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Democracy Against Capitalism: Conclusion Part 2

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Index to all posts in this series.

The Marxist views of Ellen Meiksins Wood in Democracy Against Capitalism give a bleak picture of capitalism which I contrasted with the view offered by Bruce Scott, the Paul Whiton Cherington Professor of Business Administration, Emeritus, at the Harvard Business School. Scott’s paper, The Political Economy of Capitalism is apparently a draft of a chapter of a book he wrote titled Capitalism: Its Origins and Evolution as a System of Governance. The book is available here.

The paper gives a picture of capitalism as an organic system that evolves as it encounters new things, rather than as a physical system, one subject to the laws of physics and chemistry. Scott calls capitalism a form of indirect governance of the economy. Here’s an extended quote from the paper that gives a fair picture.

Capitalism, as I define the term, is an indirect system of governance based on a complex and continually evolving political bargain in which private actors are empowered by a political authority to own and control the use of property for private gain subject to a set of laws and regulations. Workers are free to work for wages, capital is free to earn a return, and both labor and capital are free to enter and exit from various lines of business. Capitalism relies upon the pricing mechanism to balance supply and demand in markets; it relies on the profit motive to allocate opportunities and resources among competing suppliers; and it relies upon a political authority (government) to establish the rules and regulations so that they include all appropriate societal costs and benefits. Government and its agents are held accountable to provide physical security for persons and property as well as the laws and regulations. Capitalist development is built from investment in new technologies that permit increased productivity, where a variety of initiatives are selected through a Darwinian process that favors productive uses of those resources, and from the periodic modernization of the legal and regulatory framework as indicated by changing market conditions and societal priorities. Capitalist development requires that government play two roles, one administrative, in providing and maintaining the institutions that underpin capitalism, and the other entrepreneurial, in mobilizing power to modernize these institutions as needed.

I leave it as an exercise for the reader to work out the wide variances between his conceptualization of capitalism and real live capitalism. I will only point out the most obvious problem: the externalities of pollution are not corrected by any regulation or law, efforts to do so have been struck down by the courts, and the coming disaster cannot and will not be fixed by capitalism.

In the book, Scott says that he was dissatisfied with existing histories of capitalism because they were observational rather than explanatory. What he found lacking was human agency. This book is his attempt to incorporate human agency into the history of the evolution of capitalism.

When human agency is taken into account, the story of US industrial development in the 19th century becomes one of competition between those who wanted to empower firms to grow and become more productive and inevitably more powerful politically as well as economically, and those who wished to establish a regulatory framework to protect the public from the abuse of private power by those same firms, for instance, through regulation of railroad rates and/or by restricting the rights of firms to grow through mergers and acquisitions. P. xxi.

Scott claims that our current system features two systems of government, one for the economy and one for all other matters. The economy is managed by private interests, under rules and laws created by the central authority and by intermediary institutions. He calls this indirect governance of the economy. The other part of society is governed directly by the central authority. He identifies a three tier system of governance for the economy, using a sports analogy. In Olympic sports, there are the athletes and the games at one level, the governing bodies of the sports at another, and the top tier is occupied by the Olympics organization. By analogy, there are business firms at the first level of the economy, then institutional foundations, such as regulatory authorities, and then the elected officials at the third level.

In sports, as indeed in capitalism, political authorities play two distinct roles: one administrative, in maintaining the existing system of playing fields and enforcing the existing rules, and the second entrepreneurial, in mobilizing power to win the needed votes in the legislature in order to admit new teams, change the locations or timing of competition, change the rules and regulations, and/or change the distribution of revenues. Book, p. 50.

It’s possible to see the US system of capitalism as Scott describes it, at least in abstract theoretical terms. I don’t think he has solved the human agency question correctly. At least in the parts I’ve read so far, Scptt doesn’t discuss power relations in capitalism. For Wood, power relations are central to capitalism. She identifies those relations as the social relations between producers and capitalists: domination, exploitation and appropriation. Compare that with the description in the quote from Scott’s paper above: workers are free to work for wages (or not), capitalists are free to invest seeking a return (or not). What happens to workers who don’t work for wages? What happens to capitalists who don’t invest? The different outcomes are obvious: the workers starve, and the capitalists lives off their money.

