I wrote in a previous paper, Hitherto Capitalism – the end of Neo-Liberalism? about the effects of Covid 19 on Capitalism and that a paradigm shift had opened up as a result of the virus. A return to Capitalism, as we have known it for the past almost 200 years, is by no means inevitable and the opportunity exists to look at alternative forms of modus operandi in a more serious manner than at any time for the past forty odd years. Much of what follows I owe to Professor Richard Wolff an American economist.
For decades the fantasy of a link between Liberal Democracy and Capitalism has been inculcated into the population. There is no link whatsoever, as the State Capitalism of the Chinese government has demonstrated during the past three decades. Secondly, Capitalism by its exploitative nature, is not democratic as will be shown.
We started with Slavery which was followed by the Feudal system of medieval times. The end of the Domestic system around the end of the seventeenth century, released ordinary people from the bounds of servitude to the Lord of the Manor but through the Enclosure Acts, deprived them of the strip farming system which gave them their living. The gradual introduction of the Industrial Revolution forced them into factories which, on the one hand, gave them both more money and a less haphazard income but on the other, in exchange for loss of independence and a complete dependence on the factory owner. The price they paid was to sell their labour to the latter, who used the product they produced to sell to the highest bidder for a profit. In return the workers were paid wages but had no say in the distribution of profit that was created at their expense.
Fast forward to the twenty first century and larger enterprises that currently exist, along with the introduction of Neo-Liberal economics during the Thatcher era. The emphasis of the latter being on a free market untethered by regulation; the death of the trades union movement; the belief that the private sector is good and righteous and the public sector inefficient, overly bureaucratic and producing little for the economy. This is a system which has produced ever increasing wealth to a few at the top, at the expense of reducing the cost of production as much as possible. As a result, long term contracts of employment have been reduced and the introduction of such practices as zero hours contracts, outsourcing and short term contracts have resulted in risk increasingly being passed to the worker ie the supplier, rather than the owner. People at work are increasingly being treated as human machines. The Social Contract has been reduced to a Society of individuals living in a purposely created state of psychological impermanence, back to the jungle, where everyone is in competition with their neighbour. This has over the years produced a Society of selfish individualism, where consumption has become the God and acquisition of material goods the goal.
More importantly, it has created a Society with an ever increasing gap between rich and poor. Not only has Covid emphasised this but also has highlighted the reliance the Society has on the public sector and those at the bottom of the income scale. In other words, a high degree of role reversal has emerged within the past Covid ridden four months, showing the tangible value to Society of the public sector, rather than the hitherto emphasis on material wealth.
THE UNDEMOCRATIC NATURE OF CAPITALISM
If we look at the structure of Capitalism of say a large corporation. Capital is raised, workers are recruited, a Board of Directors elected from those who have raised the capital, a Chairman appointed and off we go. At the end of the year the cost of workers, materials etc are calculated and a profit is created. Do the workers see any of the profit? No! Who decides what happens to the profits? The shareholders at their annual meeting deciding on the remuneration to the Directors and what amount should be reinvested or paid in a dividend to the shareholders. Do the workers have any say in such decisions? No! Is there any democracy in the organisation? No! At work ,where they spend the main portion of their time therefore, they have no say, neither any share of the profits arising as a result of their labour.
One of the greatest skills of the owners of capital has been to create the illusion amongst the populous that Socialism is bad, does evil things to workers and is unpatriotic. Better therefore to leave decisions to the ruling class, who will protect ordinary people from those preaching the politics of envy. The patriarchal owners who, as your social betters, will look after you, and in turn those producing the wealth will look up to as their betters. And in droves working class Conservatives have believed this message. Use of the Class system has also been used for people to pretend that they above those further down the scale. Witness the two Ronnie’s and John Cleese sketch. The emphasis has been on individualism, used to stop people identifying with their social groups and aspiring to climb the greasy pole of respectability in competition with the rest. This has also been reinforced by the message that there is no alternative to Capitalism and no such thing as Society.
The Covid crisis has both emphasised the need for Society when an existential threat appears and has provided the opportunity for alternatives to be considered more seriously. Whatever the outcome, a different paradigm will exist in the new normal. Let us therefore consider some alternatives to the current system, particularly from an economic model.
SOCIALISM 1 – DEMOCRATIC SOCIALISM
This model grew out of the unrest of the Industrial Revolution through the collectivism of the workers, mainly led by the Trades Union movement during the 19th century. Whilst at times culminating in collective strikes by groups of Unions, it was primarily concerned with improving working conditions and rates of pay. Gradually practices like the Truck System, whereby workers had to buy groceries from the owners shops were overturned, particularly with the rise of the Cooperative movement founded by the Rochdale Pioneers in 1844. Benevolent members of the ruling class also enabled improvements in Health and Safety practices with the introduction of the Factory Acts.
Many forget that full male enfranchisement in the UK did not appear until 1918. This was primarily as a reward for the role the working classes had played in the First World War. The formation of the Labour Party under the leadership of Keir Hardy and supported by members of the Bloomsbury group, eventually led to Hardy being elected to Parliament as the member for East Ham in 1892, first as an Independent, and later for the Labour Party. This led ultimately to the disintegration of the Liberal Party and the first Labour government of 1924. That government was elected on the basis of Clause Four of the Party’s constitution which states;
“To secure for the workers by hand and by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution, and exchange, and the best obtainable system of popular administration and control of each industry or service.”
