While Marxism and socialism have enjoyed a noteworthy revival in the years since the 2008 financial crisis, this resurgence has not produced a widely accepted blueprint for a new economic order. My claim in this paper is that implementing the visionary hopes of recent years--the hope, in short, that it is possible to imagine and to enact policies to the left of the traditional ideas offered by liberals and social democrats--does not require any radical new policy ideas. Indeed, while I will argue for a version of so-called "market socialism," I differ from many others in making the following explicit claim: it is perfectly possible to challenge capitalist hegemony without challenging neoliberal hegemony, for the simple reason that taking neoliberal principles, as I will show, actually would lead to a much greater degree of government ownership of the means of production. As Dean Baker has persuasively shown, a great deal of what passes for "free market" policy really represents a type of government restriction of the free market. The case is no different with socialism: Grant and Quiggin have argued that economic thinking might actually suggest a greater role for government ownership of capital. Thus, opposing socialism, ironically, might be the ultimate form of intervention into the market.
Thus, socialism simply requires retooling existing liberal and social democratic ideas as expressions of socialism and advocating them as such. The work of Ernesto Laclau implies that what separates socialism from liberalism and social democracy is not so much a set of concrete policies: rather, it is the mere fact that such policies occur in an environment of socialist hegemony, and the way to achieve this is as much about framing political debates as about actual policies. In a similar vein, philosopher Slavoj Zizek--who holds the remarkable distinction of being both an anti-communist dissident under really existing socialism and an anti-capitalist dissident under really existing capitalism--argued, in a speech to the Occupy Wall Street encampment, that being a communist today means, above all else, the simple commitment to keeping what belongs to the commons in the realm of the common: "The only sense in which we are Communists is that we care for the commons--the commons of nature, of knowledge--which are threatened by the system."
This may sound like I am claiming that the key to being a socialist is simply calling oneself a socialist. This is too simple, because arguing that the key to power is socialist hegemony, something which is as much a product of rhetorico-political strategy as it is a product of policies, is not to say that articulating workable policies has no place. Scott Sumner notes, for example, that the world is becoming increasingly utopian and egalitarian on its own: "the entire world is evolving toward a near 100% service economy in terms of jobs … the big public policy issue will be deciding who should get to allocate all the wealth that will be accumulated by those with great ideas (or rents). Should the government or the wealthy get to decide which charities are most deserving?" ("The Real Story") Sumner, a libertarian, articulates here a vision that many socialist visionaries could only dream of in earlier days. Nonetheless, a political question remains: who owns and controls the capital goods that have rendered scarcity obsolete, and transformed most jobs into the mere management of the output generated by this vast productive apparatus. Sumner suggests it is a choice between government regulation and private charity. But there is a third option: common control--the people as a whole owning the means of production.
Furthermore, as Seth Ackerman notes in an influential piece offering a rudimentary vision of socialism--one that this essay will build upon in several ways--concrete policies are crucial not simply because they propose a workable path forward, but also because they offer a focal point that can assuage the self-doubt of those who desire far reaching reform: "still, a successful radical project has to appeal to every emotional register: not just those ecstatic moments when history opens up and everything seems possible, but also those pensive and critical moods when even inveterate optimists-of-the-will find doubt and reflection taking over."
For this reason, the plan I will articulate for achieving socialism is, in a sense, rather conservative: it essentially leaves in place the current free market, free enterprise system of private ownership of the means of production while building a socialist structure of public ownership and social egalitarianism on top of it. The way to achieve this is simple: if socialism in the strong sense means that the government owns the means of production, then the government should simply buy the means of production.
It may seem that this is impossible to do without disturbing the existing economy, but there are many ways in which preserving and strengthening a free market, free enterprise system with limited regulation and private ownership is actually quite compatible with, even conducive to, socialism. Ackerman notes that socialism, in essence, means that the government invests in capital in order to build up the resources necessary to further the public good. Ackerman's argument remains committed to some old style socialist tactics like expropriation and terror. He speaks, for example, of a fund that would promote "what might be euphemistically called the 'compulsory purchase' of all privately-owned financial asset." While I do not want to claim that such tactics are never useful, I do want to argue that they are not necessarily useful, only contingently useful. A peaceful, largely voluntary transition is indeed possible. Whether, and to what extent, the government actually owns outright the means of production becomes a much less pressing issue if and when other policies are in place to ensure that capital is still managed for, and available to, the wider public.
