We are all socialists now

Socialism is much more than public ownership of productive enterprises. Still, if there is one policy that clearly distinguishes socialists from their (or rather our) opponents, it is support for public enterprise as a way of organizing large-scale production, and, in particular, as the preferred model for industries characterized by natural monopoly or other major market failures. The opposite view, dominant since the 1970s, is the market liberal framework that favors comprehensive private ownership, with “light-handed” regulation as the response to market “imperfections”.

Now that I’ve explicitly adopted the term “socialist”, I’ve been struck by the fact that I seem to be pushing against an open door. Consistent anti-socialists are pretty hard to find these days. Most of the Australian right favors the compulsory acquisition of the Liddell power station, on the grounds that they don’t like the business decisions of its owner. On that basis, it’s hard to see why we shouldn’t nationalise the entire financial sector.

As regards public infrastructure, the Institute of Public Affairs, once our leading free-market thinktank, has become an advocate for publicly-funded dam projects in Northern Australia, the most notorious of all pork-barrel projects. Malcolm Turnbull is pushing Snowy Hydro 2.0.

These examples illustrate a problem. Having started by rejecting public ownership on principle, market conservatives have no theory to work on when they lose those principles. So, they naturally support the worst kinds of boondoggles, based on political expediency.

As a socialist, I support a mixed economy in which both public and private ownership play important roles. The evidence of the past century shows, in my view, that most large-scale infrastructure should be publicly owned, and operate on a statutory authority model, accountable to the public through governments, but with politicians kept at arms length from day-to-day decisions. On the other hand, small business should be left to private ownership. That leaves a large share of the economy to balance between large for-profit corporations and public enterprise. The design of a mixed economy involves getting that balance right.

22 thoughts on “We are all socialists now

  1. Pr Q said:

    As a socialist, I support a mixed economy in which both public and private ownership play important roles. The evidence of the past century shows, in my view, that most large-scale infrastructure should be publicly owned, and operate on a statutory authority model, accountable to the public through governments, but with politicians kept at arms length from day-to-day decisions. On the other hand, small business should be left to private ownership. That leaves a large share of the economy to balance between large for-profit corporations and public enterprise. The design of a mixed economy involves getting that balance right.

    This was more or less my economic philosophy, up until the early aughties advent of machine learning and the Internet of Things.

    However support of a “mixed economy” describes the position of a “social-democrat”, not a “socialist”. That is, a pluralist economy where economic organization is arrayed on a continuum, with self-owned proprietorships at one end and state-owned monopolies at the other.

    As I understand it, “socialism” entails public ownership of all enterprises engaged in the production, distribution or transaction of economic goods. Traditionaly referred to as “nationalisation”, given that the nation state is the sovereign political authority capable of more or less self-sufficiently administering a nations business.

    No doubt Pr Q would like to distance himself from the bloodless managerial politics associated with Centre-Left social democratic parties. Given that this also implies negotiation with the Centre-Right and, by guilty association, the Far-Right. Perish that thought.

    But he remains committed to a paeleo-Whitlamesque social-democratic policy, just the same. Not that there was anything wrong with that. But it is not “socialism”, as most people understand it.

    More generally, the 20th C ideological argument already seems antiquated, although it has some short-to-medium political cogency. Pr Q would be well-advised to give the ideological argument a rest, and concentrate on the technological revolution. In particular, how to manage the transition to a fully automated economy, which entails the “the End of Work” for humans, the real threat of technological unemployment and the tantalising possibility of a commonwealth of roboticised economic agencies.

