Indeed it can. Private industries such as railroads, satellite communication, aeronautics, the Internet, and nuclear power exist today only because the government funded the research and technological development, and provided most of the risk capital. The great scientific achievements of numerous universities and government laboratories during and after World War II were the fruits of federal planning and not-for-profit public funding. We already have some socialized services and, when sufficiently funded, they work quite well and less expensively than private ones. Our roads and some utilities are publicly owned and sustained, as are our bridges, ports, and airports. In a few states so are liquor stores, which yearly generate hundreds of millions of dollars in state revenues.
There are credit unions and a few privately owned banks like the Community Bank of the Bay (Northern California) whose primary purpose is to make loans to low- and middle-income communities. We need public banks that can be capitalized with state funds and with labor-union pensions that are now handled by private banks. The Bank of North Dakota is the only one wholly owned by a state. In earlier times it helped farmers who were being taken advantage of by grain monopolies and private banks. Today, the Bank of North Dakota is still an important source of reasonable credit for farmers, small businesses, local governments, and college students. Other states have considered creating state banks, but private banking interests have blocked enactment.
Often unnoticed is the “third sector” of the economy, consisting of more than 30,000 worker-run producer cooperatives and thousands of consumer cooperatives, 13,000 credit unions, nearly 100 cooperative banks, and more than 100 cooperative insurance companies, plus about 5,000 housing co-ops, 1,200 rural utility co-ops, and 115 telecommunication and cable co-ops. Employees own a majority of the stock in at least 1,000 companies.19 Labor unions in the construction industry have used pension funds to build low-cost housing and to start unionized, employee-owned contracting firms.
There are also the examples of “lemon socialism,” in which governments in capitalist countries have taken over ailing private industries and nursed them back to health, testimony to the comparative capacities of private and public capital. In France immediately after World War II, the government nationalized banks, railways, and natural resources in a successful attempt to speed up reconstruction. France’s telephone, gas, and electric companies were also public monopolies. Public ownership in that country brought such marvels as the high-speed TGV train. The publicly owned railroads in France and most of western Europe work far better than the privately owned ones in the United States.
The state and municipal universities and community colleges in the United States are public and therefore “socialist” (shocking news to some of the students who attend them). Of these some are among the very best institutions of higher learning in the country. Publicly owned utilities in this country are better managed than investor-owned ones; and since they do not have to produce huge salaries for their CEOs and big profits for stockholders, their rates are lower and they put millions in profits back into the public budget, saving the taxpayers money. Then there is the British National Health Service, which costs 50 percent less than our private system yet guarantees more basic care for the medically needy. Even though a Tory government during the 1980s imposed budget cuts in an attempt to undermine the public system, a majority of Britons still want to keep their socialized health service.
Free-marketeers in various countries do what they can to defund public services and eventually privatize them.20 Privatization is a bonanza for rich stockholders but a misfortune for workers and consumers. The privatization of postal services in New Zealand brought a tidy profit for investors, wage and benefit cuts for postal workers, and a closing of more than a third of the country’s post offices. Likewise, the privatization of telephone and gas utilities in Great Britain resulted in dramatically higher management salaries, soaring rates, and inferior service. The problem for private investors is that public ownership does work, at least in regard to certain services. A growing and popular not-for-profit public sector is a danger to the free-market system.
Most socialists are not against personal-use private property, such as a home. And some are not even against small businesses in the service sector. Nor are most against moderate income differentials or special rewards to persons who make outstanding contributions to society. Nor are they against having an industry produce a profit, as long as it is put back into the budget to answer the needs of society. Not just the costs but also the benefits of the economy should be socialized.
There is no guarantee that a socialized economy will always succeed. The state-owned economies of Eastern Europe and the former Soviet Union suffered ultimately fatal distortions in their development because of the backlog of poverty and want in the societies they inherited; years of capitalist encirclement, embargo, invasion, devastating wars, and costly arms buildup; poor incentive systems, and a lack of administrative initiative and technological innovation; and a repressive political rule that allowed little critical feedback while fostering stagnation and elitism. Despite all that, the former communist states did transform impoverished countries into relatively advanced societies. Whatever their mistakes and political crimes, they achieved—in countries that were never as rich as ours—what U.S. free-market capitalism cannot and has no intention of accomplishing: adequate food, housing, and clothing for all; economic security in old age; free medical care; free education at all levels; and a guaranteed income. Today by overwhelming majorities, people in Russia and other parts of Eastern Europe say that life was better under communism than under the present freemarket system.21
American socialism cannot be modeled on the former Soviet Union, China, Cuba, or other countries with different historical, economic, and cultural developments. But these countries ought to be examined so that we might learn from their accomplishments, problems, failures, and crimes. Our goal should be an egalitarian, communitarian, environmentally conscious, democratic socialism, with a variety of participatory and productive forms.
