IN A matter of months, the global financial crisis has dramatically reshaped the economic and political landscape around the world. The high priests of global capitalism have scrapped decades of neoliberal orthodoxy, replacing their denunciations of government spending as harmful interference in the free market with calls for trillions in bailout bills and stimulus packages. “The goal is to get the engine of capitalism going as productively as possible,” Nancy Koehn, a historian at the Harvard Business School, told the New York Times. “Ideology is a luxury good in times of crisis.”1
After decades of promoting the gospel of free markets globally and deregulation at home, the push for deregulation has been replaced—for all but the most ideologically blinkered—by the gospel of state intervention. In mid-February, former Federal Reserve chairman Alan Greenspan, a zealot of free markets, deregulation, and privatization over the past four decades, acknowledged that a nationalization of at least part of the banking sector might be necessary to address the insolvency of major American banks.2 This followed Greenspan’s admission in October that the crisis, in particular the catastrophic errors in judgment by U.S. banks that precipitated the crisis, revealed a “mistake” in free-market economic models. “[There is] a flaw in the model that I perceived is the critical functioning structure that defines how the world works,” said Greenspan.3 The massive injections of capital into the banking system as well as proposals for hundreds of billions of dollars in economic stimulus spending have returned Keynesianism to a place of prestige in the debate about how to manage capitalism.
To illustrate the extent of the political transformation, it’s worth recalling that the response of many Republicans to the Bush administration’s rescue plan was to proclaim the imminent demise of American capitalism. “This massive bail-out is not the solution, it is financial socialism, it is un-American,” said Sen. Jim Bunning (R-KY) of the initial $700 billion plan to reassure holders of mortgage-backed debt and to get the credit markets working again. On another occasion, Bunning denounced then-Treasury Secretary Henry Paulson for acting like China’s finance minister. “No company fails in communist China, because they’re all partly owned by the government,” he said. “I sincerely believe that Henry Paulson and Ben Bernanke should resign. They have taken the free market out of the free market.”4
Perhaps even more compelling is the overnight conversion of Representative Thaddeus McCotter (R-MI) from free-marketeer to bailout booster. On September 29, McCotter compared the $700 billion bailout to the “horrors” of the Russian Revolution. “During the 1917 Bolshevik revolution, the slogan was ‘Peace, land, and bread,’” said McCotter. “Today you are being asked to choose between bread and freedom. I suggest that the people on Main Street have said they prefer their freedom, and I am with them.”5 But just a few weeks later on November 20, McCotter, whose district borders Detroit, showed up at a Capitol Hill hearing with auto executives to speak in favor of the bailout for Detroit’s Big Three auto manufacturers.6 It looks as if McCotter decided he’d prefer bread to freedom after all.
The return of state intervention
The upshot of this shift in the ideological tectonic plates—combined with the McCain-Palin campaign’s attempt to smear Barack Obama as a socialist—has brought socialism into mainstream political discourse for the first time in at least a generation. What’s more, the smear failed. Not only did U.S. voters elect a man accused of being a socialist, but various pundits and experts have aggressively defended government intervention.
