of these factors there is no production and labour becomes valueless. It is all co-dependent and the removal of any one renders all the rest worthless.
On your other point – just because of supposed or possible market failure in an area does not mean that the government needs to step in. There should be a further step to ensure that the actions of the government does not make the situation worse and that private charity cannot do better.
The “logic” that identified market failure means that governments must intervene is simply flawed.
Tristan,
I would encourage you to read this piece on Catallaxy which, I feel, puts a case opposed to yours very well.
Essentially, and argued from a differing start point, it provides an answer to the question on where the will of the majority, even where expressed through a democratic process, should have the right to over-ride an individual’s will as expressed through their actions.
Tristan,
To settle the argument we need to establish a test for what a right is to see whether or not it qualifies for being called a right and we need to establish how a right can be impaired or infringed.
Best definition I ever heard ascribed to rights is “A right is a moral principle defining and sanctioning a man’s freedom of action in a social context.”
Now given we all want to live in a peaceful world the best test for a right in my opinion is whether it prohibits or authorises the initiation of force. A “right” that authorises the use of force will be bogus and the right that prohibits force will be genuine.
Does this sound fair enough? Is this the best test for establishing the bona fides of a right?
I don’t see what you’re getting at with ‘the use of force’. The state inevitably has to resort to force to uphold its laws. Is someone is guilty of tax evasion, then it is up to the courts and legal authorities to hold them to account. The physical safety of citizens is, in last resort, garaunteed by the state.
Where the state fails is to uphold liberties, by arbitrarily suppressing dissent, then its acts are not legitimate. But without an element of co-ercion, no-one would ever pay tax, social services would be unaffordable, violence between citizens would possibly escalate etc. Even a liberal understands that the apparatus of state must be used to enforce the social contract. Where I disagree with the current arrangement, is that the state apparatus is used for all manner of other reasons that are incompatible with our rights and liberties – eg: ‘sedition’ legislation, suppression of strike action and onerous sanctions for those who attempt to exercise their legitimate right to withdraw their labour etc.
re: the labour theory of value – I recognise that capital invested in a firm represents past labour – and that, fairly, there should be a return on investment. But – as is – that return is limitless, and ultimately an employee will contribute value to a firm that makes up for this investment, and yet nevertheless a surplus will continue to be extracted. This is exploitation.
sincerely,
Tristan
ansteybranchopoulos, you’ve got it wrong.
You don’t necessarily have to be in the ALP but you may not be a member of another political party.
Times change. It is much easier now to say that one is gay than that one is a socialist. It is very hard to advocate protectionism, often hard not to be republican. It is not because socialism or protection have been discredited or republicanism “proved right�, but because it is fashionable. Few opponents of socialism, advocates of free trade, or republicans can do much more than mouth a few stock phrases in argument about these things. It is not long before they appeal to authority, become personally abusive or wander off in search of a drink. Holding the right attitudes is a class badge, not proof of reasoned conviction.
Prof. Quiggin has posted on “soft power” several times over the last few years, and I can see why. I very much doubt whether these changes in what is socially acceptable in middle-class circles represent anything more than the successful exercise of “soft power” over the last couple of decades. But its penetration is limited; the sudden and unexpected success of Pauline Hanson a few years ago showed how selectively and superficially “soft power” has affected Australian attitudes to these issues.
The Hanson phenomenon also showed to what lengths people will go to stop the boat being rocked, and that in turn revealed that there are real stakes being played for here, not just whether somebody you haven’t met before is “U� or “non-U�. The class badge is also a ticket to a gravy train. In their March 2006 discussion paper (N0. 514), Atkinson and Leigh state: “During the 1980s and 1990s, top [Australian] income shares rose rapidly. At the start of the twenty-first century, the income share of the richest was higher than it had been at any point in the previous fifty years. Among top income groups, recent decades have also seen a rise in the share of top income accruing to the super-rich. Trends in top income shares are similar to those observed among other elite groups, such as judges, politicians, top bureaucrats and CEOs.�
It is not surprising that socialism is unfashionable; it is always fashionable to be rich and never fashionable to be poor. And yet Australians, of all people, should know that it is possible to live in the middle. This once was a pretty egalitarian society, and within living memory, too. But when the middle is squeezed, you have to work out which way to jump, and up is better than down. When wild women like Pauline look like upsetting the applecart, it’s not surprising that some pretty shady tactics are used.
