The Economics of Democratic Socialism

Photograph Source: Fibonacci Blue – CC BY 2.0

The fact that capitalism is authoritarian is nothing really new and the fact that it needs to be replaced by democratic socialism is also nothing new. What is new is that there are three new arguments that outline why such a shift is urgently needed. The first argument is that “our” (!) current economy works well for about 1% of the world population. The second argument is that it barely works for the rest of us – the other 99%. Finally, we need to change and we can achieve this. Perhaps ever since David Ricardo and Karl Marx began writing about capitalism, it has always seemed to be in one state of crisis or another. Today, capitalism manifests itself in no less than six main crises.

The first crisis is that capitalism means economic irrationality. The second crisis takes place at workplaces. There we see not just the continuous existence of bullshit business and the rise of bullshit jobs but also structural workplace disempowerment of workers under the all guiding ideology of Managerialism. In short, more corporate bullshit coming our way. Thirdly, with the rise of the Age of Populism, politics has become a showboat, a spectacle leading to unresponsive governments in many countries. Fourthly, there is a massive social disintegration noticeable on a worldwide scale. Then there are rafts of international conflicts with a daily carnage played out on our TV screens. Despite Steven Pinker’s “all will be well” phantasies, there are wars. These are stretching from Iraq to Afghanistan, from Syria to Yemen. As a consequence, parts of the Middle East and North-East Africa look like Mad Max III, without Tina Turner, of course.

Unforeseen by the giants of economic theory during the 19th century, a new kind of crisis has recently been added. This sixth crisis is one of environmental unsustainability, the real prospect of an uninhabitable earth. All of this links to Jameson’s dictum that it is easier to imagine an end to the world than an end to capitalism.

As the end of capitalism isn’t in sight, the rich continue to enrich themselves rather relentlessly and often ruthlessly. One might highlight the Walton family, the owners of Walmart. The family alone has more wealth than 40% of American families combined. This is just one fact that destroys the often rehearsed rags to riches ideology which most Americans have been made to believe in. Still, some might think that there is something profoundly offensive in the fact that eight people, six of them in the USA, now own as much in assets as the entire bottom 50% of the world’s population.

Like an inconsequential treadmill, every winter when world capitalists meet at Davos for champagne and caviar, the British charity Oxfam releases a report on global inequality. That global capitalism is unbothered by such reports and the facts they depict have become blatantly obvious in recent years. Even the Davos Boys – mostly men like Klaus Schwab, Børge Brende, etc. – put Oxfam’s report on Davos’ own homepage. This is the final insult of Mill’s power elite to all those who still believe that things are changing.

Meanwhile, it is bad enough when huge numbers of people are either unemployed or grossly underpaid for their labour. But many people go to work and think they are earning a fair or living wage, yet statistics belie their beliefs. Today, only 45% of employees feel their employers listen to their ideas or concerns and just 31% feel their employers show concern for employees, not just for the financial bottom line.

In regard to the environment, things do not look much better. By 1970, humanity had already exceeded the carrying capacity of the planet. We are killing off other species at an extraordinary rate. Climate change already cost 400,000 lives a year, globally. Meanwhile, from China’s Foxconn to Korea to Japan and to America, money and work remain the biggest sources of stress. In the USA, for example, the fact that men in Harlem live less long than men in Bangladesh remains a reality that is hardly shown on Fox TV. Meanwhile, US life expectancy might have stopped declining with a marginal increase of 0.1 years. Much of the slight change, workplace stress, a serious rise in suicide rates, stagnating wages, etc. comes despite – or perhaps because of – the fact that we now have corporate social responsibility and business ethics. Yet corporate responsibility and business morality have all but disappeared.

At the international level, things do not look much brighter. Our globalised world is moving further and further away from German philosopher Immanuel Kant’s dream of eternal perpetual peace based on a world government. Instead, the USA, for example, has helped to overthrow at least thirty-six governments, interfered in at least eighty-four foreign elections, attempted to assassinate over fifty foreign leaders with the Iranian general and chief terrorist Qasem Soleimani being the latest, and dropped bombs on people in over thirty countries while also providing aid to three-quarters of the world dictatorships. Other countries, western democracies, Russia, third world kleptocracies, oligarchies and a variety of failed states do as much or worse according to their proportionate size, wealth and influence. Nobody occupies the moral high ground any longer and the sea levels are rising quickly.

Given all this, there is a longstanding argument that crises are a feature of capitalism, not a bug. The same goes for unemployment. The threat of unemployment always lurks. Unemployment is not an unfortunate accidental outcome, but a permanent feature of capitalism. There simply is no unemployment without capitalism. The structural asymmetry between labour and capital manifests itself at work as well because the great majority of us negotiates our pay and working conditions at a structural disadvantage, because we need the job more than the employer needs any one of us.