What is needed to bring about fundamental change is a mass movement that can project both the desirability of an alternative system and the great necessity for change in a social democratic direction. There is much evidence indicating that Americans are well ahead of political leaders in their willingness to embrace new alternatives, including consumer and worker cooperatives and public ownership of some industries and services. With time and struggle, we might hope that people will become increasingly intolerant of the inequitable free-market plutocracy and will move toward a profoundly democratic solution. Perhaps then the day will come, as it came in social orders of the past, when those who seem invincible will be shaken from their pinnacles.
There is nothing sacred about the existing system. All economic and political institutions are contrivances that should serve the interests of the people. When they fail to do so, they should be replaced by something more responsive, more just, and more democratic. Marx said this, and so did Jefferson. It is a revolutionary doctrine, and very much an American one.
NOTES
1. New York Times, 22 August 1996.
2. See the discussion in Michael Parenti, Superpatriotism (City Lights, 2004) 111–132.
3. Frank Scott, editorial in Coastal Post (Marin County, California), 1 February 1996.
4. Robertson quoted in Nation, 10 January 2000. See also Thomas Frank, What’s the Matter with Kansas? How Conservatives Won the Heart of America (Henry Holt, 2004).
5. See selection 31, “The Rational Destruction of Yugoslavia.”
6. For a discussion of how events in Allende’s Chile have been misrepresented in the United States, see Michael Parenti, Inventing Reality, 2nd ed. (Wadsworth/Thomson, 1993), 143–147.
7. McGovern quoted in Parade, 9 August 1987.
8. Anthony Summers, Official and Confidential (Putnam, 1993); Robert Morrow, Firsthand Knowledge (S.P.I. Books, 1993); Pete Brewton, The Mafia, CIA & George Bush (S.P.I
. Books, 1992); Peter Dale Scott and Jonathan Marshall, Cocaine Politics (University of California Press, 1991).
9. Ben Lowe, in Guardian, 5 December 1990.
10. La Repubblica, 9 April 1995; Corriere della Sera, 27 and 28 March, 12 April and 29 May 1995.
11. Karl Marx, The Eighteenth Brumaire of Louis Bonaparte (various editions).
12. New York Times, 18 January 1977.
13. See Gary Webb, Dark Alliance: The CIA, the Contras, and the Crack Cocaine Explosion (Seven Stories Press, 1998).
14. Michael Parenti, “Yeltsin’s Coup and the Media’s Alchemy,” in Michael Parenti, Dirty Truths (City Lights, 1996), 133–140.
15. Once again, in case the reader missed it in the last selection, “plutocracy” refers to rule by the wealthy or to rulers who favor the wealthy interests.
16. Washington Post, 9 March 1980.
17. Frank Kofsky, Harry S. Truman and the War Scare of 1948 (St. Martin’s Press, 1993), 190.
18. Brandeis quoted in David McGowan, Derailing Democracy (Common Courage, 2000), 42;Weber in H. H. Gerth and C.Wright Mills (eds.), From Max Weber: Essays in Sociology (Oxford University Press, 1958).
19. Christopher Gunn and Hazel Dayton Gunn, Reclaiming Capital: Democratic Initiatives and Community Development (Cornell University Press, 1991).
20. See for instance, Tor Wennerberg, “Undermining the Welfare State in Sweden,” Z Magazine, June 1995.
21. See selection 30, “The Free Market Paradise Liberates Communist Europe”
VI.
MONEY, CLASS, AND CULTURE
25 CAPITAL AND LABOR, AN OLD STORY
Most people who talk and write about the U.S. political system never mention corporate capitalism. But the capitalist economy has an overbearing impact upon political and social life. It deserves our critical attention.
To begin, one should distinguish between those who own the wealth of society, and those who must work for a living. The very rich families and individuals who compose the owning class, live mostly off investments: stocks bonds, rents, and other property income. Their employees live mostly off wages, salaries, and fees. The distinction between owners and employees is blurred somewhat by the range of incomes within both classes. “Owners” refer both to the fabulously wealthy stockholders of giant corporations and the struggling proprietors of small stores. But the latter hardly qualify as part of the corporate owning class. Among the victims of big business is small business itself. Small businesses are just so many squirrels dancing among the elephants. And squirrels that dance among elephants have a notoriously low life expectancy. Every year over 30,000 small enterprises go out of business in the United States.
Among the employee class, too, there is much diversity. Along with factory and service workers there are professionals and executives who in income, education, and lifestyle tend to be identified as “middle” or “upper-middle” class. Company managers and executives are employees whose task is to extract more value-producing performance from other employees. And some top business executives, corporate lawyers, and entertainment and sports figures enjoy such huge incomes as to be able eventually to live off their investments, in effect becoming members of the owning class.
