EconomicsforDemocratic

Socialism
Drexel University
Spring Quarter 2009

WhyThisCourse?
Theeconomiccrisisof2008seemstobethemost
seriousreversalforcapitalismsince192933.
Itispossiblethatcapitalismwillnotsurvive.
Evenititdoes,therecurrenceofcrisesofthis
magnitudecallsforaconsiderationofthecostsand
benefitsofcapitalismvisavisalternativesystems.
Bothofthesepossibilitiesurgeareconsiderationof
democraticsocialismasanalternative.

FairWarning
Thiscourseisanexperiment.
Therearenosocialconventionstodefinethecontentof
thecourse.
Unavoidably,inmanycases,youaregoingtogetmy
ideas,forwhatevertheyareworth.Imnotsurehow
muchconfidenceIhaveinsomeofthem!
Iamnotqualifiedasaphilosopher,politicaltheoristor
historian,butwillhavetodigressonallthesefields.
Inanyexperiment,thingscangowrong.

EconomicandPoliticalSystems
Theuseofthetermdemocraticsocialism
suggeststhateconomicandpoliticalsystems
canbetakenunderseparateheadings,sothat
wehave,ineffect,fouralternativesratherthan
two:socialismwithorwithoutdemocracy,and
capitalismwithorwithoutdemocracy.
OrthodoxMarxistLeninistswoulddenythat
(withsomebasisinMarxideas)andsowillI,
fordifferentreasonsbutthisinterpretation
willdo,fornow,asanorganizingprinciple.

Democracy1
AsaminimumDemocraticSocialist
woulddemandapoliticalsystemthat
incorporatesthedemocraticliberties:
Freedomofspeech,advocacy,assemblyand
petition
Openlycontestedelections
Freedomoforganization,includingthe
freedomtoorganizepoliticalpartiesto
contestelections.

Democracy2
InCapitalism,SocialismandDemocracy,Schumpeter
considerstwointerpretationsofdemocracy:
Popularsovereignty,thatis,thatthegovernmentshould
enactthewillofthepeople
Competitiveleadership,thatis,theleaderisdetermined
bycompetitionforthefreevoteofthepopulation.
Schumpeterrejectsthefirstofthese.Hemakesseveral
criticisms.Theonethatbitesis:thegeneralwill,ifit
existsatall,mightbebestenactedbyanautocrat.
Theformationofgovernmentbypoliticalcompetition
doesatleastexplaintheimportanceandfunctionof
democraticliberty.

Democracy3
Undertheinfluenceofanarchism(specificallyWolff,R.
P,1970,InDefenseofAnarchism,NewYork:Harper)I
wouldpreferahigherstandardandwoulddefine
democracyasfollows:
Inademocraticsystem,anypersonwhoholdsa
positionofauthorityisresponsibletothoseover
whomtheauthorityisexercised.
(Wolffgoesmuchfurther).
Bythisstandardcapitalismcanneverbedemocratic.
Neithercouldcentralizedstatesocialism.
ButIwontinsistondoingthingsmyway.

Democracy4
MarxLeninistsrejectdemocraticlibertyas
bourgeoislibertyonthefollowingreasoning:
Marxsaysthatallpoliticalorganizationservesclass
interest.
Ifthecapitalistclasshasbeendoneawaywith,the
governmentistheinstrumentofworkingclass
interest,regardlessofliberties.
Ifsomevestigesofthebourgeoisieremain,thenthe
governmentneedsallthepoweritcanobtainto
advanceworkingclassinterestsandrepressthe
bourgeoisie.

SocialistRoots
W.ALewiswasaNobellaureate
economist(1979)andaFabian
socialist.
In1949hewrotethatBritish
socialismhadtwoaims:democracy
andaclasslesssociety.
Headdedthatgovernment
ownershipisameanstothoseends,
andnotinitselfsocialist.
HetracedtheseideastoRobert
Owen,amongothers.

ClassSocieties
Inancientsocieties,themajorclassesarethepayers
andrecipientsoftribute.
TheearlyIslamicCaliphateprovidesaveryrefined
instanceofthis.
TheArabconquerorsbuiltnewcities(Basra,Kufa,
e.g.)whereArabsoldierslivedonsalariesderived
fromtribute.
Otherclassesmerchantsandrurallandowners
existedbutwereminor.
InFeudalism,themainclasseswerelandlordsand
peasants.

