A recent report by the Hamilton Project, a policy initiative launched by the Brookings Institution, has concluded that nearly half of all American families are living in poverty, near poverty, or are one major setback in income away from being plunged into poverty. This coincides with census data that came out in 2011.
More broadly, research by the World Bank indicates that roughly 80 percent of the world’s population lives on less than $10 a day. According to a report by the United Nations, “more than 2.8 billion people, close to half the world's population, live on less than the equivalent of $2/day,” while “more than 1.2 billion people, or about 20 per cent of the world population, live on less than the equivalent of $1/day.” The UN further concludes that “nearly 1 billion people are illiterate; more than 1 billion people do not have access to safe water; some 840 million people go hungry or face food insecurity; [and] about one-third of all children under five suffer from malnutrition.” Equally noteworthy is the fact that “the top fifth (20 per cent) of the world’s people who live in the highest income countries have access to 86 per cent of world gross domestic product (GDP),” whereas “the bottom fifth, in the poorest countries, has about one per cent.” In addition, “the assets of the world’s three richest men exceed the combined Gross Domestic Products of the world's 48 poorest countries.” Finally, UNICEF has established that 22,000 children die every day because of poverty.
These are some of the harsh realities of our capitalist world order.
Are there any viable alternatives? The answer is no, according to the corporate-controlled American mainstream media. Of course the right holds capitalism sacrosanct. But perhaps more importantly, so does the left. Throughout much of the 20th century, many elements of the mainstream left, particularly socialists and communists, viewed capitalism as a force of evil, which must be opposed. But nowadays, you will seldom see an op-ed in The New York Times or a clip on MSNBC denouncing capitalism and advocating a serious alternative. They will critique the excesses of the system, such as Wall Street greed, they will yell about how the Republicans are evil, and they will push for higher taxes on the rich. But generally, they will not call into question the fundamental assumption that capitalism is the only workable economic model. This tendency is corrosive because, as the standard-bearers of modern American liberalism, these media outlets limit what passes for acceptable debate in mainstream discourse. In doing so, they create the illusion that Americans have freedom of choice when in fact they are, ironically, subtly inundating the public with pro-capitalist propaganda.
To find a coherent alternative one must turn to independent media and dissident literature. The most convincing formulation of a cure for capitalism I’ve yet to encounter is (Marxist) economist Richard Wolff’s 2012 book, Democracy at Work, A Cure for Capitalism.
Wolff, who has both a PhD in economics and an MA in history from Yale, begins by explaining how we got to where we are today. First, what is capitalism? It is popularly associated with private property and market-based economies. But these definitions are imprecise. For one, as Wolff points out, “in the United States… harbors, airspace, transportation facilities, military equipment, large tracts of land, and many educational institutions are publicly owned,” while “food is distributed via food stamps issued to certain parts of the population, and many communities distribute park, fire, police and school services to citizens based on local notions of citizens’ needs, not on market exchanges.” And at the top of the economic ladder, the rich gorge themselves on the largesse of the state through bailouts and subsidies.
Furthermore, Wolff explains that “private property and markets do not distinguish capitalist from other types of economic systems in human history.” For example, “in many parts of late Medieval Europe, the land, horses, plows and mills were often privately owned means of production, yet we refer to the economic system of that time as feudalism, not capitalism.” He adds that “feudal lords often sold the products of their serfs’ labor in markets,” and so “feudalism thus worked with a market system of distribution.”
What, then, is capitalism, or “really existing capitalism,” as Noam Chomsky calls it? Wolff focuses on the internal structure of capitalist organizations in formulating his definition. It is essentially a system in which workers sell their labor and time to capitalists, who own the means of production. The workers survive on whatever wages they can get, while the capitalists, or employers, accrue the “surplus” their laborers produce, i.e. profits. The capitalists use their surplus to re-create the conditions that enable them to profit further by hiring supervisors to ensure their workers are productive, paying taxes to a state which will enforce contracts, and sustaining institutions designed to convince the public that capitalism is good, such as advertising companies, schools, churches, think tanks, etc. They also use their money to lobby politicians.
