Last month, when I looked across the vast gray wasteland of the calendar page ahead and noted that there were five Wednesdays in November, I asked readers—in keeping with a newly minted but entertaining tradition here on Ecosophia—to suggest a theme for the fifth Wednesday post. This blog being the eccentric phenomenon that it is, it probably shouldn’t have surprised me that the result was a neck-and-neck contest between a post on nature spirits and a post on alternatives to capitalism and socialism, with a focus on democratic syndicalism. Nature spirits won by a nose, but there was enough interest in the other option that I decided to go ahead and write a post on that as well.
Nature spirits and democratic syndicalism may not seem to have much in common, but I’ve discovered one unexpected similarity: it’s very difficult to discuss either one in a single post. To make any kind of sense out of the ancient belief that the forces of nature are best understood and most truly experienced as persons rather than things, it turned out to be necessary to delve into the entire tangled mess our culture has made about the concept of personhood, and what does and doesn’t count as a person. Only when that was cleared away could we go on and talk about what it means to experience nature as composed of persons rather than things.
In the same way, if we’re going to make any kind of sense of the alternatives to capitalism and socialism, it’s going to be necessary to talk for a while about capitalism, socialism, and the third and usually unmentionable system of modern industrial economics—yes, that would be fascism. In the process, we need to pay attention to the thing that conventional economics systematically ignores—the mutual entanglement of political power and economic wealth—and that requires us to revive a science that has been dead and buried for well over a century now.
If you take an introductory course on economics, you can pretty much count on being told that the modern science of economics was launched by Adam Smith. Like so much conventional wisdom about history these days, this is false, and it’s false for at least two different reasons.
First of all, economics isn’t a science. What sets apart a science from other kinds of human knowledge is that the assertions of a science are tested against what actually happens. When a scientist makes a claim, at least in theory, other scientists run the same experiment or observe the same phenomenon and see if they get the same results. If they don’t, the claim made by the first scientist—again, at least in theory—goes into the wastebasket alongside such discarded notions as phlogiston and the luminiferous ether. Nowadays, this doesn’t always happen, and that’s one of the core reasons that the sciences these days are facing a catastrophic crisis of legitimacy, but that’s an issue for another post; when a science does what it’s supposed to do, every claim is tested to see if it can be replicated. That’s what makes it a science.
Economists don’t do this. They don’t even pretend to do it. Mainstream economists like to make claims about what will happen when their preferred policies are put into place, mind you, but the mere fact that those claims simply aren’t true never gets considered when repeating them. Consider the way neoliberal economists to this day rehash David Ricardo’s claim that free trade will make poor countries rich. They’re wrong; history shows that when poor nations embrace free trade, they become even poorer, while poor nations that reject free trade schemes generally prosper. Yet the total disconfirmation of free trade theory in practice has yet to register on the economic mainstream. As far as economists are concerned, Ricardo said it, they believe it, and that settles it.
So economics isn’t a science. It also wasn’t founded by Adam Smith. What Adam Smith founded, rather, was political economy. You won’t hear much about that field of study these days, and that’s not an accident. Political economy, as the name indicates, explores the relations between wealth and power in a society. For reasons that I suspect my readers will have no trouble understanding, this is something that a great many wealthy and powerful people in today’s industrial nations don’t want to discuss—and that, my children, is why we don’t have courses on political economy in universities today. We have courses on political science, which claim to study power without taking wealth into account, and courses on economics, which claim to study wealth without taking power into account, and both of these highly praised, well-funded fields of study by and large duly churn out vast amounts of poppycock instead of offering useful insights into the societies in which we live.
We’re going to talk about political economy in this week’s post. We’re going to do that because it’s not really possible to understand why the world’s industrial nations are running themselves into the ground without understanding the self-destruct button hardwired into capitalism, and it’s impossible to understand that latter bug—or is it a feature?—without talking about the ways that wealth and power form feedback loops in an industrial society.
The most important thing to understand, if you’re trying to make sense of political economy, is who owns the means of production. Means of production? That’s a convenient bit of shorthand. Every human society produces goods and services; the means of production are the sum total of the arrangements made to do this necessary task. Now of course a category this diverse is going to include things owned by an equally dizzying array of people, but in most societies, ownership of the most important means of production tends to follow specific patterns.
Examples? Consider a feudal society—early medieval England, let’s say. It’s an agrarian society in which most people are employed in farming, and the means of production that matter most can be summed up in one word: land. Who owns the land? That’s a simple matter. The king owns all the land; he grants the right to use it to his immediate vassals, the great dukes and earls of the kingdom, in exchange for their loyalty and obedience; they pass on the same right to barons, the lesser fish of the feudal system, on the same terms; the barons then do exactly the same thing, and we proceed straight down the feudal pyramid to Higg son of Snell in his peasant hovel. Higg has his hovel and the farmland that goes with it because he’s a vassal of Sir Hubert de Ware, who is a vassal of Baron Fulk of Lewes, who is a vassal of Duke Geoffrey of Sussex, who is a vassal of the king. Understand that pattern of ownership of the means of production—that pattern of political economy—and you understand early medieval English society.
