Thursday, February 4, 2016

Politics, Power and the Economy - by Mike Ballard

above: The author, Australian Labor Party member Mike Ballard

Politics is the power to control or make other people do things in some way or another. Power is the first principle of politics.

Left and Right in politics: The major subtext revolves around the question of who is to own wealth:

Where you stand on the left/right political spectrum relates to the division of control and/or ownership of property. Property usually comes in two different forms: land (aka Nature) and capital. Property is what most people call, "the economy". Property in this sense is not your underwear, your cat, your glass, your room or your personal belongings in general, including your car and home. Property is for example: a factory, an apartment complex, a TV station, a supermarket corporation, a small business, a coal mine, a pizza franchise, a petrol station, a bank. These places, unlike your home or your cat, are where wealth and more property are created.

Property is created by everyday people like you and me. Even if it is just land, property in this sense is the mutual recognition amongst people living in a society that this or that is owned and/or controlled by this or that person or group of people and is suitable for sale. The recognition that property is for sale is codified in laws of the State. Ownership and control of the property people create and own is political because it involves "The First Principle" of politics: the power to control people or make people do things.

Most property these days is created by employing labour and using its skills to produce commodities for sale with a view to profit. Employers hire workers to use their skills to produce goods and services, which they then own and sell as commodities for profit. In combination with the natural resources which exist and are owned as property and the various pieces of land and buildings owned by landlords, these goods and services constitute the wealth of society.

The wealth of society is measured by dollars. This means that a lot of useful activities and things are not counted as important i.e. they are not valued in money. For example: parenting has no exchangeable value, because that activity doesn't make anybody else money or, doing the dishes around the house or, mowing your own lawn. However, outside the home, a group of workers may sell what they are able to do to an employer who owns a pizza parlour. The employer buys their skills and time. This becomes their wage or salary in short, their way of making a living. Once their time and skills are purchased, the workers engage in the labour associated with making and delivering pizzas. The profit created by making and delivering the pizza belongs to their employer. The wealth, which is represented in the wages which the workers get from selling their skills and time to the employer, belongs to them.

Who has control over the wealth produced by workers is the question which defines peoples' political stance as being on either the left or right. The political position of the right is that the wealth employers accumulate should remain in their hands, to do with as they please. On the other hand, the leftist position is that the people who produce wealth should be allowed to at least havesome ownership and/or control of the property they produce.

Most societies have a mix of ownership for this property/wealth. The government decides who gets what in this mix or, to go back to our first principle : the government has the political power to control or make other people do things in some way or another. In most modern societies, the government is based on the "rule of law". In democratic republics, the rule of law and the laws themselves are created and administered by elected politicians along with their appointed officials in the government's bureaucracy : for instance, the Ministry of Defence or the Ministry of Education or the judiciary e.g. the Supreme Court. In some democratic republics, some of the judiciary is elected by the people.

Democratic republics get the power to govern from the governed themselves. Everyone is supposed to be "equal under the law". The laws are made by politicians elected by the people and largely enforced by the acquiescence of the people to the law. This is known officially as, "The Rule of Law". It differs from the old "Rule of Kings", where the aristocracy was above the law--as they were officially sanctioned by God e.g. "Dieu et mon Droit". When anyone breaks the law, they are supposed to be met with the force/power of the government, that is, the people the government employs to enforce the law: the police, prison workers and the military. So, politicians represent the people who elect them. But first, they must be selected. The selection of politicians to run for office is a fairly complicated and expensive matter, but this is where the left/right control of wealth begins to tell as people who have control of more wealth, tend to be able to amplify their voices in the selection process more than people who do not have as much wealth.

