If we are to place the ownership of capital in the hands of the government — and we must; the alternatives of individualistic or privatized ownership are much worse — then the government must more completely be placed in the hands of the people. It is no longer sufficient for the people to choose their rulers, they must step up and actively rule themselves.
Democratic self-rule cannot simply allowing any ad hoc majority to arbitrarily decide any question of social importance. Democratic self-rule must still be organized and institutionalized. We've learned some important lessons from capitalist pseudo-democracy. Social decision-making must be deliberative: we have to explicitly think and talk about our social decisions before we make them. We have to make authoritative decisions: we have to know precisely what constitutes an actual social decision as opposed to a general preponderance of opinion. We have to make coercive social decisions generally, objectively, and before the fact: it's no mistake that the US Constitution explicitly prohibits ex post facto laws and bills of attainder. All of these requirements argue for vesting political power in some sort of institutional framework.
The question is not whether we should institutionalize political power, but what kind of institution we should construct. If we do not explicitly and intentionally construct social institutions, institutions will evolve on their own. Such self-evolved institutions will probably protect and further the interests of only the most immediately powerful people. (Indeed this outcome is so obviously entailed by the right-anarchist program that one must suspect it is their covert conscious intention to seize political power for their own exclusive benefit. On the other hand, the human capacity for self-delusion is so enormous that speculating on covert intention is always problematic.)
The kinds of social institutions we should construct will depend sensitively on the conditions existing at the time of their actual construction. Most of the details of the US Constitution (one of the best examples of artificially constructed social institutions) were the direct result of conditions extant in the late 18th century: colonial divisions, slavery, the historical institutions of the British monarchy, Parliament and judicial system, etc. (It's interesting to note that with few exceptions, most states have a bicameral legislature, even though the creation of the US Senate was primarily a response to the relative independence of the separate colonies.)
Since any revolutionary change in our economic and political institutions is at the very least a decade away, and probably many decades, it's impossible to predict the specific conditions that will obtain. I can, however, speculate and theorize about some high-level ideas that might serve as a framework.
All more-or-less democratic, organized nations have both some sort of deliberative body (a legislature and executive) as well as a civil service more-or-less separate from, independent of but subservient to the deliberative body. The deliberative body sets policy; the civil service both maintains the objective expertise to carry out that policy and, because of its independence, serves to some extent as a check on unconscionable and unrealistic policy. We are fortunate in the United States to have a civil service that is competent and professional, and balances subservience and independence reasonably effectively. More importantly, the civil service is, by and large, not a component of the "capitalist state" in Lenin's terms. The character of the modern civil service is very different from the 19th century capitalist state bureaucracy justifiably condemned by Marx and other 19th century communist leaders. The civil service — with the exception of the police and the army, which will require substantial changes — is not an institution acting predominantly as an instrument of class oppression. There are some systemic abuses and problems, but the modern civil service mostly manages the objective details of the physical and administrative apparatus of government: they build and maintain the roads, bridges and tunnels; manage records; deliver the mail*; operate libraries; provide education, ensure compliance with health and safety codes, and perform other essential functions of any organized society.
*Yes, I know the US Postal Service is technically a private company. So is the Federal Reserve.
There is no reason we cannot continue to use the evolved competence and character of the civil service. We can instead focus our attention on radically changing how the civil service is actually used, on how policy is set.
Under our current pseudo-democratic system, government rule even at the local level is intentionally alienated and disconnected from the individual citizens; at the state and federal level, one's elected representatives are little more than their party affiliations and distorted biographies fictionalized by the capitalist media. If the people are to rule themselves, they have to take day-to-day responsibility for the operation of governmental institutions.
One possible way to do this is electronic direct democracy, a possibility afforded only in the last ten years with the development of the internet. Essentially everyone in a geographic region constitutes the "deliberative body" for that region; everyone logs on, discusses the issues before the body, and votes on social decisions. The technological problems are non-trivial, but there's nothing that hasn't been solved in theory and the economic hurdles are no more difficult than building the interstate highway system.
One important characteristic of electronic direct democracy is that it doesn't afford any mechanism for selecting any kind of meritocracy for the setting of public policy. Whether this characteristic is a drawback or an advantage is a matter of opinion; in my opinion, there the advantages of a meritocracy outweigh the drawbacks, so long as they can privilege only their judgment, not their interests.
An alternative to electronic direct democracy is hierarchical syndicalism. Individual citizens organize themselves into small groups, and these groups choose their local leaders, with the power of immediate recall and replacement. The local leaders choose the regional leaders (again with the power of immediate recall) and the regional leaders choose the national leaders. The power of immediate recall is critical, as well as severe and uncompromising restrictions on the individual economic reward given to delegates and a requirement of nearly absolute transparency of delegates' official activities. Furthermore, these delegates must serve not just as deliberative bodies, but as an executive body, responsible for the day-to-day operation of governmental institutions, especially the civil service, the police and the army.
A syndicalist organization offers some scope for selection not just on the basis of popularity but also of competence: competent delegates will at least have an opportunity to argue directly with their constituents for immediately unpopular decisions, and constituents can recall popular but incompetent delegates. With transparency, individual economic limitations, and direct accountability to a small group of constituents, delegates can maintain their positions not by accumulating power, but only by competently fulfilling their constituents' interests.
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