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Social Capitalism

Global capitalism is the main cause of many problems and conflicts all over the globe. Even the WEF – capitalisms coordinating committee – proclaims a multi-crisis.

To be able to answer these questions, we’ll need a good description of capitalist economy. Economy is the material life process of society; the way in which society collectively derives its material existence from nature. Capitalism is the main part of the total economy. It is the collection of large, mostly international corporations and financial institutions. States and international organizations are important supporting institutions, necessary for the functioning of capitalism as a whole and are therefore part of an examination of its functioning.

Current (macro)economic science is concerned with observing the economic condition – expressed in key figures at successive moments, usually years – and tries to make predictions about the way in which this condition will develop. It is not interested in the functioning of capitalism – the capitalist economy – as a constantly repeated interaction between organizations and individuals on a global scale, but only looks at the result and tries to explain it in a general way. These predictions often fail.

The functioning of capitalism is the subject of political economy, particularly of Karl Marx, still the most important political economist. His observations show the capitalist economic system is not sustainable in the long-term. Permanent growth in volume accompanied by a simultaneous increase in productivity will reach a critical point where the system collapses. This is not a linear process, but a cycle of growth and shrinkage that has now lasted for almost 200 years. The contraction takes place through capital destruction, especially through war. The multi-crisis and mounting global military tension heralds the next blow. Whether that is the final blow is the question, but in any case such a blow is not desirable.

It is clear that there are limits to growth. Not only to material growth through exhaustion and environmental stress, but also to the growth of the globally organized mass of people, which devalues the individual into an increasingly easily exchangeable random thing: the mass human being who no longer means anything special to his neighbors and who can easily be sacrificed for whatever reason.

Marx described how the main feature of capitalism, wage labor, leads to a massive restriction of personal freedom and a permanent threat to decent living conditions for a lot of people. In his time, the working conditions in Western factories and mines were bad and there was exploitation and oppression. After Worldwar II, this was not the case anymore. However, it was in the rest of the world. These better conditions are starting to deteriorate in the West. The rising productivity  by mechanization and automation diminishes the need for real productive labor. Workers get jobless or have to take bullshit-jobs, sometimes more than one.

It’s understandable that Marx drew the political – not scientific – conclusion from his views that capitalism must eventually be abolished. He was not very clear about what should replace it. Most of his political successors have believed that abolition should also be a personal settlement with the capitalists. However, that was not his idea of revolution. Violence would probably be necessary, but “revolution” meant a fundamental change in the structure of society, the economic system. Marx recognized that the capitalists also were part of the capitalist system and didn’t have the freedom to start producing more socially or environmentally friendly on their own. However, they benefited from the system and therefore wanted to maintain it.

Should capitalism be abolished? Is capitalism possible without growth, perhaps even  shrinking production?

Capitalism has four fundamental properties:

  1. Wage Labor
  2. Distribution through the market, supply and demand.
  3. Unconstrained private ownership of the means of production, including wage labour.
  4. Due to private ownership, profit – growth of capital – is the main goal in business; this causes a compulsion to increase production and productivity

The whole is administered by the fact that all factors of production and results are expressed in the same unit: currency, value. Decisions are made by management with the aid of plans, budgets and reports drawn up in this way. These insights were first described by Marx in “Capital”.

The first three properties enable management to make decisions, corrected afterwards by the market. So innovation, invention and improvement – including mechanization and automation – of the activities gets possible as an independent decision.

Over-all independence doesn’t exist. A company – an individual capital – must maintain itself and grow in an environment of market forces, laws and external circumstances. One can’t  make good decisions unless one is well aware of these conditions, although that’s no guarantee for success. This is the core of entrepreneurial freedom.

It’s clear that there must be funds in order to be able to invest in innovation and to absorb setbacks, so they don’t immediately threaten the survival of the company. However, there is no need to make permanent growth of profit and subsequent growth of production the central objective. There are forms of capitalism imaginable without that goal, on the condition that companies are no longer privately owned. And certainly not privately owned in the form of massive shared ownership. Independent entrepreneurs – usually not active globally – sometimes put other goals than profit on top, but shareholders go for profit. They can’t do otherwise.

Social property

Large enterprises should be converted to collective, social property (“the commons”). For worldwide operating companies this will be difficult. These should be broken up in regional units, operating within a state, a federation. These units should be bound contractually to each other within an international framework. States and federations can protect themselves and the industrial community within from unwanted interference from a-social enterprises.

The board should be democratically controlled and appointed by all stakeholders, including the state, the community as a whole. It is important that there will be no planned economy in which it is determined per sector or company what is produced at what cost. Contrary to the communist idea of “everyone works according to his ability and consumes according to need”, wage labor and market consumption remains the starting point, where labor should be employed from labor collectives. Collective property thoroughly corrects unconstrained jurisdiction, in particular the unequal position of labor and capital.

Unconstrained jurisdiction never existed, except in the first decades of capitalism. There is a lot of regulation, which makes it especially difficult for smaller companies, while the large ones benefit or have no problem. Working conditions, environmental effects, safety, composition of the workforce, absenteeism, reports on anything and everything, are prescribed in detail. This continues to expand, at least in Europe. This is a major disadvantage for the companies established here and therefore for the dependent population. Control from above by the state leads to more regulation than control from below by the stakeholders themselves.

In order to control growth or even manage contraction, companies will have to submit innovations to a central body that decides according to previously agreed guidelines. Some production, especially services like care and rearing children could and should be reassigned to the private sphere.

Social wage labour

The development  of capitalism resulted in far-reaching control over the actions of employees. Job satisfaction and the produced results suffer gravely. Under state control, this extends itself to private life. Insofar as labor disappears due to automation, no challenging work takes its place. On the contrary, working hours that have disappeared due to automation are being replaced by bullshit jobs; far less than the abolished working hours. Limiting automation and deregulation will have to receive full attention in social capitalism. As well as reassigning productive activities to the private sphere. Carrying out useful activities for others, being responsible for them yourself, is the core of satisfaction in productive activity. Jogging uselessly around in “free time” can’t compete with that.

International capital acts as a great equalizer. By its nature, capital wants a level playing field and this can ultimately only be achieved if all the different identities and cultures are mixed together in a big heap. This must end and partially reversed if human dignity and freedom are to remain. There is nothing essential left to choose or experience in a huge gray slush. Man is not a citizen of the world, but a citizen of a specific state with a specific culture. That can be a federation of states with different sub-cultures, but that’s the limit.

Social revolution

This revolution is possible but very unlikely. In any case, it will not be possible to achieve it all over the world at once, nor in an individual state like Germany. The most promising start would be such a revolution in the United States.

If the revolution is to have any chance at all,  present owners and managers won’t have to fear being punished. If possible, thety can play an important role in the continuation of the enterprise. In any case, they will be properly compensated to continue most of their way of living. Even criminal elements like Pfizer, Facebook (Meta) or Amazon should be treated mercifully if they cooperate. Smaller companies, where the owner is primarily responsible director or cooperating foreman, can remain privately owned. The speculative and non-productive elements of capital should be dealt with more harshly, hopefully with the coöperation of socialized managers.

Next:: the (im)possibility of Social Revolution .

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