Scott also understates the problems created by the power of the capitalists inside the organizational structure he describes. He is clear that capitalists have the ability to lobby, buy politicians and regulators and courts, and to rig the system in their favor. He recognizes that some of the gains of capitalists are the result of the “deliberate distortion of [market] frameworks for private advantage” but calls them by the bloodless term “externalities”. From the paper:

While small imperfections can be overlooked as acceptable aspects of an imperfect process, large, deliberate distortions for private gain are likely to add to the income inequalities in the society, creating and/or sustaining a vicious circle in which the markets serve as a way for the rich to exploit the poor. On the other hand, if a poor majority were to take political power in a country or region it could use that political power to shape institutions to disadvantage the rich, including to take their property.

Fear of letting the poor have a significant role in government has motivated the dominant classes throughout history, with few concrete examples of the horrible possiblity of losses by the rich.

And I’ll say again, capitalism isn’t going to fix the coming planetary disaster. In fact it’s going to make it worse by insisting on pumping more carbon dioxide and other chemicals into our environment. The continued profitability of huge swathes of the economy depends on it. As long as the economy is governed solely by the profit motive, there can be no solution.

Update.

Commenter Anon raises an interesting question: can the bloodless quality of Bruce Scott’s account of capitalism be attributed to Scott’s life work in the Harvard Business School. There is a partial answer in the Preface, which may be the single most useful preface I have ever read. He describes the evolution of his ideas, complete with the names of individuals, including his research associates, who helped him formulate them, and books and experiences that were important.

For those interested, this is worth reading, and I have a better understanding of the question Anon raises. In short, I think Scott has a framework grounded in standard economics and standard political science. He works at moving away from it, as is evident in his flat rejection of neoliberalism (he doesn’t use that term), as well as by his clear affinity for a form of capitalism. Thus, he finds himself in the gap between the structured views of capitalism we see in Wood, and the materials he found useless or dead wrong. He wants to construct a different view, but he tries to salvage as much as possible of the views he’s always held.

I’ll add a discussion of the similarities between Scott and Wood in the next part of this extended conclusion.

Democracy Against Capitalism: Index To Posts

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This list will be updated with links to the conclusory post or posts on Democracy Against Capitalism by Ellen Meiksins Wood, and all posts are updated to include a link to this post. As a reminder, I read this book on a Kindle, and it didn’t give page numbers. All citations are to the Kindle location, as best I could tell.

This book turned out to be very difficult going. Part of it was my own unfamiliarity with the vocabulary of Marxist thought, where even the definitions are hard to understand concretely. Part of it is that most of the previous books engage with a history I’m vaguely familiar with, while the primary issues of Marxist thought relate to the transformation of feudalism into capitalism, and from monarchy to liberalism. Wood adds detailed discussions of ancient Greek and Roman history that I didn’t knowabout. Understanding these transformation required a lot of background reading. Another difficulty is that I’m not familiar with any of the work Wood cites. Unlike most writers, Wood only engages with Marxists, with the exception of Karl Polanyi, whose work she mentions briefly.

But mostly it was difficult because it is a criticism of capitalism from outside capitalism. All of the other books I’ve discussed take capitalism as a given, and do not even offer much of a definition. At most, they criticize it from inside the bounds of capitalism. This orientation makes it very difficult for those of us raised to believe that the only option to capitalism was pure evil.

I mention these difficulties because I think this perspective is worth the difficulties of learning a new set of ideas. Even if some of the book is jargon, the value is there, and it’s worth wading through.

I did not write about Chapters 5, 8, or 9. Chapter 5 focuses on Wood’s view of Weber. The latter two chapters concern the social issues on which the left was focused during the late ’80s and early 90s. Wood argues that these issues are important, but that they were diverting leftists from the economic issues that have always been at the center of left theory. Maybe progressives are relearning the political reality that food and shelter are at the forefront of the lives of almost everyone. I generally agree with that view and have written about it repeatedly.

In my introduction, I mentioned a post by Eric Levitz, a writer at New York Magazine. I hope people will take the time to read this excellent discussion of relationship between capitalism and democracy, and the article by Jedidiah Purdy linked in it. As I have said throughout this series, you don’t have to be a Marxist to see the problems capitalism creates, and I think these two pieces illustrate that nicely.

