The Socialist Boogie Man 21 September 2019.

When it comes to the trajectory of Socialism, critics of Bernie Sanders and Elizabeth Warren are either ignorant or liars.  Historically, Socialism is an economic system in which 1.) society, not the private individual, owns the “means of production”; 2.) planning, rather than the market, determines the production of goods; and 3.) co-operation, rather than competition, is the guiding principle.

Socialism arose as a response to what people saw as the “injustices” of Capitalism; poverty, frequent unemployment; the destruction of the old handicraft industries, awful living conditions in factory cities, and a political system that tilted hard in favor of the capitalists.  Unions and strikes were illegal; there were high property requirements to be able to vote or run for office in most places; and real power belonged to the bourgeoisie.

Early Socialism (1820s-1848) argued that a humane economy and society could be created by building co-operative factories and towns managed by the people who worked and lived in them.  Many amusing stories come from this time.  (See: phalanstery; see: Brook Farm.)

In 1848 the German intellectuals Karl Marx and Friedrich Engels published The Communist Manifesto, creating the form of Socialism later called Marxism.  Marxism argued that a) capitalist greed would lead to a few owners gobbling up all their competitors so that ownership would end in a few hands; b) capitalist greed would lead to wages being forced down to the bare survival level; c) poor people can’t buy the things they produced, so capitalist governments would fight wars to conquer new markets and destroy surplus production that they could not sell; and d) all the miserable poor people would recognize that they belonged to one class (“those who work”) and the few owners belonged to another class (“those that don’t”); and e) revolution would replace Capitalism with Socialism.  Everyone would live happily ever after.

Marxian Socialism became the dominant movement in Socialism after 1848.  However, capitalism began evolving: unions were legalized, wages and living standards rose, governments created social insurance systems, and the bourgeoisie accepted political democracy.  In the early 20th Century, Marxism split into two opposing groups.  Reformist or Democratic Socialists said that Marx’s predictions hadn’t worked out, that revolution had to give way to participating in democratic politics, and that politics required a willingness to bargain with the other classes.  In contrast, Communists said that to achieve Socialism it would take a small group of professional revolutionaries to organize “the masses” and then to lead a continuing revolution.

In practice, Communism turned out to represent “prison camps, overalls, and a damned long march to nowhere.”  Communism is what contemporary American conservatives describe as “Socialism.”

In fact, the British Labour Party, the French Socialist Party, and the German Social Democratic Party have never been anything but guardians of political democracy.  They have never tried to create a monopoly on political power and they have never failed to yield power when they lost a democratic election.  Sanders and Warren clearly fall within this tradition.

Fight them on the real and many failings of Socialism, but don’t scare-monger and lie.

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Shareholders versus Stakeholders 1 21 September 2019.

Historically, American industry grew from a foundation based on prioritizing “shareholders” over “stakeholders.”  Labor and communities didn’t count for anything in the epic period of industrialization.  In my original home town, Seattle, the railroad tracks ran right along the shore of Elliot Bay because that led directly to the piers for loading cargo on ships. That’s where the railroads wanted their lines and the public be damned.   In my adopted home town, Easton, the Coal and Iron Police of the Lehigh Valley were deputized by the Commonwealth so that they could lawfully counter unionization.  Then came the Great Depression.  The great corporations were humbled and regulated by the federal government.

Then the Second World War devastated the industrial economies of most countries in the world.  Britain, France, Germany, Italy, and Japan emerged from the war with their industrial plant and agriculture in ruins.  After 1945, the pressing demands for economic reconstruction conflicted with pressing demands for higher standards of living and social welfare systems in many countries.  To make matters worse, Britain and France spent heavily on defense in order to maintain “great power” status.  All of these factors made for a slow revival of competitiveness on international markets.

In the meantime, the United States provided the goods demanded by the rest of the free world.[1]  Thus, during a “golden age” of the 1950s and 1960s, American corporations enjoyed huge profits without struggling very much.  They could reward shareholders and “stakeholders” in ways that satisfied all concerned.  Corporate social responsibility came to mean not laying-off workers or cutting wage and benefits, not closing down plants, not getting rid of unprofitable or incompatible divisions, and not off-shoring production.

Most people were happy with this situation, but not all.  In a 1970 New York Times Magazine essay Milton Friedman, asserted that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.”  Radically at odds with recent experience, Friedman’s view did not receive wide acceptance.  Instead, America’s economy became increasingly uncompetitive without most people noticing.

Soon after Friedman had spoken, huge waves of change broke over the American economy.  Globalization unleashed rebuilt foreign industries on the international and American markets.  Deregulation allowed the entrance of hungry and innovative new competitors onto the domestic market.  Rapid technological change contributed to globalization, while also substituting machines for men.  Furthermore, the 1970s witnessed the two “oil shocks” (1973, 1979).  While impossible in economic theory, combined high inflation and high unemployment turned out to be all too possible in economic reality.

Forced to choose how to use shrinking profits, corporations prioritized “stakeholders” over shareholders.  Savers—you have to save before you can invest—felt themselves to be getting “skint” from management.  Then, in the 1980s, appeared the corporate raiders launching hostile takeovers.  Disgruntled stockholders unloaded their stock on the raiders.  Successful takeovers led to fat, dumb, and happy corporations getting put through the wringer.  Fairly quickly, many boards and managers began prioritizing shareholder value over stakeholder value as a defense.  By the end of the 20th Century, Milton Friedman’s formula had triumphed.

[1] Steven Pearlstein, “When Shareholder Capitalism Came to Town,” The American Prospect, 9 April 2014, https://prospect.org/article/when-shareholder-capitalism-came-town