Schweickart's Economic Democracy

David Schweickart says he knows one big thing, rather than many small things. The Loyola University professor of philosophy proposes a theory of market socialism in which he seeks to overcome the flaws of the Soviet command economy as well as those of what he calls Chinese “bureaucratic market socialism”.

In his 2002 book After Capitalism, Schweickart outlines a plan for a transition to socialism in a modern democratic society which remains true to Marx’s vision of working class political rule and control of the economy. Worker self-management, the market, and social control of investment, are the three main elements of Schweickart’s model, which he calls Economic Democracy.

With worker self-management, enterprises are owned and controlled by their workers, who elect management and receive the profits of the enterprise’s activity. Schweickart argues that worker controlled enterprises will be more efficient than capitalist companies because of better decision making and motivation. The Mondragon network of cooperatively owned enterprises in Spain is a key exemplar.

Companies will still produce commodities for sale on the market and will strive to maximize their profits in Schweickart’s model. Since the fruits of innovation and efficiency will go to those firms that achieve them, the economy will be dynamic like that of capitalism. However, Schweickart believes that firms under Economic Democracy won’t be driven to expand ceaselessly as they are under capitalism. That is because ED firms will strive to optimize profits per worker, while capitalist forms optimize profits per firm. Once the economic benefits of division of labor have been exhausted, the firm will no longer grow merely for the sake of growth. Schweickart also envisions a way for entrepreneurs to start privately owned firms and provide for more innovation, while placing a cap on their impact by preventing them from bequeathing their profits to heirs.

Investment and banking will be controlled by the state. In place of interest and dividends that are paid by capitalist firms, ED companies pay taxes on their capital which they hold in trust, generating a social investment fund. The investment fund is allocated by elected bodies at the national, regional, and local levels, eliminating regional inequality and providing funeds to start new businesses or expand old ones. Control of investment by the state rather than by the private financial system is the most significant difference between ED and capitalism, and it is surely an appealing one, as the financial turmoil of late 2008 reminds us.

Schweickart also makes the case that ED will address inequality, unemployment, overwork, poverty, racism, ecology, and sham democracy.

Is ED too market-oriented to provide a stable socialist system? Some cooperatives will do better than others; can bankruptcies lead to centralization of ownership? Will worker control become a sham, with managers in effect controlling their enterprises’ production, acting like a new version of the Soviet nomenklatura? Will private savings and entrepreneurship provide an alternative path to accumulation, outside of and ultimately more dynamic than the socialist state? While these questions deserve more examination, I believe they are not fatal and can be solved through additional measures.

How about the transition? Schweickart envisions that the transition to ED could happen peacefully by a few specific reforms of the system. The reform agenda starts with support for cooperatives, green taxes, regulation of international capital flows, a financial assets tax, and a fair trade tariff to assist poor countries. When the financial market crashes, nationalization of the financial system is the result; the assets tax is increased, and the banks are put to work allocating the investment funds. Publicly traded corporations become worker-controlled, and payment of interest and dividends are forbidden. “Production and distribution of goods and services need not be disrupted. Workers still work, managers still manage, businesses still compete….[T]he productive infrastructure of the nation will remain wholly intact…. Life goes on – after capitalism.” A state-provided annuity compensates the capitalist class for the wealth which has been nationalized; while unfair, this allows them to continue to enjoy their consumption, their yachts and mansions, and employ the many workers who provide these things, without interfering in the productive side of the economy.

At one level After Capitalism is a return to the socialist vision of Marx, as Schweickart illustrates using quotes from the Communist Manifesto. The problem with capitalism is – capital. Expropriate capital, manage investment socially, change wage labor to cooperative labor, and we have a qualitatively different system, but one that can be set in place without the wrenching violence, the economic dislocations, of the Soviet experience.