Newsweek’s Washington bureau editor Michael Hirsh praised President Roosevelt’s salvation of American capitalism in the 1930s with “a large dose of socialism” and calls on Barack Obama to do the same. Lexington’s Kentucky Herald-Leader also made the case for socialism, arguing that
socialism is not like pregnancy. You can be a little socialist, and, thank goodness, this country always has been. Otherwise we wouldn’t have public schools and universities, public highways, Social Security or Medicare. And, thank goodness, the public resisted President Bush’s plans to hand Social Security over to the very financial titans who made out like bandits while crashing the economy…. Or the years after World War II when a little socialism built state universities and provided GIs with education benefits that created a good life for the American middle class. Think back to the Roosevelt years when a little socialism pulled this country out of the depths of economic depression and put people to work building parks, roads, bridges and public buildings.7
A few months later, the cover of Newsweek boldly proclaimed “We are all socialists now,” and the Nation magazine began a series of articles on the theme of “Reimagining socialism,” which included contributions by Bill Fletcher and Barbara Ehrenreich, Tariq Ali, Rebecca Solnit, Mike Davis, Kim Moody, Dave Zirin, and many others.8
The distinctive feature of much of this public discussion of socialism—with some exceptions—is that most admirers and detractors generally share a common (and hollowed out) idea of what socialism is: namely, state intervention in the economy.9 There is good reason for this conclusion: for more than a century socialist parties throughout Europe became parties of government and thus the highest profile expressions of socialist politics. In the U.S., Norman Thomas, the presidential candidate of the Socialist Party in the 1930s and 1940s, argued, “The American people will never knowingly adopt socialism. But under the name of ‘liberalism,’ they will adopt every fragment of the socialist program, until one day, America will be a socialist nation, without knowing how it happened.”10 In this paradigm, economic systems can fall anywhere along a continuum between capitalism and socialism based chiefly on the degree of state intervention in, or ownership of, the economy. This criterion for assessing how “socialist” an economy is leaves out a critical question: In whose interests is this state intervention carried out? In fact, the political parties grouped under the banner of social democracy11 have at various times and places favored state intervention in the economy, but at other times (and especially over the last two decades) have pushed for deregulation and privatization with increasing enthusiasm. Even when they have favored state intervention in the economy, they have done so on terms that primarily benefit the owners of capital, even if some benefits flow to workers as well.
The U.S. financial bailout is a perfect demonstration of the idea that state intervention doesn’t automatically equal a socialist vision of society that puts people before profits. Rather, it’s a reflection of the fact that the scale of the economic crisis requires an institution that can marshal resources far greater than even the world’s largest financial institutions are capable of mustering. The use of massive state intervention to save the big banks, insurance companies, mortgage companies, and automobile makers while letting the lives of working people be ripped apart by foreclosures, evictions, inflation, and unemployment represents an effort to save global capitalism from its own excesses. Frederick Engels pointed out this dynamic more than 150 years ago and is worth quoting at length.
[T]he official representative of capitalist society—the state—will ultimately have to undertake the direction of production. This necessity for conversion into State property is felt first in the great institutions for intercourse and communication—the post office, the telegraphs, the railways.
If the crises demonstrate the incapacity of the bourgeoisie for managing any longer modern productive forces, the transformation of the great establishments for production and distribution into joint-stock companies, trusts, and State property, show how unnecessary the bourgeoisie are for that purpose. All the social functions of the capitalist has no further social function than that of pocketing dividends, tearing off coupons, and gambling on the Stock Exchange, where the different capitalists despoil one another of their capital…
But, the transformation—either into joint-stock companies and trusts, or into State-ownership—does not do away with the capitalistic nature of the productive forces. In the joint-stock companies and trusts, this is obvious. And the modern State, again, is only the organization that bourgeois society takes on in order to support the external conditions of the capitalist mode of production against the encroachments as well of the workers as of individual capitalists. The modern state, no matter what its form, is essentially a capitalist machine—the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers—proletarians. The capitalist relation is not done away with. It is, rather, brought to a head. But, brought to a head, it topples over. State-ownership of the productive forces is not the solution of the conflict, but concealed within it are the technical conditions that form the elements of that solution.12
Though they don’t use Engels’ terms, the chief proponents of global capitalism accept this basic insight. Thus, the Financial Times has consciously attacked the free-market ideologues that it usually defends.
Does this rescue mean the end of private financial capitalism? Of course not. Although the size of the crisis requires an exceptional response, this is but the latest in a long line of banking crises and state rescues. Nationally owned banks seem likely to be a reality in many countries for a decade...