Classesinthe19thCentury
TheClassicalPoliticalEconomists(about17761880)
observedthattheirsocietywasdividedintothree
classes:landlords,the(wealthycapitalist)middleclass,
andthelaborers.ThiswasstilltrueinMarxtime.
Nevertheless,itisspecifictoaperiodoftransitionfrom
feudalismtocapitalism.
Essentially,aworkerdidntownanythinghe(orshe)
couldntwearoreat.Therewerenooldagepensions.
Theconditionoftheworkingclasshaschangedover
thelastcentury,though.
Areweallcapitalistsnow?

ClassesovertheLifeCycle
Todefineasocialclassin2009,we
needtothinkintermsofthelifecycle.
FrancoModigliani,antifascistresistor
andNobelLaureatemacroeconomist,
broughtthelifecycleperspectiveinto
economics.
Ifyouhavetoworkforawageor
salaryformostofyourlifetosurvive
andgetapension,youareamember
oftheworkingclass.
(Modiglianiwasafreemarketliberal.) FrancoModigliani
19182003

OtherClasses
1. Thosewhoownwealthenoughtooperateabusiness,
sothattheyhavetoworkbutnotforwagesorasalary,
arenotpartoftheworkingclass.Theyarewhata
Marxistwouldcallpetitbourgeois.Somemaybeno
betteroffthanworkers,andtherecanbealotof
mobilityfromthisclassinbothdirections.
2. Thosewhoinheritwealthenoughtolivewithout
working,thetrustfundclass,approximateVeblens
leisureclass.
3. Thosewithwealthenoughtocontrolcorporations(and
buycongressmen)arethegrandbourgeoisiewhatI
callthebillionaireclass.

Strata
Thethreegroupshaveintereststhataresomewhat
aligned,andmaybethoughtofasdifferentstrataofthe
samecapitalistclass.
However,differencesamongthemcanbeimportant,and
theirinterestsarenotwhollyaligned.
Interestsofthegrandbourgeoisietendtobenationaland
international,whilethoseofthepetitbourgeoisietendto
belocal.
Theseconflictsarethemajordifferencesbetweenthe
twopartiesintheUSA.
Inthatsense,thecapitalistclassasawholecanbe
thoughtofastherulingclass.

ClasslessSocieties
Canweevenconceiveofaclasslesssociety?
Jeffersoniandemocracyasocietyoffreehold
farmerswouldbeclassless.
Butthatisinconsistentwithmodernproduction.
Instatesocialism,everybodywould(inprinciple)bea
publicemployee.Thus,noclassdivisions.
Inasystemofworkercooperatives,asenvisionedby
Mill,everybodyearnstheirincomeasamemberofa
workercooperative.Thus,again,noclasses.

StateSocialism
Whilestatesocialismisinprincipleclassless,it
isunstablebecauseitishierarchical.
Thetechnostructureofplannersandmanagers
becomesagroupdistinctfromtheworkers,
livingofftheirsurplus.
Whetherornotthisisanewclass,itsetsthe
stage(asintheSovietUnion)forthereturnto
capitalism,sincetheycanextractthesurplus
moreeffectivelyascapitalistoligarchs.

Nationalization
Manymidtwentiethcenturydemocratic
socialistssawselectivenationalizationasapath
tostatesocialism.
AsBuskypointsout,this,too,provedunstable
andwasreversedbyprivatization,decisions
takenbydemocraticgovernmentswithlabor
partiesintheparliament.
Havetheworkersanystakeinnationalizationor
statesocialism?Nodirectstake,anyway
althoughperhapsthetechnostructuredo.

CooperativeSocialism
Inacooperativesocialistsystem,someofthe
cooperativeswillbeverylargeindeed
unavoidablyandmanagerswillbespecialists.
However,astheyareresponsibletothepeople
theymanage,itisatleastpossiblethatthe
hierarchywillbemuchmorelimited.
Thuscooperativesocialismremainsahopefora
classlesssociety.

