above: newly published by Connor Court - 'Turning Left or Right'; and a photo of the author of this essay, Tristan Ewins
The
essay that follows was an original draft of an essay on 'The Democratic Mixed Economy' - written for “Turning Left or Right –
Values in Modern Politics”: a book edited by Carlo Carli, Tim Wilson and Paul
Collits, and published by Connor Court. That essay was very significantly cut back to be much more concise; so I am hoping readers may get some idea of the intentions of the original draft.
But
firstly – the abstract below is an account of that book, and I urge readers to
consider purchasing it; The “Democratic
Mixed Economy” essay follows:
Democracy is about choice. But today it
can appear to be a choice between personalities as major political parties
squabble over different shades of the same policy. Is the great political
contest of ideas over? Or are the divisions less obvious than they once were?
How does the left balance competing ideas like free speech and avoiding
offence? Why do classical liberals want to abolish the ABC and Australian
Institute of Sport? And where do the left, liberals and conservatives agree,
and why?
Turning left or right asks these questions, breaks through the wall of sound
bites and explores how century-old political philosophies connect to practical
policy for the 21st Century.
Each chapter includes three essays from some of Australia’s most engaged political
thinkers who explore contemporary policy issues, find the dividing lines and
reinject values and ideas. Importantly, every author’s essay provides insight
into the solutions they think are needed to make Australia a better country for
future generations.
To order and for more info see:
By
Tristan Ewins
Historical
Background on the Mixed Economy
The Left has had an often ambiguous relationship
with the State when it came to matters of political economy. Marxists sought centralisation of industry
in the hands of the State under socialism en route to ‘stateless communism’. Yet there were those among them who believed that under capitalism the ruling classes
would never allow socialisation of any form to progress beyond what was
necessary to protect their own economic interests. In the Marxist view the state was not seen as
an impartial arbiter between civic interests nor as a ‘neutral’ vehicle for the
common good. Marxist views of the state as a vehicle for
specific class interests contrasted with the socialism of Ferdinand Lassalle – the
German socialist who – after the German philosopher Hegel – saw the State as a
vehicle for reconciliation and ‘the universal interest’. And both Lassalle and Marx were at odds with
libertarian anarchists such as Proudhon who saw in the co-operative movement
the potential to transcend capitalism without the trappings of the State.
In the 20th Century, however, Greek Marxist Nicos Poulantzas was to suggest
that states themselves could be marked by internal contradiction due to the
logic of class conflict. This went both
beyond liberal notions of a ‘neutral’ state and beyond orthodox Marxist notions
that state apparatuses under capitalism by their nature served only narrow
bourgeois interests. From this it follows that contested states could advance
working class and civic interests even under capitalism depending on the
balance of class forces. It is on this
basis that this author intends to argue that a ‘historic compromise’ is
possible in the form of a ‘democratic mixed economy’. Universal suffrage is one potential basis for
working class power – and affects the ‘balance of class forces’ - but is best
utilised under circumstances of high social democratic and class consciousness
and organisation.
Regardless of all this, however, in the course of
the twentieth century progressive liberals and socialists alike became
associated with ideas of (relatively) ‘big government’ – of a progressive
public sector and social wage.
Successive World Wars had demonstrated the potential of central economic
planning; indeed of ‘state capitalism’. And classical economic liberalism stood
discredited by the experience of Depression.
This lent a degree of prestige to social democracy and its ambitions of
strong welfare states, and an advancing public sector. Much of the world
adopted a Keynesian approach involving a key role for the state sector in bringing
forward public works: stimulating aggregate demand to counter cyclical
downturns. This also required higher (often
progressive) taxes – in order to source public investments and service
debt. As opposed to the classical
economic liberals and Austrian School economists, for the Keynesians there was
no natural ‘equilibrium’ – achieved through the winding back of so-called ‘distortions’
such as tax, the public sector, labour market regulation and so on. The classical Keynesian economy was ‘mixed’ –
but as yet not democratic – in the sense of delivering true popular control.
In Sweden especially Rudolf Meidner and Gosta Rehn
developed an approach to economic management involving full employment, growth,
high incomes and the containment of inflation.