Separation One: Ownership and Management
The basic idea behind this proposal is a simple one: the way to socialize the means of production is to socialize the means of production. This idea is at the core of Ackerman's proposal, an idea that he does not fully develop. The degree to which the market is compatible with socialism exceeds even the image that Ackerman paints. Not only is it possible for socialism to work within a market mechanism with autonomous and independent firms, but arguably this outcome is only prevented from going in this direction by artificial constraints on the operation of the market. In a narrow but significant region of economic policy, eliminating restrictions on a certain class of transactions--namely, the current customary prohibition on the government owning private industry--actually would mean heading down the road to socialism in a significant way.
This strong market signal in favor of socialism, I argue, exists in the form of the so-called equity premium. One long standing mystery in financial economics is that, for some reason, government securities pay much lower returns than one might expect. In an influential paper, Mehra and Prescott note that "The equity premium puzzle may not be why was the average equity return so high but rather why was the average risk-free rate so low" (158). Recent research has added new wrinkles to the puzzle and challenged Mehra and Prescott's original framework (Azeredo 3).
The equity premium, in other words, has spawned not so much explanations as interpretations, and there is indeed one very surprising interpretation: that it implies that governments should nationalize the means of production. Indeed, mainstream economics--the type with equations and sophisticated mathematical modeling and all the other standard trappings, no less--has suggested the very conclusion that Ackerman offers in his essay. Although the authors have not come out so clearly To put it in the dry language of economics, "Next we consider the possibility of public ownership of equity and show that, other things being equal, increases in public ownership financed by government borrowing (that is, by selling government bonds) will improve welfare, up to the point where the equity premium is eliminated" (Grant and Quiggin 3). It is perhaps telling that mainstream economics, upon demonstrating that a type of socialism is indeed feasible, places this point second in the argument.
To be fair, one of the co-authors, John Quiggin, in a blog post does recognize the potential impact of his paper. He even references Marx in doing so: "To misquote Marx, the problem now is not to explain the equity premium but to derive its policy implications … Some of the implications reinforce common ideas … Other implications are more sup rising at least to those who have imbibed the current conventional wisdom … An immediate implication is that, other things (such as operational efficiency) being equal, privatisation will reduce welfare and nationalisation will increase it." Despite this interpretation, some socialists no doubt may object that this is really just a type of corporatism, or that it is a watered down version of the real thing. Indeed, the proposal would have to start out slow, and at first it would own a small portion of the means of production. But over time it could increase its shares. As Ackerman further argues, any economic system needs a way of allocating goods, creating new firms, and shutting down existing ones that are failing, and we should look at the market framework not so much as determinative of the ultimate nature of an economic system but as simply one possible means of allocating goods and services. Thus, Grant and Quiggin's proposal is indeed a form of market socialism. It quite literally argues that we should follow market signals in setting the level of socialism by continuing purchases "up to the point where the equity premium is eliminated."
The main concern these authors outline is that private management is ultimately more efficient than public control. Ackerman, too, raises a similar problem, and suggests that preserving firm autonomy would be necessary even with socialism. In other words, economic decisions, rather than political ones, would have to determine when a company is closed down. Grant and Quiggin indirectly provide a suggestion of how to avoid some of the problems of public ownership while getting the efficiency benefits of private management. In their article, they note that one possible policy is to "invest part of the Social Security fund in equities while maintaining the defined-benefit character of the scheme" (1). Essentially, an investment fund, modeled on a private bank, could take investments from Social Security and other public pension funds at various levels of government. Just as with a bank, this money would fund a small part of the investing, but the vast majority of it would come from borrowing (selling bonds) and investing the money. Because of the equity premium--the fact that it costs governments less to borrow than the return they receive on their investments--the fund could borrow money and still make a profit on its investments. This would not only increase the returns on the money invested by public pensions, but it would create an institutional firewall between the government and government programs and the public investment. Firms would then be autonomous from the government proper, and would be essentially managed like pension funds: public ownership would be separated from management. It would even be possible to use direct democracy here: because the people as a whole would be the shareholders, they arguably would have the right to vote on top management, just like individual shareholders do today.