This system is inherently exploitative because workers produce products for management, not for themselves. They have little to no say in how things are run, and their entire lives are generally given up to the company that employs, or owns, them. Factory workers, for example, do not even get to see the finished products at all. They are treated like commodities and must slave away at menial tasks for hours on end, often under miserable conditions. And when the capitalists decide that it is more profitable to move the factory overseas, the workers are left to rot. It’s nothing personal, it is simply the nature of capitalism.
This system is also fundamentally unstable. It is plagued by chronic boom-bust cycles. In the past few decades, we’ve seen the savings and loan crisis, the dotcom and housing bubbles. In other words, every few years America has been rocked by a major financial crisis created by speculators, who have typically been rewarded for their reckless and criminal behavior with bailouts, appointments to positions in government and so on, while the mass of workers have lost their jobs, pensions and dignity. While more acute in the past 30 years, boom-bust cycles have been prevalent throughout U.S. history according to Wolff, with one crucial exception, as we shall see.
There are always winners and losers. One company’s success, say Walmart, often destroys other companies, such as the local mom and pop shops in a given community which Walmart penetrates. More broadly, Wolff explains that “the growth of wealth in some parts of the world goes hand in hand with the growth of poverty in others… British capitalism’s success was the root of India’s crisis and decline,” and, more contemporarily, “the explosive growth of capitalist enterprises in China finds its counterpart in devastated former manufacturing zones of the United States.” These trends help explain the horrific facts cited at the outset of this essay.
Accordingly, American capitalism has built into it mechanisms to cope with the inevitable downturns, popularly referred to as “hard times.” In addition to saving Wall Street through bailouts and low-interest loans, government also intervenes to mitigate mass suffering through unemployment benefits, reforms and regulations. Defenders of capitalism justify such downturns as a positive mechanism that weeds out inefficient companies, while politicians typically promise that their reforms will prevent such breakdowns from recurring.
But, as noted above, instability is a fundamental, eternal feature of capitalist economies.
This is powerfully illustrated by the most dramatic example of capitalism’s collapse and resurrection, the Great Depression and New Deal. When FDR came to power, it was not clear that America would remain a capitalist country. Mass unemployment and suffering gave rise to “an angry working class that was better organized and mobilized than ever before or since,” according to Wolff. The mainstream left was crammed with communists and socialists; unions, led by the Congress of Industrial Organizations (CIO), had real power (as opposed to today); and there was a realistic chance that American capitalism could have been overthrown. Steinbeck’s Grapes of Wrath, published in 1939, describes the banking system that kicked the Joads and millions of other farmers off their land as a machine, a force of evil, while depicting the government camp in which the Joads temporarily reside as a truly democratic and prosperous place.
As such, FDR saved capitalism by striking a bargain between the capitalist class, of which he and his family were members, and his leftist base. He implemented a form of welfare state capitalism by creating Social Security, an unemployment benefits program, legal protection measures for unions and a massive federal jobs program that put millions of Americans back to work. He funded all this by dramatically raising taxes on the rich.
According to Wolff, these concessions by-and-large placated the left and spurred them to abandon their revolutionary efforts to overthrow capitalism. The capitalists, on the other hand, were split. Some agreed that reforms were a necessary measure to stave off revolution while others harbored no such sentiments. Accordingly, the latter immediately went to work at dismantling the New Deal, and thereupon emerged what Wolff calls the “New Right” coalition—conservatives who blamed all of society’s ills on the welfare state, big government and inefficient bureaucracies.
But the New Deal era, which lasted until the 1970s, gave rise to a golden age for American workers, who largely enjoyed good wages, safe working conditions and job security. There were no chronic boom-bust cycles caused by Wall Street speculators, who were not free to gamble with the global economy. And unlike today, the average working man could support his family with one job and enjoy a decent life.
Even so, I cite this period as evidence of capitalism’s inherent instability because the undoing of the New Deal and return to boom-bust cycles was inevitable, given the structure of capitalism. In a society where money equals power, the superrich are bound to rig the game in their favor. As such, the New Right, whose worldview has come to dominate elite circles, has slowly but surely done away with most of FDR’s reforms. It began with the passage of the Taft-Hartley Act in 1946, which rolled back strikers’ rights, but the 1970s was a crucial turning point.