Many would argue that the Atlee government of 1945 to 51 was the greatest reforming parliament of the 20th Century, particularly by Nationalising the giants of industry ie Railways; Coal; Steel, along with the creation of a National Health Service. Whilst the nationalised industries took ownership for the nation, any profits went to the nation, rather than to the employees in such industries. Those owners in the private sector still gave the workers who produced the profits no say in how the latter were distributed as noted above.
The dropping of Clause Four as a founding principle of the Labour Party by Tony Blair in the formation of New Labour was highly significant. It is also easy to argue that the reinforcement of Neo-Liberal policies under New Labour removed the term Socialism from their mantra and we have seen above how undemocratic the working practices of the Capitalist agenda that they promoted are. Democratic Socialism should therefore be seen in the Attlee, rather than Blair/Brown, context. In general, it can be seen as trying to improve the lot of the working man but within the existing structures of the system. It will not of itself bring about any great control for the workers. Perhaps it would be better called Benevolent Capitalism. Democratic and Socialist it is not. Indeed, it is more accurate to describe the UK as being a Plutocracy given the control of big business and the governing elite over people’s lives. Added to which the continued existence of an unelected chamber denies the electorate any influence. In fact, it has been said many times that at least 80% of the electorate have no power whatsoever. In 1962 this was highlighted by Anthony Sampson’s Anatomy of Britain showing the true power elites of the UK. Updated in an excellent book by Owen Jones in 2014 under the title of The Establishment.
SOCIALISM 2 – MARXISM
Marx called the difference between the cost of production and the selling price the surplus. Whereas capitalism allows the owner to keep the whole surplus, for Marx it should go to those who created it ie in his terms the Proletariat. Investment came not from private individuals, the Bourgeoisie, to exploit the workers but from the government who would decide what to produce on behalf of the Society as a whole. The influence of the worker himself on what was produced was small but in return the State would provide the worker’s needs e.g. housing, food etc. without them having to pay taxes to the State.
Such a system depends on a different type of freedom than Social Democracy, in that Service is seen to the State, rather than the individual. In other words, people work for the good of all, as opposed for themselves, and in return the State looks after them. Virtually a parent/ child relationship.
The primary criticism of such a system however is that the initial stage, which requires a Dictatorship of the Proletariat, gets hide bound by the leaders and allows little involvement of the Proletariat in deciding what should be produced as a result of the Command economy. And in the Soviet Union, this meant the tendency to produce much needed tools for production as it increasingly industrialised after the Second World War, leaving little over for luxury goods. Like Capitalism, in its infant state, it gives little or no democratic control over the lives of those who sell their labour.
SOCIALISM 3 – CO-OPERATION
The third type of Socialism is where people get together and form their own co-operatives. Returning to the Rochdale Pioneers all those years ago, The Co-operative Movement is still alive after more than 150 years, competing in the market place against all-comers.
The most famous example of such an enterprise is in Spain. The firm, Mondragon, was founded in 1956 by a local priest and six people. It now employs 78000 people in 257 companies in four main areas of finance; industry; retail and knowledge. Who gets the surplus? Every employee! Several successful examples exist in the UK, particularly in Agriculture. Mondragon has a rule that no employee can be paid more than 9% of the lowest paid person. The average gap in the private sector in the UK is 111%. Rising at times to over 300%. Not only is reward more fairly distributed in co-operatives but motivation is higher because people know that they have a stake in the business and can share in its success. This should also feed into their well-being all round.
How to start? From little acorns great Oak trees blossom but they take a long time to grow. Ideally a State bank would provide initial capital to such founders to allow them to establish and grow. In its absence for the time being perhaps the Co-operative Bank should place itself into such a position! The main thing is to ensure that they are democratic and allow all to have a fair share of the profits/surplus.
A return to the Capitalist model with such staggering inequalities may survive for a while in the new normal. The Pandemic has demonstrated the true value of the Public Sector and those in low paid jobs from Nurses to Care Workers to Supermarket shelf stackers. It has also dragged new working practises into the 21st Century. There has been a long gestation period for new technologies to be fully appreciated and it is unlikely that, once tried for their efficiency, they will go back to normal. Sadly, and inevitably, this will result in an earlier shake down in employment than would have been. This will result in high levels of unemployment. Indeed, full employment may be a thing of the past for ever, since there will not be enough jobs to go around. This will result in the need to examine the concept of the Universal Wage. Demand for the relatively trivial might also reduce, since people have had a fright with the ease with which something can occur to interrupt their lives and will cherish their savings more.
Perhaps most importantly, there will inevitably be a change in the psychological contract of employment inside the workplace. Governments will need to negotiate delicately the balance as these changes are embedded, to avoid civil disruption. Above all, the huge discrepancy in earnings must be tackled for social cohesion if for nothing else. That will require a fundamental change in the way of seeing Society, recognising that it exists and more importantly harnessing the enormous power that it has, as the Pandemic emergency has shown.
There is nothing immutable about Capitalism. Let us start to examine the alternatives to ensure that we are prepared for a substitute when is does finally implode.
21 JULY 2020
Roger Lovell is author of Managing Change in the New Public Sector and Managing in the New Millennium