Separation Two: Consumption and Ownership
This program, of course, would still leave a substantial amount of the means of production in private hands, and so no doubt socialists at this points will object that this is not really a form of socialism at all. The rich are left with the large proportion of the means of production in their hands. This is a reasonable objection, but I would actually argue just the opposite: even in the absence of such a policy, it would be possible to implement a version of socialism.
Quiggin's proposal suggests buying capital until the equity premium vanishes. When this would occur is an empirical question, but it would probably occur before the government owned the entire economy. Even if the government ended up owning over fifty percent of the economy, it would still be the case that some portion of the means of production would be privately owned.
This may, however, be a good thing. Ackerman cites economic research showing that one of the key reasons for the failure of really existing socialism was a lack of firm autonomy and an efficient capital market: without facing the resource constraints that a capital market creates, firms did not have an incentive to efficiently allocate their resources. They could receive continual bailouts as the government overlooked their lack of profitability. As more resources are owned by the government, there is always a danger of this occurring. Having several other participants in the capital market besides the government would be one way to protect against this outcome. But even if this is a good idea for pragmatic reasons, ideologically it would, however, mean something less than a type of fully fledged socialism. Unless some other action were taken, it would be easy to simply pass of this creation as a mere mixed economy--a mere social democratic twist on traditional capitalism.
This difficulty leads to the next separation socialists should fight for: the separation of private ownership from private consumption, something that can be achieved through tax policy, specifically a progressive consumption tax. The notion of the progressive consumption tax is beginning to gain favor with liberals, progressives, and social democrats. The attraction to this set is that it allows the government to raise a large amount of money in an economically efficient way, bringing in revenue while encouraging the type of savings and investment that drives long term economic growth (Frank).
From a socialist point of view, the attraction is less that it would raise a large amount of revenue per se and more that it would encourage private owners of capital to adopt a kind of managerial ethos. They would be able to draw a certain amount of money from their investments in order to support their own personal consumption. However, although they would have a large amount of wealth, luxurious lifestyles would be sharply curtailed by a progressive consumption tax. As Frank notes, it would be possible to have very high rates of taxation on consumption without necessarily harming the economy.
The result of this would be as much a mindset from the socialist point of view as it would be actual revenue. Being wealthy would still have many benefits. It would allow an individual to draw income from investments to fuel personal consumption. But it would also encourage limitation of this consumption, making sure that being wealthy did not necessarily entitle an individual to a much higher degree of consumption. Like a manager of an investment fund, the wealthy would be able to draw compensation for their labor overseeing their investments. The difference between a manger and and owner is that the manager still has to ask permission to use the resource for his personal gain, and the progressive consumption tax would, in a sense, act as a means of requiring such permission from the public. Although this tax would also, in a sense, limit the amount
Other taxes, too, could and should be implemented as much for their disincentive effects as for the actual revenue they raise. Reducing consumption at the higher end of the income scale is arguably much more important than raising taxes per se on the rich without regard to whether that tax hits investment or consumption. Another top priority would be to implement a series of taxes that are not only economically efficient but perhaps even necessary for our survival: I am thinking of, first and foremost, a carbon tax, one that was sufficiently high to reduce carbon emissions the requisite amount. After this, we could consider some other types of consumption tax: taxes on other forms of pollution, processed food, alcohol and tobacco, newly legal marijuana, traffic congestion, natural resources, land rents, and so on. All of these taxes are economically efficient and will raise money, but, especially when looked at from a global perspective, because such things are disproportionally associated with affluence, they will further limit consumption at the higher levels of the income scale.