So if most anti-socialist, pro-immigration republicans are really doing no more than buttering their bread in times of stress (or trying to meet people who they hope will butter it for them), what price a debate about socialism? Not much, I think, unless it turns on exactly why and how Australia abandoned an egalitarian ideal. That issue is worth a lot more analysis than it has received.
Tristan,
While the State also continues to enforce such things as the inability to sack a worker without cause and without notice (which it does, even after WorkChoices through the civil courts) then the moves the other way just represent a balance of state power. As for ’sedition’ legislation, you will not find many except big “c” Conservatives who agree with this.
As for the return to capital being limitless – it is only limitless in the sense that the return to any factor is limitless. The return to labour is also ‘unlimited’ in the same way. I repeat: the use of all four factors is crucial. The returns to each reflect, correctly, their relative scarcity and importance to the productive process.
A failure to recognise this will condemn your viewpoint to utter irrelevance (IMHO).
re: Pauline Hanson
One Nation are a curious phenomenon. While, on the one hand, they represented a reactionary and prejudiced attempt to enforce a single ‘template’ of national identity – of the kind you would expect from the Conservatives – on the other hand they represented policies such as the re-establishment of a peoples’ bank. This side of One Nation is something you rarely hear discussed – the populism of Pauline’s appeal derived from her appeal to anxieties about national identity, the desire to hark back to a mythical monocultural past, Asian immigration etc. But it is sad that it is left for the likes of One Nation to promote traditional social democratic policies for the economy, while the ALP swallows the neo-liberal bait hook, line and sinker, and even the Fabian society now is concerned that socialism is ‘unfashionable’, and thus the National Executive decides to relegate about half a century of commitment to socialist reform to ‘the dustbin of history’.
Meanwhile, those on the fashionable ‘liberal left’ maintain a respect for diversity and for liberal human rights on the one hand, while abandoning any pretence of egalitarianism, or substantial policies in the way of progressive taxation, labour market regulation and social expenditure to eliminate poverty and provide for real social justice. It’s a matter of just how far the relative centre has shifted in recent years that traditional social democracy is derided as the politics of ‘Old’ (and hence irrelevant) ‘Labor’, while the so-called ‘cultural left’ entertains the notion that ‘anything goes’ – except the upper middle class intelligentsia have to pay a fair degree of tax to help provide for the welfare state objectives that, for a while, under Whitlam, were considered mainstream. And you’re right – it is a matter of FASHION. For instance, it is fashionable these days to refer to almost any progressive utilisation of state power as ‘statism’ – and amongst today’s fashionable liberal cultural ‘left’ this is a definate ‘no-no’. Of course, this involves abandoning traditional social democratic policies such as redistribution through the tax transfer system, progressive cross subsidisation through public infrastructure and GBEs, universal provision of infrastructure and services in communications, banking etc that the market does not cater for – but the neo-liberal ideology is hegemonic – and the fashionable ‘left’ dares not challenge it in any serious way. And it is for the sake of pandering to this FASHION: of not taking the risks associated with a commitment to liberal socialism, and the work of argument and persuasion this involves: of SHIFTING the relative centre rather than opportunistically adjusting to it to reap maximum political advantage – that we now see the wilful and deliberate liquidation of socialist tradition, and the closure of that small space that remained in the public sphere for the discussion of socialist and social democratic ideas.
Exploitation
As for exploitation – even under a regime of wage earner fund socialism, the captial invested in wage earner funds would involve the extraction of surplus value from labour. And yet, I think, this is one of the best viable scenarios I can imagine. Even in a best case scenario, the elimination of exploitation is almost unimaginable. My recognition of this political reality, I think, leaves my arguments in a very relevant position. But exploitation is still exploitation, and should be identified as such.