Politicians and the political parties tend to represent either the right or the left. The key word is "tend", as none of the political parties or elected politicians are ever absolutely left or right. Politicians of the right will tend toward political decisions which end up being in the interest of the people with wealth/property, allowing them to retain control and ownership over what they have legally accumulated. Politicians of the left tend toward passing laws which result in a greater sharing of the wealth between worker-producers and the people who own the wealth which is being produced. Simply put, the further left a politician goes, the more wealth she or he will want to divert back to the poorer sections of the community and by extension, the working producers of the wealth. The more right the politician is, the more he or she will refrain from proposing or passing legislation which interferes with wealth holders. The rightist justification will usually be framed in a manner which makes it seem that more of the community will eventually benefit, if these property holders do more of what they do best : employ workers to create more wealth.

How does this left/right axis work out for us in everyday terms?

Let us consider taxes. Taxes constitute the money (the wealth) which governments take from employers and workers to hire the police, purchase land for schools, keep the military paid and pay the garbage collectors and health care workers in States where there is a functioning public health system. The question is: who should pay the taxes to fund these government services or should there be government services at all?

The left position would tend to keep these services in the hands of government and put the question of who should pay the taxes to support them in the hands of the representatives the people elect, but always with a tendency to have the more wealthy sections of the community pay proportionally more of the tax which is needed. The right position would tend toward keeping these services in private hands or pushing them there, if they're currently under public influence, to make them profitable and not part of the governmental system at all. For example, the more right position would be for education become a profit making business, whereas the more left position would be for education to be publically funded by taxing wealth and funneling that wealth back to the education industry. As a compromise between the left and the right, the government might settle on a position whereby both public and private schools are funded to some degree by taxes collected from the public as is the case in Australia at present.

Ultimately, the question of right and left boils down to, "Who benefits"? This is the second principle of politics. The right says that the best society is one where the legal owners of property are allowed to use their control to hire workers to make more wealth. The left says that the best society is one where the owners of wealth produced by workers are legally made to share their property with those producers.

Practical everyday questions and applications of left and right:

Do those people who work for wages and salaries benefit by seeing more of their wealth or their employer's wealth being taxed away to fund government services like: schools, roads, hospitals and fire protection?

Do the people who own property benefit by seeing more of their accumulated wealth being taxed away to fund government services like: police, military, prisons, roads and hospitals or should that burden be put in the marketplace for commodities to be rationed on the ability to pay?

What actually is necessary in a society, is a matter which revolves around the control of wealth and property. Who owns and controls property's disposal and who has the power to make the decisions in order to benefit larger or smaller portions of the society as a whole "by making people do things?"
Who controls these decisions and whom do those decisions benefit? The more these decisions benefit the vast majority of the people, the more the society is leftist. The more legislators direct the control and ownership of wealth toward the legal owners and away from the vast majority of wealth producers, the more the society is rightist.

"Who has the authority?"

The third principle of politics is based on the answer to this question, which is also intertwined with the two other principles of politics. If politics is the power "to control or make other people do things in some way or another" and is related to, "Who benefits" from the distribution of the wealth in the society then, who is it that has this power?

Answer: it is the people who control and own the wealth produced in society. To the degree that power and authority over the wealth of society is shared equally, the society is more democratic and self-managing. To the degree that the control and ownership of that wealth is concentrated in fewer hands, the society is less democratic, more authoritarian and bureaucratic. Another way to put this is to say, the more that political power in society flows up from the majority, because of their conscious desires for self management, autonomy and sovereignty, the more democratic the society is. But, the more political power comes down on the majority from individuals above them in order to manage them, "for their own good", the more bureaucratic and authoritarian the society is.

The way these three principles intertwine and intersect make each nation different. For example: one
nation can be leftist to the degree that it shares the wealth created within its borders more or less equally, but at the same time, it can be authoritarian/bureaucratic in the way that wealth is controlled. It is also possible for a country to be rightist to the degree that wealth created by worker producers is concentrated in a few hands and not shared, but still democratic to the degree that those people living within the society are free to choose politicians to represent them and free to criticize these politicians--civil liberties remain in force. Other possibilities include societies which are both rightist and authoritarian-bureaucratic or leftist and self-managing and democratic.