Once again, this policy represents a perfect combination of performative power and policy effectiveness: simply declaring that the express purpose of these policies is to create and perpetuate a socialist norm--the idea that individual wealth is something that people have the right to consume only within certain limit--will create a new mode of consciousness, one quite different than if these same policies were implemented in a liberal or even a social democratic context. We could even, theoretically, have progressive consumption tax rates that gradually rise to infinity. The actual revenue effects of these rates would likely be small, as a relatively small percentage of the population consumes at very high levels, but it would no doubt have a powerful symbolic effect. Economists have documented the important role of social norms in higher rates of inequality (citation needed).
Finally, although actively articulating these policies as explicitly socialist aims is crucial, the actual effects themselves are also consistent with the aims of equality. Indeed, they are arguably more consistent with these aims than standard, soak-the-rich progressive and social democratic policies. Libertarian economists like Scott Sumner who have a serious and genuine commitment to redistribution and equality rightly point out that in order to actually redistribute resources, it is necessary to discourage consumption at the high end while also encouraging investment: as others consume less, those resources become available for redistribution; but new investments are also needed to create the additional productive capacity necessary for a higher total level of consumption (Sumner, "You Can't Redistribute Income").
Separation Three: Work and the Labor Market
Of course, it is also necessary to have some redistribution mechanism, and to have a conscious plan behind it. Even if the two other separations were achieved, it is still possible that many of the benefits of this society would not extend to all members. Even with an implicit ceiling on consumption at the top, enforced through norms, taxes, and perhaps eventually a hard cap on annual consumption, it would be possible for those at the lower end to fall behind. We therefore require a floor on consumption perhaps even more urgently than a ceiling. This, again, will mean finding a framework simultaneously to go beyond social democracy without ending up facing the difficulties of really existing socialism. One of the goals of social democracy has been to establish a right to employment. One of the main ideals of the Soviet Union was the requirement to labor: it was not simply that one needed to work, but that one had to work. The third separation I propose aims at something between the two: we do not want to see work merely as a right, a kind of goodie that people are entitled to receive. This makes it seem like it is some kind of special treat. On the other hand, work is indeed compulsory; but it is compulsory as a matter of course: we need to recognize that people are always working in some way or another, even if it is not compensated labor, and we need to find a way to reward them for that.
Separating the consumption of individuals from the wealth they own would be one step toward this: those who consume their wealth would not necessarily be able to consume their wealth as an inherent right. They would, in a sense, earn a certain amount of consumption each year, and while they would also be free to consume their wealth, they would a steep consumption tax on it. This would, implicitly at first and perhaps explicitly at a later date, proletarianize the capitalist class, gradually blurring class divisions, and just perhaps setting us on the road to the abolition of class that Marx has been so ridiculed, even from the left, for proposing (source critical of Marx's classless vision).
On the other end of the spectrum, we also want to blur the boundary in the other direction by ownerizing the proletarians. What this means, in practice, is recognizing that a job is not a naturally occurring product of the labor market. A variety of tax incentives, for example, create what we think of as a "good job": tax breaks on employer provided health insurance, and regulations affecting the way this health insurance works, ensure that employees in certain circumstances receive a total package that we call a job (find source here). A job, then, is a kind of total package, something different in many ways from laboring for a wage. A job, in other words, is already a kind of microcosmic embodiment of socialism: it is a total package that comes not just with pay, but with benefits, and with the satisfaction that derives from having a good career.
We should see a job, then, as a type of social insurance, a social creation of relatively recent origins (find source here). It is perhaps not as sublime as a calling or a vocation, but it is far above the mere wage slavery that is selling ones labor power for cash on the open market and little more. Any free market approach, socialist or otherwise, has to recognize this fundamental fact. As this paradigm suggests, however, there is no need to interfere with the labor market in order to create good jobs. It is simply necessary to extend much more broadly the type of social insurance that transforms labor into jobs and, ideally, into meaningful work.