Is it real? The political strength to enact the initial non-revolutionary reforms is not presently at hand for U.S. progressives, but there have been many times and places when they were within reach in advanced capitalist countries. Uniting a section of the population behind them is not in any way an unreasonable political goal. It is the implementation of the second stage, the core economic tenets of ED (elimination of interest and dividends, worker ownership of enterprises) that are unlikely to proceed smoothly and peacefully. The 1973 overthrow of the Unidad Popular in Chile is but one of many examples that shows the capitalist class will respond with violence to any attempt to challenge its rule. It is the political process of winning the transformation that I believe is most in need of expansion in Schweickart’s analysis.

Give in or move in

After the collapse of the Soviet Union and the Soviet model of socialism, the capitalist model reigned in triumph. "There is no alternative!" (TINA), proclaimed British prime minister Margaret Thatcher, meaning that a free market economy and capitalism is the only way societies can be organized in the modern world.

But the unquestioned era of TINA lasted less than two decades. With the mounting disasters of Iraq and Afghanistan, with the planet spinning toward runaway global warming, and now with the biggest economic crisis since the 1930s threatening the livelihoods of millions, many people are wondering whether the capitalist system can ever again deliver peace, prosperity, security, and human development.

These people organized and voted in the hope that a modern, smart, energetic politician like Barack Obama will lead the way to fixing the problems and to a more humane capitalism. "President-elect Obama is a centrist at a time when centrism means energy independence and green jobs and universal healthcare and massive economic stimulus programs and government intervention in the economy," Katrina vanden Heuvel writes in today's Nation.

Perhaps so, but the fightback of capital against these measures will not be long in coming. For one thing, except for the national security apparatus the U.S. government has been so decimated by privatization that it would have to be radically overhauled before it could be used to supervise large scale projects. By the time capital agrees to take the government's money and build the projects the taxpayers are paying for, the rakeoffs, ripoffs and compromises are likely to so dilute the impact that there is a real danger of further disillusioning the supporters of the reform program.

To prepare for this struggle, the left must develop its vision of the transition to socialism. This statement may seem strange, because that transition is not at all on the horizon in the U.S. But it is precisely the awareness of possible alternatives that sharpens the struggle for implementation of the reform program. An example is the current discussion that nationalizing the auto industry is a viable alternative to bailout or bankruptcy. Nationalization of industries is not socialism, but it is the straitjacket of TINA that refuses to consider it. TINA leads to narrowness and defeat of the struggle for reforms.

The international left has struggled since the fall of the Soviet Union to learn the lessons so that it can answer and defeat TINA. Among many there is convergence on a view that Karl Marx' critique of capitalism is accurate, but that the Soviet model of planned, bureaucratic economy under vanguard party control is not a viable model for the transition to socialism. A discussion of socialist transition which is democratic, which builds from below, which addresses both economic and political development concurrently, is a requirement.

Michael Lebowitz offers one exposition of the new socialist project in Build it Now: Socialism for the Twenty-First Century. While a full evaluation of his arguments are beyond the scope of this article, his comments on "The Failure of Social Democracy" are directly relevant to the current situation of U.S. progressives as they prepare to engage in inside-outside struggle with the Obama administration.

"Understanding the responses of capital means that a capital strike can be an opportunity rather than a crisis. If you reject dependence upon capital, the logic of capital can be revealed clearly as contrary to the needs and interests of people. When capital goes on strike, there are two choices, give in or move in. Unfortunately, social democracy in practice has demonstrated that it is limited by the same things that limit Keynesianism in theory -- the givens of the structure and distribution of ownership and the priority of self-interest by the owners. As a result, when capital has gone on strike, the social-democratic response has been to give in.... The result has been the discrediting of Keynesianism and the ideological disarming of people who looked upon it as an alternative to the neoclassical wisdom.... With this acquiescence to the logic of capital, its hold over people was reinforced; and the political result was the popular conclusion either that it really doesn't matter who you elect or that the real solution is to be found in a government unequivocally committed to the logic of capital."