Socialism or capitalism? [AUDIO & TEXT]

Submitted by SJW on 25 April, 2018 - 12:20 Author: Katy Dollar & Mark Pennington

On 17 March Katy Dollar of Workers’ Liberty debated Mark Pennington, Professor of Political Economy and Public Policy at King’s College London, on Socialism or the free market?

Here we present extracts from their speeches. The full speeches can be listened to below

Katy Dollar

Capitalism has brought us progress, an explosion of technology and industry, unprecedented productivity and efficiency. It has connected globally and built human cooperation on a scale not yet known before.

Markets have produced products to meet the needs of people of whom they have no direct knowledge. We have stuff people 100 years ago did not have and some things they did not even know they wanted.

If I took a serf into my house and showed him my bed, my mobile and my fridge, if I showed them my 90-plus year old grandmother who is still alive thanks to better diet and medical advances, they would be impressed. We are living through a period of peak in global life experience.

But that isn’t the whole story. Everyday 22,000 children die because of poverty.

Half of all deaths of under-fives in the world are attributable to hunger. Babies and toddlers die because the market doesn’t allow for the food to get to them. 168 million children are engaged in child labour. Over half of those are in hazardous work.

What is it in the free market that breeds these inequalities?

It is a particular exchange, the exchange between worker and employer. I sell my ability to work, my skills, my time and energy, and someone buys it. It is like selling or buying anything else in the market, a mobile phone, a nuclear weapon, the difference being that you don’t simply have a moment of exchange and then move on with your life with either your money or a commodity to consume. In this exchange your boss then controls the bulk of your life. The exchange decides where your skills and energy go. It decides where you live. It can destroy your health. It is the central focus of your life.

There is obviously one answer to this: don’t be the worker, be the boss instead. One small class of people own the means of production, the means of production being the resources and facilities needed to make goods and services. One set of people own the resources to get rich on the results of others’ work.

Into this system is built a layer of unemployment. That means poverty. Depending on where you are, that poverty takes different forms. In a wealthy country like ours, through class struggle we’ve won a number of rights, benefits and safeguards. Even here you might lose your home, you might face the choice between three meals a day or school shoes for your kids. In a country like the US where struggle and political representation has won less, you may lose your access to healthcare. If you are sick, you will get sicker. If you are in pain, you will suffer the agony.

It gets worse in other countries. Even the unemployed in the UK or US you are unlikely to be one of the parents of those 22,000 children who die every day from poverty.

We can do better than this. Rather than the free market, we propose socialism.

What is our socialism? You cannot agree with all of Bevan, Stalin, Mao, Trotsky, Pol Pot and Kautsky. Our socialism means class struggle against the capitalists which removes them from power; social ownership of the means of production; co-operative and democratic management of the economy; and the end of the oppression and exploitation, hunger and poverty.

Socialism is possible because of the changes brought about by capitalism, by the expansion and socialisation of production.

Ruling classes have existed necessarily throughout history because of scarcity. One class built a life and a civilisation on the work of others. Poverty came from the inability to provide the basics for the whole population.

That scarcity no longer blights us. We have the chance to build a new more equal system through democratic planning. Democratic planning requires other things from us. It requires the habit of co-operation. It requires education, literacy and culture. It requires information and connectivity and it requires the will to bring these things about. Those are all provided by capitalism.

Globalisation has linked people together. Across the economy, in the public and private sectors, cooperation happens every day at work, and even more on the picket line and other arenas of struggle.

Democratic planning would mean the ending of insecurity and hunger. Work would be shared out, ending long work-hours. The shortening of the working week and the loss of insecurity would mean we would have more time to think, to be with the people we love, to read, to play. Human culture could flourish from that leisure. Rational distribution of resources will chip away at the source of violence and war.

We have all the building blocks of that world. We can do away with this wretched system.

I will cover some of the arguments against socialism and for capitalism. The most damaging of them is that we have had socialism, with Stalin and his like, and that it led to state terror, removal of freedom and starvation.

