Capitalism and Critique

Unruly Democracy and Solidarity Economics

Edward Martin, Rodolfo Torres, Mateo Pimentel, Edward J. Martin, Rodolfo D. Torres, Mateo S. Pimentel

• Publisher: Routledge
• Year: 2018
• Print ISBN: 9781138365544
• eBook ISBN: 9780429773617
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

While there are signs of recovery from recent economic collapses, relatively few protective measures are in place in the United States to prevent future crises and widespread destruction of livelihoods around the globe.

This book, a follow-up and further development of Martin's and Torres' ideas in their acclaimed Savage State: Welfare Capitalism and Inequality, contains a synthesis and critique of economic theory with historical case studies and new discourse on American globalism and its failures to provide for the economic security of millions of people. Since the original publication over ten years ago, there has been a resurgence in radical political economy and critical theory. Instead of "demonizing" the market, Capitalism and Critique draws lessons from the new directions in social theory and seeks clear solutions for future modes of capitalism.

1

On the Priority of Wage Labor

Marx’s theory of capitalist exploitation is critical to understanding the rationale for transitioning away from a neoliberal form of market capitalism to a democratic political economy based on economic rights. The argument, succinctly put, is that wage laborers, according to Marx, are exploited by their employers, since wage earners create the surplus value. This is basically the core argument of what has become Marx’s labor theory of value. Put another way, the value created by a laborer is intrinsically related to the amount of labor expended to produce the product. But to be clear, it is the laborer who creates the value, not capital.

The value of that product is created by the worker who transforms given material objects into a finished price. The income from this finished price is then divided between labor (wages), capital (profit), and expenses, such as overhead and raw materials. Exploitation occurs when the wages received by workers do not reflect the full value of their effort because that value is taken by the employer in the form of profit. The lion’s share of the wealth is retained by the employer at the expense of the worker. Thus “making a profit” essentially means taking away from the worker the value resulting from their labor. Marx terms this capitalist exploitation (Murphy 2004).

This position implies another related problem in that capital undermines itself precisely because workers have less money to spend in a market economy. The lack of income, due to downward pressure on wages and increased profitability, is eventually felt by both the capitalist class and working class in stagnation, recession, and even inflation, thus perpetuating economic crisis (Marx and Engels [1848] 1978; Marx [1849] 1964, 146–49). Here it is important to note that socialists, Marxists, anarchists, and radicals see exploitation and economic crisis as constituting inherent elements of capitalist-worker relations that in turn generate inequalities in power and advantage for the capitalist class. Consequently, asymmetrical distributions of power create individual and class variations across the entire social stratum that in turn create further inequalities undermining the economic well-being of the working class.

Workers are compelled, after selling their labor power, to work longer than is necessary, since workers do not own the capital and instruments of production with which they work. The revenue or profits from these extra hours of production accrue to the capitalists and investors. Thus theoretical contributions to radical political economy remained largely intuitive until the Industrial Revolution. What resulted was the notion that private property (land, capital, and financial assets) was the source of existing inequality, alienation, exploitation, and oppression.

While Marx’s theory of exploitation is helpful in highlighting the need for reconstructing an economy based on social justice, we nevertheless argue that political-economy contributions other than from scholars such as Marx, Ricardo, and Owens have much to offer the democratic political economy we urge for policy implementation. For example, Locke’s labor theory of property and elements of Adam Smith’s Wealth of Nations identifying labor as the source of value, Gar Alperovitz’s “knowledge economy” as a public good for which previous generations have provided an intellectual foundation for economic growth and productivity, and Elinor Ostrom’s common-pool resource theory, all provide insightful guidelines for a renewed vision of economic justice (Locke [1690] 1979; Smith [1776] 1952; Ostrom 2003; Alperovitz and Daly 2008). All of this is critical in understanding the theoretical underpinnings for an economic bill of rights in the United States.

In order to transform today’s manifestation of capitalism—that is, a neoliberal globalized form of capitalism—into a democratic political economy that recognizes the fundamental rights of workers who create the surplus value of capital enterprises, we seek to analyze three major political economists and their theories on this matter—Owen, Ricardo, and Marx—and then advocate an anarchic social-justice model in support of a socially just democratic political economy. However, before this analysis takes place, a deeper examination of the systemic causes of today’s version of capitalist exploitation demands attention. In this chapter we seek to examine more precisely the serious issues that have resulted from neoliberal globalized economic arrangements manifested in capitalism.

Capitalism is essentially an economic system shaped by the pursuit of financial profit. Several hallmarks include: (1) the ownership of private property, financial investment, and personal financial risk, (2) the globally scaled organization of economic activity, including the participation of state and governments, (3) salaried workers or wage laborers, (4) impersonal markets that facilitate the purchase and distribution of goods and services, and (6) business cycles that experience financial profit and loss.

Here, markets and their concomitant pricing systems require that people be free to engage in the ownership, utilization, and transference of their property and assets and that people be free to participate in enforceable contracts with any willing counterparty. Thus defenders of capitalism have argued that, while democracy is not to be conflated with capitalism—that is, there exists no logical connection between the two—they have, in the same breath, argued that freedoms, such as those of assembly, association, expression, and movement, are necessary to democracy and in fact inseparable from the rights to life, liberty and property (Wolff 1970 and Wolff 2012).

