When a government takes over a private enterprise, it usually gives full compensation to the owners. The investors who once owned the private stocks now own public bonds and collect the interest on these bonds. The wealth of the enterprise shifts from stocks to bonds. While ownership is now nominally public, the income still flows into private pockets. What the public owns in this case is a huge bonded debt—with all the risks and losses and none of the profits.
Defenders of the existing system assert that the history of “democratic capitalism” has been one of gradual reform. To be sure, important reforms have been won by working people. To the extent that the present economic order has anything humane and civil about it, it is because millions of people struggled to advance their living standard and their rights as citizens. It is somewhat ironic to credit capitalism with the genius of gradual reform when most reforms through history have been vehemently and sometimes violently resisted by the capitalist class and were won only after prolonged and bitter contest. It is doubly ironic to credit capitalism with being reformist when most of the problems needing reform have been caused or intensified by the capitalist plutocracy.15
Furthermore, the corporation does not exist for social reconstruction but for private gain. Corporations cannot build low-rent houses, feed the poor, clean up the environment, or offer higher education to any qualified modest-income person—unless government gives them lucrative contracts to do so. Even then their major concern would be to squeeze as much profit out of the program as possible.
How can we speak of the U.S. politico-economic system as being a product of the democratic will? What democratic mandate directed the government to give away more money every year to the top 1 percent of the population in interest payments on public bonds than are spent on services to the bottom 20 percent? When was the public last consulted on interest rates and agribusiness subsidies? When did the public insist on having unsafe overpriced medications, and genetically altered foods, and hormone-ridden meat and milk, and federal agencies that protect rather than punish the companies marketing such things? When did the American people urge that utility companies be allowed to overcharge consumers billions of dollars? When did the voice of the people clamor for unsafe work conditions in mines, factories, and on farms, and for recycling radioactive metals into consumer products and industrial sludge into agricultural topsoil? How often have the people demonstrated for multibillion-dollar tax breaks for the superrich, and privatization of Social Security, and cutbacks in student aid? When did they demand a multibillion-dollar space shuttle program that damages the ozone layer and leaves us more burdened by taxes and deprived of necessary services, along with an unworkable multibillion-dollar outer-space missile program that would only increase the dangers of nuclear confrontation if it ever did work? When did the populace insist that the laws of the land be overruled by international, nonelective, anonymous, “free-trade” panels in service to transnational corporations?
What democratic will decreed that we destroy the Cambodian and Laotian countrysides between 1969 and 1971 in bombing campaigns conducted without the consent or even the knowledge of Congress and the public? When did public opinion demand that we wage a mercenary war of attrition against Nicaragua, or attack Grenada, Panama, Somalia, Yugoslavia, Afghanistan, Iraq, and Haiti, slaughtering tens of thousands in the doing; or support wars against popular forces in El Salvador, Guatemala, Angola, Mozambique, the Western Sahara, and East Timor? Far from giving our consent, we ordinary people have had to struggle to find out what is going on.
The ruling class has several ways of expropriating the earnings of the people. First and foremost, as workers, people receive only a portion of the value their labor power creates. The rest goes to the owners of capital.
Second, as consumers, people are victimized by monopoly practices that force them to spend more for less. They are confronted with exploitative forms of involuntary consumption, as when relatively inexpensive mass-transit systems are eliminated to create a greater dependency on automobiles, or low-rent apartments are converted to high-priced condominiums, or a utility company doubles its prices after deregulation.
Third, as taxpayers, working people have had to shoulder an ever larger portion of the tax burden, while corporate America and the superrich pay less and less. Indeed, the dramatic decline in taxes on business and the superrich has been a major cause of growth in the federal debt. The debt itself is a source of investment and income for the moneyed class (via government bonds) and an additional tax burden on the populace.
Fourth, as citizens the people endure a lower quality of life. Hidden diseconomies are repeatedly foisted onto them by private business, as when a chemical company contaminates a community’s air or groundwater with its toxic wastes, or when the very survival of the planet is threatened by global warming.
The reigning system of power and wealth, with its attendant abuses and injustices, activates a resistance from workers, consumers, community groups, and taxpayers—who are usually one and the same people. There exists, then, not only class oppression but class struggle. Popular struggle in the United States ebbs and flows but never ceases. Moved by a combination of anger and hope, ordinary people have organized, agitated, demonstrated, and engaged in electoral challenges, civil disobedience, strikes, sitins, takeovers, boycotts, and sometimes violent clashes with the authorities—for socio-economic betterment at home and peace abroad. Against the heaviest odds, dissenters have suffered many defeats but won some important victories, forcibly extracting concessions and imposing reforms upon resistant rulers.