These leaders are not putting capitalism to the sword in favor of the gentler rule of the state. They are using the state to defeat the marketplace’s most dangerous historic enemy: widespread depression. And they are right to do so.13
Likewise, George Bush sought to comfort free-market hardliners as he announced the plan to follow the lead of European central banks by injecting capital into the U.S. banking system through stock purchases in financial institutions. “These measures are not intended to take over the free market, but to preserve it,” Bush told reporters.14 Obama struck a similar tone at the G20 summit in London, speaking about the need for coordinated stimulus plans internationally: “Each country has its own constraints, its own political rhythms and what we want to make sure is that everybody is doing something...and that we are prepared to step into the breach should current efforts prove inadequate.”15
Columnist E.J. Dionne described the Obama approach as a “novel blend of opposing ideas,” but his observation essentially boils down to a strained acknowledgment of the same tendencies identified by Engels. “Describing what Obama is up to leads quickly to sentences freighted with contradictions,” wrote Dionne. “He wants to regulate the market more tightly in order to save it. He thinks big government is required now if we are to return to a less-restricted economic system later. You might say that he is using collectivist means to capitalist ends.”16
The immense scale of state intervention shouldn’t be understood as an assault on capitalism, so much as an alternative method for managing it. That doesn’t mean that the capitalist class isn’t disappointed by the need for a growing public sector. Under normal conditions, U.S. corporations push for deregulation and free markets because this makes it easier to maximize their profits. Deregulation of the energy industry, for example, allowed Enron to make big profits by manipulating the supply of electricity, until its sham accounting practices and bad bets brought it down. Likewise, the lack of government oversight let the mortgage industry and a shadow banking system create huge markets in securities trading based on subprime loans, which no investment bank or hedge fund could refuse to participate in if it wanted to keep pace with its rivals.
The bailout of various financial firms and nationalization of the banks, however, is nothing more than a way to use the taxes paid by the working class to absorb the losses incurred by Wall Street’s gamblers. On April 1, Nobel Prize-winning economist Joseph Stiglitz described Treasury Secretary Timothy Geithner’s plan this way:
Some Americans are afraid that the government might temporarily “nationalize” the banks, but that option would be preferable to the Geithner plan. After all, the FDIC has taken control of failing banks before, and done it well. It has even nationalized large institutions like Continental Illinois (taken over in 1984, back in private hands a few years later), and Washington Mutual (seized last September, and immediately resold). What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a “partnership” in which one partner robs the other. And such partnerships—with the private sector in control—have perverse incentives, worse even than the ones that got us into the mess.17
Despite all the free-market ideologues who prattle on about America’s foundation in free markets, state intervention in the economy is a persistent feature of capitalism, both in the U.S. and around the world. “Over the last century, the federal government has occasionally nationalized railways, coal mines and steel mills, and has even taken a controlling interest in banks when it was deemed to be in the national interest,” according to the New York Times.18 Sometimes, these takeovers took place during times of war to facilitate production and distribution for military purposes. But the federal government has also seized failing companies and banks—for example, the 1984 takeover of Continental Illinois Bank and Trust, then the seventh-largest U.S. bank—when such collapses threatened to impact the rest of the economy. During the Great Depression of the 1930s, the administration of Franklin Roosevelt bought shares in thousands of banks, undertook massive spending to stimulate the economy and imposed a series of regulations on the finance industry (a number of which were repealed under the presidency of Bill Clinton, thus opening the way for the rapid growth of a shadow banking system that triggered the current crisis).
The rise of state capitalism
Such episodes of state intervention reflect a more general trend in the development of capitalism and nation states in the late nineteenth and early twentieth centuries. During this time, the concentration and centralization of capital led to the first industrial monopolies (think of the rise of the railroads, oil corporations, and industries essential to the production of capital goods, such as steel, copper and other extractive industries). At the same time, the globalization of the economy created increased competition between national states over the control of markets, raw materials, and sources of cheap labor in the less developed world. These dynamics, in the words of Russian Marxist Nikolai Bukharin, compelled the development of “state capitalist trusts” as each state attempted to marshal its domestic resources in order to nurture, develop, and project its own industrial powerhouses at home and abroad.
This tendency intensified globally in the early twentieth century, but the extent of this fusion between state and capital differed from one nation to another. The global economic crisis of the 1930s impelled these developments yet further as nations attempted to bend all efforts toward restarting their economies. The command-and-control economy of the Soviet Union and the state control of the economy in Nazi Germany represented one end of the spectrum while the New Deal policies of the Roosevelt era were milder expressions of the same currents at work.