Wolff observes that “for more than a century before the 1970s, labor shortages were recurring problems [for management], thus driving real-wage increases.” In other words, there was a greater demand for labor than today, which enabled workers to attain rising real wages. Prior to the 70s, the capitalist class dealt with this shortage by implementing the slavery system in the South and encouraging wave after wave of immigration from Europe, in which they had to entice workers to leave their homeland for better wages (although, as Upton Sinclair’s The Jungle graphically illustrates, many of these immigrants were ruthlessly exploited by the major conglomerates).
This pattern ended in the 1970s, when we entered a period of steady decline because of a few factors that tilted the balance of supply and demand much more heavily in favor of management. First, the rise of computers in the manufacturing and services industries rendered many jobs obsolete. In addition, corporate lobbying became much better organized according to political scientists Jacob S. Hacker and Paul Pierson, authors of Winner-Take-All Politics, and the elites pushed through legislation that enabled them to ship jobs overseas, where they could pay lower wages. Furthermore, women began to enter the workforce en mass, an achievement of the women’s liberation movement. Finally, millions were driven to migrate from Mexico and Central America because of “capitalism’s uneven development,” according to Wolff. Measures such as Bill Clinton’s NAFTA in 1994 enabled American corporations to penetrate new markets and drove countless farmers who couldn’t compete from their land, forcing them to flee for America in a desperate search for work. All these factors stripped labor of its power to demand better wages. As such, real wages have remained stagnant or declined ever since.
The consequences have been devastating. As noted above, the average American man can no longer expect to obtain one job on which to support his family. A typical American household now consists of both parents holding jobs, often two jobs per spouse, with increasingly longer working hours and reduced benefits. This creates more expenses, since these families need two cars to get to work and must pay for child-care, as working mothers cannot stay home to raise their children. The nuclear family has been eroded by divorces stemming largely from tensions brought about by financial hardships. Wolff explains that “women brought their job stresses home” and “children received less time and attention from parents.” He adds that, “on US television programs, situation comedies changed from celebrating the happy nuclear and patriarchal family of the 1950s and 1960s to laughing with compassion at the increasingly dysfunctional families of the last several decades. A historically unprecedented and growing proportion of the population began choosing not to get married.” It’s no coincidence that, according to Wolff, “the pornography industry grew fastest of all… The stresses and strains of all these changes made many men, raised with ideals of masculinity based on providing for their families, feel diminished, emasculated, and devalued. For many, pornography provided, in voyeuristic fantasy, the male control and domination that had eroded in their real lives.”
We’ve also seen an explosion of debt, as wages are no longer sufficient to meet rising prices for basic goods. Wolff explains that “the credit card was transformed in the 1970’s from a non-debt-accumulating convenience for business and elite travellers to a debt-accumulating necessity for nearly everyone.” Auto loans shot up, as more families needed two cars, and student debt began to rise dramatically because a college degree became an indispensable prerequisite to obtain a decent job. Wolff notes that “when the Great Depression hit in 1929, the average US family had debts roughly equal to 30 percent of its annual income. In 2007, according to the Federal Reserve, the comparable number was well over 100 percent.”
Furthermore, the taxation system has been inverted and become regressive, as “the burden of taxation was increasingly shifted onto the working classes,” according to Wolff. He points out that, “whereas federal taxes on business had brought in far more than taxes on individuals in the 1940s, by the first decade of this century, that relationship has been starkly reversed: federal taxes on businesses brought in a quarter of the tax revenues collected by individuals.” In addition, top bracket income tax rates have dropped from a high of 91 percent in the 1950s and 60s to around 35 percent the past few decades. Finally, Wolff says that “the fastest-growing federal revenue source during these years was not the less and less progressive individual income tax, but the regressive Social Security and Medicare taxes.”
This entire cycle is self-perpetuating. The capitalist class plunges the working class into financial hardship, inducing the masses to sink into debt, which is financed by the capitalist class. Meanwhile, the capitalists use the rising surplus profits produced by the longer working hours and lower wages to lobby Washington to pass legislation that further consolidates their power. At the same rate, the working class has less time to participate in politics as they struggle for bare survival. And they have increasingly less inclination to participate as they become disenfranchised by the performance of their representatives in government. This is how our democracy has been dismantled by the corporate state.