Today, capitalism has morphed into what is known as neoliberalism. Four basic components comprise neoliberalism and can thus be described as an economic and financial policy in which radically free markets, and not states: (1) provide the most efficient and effective distributions of services and goods in a global economy, (2) provide market-optimal solutions in which governments ought not intervene beyond their duty to secure property and the private ownership of it, (3) provide a venue for the privatization of government and public goods and services, and (4) hold that human interaction through markets is the only grounds for realizing true human freedom (Machan 1990; Nonini 2008).

Neoliberalism has become a theoretical mainstay within the social sciences and economics. Its popularity, especially among neoliberal economists, is that it serves to describe much of the structural changes in global economics. This has been occurring since the international, political, and economic turbulence of the 1970s and after the decline of the “golden age” of capitalism and Keynesianism in a post–World War II setting (Williams 2012). In all, neoliberalism persists because it expounds on the classical liberal sense that market forces, and individual liberty, are preferred to the state and government.

Added to the phenomenon of neoliberalism is the emergence of globalization, which can best be described as (1) an economic agenda that traverses the world, promoting market economies and enhancing trade in the service of capital growth, (2) a corporate structure and mechanism that may supersede the rule of nation-states and challenge or even threaten democracy, (3) a global village, the consequence of vast cultural exchanges, communication technologies, transportation, migrations, and a wide array of global interconnections, including the globalization of ideas—for example, green ecology, deep ecology, degrowth, and (4) a grassroots globalization or globalization from below as witnessed in antiglobalization or prodemocracy movements emerging in resistance to economic and cultural globalization (Stiglitz 2002 and 2006).

For our purposes, we utilize definitions 1 and 2 as they relate to what we consider economic injustice. In this definition we will discuss globalization within the context of neoliberalism in this chapter. And while definitions 3 and 4 provide a theoretical basis for a just democratic political economy, we will only touch on these two issues as a part of an anarchist approach to social justice and an economic bill of rights.

In order to counter the stagflation of the 1970s, neoliberal policies were ushered into existence as a remedy to the perceived economic problems of this era. Neoliberalism explicitly rejected the Keynesian style of demand management and state intervention (Harvey 2006 and 2007). Both the Thatcher and Reagan administrations during this timeframe actively promoted a new, market-based system of economics and the reduction of taxation on the wealthiest persons and corporations. Funds not used to pay taxes would be used by elites in society to reinvigorate a market economy, presumably. This would in turn incentivize investment through which all would prosper. Critical to the neoliberal agenda was the termination of social-welfare programs declared a “burden” on the economy and counterproductive to economic growth.

This same strategy was disseminated throughout the world. Institutions like the World Bank and the International Monetary Fund (IMF) have also deployed neoliberal tactics to shape the development of poorer nations. They widely prescribed privatizing public resources and implementing austere economic programs, and even demand that changes be made to welfare before less-developed countries (LDCs) might be granted loans and other economic assistance. This is what experts describe as “disciplinary” neoliberalism; its extreme measures for consolidating governance within developing countries is one of its hallmark components (Gill 2003).

Many differences exist between neoliberalism’s advocates and its detractors (Weyland 2004; Kipnis 2009). Those who oppose neoliberalism signal its contribution to incredible instances of global inequality, economic asymmetries, growing unemployment, social and political alienation, environmental destruction, and cultural homogenization and hegemony. In their crusade to illuminate the negative externalities that resulted from adopting neoliberalism, opponents of neoliberalism regularly broach the failures and injustices wrought by market fundamentalism, competition, deregulation, economic liberalization, and the negative effects wrought by privatization in developing countries (George 2015; Reich 2015).

On the other hand, neoliberal apologists who consider broadly unbridled competition to be superior to broadly defined state-backed attempts at coordinating human productivity rival their antineoliberal counterparts with arguments about the necessary economic supremacy of laissez-faire liberties in the face of any sort of public intervention. According to Robert Reich, market economies demand that states intentionally act, because such economies do not arise from “natural” market forces; nature itself promotes no industry, markets, or law, all of which contribute to the common facility of property rights and ownership among states (Reich 2015).

All of this notwithstanding, neoliberalism’s steadfast proponents cling to the chimeric idea that unrestrained market forces beget prosperity and peace—two requisite conditions, they claim, for human freedom. The ceaseless commitment to liberalized governance and market reforms is precisely what marks a shift from embedded liberalism—the post–World War II economic order established by the United States—to disciplinary neoliberalism.

This form of neoliberalism corresponds to disciplinary measures imposed on states’ governments (Williams 2012). Entities that lend money to these governments may enforce conditions to achieve their commitments to market-based policies or to preclude changes to those commitments by future governments and their state-sponsored regulatory reforms. Thus violation of state sovereignty is endogenous to neoliberalism, and the general degradation of individual civil liberties supposedly afforded and protected by the state is jeopardized (Danaher 1994; Stiglitz 2002).