Thus, in different places and times during the last hundred years, various nations around the world have relied on state intervention in the economy to different degrees in order to promote capitalist development and to deal with other political challenges.
In Europe, upsurges in workers’ struggles forced many countries to use more aggressive social spending in an effort to co-opt the labor movement and head off more radical challenges to the capitalist system. In addition, mobilizing resources on a large enough scale to rebuild from the devastation of the First and Second World Wars led many European states to direct investment into critical areas. In the USSR, after Joseph Stalin and his allies effectively overturned all vestiges of workers’ democracy and workplace control over production, the state bureaucracy undertook a rapid development of productive forces based on the brutal exploitation of the Russian working class, enabling what had been a backward economy to contend as a world superpower for a number of decades. Thus, various countries, including the U.S., have used state capitalist measures to manage both economic development and economic crisis at various junctures—not as a means to abolish capitalism but as a means to preserve it.
In fact, even in “normal” times, the U.S. state directs huge amounts of investment outside the free market—for example, the building and maintenance of the federal interstate highway system, military spending, and research and development spending. But because Corporate America benefits from such investment in many direct and indirect ways, they don’t see fit to denounce this as “socialism.” Instead, they see these measures as the state fulfilling the useful function of maintaining a “healthy business climate.”
The socialist case for state intervention
Just as the capitalist class isn’t agnostic about the question of state intervention, generally preferring deregulation and privatization to state ownership of the economy, socialists likewise are not indifferent to such issues. Even if state ownership does not in itself accomplish the full socialist program, the neoliberal trend toward privatizing all manner of formerly public functions—from schools to airports to roads to parking meters—represents an assault on working-class interests. Privatization allows corporations to cut jobs, cut wages, and cut services all in the name of efficiency while they pocket taxpayer dollars in the form of profits. There is no doubt that nationalized health care, for example, would be a tremendous advance over the for-profit, private insurance-based system that, in the name of profitability, makes it more difficult to get health care for those who need it most.
Privatization takes the decision-making about such services out of the public sphere, where these issues can be subjected to political pressures and political demands, and puts them in the hands of private entrepreneurs who are wholly unaccountable—unlike politicians who are subject at least in some limited way to the will of the voters at the end of the day. Similarly, nationalization of industries under threat of bankruptcy has historically been a demand of the socialist movement as a means to save jobs and ensure the provision of needed services. We should demand that basic necessities of the working class—such as utilities, for example—be taken out of the hands of private corporations and nationalized.
In less developed countries, nationalization can serve an additional function—to expropriate foreign multinational corporations and put the profits of large industries and indigenous natural resources under the control of the national state, thus keeping those profits from being siphoned abroad and instead directed toward domestic industrial development and social welfare. There is a long tradition of deploying such defensive measures against imperial domination by radical, populist, and social-democratic governments around the world—from the 1938 nationalization of foreign oil companies by Mexican President Lázaro Cárdenas to the 1972 Chilean nationalization of the foreign-owned copper industry to the 2006 nationalization of Bolivia’s foreign-owned oil and gas reserves by President Evo Morales.
In demanding such nationalizations, however, the left calls for these institutions to be placed under democratic workers’ control. This is essential because such nationalized institutions continue to operate within a wider capitalist context and therefore must be subject to pressure from below to answer to the needs of the working class rather than capital.
The socialist case against the market
So if socialism isn’t simply state control over important parts of the economy, what is it? First, it should be said that a socialist society would indeed need to nationalize key industries in order to replace the irrationalities of capitalist finance with a more rational way of directing investment. The Financial Times editorial board’s own defense of the banking industry is an indictment of the irrational and crisis-prone nature of capitalism:
Modern capitalism needs well-functioning banks. Businesses and individuals need liquidity and an effective means of turning their savings into productive investments. But banks perform this function by making bets on the future. This is the purpose for which they exist—but it makes them inherently unstable. They tend to overextend themselves in the good times and are overcautious in the bad, exacerbating booms and busts. The reason we insist on keeping our economic systems built on these trembling fault lines is that they are normally so effective at this job of intermediation.19
This passage beautifully captures the anarchy of the free market. Capitalism’s lifeblood depends on finance capital granting credit to firms seeking to make new investments. But when bankers get together and decide whether to finance a proposal put before them by a particular firm, they do so without regard to any consideration except whether they can expect to have their loan repaid with interest. Likewise, companies don’t produce any goods except those they expect to be able to sell profitably on the free market.