Tristan, the centre is certainly shifting. I tentatively identify two ways of marking the shift. First, the idea of public interest is either dying or being radically redefined. It used to be commonly assumed to exist (you didn’t have to redefine it every time you mentioned it) and arguments were had about whether particular proposals were “in the public interest” or not. This no longer seems to occur, or when it does the whole discussion degenerates into pointless hair-splitting arguments about what the public interest means.
Second, the idea of a government which governs (in the public interest) seems to have been abandoned in favour of a concept of government as a sort of United Nations of vested interests dominated by a kind of Security Council of the most powerful ones. Everything by negotiation and no really powerful interest ever offended. Only a political scientist would regard such a government as democratic on any definition.
Behind the decline of the public interest one may discern the constant boosting of the individual, conceived as a sort of franchisee of globalisation, borrowing his/her chips from the finance capital franchisor and playing the game that he/she will almost certainly lose, but, as we always say, “you’ve got to be in it to win it”. We have forgotten that it’s not (necessarily) the only game in town.
It is curious that Australians should find it odd that Pauline Hanson should simultaneously embrace racism and “…policies such as the re-establishment of a peoples’ bank. This side of One Nation is something you rarely hear discussed – the populism of Pauline’s appeal…” One Nation’s policies had a marked resemblance to mainstream policies of the early years of the 20th century. Why the surprise?
Tristan,
I suspect that, having swallowed the mantra of socialism whole, you have not emerged sufficiently from academia (or some other world divorced from reality) sufficiently to realise that what you call “exploitation” is just what happens when people happen to work together or for each other.
Our good host here well knows that the processes of people freely agreeing to interact economically with each other (a process often termed “the market”) can and does provide many of the answers to economic problems. Lose your evident prejudices against it and your analysis may be improved.
Andrew – exploitation of labour is understood in two ways. Firstly, there is the view that exploitation of labour simply involves unfair or unjust working conditions or wages. Secondly, there is the view that exploitation involves the expropriation of a surplus. The second definition is not very fashionable given its origins in Marxist economic thought, but I do still believe that an expropriation of a surplus occurs – and that this is a useful mechanism for understanding this process. As I’ve said before, though, I don’t believe there is any simple remedy to this problem. Universal state ownership stifles innovation and competition. Co-operativism and mutualism provides one response – but in order to remain competitive there are great pressures for organisation to de-mutualise or abandon co-operative ownership in mergers aimed at securing better economies of scale, and greater inflows of capital. Even the solution of wage earner funds, while democratising the economy, sees the expropriation of a surplus by workers from other workers. That’s why I don’t believe the Marxist dream of ending exploitation once and for all is feasible. I do believe, however, that the pursuit of a mixed economy; involving GBEs, public infrastucture, strucutural support, financial support and tax incentives for mutualist and co-operativist enterprises, the establishment of democratic pension funds, the establishment of works councils in business enterprises: all ameliorate the problem, and are policies worth pursuing – to further the ends economic democracy.
Tristan
Tristan,
Just to be clear. Are you using the terms “exploitation” and “expropriation” with negative connotations? I assume you are. If not, please let me know and ignore the following.
I see “exploitation” and “expropriation” happening when the individual has no real choice between economic (or non-economic) options. The marxist “dream” as you put it is, therefore for me at least, the ultimate in “exploitation” and “expropriation”. I also see GBEs, public infrastucture (for the most part), strucutural support, financial support and tax incentives for mutualist and co-operativist enterprises, the establishment of democratic pension funds, the establishment of works councils in business enterprises all as further examples of “exploitation” and “expropriation”.
A government, if it is operating reasonably effectively, essentially enforces a monopoly on the use of force. To use that monopoly to limit my choices as an individual, except where my choices effectively limit others choices as wrong.
Government business enterprises are particularly pernicious. Typically, and almost universally, they are less efficient than an equivalent private sector enterprise as they do not have the disciplines that come with having to operate with competition. Governments then have to prop them up or declare a monopoly, further harming the situation. Telstra is a great example – a mightly monolith that held back telecoms in this country for years and taking advantage of its monopoly power to hold things back. They are still doing this through sheer market size.
