Posts Tagged ‘democracy’

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I have been arguing for some time on this blog that contemporary capitalism faces a profound legitimation crisis. It has failed to deliver on its promises, and therefore is being calling into question.

As it turns out, Martin Wolf, the chief economics commentator at the Financial Times, has also sounded a warning about the ongoing legitimacy crisis. But for him it’s a bit different. The problem, as he sees it, is the tension between democracy and capitalism.

A natural connection exists between liberal democracy — the combination of universal suffrage with entrenched civil and personal rights — and capitalism, the right to buy and sell goods, services, capital and one’s own labour freely. They share the belief that people should make their own choices as individuals and as citizens. Democracy and capitalism share the assumption that people are entitled to exercise agency. Humans must be viewed as agents, not just as objects of other people’s power.

Yet it is also easy to identify tensions between democracy and capitalism. Democracy is egalitarian. Capitalism is inegalitarian, at least in terms of outcomes. If the economy flounders, the majority might choose authoritarianism, as in the 1930s. If economic outcomes become too unequal, the rich might turn democracy into plutocracy.

Historically, the rise of capitalism and the pressure for an ever-broader suffrage went together. This is why the richest countries are liberal democracies with, more or less, capitalist economies. Widely shared increases in real incomes played a vital part in legitimising capitalism and stabilising democracy. Today, however, capitalism is finding it far more difficult to generate such improvements in prosperity. On the contrary, the evidence is of growing inequality and slowing productivity growth. This poisonous brew makes democracy intolerant and capitalism illegitimate.

One can find plenty to pick apart in Wolf’s story, starting with the idea that there’s a “natural connection” between democracy and capitalism. There’s nothing natural about it, although clearly there is a historical relationship—complex, fragile, and contested—between democratic political structures and capitalist economies.

But Wolf does understand that today’s capitalism is global:

Left to themselves, capitalists will not limit their activities to any given jurisdiction. If opportunities are global so, too, will be their activities.

And while Wolf forgets or overlooks the fact that capitalism has been global from the very beginning, he demonstrates his awareness that the disappointing recent performance of global capitalism (“not least the shock of the financial crisis and its devastating effect on trust in the elites in charge of our political and economic arrangements”) has once again created tensions between capitalism and democracy. One source of tension is the rise of a global plutocracy (“and so in effect the end of national democracies”), the other is the rise or illiberal democracies or outright dictatorships (“in which the elected ruler exercises control over both the state and capitalists”).

Wolf is most worried about the danger to democracy, and therefore has come around to the view that the continued pursuit of international trade agreements (like the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership), which “tightly constrain national regulatory discretion in the interests of corporations,” needs to be curtailed and rethought.

The alternative, of course, is to safeguard and strengthen the future of democracy—in which, in Wolf’s words, economic policy can be “orientated towards promoting the interests of the many not the few”—by doing away with capitalism itself.

Jamie Galbraith’s ties to Greece go back some seven decades, most recently as an adviser in the Ministry of Finance (working with Yanis Varoufakis) for the Syriza government.

In a recent comment (itself a summary of his new book, Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe), Galbraith [ht: cb] has presented a clear, trenchant critique of Europe through its treatment of Greece.

Last year’s third bailout of Greece, imposed by Europe and the International Monetrary Fund, does to Greece what Versailles did to Germany: It strips assets to satisfy debts. Germany lost its merchant marine, its rolling stock, its colonies, and its coal; Greece has lost its seaports, its airports — the profitable ones — and is set to sell off its beaches, the public asset that is a uniquely Greek glory. Private businesses are being forced into bankruptcy to make way for European chains; private citizens are being forced into foreclosure on their homes. It’s a land grab.

And for what? To satisfy old public debts, incurred for tanks, submarines, the Olympics, big construction projects outsourced to German firms, and to hide deficits in health care, with creditor connivance — a quagmire of graft to support an illusion, that Greece could “compete” as part of the euro. Already in 2010 the IMF knew it was breaking its own rules by pretending that Greece could recover quickly, sustain a huge primary surplus, and repay its debts. Why? To help save French and German banks, which the IMF’s sainted managing director, Dominique Strauss-Kahn, wanted to do, because he wanted to be president of France.