Okay, let’s consider another example: early twentieth-century America. It’s an industrial society. and factories and offices are the means of production that matter most. Who owns the factories and the offices? That’s also a simple matter. The factories and offices are owned by corporations. Who owns the corporations? Their investors. How do you get to be an investor? By having enough capital to purchase stocks and other investment vehicles. How do the investors exercise their ownership? By electing boards of directors in elections in which each share of stock has one vote; the boards of directors then hire and fire the people who run the factories and offices. (Remember, this is early twentieth-century capitalism; things are different now.) Understand that pattern of political economy, and you understand early twentieth-century America.
Notice, before we go on, that there are two crucial differences between the political economies of feudal England and industrial America. The first has to do with the relationship between power and wealth. In feudal England, that’s totally explicit: the king is the head of state and also the landowner of last resort; the dukes and barons are political officer as well as economic magnates. In industrial America, it’s not explicit: in theory—mind you, only in theory—the government is entirely separate from the economic sphere. In practice the wealthy buy and sell political offices and voting blocs the way they buy stocks and bonds, and since there’s no explicit relationship between power and wealth, there’s nothing to keep them from doing whatever they want.
The second difference has to do with the distribution of wealth. In both societies, wealth is very unfairly distributed—the rich are very rich and the poor are very poor—but the feudal system has a counterbalance to the tendency of wealth to flow uphill. If you, dear reader, were a duke or a duchess in early medieval England, and you had the brains the gods gave geese, you would know that your influence, your security, and your survival depended on having plenty of vassals who would come running with drawn swords any time you needed them. How do you get vassals? By granting them landholdings—that is, transferring wealth down the ladder.
But your vassals are in the same situation you are. They need vassals of their own, and their vassals need vassals, all the way down to Higg son of Snell, who will not only come running with a billhook in his hands when Sir Hubert needs him in battle, but puts in the daily labor that puts bread on everyone’s tables. Thus feudal societies constantly move wealth down the pyramid. As a direct result, they tend to be extremely stable—so much so that when complex societies collapse, a feudal system is almost inevitably what takes shape amid the ruins.
Capitalist societies don’t do this. Quite the contrary, in a capitalist society like early twentieth century America, all the incentives keep wealth flowing up the social ladder, and nothing brings it back down. The investors who own stock in corporations have an understandable interest in maximizing the return on their investment, so they reliably vote in boards of directors who will hire management who will force down wages as far as possible. The investors who own stock in corporations also have an understandable interest in keeping as much of their wealth as possible out of the clutches of the tax man, so they reliably pressure and bribe government to spend as little as possible for the benefit of anybody outside the investor class.
As a result, capitalist societies are anything but stable; they suffer from savage cycles of boom and bust. The process at work here is quite easy to understand, and in fact it was very widely understood three quarters of a century ago; regaining that understanding is a crucial step toward making sense of the mess we’re in today.
Here’s how it works. Since working class wages get driven down, and government expenditures aren’t allowed to rise to take up the slack, people in the working classes can’t afford to consume the value of the goods and services they produce. Sales accordingly falter, and so do profits in productive industries. Since the investor class is interested solely in maximizing the return on its investment, in turn, investment money flows out of productive industries and into financial instruments of various kinds, where it drives speculative bubbles. As the bubbles inflate, they suck even more money out of the productive side of the economy. When the bubbles pop, in turn, so does the economy, and down we go into a depression.
That’s what happened all across the industrial world in the nineteenth and early twentieth centuries, over and over again, until the Great Depression hit and the investor class realized that something had to give. What convinced them of that? The rise to power of two rival economic systems that rejected the basic presuppositions of capitalism, and—ahem—worked.
The first of these systems was socialism. Let’s stop right here for a moment and explain the meaning of the word, shall we? Plenty of people, especially but not only in the United States, have been using that moniker “socialism” to mean any number of randomly chosen things, but the word does actually mean something specific. Socialism is the system of political economy in which the means of production are owned by the national government. That’s what it is, and that’s all it is. (Most of the things that currently get labeled “socialist” in the English-speaking world are actually social democracy, which is an entirely different system that we’ll discuss in a moment.) If it doesn’t have to do with government ownership of the means of production, it’s not socialism, full stop, end of sentence.