BacktoLewis
Writinginthe1940s,Lewiscriticizedselective
nationalizationofindustriesasessentiallyanewformof
exploitationoflabor.
Heagreedwithmanyeconomistsatthattimethat
corporationsdontmaximizeprofitsanyway.
Hisprogramwasforthegovernmenttorunanannual
surplus,retirethenationaldebt,andbegintobuyup
sharesinthecorporations.
Thus,eventually,thecorporationswouldbecomepublic
property,althoughtheywouldcontinuetobeunder
decentralizedand(moreorless)interestedmanagement.

FromLewistoGreenspan
Greenspan,too,conceivedgovernment
surplusesasapathtosocialism.
ThatwasthereasonhegaveforsupportingtheBush
taxcuts.

Butfewsocialistsof2007,ifany,wouldregard
corporationsasprogressiveorganizations.
Indeed,thecrisisof2009was,toaconsiderable
extent,acrisisofcorporations.

OntheOtherHand
Anticorporateleftists(suchasMagnusson)
couldfavorcooperativesasanalternativetofor
profitcorporations.
However,historiccooperativesareworker
owned,notpublicproperty.
Canweconceiveofasystemthatcombines
publicownershipwithdecentralized,interested
management(asworkercooperatives?)Thatis
thesocialismIpersonallywouldfavor.

RobertOwen
1771-1858
Born in Newtown, North
Wales, the son of a saddler.
An entrepreneur at 19 and one
of the all-time great business
managers!
Known as a utopian
socialist.

NewLanark
OwenmanagedinnovativespinningmillsforPeter
DrinkwaterandDavidDale,whosedaughterhe
married.
In1813,hepurchasedtheDalemillatNewLanark,and
reorganizeditasautopiancommunity.
Hewasanenvironmentalist,andhopedtoprovidean
idealenvironmenttoformgoodcharacteramongthe
workersofNewLanark,andtheirchildren.
Amonghisfirststepsweretoeliminatechildlaborand
startaschool.

NewLanark,Scotland

NewViewofSociety
He published his ideas on educational reform and the
influence of social environment on character, in a
series of essays which were collected and published
as a New View of Society. In this major work he
outlined his vision of the ideal community - a system
run on a co-operative basis involving both factories
and agriculture. -- Robert Owen Museum
In1825,purchasedNewHarmony,Indiana,to
establishacolonythere.(Thiswaslesssuccessful
thanNewLanark).

The Grand National

Consolidated Trades Union
At this time, in the early 1830's, the trade union
movement was growing and a number of co-operative
societies had opened shops and workshops. In 1832 he
proposed that the unions should unite and in 1834 the
Grand National Consolidated Trade Union was formed.
Within a week it had over half a million members and the
government were alarmed by this new mass labour
movement. It was suppressed, however.
However, the idea of the co-operative movement did not
die completely, for in 1844 the Rochdale Pioneers started a
co-operative venture in Lancashire which eventually grew
into the modern Co-operative Movement.
AfterRobertOwenMuseum

OwensEvolution
Owenhadevolvedfromapaternalisticutopiantoa
laborleaderandreformer,ifnotquiterevolutionary.
Hedid,however,supportonelaterattempttoforma
colonyinBritain.
Owensfreethinkingreligiousviewswereoften
violentlyopposed,andsomeofhissocialistfollowers
wereprosecutedforblasphemy.
Lastyear,the150thanniversaryofhisdeathwas
celebratedathisbirthplaceinNorthWales.Formore
information,contactthecooperativethere.

OtherUtopianSocialists
MarxwroteaboutthreeUtopiansocialists.Owenwasone.
Francis-Marie-Charles
Fourier, 1772-1837
Advocated planned
communities with
common ownership and
production.

Claude Henri de Rouvroy,

Comte de Saint-Simon,
1760-1825
Really more technocratic
than socialist.

AUtopianCommunist
Etienne Cabet, 1788-1856
Political activist, 1830-39 (exiled in
Britain)
Wrote Voyage en Icarie, 1840
An environmentalist, he thought that a
communist dictatorship would be
necessary to establish a noncompetitive
society and transform human nature.
Influenced the insurrectionist August
Blanqui, and through him, Lenin.

