Reasonable conversation about capitalism is possible again. Debates about its strengths and weaknesses resume. The United States’ post-1950 taboo against honestly evaluating capitalism finally is fading. The public increasingly ignores over-the-top celebrations of capitalism as humanity’s peak achievement, God’s choice, perpetual prosperity generator or guarantor of individual freedom. Politicians, journalists and academics could stop their uncritical cheerleading for capitalism, although most still pay their bills that way.
The reasons are many. Capitalism no longer “delivers the goods” to most Americans. With consumer debt already high, more borrowing can no longer postpone hard times. The “American Dream” slips farther out of reach. As Cold War memories recede, labels like socialism or communism no longer stifle debate. Destroyed cities like Detroit; students with unsustainable debts; declining wages, benefits and job security; and millions unemployed or foreclosed – to them, the usual rationalizations of capitalism seem hollow and ridiculous.
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This July’s national survey found 26 percent of Americans believing that capitalism is “not working too well” and another 16 percent that capitalism is “not working at all well.” Imagine the consequences if a new political party arose to represent those 42 percent by demanding basic changes in the economic system.
However, that survey and resumed debates about capitalism have not yet faced or solved a shared problem. Widespread confusion and disagreement surround what capitalism means and thus what exactly “is not working.” This situation weakens the clarity and appeal of solutions offered by capitalism’s critics.
A two-dimensional definition of capitalism – as private property plus markets – prevailed for the past 150 years. It neatly contrasted socialism or communism as public property and planning. Privately owned enterprises producing goods and services and free market exchanges of resources and products defined capitalism. State-owned and -operated enterprises and government-planned resource and product distributions defined socialism or communism. Those definitions’ inadequacies should have been obvious. They persisted likely because they served leaders in both systems well.
Private capitalists and their supporters demonize government regulations, taxes and public services they oppose as socialism or communism and equate them with atheism, revolution, violence and dictatorship. The old definitions work for them. Keynesians and social democrats advocate government intervention to preserve capitalism by offsetting its excesses and flaws. Because they fear being called communists, they use the old definition (that of communism being total state ownership and planning) to reject communism emphatically. Leaders in countries such as the Soviet Union and China – products and custodians of “revolutions against capitalism” – defined their economies as opposites, negations of capitalism. Polarized definitions – capitalism as private property and markets and socialism or communism as public property and planning – usefully emphasize their difference and distance from capitalism.
Those polarized definitions are now being challenged and displaced. This is partly because of their close associations with socialist and communist economies that imploded and capitalist economies languishing in deep crises. Searches for alternatives to both systems uncovered the old definitions’ flaws. New agendas for effective economic change begin with different definitions.
Definitions focused on private versus public property distinguish capitalist from socialist economies poorly. For example, the 1917 Soviet revolution guaranteed private property in land – the agricultural economy’s key resource – to millions of peasants. De facto private property comprised the “family plots” alongside collectivized agriculture after 1930. Soviet-style socialisms often did not “abolish” private property. Likewise capitalist economies often did not abolish public property: postal systems, utilities, schools, transport systems, credit agencies and many other sectors remained public enterprises.
Markets-versus-planning definitions are likewise problematic. Socialist economies always used markets among other mechanisms for distributing resources and products. That included wage-labor markets. Of course, socialist governments planned, controlled and intervened in most markets. Yet government planning and intervention also exist in capitalism and shape all sorts of market supplies and demands (including labor markets). Keynesian economists mostly favor capitalism while advocating greater government intervention in it.
Planning and markets, like public and private property, usually have coexisted over recent centuries. Nor did they tend toward the opposites favored in the old definitions.
How should we now differentiate capitalism from other economic systems? Marx’s work helps by defining capitalism in terms of its organization of production, the internal structure of enterprises (factories, offices and stores). Capitalist enterprises exclude most workers from key decisions: what, how and where to produce and how to use net revenues (in Marx’s terms, the enterprise’s “surplus value”). Capitalist enterprise decision-makers include only enterprise owners (e.g., major shareholders) and the boards of directors they select.
For this definition, capitalism can exist whether the enterprise is owned privately or publicly and whether it distributes its outputs by market exchanges or a state plan. In short, capitalism defined as a particular organization of production exhibits different forms: private and state and market and planned.
For this definition, a new socialist alternative to capitalism entails democratically transformed enterprises. All the workers have become the board of directors. They collectively employ themselves. They democratically decide what, how and where to produce and how to use net revenues. They do that together with the similarly organized residential communities they interact with. In this new definition, socialism too would exhibit different forms: workers’ self-directed enterprises publicly or privately owned and with planning or markets. Socialist societies would debate and decide among possible forms.
This new definition enables today’s critics of capitalism to focus on what earlier critics missed when they advocated changes from private to public property and from markets to planning. It clarifies what is to be done now, namely a transition that includes turning capitalist into workers’ self-directed enterprises, workers cooperatives, etc.
Without such a definition, those increasingly dissatisfied with capitalism now risk repeating the failed transitions of the past. Previous socialist and communist critics of capitalism proved unable, in those transitions, to go beyond state and planned forms of capitalism. We could do better this time by insisting that genuinely democratized enterprises be part of any transition beyond the capitalisms and socialisms of the past. Democratized enterprises give working people the means to hold any state apparatus accountable (because they provide its resources). Democratized enterprises could attract mass support. They embody that “vision thing” social critics need.