It’s no wonder, then, that this time around, in our version of the Great Depression, Washington never seriously considered implementing a modern New Deal, in spite of all the horrific statistics cited in the opening of this essay.
So what’s to be done? The immediate answer that comes to mind is, of course, socialism. But didn’t the Soviet Union prove that socialism doesn’t work?
First of all, what is socialism? Much like with capitalism, conventional definitions are imprecise. It is popularly understood to mean a planned economy dominated by state intervention. But these characteristics pervade American capitalism too, as described above, rendering little difference between the two systems.
And that’s the point. Wolff describes the Soviet Union as merely a harsher and more backwards form of state capitalism than Western style “free markets.” The workers did not own the means of production. They did not work for themselves and their communities. They still worked for bosses in a system of haves and have-nots. Only here, the haves were in government, not private corporations. Wolff says that in the Soviet Union, “hired workers produced surpluses that were appropriated and distributed by others: the council of ministers, state officials who functioned as employers. Thus Soviet industry was actually an example of state capitalism in its class structure.”
One of the great ideological coups for the two dominant propaganda systems of the 20th century, those of American capitalism and Soviet communism, was their ability to convince the world that Soviet communism was genuine socialism (which I’ll use interchangeably with communism in this paragraph for simplicity). This redefinition of socialism masked the fact that laborers all over the world continued to be enslaved by bosses, whether the bosses called themselves capitalists or communists. The West called it communism in order to associate the miserable conditions of the Soviet dungeon with socialism in the minds of its citizens. And the Soviets called their tyranny socialism to persuade their subjects to attach the positive moral qualities of socialism to the state’s policies, much like how American leaders call America a democracy, when it is in fact a plutocracy.
But Wolff argues convincingly that now is the time for the world to finally transcend capitalism in all its forms. Considering that the sub-prime mortgage crisis nearly collapsed the global economy, and that a handful of mega-banks control over 60% of the nations’ GDP and enjoy even more highly concentrated power than they had in 2008, another meltdown is essentially inevitable if we do nothing.
Wolff’s proposition is simple. There is no need for a dramatic revolution. We don’t need to overthrow the government or nationalize everything and strip the rich of their wealth. All we must do is create and spread workers’ self-directed enterprises, henceforth known as WSDEs. These are companies in which there is no distinction between workers and bosses, and everyone is treated as an equal—democracy at work. WSDEs can be owned by a group of people, one person, the state or some combination. Each member of the organization must perform a job and participate in the decision-making process as a member of the board of directors.
So in a restaurant, for example, every member of the team, from the janitor to the chef to the supervisor has a specific task to perform on a day-to-day basis and must also help make decisions about how much food to produce, where to buy food from, how many hours they will work, how safe the working conditions must be, how much money everyone should make, how to allocate surpluses/profits, etc.
This does not mean absolute equality. Nor does it entail shackling gifted individuals so everyone else can feel good about themselves. History demonstrates that some will always dominate. Obviously, most people do not know how to run a business, and those with the requisite knowledge must win recognition from their peers and assume leadership positions. But whereas capitalism encourages crushing everyone in your path, WSDEs force superstars to improve the performance of everyone around them. As such, hierarchies will likely develop in a given WSDE. But they will be democratically-based and rooted in majority vote. If someone slacks off too much, the rest of the workers can vote to fire him. Conversely, to stick with the restaurant example, if a chef or waiter distinguishes himself with excellent performance, his peers can vote to raise his salary as a reward and an incentive to prevent him from moving to a rival restaurant.
There are many other possibilities. As one of my best friends, who has a decade of experience in the restaurant industry suggests, some WSDE restaurants may opt to retain the conventional capitalist, worker-boss paradigm, but with salary caps to ensure that the surplus goes back into the restaurant instead of management’s pocket. This surplus can be used to hire more workers, which would enable everyone to earn a living wage and work fair hours. Such a system would vastly improve the lives of those who, like my friend, toil away for 12 hours a day without receiving pay commensurate with their effort.