Colonies
FollowersofFourierandCabetformedcoloniesafter
theirprinciples,mostly(only?)intheUnitedStates.
FourieristPhalangerieswerefoundedinNewJersey,
Texas,andseveralmiddlewesternstates.
AnIcariancolony,plannedforTexas,tookrootin
Iowa.
Cabetwasthefirstpresident,butdefeatedforre
election.
Founded18481852,itlastedinIowauntilAugust,
1886.(NewYorkTimesArchives).

CooperativeMovement1
Acooperativeisanenterpriseoperatedbya
membershiporganization.Controlisbasedon
membership,andprofitsaredistributedamong
members.Membershipisopentothosewhoare
partoftheenterprise,notasowners,but
Employees,inaworkercooperative
Customers,inaconsumercooperativeormutual
financialorganization
Rawmaterialsupplier,ine.g.afarmercooperative.

CooperativeMovement2
UndertheinfluenceofOwenamongothers,
cooperatives(especiallyworkercooperatives)were
widelyadvocatedinthe1820s.
AmongveryinfluentialfigureswasDr.WilliamKing,
1786-1865, who was also active in education of
working class children and adults.
In 1844 28 working men gathered together to set up
the Rochdale Equitable Pioneers Society and opened a
co-op shop on Toad Lane in Rochdale. (Coop online).
This consumers coop is considered the beginning of
the international cooperative movement.

France
InFrance,cooperativeswere
organizedandadvocatedas
TheRepublicinthe
Workshop.
Importantfigureswere
PhilippeBuchezandLouis
Blanc,whoadvocated
governmentaidtothe
formationof(moreorless)
cooperativeworkshops.

LouisBlanc

CooperativeMovement3
Over the subsequent 170 years, thousands of
cooperatives, including worker cooperatives,
have been formed, and the record of success is
excellent.
The international cooperative movement is
affiliated with the United Nations and
headquartered in Geneva.
http://www.ica.coop/alica/
The slogan of the 150th anniversary
celebration in 1990 was tried and proven.

JohnStuartMill
18061873
SonofJamesMill,a
Ricardianpolitical
economist
Millwasraisedasa
sociologicalexperiment
tocreateageniusby
education.
Forwhateverreason,he
wasoneofthegreatest
mindsofthe1800s.

MillsSocialism1
Theformofassociation,however,whichifmankind
continuetoimprove,mustbeexpectedintheendto
predominate,isnotthatwhichcanexistbetweena
capitalistaschief,andworkpeoplewithoutavoiceinthe
management,buttheassociationofthelabourers
themselvesontermsofequality,collectivelyowningthe
capitalwithwhichtheycarryontheiroperations,and
workingundermanagerselectedandremovableby
themselves.

MillsSocialism2
[C]ooperationtends...toincreasetheproductivenessof
labour,consistsinthevaststimulusgiventoproductive
energies,byplacingthelabourers,asamass,inarelation
totheirworkwhichwouldmakeittheirprincipleand
theirinterestatpresentitisneithertodotheutmost,
insteadoftheleastpossible,inexchangefortheir
remuneration.
Iagree,thenwiththeSocialistwritersintheirconception
oftheformwhichindustrialoperationstendtoassumein
theadvanceofimprovement;andIentirelysharetheir
opinionthatthetimeisripeforcommencingthis
transformation,

MillsSocialism3
ButwhileIagreeandsympathizewithSocialistsinthis
practicalportionoftheiraims,Iutterlydissentfromthe
mostconspicuousandvehementpartoftheirteaching,
theirdeclamationsagainstcompetition.theyhavein
generalveryconfusedanderroneousnotionsof[the]actual
working[ofsociety];andoneoftheirgreatesterrors,asI
conceive,istochargeuponcompetitionalltheeconomical
evilswhichatpresentexist.Theyforgetthatwherever
competitionisnot,monopolyis;andthatmonopoly,inall
itsforms,isthetaxationoftheindustriousforthesupport
ofindolence,ifnotofplunder.

KarlMarx
18181883
BornTrier,GermanRhineland
Hisfather,originallyJewish,
convertedtoChristianity
PhD,1841,Jena,onGreek
materialistphilosophy
Notbeingabletofindan
academicjob,heturnedto
journalismforaliving.