I have no problem with mutuals or other such structures. In many cases they do a great job. If people have a free choice to use them or not then perfect.
The seeds of the understanding of my perspective are within your statement that
If a mutual cannot achieve sufficient inflows of capital to grow, why is that? Think about it. Capital, like the other factors, requires a decent return – as does enterprise (which I prefer to refer to as the ability to organise the other factors) as does land. There is no real reason why a mutual structure cannot achieve that return in exactly the same way – yet your line essentially says they cannot. Why is this?
How can setting up a co-operative where workers elect from their own ranks accountable and recallable directors, and take part in the running on their own enterprise, be seen as ‘exploitative’ and ‘minimising choice’? Furthermore, what ‘choice’ does the domination of many industries and sectors by multinational oligopolies enhance liberty and choice?
Now Marxism supposed that all productive activity would be centralised under the state, but that workers would also directly take part in these decisions, and in the day to day running of these enterprises, coming together in a democratic fashion to plan entire industries. As it turned out, we know attempts to centralise production in the hands of the state led to bureaucratisation, supression of price signals, and the ossification of worker’s representative bodies. (ie: the soviets)
Surely, there is a middle road between capitalist monopolism and the supression of market mechanisms and price signals.
For me, this implies a mixed economy. Government can provide infrastructure efficiently, without wasteful duplication and on a universal basis, and does not have to worry about maximising share value, hence cutting programs (such as broadband rollout, regional bank branches and infrastructure etc) that, while necessary, are not, in the short term, profitable. Mutual societies, meanwhile, are directly accountable to their members, and co-operatives are democratic in structure, while nevertheless operating in a market environment. Finally, GBEs can provide extra choice and competition, undermining possible collusion within oligopolies – as was the intention with the establishment of Medibank Private. Progressive cross-subsidation for the poor and needy also provides additional ‘positive choice’ who otherwise might have been excluded from the market. Finally, wage earner funds, organised on a regional basis, and enable democratic bodies to systematically invest in economically viable and socially useful activities, infrastructure, services, industries, creating jobs and providing for real popular participation in economic decision-making, instead of leaving the administration of pension funds to an unaccountable financial elite.
At the same time, in a democratic mixed economy, these co-operativist, mutualist, and pension-fund run firms compete against private enterprises which, also, might be the subject of employee share ownership schemes, works councils and the like. Choice through market mechanisms remains strong, democracy in the economy is enhanced, and investment is determined not only by the maximisation of share value, but by the use value of the services and infrastructure to which it is directed.
As for your comments about my comment that mutualist and co-operative enteprises might be driven to issue shares, demutalise etc – it depends on the ambitions of the individual enterprises. Sometimes it is easier to rapidly expand one’s activities by issuing shares to raise capital – but this can undermine the democratic structure of such enterprises. Sometimes the capital necessary for expansion, for instance, cannot be gained from such enterprises’ profits, or from its exisiting members. In recognition of this, such enterprises should be supported by government, including through the provision of low-interest loans. This would expand the choice available to mutual societies and co-operatives, without driving them to de-mutualise or cease operating as co-operatives – in order to attract capital.
Tristan
Tristan,
I have, as I stated, no problem with entities such as those. In fact, I work for one and with several others. The problem I have is where they get financial support and tax incentives. By artifically giving them support you reduce choice by the forcible expropriation of funding to support them (tax revenue) if you use financial support and increased tax payments from others if you give them tax incentives. I do not believe that the government should give artificial advantage to one set of entity structures over any other.
On the multinationals – from a simplistic, static view of market processes there may be a few that are able to behave like oligopolies – for short periods. If they fail to satisfy consumers or someone else can do it better, how long do you think that they would be able to survive? Capital is sufficiently amoral to follow the scent of higher profits and a competitor will always move in, given some time. The world is littered with he husks of companies, large and small, that tried to dominate in this way. The only ones to survive and do damage for any length of time were the GBEs that had an enforced monopoly.
Broadband in Australia is a great case in point. Telstra, by abusing its effective copper monopoly has artificially hobbled ADSL 1 to 1.5 Mbps and, until recently, effectively ruled out ADSL 2 or 2+. This (IMHO) would have been impossible in a competitive market. The price we have been paying for a very long time was the manifestly excessive call costs, antiquated technology and stone age customer service we used to have to put up with.