1. Introduction To New Series.

2. Competing Stories About Wages.

3. The Separation Of Politics And Economics.

4. Capital In A Fiat Money World.

5. Base, Superstructure and More Definitions.

6. Neoliberalism.

7. Class.

8. Notes On Class.

9. Markets.

10. Democracy.

11. Liberalism.

Conclusion, Part 1 on Capitalism

12. Democracy Against Capitalism: Conclusion Part 1.

13 Democracy Against CApitalism: Conclusion Part 2.

Democracy Against Capitalism: Liberalism

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In Chapter 7 of Democracy against Capitalism Ellen Meiksins Wood sets out an historical analysis of the politics of the transition from Feudalism to Capitalism, starting with England. In Wood’s telling, two of the major steps along the way were Magna Carta and the Glorious Revolution of 1688. Both events temporarily settled the relations between the nobility and centralizing state in the person of the monarch. Neither event had anything to do with the establishment of democracy in the sense of rule by the people. The settlements assume the continued servility of the masses, and continued domination by the aristocracy. The power of the nobility was based on their economic domination through non-economic means, military, juridical, and ideological, and on control over the power of the nascent state.

As feudalism morphed into capitalism, domination was split between two forces, the centralizing state and increasing economic power, mostly held by the aristocracy and by the rising merchant class. The latter were threatened by growing centralized power, and reacted to it by working to increase the power of the Parliament which they controlled. Capitalism helped make this possible because the economically dominant class was able to extract surplus from the productive sector through economic power, only somewhat aided by the power of the state.

Liberalism became the dominant ideology among the dominant economic class. This use of the term “liberal” has a specific meaning: it refers to a set of values including limited government, constitutionalism, individual rights and civil liberties. Kindle Loc. 4499. The pre-condition for this kind of liberalism is the existence of a centralized state, one that has to be limited by these ideological constructs. Kindle Loc. 4502.

The dominant classes were willing to extend civil protections from the central state to the multitudes. What they were not willing to do was to allow any intrusion on their rights of property. That led to a search for legal and constitutional protections of their property rights. Capitalism provided the economic framework for this project. Citizenship relates to the State, and a growing right to select representatives to govern. Citizenship is irrelevant to the economy, where the economically dominant class controls everything. Legal and ideological structures protect that division.

Wood looks at US history, and sees a somewhat similar process. In the US, a limited form of democracy existed in the States at the time the Constitution was written, and the Founding Fathers could not displace it. Still, the same solution emerged. The Constitution protects property interests. Theoretically, all citizens share in that protection of property, but the emphasis is on political freedoms, the liberal freedoms of individual rights and civil liberties, and limited government. The principle limit on government was to prevent it from imposing restrictions on the free use of property. The dominant class, first merchants, then industrialists, and then financiers, controls the economy.

The idea was that all citizens would be represented by their elected officials. Wood says that the representatives are removed from the people at large, both spatially in the sense that the central government was isolated; and in the sense that the representatives are few in number compared to the number of citizens.

In ‘representative democracy’ rule by the people remained the principal criterion of democracy, even if rule was filtered through representation tinged with oligarchy, and the peoplel was evacuated of its social content. Kindle Loc. 4436; ital. in orig.

The term “social content” means the natural social context in which people live, relations of home, work, church, community. This idea of representation is natural according to Alexander Hamilton in Federalist No. 35, quoted by Wood

The idea of actual representation of all classes of the people, by people of each class, is altogether visionary…. Mechanics and manufacturers will always be inclined, with few exceptions, to give their votes to merchants in preference to persons of their own professions or trades…. they are aware, that however great the confidence they may justly feel in their own good sense, their interests can be more effectually promoted by merchants than by themselves. They are sensible that their habits in life have not been such as to give them those acquired endowments without which, in a deliberative assembly, the greatest natural abilities are for the most part useless…. We must therefore consider merchants as the natural representatives of all these classes of the community. Kindle Loc. 4240.