In Sweden security and growth went hand in hand as a steadily expanding
welfare state developed alongside one of Europe’s most robust economies. Strong
industry policies aimed to create high wage jobs in the place of unviable
industries which could not survive without cheap labour. Full employment was accepted by both employers
and employees as part of the Swedish ‘historic compromise’. This was opposed to the previous reality: of
capitalism founded on insecurity –
with a ‘reserve army of labour’ resulting in ‘labour market discipline’ – but
at great economic and social cost.
Swedish social democracy was to advance steadily for
decades – achieving ‘political citizenship’ (through universal suffrage) and
‘social citizenship’ (through the welfare state): and finally attempting to
achieve a regime of “economic citizenship” through innovative measures of
economic democratisation and socialisation. But Sweden’s march forward was
brought to a halt over the issue of Meidner wage earner funds. Through these funds, Rudolf Meidner and the powerful
unions who promoted the cause sought to compensate Swedish workers for past
wage restraint – which had resulted in ‘super profits’ and concentration of
ownership – by according to them collective capital share. This held the
potential of gradually socialising investment in Sweden – leading to what in
retrospect could legitimately have been called a “democratic mixed economy”. The defeat of the Meidner initiative by
militant employers, here, was ‘the high water mark’ for Swedish social
democracy.
Around about the same time (the 1970s and 1980s) social
democracy underwent a succession of defeats through much of the advanced
capitalist world. The First and Second
Oil Shocks hit western capitalism hard, underscored by an ongoing tendency of
profits to fall as anticipated by Marx as far back as the 19th
Century.. (This ‘falling rate of profit’
remains the consequence of the cost of constant revolutionising of the means of
production; although capitalists can get away with intensifying the rate of
exploitation as a response - in a context where new technology improves productivity
and living standards in absolute and qualitative terms at the same time;
Favourable terms of trade can also serve as a protection at a national level –
as historically with Sweden - but not a comprehensively global level) Wage restraint
and a falling wage share of the economy, as well as attacks on industrial
liberties were promoted as a means of restoring profitability. So too was
‘corporate welfare’ – funded through attacks on the welfare state,
implementation of ‘user pays’, reduction of corporate taxation and like
measures. Profits were restored and inflation contained – but through much of
the world this was at tremendous social cost.
(Sweden was not unaffected, being forced to drastically reduce the value
of the Krona to remain competitive; but its welfare state remained resilient,
and cushioned vulnerable Swedes against the ‘economic storm’)
The rise of neo-liberal ideology meant the
progressive stigmatisation of the public sector; of the welfare state and
social wage; of industrial rights and of progressive taxation. User pays and
more regressive tax mixes hit the vulnerable hard. Even in Australia the Accords entered into by
the unions and the Hawke Labor Government did not deliver the ‘Nordic’ outcomes
some had hoped for. Wage restraint was rewarded with tax cuts – but those very
tax cuts also reduced the revenue base from which the social wage and
welfare state might otherwise have been expanded. Stigmatisation of labour militancy – on the
grounds of ‘reconciliation’ – also led to a growing intolerance for industrial
action. Furthermore – the most
rudimentary ideas of social democratic redistributive justice became virtually ‘unspeakable’
– let alone a more robust critique of capitalist instability, exploitation, waste
and centralisation of power.
Fast forward to 2013, however, and there were
growing ‘cracks in the neo-liberal ideological edifice’ despite decades of its
Ideological hegemony. In Australia
robust intervention by the Rudd Labor government managed to steer Australia
through the 2007-08 ‘Global Financial Crisis’ relatively unscathed. But stigma against major tax reform remained;
and an ill-timed attempt to introduce a ‘super profits’ tax on mining saw the
end of Rudd Labor with Prime Minister Kevin Rudd’s replacement by Julia Gillard. Following this, Prime Minister Gillard’s
carbon tax was successful in reducing emissions – and yet its introduction was politically damaging in light of
previous promises not to introduce such a tax; and with Conservative
disinformation about the proportionate effect of the tax on cost of living
pressures)
What
kind of Democratic Mixed Economy for Today?
