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Market Socialism, realistic alternative to capitalism

Sant Juli de Lria, Andorra

Jordi Corominas

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There are many movements and groups throughout the world that are critical of the existing order and are involved in the fight against poverty. There are countless people who, without participating in groups or alternative actions, recognize that the current economic system leads to the abyss. However, there is something that is paralyzing or that simply leads to fatalistic, if not cynical, positions: the lack of an alternative to the economic structure. In the socialisms of the 20th century, it was proven that centralized control of the marketeven if the directors and workers had been angelswould produce greater inefficiencies than a capitalist economy run by demons. Thus, despite more wars, displacements of populations, environmental catastrophes and the worsening of misery because of capitalism, it could easily absorb all moral criticisms and protests, because it could always present itself as the least bad of the economic models known until now. But how true is it that there are no alternatives that improve upon capitalism? And, without going so far, isnt capitalism reformable such that it can bring humanity out of the shadow of misery without even looking for systemic alternatives? An economic system is capitalist (regardless of whether it is combined with a democratic political system or a dictatorship) if it maintains three essential characteristics: the means of production are private, the market is regulated by supply and demand, and there is a salaried workforce. It ceases to be so when one of these three characteristics is altered. In this way, controlling by law certain basic commodities, nationalizing some companies, providing social security and free education and health care are important reforms to the system, but they do not constitute a change of economic regime. However, state control of the market and ownership of the means of production introduces us to the communist model known in the 20th century. Today, of the nearly 7 billion people who live under the capitalist system, the majority are poor. 1 billion people live in extreme poverty, on less than $1 per day; 1.5 billion live in moderate poverty, on less
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than $2 per day; and 2 billion live in relative poverty. (In Europe the poverty line is fixed at 752 euros per month and 80 million are below that in the European Community). Even more catastrophic scenarios are drawn: it is estimated that, in the years to come, 200 million people may be permanently displaced by floods, rising sea levels, and wars, now motivated by the struggle for basic resources. If it is impossible to perpetually grow, a permanent cycle of growth and destruction based on periodic wars is possible. Even if we were to suppose the death of three fourths of the worlds population, we would still be left with 1.6 billion people, the same population that the planet had in 1900. Fortunately, within capitalism itself, opposing scenarios are being drawn up. Although many economists argue that there is a essential relationship between capitalism, war, and increased poverty, many social democrats argue that a social-democratic world could humanize capitalism by imposing measures such as a basic income for all citizens of the world. However, even granting that a capitalism with a human face is possible and that wars are not intrinsic to the system, something that has no solution in the best of all capitalisms is that the economy as a whole has to grow in order to remain healthy. Without a rate of at least 3% annual growth, a global social-democratic system would also lead us to catastrophic scenarios (The global GDP is still growing at 3% even after the crisis of 2008). But an annual growth of 3% is equivalent to doubling consumption every 24 years , and, at this pace, we will consume 16 times more in 2100 than in 2000. Surprisingly, many economists seem to believe in this Utopia: the possibility of infinite growth when faced with limited resources. If it is impossible to perpetuate growth, do we necessarily need to accept a series of recessions, wars and destruction to make capitalism healthy or to turn back to a communist economy? Market socialism seeks to be a third way between the two systems, one that does not depend on growth for its stability, and that continues favoring efficiency and the innovations of entrepreneurs. In this economic model, private own-

http://en.wikipedia.org/wiki/Mondragon_Corporation

Translation by Alice Mendez

ership of the means of production is replaced by a democratic ownership while the free market and wage labor are retained. Directors of companies are not accountable to shareholders but to workers, who choose the direction and approve basic guidelines. There are sufficient examples to show that productive enterprises can be democratically directed without losing efficiency, as long as a certain amount of autonomy is given to management, and workers understand and participate in cooperative culture. To maintain the initial capital, every company is obligated to maintain a sinking fund. The benefits obtained are distributed according to the criteria established by the workers, who can opt to pay more for a manager or for certain jobs. In case the company does not generate the minimum income necessary, the workers will have to close it in order to look for work in another place, and the means of production will return to society. The market continues to operate in the allocation of consumer goods and capital goods according to the laws of supply and demand. Investment funds are generated not by offering an interest payment to savers (Money market) but by taxing capital goods. These funds are socially controlled and open up other alternatives. At one extreme, parliaments plan investment. On the other, they are totally free. The banks receive funds and they lend to companies that want to expand production or improve their technology, or to individuals or groups who want to start a new business. In market socialism, companies do not need to keep growing compulsively, something that would seem to be impossible even in the best capitalism. A capitalist firm seeks to maximize the benefit to its investors, while a democratic enterprise seeks to maximize the benefit for each worker. Thus, the shareholders of a capitalist enterprise can double their benefit by doubling the size of the company, whereas if a democratic firm doubles in size, it doubles the number of workers but the benefit to each worker does not change that much. Another comparative advantage over the best possible capitalisms is that when an innovation leads to greater productivity and profits, workers can choose time off instead of increased consumption. In 20th century socialism, the transition necessarily came through seizing the political power of the

state; in market socialism, change does not need to alter the current situation so profoundly: 1. Abolish the obligations of companies to pay interest or dividends for shares; 2. State that the only legal authority of the company are its workers; 3. Introduce on companies a capital tax that will go towards a social investment fund; and 4. Nationalize the banks, which will manage the funds. The day after this, people would go to their workplaces and keep on with their normal lives. The only drastic change would be for shareholders. To avoid conflicts with the previous owners of the means of production, they could be granted compensation in the form of a generous honorarium which they could continue to receive for one or two generations. Interestingly, there is already a broad-based empirical showing that this model is efficient because many companies are governed democratically. Currently, the largest of them, a leader in cooperativism, is the Mondragon Corporation (Basque Country, Spain). With 83,000 employees and 9,000 students, it has a presence in 20 countries and in multiple sectors of the economy. Fortune Magazine mentioned it in 2003 as one of the best companies to work for in Europe. This specific example, competitive even under capitalism, shows something very important: that, as was shown in the transition from feudalism to capitalismchanges may begin to happen long before the political power of the state changes. Everything that in a capitalist context leads to greater democratization in all areas and greater participation by workers in productive fields is certainly a step towards a different society. Market socialism goes hand in hand with the struggles for the democratization and economic transparency of all structures, starting with universities, NGOs, churches, schools, groups, and parties who want to contribute to a different society. In this, vertical and dictatorial organizationswhether a UN agency like the Security Council, or a small neighborhood associationlose their meaning and authority.
*There is expansive literature on this theme. One of the most interesting proposals is that of David Schweickart, After Capitalism, Rowman & Littlefield Publishers, October 2002. See his most recent texts at http://www.luc.edu/faculty/dschwei/ articles.htm. Incorporating substantial philosophy, see A. Gonzlez, La Transformacin Posible, Socialismo en el Siglo q XXI?, Bubok 2010. 21 2