Democracy is something more than a set of political procedures. To be worthy of its name, democracy should produce outcomes that advance the well-being of the people. The struggle for political democracy—the right to vote, assemble, petition, and dissent—has been largely propelled by a desire to be in a better position to fight for one’s socioeconomic interests. In a word, the struggle for political democracy has been an inherent part of the struggle against plutocracy, a struggle for social and economic democracy.
Through the nineteenth and twentieth centuries, the moneyed classes resisted the expansion of democratic rights, be it universal suffrage, abolitionism, civil liberties, or affirmative action. They knew that the growth of popular rights would only strengthen popular forces and impose limits on elite privileges. They instinctively understood, even if they seldom publicly articulated it, that it is not socialism that subverts democracy, but democracy that subverts capitalism.
The reactionary agenda successfully advanced in recent years has been designed to take us back to 1900 or thereabouts. Wages are held down by forcing people to compete more intensely for work on terms favorable to management. This is done with speedups, downgrading, layoffs, the threat of plant closings, and union busting. In addition, owners eliminate jobs through mechanization and moving to cheaper labor markets overseas. They have sought to roll back child-labor laws, lower the employable age for some jobs, bring in unregulated numbers of immigrants, and raise the retirement age, further increasing the number of workers competing for jobs.
Another way to depress wages is to eliminate alternative sources of working-class support. The historical process of creating people willing to work for subsistence wages entailed driving them off the land and into the factories, denying them access to farms and to the game, fuel, and fruits of the commons. Divorced from this sustenance, the peasant reluctantly metamorphosed into the proletarian.
Today, unemployment benefits and other forms of public assistance are reduced in order to deny alternative sources of income. When public jobs are eliminated there are more people competing for employment in the private sector. When jobs are scarce, people are compelled to work harder for less. Conservatives seek to lower the minimum wage for youth and resist attempts to equalize wages and job opportunities for women and minorities, thus keeping women, youth, and minorities as the traditionally underpaid “reserve army of labor,” used throughout history to lower th
e floor on wages and keep the workforce divided and poorly organized. Racism is especially useful when channeling the economic fears and anger of Whites away from employers and toward out-groups who are seen as competitors for scarce jobs, education, and housing.
A century ago the working populace lived in hovels and toiled twelve to fourteen hours a day for poverty wages under gruesome conditions. Their children more often went to work than to school. But with decades of struggle, working people were able to better their lot. By the 1970s millions of them were working eight-hour days, had job seniority, paid vacations, time-and-half overtime, company medical insurance, and adequate retirement pensions; many lived in decent housing and even could pay a mortgage on a home of their own, while their kids went to public school and some even to public universities. Along with this came improvements in occupational safety, consumer safety, and health care.
More for the general populace, however, meant less for the privileged few. By the 1970s it looked like this country might end up as a quasi-egalitarian social democracy unless something was done about it. As Paul Volcker said when he was chair of the Federal Reserve in 1980, “The standard of living of the average American has to decline.”16
Decline it has. Over the last two decades the reactionary rollback has brought an increase in poverty and homelessness, substandard housing and substandard schools, longer work days with no overtime pay, less job security, wage and benefit cutbacks, a growing tax burden increasingly shifted onto the backs of the lower and middle classes, fewer if any paid vacation days, less affordable health care, privatization of public services, disappearance of already insufficient pensions, drastic cuts in disability assistance and family support, and serious dilution of occupational safety regulations and consumer and environmental protections.
Democracy becomes a problem for the plutocracy not when it fails to work but when it works too well helping the populace to move toward a more equitable and favorable social order, narrowing the gap however modestly between the superrich and the rest of us. So democracy must be diluted and subverted, smothered with disinformation and media puffery, with rigged electoral contests and with large sectors of the public disfranchised, bringing faux victories to the more reactionary candidates. At the same time, the right of labor to organize and strike has come under persistent attack by courts and legislatures. Federal security agencies and local police repress community activists and attack their right to protest.
The state is the single most important instrument that corporate America has at its command. The power to use police and military force, the power of eminent domain, the power to tax and legislate, to use public funds for private profit, float limitless credit, mobilize highly emotive symbols of loyalty and legitimacy, and suppress political dissidence—such resources of state give corporate America a durability it could never provide for itself. The state also functions to stabilize relations among the giant enterprises themselves. Historically, “firms in an oligopolistic industry often turn to the federal government to do for them what they cannot do for themselves—namely, enforce obedience to the rules of their own cartel.”17
The state is also the place where different ruling factions struggle over how best to keep the system afloat. The more liberal and centrist elements argue that those at the top of the social pyramid should give a little in order to keep a lot. If conservative goals are too successful, if wages and buying power are cut back too far and production increased too much, then the contradictions of the free market intensify. Profits may be maintained and even increased for a time through various financial contrivances, but overcapacity and overproduction lead to economic recession. Unemployment grows, markets shrink, discontent deepens, and small and not so small businesses perish. The corporate capitalist system begins to devour itself.