The first step is, paradoxically, to encourage a vigorous and robust labor market. This will help to ensure that the labor market on its own does as much as it possibly can to raise labor up to the standard of work and jobs. Many leftists have been critical of using the Federal Reserve as a means to address the recent failure of the labor market. They argue that this is to remove the labor market from the realm of politics, and to reduce the struggle for meaningful work to a mere technical microeconomic fluke. This is an enormous mistake. It will be much easier to extend forms of social insurance to laborers if there is already a healthy labor market. We should see a vigorous labor market, then, as a necessary but not sufficient condition of creating meaningful work: it facilitates, rather than preempts, more fundamental reforms. Indeed, as Christina Romer has argued, the vast majority of the recovery from the great depression was a product of monetary policy, not fiscal policy (find citation to Romer article). The political boost that a very quick economic recovery provided--a boost or jolt that monetary policy is uniquely suited to provide--laid the political groundwork for the later successes of the New Deal. To establish stable monetary policy, I favor the NGDP level targeting regime advocated by Scott Sumner ("Retargeting"). Even on its own, and despite the apparent humble technicality of this issue, this move would be a fairly radical achievement: Sumner's proposal aims at nothing less than eliminating recessions as such. Getting behind this proposal is not something that just liberals and progressives should be interested in doing; it should be a core socialist goal.
While ending recessions could go a long way toward raising the standards of the labor market part of the way up to the standards of meaningful work and that highly unnatural social construction we call a job, it no doubt will not go all of the way there. The other part of the task will be to boost wages. The minimum wage is a great way to do this, and the findings of an influential paper by X, that modest increases in the minimum wage do not lead to increases in unemployment (find that main paper). Of course, this too will not be able to go all the way to creating meaningful work, so we would want to establish a three-legged stool: gradually raise the minimum wage so that it is equal to the minimum wage at its peak in inflation adjusted terms, and then index it to the rate of inflation; provide additional benefits by providing wage subsidies such as the earned income tax credit; and establish a universal basic income. Finally, for those who still have difficulty finding work, we should establish a government jobs program on a permanent basis. The logic here, again, should not be that of intervening in the market but rather instituting free market reforms: by raising the minimum wage, we make sure that taxpayers are not subsidizing employers who do not pay their workers a living wage; by replacing paternalistic programs with wage subsidies, we combat bureaucracy and regulations that intrude into the lives of benefit recipients; and by removing the current restrictions on allowing the government to hire as many people as need work, we ensure that society can benefit from the work that these individuals are no doubt already doing, while also ensuring that society receives additional benefits for the support it is already paying--in some form or other--to these individuals.
Conclusion: It's the Economic Norms, Stupid!
For too long, socialists and the left have concentrated on all-or-nothing plans. This ensured that if we did not get everything we wanted, we did not get anything we wanted. What we need instead is what we might term "nothing is all" planning: something that ensures that even as none of these plans are getting enacted, we are still moving the totality of the cause forward. Any movement forward on any of these plans--including simply talking about these ideas more, and talking about them in a socialist context--is already to move the plan as a whole forward. This is small-c conservative politics in the best, Burkean sense: through what may appear to be gradual, imperceptible changes, the totality of society slowly alters, until one day it becomes clear that we had been on the path to a brand new order all along.
Norms, values, and customs, rather than explicit changes to policies, are the key movers of this small-c conservative politics, and the left has too long let the right monopolize these extremely powerful forces. To put this otherwise, once people think about themselves as socialists, and think about the norms that define their lives in socialist terms, even small changes can become extremely radical. The goal above all else is to encourage ways of acting, speaking, and thinking that cement the social norm and precedent that encourages thinking about any form of property with a common character--the environment, ideas, public institutions, and of course capital itself--as a public trust, even if and when it is nominally privately owned. A socialist country means first and foremost all non-personal wealth (anything above and beyond our own personal items, clothes, car, house, and other effects) as social goods. We want to replace the norm of an inherent right to property with the a norm that emphasizes the privilege of managing common goods. This would mean that Wealth would not exist to foster consumption solely, and while the wealthy could still support themselves with their wealth, they would owe that consumption not to an inherent right, but rather to the fulfillment of their social role, must as a worker would owe his or her consumption not to the vicissitudes of the labor market, but to the performance of his or her social duties.