The duplication you see as “wasteful” is the greatest source of innovation and competition. Trying to eliminate it through legislative fiat has resulted in some of the biggest cock ups of all.
Your last paragraph shows the weakness of your argument – you seem to believe that these entities cannot survive, or at least grow, without government handouts – again, with the revenue expropriated from the taxpayer by force or its threat. If I choose to support this business form, as I do, it should be without force, not by government action. A low interest loan is the same as a handout, just dressed up differently.
A couple of points:
a) if the party political system works as it should, then political parties ought be able to hold each other to account to ensure the modernisation of infrastructure – and if such matters fail to attract sufficient attention, then it is a failure of the public sphere. Under conditions where political parties hold each other to account, and whereby those parties themselves are held to account by the public sphere, there is no reason why sufficient pressure cannot be brought to bear to ensure the ongoing modernisation and efficiency of public infrastructure.
b) re: tax incentives and low interest loans for co-operative enterprise. If you’re opposed to incentives to promote economic democracy, I wonder what you think of ongoing company tax cuts, capital gains tax concessions, R&D grants etc… (personally, I feel some of this is corporate welfare – although I do agree with R&D grants as a matter of attracting high wage, high skill industry)…
I do, however, think that government needs to be pro-active in pursuing its vision of ‘the good society’… Co-operatives simply are not arising spontaneously.. The workers concerned are not organised, and in any case do not have access to sufficient capital… What is necessary – and I think it could be paid for by reducing some of that ‘corporate welfare’ – is firm action to creating incentives for shifting to a co-operative model – and the right infrastructure in terms of finance, advice, and structural support through the tax system – to make a broad shift towards economic democracy a reality. What we get in return is an economy where workers have a direct say in the future of the enterprises they work in, and a direct stake in the future of those enterprises. Personally, I think such an extension of democracy into the economic sphere is something worth pursuing: and I don’t mind the process being subsidised by non-democratic enterprise.
I agree on corporate welfare – it should all be removed – along with all company taxes, which are just income taxes brought forward.
So, now we get to the root of the perceived problem – corporations are not “democratic”.
A corporation is a legal construct, intended to allow investors in them to obtain limited liability. This is why they, unlike natural persons, have to publish accounts so that those who deal with them know that the credit stops at the company and does not go futher. The only real difference between an incorporated mutual (as many of them are) and a normal shareholder owned company is the voting system at the AGM. A mutual has one vote per shareholder and a non-mutual having one vote per share. Some mutuals also require you to have some other connection to the company – like working for it for example.
Is this really why you believe mutuals should be advantaged? Because of the voting system at AGMs?
The difference between ‘one vote per shareholder’ and ‘one vote per share’ is significant. Just consider if liberal democracies were considered to be corporations, and instead of ‘one person, one vote’, we had a number of votes in parliamentary elections proportionate to our wealth.
Also, in co-operatives, the people working on the shop floor are those same people who hold directors accountable, and a system is even imaginable where directors elected from the shop floor could be immediately recallable. The difference is not minor, but very considerable indeed.
Tristan
AR,
“The returns to each reflect, correctly, their relative scarcity and importance to the productive process.”
How do you know this?
Tristan,
That is why they have trouble accumulating capital – because they do not reward its contribution – either by way of dividends or influence. The return to labour is wages or salaries, the return to land is rent, the return to enterprise is a higher salary – what does capital get in a mutual? Not even a proportional say in the management of their investment, never mind a return on the risk of its contribution.
.
Melanie,
In the absence of some enormous, long lasting conpiracy, simple demand and supply does that. The only time it fails to do so is in the event of government intervention – like the imposition of a minimum wage causing unemployment.
