Dan Little: Capitalism's bad incentives

Chris Dillow writes about Capitalism's bad incentives.

Now, I’m not saying that these bad incentives will bring down capitalism or that they are all eliminable: there is a great deal of ruin in a nation. They do, however, raise an important possibility — that there is abundant room for a leftist government to consider alternative governance structures that reduce agency problems and produce better incentives. As John McDonnell notes, such structures might (pdf) well include more cooperatives, as these give control to workers who have both skin in the game and local knowledge of particular working practices.

Unfortunately, the Capitalists will see the development of worker cooperatives as a threat to their power as these cooperatives are a contending centre of power in the political and economic system. And their existence undermines the Capitalists' contention that there is no alternative.

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Noam Chomsky: A World in Peril

Noam Chomsky and David Barsamian discuss A World in Peril.

Functioning democracy erodes as a natural effect of the concentration of economic power, which translates at once to political power by familiar means, but also for deeper and more principled reasons. The doctrinal pretense is that the transfer of decision-making from the public sector to the “market” contributes to individual freedom, but the reality is different. The transfer is from public institutions, in which voters have some say, insofar as democracy is functioning, to private tyrannies — the corporations that dominate the economy — in which voters have no say at all. In Europe, there is an even more direct method of undermining the threat of democracy: placing crucial decisions in the hands of the unelected troika — the International Monetary Fund, the European Central Bank, and the European Commission — which heeds the northern banks and the creditor community, not the voting population.

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Capitalism destroys Democracy.

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Dan Little: Community resilience

Dan Little writes about Community resilience.

So the question here is this: what features of community life can be developed and cultivated that can serve as "shock absorbers" working to damp down the slide towards antagonism? What social features can make a multi-group community more resilient in face of provocations towards separation and mistrust?

Without pretending to offer a full theory of inter-group community stability, there are a few measures that seem to be conducive to stability.

First, the existence of cross-group organizations and partnerships among organizations originating in the separate groups, seems to be a strongly stabilizing feature of a multi-group society. The presence of a group of leaders who are committed to enhancing trust and cooperation across group lines provides an important "fire break" when conflicts arise, because these leaders and organizations already have a basis of trust with each other, and a willingness to work together to reduce tensions and suspicions across groups.

Second, person-to-person relationships across groups (through neighborhoods, places of work, or family relations) provide a basis for resisting the slide towards suspicion and fear across groups. If Chandar and Ismael are friends at work, they are perhaps less likely to be swayed by Hindu nationalist rhetoric or Islamic separatist rhetoric, and less likely to join in a violent mob attacking the other's home and community. Neighborhood and workplace integration ought to be retardants to the spread of inter-group hostility.

Third, policing and law enforcement can be an important buffer against the escalation of ethnic or religious tensions. If a Muslim shop is burned and the police act swiftly to find and arrest the arsonist, there will be a greater level of trust in the Muslim community that their security interests are being protected by the system of law.

Intergroup violence is the extreme case. But the separation of communities into mutually fearful and mistrustful groups defined by religion, race, or ethnicity is inherently bad, and it has the prospect of facilitating intergroup violence in the future. So discovering practical mechanisms of resilience is an enormously important task in these times of division and antagonism presented by our national political leaders.

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Shouldn't we consider class solidarity instead? Little's analysis seems to be blind to class. He alludes to the ruling class formenting community antagonism, but is unable to elucidate a theory for such a policy.

The explicit generation of community unrest by the political class means that law enforcement is unlikely to intervene. In fact, the police are more likely to protect the agitators (such as Fascists) than their victims.

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Dan Little: Worker-owned enterprises as a social solution

Dan Little writes that Worker-owned enterprises as a social solution.

The central insight of Marx's diagnosis of capitalism is couched in terms of property and power. There is a logic to private ownership of the means of production that predictably leads to certain kinds of outcomes, dynamics that Marx outlined in Capital in fine detail: impersonalization of work relations, squeezing of wages and benefits, replacement of labor with machines, and — Marx's ultimate accusation — the creation of periodic crises. Marx anticipated crises of over-production and under-consumption; financial crises; and, if we layer in subsequent thinkers like Lenin, crises of war and imperialism.

The shorthand for this is alienation.

The logic is pretty clear. When an enterprise is owned by private individuals, their interest is in organizing the enterprise in such a way as to maximize private profits. This means choosing products that will find a large market at a favorable price, organizing the process efficiently, and reducing costs in inputs and labor. Further, the private owner has full authority to organize the labor process in ways that disempower workers. (Think Fordism versus the Volvo team-based production system.) This implies a downward pressure on wages and a preference for labor-saving technology, and it implies a more authoritarian workplace. So capitalist management implies stagnant wages, stagnant demand for labor, rising inequalities, and disagreeable conditions of work. 

When workers own the enterprise the incentives work differently. Workers have an interest in efficiency because their incomes are determined by the overall efficiency of the enterprise. Further, they have a wealth of practical and technical knowledge about production that promises to enhance effectiveness of the production process. Workers will deploy their resources and knowledge intelligently to bring products to the market. And they will organize the labor process in such a way that conforms to the ideal of humanly satisfying work.

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Who owns the means of production greatly affects how workers are treated.

Worker management has implications for automation in a different way as well. Private owners will select forms of automation based solely on their overall effect on private profits; whereas worker-owned firms will select a form of automation taking the value of a satisfying workplace into account. So we can expect that the pathway of technical change and automation would be different in worker-owned firms than in privately owned firms.

