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Analyses Last Updated: Dec 2, 2021 - 11:20:23 AM


Capitalism vs. Liberty
By Robert Kuttner, TAP, December 1, 2021
Dec 2, 2021 - 11:18:49 AM

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All that we liberals cherish—socially, economically, and politically—is being undermined by toxic capitalism. What might lie beyond it, and how might we get there?

All of my adult life, I’ve considered myself a left-liberal, tending toward social democrat. Much of that sensibility reflects the era of my early adulthood, a time when reformed capitalism seemed plausible and practical. The New Deal had created a fundamental shift of power and ideology. Free-market ideologues and Wall Street moguls were discredited and disgraced by the Great Crash. Financial markets were tightly regulated. Labor unions were empowered. Government demonstrated the value of public investment and social insurance. The mixed economy had arrived, seemingly for keeps, well defended by grateful voters.

But that moment turned out to be all too transient and fragile. What followed was not just a reversion to the laissez-faire of the 1920s. What has ensued is hyper-capitalism, impervious to the usual strategies of reform, turning humans and social institutions into expendable commodities, destroying the ability of people to thrive. Saving democracy, the planet, and decent lives for regular people requires moving beyond capitalism. To be an effective liberal today, you need to be a socialist.

I’ve long resisted the socialist label, on several grounds—partly because the habit of sectarian infighting sometimes makes socialism seem a caricature of itself; partly because the word “socialism” gives the right too fat a target in a country without much of a socialist tradition. Then again, socialist-baiting is standard Republican playbook even when Democrats propose the most timid of programs. After the House belatedly passed a badly stripped-down infrastructure bill, scores of Republicans absurdly claimed that this was socialism. If only.

I’m also uneasy in the company of some people to my left who indulge self-defeating slogans like “defund the police,” which are gifts to the right; or who are unhelpfully scornful of President Biden’s efforts. (Where do they expect him to find the votes in Congress for an even more robust left program?) Conversely, some admired friends from my generation who were once founders of Students for a Democratic Society and who are unabashed socialists are fervent Biden supporters. They’re political realists, while also pushing Biden to be more progressive in his aspirations. That’s my stance, too. So this essay is an exploration of the deepening toxicity of capitalism and the alternatives, not a brief for no-enemies-on-the-left.

When I was young, the liberal tradition was far more robust. “Liberal” evoked FDR. There was no Trumpism because New Deal liberalism delivered for the working class. This magazine was born very much in the liberal tradition. When Paul Starr, Bob Reich, and I founded the Prospect in 1989, we paid calls on two iconic older liberals to seek their blessing, Arthur Schlesinger Jr. and John Kenneth Galbraith, and not on socialists Michael Harrington and Irving Howe (though both were personal heroes of mine as well as friends, and I’d written several pieces for Howe’s Dissent). A Prospect slogan, emblazoned on our cover, was A Journal for the Liberal Imagination.

That era and those assumptions have been overtaken by events. The system’s excesses are becoming steadily more grotesque. The profit maximization strategies of Amazon repeat the worst sweatshop conditions of a century ago, as if the labor movement had never existed. Likewise today’s slaughterhouses. Ultra-commercialization is infecting every corner of the medical system, harming patients and health workers alike, mocking the idea that markets are efficient. The supply chain crisis is the result of excessive globalization and deregulation. The platform monopolies have built their business models around surveillance capitalism and cultivation of addictive behaviors. Private equity firms and hedge funds are taking over sector after sector, from retail to nursing homes to newspapers, undermining workers and the viability of underlying enterprises. Wealth has never been more concentrated. What’s needed is substantial social ownership and a political consciousness to animate it.

Politically, socialism is no longer fringe. Bernie Sanders, a democratic socialist, very nearly won the Democratic presidential nomination twice, because he articulated the frustrations and aspirations of working people. There is a good case that he had a better shot at beating Trump than Hillary Clinton. In 2019, YouGov reported that 70 percent of millennials, ages 23 to 38, have a positive view of socialism—not surprisingly, given their lifelong experience of hyper-capitalism. (Our friend John Judis goes more deeply into this shift in his 2020 book, The Socialist Awakening.) Standard economics has a concept called “revealed preference.” New products and prices reveal preferences people didn’t know they had. Same with ideologies, evidently. The surprise support for Bernie and democratic socialism was a revealed preference.