  2. Thanks, John and Jack. It’s a thought-provoking and (I think) important topic.
    I don’t really know if I’m a socialist. Although we need labels to communicate with each other, they can also get in the way of clear communication.
    While there are still jobs, what I would like to see is more democracy in the workplace. In most workplaces we give up democracy when we go to work. Admittedly there are moves away from authoritarian workplaces, but they proceed very slowly.
    I agree with Jack Strocchi that it would be good to “concentrate on the technological revolution”. As artificial intelligence takes over the easy jobs, there is an important question — who owns the artificial intelligence? They will rule the workplace, and (arguably) the world.
    Alternatives? They will be more left than right, I think. Socialist? Perhaps. It depends what we mean by that label.
    However, I think there are major obstacles to that change. In the Anglophone world, individualism is one. More generally, the ideology of meritocracy is another.
    And what are we going to do about private property? It currently produces enormous disparity in income and wealth. Perhaps we have to rediscover and carefully define “the commons”.

  3. It seems, once again, we have to reform capitalism. We did that for one cycle, of approximately 25 years, after the Great Depression and WW2. Without going into details, we clearly did not go far enough. Capitalism has reverted to type. The regress of the neoliberal era is thr proof.

    Thomas Piketty’s data, his graphs and conditional equations have helped to diagnose and demonstrate the problem. If return on capital is greater than growth then income and wealth inequalities increase. In a world where environmental limits are being reached it becomes harder and harder to grow the economy. These two trends together constitute what we might term the “Piketty Trap”. A moment’s reflection will show that ever greater concentrations of wealth for fewer and fewer individuals imply ever greater poverty and immiseration for the majority when the economy cannot grow or cannot grow fast enough. This inability to grow fast enough (secular stagnation) becomes almost a near certainty as we approach the limits to growth. Ever greater impoverishment of the majority is an unsustainable trend. They will revolt at some point.

    The cycles of capitalism have shown that it periodically has great crises involving any or many of the following; large recessions, great depressions, underproduction, overproduction, over-accumulation, unemployment, capacity-underutilisation, financial crises and wars. Some of these can occur in combination except obviously where they are directly contradictory in nature.

    Capitalism (including its institutions and governance overlays) is an imperfect complex adaptive growing system. As such it has internal homeostatic systems (seeking to maintain necessary internal equilibria) as well as growth and progress directions. Capitalism experiences cycles generated and influenced by dynamic instabilities with internal causes, and further perturbations induced by external (environmental) shocks.

    The central conceptual blind-spot of pro-capitalist thinkers is their denial of the existence of internal contradictions in the system. Every complex adaptive system, and especially one that is still growing, has internal contradictions. These contradictions are not unique to capitalism. Some contradictions may cause serious problems, even critical problems. Others may generate possible new ways of co-evolving with the environment. The goal is to identify which contradictions might generate system-critical or system-fatal problem and which may generate innovations for co-evolving with the environment.

    It should be clear by now that the contradiction of the rate of return on capital being greater than the rate of growth must be solved. This is a system-critical to system-fatal problem. It does not permit adaptation, co-evolving and sustainability with respect to the environment. We need to accept that a slow rate of growth (as qualitative rather quantitative growth) is now likely to apply indefinitely as we closely approach the limits to growth. Thus our formal system of finance and capital(ist) accounting in conjunction with our taxation system must ensure that returns on capital are equal to or less than economic growth. Currently it would need to be less to ensure redistribution. A range of quite standard and well-known socialist policies could ensure this.

    The final need is to permanently change economics, political economy, and public morality such that any serious regression from implemented socialist policies can never again be contemplated or enacted. I mean that public advocacy for reversion to neoliberal or market fundamentalist policies would become as morally objectionable as advocacy for the return of slavery.

  4. Bob and dick, as prof q pointed out in a previous post, mixing politics and economics when describe your position on these things has only caused confusion. Terms like social democrat or democratic socialist have been used as cover for governments who are socially liberal, non authoritarian etc but pro big business, free market in their economic policy.

    To describe your self as socialist is to make it clear that you favour government planning and ownership as a means of solving the overriding problem in economics that every first year student learns in thier first class “How are we to meet limited demands from unlimited resources?”. It does not mean that you reject private ownership, free enterprise and market forces completely but that you recognise that on balance natural monopolies and essential services need to be owned and their operations heavily regulated by, if not in the hands of, public agencies.