Back on 6/3/04, Prof. Quiggin discussed the pros and cons of privatisation in relation to the equity premium and the efficient markets hypothesis (which A. Reynolds seems to support) and said this: “If the advantages of privatisation outweigh the difference in the cost of capital, and assets are sold in a competitive market, then the government should come out ahead by selling assets and using the proceeds to repay debt, thereby reducing obligations. In fact, this is rarely the case.� He goes on to say: “…the kinds of enterprises where government ownership is common are, in general, those where you would expect the balance of considerations to lean towards public ownership. They are capital intensive, so a lower cost of capital is important and excess labor costs (for example, due to overstaffing) are not. In addition, they are often subject to fairly tight regulation for natural monopoly or essential-service reasons, which reduces the reward to entrepreneurial innovation.� He finishes up that post by saying: “So, it turns out that the equity premium provides a case for the mixed economy, rather than for comprehensive socialisation. Given the generally successful performance of mixed economies (most notably between 1945 and 1970), there’s nothing paradoxical or surprising about this.�
If Andrew Reynolds is right, then Prof. Quiggin’s views on public ownership and the mixed economy are wrong. Tristan Ewins, Prof. Quiggin and I are all in the mixed economy camp. But I think we can all agree on a comprehensive review of corporate welfare.
To summarize PrQ’s position, as given by Gordon:
Under the following conditions, an industry should be in public ownership –
1. Capital is cheaper for government than private.
2. Labour is cheap compared to capital cost.
3. Natural monopoly or essential service conditions means regulation is going to occur anyway.
Due to the ability to force people to give up their money, something no private company can do, credit risk on lending to a government is almost always going to be less than to a private company in the same economy. This is why point 2 is important – otherwise, it is an argument to nationalise everything.
The problem with point 2 is that overstaffing becomes rampant, as it naturally does in any bureaucracy. If you are in any doubt, read Parkinson’s Law. Very short book, but once you have worked in any bureaucracy, as I have, you will see how right it is.
Point 3 is a furphy, as I argued further up the thread. “Natural” monopolies occur only where competition is legislated out – meaning they are decidedly unnatural.
Tristan,
The discussion thread seems to have evolved substantially since I left it on Friday for a busy weekend but the answer to your question about the legitimacy of rights remains largely unanswered.
Are you able to present a test to apply to a “right” to establish it’s genuine nature. From where I’m sitting I can’t apply any logic to your assertion that the two categories of rights stated can possibly both be classified as rights.
Dear Hank,
I think the best ‘test’ for a right, is to ask oneself in the application of such a right, whether or not you ought consider it a universal law. I’m no expert in Kantianism, but this much I agree with. That said, rights are contextual. The idea of a right comprising a universal law must also consider the context in which that right is applied. That said, as stated earlier, I see no contradiction between ‘civil liberties’ and ‘social rights’.
If one considers the constructed right of private property to be absolute, however, then yes there is a conflict between right of private property in certain contexts, and the idea of ‘social rights’. This does not really concern me, however, because as a liberal socialist I feel the means of acquiring private property is often injust – and this bolsters the case for redistributive policies. (eg: progressive taxtion including inheritance taxes, the welfare state, subsidies for democratic enterprise etc)
Tristan
Shorter Tristan: Your rights are what I say they are.
AR,
Have you read the Cambridge capital controversies?
Fascinating mathematics. Reminds me of a proof from high school that 1=2. I think the CCC has been ignored because no one has yet been able to demonstrate a realistic situation where it could occur.
Perhaps you should read Harcourt on this:
Geoffrey. C. Harcourt, Some Cambridge Controversies in the Theory of Capital (Cambridge: Cambridge University Press, 1972), p. 122f.
Have you read The Road to Serfdom?
Tristan,
It must deeply sadden you when you hear figures like that 70% of Australians own or are paying off their own home.
Given your previous response I’m of the opinion that you are actually misusing the word “rights�. A “right� that is not absolute and inalienable to all men cannot be called a “right�. It’s more intellectually honest to just be upfront and say that as a socialist, rights don’t exist. Instead what you are proposing should be called something like “privileges� that would be doled out by whoever is the ruling party.
To bolster the case for the far reaching redistributive policies you mention such as progressive taxation, inheritance taxes and a cradle to grave welfare state you must firstly identify at what stage of human interaction the injustices occur.