In short, the economic and institutional realities of worker-owned enterprises are not entirely clear. But the concept is promising enough, and there are enough successful real-world examples, to encourage progressive thinkers to reconsider this form of economic organization.

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Getting workers to voluntarially increase their productivity was a big problem user USSR Socialism. We need to understand this problem in greater detail.

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Chris Dillow: The Wykehamist fallacy

Chris Dillow examines The Wykehamist fallacy.

I suspect it’s partly because of a longstanding assumption among much of the Establishment, of which the BBC is part. This assumption is a form of the Wykehamist fallacy, the belief that members of that Establishment are jolly good chaps, usually because they went to the right schools and universities.

In truth, of course, the Wykehamist fallacy is an ancient one. Adam Smith was describing something like it when he wrote:

We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous. We see frequently the vices and follies of the powerful much less despised than the poverty and weakness of the innocent. (Theory of Moral Sentiments, I.III.29)

I think Dillow misses the class basis for the Wykehamist Fallacy — it is the objective of the ideological superstructure to convince us everything is fine with Capitalism. Theire relentless message is that Capitalism is Good, and Socialism is Bad.

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Steve O'Brien: Russian Revolution's legacy worth celebrating

Steve O’Brien writes that Russian Revolution’s legacy worth celebrating.

In the contemporary context, however, it is capitalism, more than socialism, which is falling short. Voters are feeling disenfranchised by a political system which sees the 1% get richer, as rents, house prices, student debts and utility prices soar.

The powerful minority that dominates capitalism says it is not the system which is to blame for low wages and longer working hours, but rather refugees, single mothers, climate activists, trade unionists and the unemployed.

Their neoliberal answer to social and economic problems is to offer more of the same: more privatisation, tollways, coal mines and budgetary restraint.

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Rather than excuse the failure of Socialism in the USSR, we should examine the trajectory of Socialism there and seek out lessons for Australia.

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Paul Le Blanc: The Russian Revolutions of 1917

Paul Le Blanc writes about The Russian Revolutions of 1917.

The collapse of the tsarist regime thus left in its wake two centers of political authority: (1) the traditional politicians of the Provisional Government, who had little control over the people, and (2) the democratically elected soviets, which exercised more political power owing to support from the great majority of workers and soldiers. This system of dual power proved to be unstable. The instability grew as the moderate politicians proved increasingly unable to meet the rising expectations of the laboring masses.

With armed workers and revolutionary troops controlling the streets of the capital, political realities now tilted in a much more revolutionary direction. The Russian workers and peasants saw clearly that the landowners and capitalists and their leading political representatives had actively supported Kornilov. Kerensky was badly compromised because of his earlier overtures to Kornilov. The moderate SR and Menshevik leaders were discredited for supporting Kerensky. The Bolsheviks—who had built an effective political organization and put forward the popular demands of “Peace, Bread, Land” and “All Power to the Soviets”—had greater mass support than ever before.

Trotsky’s failure at the peace talks led to another crisis that undermined soviet democracy. After a fierce debate, Lenin persuaded a Communist Party majority in the government to accept the harsh peace terms. The Left SRs strongly opposed any agreement to the German demands, which included Russia’s giving up the Baltic states, Finland, Poland, and Ukraine. The Treaty of Brest-Litovsk was signed on March 3, 1918, and the Left SRs angrily walked out of the government and began organizing against both the peace settlement and the Communists. The Left SRs had a far better understanding of realities among the peasants than did the Communists. Their departure from the government opened the way for serious (sometimes even criminal) misjudgments by the government in dealing with the rural population. In particular, efforts to secure grain from the countryside in order to relieve bread shortages in the cities resulted in violent conflicts that undermined support for the Communist regime.

In this same period the Communists carried out a shift in economic policy that was to cause lasting problems. Threats of economic sabotage by capitalist factory owners who were hostile to the regime led the government to take over more and more of the economy—much more rapidly than originally intended. Ordinary workers were put in charge of factories, and their inexperience as managers resulted in economic difficulties. The government’s expansion into the economy also generated the growth of bureaucracy. A bureaucracy involves a hierarchy of administrators, managers, clerks, and others who are supposed to coordinate and control complex political, social, or economic activities. Often, a bureaucracy becomes an extremely impersonal and relatively inefficient structure, notorious for its arbitrary power and unnecessarily complicated procedures. Some historians believe that as the Soviet bureaucracy grew larger and more cumbersome, what was left of political democracy and economic efficiency degenerated. This bureaucratic degeneration added to the severe strains of the civil war and the foreign economic blockade. These added strains, in turn, resulted in a devastating breakdown of much of Russia’s industry.

As the USSR was experiencing significant economic development and becoming a major world power, the bureaucratic and authoritarian nature of the Stalin regime gave Communism the profoundly undemocratic connotation that it has for many people today. For many, socialism came to mean not economic democracy but merely state ownership and control of the economy. Even the word soviet became associated simply with the USSR’s dictatorial regime. Stalin’s successors in subsequent Communist governments of that country later denounced his crimes, but they were never successful in overcoming the dictatorial legacy. That legacy ultimately undermined the country’s future development, contributing in significant ways to the collapse of the USSR in 1991.

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Workers should learn from this history.

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