These words could have come from Plato, substituting a different elite for merchants, or from any other elitist theorist. This obviously is not rule by the people, as in the original meaning of democracy. As I type this, we can see our elitists in action, busily confirming a known liar and a sexual creep to join four other conservative hacks on SCOTUS, where they will decide just how much majority rule we are allowed.

The political sphere is the home of limited government, the home of civil liberties, the home of individual rights. That sphere is separate from the economic sphere, which is put into the hands of the oligarchs, the rich, and their minions. The economic sphere is the area that provides us with the means to live, mostly by selling our labor. The idea is that the political sphere is not supposed to interfere with the economic sphere, insuring that every part of our productive lives are at the disposal of the rich, including our ability to provide our families and ourselves with food and shelter.

Wood sees liberalism as “democracy tinged with oligarchy”. As I explain in this 2013 post at Naked Capitalism, we live in an oligarchy inside a democracy. This and similar posts at FDL are based on Oligarchy in the United States? by Benjamin Page and Jeffrey Winters and on Winters’ book Oligarchy. They argue that Oligarchs share three interests:

1. Protecting and preserving wealth
2. Insuring the unrestricted use of wealth
3. Acquiring more wealth.

Oligarchs differ on what we call social issues (the carceral state, abortion, gay rights, guns and so on), which in Wood’s telling are the domain of the political sphere. Consequently some legislation on those issues is possible. Their views on economic issues are almost identical. A threat to one rich person is a threat to all. Therefore they unite on economic issues and generally prevail when legislation or regulation threatens any of them. Or when they really want a SCOTUS nominee to be confirmed.

Democracy Against Capitalism: Democracy

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The second half of Ellen Meiksins Wood’s book, Democracy Against Capitalism, is devoted to a discussion of the current state of democracy in the UK and the US. She begins with a discussion of ancient Athenian democracy, which she regards as a real democracy, and a good model for comparison. In Athens, there was a class of peasant farmers and artisans who were juridically free citizens. They owed no duties to tyrants or aristocrats. They possessed their own means of production, lands and tools, and worked as they saw fit with out any regard to the demands of any other class, or tyrant or government. There were slaves, to be sure.

But the free labourer enjoying the status of citizenship in a stratified society, specifically the peasant citizen, with the juridical/ political freedom this implied and the liberation from various forms of exploitation through direct coercion by landlords or states, was certainly a distinctive formation and one that signaled a unique relationship between appropriating and producing classes. Kindle Loc. 3586.

In other pre-capitalist societies, either the state or a group of aristocrats appropriated some or all of the production of the peasant class “… through various mechanisms of juridical and political dependence, by direct coercion – forced labour in the form of debt bondage, serfdom, tributary relations, taxation, corvée and so on.” Kindle Loc. 3700.

In classical Athens, all citizens, including the peasant farmers and artisans, had the right to participate in decision making on all issues. Of course, people generally deferred to experts on technical matters, such as warship design, but all were entitled to hear the presentations of the experts and to choose the one they thought best. In the same way, all participated in other political decisions. It goes without saying that this “all” didn’t include slaves and women. Even so, this is a remarkable advance for the peasant class.

This arrangement was the subject of debate among the Athenians; though it’s fair to say that pretty much everything was a subject of debate there. Wood offers a fascinating discussion of Plato’s dialog Protagoras as an example. Protagoras was perhaps the most famous of the Sophists, a group of teachers of wisdom and virtue. We only have fragments of his work directly (as opposed to the words Plato puts in his mouth), but I especially like this:

Man is the measure of all things; of things that are, that they are; of things that are not, that they are not. P. 239, The Pre-Socratics, ed. John Wainwright.

In the dialog, Socrates defines the issue as whether virtue can be taught. Roughly, Wood claims Plato argues through Socrates that virtue is philosophical form of knowledge available only to those with a privileged access to a higher truth. Obviously to Plato man is not the measure of all things; rather there is some other sphere of understanding and universal truth that eludes most people, but is available to a special few.

In the Dialog, Protagoras argues that virtue is taught from the beginning of life.