For many employers, labour is not much more than another production cost. Unlike labourers, companies can off-load such costs onto someone else. This is called externality. The environment, for example, is an externality. Capitalism is a system that consumes forests, fish, minerals, soil fertility, and fresh water faster than they can be replenished. Thus, capitalism as an extreme example that shows industrialisation encourages environmental plunder. Plunder boosts the bottom line. This is not really new. Since Das Kapital, we know,

with adequate profit, management becomes very bold. A certain 10% will ensure its employment anywhere; 20% certain will produce eagerness; 50%, positive audacity; 100% will make it ready to trample on all human laws; 300%, and there is not a crime at which it will scruple, nor a risk it will not run.

Not only that, capitalism also destroys the environment and most likely the entire planet. All this leads to a growing tension. To alleviate this tension or what Harvey has named the seventeen contradictions of capitalism (2014), four avenues of approach are usually proposed. The first is what might be called ethical capitalism – a version of please, be nice capitalism! This anodyne version is often found in the more enlightened corners of business schools and economics faculties. In business schools, it is sold as win-win opportunities that help competitiveness. The next l’idée fixe is that one can make capitalism good by regulating it. It comes under the hallucination that good laws make good capitalism. The third idea is that social democracy will solve problems. British sociologist Giddens made it famous in the Third Way. In the subsequent Blair years, poverty rose as corporations thrived and wealth hoovered upwards rather than trickle down. The last delusion is that of technology. Modern technology – the internet of things, battery-driven cars, etc. – will solve our problems.

None of these seem to have worked so far. Since the comprehensive failure of all four models, perhaps our economy needs to be democratically managed. Four ways might be suggested:

1) collaborative strategising, i.e., democratic planning through identifying our common goals;

2) collaborative innovations. This means that R&D is geared towards human – rather than corporate – needs;

3) collaborative learning that shifts the current factory model of education substantially;

4) inside companies, our current control and command model needs to move towards collaborative working. Experts on workplace relations suggest four innovative ways in which this can be achieved: (a) the articulation of collective goals; (b) on-going, reasoned discussions about how these collective goals relate to everyday work decisions; (c) evaluations and pay systems that reinforce the combination of individualism and collectivism; and (d) the development of distinctive skills.

All this leads even further. It leads towards the idea that we must replace private enterprise with publicly owned enterprise. So far so good. While many have suggested this before, we need to know how we are getting there. Perhaps four scenarios can be developed. To build the momentum for the establishment of public rather than state ownership nor nationalisation, four spheres of change can be conceived: (1) the political sphere, (2) the workplace sphere, (3) schools and universities and (4) our communities.

Despite the rise of populism around the world from India to Brazil, with great headline stars such as Boris Johnson and Donald Trump, progressives have reason to be optimistic about the prospects for democratic socialism in the twenty-first century, moving towards the creation of an economy for the 99% – it is urgently needed.

What has been outlined above is an astute evaluation making sensible suggestions, if – and only if – all this makes much sense in the real world, where forces, people, and ideas do not come in neatly set out lists, paradigms and bullet points. The problem remains, why can’t we find ourselves in the place described above? It is very well conceivable that such discussions still make the mistake many have made and are continually making.

There might be a kind of blind-spot. In his seminal article entitled Communications: Blindspot of Western Marxism’, Smythe alludes to the role of communication, or better the media, in capitalism. The media remains a powerful institution in capitalism and in democratic societies. We know capitalism, neoliberalism, politics, Donald Trump largely through the media. As such, the media is an important gatekeeper in society linking the individual to society. Smythe’s core argument is that one needs to take the role of the media into consideration when discussing capitalism and society. It is a question that comes whether such an analysis is conducted from the standpoint of Western Marxism, as in Smythe, or from many other standpoints.

Essentially, the missing argument is a tendency to undervalue the role of the media in capitalism. In capitalism, capital not only owns factories that make things like shoes and cars but also includes companies that make news, entertainment, etc., and here it can be said that the media has two functions. It’s role is not just to sell us consumer goods but it also creates what Theodor W. Adorno and Max Horkheimer have called mass deception. This function legitimises capitalism largely through camouflaging the aforementioned contradictions of capitalism. This is the case whether it is liberal capitalism, social-democratic capitalism or neoliberal capitalism. Today, we seem to experience a world in which its prime ideology – neoliberalism and more recent hallucinations – are transitioning towards the Age of Populism. Sadly, our world does not appear to move towards prospects for democratic socialism, but towards right-wing populism.

Paul Adler’s book is called The 99 Percent Economy.


Thomas Klikauer is the author of 550 publications include a book on the AfD. Norman Simms is a retired academic who lives in New Zealand and continues to write articles and books, as well as editing an online journal.