Biden has attempted to govern with expansive spending, taxing, and regulatory measures in the spirit of FDR. But his aspirations and credibility are being blunted by the corporate Democrats in his own party, reflecting the persistent undertow of capitalism. Biden’s heroic efforts, like Roosevelt’s, are well worth supporting—without illusions. The deeper sickness of the economy and society is hyper-capitalism, and we need to supplant it.

I’ve come around to this view gradually, not because my values have changed but because reality has changed. I’m a child of the New Deal. My parents and grandfather cashed in their war bonds in 1948 for a down payment on a 900-square-foot house in suburbia, financed with my dad’s 2.5 percent GI loan. When my father was stricken with cancer in 1952, the VA, which provided high-quality socialized medicine for an entire generation of men, paid for all of his excellent care. After he died, my mom was able to keep our house with a part-time job, thanks to his veterans pension and Social Security.

What’s needed is substantial social ownership and a political consciousness to animate it.

So I was a New Dealer in my bones before ever studying Roosevelt. Two sacred words in my house were VA and Social Security. I also acquired a sense of social class growing up as a poor kid in a rich town. Yet this was an era of substantial upward mobility. Like others of my generation, I was able to go to college with no debt.

Despite the loss of my father, despite the vague worry of being blown to hell in a nuclear exchange, despite the persistent racism and the inconclusive struggles for civil rights, America seemed like a hopeful place when I went off to college in 1961. When I became a journalist and for a time a Senate investigator, my sensibility continued to be left-liberal. Reform seemed worth the struggle, and it seemed possible.

One of my proudest achievements was an investigation and a series of hearings for the Senate Banking Committee on redlining and community disinvestment. Guided by local activists, we demonstrated that banks in many urban neighborhoods were pulling savings out of the community but refusing to put mortgage loans back in. Under the leadership of a great progressive, Wisconsin Sen. William Proxmire, we passed three bills. One required banks to disclose where they were making their loans, so that activists could pressure them. A second created an affirmative obligation for banks to reinvest in communities. A third created a housing assistance program for moderate-income homeowners.

One of our star witnesses was an idealistic and smart community banker named Ron Grzywinski, who had built the South Shore National Bank in Chicago (later renamed ShoreBank) as a model institution to finance low-income homeownership and local business on Chicago’s mostly Black South Side. A little later, after I moved back to journalism, other legislation used that bank as a template for a new kind of lender, the community development financial institution, spawning dozens of others following the ShoreBank model.

This was heady stuff. Working with local organizers, you could actually legislate, and it could make a difference on the ground. And then it all turned to shit. And how it turned to shit is instructive.

While we liberals were idealistically promoting community reinvestment, the real power players on Wall Street and their allies in Washington were inventing subprime. Bill Clinton was supporting ShoreBank and kindred community lenders with one hand. (He actually made the ShoreBank model part of his 1992 campaign stump speech.) But with the other, he was promoting the extreme financial deregulation and speculation that led to fraudulent mortgage-backed securities and the 2008 financial collapse. Subprime “exploding” mortgages designed to default were cynically targeted at exactly the populations and communities our work on community reinvestment sought to help. In the wake of the collapse, close to ten million families, disproportionately Black and brown, lost their homes. Three decades of work increasing homeownership for working people was wiped out.

In a perfect final touch, the government bailed out all the big investment banks that had bankrolled the subprime lenders and underwritten the faked mortgage-backed bonds that collapsed in 2008. They were too big to fail. But ShoreBank, which had not participated in subprime at all, got caught in the general downdraft of falling property values. It was deemed too small to matter. Barack Obama was not embarrassed to bail out Wall Street. But since ShoreBank was in his old neighborhood, his handlers were concerned that saving the local community bank might not look good. So ShoreBank got no federal aid and was allowed to fail.

Look at the past century, and you see good people doing hard and noble work that produces results that stick—for a time: labor organizers, community activists, civil rights workers. And then much of it, even most of it, gets wiped out and worse.

The liberal tradition, as represented by Franklin Roosevelt, was once far more robust.