I would answer: Stalinism was not socialism. It was separated from socialism by a river of working-class blood. I don’t say that after the event, because it failed. People like me said that for decades.

The tradition I am proud to be a part of championed underground workers’ movements who challenged the “actually existing socialism” in Russia and elsewhere. We cheered when people rose against those states.

Since the 1880s Marxists had argued against state socialism, against bureaucratic control of the economy. They had insisted that socialism is democratic and controlled by the working class.

1917 was socialist in the sense it was the beginning of the international revolution. But, as the leaders of the 1917 revolution said, and as Marxists had said long before 1917 was that the prerequisites for socialism grew out of advanced capitalism.

Stalinist economics developed not from the best achieved by advanced capitalism, but in competition with and in imitation of the West. It was motivated by growth, not by a reduction of control over the economy in human life. It was much more part of the history of the era dominated by capitalism then it was part of our socialist future.

The new technologies which arise under capitalism are developed by collective social processes. The development of mobile phones was funded through a series of large contracts with the LAPD. In computing the big advances have originated in academia, in state-funded programs for the military, and more recently with open source development.
Some major advances support the “market drives innovation” theory, but most have not. Fridges and vaccines and the internet all came out of the public sector. Major innovation requires failure after failure after failure in order to make breakthroughs. That is not sustainable for a private business.

The biggest driver of technological development in the 20th century was the US Army. If that progress had been based on human need and liberation rather than death and power, where we could be and what we could have right now!
The market keeps some people very rich and others in absolute poverty. That is the supposed freedom and rationality of the market.

You are pushed down, not because you stopped working hard, or you stole something, or you attacked your boss — not even because people do not want what you produce. There was no natural disaster to explain the housing crash, and it didn’t come through the newly-homeless all exercising their freedom to try camping, but lives were ripped apart.
Under capitalism, right to live for the majority falls below the right of the rich to get richer. We now have everything we need to leave that system behind. We should do that.

Mark Pennington

I’m going to make the case that to achieve workers’ liberty you need capitalist institutions and substantial, although maybe not exclusive, private ownership of the means of production.

You need a regime where individuals or groupings — firms, corporations or cooperatives — own the means of production. That does not exclude some forms of state ownership or the redistribution of income. But what distinguishes it from socialist regimes is that there is a preponderance of private ownership of the means of production.

Even if the pragmatic objections to socialism could be overcome, capitalist institutions are preferable because they hold people to a higher ethical ideal.

The first pragmatic objection is that it is not possible to have an advanced economic system without substantial reliance on market prices. Prices convey dispersed information about the changes in scarcity, supply, and demand, of countless different inputs and outputs. Profit and loss accounting within the context of market pricing enables producers to learn which goods generate the maximum value from the minimum of inputs.

Any economic system which is remotely rational needs to be able to communicate where the maximum value is compared to the minimum. Without market prices you cannot have a rational allocation of economic resources.

We see the consequence of that in all sorts of socialist regimes that have moved away from markets. They have always been characterised by the systematic production of things that people do not want, and production with inputs that are too expensive relative to the demands of the people for whom the goods are produced.

If prices are to be effective communicators of information, they cannot be determined effectively with a single public owner of the means of production. They need to come from a bottom-up process where decision-makers are at liberty to bid up or down on prices in response to circumstances with which only they are familiar.

In a market economy each person is a data point. Each time someone chooses one purchase over another or one investment over another they transmit a piece of information about their circumstances to other actors that they can then adapt to.

Multiple ownership of property disperses risk, whether it be equal or not. If you have a single owner and that owner makes mistakes, then the whole system is affected in a negative way. If ownership is dispersed, there will be mistakes, but the effects can be minimised because they are dispersed in a regime of private and not social ownership.

A private property regime would allow for what I would describe as permission-less innovation. Progress in all fields of human endeavour occurs when some people — entrepreneurs — break from the way the majority believes is right, and do something different. Then their ideas are copied and we have progress occurring by a ripple effect.