If it makes things easier, think of basic politics as a graph, like the one below. In the graph, you would map libertarian socialism in the bottom left hand corner and libertarian capitalism in the bottom right hand corner. Fascism would be in the upper right hand corner and bureaucratic socialism in the upper left hand corner. Liberal capitalist democracy would be to the right of the centre point and the liberal social democracy on the left side of the centre point and up and down as the bureaucratic or democratic tendencies would allow.

Tuesday, October 29, 2013

What is the ‘Democratic Mixed Economy’?

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: )  

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.


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.




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

Saturday, September 29, 2012

The Greatest Transformation - by Eric Aarons

above: A recent book by Eric Aarons - exploring the clash between Karl Marx and Friedrich Hayek.

In the following article former Communist Party of Australia leader Eric Aarons responds to our earlier article by Shayn McCallum. (Shayn's article can be found here: ) Aarons critiques 'social market' approaches to change, positing global warming and other environmental challenges as the most important issues facing humanity. While recognising the necessary role of some markets, Aarons proposes an egalitarian services-based economy, and an economy which goes beyond the treadmill of over-work and over-consumption. DEBATE WECOME!!!

nb also: In addition to our article here, a very detailed review of Aarons' larger, more academically-inclined book on the same theme of Hayek and Marx can be found via the link below  - where we welcome debate!!!:   SEE:

Eric Aarons, September 2012

This article is a response to Shayn McCallum’s article ‘State and Market – a Democratic Socialist Approach’ that appeared on a Tristan Ewins’ website. I do so because the concerns it deals with are close to my own – that is, seeking to formulate  a substantive definition of what currently  active people of the left should do or ‘stand for’.

My response is not intended as a polemic, though it is forthright and direct because I assume that neither Shayn nor I wants to smarm over difficulties or differences. I therefore begin with the title of his piece stated above. 

Shayn poses ‘a mixed economy’ as one reasonable answer to the question posed by his title ‘State and Market’. But that term, which I also use, can’t take us very far or generate enthusiasm unless the nature of the mix is further clarified. I also use the term, sometimes with the proviso that the ‘mix’ must be devoid of the extremes evident in the continuing practices of capitalism and the type of socialism that came to prevail in the Soviet Union or Maoist China and blackened the very term.

But I believe that ‘mixed economy’ is not made adequate by adding the word democratic, or the phrase ‘devoid of extremes’. Similar problems arise with ‘economic democracy’. I agree that ‘The Social Market’, as devised by its founders and analysed by Australia’s Hugh V. Emy,  Professor of Politics at Monash University, poses little danger to the existing system, or possesses any significant transformative power.

Thus we seem to agree that no expression has yet been found that contains the emotional and intellectual force possessed in the past by the ‘left’, and backed by the capacity to enthuse people into action by concretising general aims in specific strugggles.  Shayn points out that much of social democratic (in Australia, particularly Labor Party) discourse is ‘excessively tenuous, somewhat vacuous’ and limits its criticism of [neo] liberalism to the details rather than its over-arching vision.’ That comment, I believe, is justified, but loses much of its force when Shayn himself fails to outline what the content of an effective critique of that vision would be.

I don’t feel lacking in that area, having written three books on the subject, the last being Hayek versus Marx (2009). The publishers insisted on that title because it was part of a planned series (mine came out as the 180th  work in      that series). But I eventually persuaded them to add the subtitle: And today’s challenges, the significance of which for discussions like the present one I explore later.

But I think it is essential to appreciate the vast difference between the retail markets that we visit almost every day, and the financial markets that played a crucial role in generating the Great Financial Crisis of 2008, to the present time, when it threatens to break out with even greater force at any moment in Europe.                     