DURING A LIFETIME that has blended journalism, activism, scholarly research, and teaching, I’ve tried to get my mind around the relationship between markets, social justice, and democracy. My most ambitious book, published in 1997, was called Everything for Sale: The Virtues and Limits of Markets. In that book, I looked at every sector of the economy and demonstrated that contrary to the conceits of orthodox economics, “market failure” was not an exceptional case; in much of the economy, market inefficiency was the norm. You could improve on it with social investment and regulation. As one reviewer aptly wrote, my quarrel “is not with capitalism per se.”

Rereading that book after 25 years, I now realize that my conclusions were right but my framing was off. The problem was not “markets” or the technical mistakes of economists. It was capitalism as a system. Why, after all, would a nation come up with a health system like ours that is so staggeringly inefficient, inconvenient, and brutal? What kind of system would tolerate surprise billing that bankrupts families, or deny sick people lifesaving drugs that cost a few cents to manufacture? What kind of system would overuse profitable procedures for the insured, such as endoscopies, while disallowing lifesaving surgeries and drugs for people who can’t pay? A capitalist one.

All of these seeming inefficiencies are in fact highly efficient—from the perspective of profit maximization. They are so totally ingrained that efforts at incremental reform only make the system that much more convoluted. Recently, The New York Times ran an obtuse piece titled “Why Aren’t More People Comparison Shopping for Health Plans?” The piece, by Paula Span, quoting a Kaiser study, reported that 71 percent of recipients did not shop around for Medicare Advantage and Part D drug plans, even though they might have saved money. The author added: “Some of that inertia may reflect people’s satisfaction with their coverage; it might also indicate an overwhelming amount of choice. For 2022, beneficiaries face an average of 33 Medicare Advantage plans to select from (but 56 in Philadelphia and 63 in Cincinnati) and 30 stand-alone Part D plans.”

Rather than including even a paragraph on how our absurd system got this way, she concluded by urging people to shop around: “[I]t’s open enrollment season. SHIP programs in every state, with 12,500 trained team members, represent the best source of unbiased information and work with more than 2.5 million people each year.”

What the piece did not point out is that the private insurance industry uses a trusted public brand, Medicare, to market for-profit products, offering bewildering “choices” precisely to confuse and manipulate subscribers; and that the idea of shopping around for drug benefits is preposterous on its face. Far superior would be universal drug benefits under public Medicare; or even better, under national health insurance, with prices negotiated by the system. Still more efficient would be a socialized drug industry with no profit motive at all.

But all of this is precluded by the sheer political power of the insurance and drug industries, which have corrupted Democrats and Republicans alike. The assumptions that this is how the system has to work are so deeply engrained that our most serious newspaper, rather than explaining the real choices that ought to be on the table, provides anodyne advice on how to shop around within a rigged system.

Look around the entire economy, and you find case after case where the sheer power of capital is precluding more social approaches that are not only more decent and fair, but far more efficient and streamlined, and less costly to citizens and the economy. The for-profit sector keeps crowding out public and not-for-profit alternatives. And because they need to swim in a market pool defined by profit-maximizing corporations, large not-for-profits are increasingly indistinguishable from their for-profit cousins. (“The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.” —George Orwell, Animal Farm)

The Massachusetts General Hospital, nominally one of the great nonprofits, plays exactly the same games as the commercial for-profits: buying up referral networks, gaming insurance reimbursements, investing in more profitable specialties, and maximizing market share. Back in the day, when the entire health system was less commercialized, when did community hospitals worry about market share? When did they buy up medical practices? It isn’t just that market institutions crowd out non-market ones. It’s that market norms crowd out other norms and other values. As someone once said, all that is solid melts into air.

THAT, OF COURSE, WAS MARX. I never went through a Marxian phase. In the 1960s, at the peak of the postwar boom when I was in college and graduate school, the concepts and language of Marxism seemed quaint and silly. The proletariat, rather than rising up against the bourgeoisie, had joined the middle class via effective trade unions. The middle class, far from being immiserated, was content and growing. Nations that invoked Marx were economic failures. They were not dictatorships of the proletariat but plain old corrupt dictatorships. The reserve army of the unemployed had not materialized, nor had the law of the falling rate of profits, nor the hegemony of capitalist ideas. In Europe, social democracy was alive and well. Thanks to countervailing power, the state was far from Marx’s executive committee of the working class. It was the instrument of workers and citizens working to tame capitalism in the public interest.