Finally, and perhaps most unexpectedly, this proposal should have broad appeal beyond the traditional left, for the simple reason that many of the ideas upon which I have erected my thinking comes from non-socialists. Quiggin defines himself as a social democrat, but the progressive consumption tax is supported by economists and policy analysts both left and right; NGDP targeting is supported primarily by libertarians, as well as by some right-leaning thinkers; and Charles Murray, of all people, recently came out in support of a basic income. Of course, it is certain that as these views become increasingly associated with socialism, this support will begin to vanish. That is not only expected but perhaps desirable. Nonetheless, anyone who truly values free markets and neoliberal thinking broadly over capitalism and the values of the right will possibly find something to like in this plan.
Indeed, ironically, the path to socialism in an international context will now run through many of the supply-side reforms supported by many on the right, because these reforms tend to strengthen the economic and political infrastructure that make an equity premium emerge in the first place. Furthermore, by placing entitlement programs on a sound financial footing and connecting their funding to the equities market, the plan also gives the population a direct interest in an efficient, productive economy. As with all people who suddenly find themselves with new found wealth, the population will become much less susceptible to a cruder and more inefficient form of populist economics: if the people own the means of production, they can always take advantage of them; but as their owners, they will recognize that, just as with any investment, it is wise to avoid drawing upon it as much as possible. As our friends on the right are quick to remind us, it is the owner who has the biggest interest of all in the wellbeing and success of the enterprise. Taking this observation to its limit, socialism becomes the ultimate pro-market, pro-enterprise neoliberal reform.
Works Cited
Ackerman, Seth. "The Red and the Black." Jacobin 9 (December 2012): n.p. Web.
Azeredo, Francisco. "The Equity Premium: A Deeper Puzzle." Working paper, 31 August 2013 <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=996163>.
Baker, Dean. The End of Loser Liberalism: Making Markets Progressive. Washington: Center for Economic and Policy Research, 2011. Web.
Frank, Robert. "Progressive Consumption Tax." Democracy Journal 8 (2008): n.p. Web.
Grant, Simon and John Quiggin. "Public Investment and the Risk Premium for Equity." Economica 70 (2003): 1-18.
Laclau, Ernesto. Hegemony and Socialist Strategy (New York: Verso, 2001). Print.
Quiggin, John. "The Equity Premium: Puzzle and Policy." John Quiggin. John Quiggin, 5 March 2003. Web. 25 November 2013.
Laclau, Ernesto. Hegemony and Socialist Strategy (New York: Verso, 2001). Print.
Quiggin, John. "The Equity Premium: Puzzle and Policy." John Quiggin. John Quiggin, 5 March 2003. Web. 25 November 2013.
Rajnish, Mehra and Edward C. Prescott. "The Equity Premium: A Puzzle." Journal of Monetary Economics 15 (1985): 145-161. Web.
Sumner, Scott. "You Can't Redistribute Income." The Money Illusion. The Money Illusion, 26 July 2011. Web. 25 November 2013.
--. "The Real Story is Growing Equality." The Money Illusion. The Money Illusion, 25 Jan. 2012. Web. 25 November 2013.
Zizek, Slavoj. "Slavoj Zizek at Occupy Wall Street." Blog post by Sarah Shin. Verso Blog. Verso, 10 Oct. 2011. Web. 25 Nov. 2013.
Sumner, Scott. "You Can't Redistribute Income." The Money Illusion. The Money Illusion, 26 July 2011. Web. 25 November 2013.
--. "The Real Story is Growing Equality." The Money Illusion. The Money Illusion, 25 Jan. 2012. Web. 25 November 2013.
Zizek, Slavoj. "Slavoj Zizek at Occupy Wall Street." Blog post by Sarah Shin. Verso Blog. Verso, 10 Oct. 2011. Web. 25 Nov. 2013.