You are a member of the owning class when your income is immense and comes mostly from the labor of other people, that is, when others work for you, either in a company you own, or by creating the wealth that allows your investments to give you a handsome return. The secret to wealth usually is not to work hard but to have others work hard for you. This explains why workers who spend their lives toiling in factories or offices retire with little or no wealth to speak of, while owners who never set foot in the factory or firm can amass considerable fortunes. The ultimate purpose of a business is not to perform public services or produce goods as such, but to make as large a profit as possible for the investor.
Adam Smith, considered one of the founding theorists of capitalism, noted in 1776, “Labor . . . is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price only.”1 What transforms a tree into a profitable commodity such as paper or furniture is the labor that goes into harvesting the timber, cutting the lumber, and manufacturing, shipping, advertising, and selling the product.
Workers’ wages represent only a portion of the wealth created by their labor. The average private-sector employee works two hours for herself or himself and six or more hours for the boss. The portion that goes to the owner is what Marx called “surplus value,” the source of the owner’s wealth. Capitalists themselves have a similar concept: “value added in manufacture.” In 2000, workers employed in manufacturing alone produced at least $1.64 trillion in value added, as reported by the U.S. Census Bureau, for which they were paid $363 billion in wages, or less than one-fourth of the value created by their labor. Workers employed by Intel and Exxon received only about one-ninth of the value added, and in industries such as cigarettes and pharmaceuticals, the worker’s share was a mere one-twentieth. In the last half century, the overall average rate of value added (the portion going to the owner) in the United States more than doubled, far above the exploitation rate of other industrialized countries.2 Workers endure an exploitation of their labor as certainly as do slaves and serfs. The slave obviously toils for the enrichment of the master and receives only a bare subsistence in return. James Madison told a visitor shortly after the American Revolution that he made $257 a year on every slave he owned and spent only $12 or $13 for the slave’s keep. Slavery is a very profitable system (which explains why it still exists in many parts of the world). Sharecroppers who must give a third or half their crop to the landowner are also obviously exploited. Under capitalism, however, the portion taken from the worker is not visible. Workers are simply paid substantially less than the value they create. Indeed, the only reason they are hired is to make money off their labor. If wages did represent the total value created by labor (after expenses and improvements), there would be no surplus value, no profits for the owner, no great fortunes for those who do not labor.
The value distributed to the owners is apart from workers’ wages or even executives’ salaries; it consists of profits—the money one makes when not working. The author of a book, for instance, does not make profits on his book; he earns a recompense (fancily misnamed “royalties”) for the labor of writing it. Likewise, editors, proofreaders, printers, and salespersons all contribute labor that adds to the value of the book (usually). Profit on the book goes to those who own the publishing house and who contribute nothing to the book’s marketable value. The sums going to owners are aptly called unearned income on tax reports.
While corporations are often called “producers,” the truth is that they produce nothing. They are organizational devices for the exploitation of labor and accumulation of capital. The real producers are those who apply their brawn, brains, and talents to the creation of goods and services. The primacy of labor was noted in 1861 by President Abraham Lincoln in his first annual message to Congress: “Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” Lincoln’s words went largely unheeded.
Capitalists like to say they are “putting their money to work,” but money as such does not work. What they really mean is that they using their money to put human labor to work, paying workers less in wages than they produce in value, thereby siphoning off more profit for themselves. That’s how money “grows.” Capital annexes living labor in order to convert itself into goods and services that will produce still more capital.3 All of Rockefeller’s capital could not build a house or a machine or even a toothpick; only human labor can do that. Of itself, capital cannot produce anything. It is the thing that is produced by labor.
Persons of great wealth can get quite annoyed when it is point
ed out that they do not work. Since many of them equate work with whatever activity they happen to pursue, they do not see themselves as parasitic idlers. When asked, they will tell of their endeavors: serving with a charity organization or on a church or museum board of directors; running for public office; studying art, photography, or ceramics; writing a personal memoir; raising horses; preparing for a long sailing expedition up the coast, an exploration in Indonesia, or a shopping trip to Paris or London; or going on a spiritual retreat or to a health spa to work on their personal development.
Some wealthy individuals actually do work in the more usual sense. They pursue professions and occupy managerial posts—but it is out of personal choice, not economic necessity. Such labor would seem to entitle them to a fair recompense, not an immense fortune. Some prominent tycoons, whose names regularly appear in the press, manage vast financial empires. But the workday they put in, no matter how arduous, does not explain the source of their immense wealth nor the pace at which it accumulates. The far greater portion of their money still comes from the acquisition of assets that directly or indirectly engage the labor of others. This perpetual transference of value is the less conspicuous part of their otherwise highly publicized careers.
The power of the wealthy business class is like that of no other group in our society. The giant corporations control the rate of technological development and availability of livelihoods. They relegate whole communities to destitution when they export their industries overseas to cheaper labor markets. They devour environmental resources, stripping our forests and toxifying the land, water, and air. They command an enormous surplus wealth while helping to create and perpetuate conditions of scarcity for millions of people at home and abroad. And they usually enjoy a predominating voice in the media and the highest councils of government.
Contrary Notions Page 21