Well, gentle reader, that era turned out to be a blip—the consequence of historically anomalous constraints on the economic and political power of capital in a capitalist economy. In the intervening years, I haven’t become more Marxian. The world has become more Marxian.

The era of social democracy and managed capitalism lasted barely a generation before capitalists recovered their normal immense power in economies whose ownership remained fundamentally capitalist. With hyper-globalization, a worldwide reserve army of the unemployed does batter down wages and marginalizes the political power of labor in the democracies. A lumpenproletariat of the homeless and stateless migrants rends the social fabric. Even elite professions are becoming proletarianized. It is no longer risible to use “capital,” Marx-style, as a collective noun. Far too much of society is indeed becoming commodified. The idea that things have to be this way, perhaps with social buffers around the edges, is close to hegemonic.

I haven’t become more Marxian. The world has become more Marxian.

But while Marxism provides some useful insights, I would not call myself a Marxist. The Marxian characterization of historical laws is far too mechanistic. Marx neglected to attend to how democracy would actually work, if socialism ever arrived. And he got the most important thing of all dead wrong. Marx thought that when the crisis finally came, workers of all countries would unite in their collective interest. But as the history of the past century proves again and again, when market forces overwhelm the security and livelihoods of working people, they are far more likely to turn to ultra-nationalism and fascism.

The great prophetic critic of that dynamic is not Karl Marx but Karl Polanyi. Like Marx, Polanyi astutely explained the tendency of capitalism to commodify things that needed to operate by other norms and values, such as human society and human labor. Unlike Marx, Polanyi appreciated the risks of fascism. Most importantly, Polanyi saw tendencies rather than iron laws. He left room for human agency and diverse experimentation.

Polanyi came of age as a journalist and public intellectual in the 1920s, in what was then known as Red Vienna. The city of Vienna had socialist municipal governments from 1919 until 1934. During this remarkable period, the city government created social housing for the middle class as well as the working class, a model to this day. Vienna levied taxes on employers of private servants as well as taxes on cars, horse racing, and other luxuries, to help finance an array of services, including family allowances for parents, preschools, and unemployment insurance run through the trade unions. Electricity, gas, and water were socially owned. None of this undermined Austria’s private economy, which was far more endangered by the austerity policies criticized by Polanyi. In his theoretical work, Polanyi viewed democratic socialism as the system to carry out the political liberalism of the Enlightenment, and economic liberalism (laissez-faire) as corrosive of political liberalism.

Polanyi published his epic book on capitalism, The Great Transformation, in 1944. He lived another 20 years, long enough to see some evidence that the democracies were taking history’s lessons to heart and constraining capitalism’s destructive tendencies, and to hope that we would go beyond social democracy to democratic socialism. He did not live long enough to see it all reversed, confirming his darker insights.

In the 1920s, Karl Polanyi’s Red Vienna featured socially owned housing, water, and electricity, and used taxes on the rich to finance child allowances, preschools, and other social services.

One of Polanyi’s most powerful concepts is what he called the “double movement.” Capitalism overwhelms other social institutions on which ordinary life and economic security depend. Eventually, the common people revolt and are willing to sacrifice democracy for a measure of security and respect. Thus does capitalism destroy democracy in a bank shot. Capitalism also destroys democracy directly, by substituting money and power for citizenship, precluding reformist remedies, and signaling the common people that they are fools to think that voting could make a difference.

Polanyi’s double movement uncannily describes our own era. Ordinary people are disaffected from the dislocations and excesses of capitalism but unsure whom to blame or whom to trust. Ever since Carter, much of the Democratic Party has been so compromised and bedded down with Wall Street that displaced middle- and working-class people are skeptical that Democrats and liberal remedies can make much of a difference in their lives. The cumulative result is Trumpism, a weird combination of racist nationalism and redoubled corporate rule. Libertarians like to teach that liberal democracy and free markets are handmaidens. But autocrats from Trump to Hitler to Xi demonstrate that dictatorship and market modes of production and employment can coexist all too well. The signal disgrace of our era is the ease with which the corporate center-right has gone along with Trump and the Republican efforts to destroy what remains of democracy. If it’s possible to oust unions, cut taxes, and gut regulation, losing democracy is a price worth paying, if it’s a price at all.