Europe crushed the Greek resistance in 2015. Not because Wolfgang Schäuble, the German finance minister, thought his economic plan would work; he candidly told the Greek finance minister, Yanis Varoufakis, that “as a patriot” he would not sign it himself. But Germany wants to impose its order on Italy and on France, where civil society continues to fight back. And Chancellor Angela Merkel could not admit to her voters, or to fellow Europeans from Slovakia to Portugal, that back in 2010 she’d saved Germany’s banks by saddling them with Greek debts that could never be paid.

Greece was given collective punishment as a lesson. It was done to show that “there is no alternative.” It was done to stop any other attempt to develop, articulate, and defend a more rational policy. It was done to protect the power of the European Central Bank, the German government in Europe, and the policy-making authority, in face of a long record of failure, of the IMF.

If there is an alternative for Europe, where would it come from? According to Galbraith, the process begins with the Democracy in Europe Movement (or DiEM25), launched in 2015 by Varoufakis. But it doesn’t stop there.

Ultimately there would have to be big changes, as revolutionary as the 2015 Athens Spring. The old oligarchies, the Brussels cabals, the self-serving technocrats, and the economic ideologues who now dominate European economic policy would have to yield.

British Labor leader Jeremy Corbyn considers socialism—which he defines as “You care for each other, you care for everybody, and everybody cares for everybody else”—to be obvious.

As it turns out, socialism is increasingly obvious for folks on this side of the pond, too. Like Bernie Sanders. And Mark Workin and Melissa Young, who made the film Shift Change. And Richard Wolff, through Democracy at Work.

Now they’re joined by Shannon Rieger, a recipient of the Janice Nittoli “Forward Thinking” Award from The Century Fund.

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Rieger’s argument is that, in the face of growing inequality (such that “the top 1 percent wage has increased by 138 percent since 1979, [while] the wages of the entire bottom 90 percent of earners have grown by the comparatively meager margin of just 15 percent—and an even more unequal distribution of wealth”), it’s imperative that the United States “develop policies that not only mitigate existing economic inequality and poverty, but that actually reverse these trends for the long term.”

And her proposed solution? Enterprises that are owned and managed by their employees.

By creating a policy environment to support and promote democratic employee-owned businesses, the United States could promote a more equitable employment system and a more just distribution of wealth. Doing so would not only help the country recover from the recent economic devastation of the Great Recession, but also begin to reverse the deep wealth and income disparities that have plagued American workers and families for decades.

Worker-owned cooperatives (which, across the world, employ more than 250 million people, and in 2013, generated $2.95 trillion in turnover) are a particular form of democratic employee-owned business that Rieger considers to have particularly rich potential in the United States.

But they need support, to “help grow the sector to scale.” So, as Rieger explains,

it is crucial that the United States establish a national-level regulatory framework for worker-cooperatives. Foundational components of such a framework could include a clear, universal definition for worker-cooperatives and a national worker-cooperative incorporation code; financial support mechanisms, such as a dedicated worker-ownership fund; and cross-sector partnerships with the existing decentralized network of employee ownership service providers.

Using examples from around the world (including the Marcora Law in Italy) Rieger makes the obvious case for the growth of democratic worker-owned enterprises in the United States.*

Worker-owned enterprises, as a key feature of a socialist transition from capitalism, are certainly obvious to me.

 

*The Marcora Law, which was passed in 1985, offers Italian workers an array of financial support options and a “right of first refusal” opportunity to purchase and re-launch troubled businesses as worker-cooperatives. As Rieger explains,

a U.S. worker-buyout policy modeled after the Marcora Law should become a component of federal-level policy framework for worker-cooperatives. By creating federal legislation that recognizes the worker-owned cooperative business as a distinct form of democratic employee-ownership, and that aligns existing state-level incorporation codes and the worker-ownership service provider network under universal regulatory guidelines, the United States could make a meaningful, effective commitment to expanding the democratic worker-ownership sector.