Free-market fundamentalists may support institutions like the World Trade Organization, the World Bank, the IMF, or the Organization for Economic Co-operation and Development, as well as their operating norms. Such organizations and their protocols have greatly destabilized poorer countries, especially in terms of liquidity. Consider the impact of the structural-adjustment policies, designed to liberalize trade and free the movement of capital—the fiscal-austerity programs, for example, aimed at recalibrating the macroeconomics of debtor nations. We must address the question of whom these policies most oppress and whom they most benefit (Sen 2009; Derber 2016; Derber and Magrass 2014).

2

Robert Owen and Utopian Thought

We now turn our attention to what we believe constitutes the basis of a just democratic political economy and the foundations for an economic bill of rights as outlined by FDR. We argue that the democratic economic formulations for an economic bill of rights are, for the most part, grounded in the theoretical works of Owen, Ricardo, and Marx. Nevertheless, other theoretical sources are significant in this investigation, such as Gar Alperovitz’s assessment of John Locke’s labor theory of property and Alperovitz’s notion of the knowledge economy. We address Alperovitz’s democratic-economy model later in this book. For now, we turn to Robert Owen’s theory of a democratic economy.

The Industrial Revolution that gathered momentum in Europe and the United States during the late eighteenth century created the historical context for the theoretical development of radical political economy. The major cost of these innovations was borne by society’s least powerful—the working class, or, for all intents and purposes, the poor. In 1750 the working class in Europe (specifically, England) and the United States lived near subsistence levels, and the purchasing power of wages deteriorated during the second half of the eighteenth century, while the controversy among economic historians as to whether real wages rose between 1800 and 1850 suggests that any improvement was only slight (Deane 1957; Lindert and Williamson 1983; Hooks 2000; Marable 2000). In the United States, national income grew over this period, so that workers’ relative living standards fell and the potential consumption they involuntarily sacrificed financed the investment required for industrialization. Had working-class incomes kept in step with national income, the average worker would have been approximately 50 percent richer in 1840 than thirty years earlier (Kuznets 1952; Lindstrom 1983).

Prior to and during the Industrial Revolution, factory work replaced traditional occupations—typically rural farming or guild status as an artisan in various crafts. This change resulted from the breakdown of the old feudal societies of Europe and the industrialization of those same economies due to mechanistic innovations in the means of production. Mechanization facilitated the division of labor, creating tasks that not only men but women and children as well could perform. Consequently, whole families often worked to achieve subsistence.

The conditions under which labor was performed were unregulated and dangerous, and involved long hours in dehumanizing conditions. The growth of factory production stimulated urbanization in Europe and the United States. As a result, roads, water, sewage, waste management, public health, and provisions for open spaces failed to keep pace with urban migration, while housing was concentrated in crowded slums. The inevitable result was air and water pollution, epidemics of typhoid and cholera, and widespread respiratory and intestinal disease, with a consequent low expectation of life (Kuznets 1952; Lindstrom 1983).

In addition to being driven from the land by enclosures,¹ workers suffered the additional burden of political persecution due to government fears of a repetition of the French Revolution.² Successive administrations in England, specifically during the nineteenth-century Industrial Revolution, were slow to intervene to remedy social problems and maintain the price of bread, and impeded, or rather subverted, the development of trade unions. Within this historical context it can be postulated confidently that the period of Napoleonic war and the subsequent economic crisis constituted the bleakest chapter in British labor history.

The prima facie evidence was that the foundations of modern industry were erected on the suffering of workers denied access to the fruits of an expanding economy and the surplus value they created (Cole 1948; Thompson 1966).³ By contrast, capitalists enjoyed absolute power over their labor force. The Industrial Revolution hence created the modern working class, nominally free but able to live only by selling their labor power. Suffice it to say, Britain witnessed a considerable development of radical economic doctrines in the first half of the nineteenth century.

The Industrial Revolution and the Radical Response

Late eighteenth- and early nineteenth-century industrialization rested on three sets of institutional principles: (1) private property as the means of production, (2) a self-regulating laissez-faire market economy, and (3) the transformation of labor into a commodity. Orthodox economists (classic liberal) either took as given or positively approved these phenomena, while many conservatives and socialists/radicals opposed them. The “Tory Radicals”—such as Richard Oastler and Lord Ashley, Earl of Shaftesbury—maintained a paternalistic conservative ethic based on High Church English aristocratic beliefs, which usually translated into a distain for industry (Thompson 1966).

These views seemed impractical in ignoring the productive potential of industry an...

Table of contents

• Cover
• Half Title
• Endorsement
• Title Page
• Copyright Page
• Dedication
• Contents
• Acknowledgements
• Introduction: Foundations of Direct Democracy and a New Solidarity Contract
• 1 On the Priority of Wage Labor
• 2 Robert Owen and Utopian Thought
• 3 A Democratic Capitalism?: Ricardian Socialism and Beyond
• 4 Marx’s Critique of Political Economy and Class Analysis
• 5 The Conundrum of Marx’s Theory of Value
• 6 A Moral Theory of Justice and a Democratic Economy
• Conclusion: Against Capital: Unruly Democracy and Popular Economics
• References
• Index