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After capitalism?

In examining the political prerequisites for change Frank Lee traces what the likely contours of a socialist economy may look like.

“Can socialism work? Of course it can.” (Capitalism, Socialism and Democracy – Joseph Schumpeter 1942)

It is a matter of record that with any given society – slavery, feudalism or capitalism– there will be group of ideologues whose function will be to provide the established order with an intellectual and cultural underpinning; this being the necessary legitimating process for a continuation of the status quo. Of course such justifications serve a political purpose being, as they are, based on sectional (or class) interests. As Marx and Engels pointed out in The German Ideology ‘The ideas of the ruling class are in every epoch the ruling ideas, that is to say, the class which is the material force in society, is at the same time its ruling intellectual force.' This group may, as in the middle ages, be a priestly caste defending the divine rights of kings, popes and nobility. In our own (supposedly more enlightened) era, academics, politicians and journalists posit the status quo as being just (or as just as it is possible to be) and fair, and given the ‘facts' of human nature, inevitable. Of course all such ideological postulates involve a series of massively begged questions regarding human nature, historical development and explanations of fundamental change.

Unfortunately for the ideologues, however, history has had the unfortunate tendency to sweep away their various claims regarding the permanence and inevitability of their civilizations (if that is the right word). Instead of stability and continuity, fundamental historical change is propelled and accompanied by a series of violent shocks and convulsions. History is a period of the flowering of civilisations, inevitably followed by decay and dissolution; this in turn leads to economic disruptions, wars and revolutions. The whole process then once more resumes, although the pattern is never an exact facsimile of what went before.

So it is with the present order of things. It would be true to say that many, if not most, academics and journalists, see the present dispensation of deregulated liberal capitalism as permanent: the end point in human social, political and economic engineering. The ‘End of History' as it has been called. It has been argued for the last couple of decades that capitalism had entered a new golden age of permanent, low-inflationary growth. Mature capitalist economies – primarily the Anglo-American financialised economies – were transmuting into something called ‘knowledge economies' - i.e. hollowed out, deindustrialised, bubble economies. The debt-fuelled spurt of growth of the last two decades would continue ad infinitum since debts and deficits – government and corporate, household and personal – no longer mattered, the rules had changed. Old fuddy-duddy notions such as savings and investment (as the road to prosperity) were supplanted by seductive new explanations. Borrow, spend and asset-price inflation became the new received wisdom, at least in the Anglo-Saxon world.

It is sometimes difficult to believe how people (even, on the left) were taken in by this vacuous claptrap. And not just your ordinary man or woman in the street; highly paid and presumably well-educated and intelligent journalists and other well-heeled opinion formers were – whether knowingly or not – suckered into this ridiculous consensus.

However, it looks – contrary to Fukuyama - as though history has resumed its cyclical pattern once more. The counter-revolutionary wave of the last three decades is finally breaking on the shoals of economic reality. The neo-liberal order of deregulated global capitalism is visibly unravelling. How long this process will take is difficult to estimate. But we are unquestionably entering into a new and more volatile epoch. After a long hibernation socialism will be back on the agenda.

Of course it is impossible to predict in what context a broad socialist movement may arise and what conditions it might inherit. But it is well within the realms of possibility that it would be confronted by a broken backed capitalist system in deep crisis – a system which has reached to point where it can no longer continue. In this instance a socialist policy for renewal would take the form of an emergency rescue programme. As follows:

‘Mass state appropriation (at least on a temporary basis) of insolvent companies and financial institutions so as to permit normal trading to continue as far as possible;

General suspending of debts pending their resolution on a transparent and equitable basis (case by case) over years;

Suspension of free cross-border movement of capital (involving the application of tight foreign-exchange controls);

Increase of supervised direct aid to prop up already insolent Third World countries on an interim basis (this would in fact be an extension, only on a vastly bigger scale, of the current covert and ad hoc strategy of Western governments of providing budgetary support to countries in Africa and elsewhere);

Tight supervision and control of international trade flows so as to minimise disruption of activity and avert the danger of overt trade warfare.' (The Decline of Capitalism – Harry Shutt)

It goes without saying that the precondition for these types of draconian measures must perforce assume the building of a political movement based upon socialist (or at least socialistic) theory and policies; and then the further permeation of these ideas and values into the more apolitical social strata. For in the final analysis ‘Men (sic) make their own history (although they do not do it as they please)' and whether or not capitalism is superseded by socialism is a political not an economic question.