WSDEs are different from worker-owned and worker-managed enterprises because the latter two can feature an appointed board of directors consisting of non-workers who make all the major decisions about how these companies are run. WSDEs are also different from cooperatives, which can function as jointly owned enterprises that preserve the worker-boss structure. “For example,” Wolff writes, “groups of farmers have sometimes purchased and cooperatively owned land together, while each has hired workers and farmed a portion of the cooperatively owned land as a capitalist enterprise. In this case, co-op refers to how the land is owned, but not to the organization of production or class structure of the farming enterprise.”
WSDEs are, obviously, no utopia. Every WSDE must resolve many questions on its own terms—what constitutes a majority, merely more than 50 percent or something more? Should the workers rotate jobs every so often or does specialization best suit their strengths? Who should be put in charge of what? Ultimately, anyone who attains authority in a given WSDE would have to earn it by demonstrating to all his colleagues that he is most suited to lead. And, yes, government must never instruct WSDEs on what is the right answer because there is no clear-cut path. Government must only offer assistance in forms that will be discussed shortly.
In spite of these uncertainties, Wolff argues that, like the ending of slavery in America, implementing WSDEs is the beginning rather than the end of the debate about how to create a more just and prosperous society. No reasonable person can deny that shuttering the slavery system was a positive development, a huge first step in the right direction, even though African-Americans continue to be enslaved by the drug war and exploitative economic system. Similarly, WSDEs offer a significant first step towards transcending capitalism. For one, WSDEs are non-exploitative, as nobody can earn a surplus generated by somebody else’s labor.
They also offer a solid basis for a more stable economic system. Take outsourcing and the environment. The root cause of both problems is the fact that today owners often live far away from their factories and have no concern for the human cost of shipping jobs overseas or environmental degradation. In a WSDE, however, it is unlikely that a board of directors run by workers would close down a factory and open one in China to save money on wages because the directors are the workers, and so they would either lose their jobs or suffer directly from their community’s losing a job source. Likewise, no sane WSDE would dump toxic chemicals in the local lakes and forests to save money because they live near their factories and would bear the consequences.
The population could use their collective surpluses, i.e. tax dollars, to invest heavily in clean technology and transcend fossil fuels. A WSDE-based society is more likely to solve the energy crisis than our current economy, in which few are willing to take up the financial risks of investing in electric cars, wind, solar, etc. Many individual companies go bankrupt, but if society were to pool its wealth into clean technology the way it currently spends on the military, we could revolutionize the manner in which we generate energy.
Inequality in a WSDE-based society would likely be extremely limited. Wolff explains that, “to pay some workers many times more than others or to compensate some workers so poorly that they need three jobs and have neither time nor energy to participate in politics or workplace deliberations would undermine and eventually dissolve WSDEs” because there would be little incentive for workers to join them. “Thus, a system based on WSDEs and reproducing them over time would likely mandate minimum and maximum income levels for all workers, based on democratically chosen criteria.”
And that’s the ultimate goal—to create a genuine democracy that serves the overwhelming majority of the population. It starts in the workplace, and it would spread throughout the political system. If an economy distributes its wealth evenly, it will preclude tiny elites form manipulating government because presumably no such elites would exist. “Capitalists’ use of the surpluses they appropriate will no longer dominate politics,” Wolff writes. “Instead, the community of workers who direct WSDEs will be the prevailing political partner of residence-based governing bodies.”
The people, therefore, would finally be free to resolve problems for themselves and create their own values. They could pressure the government to spend their tax dollars on creating a free, universal healthcare system, a clean, fossil fuel-free energy system and efficient public transportation rather than feeding a bloated “defense” budget that at its core is an imperial project. Our military would exist for the limited purpose of defending the nation, not imperial expansion.
Schools would no longer merely be institutions designed to churn out obedient drones to enter the workforce and obey their superiors. They would instead teach students how to work with teams of equals to direct and participate in projects that better their world. This and other similar measures would likely alleviate the alienation that pervades capitalist societies and encourage a sense of community, reducing depression, crime and substance abuse. And nobody would have to take up debt to get an education, which would be free and paid for with WSDE surpluses/taxes.