MarxCurriculumVitaeI
1842:EditoroftheRhenishGazette,Kln
1843:EscapedPrussianpolicetoFrance,married.
Editor,FrancoGermanAnnals.FriedrichEngels,a
wealthyindustrialistandpoliticalradical,wasa
contributor.
1845:ExpelledfromFrancetoBelgium,supportedby
Engelsasaonemancommunistthinktank.
18478:WroteTheCommunistManifesto,basedonadraft
byEngels.
1848:ExpelledfromBelgium;participatesinrevolutionary
agitationinKln,again.

MarxCurriculumVitae2
From1849,inexileinEngland.
From1852early1860s,writesfortheNewYorkDaily
Tribune,somewhatalleviatinghisextremepoverty.
1859:ContributiontotheCritiqueofPoliticalEconomy
stateseconomicmaterialistposition.
1867:Capital,v.1
Died1883
1885:Capital,v.2publishedposthumously.
1894:Capital,v.3publishedposthumously.
ThelattervolumeswerefinishedbyFriedrichEngels.

Revolution
InWesternEurope,from1789to1871,therewasno
continuous,peacefulpolitics.Theonlypoliticalevents
thatmatteredwererevolutionsandcoupsdetat.
TheFrenchRevolutionof1789wasfollowedbyaseries
ofcoupsdetat,culminatinginNapoleons.
1830wasayearofrevolutionthroughoutwesternEurope.
Sowas1848.InFrance,thiswasfollowedbyacoup
detatbyyetanotherNapoleon.
ThiswasthepoliticalmilieuMarxhadexperiencedand
thatseemedinevitabletohim.
TheCommunistManifestowaswritteninthecontextof
the1848revolutions.

Ideology
Inthemid1840s,MarxandEngelswroteTheGerman
Ideology,acritiqueoftheyoungHegelians.
TheYoungHegelianideologists,inspiteoftheir
allegedlyworldshatteringstatements,arethe
staunchestconservatives.
Pointbeingthattheircriticalphilosophy,thoughvery
radicalinitsattackonolderideas,isintheinterestof
thedominantclassthatswhatideologydoes.
Thatdoesntmeanideologyissimplywrong.Ifitisto
doitsjob,anideologyneedstohaveenoughtruthtobe
persuasive.
ThisbookisanearlystatementofMarxtheoryof
historyandarguesthatideasarisefrommaterial
conditionsofproduction.

FromTheCommunistManifesto
Thehistoryofallhithertoexistingsocietyisthehistory
ofclassstruggles.Themodernbourgeoissocietythat
hassproutedfromtheruinsoffeudalsocietyhasnot
doneawaywithclassantagonisms.Ithasbutestablished
newclasses,newconditionsofoppression,newforms
ofstruggleinplaceoftheoldones.
thefirststepintherevolutionbytheworkingclass
istoraisetheproletariattothepositionofrulingclassto
winthebattleofdemocracy.
Theproletariatwilluseitspoliticalsupremacyto
wrest,bydegree,allcapitalfromthebourgeoisie

ManifestoSummary
When,inthecourseofdevelopment,classdistinctions
havedisappeared,andallproductionhasbeen
concentratedinthehandsofavastassociationofthe
wholenation,thepublicpowerwillloseitspolitical
character.Politicalpower,properlysocalled,ismerely
theorganizedpowerofoneclassforoppressinganother.
Iftheproletariatmakesitselftherulingclass,and,as
such,sweepsawaybyforcetheoldconditionsof
production,thenitwill,alongwiththeseconditions,have
sweptawaytheconditionsfortheexistenceofclass
antagonismsandofclassesgenerally,andwillthereby
haveabolisheditsownsupremacyasaclass.

SocialismandCommunism
TheanticapitalistleftbyMarxtimealreadyhad
factionsofsocialists,communists,andanarchists.
Socialismcalledfortheabolitionofsocialclasses,in
particularthedivisionbetweenowningandworking
classes.(Authority:W.A.Lewis)
Communismusuallydemandscommonownershipof
themeansofproduction(sometimesatthelocallevel)
butsometimesjustmeansthemoreextremeor
advancedsocialism.(Authority:PaulSweezy)
By1848,Marxcategorizedhimselfasacommunist.