    We live in a society were minimum standards of health, education, housing and retirement income are beyond the means of a significant portion of the population. Medicare is socialism, public hospitals are socialism, the state owned banks we used to have were socialism (some that are left are still majority owned by government), with so many important institutions in public hands in is not a stretch to call Australia a socialist country, all-be-it one that resists it true nature by equation the free market with individual rights and freedoms.

  5. JQ above – “…These examples illustrate a problem. Having started by rejecting public ownership on principle, market conservatives have no theory to work on when they lose those principles. So, they naturally support the worst kinds of boondoggles, based on political expediency.”

    Yanis Varoufakis yesterday* – “…The manifesto argues that the problem with capitalism is not that it produces too much technology, or that it is unfair. Capitalism’s problem is that it is irrational.”

    *YV’s article taken from his introduction to a coming new pocket edition of the Communist Manifesto. theguardian.com/news/2018/apr/20/yanis-varoufakis-marx-crisis-communist-manifesto

  6. Here is the santa fe Institute book “Scale” (maybe showing my conformation bias) understanding showing “support a mixed economy in which both public and private ownership play important roles.”
    “” Figure 35 shows the number of patents awarded in the United States scaling with the 1.15 power of the size of the population. Figure 36 shows the number of crimes reported in cities in Japan scaling with the 1.2 power of population. Figure 75 shows that commercial companies in the United States have a constant death rate independent of age—the life expectancy of a company at any age is about ten years. The short lifetime of companies is an essential feature of capitalist economics, with good and bad consequences. The good effect is to get rid of failed enterprises, which in socialist economies are difficult to kill and continue to eat up resources. The bad effect is to remove incentives for foresight and long-range planning.”” …on phone, apologies for formatting.
    http://www.nybooks.com/articles/2018/05/10/the-key-to-everything/

  7. My pennyworth (sketched in this old blog post: ***samefacts.com/2009/07/everything-else/communism-ii-love-it-or-leave-it/ ) is that a modern political economy should not be seen as a continuum between two poles (capitalism and socialism) but as a triangle, with the third vertex being the communist mode of production based an informality, gift exchange and sharing. Since this has considerable advantages for the fast-growing sector of information, with a zero marginal cost of reproduction, it’s doing rather well. It can’t take over for now – the three sectors are interdependent.

  8. Reading the main article reminded me of my blind fury at watching Australia handle major projects. Like that national fibre optics grid. Neo-classical “thought” has been horrifying in that policy makers cannot now seem to make up their mind the nature of what they are doing. Its like they cannot decide whether they are Bucks Fizz or Judas Priest. So you get the NBN and they haven’t figured out properly whether they are dealing with a communist undertaking or a private enterprise affair. If its communist, and I think it is, thats great. But it should be run debt-free, without all these rent-seeking bankers sniffing around.

    Same with the telstra privatisation and privatisation all the way down the line. Did the neoclassicals have a convincing theory for competitive infrastructure? To me its all about pipes. Infrastructure involves items that cross many private properties. But its all analogous to piping. So the electricity wires are really just electron pipes. Those cross-city tunnels are piping cars and trucks. The easiest way to do things is that the pipes stay communist 100%, but you could have many if not most of the stuff being piped as free enterprise.

    The neoclassicals turned out to be bait and switch merchants. Since what they really seemed to want is to confuse these two aspects and leave us with privatisation that held a sort of identity crisis, which lead to all sorts of rent-seeking and ineffectiveness.

    I tried to show at Catallaxy how you might contrive competitive infrastructure but they didn’t seem to be the least bit interested and in the end I gave up on the project. Its a queer and perverted thing, but it was as if they were batting for the already wealthy. Not the deserving wealthy but just for rich incumbents. As if they wanted all this economic rent floating around. Like they were after the appearance of a Carlos Slim type to be their new business hero.