This dynamic carries with it three fundamental problems. First, those goods that people need, but are too poor to afford, simply won’t get produced. So even if there is a need for more food to be produced or more houses to be built, if the hungry and the homeless have no money, they also have no way of making their demand “effective”—and thus, no profit can be made from producing such goods for the market.
Second, the rational deployment of society’s productive forces in pursuit of broadly agreed-upon social goals is constantly frustrated by the allocation of capital investment according to market mechanisms. For example, scientists have identified various sustainable strategies to address the increasingly dire threat to life on Earth posed by climate change and other ecological pressures. But implementing these strategies constantly runs up against the entrenched economic and political clout of the corporate titans that dominate key industrial sectors such as transportation and energy. The strategic thinking and long-terms plans of these entities are dominated by only one concern—how to make a profit. In the infamous words of Bethlehem Steel CEO Donald Trautlein, “We are not in the business of making steel. We are in the business of making money.” Every CEO must always remain acutely aware of this basic point—or risk the corporation’s financial ruin. The production of goods isn’t undertaken because of the usefulness of the goods in question. Steel—or whatever commodity—is only an incidental means to achieve another goal, namely the selling of the good on the market in order to realize profit.
Third, competition between rival firms means that in good times, every firm must rush to produce more goods, grab as large a share of expanding markets as possible and attempt to undersell the competition. Failure to do so will leave any individual firm with a smaller mass of profits to undertake the next round of innovation and investment. But investment into a particular type of production must be made today, while the products of that investment are sold some time in the future—in some cases, years in the future. For example, in the case of automobile production, investments made today require years of building up assembly lines, supply chains, and production facilities to bring them online. But if every auto company is rushing to take advantage of a perceived increase in demand, by the time they all get their cars to market, they can produce a glut. The seemingly shrewd decision to extend credit to a big auto producer now suddenly looks bad when excess supply means that all the cars that have been produced can’t be sold profitably.
In a similar fashion, the current financial crisis is the product of a rush by investment firms to take advantage of the housing bubble by making loans to homeowners at high interest rates that seemed certain to be repaid—so long as the bubble continued to expand. Every kind of hedge fund, investment bank and financial institution found it impossible to resist investing in the high-yield bundles of these loans—precisely because if they didn’t, their return might look anemic compared to rivals that were enjoying handsome rewards. Now that the housing bubble has burst, and these investments have become so toxic, the banks fear making loans to anyone, unsure of whether the potential borrower may be the next to go down, and hence unable to repay the loan.
This is what the Financial Times means when it states that banks “tend to overextend themselves in the good times and are overcautious in the bad, exacerbating booms and busts.” Nevertheless, the Financial Times asserts, banks “raise living standards” while state control over investment tends to “sacrifice efficiency and growth for stability.”20 With the current financial crisis destroying housing equity, creating unemployment, and producing a huge bill to be paid by taxpayers, the claim that banks “raise living standards” ought to make the editorial writers blush—unless they mean to make the more obvious point that banks raise living standards for bankers.
The question, then, is not just nationalization under capitalism—where workers merely trade one boss for another—but complete socialization of production under popular, democratic control.
Socialism from below
In a society where all of the means of production are socialized, blind market forces would be replaced by democratic planning. The accumulated savings of society would not be handed over to a class of people, unelected and unaccountable, to invest for the purpose of their private gain. Instead, the economic output of society would be used to address the social needs of the producers. The critical determining factor of whether state ownership of the means of production (or the means of finance) has a socialist character depends on the answer to a simple question: If the state controls the economy, who controls the state?