MarxasEconomistandPolitician
Marxundertookthestudyofeconomicsandproduced
thebookCapital.
Inthe1860s,hejoinedtheInternationalWorkingmens
Association(FirstInternational)andbecamealeader
ofitsmoremoderatefaction.
Thismoderatefactionadvocatedparticipationin
parliamentarypoliticsbyworkers(socialist)parties
wherethiswaspermitted,asincreasinglyin
Germany.
Theothermajorfaction,ledbyanarchists,calledfor
strugglethroughstrikesandviolence.

SecondInternational
TheIWA,alwaysdivided,
disbanded1876.
AnewInternationalwas
founded1889,anassociation
of(largelyMarxist)workers
socialistparties.
Therewasatendencyaway
fromrevolutionarypoliticsand
towardevolutionary
socialism(EduardBernstein)

EduardBerstein

Bolsheviks
AnexceptionwasRussia,where
anyoppositioncontinuedtobe
repressedbyapolicestatethat
presaged20thcentury
totalitarianism.
NicolaiLenin(VladimirIlych
Ulyanov)advocatedasmallparty
ofprofessionalrevolutionaries
andledhisfollowersoutofthe
SecondInternational.
TheSecondInternationalbroke
upduringWorldWarI.

Lenin

RussianRevolution1
ThesuccessoftheBolsheviksinseizing
powerandestablishingadictatorshipof
theproletariateledtoapermanent
divisionamongsocialists.
Fromthistime,itisnecessaryto
distinguishDemocraticSocialistsas
socialistswhorejecttheDictatorshipof
theProletariate.

RussianRevolution2
FollowingtheRussianRevolution,CommunistParties
wereformedinmanycountries,generallybyformer
socialists.(TwowereformedintheUS,butsoonmerged.)
DemocraticSocialistswerefurtherdividedassome(e.g.
SPUSA)refusedtoworkwithCommunistswhileothers
underpressurefromFascism,orseekingunityfor
workingclassmovementsenteredintopopularfront
organizations.
AsFascismadvancedanddemocraticwestern
governmentswouldnotassistthosewhoopposeditin
Europethesepopularfrontsweremoreandmore
dominatedbytheSovietUnion.

IntellectualControversy
Withsocialismunderstoodascentralizedstate
controloftheeconomy,Austrianeconomists
arguedthatarationalsocialistsystemwould
beimpossible.
Socialisteconomistsrespondedbyproposing
thatasocialistsocietycouldusemarketsinthe
allocationofresourcescombiningpublic
ownershipwithdecentralizedmanagement
instructedtomaximizeprofits.
Thisistheoriginofmarketsocialism.

TwentiethCentury
Duringthetwentiethcentury,especiallyafterthedefeatof
fascism,socialdemocraticandlaborpartiesoftenplayed
partsinparliamentarygovernments,oftenastheleading
party.
Socialistmeasuressuchasselectivenationalizationof
importantindustriesandthecreationofasocialsafetynet
wereadopted.
AsLewisnotes,thesedidnottransformcapitalismtoa
classlesssociety,andmanywerereversedbylater
conservativegovernments.
Someincludinguniversalhealthcare,socialsecurity,and
codeterminationinGermanyandelsewheredonotseem
likelytobereversed.

ArthurLewis,Again
Lewisprogramwasthatinsteadofnationalizationof
steelmakingandcoalminingandsuchthe
governmentshouldrunasurplus,ontheaverage.
Afterpayingoffthenationaldebt,theywouldbuy
sharesincorporations.
Increasingly,thesystemwouldcombinepublic
ownershipwithdecentralized,interestedmanagement.
Thisisakindofmarketsocialism.
But:cancorporationsreallybepartofthesolution?

TwentyFirstCentury
DemocraticSocialistshavelearneda
greatdealfromthetwentiethcentury,
anddonesomegood,buthavenot
createdaclasslesssociety.Thewayto
thisobjectiveseems,ifanything,less
clearratherthanmore.