Of course Shutt's proposals would stand very little chance of being enacted in any one national economy. We now live in a globalised economy and any nation which attempted to carry such policies would be at the receiving end of an extremely hostile reaction from the global überklasse of financial interests, transnational corporations and their political allies. However the existence of regional blocs – the EU – at least provides the potential for such policies to be enacted. The EU has both the financial and economic fire-power to make its currency speculator-proof and it would be a very foolish forex dealer who speculated against the euro, whereas on Black Monday the pound and lira were sitting ducks. It would also have the potential in terms of geo-political and diplomatic power to stand up to any attempt to bully it (by the USA, who else?) into submission. But the essential caveat is potential not actual power. States such as the UK, Poland and Italy will take much persuading to jettison their Atlanticist orientation and their client status vis-à-vis the USA.

Thus the technical details of socialism are not the primary concern, although they maybe given a brief outline. The foundations of a socialist economy would involve:

‘…the bringing into social ownership…the major oligopolies in the economy, normally between three and six companies in each sector along with nearly all of the finance industry. The then remaining private companies would fit in with social priorities not the other way around. The transition to socialism is about power, about breaking the grip of the free-market on the economy.' (Anti-capitalism – Christopher Hill) And this is just for starters.

The form of social ownership would of necessity be rather different from the old nationalised behemoths. Instead of top-down, command and control systems of producer power, there would be a stakeholder system of governance with all interest groups – consumer, producer, state – involved in decision making and policy determination. What must be avoided is the capture of these institutions by particular sectional groups who have a tendency to promote policies which reflect their interests and not the interests of society as a whole.

‘Why do I suggest a three way division of between consumers (and suppliers) employees and the state? If only employees controlled a large enterprise or industry it would inevitably tend to be run in their interests. Employment, working conditions and wages are likely to be prioritised over productivity, quality and social benefit. This would only be a tendency. Many examples could be given of both altruistic and socially conscious planning emerging from a situation of workers' management. Within a socially directed economy there would remain ample scope for workers' management and co-operatives, but it is easy to envisage cases where employee management of industry would conflict with social benefit.'' (Hill – Ibid.)

In a similar vein, if the state took full responsibility for the running of industry a situation of government regulatory capture would inevitably arise. The Stalinist experience should serve as a salutary warning. Thus socialisation – as opposed to nationalisation – would consist of a governing structure of pluralist stakeholder groups which comprised a collective of countervailing powers so that regulatory capture of the industry would not be possible.

Additonally, there would also be room for smaller self-governing collectives on the lines advocated by G.D.H.Cole and guild socialism. As well as being innovative and good in themselves, these small co-operatives would form another system of countervailing powers. Rather like local and central government.

I have spent some time on the ideological/political aspects on the transition from capitalism to socialism and in doing so may be accused of neglecting the practical policy proposals. This is because these political issues are crucial. Taking industry into public ownership is not fraught with difficulty. Railtrack, MetroNet and Northern Rock clearly demonstrate that this is simply a matter of routine administration. It is ultimately a question of politics.

‘The ease of nationalisation has been shown on many occasions. On the week-end of the 30 September 1984 the Bank Of England summoned nearly 200 bankers to the City. They announced the nationalisation of the failing secondary bank Johnson Matthey. They charged the bank £50 million for their trouble and organised a £250 million support loans from the other banks. The nationalisation was completed for the bank to open at 8:30 am on the following Monday morning.' (Hill – Ibid)

The difficult part in the transition phase from a capitalist to a socialist economy involves the building of a mass transnational movement, if not socialist, then at least anti-capitalist; strong enough, broad enough and with a clear sense of the direction it wants to go. This has barely begun.