  9. “It seems, once again, we have to reform capitalism. ”

    Its really about usury, fractional reserve of almost everything (negative inventories speculation) and artificial entities. Our business ecology is now so incredibly out of whack. Its like we have too many mastodons and not enough earth-worms. One wedge measure that could start slowly reforming the problem is to immediately abolish any takes on retained earnings for sole traders. As things stand they pay almost nothing in the way of taxes at the moment, so this doesn’t present a serious short-run budgetary problem.

    We either resource business renovation through retained earnings or through debt and artificial entities. The problem with capitalism doesn’t get there through the retained earnings financing mechanism. Its a feature of the other ways of finding the resources. So as long as we have policy skewed towards emphasising the retained earnings of sole traders, as the main wealth creating mechanism, we won’t have as much of the extreme current dysfunction.

    Of course the other thing we must do is get back to the late 19th Century idea of identifying economic rent and taxing it away the best that we can. But here we need a much greater degree of long-term thinking.

    People don’t think long-term enough. To me it might take 20 years to transition to sound money. It might take 100 years to transition to taxing away all economic rent. And it might take 5000 years to put together all the canals and tunnels we can use. Its not a problem that things can take a long time, I just think we should get started.

  10. @jack strocchi

    Doesn’t “socialism” involve the control of the production of goods AND SERVICES (eg health, education, transport) by the state, or rather perhaps in a social democracy, the participation and provision of these necessary services by the state, which cannot equitably be provided by the private sector?

  11. Mankind divides itself into two basic classes: owners and owned; or capitalists and workers.

    Everybody in the working class is a socialist. No exceptions. Even workers who claim to oppose socialism are socialists.

    Don’t believe me? Suppose we ask a person from the working class this question…

    “Do you think that all utilities, prisons, police and fire departments, banks, roads, highways, airports, harbors, and government itself should be privately owned?”

    If he answers yes, then he is a liar (in which case he is a closet socialist) or else he is a moron (in which case he will change his tune when we explain reality to him). Either way, he is a socialist.

    Unfortunately, many workers are liars. Even though all workers believe in socialism (or at least in a mixture of socialism and capitalism) many workers pretend that they don’t.

    Their compulsive bullshitting is why they remain impoverished and enslaved.

  12. JOHN QUIGGIN WRITES: “As a socialist, I support a mixed economy in which both public and private ownership play important roles.”

    Exactly. The spirit of socialism is the spirit of sharing and mutual aid for maximum social benefit. Authentic sharing and mutual aid for maximum social benefit includes respect for some degree of private ownership.

    It’s a question of balance. Too much private ownership results in feudalism, where wealthy oligarchs own everything and everyone. Too little private ownership becomes Communism, in which the party bosses rule all. Both extremes create nightmares.

    Therefore, when we call ourselves socialists, we do not mean that we favor government ownership of all means of production. (That’s communism.) No, we mean that we favor a balance of public and private ownership. A mixture.

    We can never achieve this balance perfectly, but it is a worthy goal for a nation to continually pursue. It is a worthy star to steer the ship of state by.

    When workers reject socialism, it is because they erroneously equate socialism with communism.

    As for politicians who call themselves “social democrats,” they are not socialists. They are neoliberals. They push feudalism. They do not seek a balance.

    What does a nation look like when it pursues a balance between public and private ownership?

    Cuba.

    Because Cuba seeks a balance, the Western Empire falsely calls Cuba communist, and sanctions and blockades Cuba.

    Because Cuba seeks a balance, Cuba’s beaches and rural areas are unspoiled and unpolluted.

    Because Cuba seeks a balance, Cuba is by far the most popular Caribbean destination for foreign tourists.

    Cuban tourism sets new records each year, and it brings foreign currency, which Cuba uses to buy imports.

    This is why Washington fabricated the absurd nonsense about “sonic attacks: in Cuba. It is a desperate attempt to hurt Cuba’s tourist industry. The lie only works on American tourists. No one else believes it.

  13. Sorry Konrad but that is cobblers.

    You aim for competitive markets where consumer sovereignty reins not producer sovereignty.

    This means the public sector owns only essential services and nothing else. you only privatise industries which are not essential.

    this means electricity would have never occurred. Nor would you change the NBN but you would not touch the Retailers in the internet or the banks.