Yet Polanyi’s sensibility gives me some hope. Looking at the tendency of capitalism to crush efforts to build decent human economies, you can become a defeatist and a cynic; or you can keep at it, appreciating that sometimes solidarity produces results and that nothing lasts forever. The 15 years of Polanyi’s Red Vienna stand as a model. Likewise the 40 years between the 1930s and the 1970s when the New Deal system contoured America. Swedish social democracy has been around for almost a century. While global capitalism keeps chipping away at the Swedish model, that model continues to provide decent lives for most Swedes. As capitalism goes, a century of decency is pretty good.

When we had a 30th anniversary testimonial dinner for the Prospect in October 2019, I gave a talk invoking Camus’s celebrated essay The Myth of Sisyphus. As you will recall, Sisyphus is condemned to push a rock up a hill, only to have it roll back down. His every effort is futile. Yet Camus ends his essay with the words “One must imagine Sisyphus happy.” When I first read that, it seemed preposterous. Happy? Then I appreciated the insight that the joy is in the struggle. And then, I finally got the larger point. The rock, ultimately, is death. In the end, it crushes us all. But along the way, we build the best life and the best society that we can, recognizing that nothing lasts forever.

So with that credo, Sisyphus Happy, what is to be done? For if we can’t even produce reformed capitalism, how on earth do we move toward democratic socialism?

ONE THING THAT NEEDS to be done is to keep pushing outward the boundaries of the possible. In a seeming paradox, the more socialistic elements of Biden’s full $3.5 trillion program are the most popular—the paid family leave, the child allowance, the social provision of child care, the free tuition for community college, the social enhancements to health care. Revealed preference. Yet the press, in its myopia, concluded that the Democrats had a rough election in November because Biden’s program was too left-wing. Sorting out the Democrats’ election defeat, The New York Times, channeling Fox, published a monumentally stupid editorial titled “Face Reality, Democrats.” It claimed, “Tuesday’s results are a sign that significant parts of the electorate are feeling leery of a sharp leftward push …”

In fact, the Democrats were repudiated because they and Biden couldn’t get their act together and looked like a party that couldn’t govern. And the reason they couldn’t reach agreement on a budget reflected the perverse influence not of “moderates,” as the press keeps calling them, but of corporate Democrats. Most of Rep. Josh Gottheimer’s gang of obstructionists in the House represent districts whose constituents support Biden’s program. The Gottheimer naysayers oppose it not because that’s what it takes to get elected, but because of their corporate debts and alliances.

In individualistic America, the citizenry supposedly mistrusts government. But once socialistic programs are enacted, they are immensely popular. Chattanooga has the country’s cheapest and fastest broadband provided by the local public power company—pure socialism. Ask the citizens if they want to return to slower, more costly, and less reliable private broadband. Our most popular programs are the most socialistic—Social Security and Medicare. Revealed preference again.

That same Times editorial quotes Rep. Abigail Spanberger, a centrist Virginia Democrat, saying, “Nobody elected him [Biden] to be F.D.R.” Maybe not, but last spring when the pandemic emergency, the recession, and the progressive movement impelled Biden to govern in the spirit of FDR, the citizenry liked what they saw. It was only when the momentum was stalled by Republicans and corporate Democrats that Biden started looking feckless.

Given the immense corporate undertow in American politics, Biden’s program, even if fully enacted, would be necessary but not sufficient. He has made a good beginning with his regulatory appointments aimed at breaking up extreme corporate concentration. He needs to go a lot further by getting rid of the dark financial pools of private equity and hedge funds, and by constraining private capital generally.

Bernie Sanders has been a champion of social ownership going back to land trusts during his mayoralty in Burlington.