As the pyramid increasingly trembles from reactionary victories, some of the less myopic occupants of the apex develop a new appreciation for the base that sustains them. They advocate granting concessions to those below. But the more reactionary free-marketeers will have none of that. Instead they press ever forward with their backward agenda. If demand slumps and the pie expands only slightly or not at all, that is quite all right as long as the slice going to the moneyed class continues to grow. If profits are going up, then the economy is “doing well”—even if the working public is falling behind in real wages and living conditions, as happened during much of 2001–2007.
The state has two roles that have been readily recognized by political thinkers as varied as Adam Smith and Karl Marx. First, it must provide those services that cannot be developed entirely through private sources: a national defense, a dependable currency, postal service, roads, ports, canals and the like. Second, the state protects the moneyed and propertied interests from the have-nots; this is the capitalist class-control function we have been discussing in this and the previous selection.
But there is a third function of the capitalist state not usually mentioned. It consists of preventing the capitalist system from devouring itself. We have witnessed how this self-destruction might happen in places like Argentina during the 1990s when free marketeers stripped enterprises for massive profits, leaving the entire economy in shambles. Then in the United States there was the multi-billion-dollar plunder and theft perpetrated against the investor class itself by corporate conspirators in Enron, World-Com, Harkin, and a dozen other companies. Instead of making money by going through the trouble of manufacturing and selling products, the corporate predators dip directly into the money streams of the system itself, using every subterfuge and fraud in the doing.
I would suggest that a major difference between the Democratic and Republican parties is that the Democrats recognize this third state function and the Republicans—or their more militantly reactionary wing—refuse to be bothered about it. Indeed some of their key players, for instance, Bush Jr., Dick Cheney, and Ken Lay, were directly involved in the plunder that turned rich successful enterprises into sheer wreckage in order that a few might pocket billions in ill-gotten gains.
The state best protects the existing class structure by enlisting the loyalty and support of the populace. This is accomplished by keeping an appearance of popular rule and neutrality in regard to class interests, and by playing on the public’s patriotic pride and fear, conjuring up images of cataclysmic attack by foreign forces, domestic subversives, communists, and now Islamic terrorists.
Having discerned that “American democracy” as professed by establishment opinion makers is something of a sham, some people incorrectly dismiss the democratic rights won by popular forces as being of little account. But these democratic rights and the organized strength of democratic forces are, at present, all we have to keep reactionary rulers from imposing a dictatorial final solution, a draconian rule to secure the unlimited dominance of capital over labor. Marx anticipated that class struggle would bring the overthrow of capitalism. Short of that, class struggle constrains and alters the capitalist state, so that the government itself, or portions of it, become a contested arena.
The vast inequality in economic power remains a threat to whatever little democracy we have. More than half a century ago Supreme Court Justice Louis Brandeis commented, “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” And some years earlier, the German sociologist Max Weber wrote: “The question is: How are freedom and democracy in the long run at all possible under the domination of highly developed capitalism?” 18 That question is still with us. As the contradiction between the egalitarian expectations of democracy and the demoralizing realities of the free market sharpens, the state must act more repressively to protect the existing class inequities.
Why doesn’t the capitalist class in the United States resort to fascist rule? It would make things easier: no organized dissent, no environmental or occupational protections to worry about, no elections or labor unions. In a country like the United States, the succes
s of a dictatorial solution would depend on whether the ruling class could stuff the democratic genie back into the bottle. Ruling elites are restrained in their autocratic impulses by the fear that they might not get away with it, that the people and the enlisted ranks of the armed forces would not go along. Given secure and growing profit margins, elites generally prefer a “democracy for the few” to an outright dictatorship. Rather than relying exclusively on the club and the gun, bourgeois democracy employs a co-optive, legitimating power—which is ruling-class power at its most hypocritical and most effective. By playing these contradictory roles of protector of capital and “servant of the people,” the state best fulfills its fundamental class control function.
Finally, it should be noted that much of what has been said of the state applies also to the law, the bureaucracy, the political parties, the legislators, the universities, the professions, and the media. In order to best fulfill their class-control functions yet keep their credibility, these players must maintain the appearance of neutrality and autonomy. To foster that appearance, they must occasionally exercise some critical independence and autonomy from the state and from corporate America. They sometimes save a few decisions for the people, and take minimally corrective measures to counter some of the many egregious transgressions against democratic interests. As insufficient and hypocritical as these concessions are, they still sometimes lead to substantive gains in the struggle for social democracy.
24 SOCIALISM TODAY?
The structural problems of capitalism are not likely to solve themselves. What is needed, some say, is public ownership of the major means of production and public ownership of the moneyed power itself—in other words, some ample measure of socialism. But can socialism work? Is it not just a dream in theory and a nightmare in practice? Can the government produce anything of worth?
Contrary Notions Page 20