  14. No its not about essential or inessential. Its about that part of infrastructure which is analogous to piping. Roads, pipes, powerlines, tunnels and so forth. You have the divide completely wrong. The underground cables and the above ground electricity wires should be provided on a communist basis since we have no agreed upon way to provide them competitively and without unjust enrichment. Its got nothing to do with essential or inessential. These are weasel words.

  15. LIke the lone person in Life of Brian said when everyone else screamed in unison “Yes we are all individuals” my response to this article is “I’m not” (a socialist in any for I can identify even if I’m not a capitalist either). As to why, being a devil in the details person I am deeply sceptical of what was claimed to be ‘Socialist’ in the past and how it might work today. But I see here no explanation of here of how to avoid a new round of the rot setting in. To illustrate/tease via some Dorothy Dixers for you John:

    a. Can you explain how the ‘Central Planning Board’ within the Ministry of Socialisation would be organised, populated, appointed, operate etc.etc (see LANGE, O. 1936. On the economic theory of socialism: part one. The review of economic studies, 4, 53-71.) [Given the diversity of the economy and the dumbing down of government into specialised managers this organisation and its scale boggles the mind.]

    b. so as to avoid monsters like the legendary and now dead Alan Croxford godfather of https://en.wikipedia.org/wiki/Melbourne_and_Metropolitan_Board_of_Works . Legendarily he used to employ his giant 6ft 8 in frame to bully / intimidate anyone who opposed him https://en.wikipedia.org/wiki/Melbourne_and_Metropolitan_Board_of_Works#Alan_Humphrey_Croxford – an archetype boss of an archetype natural monopoly.

    c. would you trust the sub-boards to appartchicks like our eclectic Vice Chancellors straight out of management school – would each area would have a single Mandarin or a truimvirate?

    d. how do you avoid crony government given the current penchant for each Minister having their personal gaggle of policy comissars who can as Trump shows be drawn from the plutarchy as well The Party and maybe those profession parasites – the giant multinational consulting firms?

    e. what exactly do you propose to do as a good socialist with the biggest bundle of loot in the country available for expropriation – the Defined Contribution superannuation funds.

    Maybe what the Coalition Right and the IPA have actually realized is that the real game is power and privelege and as shown by the good socialists of the PRC, Trump and that weird den of social capitalism, Singapore, labels mean nothing or can be made to mean anything the powerful want.

  16. “You aim for competitive markets where consumer sovereignty reins not producer sovereignty.”

    I want sole trader producer sovereignty. If the job cannot easily be performed by sole traders, then it ought to probably be communist run. If you cannot conceive of sole traders doing it, and yet people are suggesting these big companies pull it off, what you are looking at is rent-seeking activity.

  17. @James Wimberley

    I agree with this, as I said here https://www.theguardian.com/business/2017/oct/09/socialism-with-a-spine-the-only-21st-century-alternative

    @Newtownian

    As the linked article says, I am not interested in reviving the idea of central planning.

    On other points, I think the big issue is managerial power and the bossiness of (mostly male) bosses. Capitalism is particularly conducive to this, but socialism doesn’t automatically cure it.

    Finally, I think the shift to defined contribution was a step in the wrong direction, though I’m not sure how to reverse it.

  18. @Newtownian
    I’m not sure why the onus is on people challenging the status quo to fix a bunch of problems that occurred in the past in a different time operating in a different world such as the board of works. I think the onus should be on people wanting to keep the status quo to explain how they are going to fix the mounting problems playing out in private provision of electricity, transport, banking, superannuation, education and healthcare.

  19. “the Institute of Public Affairs, once our leading free-market thinktank”
    To be fair to the IPA, they’ve always thought of themselves as a CONSERVATIVE, not free-market, thinktank; since the 1950s they have always been all for big government when it suits the interest of their paymasters (pushing for Gina’s dams was well in this tradition). The CIS is, love ’em or loathe ’em, much more consistently free market.

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