All this said, what kind of ‘democratic mixed
economy’ should Leftists be aiming for today? Certainly the Left would be well advised to
exploit any weak points in the ‘neo-liberal edifice’ as the basis for and ideological
counter-offensive. Importantly: many arguments for the old kind of mixed
economy remain relevant – and Labor needs to reassess its previous commitment
to the neo-liberal Ideology; including its own past rejection of the mixed
economy.
Firstly we will observe the centrality of the
welfare state and social wage for ‘social citizenship’.
Public sector intervention can provide ‘social
insurance’ – for example in aged care, disability support and services, comprehensive
socialised medicine, legal aid, social housing and various forms of welfare. Arguably
these services must be provided to all on the basis of need – as a matter of
human decency, and of distributive justice. At the moment the quality of aged
care in Australia is a hidden shame; and one which would spur much greater
social outrage if working class voters realised what quite possibly awaited
them and their loved ones in their final years.
The strongest welfare states are found in the Nordic
nations (Sweden, Finland, Norway, Denmark) as well as in the Netherlands. Australian social democracy as embodied in
the Labor Party has a long way to go to deliver Nordic levels of social
security; and falls short in its scope of social expenditure compared to many
other OECD countries as well. And yet the class base necessary as a foundation
for a strong welfare state remains viable in Australia. Tax reform aimed at the
wealthy and the upper middle class (in the vicinity of the top 15% income
demographic) – would have a broad enough base to deliver tens of billions in
funds for comprehensive social wage and welfare reform to the benefit of the
remainder of the population.
Modern abundance also provides the economic
foundation for greater cultural development and popular cultural participation
than ever before.
As early as 1892 the Marxist scholar
Karl Kautsky proclaimed:
“We must not think of
the socialist society as something rigid and uniform, but rather as an
organism, constantly developing, rich in possibilities of change, an organism
that is to develop naturally from increasing the division of labour, commercial
exchange, and the dominance of society by
science and art.” (my emphasis) (Kautsky,
P 141)
In the information age Kautsky’s words appear prophetic. And yet
modernity in its capitalist guise also warps culture, including science and art
themselves. Even science and art are increasingly commodified to fulfil the
ends of profit maximisation. In the field of academia, Arts and Social Sciences
not ‘functional’ to capitalism are increasingly marginalised. But free
education, including liberal education and education for ideological literacy
and active and critical citizenship - could accommodate a plurality of wide
ranging criticism – including of capitalism itself - as part of the project for
a ‘democratic mixed economy’.
This brings us to the matter of public
infrastructure and enterprise.
There are ‘natural public monopolies’ – especially
in the area of infrastructure – where competition just doesn’t make sense - and private monopoly even less so. To elaborate – competition can duplicate cost
structures – the physical cost of infrastructure; the cost of duplicated
administration; the cost of profit margins.
And private infrastructure (also Public Private Partnerships) tend to
pass on an increased cost of borrowing on to consumers. On the other hand
private monopoly can be just as damaging – lacking the corrective functions of
competition, and also potentially leading to profit gouging and abuse of market
power. To be specific, current areas of potential
natural public monopoly include communications infrastructure; as well as water
and energy; roads and public transport; ports and airports. In Melbourne it is notable that emerging
working class suburbs are lacking crucial infrastructure including public
transport, health services and schools because the state has abrogated its
responsibilities – in order to hold down tax. Private infrastructure is the more-costly option;
and if funded through user pays mechanisms can be highly regressive.
Large public sector corporations can also potentially
compete in the global marketplace – delivering social dividends to the public –
and made viable by the economies of scale provided in the context of government
investment - without removing the corrective and refining influences of
competition. Social investment in mining
via a Sovereign Wealth Fund could potentially capture tens of billions for
social purposes which otherwise are largely diverted overseas. It could even be financed in part via a
reformed mining tax.
There are other areas where public sector
intervention makes sense – not always to form a ‘natural public monopoly’ – but
to enhance competition and outcomes in otherwise monopolistic or oligopolistic
sectors. Sometimes there is also the
need to counter possible collusion. Examples include public sector banking;
state owned general insurance; state-owned private health insurance. State enterprises have also historically
involved cross-subsidisation for the disadvantaged. Municipal as well as co-operative and
not-for-profit child care and aged care can also ‘deliver a better deal’ to consumers. (where necessary with state subsidy)
State funding can also be essential in areas of pure
scientific research where the immediate commercial gains are not clear. And public sector media and broadcasting can
provide a corrective influence – pursuing goals beyond mere profitability, or
the ‘cultural power-plays’ of a handful of billionaires. This can include the
goals of an authentic and inclusive pluralism, as well as ensuring quotas for
local content, and the genuine promotion of participatory media.