The necessity of some markets

As Shayn clearly recognises, markets existed to one degree or another in practically every society later than the stone age. (For instance, the Conquistadores found extensive markets in some of the countries of what is now called Latin America). But Shayn neither distinguishes between different kinds of market, nor explains the reasons for the universal existence of some of them.

The foremost of these concerns has to do with what most of us perforce do every day, in response to the natural evolution of the division of labour. This compels us to engage in exchanges, usually of money from our wages, to obtain the mix of different commodities we need to live. These range from foodstuffs to transport, liquor, haircuts, entertainment and other items. One doesn’t need a vivid imagination to envision the difficulties, not to speak of the public outrage, that would result from any attempt  to plan and institute an alternative, for example, one of state allocation of the same  items or meals for all irrespective of the work they may, or may not have contributed in Mao’s ill-fated Chinese rural communes, while in competitive marketts, it is equals that are generally exchanged.      

 (I don’t think it necessary to pursue the many further variations that arise in areas such as whitegoods, TVs, computers, houses or cars, where the state may step in with requirements for performance standards, health requirements and the like.)

The Social Market

I agree with Shayn that the term ‘social market’ doesn’t take us very far. Its origin and meaning was well analysed by Australian academic Hugh Emy as the vision of some genuinely liberal-minded post-war German theorists, couched in moral as well as economic terms. It centred on the idea of ‘co-determination’ by owners and workers in businesses but ruled out any interference with ownership relations. It had some progressive content, but was by no means a transformative development.

Shayn rather airily dismisses cultural issues and contests, defining them as though they were lightweight compared with a physical presence or direct economic content. Without trying here to cover the full scope of culture, political activists need to realise that morals, values and attitudes, among other features of human behaviour and consciousness, are sources of action or passivity, which are surely of central importance in politics.

Without entering the field of values, for instance, I see little chance of constructing an effective critique of the neo-liberal vision which at present still holds (now less securely) a hegemonic position, or defining an effective social democratic one. Shayn instead speaks of confronting the ‘questions of class power’, that he then nominates in purely economic terms as ‘redistribution or the provision of social goods and services’.                                   

I am far from dismissing the importance of this for a segment of the population of our country, a similar proportion of other economically developed countries, and massive numbers in the undeveloped. But I am convinced it is the wrong direction, at this particular juncture, in which to look for a liberating, emancipatory, transformative orientation.

Today’s  main  challenges                                                                                                                 

The general social conditions and forms of economic restructuring that would be involved in meeting those challenges, the first of which is Global warming, requires sober calculation, including of the time frame. Solutions need to be, or clearly becoming, politically possible within two or three decades, or the problem could take a disastrous turn, for example by the melting of the tundra in Siberia, Greenland and elsewhere which would release huge quantities of now frozen methane – an even greater ‘greenhouse effective’ gas than carbon dioxide.

 ‘Politically possible’ means that to be democratically effected there has to be near enough to majority support for the measures involved type. There are already in existence more than needed of what I call ‘if only’ plans  – ones that pose preconditions having little chance of being realised, and which in any case are inadequately campaigned for.

Global Warming occurs today mainly because we are burning increasing quantities of fossil fuels (coal, oil and gas) to generate our ever-increasing energy requirements. The burning  process produces carbon dioxide gas which has the physical property of acting like a greenhouse – that is, a kind of‘house’ device, usually made of glass that lets in the sun’s rays, or is internally heated to cultivate plants that need heat to grow, but doesn’t let the heated air inside escape. Carbon dioxide and other gases, in the quantities now being generated by burning, mix uniformly in the global atmosphere from whatever country they come, warming the world, from frozen poles and glaciered areas to the tropics, causing the escalating number of weather extremes we all see on TV or ourselves experience, and raising ocean levels by melting ice.

Earth’s resources are not infinite

The related major challenge of our times is first of all the growing threat to the sustainability of the supply base for all this burning of fossil fuels.  It is clear that oil will soon run out, while coal and gas won’t last forever. Water is becoming scarce in many places, and large quantities of underground water are being polluted by the fracking of coal and shale beds to produce gas. ‘Rare-earth’ elements, essential for many sophisticated electronic apps are scarce. Phosphorus, one of our main fertilisers (and an essential component of DNA) is in short supply, as is potash.