Hypothetical Case Study:
Person A accumulates enough wealth and skills through hard work and honest endeavour to establish his own profitable business making widgets. Buying land and equipment at market values, widgets sold for market value. Person A earns $50K per year in profits
Person B approaches or is approached by Person A to work for an agreed rate and set of working conditions. Person A and Person B forge relationship agreeable to both parties. Person B earns $35K per year
Person C for whatever reason cannot or chooses to not to exchange his value, skills and labour with either Person A or Person B. Leaving Person C with significantly less than what either Person A or Person B have. Person C earns next to nothing.
Tristan in this example who has committed the injustices and what happens with Person C according to how you would apportion “rights� or “privileges�??
Andrew Reynolds’ world is obviously not the one I or Prof. Quiggin, or Tristan Ewins are living in. First, the taxing power by itself doesn’t guarantee Govt. debt. There are lots of examples, over hundreds of years, of Govts. with taxing powers which have defaulted on sovereign debt. Second, Parkinson’s Law applies as much to private as to Govt. bureaucracies, with the added risks of fraud and corruption at the top of private businesses. We have seen plenty of that over the last decade or two. Quite enough to be sure that helpless capitalists are not being regularly plundered by rampaging socialists. And third, there are lots of monopolies and oligopolies which Govts. have not created. As JKGalbraith once said, “The problem with competition is that in the end somebody wins�.
When Robinson Crusoe was first wrecked on his island, he tortured himself with fears of wild beasts and cannibals. He fortified his dwelling with a double palisade, went abroad armed and had difficulty sleeping at night. In a similar way, Andrew Reynolds appears to be torturing himself with fears of Stalinists about to attack him any minute from every direction. Eventually, Robin’s greatest threat turned out to be pirates of his own nation (this is an appropriate reference on Talk Like a Pirate Day, mateys). It is the corruption and ruthlessness and occasional disastrous collapse of unregulated private enterprise itself which renders regulation and appropriate Govt. enterprise necessary; these things are not the fruits of some omnipresent Stalinist conspiracy.
gordon,
I am not sure which world you are living in – I do not presume to speak for the others – but it seems that it is filled with strawmen of your own creation. Oz springs to mind – the one with Dorothy in it.
Precisely which part of this – “credit risk on lending to a government is almost always going to be less than to a private company in the same economy” indicates that governments are credit risk free?
“Rampant” capitalists are destroyed when they do not meet consumer demand. Companies collapse regularly, have to be restructured etc. etc. etc. Have a look at Ford if you want an example. Socialists, thankfully, have been relegated to the sidelines because of their many and manifold errors.
As for Galbraith, like most people who are arrogant enough to imagine they can run an economy as if it were a machine with levers and knobs, he was wrong on so many points it is not funny – as he is on this. When does the competition end, precisely? Is there a fixed date? Or is it when a triumphal parade occurs down Main Street?
The last part is simple twaddle. Have I once mentioned Stalinism? The danger with more government interference is underperformance, not Stalinism.
Try again; this time read the arguments and compose a response based on them rather than on your own
feveredimagination.Andrew,
When the finance community invents a concept called the “risk free rate of return” and bases it on government bonds (which quite amusingly assumes that governments never default on their debts) then what do you expect people to think. I do wish Costello had closed down the market in government debt just to see how the finance community might have adapted this concept.
We also have managed interest rates (ie they are the target of open market operations) so the market can not even price debt freely. The monetary base is manipulated to ensure that the price of short term debt meets up with the latest RBA plot.
Regards,
Terje.
Terje,
It is called “risk free” because it is less of a mouthful than “closest to risk free we can really get in this economy.
In practice, for a AAA rated government like Australia out to a 10 year horizon the debt is as close to risk free as possible – normal estimates of the probability of default on a AAA rated government paper is less than 0.03%. I say estimated only because it has not happened since ratings started.
.
Still waiting for gordon, melanie or Tristan to respond to Hank or me – but i guess we will be waiting a long time.
Terje, you do have a point about the ‘finance community’s behaviour’ as you described it. However, IMO, the point is not relevant to the heading of the thread, so I shall not expand on it.