The Obama administration’s state intervention in the economy today is designed to preserve decision-making power for the owners of banks and corporations. And in any case, the principle that the state will use in deciding how to exercise its ownership stake will be to maintain a “healthy business climate,” not to put the needs of workers and the poor first.
This is not surprising, given the completely incestuous relationship between the state and private business, with a steady flow of businessmen into government jobs and then back again. Robert Rubin began as a co-chairman of Goldman Sachs, worked as Clinton’s treasury secretary, and then went on to work for Citigroup. Henry Paulson was CEO of Goldman Sachs before he became Bush’s treasury secretary.21 Obama’s top adviser, Lawrence Summers, who was also a treasury secretary for Clinton, “earned more than $5 million last year from the hedge fund D. E. Shaw and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money.”22 Because of its economic clout, the capitalist class can exert control over the state even when politicans and government bureaucrats are not on corporate payrolls. It is simply “common sense” in Washington that what is good for Wall Street is good for America.
The working class exerts its power, first through its ability to shut down production—the strike weapon. But if it is to assert its collective interests on society as a whole and against the employers as a class, it must seize political power. Only after the working class has seized political power can it begin to reorganize production and distribution in such a way as to gradually abolish the market and production for profit’s sake, and replace those relations with a purely socialized system of planning.
As Karl Marx and Frederick Engels put it in the Communist Manifesto:
[T]he first step in the revolution by the working class is to raise the proletariat to the position of ruling class to win the battle of democracy. The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralize all instruments of production in the hands of the State, i.e., of the proletariat organized as the ruling class; and to increase the total productive forces as rapidly as possible.
Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production; by means of measures, therefore, which appear economically insufficient and untenable, but which, in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionizing the mode of production.23
Marx and Engels then list a number of measures that would facilitate the placing of society’s productive infrastructure at the disposal of a new workers’ state, including a steeply progressive income tax, the abolition of inheritance rights, the centralization of credit through nationalization of the banks, and the steady extension of the state’s command over the key sectors of industrial and agricultural production. Thus, the state could set about directing economic activity to address, first, pressing social needs and, over time, progressively more ambitious goals in the realms of consumption, education, art, and so forth. Marx and Engels continue:
When, in the course of development, class distinctions have disappeared, and all production has been concentrated in the hands of a vast association of the whole nation, the public power will lose its political character. Political power, properly so called, is merely the organized power of one class for oppressing another. If the proletariat during its contest with the bourgeoisie is compelled, by the force of circumstances, to organize itself as a class, if, by means of a revolution, it makes itself the ruling class, and, as such, sweeps away by force the old conditions of production, then it will, along with these conditions, have swept away the conditions for the existence of class antagonisms and of classes generally, and will thereby have abolished its own supremacy as a class.
In place of the old bourgeois society, with its classes and class antagonisms, we shall have an association, in which the free development of each is the condition for the free development of all.24
From here to there
What does it mean to say, as Marx does, that workers must achieve political power? It does not mean winning a majority of seats in a congress or a parliament. Such institutions represent a truncated democracy at best. History is full of social-democratic parties whose efforts at achieving electoral success have blunted their revolutionary vision, and who, having achieved parliamentary position, have adapted to, rather than fundamentally altered, capitalism. If the state is, as Engels describes it, “essentially a capitalist machine,” then surely the working class needs a different kind of state in order to effect a social transformation. The complete socialization of production and distribution requires workers to erect their own democratic state on the ruins of the old that seizes control over production and distribution and reorganizes these spheres of economic life along socialist lines.
The key lies in the popular masses forming, in the course of resisting capitalism, counter-institutions that begin first as organs of collective struggle, but which are able potentially to evolve into alternative institutions of state power.