Fish are becoming scarcer, and some of its best food species are on the verge of extinction, while ever-larger trawlers are built to pursue others still existing. New agricultural land is scarcely to be found and the productivity of large areas is being reduced by overuse and  more extreme weather events.
 Much more information is readily available, but is not acted upon. Nor are either the dangers, or the transformational possibilities flowing from victory in the struggle to overcome them sufficiently taken on board by the left including, regrettably, the trade unions.

The scale of all this
Geology Professor Mike Sandiford of Melbourne University gives us a striking  measure of this scale:
Rivers and glaciers have moved about 10 billion tons of sediment from mountain to sea each year on average over geological time. Each year humans mine about 7 billion tons of coal and 2.3 billion tons of iron ore. We shift about the same amount again of overburden to access these resources, along with construction aggregate and other excavations. In short we are now one of the main agents shaping the earth’s surface. (Sydney Morning Herald, May 23, 2011)
The course of solving it will not only help to change the present unfavourable-to-the-left balance of political forces. It will provide us, and especially succeeding generations, with clues about the best course to further economic and cultural steps.
                                   *                       *                      * 
Inverting the meaning of Karl Polanyi’s striking title to his famous book The Great Transformation which he used with the subtitle The Political and Economic Origin of Our Time, I have called success in meeting fully the present challenges The Greatest Transformation.
This may seem exaggerated, but consider the fact that for the first time ever in history, all countries and cultures will eventually have to become involved, and that the vast majority of people will then have to be guided by the principle that excesses in resource consumption must be avoided.
Some may be alarmed at this and consider it to be going backwards. But I hold that it is true progress, liberating us from toils of consumerism which daily (and nightly) consume the time and energy of a growing proportion of the world’s population, while also keeping a large proportion of humanity in wretched poverty or on the brink of starvation.             
Transformation, emancipation
Those on the political right, centred on the ideology of neo-liberalism, and their rabble-rousing foot soldiers, simply deny what is there to be seen and experienced. Maybe they simply fear change as such, perhaps believing that what now exists is the pinnacle of possible human existence, as Frances Fukuyama once asserted, but now, to his credit, has changed his tune.
Even those on the left, the core of which are the social democrats, and the Greens (who are to the left of them on some issues), aspire to something better and more constructive for the future, but have yet to develop a sufficiently coherent social philosophy.
And I am concerned that Shayn gives so little attention to these issues. Could it be that he holds the view common among a small section of the left, that no substantial progress can be made in any social field until the economic base on which it has arisen is first transformed? Such views have dogged the socialist cause almost from its beginnings, with Eduard Bernstein, for one, struggling with it through most of his life.
Of course, no one political strategy could meet every different set of conditions; but my judgment is that the issues stated above are tailor-made for a strategy of resolving pressing major issues, not instead of (perhaps) more basic ones, but rather as an essential step on the way to actually doing so.
Consumption is essential up to the point of sufficiency (which of course cannot be too narrowly defined) but taken beyond that to the very aim of life is a view and practice that is far from liberating. It binds a majority of people in the economically developed countries to a daily (and often nightly) treadmill that is now restricting rather than helping to extend our development as human beings.

Friedrich Hayek, who developed neo-liberal philosophy to its present (though declining) predominance, helped elevate consumerism to its present peak above more worthy and humanly satisfying aims by denouncing those who rejected his view ‘that the great ideal of the unity of mankind should in the last resort depend on the relations between the parts being governed by the striving for the better satisfaction of their material needs.’ (LLL2, 111)

He followed that up by denigrating working people with the assertion that ‘their intuitive craving for a more humane and personal morals corresponding to their inherited instincts is quite likely to destroy the Open Society [capitalism].’ (LLL2, 146).