Finally, today most Australian families would prefer
to own their own home. But the
Howard-era housing bubble has put housing out of reach for many. Substantial investment in public and social housing (say in the vicinity of at least $10 billion; perhaps significantly more)
could provide for disadvantaged families, pressing urban consolidation, while
also increasing housing supply, and helping to correct the market failure of
unaffordable housing.
Manifestations of Economic
Democracy: Consumer and producer co-operatives
But the public sector alone is not ‘the last word’ on
the democratic mixed economy. To be truly ‘democratic’ an economy must rest on
real popular control. There is no ‘play
of class forces’ favourable enough currently to result in the socialisation of
the big transnational corporations – the ‘economic commanding heights’. (for instance
as envisaged in the 1970s by British Labour thinker Stuart Holland) And engagement with the transnationals is
necessary in order to make available their innovations for the general public.
But there are a number of possible strategies which could gradually extend the
‘democratic sector’ of the economy. We
will mention
co-operative enterprise, mutualism and collective capital formation, co-determination
and economic regulation.
Karl Marx had
argued at one point that co-operative productive enterprise attacked capitalist
exploitation “at its very roots”. Though socialist revisionist Eduard Bernstein
observed that co-operative enterprise under capitalism faced the same
contradictions as private enterprise. To elaborate, Bernstein – who had refuted
important parts of the Marxist orthodoxy – nonetheless observed of Marxian
economic analysis:
“The fall of the profit rate is a fact, the advent of
over-production and crises is a fact, periodic diminution of capital is a fact,
the concentration and centralisation of industrial capital is a fact, the
increase of the rate of surplus value is a fact.” (Bernstein, Pp 41-42)
So as opposed
to comprehensive socialisation under socialism, co-operatives under capitalism
would face competitive pressure due to the economies of scale of their private
sector rivals – who tended increasingly towards monopolism. They would be affected – and potentially
ruined – by cyclical crises. And they would have to reserve greater proportions
of their profits for investment (ie: internally financed investment) in the means of production – to retain
co-operative status and still remain competitive.
Bernstein also
feared co-operatives – for instance as anticipated by Lassalle - could become
‘corporate interests’ which actually gouged and exploited consumers. Specifically
he considered the scenario of union-run co-operatives coming to dominate “whole
branches of production”.
In reality,
though, co-operatives have achieved nowhere near monopoly status. Even the
largest co-operatives can be held to account through competition in local and
global markets. Corporate monopolisation on a global scale is the real
threat. And mutual societies have no
incentive to ‘maximise profits’ – as all revenue is reinvested for the benefit
of members. Canadian economist and
labour movement activist, Jim Stanford has observed several examples of
successful co-operative enterprise. As of 2007 this included ‘Rabobank’ in the
Netherlands, with 55,000 staff and 600 billion Euros under management. Also notable was the ‘Mondragon Co-operative’
in Spain – a worker-owned co-operative network employing over 80,000 people.
(Stanford, p 329)
While subject
to capitalist pressures, existing co-operatives do away with the expropriation
of surplus value by capitalists. Generally under the co-operative model any
profits are duly socialised; and workers maintain democratic control. And while small co-operatives may be subject
to greater risk, participation in that context can be rewarding insofar as
direct control overcomes the kind of alienation resulting from the division of
labour under capitalism.
Meanwhile
consumer co-operatives can provide ordinary people with greater market power;
and mutual societies can provide voluntary social solidarity while cutting out
the profit motive and indeed the profit mechanic entirely. Mutualised
automotive societies, mutual credit and mutual insurance all have long
histories.
Arguably,
though, robust state-aid is necessary to support these endeavours, and ensure
such democratic enterprise retains strong market share, and a higher market
profile. Ideally this should involve
concessional loans, financial advice, tax concessions, and assistance with
marketing. This is suggestive of
potentially visionary policies favouring economic democracy by a future
Australian Labor government, and other potentially progressive future
governments worldwide.
