I have just presented a short talk on Australian ABC Radio National entitled “Should the financial crisis prompt another look at social ownership?”. Here is the podcast and transcript.
The ownership I am referring to relates to the means of production, the physical assets of businesses. A system where such a form of ownership dominates ought I think be called socialism, although this does require wresting the word back from the right and pseudo left for whom it means government meddling with capitalism. There are two main take home messages from the talk.
The first is that the conditions of advanced capitalism in places like Australia, USA and western Europe are vastly more conducive to the success of socialism than the backward conditions that prevailed in places where it had previously been attempted and failed. Transforming Czarist Russia, Manchu China and agrarian fascist eastern Europe into socialist societies was a big ask.
What makes the advanced conditions more conducive? I flag a number of things that make a big difference. (1) Work is generally approaching something people would want to do for its own sake and less like something you need to be forced to do. (2) Workers are more competent and better educated. (3) Democracy and individual liberty are fairly well entrenched.
These conditions will mean that eliminating private ownership and the profit motive will not lead to rule by bungling, corrupt and unaccountable bureaucrats. Instead they will allow us to transform the relations of production which is what socialism has to be about if it is to work. So workers will have the ability to take on increasingly interesting work; and the removal of existing ownership and authority barriers will enable an extensive system of formal and informal scrutiny that will keep workers and organizations on their toes.
The second message is that socialism would be more efficient. In the talk I only mention two of the reasons. Firstly, there is no financial crises or recessions because there is no capital market: investments are funded by grants from tax revenue. Secondly, there is a better decentralized price system with less distortions. Another important one I did not mention, although it was implicit, is the favourable impact on economizing and innovation from having a keen and committed workforce.
For more on this stuff also see The Economics of Social Ownership.
Fire away with your comments.
You say that modern bureaucrats will do things better… but you don’t say why. I find this very hard to believe, and I certainly would not want to bet lives on it (which is generally the consequence of failed socialist experiments). I’m sure you *hope* things would work better now. I’m sure all socialists have hoped that their system would work. But ultimately the government controlling all assets will lead to the same problems it always has lead to — corruption, self-serving behaviour, lack of innovation, incorrect signals about resource use leading to resource waste, intrenched interests which cannot be moved, etc.
Recessions aren’t caused by the capital market. Recessions are a necessary consequence of previous mistakes. The market makes mistakes and occasionally tries to fix them. In a socialist system mistakes would still be made (probably more mistakes) but there is less mechanism to fix them. So the inefficient/inappropirate industry continues to produce (avoiding the unemployment and cycles of creative destruction under capitalism) and this leads to a slow decline into stagnation.
You assert that the workforce would be more keen and committed, but there is no reason to make this assumption. Crappy jobs will still need to be done. People will still suffer the same angst that we always have. Changes of employment will have to be bureaucratically controlled, giving people less freedom over their working choices. And those bureaucratic decisions will probably be made by increasingly political (instead of economic) reasons. I like your optimism. But if you were really optimistic about how things would progress you would let it evolve naturally into voluntary communities of civic minded people. And if you don’t have sufficient faith in people to do that — then you should reconsider the amount of faith you want to put in politicians, bureaucrats and planner. They aren’t better than us mere mortals. And power corrupts.
david mc
Good on you for putting this “out there”. I can’t listen to the podcast at the moment, so sorry if you answer my questions in it. How do you respond to the lessons we have learnt over the past 75 years or so about huge centralised bureaucracies in sophisticated modern (post)industrial societies whose populations can run into the hundreds of millions?I am not suggesting Hayek is the bees knees, but his insights into the information deficits that follow state bureacracies and the consequent learned helplessness of the citizenry must give you food for thought, no?
Reply to John Greenfield
Yes do listen to the talk and maybe even read the web site I mention above.
Reply to John Humphreys
“You say that modern bureaucrats will do things better… but you don’t say why.”
I suppose you could call people who engage in entrepreneurial activity for a wage bureaucats, but I wouldn’t. As for why they would do better … Trying to achieve good outcomes strikes me as fun. Then we don’t have the distortions thrown up by the profit motive. But we do have the extensive system of scrutiny which I refer to and which would keep everyone on their toes.
“government controlling all assets.”
Just as under capitalism there will be eminent domain. But generally industries and enterprises will be left to do their own thing.
“Recessions are a necessary consequence of previous mistakes.”
Under socialism there will still be disproportions because information and decisionmaking can never be perfect – too much investment in capacity for some goods and not enough for others. However, this won’t result in recessions or depressions just a less than optimal mix of output and some extra labor retraining.
“Changes of employment will have to be bureaucratically controlled, giving people less freedom over their working choices.”
Changes in employment will not have to be bureaucratically controlled. There will be a labor market and flexible wages. The big difference from capitalism is that redundancy plans won’t be a management secret until they are announced and the decision about who goes will be a civilized process that tries to look at what is best for all concerned.
David Mc
You ought to think of “social ownership” in another way. You are aware that share ownership privately or though pension funds anchored by super superannuation basically reaches your goal of social ownership? The bulk of our large firms are owned through pension funds these days. Meanwhile globalization has meant the 100 odd interlocking families that once ran have been thrown on the scarp heap allowing the meritocracy to do the work.
David, do you see any market operations happening? Will there still be money and wages? Will wages be equal? If I don’t want to work can I get the same income any way? Will my wife have to work or can she stay home with the kids and we get the same income anyway? Will I still own my house or will the state take that over? If my wage changes to an equal wage how will we pay a mortgage based on current affordabilty (you can assume we earn a bit more than average household)?