This may sound like a compelling, but ultimately utopian fantasy, but there is a rich history—often hidden from view by the work of historians who focus more on heads of state than on the struggles of regular people to shape the world around them—of such counter-institutions springing up again and again as an organic part of workers’ struggles. At the high points of working-class uprisings during the last century and a half—from Paris in 1871, to Russia in 1917 and Germany in 1918, to Hungary in 1956, to Chile in 1973 and Iran in 1979—workers who organized inspiring fights against capitalist exploitation also set up workers’ councils (called by many different names, but in essence fulfilling the same function) to coordinate their efforts. At the same time, these formations gave workers a means of carrying out production under their own control and insuring that the products of their labor were used to feed and sustain their challenge to the status quo rather than supply the defenders of the old order with the resources to defeat the workers’ councils and the vision of a new society they represented.
Workers’ councils at the school, hospital, warehouse, and factory level would be essential to give workers a say in the day-to-day running of their workplaces. Each workplace council would also send elected delegates to coordinate decision-making on an industry-wide and economy-wide basis. Because these delegates would be drawn directly from and accountable to the base, because they would be paid the same as the rest of the workers in that workplace and known by their co-workers, and because they would be recallable if they failed to exercise the will of those who elected them, such councils would give workers the ability to have a real and deciding say in every aspect of society.25
Needless to say, the political and business establishment in these examples didn’t relinquish their wealth, power, and privilege without a fight. Thus, achieving workers’ democratic control over production requires a confrontation with the state to succeed in the long run. Nationalization of the banks and other institutions are essential in the effort to create a society based on democratic planning; but that nationalization will be nothing more than a form of state capitalism unless it is organized under the democratic control of the majority.
As a result, the transition from capitalism to socialism can’t be a gradual or incremental process by which the state enacts reforms and progressively takes ownership of more and larger chunks of the economy. Rather, socialism represents a radical break with the present system—and depends on the active struggles of workers and their subsequent engagement with every aspect of governing society in their own interest, under the guiding principle of human need before corporate greed.
Every severe crisis of capitalism starkly reveals the system’s bankruptcy and gives rise to debates about alternatives. This crisis is no different. Alongside tremendous reserves of hitherto undreamt-of wealth that should long ago have abolished poverty, millions are thrown out of work and are left destitute. Engels’ commentary on how the capitalist class, and capitalism itself, has outlived itself (written in 1877) reads as if it were written yesterday:
Their political and intellectual bankruptcy is scarcely any longer a secret to the bourgeoisie themselves. Their economic bankruptcy recurs regularly every 10 years. In every crisis, society is suffocated beneath the weight of its own productive forces and products, which it cannot use, and stands helpless, face-to-face with the absurd contradiction that the producers have nothing to consume, because consumers are wanting. The expansive force of the means of production burst the bonds that the capitalist mode of production had imposed upon them. Their deliverance from these bonds is the one precondition for an unbroken, constantly-accelerated development of the productive forces, and therewith for a practically unlimited increase of production itself. Nor is this all. The socialized appropriation of the means of production does away, not only with the present artificial restrictions upon production, but also with the positive waste and devastation of productive forces and products that are at the present time the inevitable concomitants of production, and that reach their height in the crises. Further, it sets free for the community at large a mass of means of production and of products, by doing away with the senseless extravagance of the ruling classes of today, and their political representatives. The possibility of securing for every member of society, by means of socialized production, an existence not only fully sufficient materially, and becoming day-by-day more full, but an existence guaranteeing to all the free development and exercise of their physical and mental faculties—this possibility is now, for the first time, here, but it is here.26
- Simon Johnson, “The quiet coup,” Atlantic Monthly, May 2009.
- Jeff Zeleny, “Financial industry paid millions to Obama aide,” New York Times, April 4, 2009.
- Karl Marx and Frederick Engels, The Communist Manifesto: A Road Map to History’s Most Important Political Document, Phil Gasper, ed. (Chicago: Haymarket Books, 2005), 69–70.
- Ibid., 71.
- For a more thorough elaboration and defense of the idea of democratic socialist planning than space allows here, see David McNally, Against the Market (London and New York: Verso, 1993); and Ernest Mandel, “In defense of socialist planning,” New Left Review 159, September–October 1986.
- Engels, Socialism: Utopian and Scientific, 71–2.