ONE BASIC STRATEGY, I think, is to keep creating islands of social ownership and to limit capitalist ones. Our colleague Ganesh Sitaraman calls these “public options.” Ideas like postal banking and other forms of public banking, such as establishing individual accounts directly at the Federal Reserve or a green development bank, can do that. Likewise public power and public broadband. Or the original public option of socialized health care. Or direct public development and distribution of patent-free drugs. Social institutions like these demonstrate the superior equity and efficiency of socially owned alternatives; they also weaken competing private ones and thus the political power of capital. As Chattanooga suggests, this can be done at the municipal level, as well as by states and the national government.

Social ownership doesn’t mean just government institutions, but incudes others that are noncapitalist in their logic and ownership structure. Once, such institutions were plentiful in America. The New Deal created islands of public ownership, such as public power, public housing, and public financial institutions like the original Fannie Mae and a much enlarged Reconstruction Finance Corporation. But the first half of the 20th century was also an era of noncapitalist mutual and nonprofit institutions.

Most savings and loans were nonprofits; most insurance companies were mutually owned. The first wave of prepaid group health plans were co-ops. These embodied values other than capitalist ones; they promoted direct democratic governance in ways that bureaucracies don’t; and they stood as bulwarks against the relentless incursion of capitalist institutions. In recent decades, however, financial capital viewed these institutions as pools of money they wished to appropriate. The stewards of these institutions saw a chance to cash in and enrich themselves. Congress obliged by making such conversions legal. Most mutual financial institutions have become conventional for-profits. Most nonprofit health plans were converted to for-profit HMOs. This sector needs to be reclaimed.

I happen to love public libraries, not just because I love books, but because when you enter a library nobody is trying to sell you anything. It is free and the ethic is noncommercial. It is like breathing different air. Public radio, despite the annoyance of encroaching quasi-commercials, is still light years away from commercial broadcasting in its basic ethic. We need more such institutional oases of non-market norms.

Housing is an emblematic area where America’s attempts to graft some social objectives onto a for-profit system controlled by developers and financiers are inefficient and pitiful. Our subsidies to create affordable housing include a low-income tax credit that is complex and bureaucratic for community housing developers to use, and that delivers much of the subsidy to financial operators who syndicate the tax shelter to other rich people. A second instrument, housing vouchers, does not meet the need and bids up prices and profits to landlords. A third gimmick, requiring developers of luxury housing to set aside some affordable units, is woefully inadequate. Far better would be the creation of a large, genuinely social housing sector that need not be traditional public housing. We have a model for this in the form of housing land trusts that create diverse forms of social housing permanently protected from market pressures—pioneered in Bernie Sanders’s Burlington and in Karl Polanyi’s Red Vienna.

Not only is liberalism too weak to resist the predations of metastatic capitalism; so is social democracy.

We also need to resist and reverse privatization. Institutions that should be public have been increasingly privatized, with results that provide windfall gains to private capital. For everyone else, the flip side is added costs, debased public values, and degraded services to ordinary citizens. These include privatized prisons, privatized Medicaid and Medicare, privatized voucher schools, privatized highways and parking meters, privatized management of public-transit systems, and a great deal more. Regulation itself has been increasingly privatized, as public agencies have delegated their authority to “self-regulatory agencies” that are thinly disguised trade associations. A comprehensive and depressing guide to this is the superb new book The Privatization of Everything, by Donald Cohen and Allen Mikaelian. Here again, it’s important to appreciate that this tendency is not just “privatization,” a neutral-sounding term that suggests well-intentioned policy strategies that sometimes went awry. What’s at work here is yet another realm of the relentless encroachment of capitalism as a system.

It would be good to get more creative in devising new forms of social ownership. Peter Barnes’s latest book, Ours: The Case for Universal Property, provides some ingenious ways to think about this goal. It was Barnes who first pointed to the Alaska Permanent Fund as a more general model. When oil was discovered on Alaska’s North Slope in the 1970s, the governor, a renegade Republican named Jay Hammond, rather than hand all the profits to the oil companies, sponsored a public fund that would pay all Alaskans annual dividends in equal amounts. Barnes calls for collective sources of wealth (such as sunlight) that are privately exploited to generate dividends and trust funds for all. Thomas Piketty, in his new book, Time for Socialism, calls for a “universal capital endowment” of about $150,000, to be paid to every adult at age 25, financed by taxes on extreme wealth.