Education and admonition commence in the first years of childhood, and last to the very end of life. Mother and nurse and father and tutor are vying with one another about the improvement of the child as soon as ever he is able to understand what is being said to him: he cannot say or do anything without their setting forth to him that this is just and that is unjust; this is honourable, that is dishonourable; this is holy, that is unholy; do this and abstain from that. And if he obeys, well and good; if not, he is straightened by threats and blows, like a piece of bent or warped wood. At a later stage they send him to teachers, and enjoin them to see to his manners even more than to his reading and music; and the teachers do as they are desired. And when the boy has learned his letters and is beginning to understand what is written, as before he understood only what was spoken, they put into his hands the works of great poets, which he reads sitting on a bench at school; in these are contained many admonitions, and many tales, and praises, and encomia of ancient famous men, which he is required to learn by heart, in order that he may imitate or emulate them and desire to become like them.

That sounds like something Pierre Bourdieu might have written. We teach our young how to be virtuous in our own societies, using the social understandings we learned in the same way, and through our own experience of our culture, including our own study of the texts available to us. This argument leads to the conclusion that every citizen partakes in virtue, and that this civic virtue is the indispensable tool of democracy. Socrates takes the view that only some have access to the higher, universal virtue, and those ought to rule. Wood adds that the producers should be required to enrich and feed the chosen few.

Wainwright says that the Sophists primarily taught people how to win arguments. Those arguments might or might not be best for the community, or even virtuous or moral. Wainwright seems to favor Plato’s position. This argument is ongoing; for example, it’s a big part of Zen and the Art of Motorcycle Maintenance by Robert Pirsig.

Two thoughts.

1. Philosophy. Plato draws a distinction between appearance and reality, a dualism that survives today. Appearance is the aspect of reality that comes to the human mind mediated through our senses. Reality is something else, a deeper unchanging universal existence which only some precious few of us can grasp. One analogy is Plato’s cave, where we humans can perceive only the shadows that real things cast on the wall, not the things themselves. It’s as St. Paul says, 1 Corinthians 12.

For now we see only a reflection as in a mirror; then we shall see face to face. Now I know in part; then I shall know fully, even as I am fully known.

Reading this, it’s easy to see how St. Thomas Aquinas might have been influenced by Plato, if he had those texts, and at least by the Neo-Platonists, which he did have.

Protagoras’ view that man is the measure of all things rings true to me. I will resist the temptation to write about this in depth, but I more or less agree with the ideas Richard Rorty, the American pragmatist, discusses in his accessible collection of essays, Philosophy And Social Hope. It’s worth noting that Rorty really despises Marxism, at least dogmatic Marxism, for reasons that are baffling after reading Democracy Against Capitalism, and which are hard to square with his appreciation of E.P. Thompson’s The Making of the English Working Class, a book praised by Wood.

2. Democracy. I think Protagoras has the better argument on this point. Decisions about how society ought to operate should be made with the participation of as large a number of citizens, the people most affected, as possible. Wood agrees. She thinks that socialism comes from decisions made by a large majority of us or not at all. In our current system, we assume that it’s enough that we are represented in those decisions through our elected officials. But what does that even mean in our current version of democracy?

Democracy Against Capitalism: Class

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Chapter 3 of Ellen Meiksen Wood’s book, Democracy Against Capitalism, takes up the issue of class. She says that class can be defined in one of two ways: “either as a structural location or as a social relation.” Kindle Loc. 1504, ital. in original. The first way takes an index and divides it into parts. For example, we rank everyone by income, then call the lowest quintile the lower class, the next three quintiles, the middle class, the 81-99% the upper middle class, and the rest the upper class.

The second way is to define class in terms of relationships, the relations of the members to the means of production, relations among themselves, and relations with members of other classes. In this treatment, the working class is people who have no direct access to the means of production and only have their labor to sell. Marx wrote:

“In the process of production, human beings work not only upon nature, but also upon one another. They produce only by working together in a specified manner and reciprocally exchanging their activities. In order to produce, they enter into definite connections and relations to one another, and only within these social connections and relations does their influence upon nature operate – i.e., does production take place.

