World: Capitalism is the problem
By Richard D. Wolff
January 7, 2017
Over the last century, capitalism has repeatedly revealed its worst tendencies: instability and inequality. Instances of instability include the Great Depression (1929-1941) and the Great Recession since 2008, plus eleven "downturns" in the US between those two global collapses. Each time, millions lost jobs, misery soared, poverty worsened and massive resources were wasted. Leaders promised that their "reforms" would prevent such instability from recurring. Those promises were not kept. Reforms did not work or did not endure. The system was, and remains, the problem.
Inequality likewise proved to be an inherent trend of capitalism. Only occasionally and temporarily did opposition from its victims stop or reverse it. Income and wealth inequalities have worsened in almost every capitalist country since at least the 1970s. Today we have returned to the huge 19th-century-sized gaps between the richest 1 percent and everyone else. Rescuing the "disappearing middle class" has become every aspiring politician's slogan. Extreme inequality infects all of society as corporations and the rich, to protect their positions, buy the politicians, mass media and other cultural forms that are for sale.
Recent Crises in the History of Capitalism
Capitalism in Western Europe, North America and Japan -- its original centers -- has boosted profits in four basic ways since the 1970s. First, it computerized and robotized, not to lessen everyone's work time, but instead to raise profits by reducing payrolls. Second, it exploited low-wage immigrant labor to offset wage increases won by years of labor struggles. Third, it moved production to lower-wage countries such as China, India, Brazil and others. Fourth, it divided and weakened the labor unions, political party groups and other organizations that pursued labor's interests. As a result, inside nearly every country of the global capitalist system, the rich-poor divide deepened.
The Great Depression provoked economic "reforms," such as FDR's New Deal. These included regulations restricting risky bank and other market practices. Reforming governments also established public pensions, unemployment insurance, public employment systems, minimum wages, monetary and fiscal policies, and so on. Advocates believed that such reforms would end the 1930s depression and prevent future depressions. They dismissed critics who diagnosed depressions as systemic and prescribed system change (or "revolution") as the necessary solution. "Reform versus revolution" was then a hot debate.
In the US, the reformers defeated the revolutionaries as preparation for war -- and then war itself -- finally ended the Great Depression. As capitalism rebounded after 1945, capitalists increasingly evaded the Depression-era reforms, using their growing wealth to buy the political influence needed to gut many reforms. Later, Reagan led the frontal assault, repackaged as "globalization" and "neoliberalism" to undo the New Deal. When that rollback of reforms culminated in the 2008 crash, it exposed capitalism's instability and inequality yet again.
The continuing post-2008 economic crisis has reproduced both the kinds of suffering that happened after 1929 and the reform-versus-revolution debates. The difference this time is that we know what happened last time. While the reformers then defeated the revolutionaries, their reforms failed to prevent the continuation of capitalism's instability and inequality, and their harmful social effects. Reformism today advocates the same (or a slightly varied) set of reforms as last time. It thus represents a refusal to learn from our history. The revolutionary alternative now makes more sense. "Revolutionary," however, need not evoke romantic notions of storming barricades: Today, revolutionary refers to the recognition that system change, not another reform, is our primary task.
What System Change Requires
What differentiates system change from reforms? Reforms refer to government interventions that still leave employers in the exclusive position to make the basic enterprise decisions: what, how and where to produce and what to do with profits. Reforms include minimum wage laws, redistributive tax structures, and enterprises owned and operated by the government. They range from the mildly Keynesian (the New Deal) to the democratic socialist (what we see in Scandinavian countries) to the state socialist (the model of the USSR and People's Republic of China). All such reforms retain the core relationship inside enterprises as that of employer-employee, with private or public directors controlling the mass of workers and making the basic enterprise decisions.
In contrast, system change means reorganizing the core human relationship inside the factories, offices and stores of an economy. That relationship connects all who participate in production and distribution of goods and services. It shapes (1) who produces what, how and where; (2) how much surplus or profits are available; and (3) the disposition of the surplus or profits.
Truly moving beyond capitalism means breaking from the employer-employee core relationship. It means no longer assigning a relatively tiny number of people inside each enterprise to the employer position of exclusively making the sorts of decisions outlined above. In private corporations the employers are the boards of directors selected by the major shareholders. In state or public enterprises of the traditional socialist economies, the employers are state officials. Instead of either kind of employer-employee relationship, system change installs a different core relationship inside enterprises. A different group of people -- all workers in the factory, office or store -- democratically makes those same decisions. The rule is "one worker, one vote," and in general, the majority decides. The difference between employer and employee dissolves.
Such system change beyond capitalism means something quite different from shifting to public directors from private directors, which is a reform. System change entails the democratization of the workplace. The logic governing the economic system, then, would no longer be capital-centric (making decisions (1) through (3) in such a particular way that the capitalist employer-employee relationship in production is reproduced). The particular connecting relationship at the core of capitalism will have been superseded: rather like what happened earlier to the slave-centric core relationship (master-slave) and the feudal-centric core relationship (lord-serf). Instead, the post-capitalist core relationship will be democratically worker-centric, with the central type of workplace being the worker cooperative.
Among the goals driving an economy based on democratic worker coops, job security, quality of workers' lives and reproduction of the worker coop core relationship in production will weigh more heavily than enterprise profits. Because different people will be making the key enterprise decisions and because those people will be driven by different goals, the post-capitalist society will develop very differently from the capitalist. Democratic worker coops will likely (1) not relocate themselves overseas, (2) distribute incomes far less unequally than capitalist enterprise, (3) not install ecologically damaging technologies near where their families and neighbors reside, and so on.
Responding to reductions in demands for their outputs, worker coops will more likely stress sharing any reduced work hours among all workers rather than forcing a few into unemployment. The needless social irrationality of capitalist downturns -- when unemployed workers coexist with unutilized means of production to leave social needs unmet -- will be much more apparent and thus widely unacceptable.
In an economy built on worker coops, children, retired people, people living with disabilities or illness and others outside the labor force would be sustained from the worker coops' "surplus." The latter comprises what the coop labor force produces above and beyond what it consumes and requires to replace used-up means of production. Adults in and out of the coop labor force would together and democratically determine the sizes and recipients of all the distributions of the surplus. They would decide how much of the surplus would go to expanding production, to provisions for future contingencies, to providing for children, for those in other social institutions, and so on. In place of capitalists (a social minority) distributing the surpluses produced by and appropriated from their employees, a genuine democracy would govern that distribution, much as it governs other worker coop decisions.
Worker coops mark a qualitative and quantitative advance beyond capitalism. They represent a system change adequate to key problems capitalism has shown it cannot overcome, even after centuries of failed efforts to do so.
Richard D. Wolff
Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, where he taught economics from 1973 to 2008. He is currently a visiting professor in the Graduate Program in International Affairs of the New School University, New York City. He also teaches classes regularly at the Brecht Forum in Manhattan. Earlier he taught economics at Yale University (1967-1969) and at the City College of the City University of New York (1969-1973). In 1994, he was a visiting professor of economics at the University of Paris (France), I (Sorbonne). His work is available at rdwolff.com and at democracyatwork.info.