I’ve just posted a comment in the “Allying with the Right” discussion, which could just as easily have gone here. It seems that the two threads are currently quite parallel discussions. They probably need to be read in conjunction with each other.
jc
I agree that the current system of ownership is murky because of the stock exchange and banks. However, what we have at the moment is definitely not ownership by society.
pedro
This is what I say at the Economics of Social Ownership on the persistence of markets for labor and consumer goods.
“Under social ownership, there would still be markets for consumer goods and for labor power, with workers providing the latter to society in exchange for the former. However, these will be different kinds of markets from what we are used to under capitalism. In the case of consumer goods, suppliers will be there to benefit consumers and not shareholders and extravagantly overpaid executives. In the labor market workers will receive the full value of their output, the total final product of society. While one’s current job will not be guaranteed (and is very likely to be temporary in a dynamic economy), work (and a wage) can be guaranteed because unemployment is no longer used to keep down wages, and the elimination of the capitalist financial system and the necessity to make a profit removes the possibility of recessions and depressions.”
At least initially I would expect significant wage inequality. However, I would see this declining. For my views on that check out the section entitled Efficiency Accompanied by Greater Equality in my book Bright Future. Go here and scroll up three paragraphs.
I personally would not support subsidizing child rearing unless there a political decision in support of encouraging a birth rate above what it would otherwise be.
I am still thinking about the question of house and land ownership by individuals. Ultimately, the real question is would we want to make greater use of eminent domain for collective decisions about whole neighbourhoods? For example, a whole area can be given a makeover by demolishing everything and starting again. Improvements intransport and parkland systems can be implemented more effectively if houses can be selected for demolition with no great fuss. I still need to think about what this means for the systems of tenure and property rights.
Regarding the current price of housing, that is more to do with speculation and the undersupply of land for building. A good family home should not cost more than AUD250,000.
John:“…controlling all assets will lead to the same problems it always has lead to — corruption, self-serving behaviour, lack of innovation, incorrect signals about resource use leading to resource waste, intrenched interests which cannot be moved, etc.”
Perhaps a trifle overstated, but certainly a compelling case against capitalism (whether state capitalism or not)…Now given your recognition of the inevitable results of the system we actually live under, why do you imagine that system does not make people who work for it less keen and committed?Or does the working class in modern society strike you as keen and committed?
Sorry, my above to “John” was responding to John Humphries.
Now to John Greenfield:The learned helplessness of the population waiting breathlessly to find out what “the economy” will do next must indeed give food for thought.This vivid demonstration that “we only work here” (ie have no responsibility, no clue and no say) must especially give food for thought to libertarian apologists for capitalism’s gigantic state and corporate bureaucracies.
How can they go on pretending that the systematic inculcation of learned helplessness for the overwhelming majority by tightly restricted private control of social wealth is not a fetter to “free enterprise”?
As for Hayek’s superiority of markets for information processing, so far recent events have only revealed a few trillion dollars of resource misallocation. But you know what they say, a trillion here and a trillion there and pretty soon you’re talking real money…
I find your project very interesting but I think the “time is now right” argument is a little optimistic. Maybe socialism will get another look in in a century or so when (maybe) automation, information technology etc will have displaced the need for human labour to meet our basic needs.
Nonetheless it’s certainly worth discussing now.
I also note with considerable mirth that you’ve attracted catallaxy’s resident house flies. Don’t let them bother you too much 🙂
David, the guys who think you can be converted to libertarianism are way of the mark aren’t they. I like my house so lucky that your poxy ideas about the socialist society will never go anywhere. No personal offence intended.But keep up the good ideas and justtuck the marxism under a rug so it doesn’t give people an excuse to ignore sensible things you say.Nice to see you mel. Can’t bring yourself to be nice eh?
As a wise man once noted- Some institutions want to do well and some want to do good. When I hear of institutions that want to do well and good I reach for my wallet and so should you. I notice we’re all reaching for our wallets now thanks to the Freddies and Fannies kicking off all that wellness and goodness that’s engulfing us.
This kind of superficial plea for socialism based upon a (stock) market based explanation for crisis rather than a discussion based on the inherent and internal dynamics of capitalism itself leaves me quite unsatisfied.
However, even more troubling is the kind of off the cuff dismissal of the complex attempts to construct alternatives that McMullen so off-handedly dismisses at the end of his presentation; are alternatives in Australia so well conceived that ongoing political processes in countries like Ecuador, Bolivia, Cuba or Venezuela can be dismissed to cavalierly as this commentator from “down south” does?
Here in Latin America, such flippancy would merit energic debate.
Response to David Barkin: You won’t find any energetic debate in Cuba, and Chavez is doing everything he can to close it down in Venezuela.
“Transforming Czarist Russia, Manchu China and agrarian fascist eastern Europe into socialist societies was a big ask”Good program, RN rarely covers contrary views to the “accepted norm” these days. It’s the same within the left with VANGUARD and GUARDIAN lining up on one side against all the Trotskyist groups that say that capitalism has been restored in the PRC, Cuba and VietNam.Very little independent analysis with most groups looking like they’ve imported their ideology from another party somewhere else. Strangetimes is an exception to the rule, the only other one I can think of is the Trotskyist Platform at http://www.trotskyistplatform.org Are there any other forums or blog websites where there is debate on issues facing the left – debate that isnt censored such as on GLW?