I saw a folk musical recently in Chicago called Haymarket, about the Haymarket Affair, a general strike that turned violent in Chicago in 1886. The play opened with one actor singing a union song, Solidarity Forever. She encouraged us to join in the chorus, which, of course, I did. It was a great way to demonstrate how organizers of that day worked to instill a sense of comradeship among workers in different industries, a sense that they had a lot in common, a sense that they formed a class in opposition to the capitalists, a/k/a the “greedy parasites”. This is the last element of class in Marxist thinking. The class can be seen objectively, which Marx called a class-in-itself, but when the members become aware of their status as class members and begin to struggle together for a common end, Marx called it a class-for-itself.

This last point is illustrated by E.P. Thompson’s book, The Making of the English Working Class, which Wood discusses at length. The basic class structure is in place long before the members begin to understand that they are a class. People similarly situated in the relations of production experience them in class ways. Kindle Loc. 1614. Shared experiences bring them together. Ultimately the members of the class become conscious of the conflicts of interest and aggravation that are making them miserable, and those become the grounds of struggle. The struggle eventually leads to confrontation. Marx argued that in the long run those confrontations lead to socialism as the only form that gives workers a voice.

Wood identifies the relations of production in capitalism as exploitation, domination and appropriation. Neoliberal capitalism has jacked up these three relations at the expense of all workers. For example, meat companies use government regulations to increase the exploitation of meat cutters by increasing line speeds. Payday lenders suck money out of military families and other low income people, protected by the totally not corrupt Republican Mick Mulvaney. For domination, look at the way Amazon warehouse workers are treated. As to expropriation, look at the latest research on the impact of concentration of businesses on wage rates. Or just check out this simple chart, discussed here. The blue line represents corporate profits in constant dollars; the red line is wages in constant dollars.

The concept of class has received “remarkably little elaboration, either by Marx himself or by later theorists…”, Kindle Loc 1519, but it’s possible to identify several. Capitalists own the means of production and control access to them. The working class owns no assets and has no access to the means of production other than through individual relations with capitalists. They own only their own labor, and rely on their ability to sell that labor to stay alive and reproduce. Slaves don’t own themselves or their labor. Professional people, small business people and artisans own a little property and use it to produce goods and services for sale. Many of them are dependent on the capitalists in the financial sector through loans and leases, which compromises their independence as a class.

In America, everyone is middle class. Barack Obama appointed Joe Biden to chair a multi-agency Middle Class Task Force. The Department of Commerce was the only agency to respond, as I discussed here. The Department offered the following definition of middle class:

Middle class families are defined by their aspirations more than their income. We assume that middle class families aspire to home ownership, a car, college education for their children, health and retirement security and occasional family vacations.

There’s something fabulously American about that definition, so focused on the individual and so utterly indifferent to the context in which people try to achieve their aspirations. Also, who doesn’t want that stuff? The vacuity of the definition makes it clear that we as a nation are not willing to confront the implications of class.

In our highly differentiated economy, it isn’t easy for people to understand that the unpleasantness or worse that they endure in their jobs is common to everyone. That makes the nastiness feel like something specific to the job, a bad manager, bad policies or other excuses. We don’t notice appropriation because the capitalist pumps money out of workers using the “market”, and producers think it’s normal for the capitalist to grab all the profits. Somehow US workers don’t recognize that they are being exploited. They think their long hours and wrecked evenings and weekends and lack of vacations and medical and personal leave and lousy pay and benefits are just fine.

Wood has a different idea. She thinks that capitalism has successfully separated democracy from the economy. Everyone agrees that the government should be controlled democratically. People are taught that the economy is and should be controlled by private interests, and that private control should be sanctioned and enforced by government. Employers exercise domination and control in ways that would not be acceptable if done by the state. Employers restrict exercise of political rights in ways that are forbidden by the Constitution to the government. Fear of losing our income silences most of us at least occasionally.

Wood argues that the economy should not be separated from democratic control. She doesn’t offer a specific mechanism; she thinks that people will eventually demand change, and that the new controls will spring from democratic control over the State. She quotes E. P. Thompson who asked:

By what social alchemy did inventions for saving labour become agents of immiseration? Kindle Loc. 1739.

We can’t begin to solve the problems capitalism creates until we all come to grips with this question. And we almost know the answer, even if we haven’t verbalized it yet. It springs from the relations of the capitalist mode of production: exploitation, domination, and appropriation.