Collective Capital formation
Another area
of potential economic democratisation is collective capital formation. This
involves workers and citizens coalescing to invest in the economy; and in the
process potentially delivering economic power to those people collectively. Collective capital formation can take many
forms: some radically redistributive; others barely challenging the logic of
capitalism.
In Australia it is true to argue that industry
superannuation funds (private pensions) hold the potential of delivering economic
power to organised labour – which administers many funds on a not-for-profit
basis. This is a common argument. And yet there is a downside as well. Public pension funds hold the advantage of
socialising (rather than privatising) risk faced by workers; and also of not
replicating labour market inequalities in retirement. Policy makers also have
to deal with the future prospect of an Aged
Pension marginalised along class lines. And there is the potential for
rent-seeking behaviour when it comes to fund involvement in Public Private
Partnerships which simply cannot provide the best value infrastructure for
citizens.
However: returning to
‘Meidner’; wage eager funds in Sweden were based on far more radically
redistributive premises, with 20 per cent of annual company profits set aside
for workers. In decades, this would have
led those democratic funds to a dominant position in the Swedish economy. But Meidner was arguably flawed in its
apparent ‘productivism’ – its focus on Swedes in their capacity as employees -
as opposed to their capacity as citizens. Arguably ‘citizens funds’ – marked
from the start by a cap on the projected level of fund ownership – may have won
over more voters, and averted the unflinching opposition of employers. At the time they were ‘wound up’ the funds
only controlled 7 per cent of the Swedish stock market. (see: http://newleftreview.org/II/34/robin-blackburn-capital-and-social-europe )
But learning the
lessons of Meidner, the time could be right for a reconsideration of democratic
and redistributive forms of collective capital formation.
‘Peeling the Onion’ of
bourgeois property rights: Nils Karleby
Swedish social democrat Nils Karleby
was well-known for his characterisation of economic ownership of the means of
production not as an ‘indivisible’ phenomenon – but rather as a ‘bundle of
rights’. The consequence of this is that
socialisation ought be approached piecemeal – and that infringements upon the
‘prerogatives’ of private ownership can proceed gradually – with labour market
regulation, health and safety standards, accident insurance, an eight hour day
and so on. (Tilton, pp 79-81)
Hence there was Karleby’s powerful
metaphor that: Social Democrats should
“[strip] away the prerogatives of capitalists, like layers of an
onion, until nothing remains.” (Karleby
in Tilton, pp 80-81)
However in Australia far-reaching economic deregulation – including labour market
deregulation – and tax cuts contributing to a regime of ‘corporate welfare’ –
have restored these prerogatives. Meanwhile
Financial deregulation and uncontained finance market speculation led to the
Global Financial Crisis disaster in 2007-2008.
(the legacy of which we are still living with)
A
democratic mixed economy does not simply leave these matters to ‘the market’
when the consequence is an intensification of exploitation. Restrictions on
union rights of organisation, withdrawal of labour, and access are intended to
facilitate this intensification and overcome resistance.
Growth is
always considered ‘good’ as it facilitates the endless expansion of consumption
and of the world market on which capitalist self-reproduction depends. But proponents of a democratic mixed economy question
the assumed “rights of property” and the social consequences of this. Increasing levels of over-time for some and
promoting casualization and job insecurity for others; with a steadily-rising
retirement age - all contribute to the logic and imperatives of capitalist
accumulation - to the detriment of the ‘life-world’ of real people. Work/Life balance across peoples’ entire
lifetime conflicts directly with these ‘prerogatives of capital’.
Further –
neo-liberal capitalism is self-destructive in the sense that the inequality it
produces dampens aggregate demand – and hence the very growth upon which its
systemic logic depends. (as those on lower
incomes tend to spend a greater portion of their income)
In
response to these phenomena strong unions could be well advised to pursue an
optional shortened working week for those unionised workers who so choose; and a more robust minimum wage; with
recognition of the hardship faced by some workers enduring unpleasant and or
inconvenient hours and conditions. (for example cleaners) Further government subsidy of wages in areas
such as child care and aged care - largely feminised industries currently involving
high levels of exploitation for skilled workers - could also comprise a welcome
reform. (as of writing the Gillard Labor
government had made some progress on this front; but the new Conservative
Abbott government is rescinding subsidies for Aged Care workers)
Also co-determination
as has been attempted in some countries – very notably Germany – could involve
mandatory employee representation on the boards of major companies and employee
input into safe work practices amongst other areas - ameliorating the
‘absolutism of capital’. Though it is no permanent or comprehensive solution
for antagonisms of class interest.