Progress never occurs by a majority deciding what counts as innovation. It is what minorities spot and move ahead with without requiring the permission of large numbers of other actors.

In real world capitalism we have too many examples of privatisation of the gains and the socialisation of losses as in the financial crisis, the bailing of the banks and agricultural subsidies. They are genuine problems. But they are bugs in the system, not inherent features of it.

The top 100 companies across the world account for about 6% of global GDP. Those companies only have the power that they have because they sell things that people want. They require the consent of people who buy those products.
They might use their power inappropriately to steal from others and to get favours from the state. But in general those corporations have to compete for people’s money.

The arguments I have sketched explain why capitalism has been so successful compared to the failure of socialism. They explain why capitalist societies are more prosperous and why living standards for the working class have increased by 1800% since the industrial revolution.

They explain why in the last 20 years we have seen the biggest ever global reduction in poverty as China has moved towards a capitalist model. They also explain why in socialist regimes, people have to be kept in. There are very few people running to go to socialist regimes!

I think these are persuasive arguments but there is an important objection. Is socialism not to be preferred because it expects more from people than capitalism?

Socialism has failed, say some people, because people are too selfish. If people were not selfish and were socialised to think about the common good and not private greed, then collective ownership could work. They would not need private property rights to incentivise them to act in the right way. People would give freely to the disadvantaged because that is the morally right thing to do.

To continue the argument, it is said that socialism has failed because its leaders have abused power, but if people had proper respect for others then those in positions of power would only ever do what is right for the common good. They would not dream of privatising gains and socialising losses.

There is no need for the collective ownership of property to lead to famines or lead to gulags.

The problem with this kind of argument is that it can be applied to the case for capitalism. Real world capitalism already out-performs really existing socialism but it could work far better if people could be socialised out of some of the behaviours they have in today’s world. What are those behaviours?

Capitalism today falls short of its potential because people do not treat each other as ends in themselves. They treat them as instruments to be used and exploited. There is nothing inherently exploitative about trade. It represents the principle of reciprocity. But in today’s world people take advantage of informational imbalances and misfortunes of other people to rip off their trading partners.

If they were socialised out of such selfish trades, then we would have the benefits of trade and division of labour without the downsides. Capitalism falls short of its potential because those who lack the opportunity to live a good life through no fault of their own are often neglected. In so far as their interests are catered for at all, people have to be coerced into doing the right thing through the welfare state.

If people were properly socialised into respecting the moral worth of others, then capitalism would provide more and better opportunities to the disadvantaged.

People would not need to be coerced into doing the right thing. We could dispense with the entire apparatus of the welfare state and rely on voluntary giving — not patronising charity but giving on the basis of genuinely wanting to improve the lives of others.

Others say that to keep the system operating, it requires a massive system of coercion to enforce property rights. But if people were properly socialised, then we could dispense with the entire apparatus of state coercion. We could have a world where we could abolish the criminal justice system, an anarcho-capitalist society where the state withers away as it supposed to do but never does under free-access communism.

Many socialists will argue that this is fantasy. It is fantasy to ask people to transform themselves under a capitalist system that makes people behave badly. If we are supposed to accept that socialism will not end in famine, dictatorship and gulags, then we should also accept that it is possible to socialise people to mitigate the morally reprehensible aspects of the capitalism we see today.

It seems to me that both socialism and capitalism would perform better if people were more morally virtuous. In my view though capitalism would still be the morally superior option.

To suggest that people will be incapable of respecting the humanity of others unless differences are eradicated is not to appeal in the highest in human nature.

Asking people to respect differences, including differences in wealth, that result in different value judgements and choices, and still to respect others with humanity, is to hold people to a higher ethical standard.

Add new comment

This website uses cookies, you can find out more and set your preferences here.
By continuing to use this website, you agree to our Privacy Policy and Terms & Conditions.