Or take technology and unemployment. In a capitalist society, capitalists seek to choke off new technologies that threaten their business, thus hindering progress. A classic example is how the fossil fuel industry combats clean energy. And workers worry that the latest advances in machinery will destroy their jobs. But in an economy dominated by WSDEs, “the gains and costs would be shared across the totality of employees in ways they would democratically establish,” Wolff says. “For example, periodically, debates would be arranged and votes taken as to how to share the gains in productivity, (what combination of greater leisure for workers or greater quantities of output).” This could conceivably culminate in a utopian, science and resource-based economy outlined in the film Zeitgeist, in which machines finally replace humans at producing goods and providing services altogether (as they are apparently on pace to do anyway), and there is no need for most people to work or trade anything—machines would create all our necessities and manage a clean energy system in the most sustainable and efficient way possible.
But assuming such an ideal never materializes, in cases where technology does render jobs obsolete, and more broadly, in order to deal with unemployment, Wolff proposes establishing
[A] special agency that would immediately swing into action upon learning of an enterprise considering a labor-saving technical change. It would always know, from constant monitoring, which existing enterprises need more laborers, which have registered that wish to commence new production, all the relevant skill and experience requirements, and where affected laborers and enterprises are located. Rather like a matchmaking service, this agency’s task would be to match employees willing to change jobs with job availability and to arrange for appropriate training and inducements to facilitate the reallocation of personnel. No loss of income would attend the transition period for workers who left one job for another. To run this agency would cost a small portion of all the surpluses distributed by WSDEs [i.e. taxes] to sustain its staff and activities. This agency’s reports and services would form one basis for the decision by all workers about whether to make the technical change in question.
So how can we go about establishing WSDEs? Wolff argues that we must push the government to create a modern version of the New Deal which revolves around giving unemployed workers capital to start up WSDEs. “Instead of a period of receiving regular unemployment payments, they [unemployed workers] could choose to get the total of such payments in advance as initial capital for a WSDE,” Wolff writes. As a model, he points to “Italy’s very successful 1985 Marcora Law, which enabled workers to take over enterprises that were in crisis.” The government could further foster WSDEs much like how it encourages small businesses today—with subsidies, easy access to credit, temporary tax exemptions, etc. American consumers must in addition use their purchasing power to support WSDEs the same way they currently have the option to promote organic food.
Once WSDEs become popular they will have an enormous impact on the broader economy. Workers in traditional capitalist companies would compare their lot to that of their WSDE counterparts. They might switch to the more democratically run enterprises. And even if they stay put, they might demand better working conditions, something comparable to what their new competitors enjoy. They might observe how differently WSDEs can deal with problems such as falling revenues. Instead of firing workers, the conventional capitalist remedy, WSDEs may choose to lower everyone’s salaries and use the extra money to increase advertising or install new equipment. Such measures might enable WSDEs to outcompete their capitalist rivals by being more productive. Wolff explains that “if WSDEs sharply reduce the remuneration of managers, eliminate dividends, and use those funds instead for technological innovation, they might thereby outcompete capitalist enterprises unwilling or unable to do likewise.”
This is a rough sketch of what such a society might look like. To reiterate, WSDEs are the beginning, not the end, of the conversation. No successful social model in history was completely thought out and put in practice perfectly. But the idea of democracy, both on a micro and macro level, is that we must endlessly engage in governing ourselves and improving our society. No issue can ever be completely resolved. In the realm of healthcare, for example, journalist T.R. Reid explains in his book, The Healing of America, that most people outside America are not entirely satisfied with their healthcare system. But nearly everyone in Europe or Japan knows that what they have is infinitely better than an American-style, for-profit model. Just as the true solution to America’s healthcare crisis must begin by abolishing the for-profit paradigm, any true solution to the broader crisis of capitalism must begin by dismantling the worker-boss paradigm.
Given the statistics cited at the opening of this essay, now is the time for change. And as America is still the world’s dominant superpower, we have a chance to lead by example and for once, truly to spread freedom and democracy. As an Occupy Wall Street activist, I must admit that the best critique of OWS is that we never pushed a concrete agenda that would’ve improved the lives of most Americans when we had the chance. A rallying cry for a fair minimum wage might have been a nice starting point. But why pursue such a limited goal? It seems more prudent to pressure the government to support WSDEs and revolutionize our economy and society altogether.