Socialism has its problems. In its most popular form, the version that more or less follows the recipe laid down by Karl Marx, it so consistently produces bloodthirsty dictatorships that a good case can be made for chucking it into the rubbish heap of failed ideologies. The fact remains that as an economic system, it works about as well as capitalism—that is to say, not well, but well enough to stay in power—and it does a much better job of distributing wealth to the working classes than capitalism does, which is why capitalists hate it so much. On the other hand, given a choice, the working classes favor it, for the same reasons capitalists hate it: if you’ve got a choice between two dysfunctional systems, why not choose the one that benefits you most?
Then there was the other rival system, which has been so obscured by shrill rhetoric over the last three quarters of a century or so that we’re going to have to approach it by a roundabout route. Suppose, then, that some charismatic figure in today’s American scene—somebody toward the center of our overheated political spectrum—were to propose a new system of political economy to replace the mess we’ve got now. We’re going to keep capitalism, she says, but it’s going to have its excesses curbed and its abuses prevented, not by the government, but by an organized movement of citizens under my leadership. Each year we’re going to sit management and labor down at the bargaining table, everybody in a given industry all at once, and make them bargain in good faith, with the citizen movement watching both sides to make sure a fair settlement is reached; there will be no more strikes, no more lockouts, no more labor troubles, just a new contract every year, and the citizen movement will enforce that by whatever means happen to be necessary. What’s more, she tells adoring crowds, the citizen movement will take on the same role in the political sphere, and be ready to yank the chains of officials when they get out of line. Of course the citizen movement will have to have special powers to do this, she says, and here’s the enabling act to give it those powers, just as soon as I become Chancellor…
That is to say, we’re talking about fascist economics. Yes, I’m aware that this isn’t the sort of thing that comes to most Americans’ minds when you mention the word “fascism,” but that just shows how thoroughly ignorant most Americans are about history. Fascism was never about the unrestricted rule of the capitalist investment class—that’s a falsehood originally manufactured by Stalin’s flacks back in the days of the Third International, and repeated by the misinformed ever since. Fascism attracted the masses in the 1920s and 1930s because it offered an alternative to unrestrained capitalism with its lethal boom-and-bust cycles. Did it work? Not very well, but then neither did unrestrained capitalism, and here again most people forced to choose between dysfunctional systems will choose the one that benefits them personally.
It was in response to the popularity of the socialist and fascist systems that social democracy came into being. (This, remember, is the thing that Republicans these days call “socialism.”) Social democracy was an attempt to take the best parts of fascist economics and combine them with constitutional government and the rule of law. In place of the “citizen movement” of my sketch above—that’s spelled “The Party” in its historical examples—social democracy puts the elected government of a constitutional representative democracy. In a social democracy, capitalism still exists, but at least in theory, it has to put up with legal checks that keep it from running too far off the rails: laws against monopolies, laws against insider trading, laws forcing banks to have deposit insurance, and so on.
It’s not a bad system, all things considered—which is to say it’s dysfunctional, but slightly less so than any of the three other alternatives we’ve discussed. Its great weakness was that it came into being because the investor class realized that they would end up dangling from lampposts if they tried to keep unrestrained capitalism going much longer, and it could only survive so long as the investor class stayed scared. Once the Great Depression and the age of rising fascist states faded out of historical memory, though, a new generation of capitalists convinced themselves that all this social-democracy stuff was a useless hindrance to their God-given right to engage in a kleptomaniacal orgy of profiteering at public expense.
That was when the Republican Party in the US, the Conservative Party in Britain, and their equivalents elsewhere embraced the view that the sole business of government was to make rich people richer while kicking the poor in the face, and when the Democratic Party in the US, New Labor in Britain, and their equivalents elsewhere embraced the supposedly opposite view that the sole business of government was to make rich people richer while mouthing vacuous feel-good verbiage at those of the poor who were sufficiently politically organized to be annoying. The results are predictable: in Britain, a resurgence of old-fashioned socialism under the leadership of Jeremy Corbyn, who will probably become Britain’s next prime minister if the clown car that passes for a Conservative government keeps bungling things as badly as they’ve done so far; in America, a crisis of legitimacy that’s already catapulted a populist demagogue into the White House and may well replace him with something much worse in the years ahead.
There are alternatives. Next week, in place of the usual ask-me-anything open post, we’ll talk about some of them. The following week? 2018 will have arrived, and it’ll be time for the annual round of predictions about what the new year will hold. Stay tuned!
As just mentioned, there will be no ask-me-anything post next week. Instead, I’m going to be trying out a version of the same thing in a different place. My Dreamwidth account at ecosophia.dreamwidth.org is active again — apologies for the long dry spell — and next Monday I’m going to post an ask-me-anything post on occultism. Call it Magic Monday; a lot of my readers seem to have questions about the theory and practice of occultism, and I’ll be fielding those and answering them there. See you then!