Conclusion
Looking back to the 1950s it is
interesting to note that the conservatives and ‘centrists’ of that time were
often more ‘radical’ on the economy than today’s avowed social democrats: and
even of some avowed members of the Socialist Left.
In his important work, ‘Hayek Versus
Marx’ former Australian Communist leader Eric Aarons considers the “social
market” model – as embraced by the German Christian Democrats in 1950s, and the
German Social Democrats “after 1959”. As
Aarons explains, this approach
suggested “a social vision couched in moral as well as economic terms…”, and
“recognition of the fundamentally social nature of organised production”.
Further, it implied a “moral community” “required to legitimate the social
order…” , and the“[prevention] of the emergence of a ‘two-tier’ society”
including a layer of permanently poor. A
consequence of this was that “resources are allocated through both the
political and economic system.” And yet
it also involved “recognition that desirable public ownership should not be
seen as a bridgehead to full public ownership and a traditional socialist
society”. (Aarons pp 33-34)
Talk of a “traditional socialist society”, here, is presumed to infer
comprehensive state ownership and central planning. This author does not seek to replicate the
errors of the old Communism – for instance the virtual usurpation of peoples’
right to determine their own needs structures to a reasonable extent via
market-mediated channels of consumption.
Even though increasingly there are many areas – for example the energy
market – where the promise of ‘choice’ has rung hollow – simply providing a
cover for needless duplication, profiteering and waste. And while
comprehensive central planning stifled individual consumer choice, it did make
more sense in economies marked by greater scarcity.
A moderate form of the ‘democratic
mixed economy’ could well conceive of itself in the tradition of the ‘social
market’. Although what this author does aspire
to – at least in principle – is significantly more radical. As Leftists we
should probably seek to shift the whole relative centre of political discourse
– ultimately striving for a new hegemony.
So when we speak of a ‘democratic mixed economy’ there is a potential
plurality of interpretations. But a
common denominator should be a robust public sector, and a commitment to substantial
democratisation in a wide array of forms as outlined in this chapter.
Again: in addition to a
strategically extended public sector this could involve a mix of co-operatives,
mutualism, collective capital formation, co-determination, economic regulation,
a progressive tax system, welfare state and social wage; extension of liberal
rights to the industrial sphere; and appropriate economic regulation – including
labour market regulation – to ensure fairness.
Importantly: the language of a "democratic mixed economy"
brings together a notion which is still relatively mainstream - (the mixed
economy) - in combination with "economic democracy" - which has
radical connotations. In so doing, that combination is creating a space for
radical and progressive ideas - possibly introducing radical ideas to a broader
audience. The ‘democratic
mixed economy’ has strategic value both as a political discourse and as a
strategy for economic management, democracy and liberation.
Concluding, though:
Arguably there is a place for co-operation and competition: planning and
markets. And yet large scale co-operation (at the level of the largest
multinationals, say) looms as ‘the economic undiscovered country’. Who is to
say that the refining logic of competition and self-interest is the only
guarantor of quality, and will remain so forever? What future potential is
there for economic activity based on altruism and co-operation? Only the future will tell.
Bibliography:
Aarons, Eric; Hayek
versus Marx And Today’s Challenges; Routledge. New York, 2009
Bernstein, Eduard
“Evolutionary Socialism”,
Shocken Books, NewYork, 1961
Kautsky,
Karl, “The Class Struggle” (Erfurt Program), the Norton Library, Toronto,
1971
Stanford, Jim; Economics
for Everyone – a Short Guide to the Economics of Capitalism, Pluto Press,
London, 2008
Tilton, Timothy; “The
Political Theory of Swedish Social Democracy – Through the Welfare State to
Socialism”; Clarendon Press,
Oxford, 1990
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