Let us wear this as a badge of honour.                                               
Human development       
One aspect of switching our view of progress from more material goods to greater human development is to expand and deepen our relationships with other human beings, family and otherwise. This activity is both pleasurable and emancipatory, cultivating our human sensibilities whose possibilities are inexhaustible, as are the possible accomplishments of our reason.  

Furthermore, caring occupations require increased human participation, as do educational, and health services, and individual and collective cultural and artistic pursuits, while engineering and related developments to create more material commodities often cut employment, though capturing sufficiently more of the sun’s heat and electronic rays to replace burning for energy will keep the need for engineering and related activities, including science, fully employed indefinitely into the future.

The Services Society

Largely unnoticed and unremarked till recently is the fact that provision of services rather than material consumption commodities is by far the largest part of the economies of the developed countries.    
Last year, two Reserve Bank economic analysts, Ellis Connolly and Christine Lewis, quantified the changes in Australia. Titled Structural Changes in the Australian Economy, it showed that 80 per cent of the total value produced in our country came from the service sector, and embraced 85 per cent of the total workforce. The remaining 20 per cent of value was produced by agriculture, manufacturing and mining which employed the remaining 15 per cent of the workforce.
I queried them about the inclusion of ‘construction’ (for instance, construction of massive office blocks) and they replied that they did so because it is listed in the Australia and New Zealand Standard Industrial Classification (ANZSIC).  However, they did agree that there is no clear distinctions between industries that are ‘services’ and those that are ‘non-services’.
As a lay-person in this area I would estimate that a more realistic figure might be about two thirds services. But that figure, and the fact that only 15 per cent of the workforce, in manufacturing, mining and agriculture, produces no more than 20 per cent of all value indicates a major restructuring of society is already under way, I believe with great significance for proceeding to ‘the greatest transformation’ that humanity must accomplish before the end of this century. And building on a spontaneous/evolutionary development is generally far easier to accomplish than trying to create something so radically different that people may be more reluctant to embrace it, while it can also be more subject to violent reversal.                                                             
Consumption goods cannot be distributed equally because people and families are different, have different responsibilities, different incomes and different tastes, Services, however, from electricity, water and sewerage supplies, health and education and transport and communication services … are equally essential to everybody, indeed possess an egalitarian aspect that is desirable, but     rare in present society. This fact is expressed in the so far unsuccessful attempt to globalize and privatise trade in services through GATS (General Agreement on Trade in Services), leaving most services still locally supplied, with a major portion still in state hands.

The Australia Institute conducted surveys that revealed a majority would prefer better services over tax cuts. When asked which election promise was more likely to win their vote, 56 per cent of those surveyed chose better services to increased living standards compared to 44 per cent who said that tax cuts would sway their vote. Of all those surveyed, 63 per cent wanted services to benefit Australians equally.

As well as treasuring this egalitarian factor, we should remind ourselves e forget conditions of work have an effect on ways of thinking, ‘big industry’ significantly generating trade unionism and to a certain extent socialist thinking. This is not to suggest that trade union and socialist sentiment cannot arise among workers in, for example, caring activitie, only that they may have to be approached in a rather different way, as do workers in country areas compared with the city. The conclusion should be that understanding the ways of thinking of differently placed, differently formed, differently parented and differently educated people, is not simply the product of class economic relations.

Taken generally, we need to realise that politics is an art rather than a science where ‘theory’ alone is adequate to decide on policy and practical activity. Or, put somewhat differently, the common view in left, right, and to some extent in neutral or various other circles, that property or other economic relations have to come first – that these, often called material relations, must change before any significant society-wide alternatives can occur.

My contention is that in the concrete conditions of global warming and threats to planetary resource provision, tackling these problems should be the priority, and that succeeding in the endeavour to overcome them will do more than any other available way in which to clarify what economic changes can politically then be made.