These ideas are ingenious technical policy solutions. But to gain political traction, they require a movement built on a coherent understanding of capitalism as a system. The labor movement is one such movement and, just between us, much of it is socialist. A weakness of the American liberal tradition, even at its apex under FDR, was that it was disconnected from a comprehensive critique of capitalism as a system. As Albert Hirschman pointed out, FDR sold his reforms as merely pragmatic. Writing in the 1980s, as Reagan was reversing the New Deal, Hirschman observed, “Today, of course, we can appreciate the high cost of Roosevelt’s maneuver. The New Deal reforms … were never truly consolidated as an integral part of a new economic order or ideology.”

MORE THAN 20 YEARS AGO, Paul Starr and I had an exchange in the Prospect on the relationship between liberalism, social democracy, and socialism. Both pieces are well worth rereading in light of subsequent events. Paul, in a piece titled “Liberalism After Socialism,” was writing not that long after the collapse of communism. His basic argument was that liberalism and socialism come out of entirely different traditions; that it’s a categorical and political mistake to blur them with something called social democracy; and that the liberal tradition is capacious enough to include all the reform that we need. He concluded his Prospect essay with these words: “While the house of liberalism in America has many rooms, it should not be allowed to become the last refuge of a defeated and disappointed socialism. When socialism was young and full of fervor, some liberals were understandably infatuated and thought of marrying their political values to socialist economics. But the romance should be over once and for all.”

 

In my own piece, I wrote that social democracy is a more robust heir to the aspirations of liberalism. “Europe’s social democrats, developing a welfare state and a Keynesian strategy of economic stabilization roughly in parallel with American liberals, nonetheless had a somewhat different understanding of what they were about. As part socialist and part liberal, they understood the enterprise not just as spreading social benefits or fighting unemployment, but as taming capitalism and as building a durable political constituency to make that enterprise electorally possible … I am sympathetic to social democracy, not as a bridge to socialism, but as a bridge to a more durable liberalism.”

Two decades after that exchange, events have not been kind to either essay. Not only is liberalism too weak to resist the predations of metastatic capitalism; so is social democracy. Paul wrote, “Western European countries that have had Socialist and Labour parties in power have drifted progressively further away from a commitment to socialism … indeed, some nominally Socialist governments have been actively privatizing public enterprises.” This is precisely the problem. The great destroyer of liberal values that Paul and I both hold dear has been rampant capitalism.

In a recent Prospect piece, “The Agony of Social Democratic Europe,” I concluded that the cause of the social democratic near collapse was the pervasive spread of neoliberalism as embraced by watered-down “center-left” parties as well as by conservative ones. As the lives of ordinary people became more and more precarious thanks to ultra-capitalism spread by globalism, they had no good reason to vote for social democrats.

In the 1980s, when Swedish social democracy was coming under threat by the general turn to the right and the deregulation of global financial markets, two of the smartest Swedish economists, Rudolf Meidner and Gösta Rehn, realized that to defend social democracy you needed something more like socialism. But as Swedes, they did not want statism. Meidner and Rehn both came out of the trade union movement, the central pillar of the Swedish model. Their idea was to build socialism on what they called “wage-earner funds.” Every year, a set percentage of all profits of Swedish corporations would be directed to funds collectively owned by workers. These would not only enhance pensions. More fundamentally, in less than a generation, they would lead to collective worker ownership of Swedish industry, but without undermining Swedish entrepreneurship. On the contrary, as a source of patient capital they would be far better than private financial markets impatient for quick returns. But by the 1980s, the Swedish Social Democrats were already becoming more neoliberal, and the social democratic leadership killed the plan.

The difference between democratic socialism and social democracy is that the former grasps the need for substantial social ownership to supplant capitalism as a system. The latter tends to deteriorate into welfare capitalism, which becomes an impossible straddle fiscally and vulnerable politically, and gets eroded over time.

In 1972, a young Christopher Jencks, who later became a frequent contributor to these pages, wrote an influential book called Inequality. He closed by delicately calling for “what other countries call socialism.” It’s time for Americans to call socialism by its name. Like Sisyphus, the best we can expect is that the rock may stay where we’ve put it for a long while, sometimes for entire generations of decency, as the struggle continues.


Source:Ocnus.net 2021

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