Monday, July 09, 2012

Communism

The following is the text of a speech to the Humanists of Colorado on Sunday, July 8, 2012

8.2%.

That’s the unemployment rate: 8.2%. If we count the underemployed and “discouraged workers,” it’s 14.9% . In May of 2007, the unemployment rates were 4.4% and 8.2%, respectively.

In case you didn’t notice, the recession was over in June of 2009. Yeah. Three years ago, I suspect a lot of the people currently unemployed, more than half of whom have been unemployed for more than 15 weeks, and some for over 100, may not have noticed.

We know how to fix this. It’s not rocket science, just basic capitalist macroeconomics. And yet we choose not to.

Our vaunted “free press” is an obvious joke. The courts have gutted the constitutional rights of actual human beings while expanding them for corporate “people.” We have the right to speak freely and peaceably assemble, as long as we do it in our own homes with the shades down or in fenced-off free-speech zones miles away from an audience.

We know how to fix this; we choose not to.

All but our wealthiest primary and secondary schools are becoming warehouses. Our universities are running on slave lab… er… “adjunct” faculty, and have become factories for converting student loans into administrators’ salaries, graduating masses of unemployable debt peons.

We know how to fix this; we choose not to.

Our roads are crumbling. Our bridges are falling down. Public transportation is falling apart. We have fewer police officers on the street, fewer firefighters putting out fires, fewer teachers educating our children.

We know how to fix this; we choose not to.

Of all the countries in the world, the United States has the largest proportion of our population in prison, 730 per 100,000. Just to compare, Cuba imprisons 510 per 100,000.

We did pass RomneyCa… er… ObamaCare, and surprisingly enough, the Supreme Court didn’t overturn it, but that’s only one small half-victory. Besides, the Transportation Security Administration was already providing free prostate exams.

Our problems are not “working out the details” kinds of problems. We know how to fix our problems. We choose not to. And we choose not to precisely because we are a capitalist country, precisely because it is the capitalists who are making the choices.

The alternative is communism.

I want to talk about Marx’s critique of capitalism, and why we have good reasons to believe that our problems really are intrinsic to capitalism. Next, I want to tell you what communism is, and, more importantly, what it is not. Finally, I want to talk about some basic ideas for how communism might really work out in practice, right here, right now.

Maybe the problem is that we’re just not doing capitalism right. Maybe we just need “better capitalists.” Maybe we don’t need revolutionary changes; maybe we just need to fix some things we’re doing wrong. Well, Marx didn’t think so, and he wrote the three volumes of Capital showing that capitalism is inherently defective. His critique rests on two fundamental points: the labor theory of value and the falling rate of profit.

The first of Marx’s key insights was to take seriously the labor theory of value, originated by Adam Smith and David Ricardo. We are, Marx said, trading our labor, either directly through services or “embodied” in tangible goods. Therefore, goods and services will (in the ideal case) trade at the socially necessary abstract labor time. If, under the physical conditions in some society, it takes five hours to produce a coat, and fifty hours to produce a computer, then one computer will trade for the equivalent of ten coats.

Note that socially necessary is a key component of Marx’s definition. If it normally takes fifty hours to produce a computer, but it takes me personally a hundred hours to produce a comparable computer, I’m not going to get twice the going price. On the other hand, if it normally takes a hundred hours to produce a computer, but it takes me personally only ninety hours, then yeah! I’m going to get the full hundred hours’ price… at least until everyone else figures out how I’m making computers in ninety hours. Economists call this the “producer surplus.”

(This is, by the way, an example of a kind of inequality that communists don’t have to worry too much about, precisely because it sorts itself out naturally.)

Before Marx, workers were thought to be trading their labor. But this posed a problem for Smith and Ricardo: where does profit come from? If a worker works for twelve hours, and receives in compensation stuff that required twelve hours to produce, there’s nothing left for the capitalist to invest or consume. Marx’s key insight is that workers do not trade their labor; they trade their labor power, the ability to perform labor. And labor power has a cost: the socially necessary abstract labor time to feed, clothe, house, etc. the workers to enable them to work, as well as to allow them to pop out and rear new baby workers.

The cost of labor power is less than the labor afforded: it takes less than one day’s labor to create one day’s labor power. The difference is the surplus value of labor. And the surplus value of labor is the source of profit. That’s all that’s left over to be profit, real profit; that’s all the capitalist can consume or invest.

By the law of supply and demand, the price of labor power should be at the point where the demand equals the marginal cost of labor power. This means that there’s enormous economic “gravity” pushing workers, who are “free” to sell their labor power on the “free” market, to make about the bare minimum of what it costs them to just live and reproduce.

The second of Marx’s insights was to discover the principle of the falling rate of profit. Marx first divides capital into two forms. The first is constant capital, the physical stuff, machines, buildings, raw materials, electricity, etc. necessary to make a commodity. The second is variable capital, the workers and the labor power the capitalist transforms into the labor to use the machines to transform the raw materials into commodities. Machines themselves don’t work; people use machines to work. Marx calls the ratio of constant capital to variable capital the organic composition of capital.

Because surplus labor is the source of profit, only variable capital actually provides a surplus. Constant capital is like the price of admission: owning it allows you to get into position to expropriate the surplus value of workers’ labor, but all a capitalist actually gets to actually expropriate is the surplus value of the workers he or she directly employs.

Over time, however, because capitalists are always vying with each other in the short term to reduce prices and capture that elusive producer surplus, there’s a strong pressure to increase constant capital and reduce variable capital. Once a capitalist starts producing more commodities with fewer labor hours, he’s left with less total surplus labor, the source of his profits. His profits therefore fall.

Marx predicted that capitalism strongly favors the accumulation of capital in the short term. Therefore, the organic composition of capital overall would rise at an exponential rate, rates of profit would fall, and finally capitalists would simply stop investing. But a large part of the economy depends on investment; when you just stop investing, you depress the economy. People, especially the people who were formerly making a lot of capital and are now unemployed, stop buying, which reduces the need for capital even further. The positive feedback cycle that leads to the exponentially rising accumulation of capital becomes a negative feedback leading to the destruction of capital, leading to the downfall of capitalism.

And that’s exactly what happened. In his book, Railroading Economics, Michael Perelman describes how, in the middle of the 19th century, the railroads developed a high organic composition of capital, i.e. a high proportion of constant, physical capital to variable, human capital. You have to have a huge investment in constant capital – locomotives, cars, tracks, switches, not to mention coal, oil or diesel etc. – to run a railroad. It was great for the first railroads; in the short term the producer surplus temporarily overwhelmed the falling rate of profit, but as more and more people built railroads, the actual price of moving a ton of wheat or coal fell to the marginal cost, just fuel and labor, completely ignoring capital investment as a sunk cost. Therefore, people stopped making railroads, throwing a lot of people out of work, and leading to the Long Depression of 1873-1896.

The Long Depression was the end of pure “laissez faire” capitalism. In order to counteract the falling rate of profit, the capitalist class had to find a way to at least partly socialize the ownership of capital… without, of course, letting the working class in on the deal. So we’ve had trusts and cartels, state-sponsored capitalist imperialism, finance capitalism, etc. Not to mention a couple of world wars with millions of people killed and a lot of destruction of physical capital. All of these methods work… for a while… but they all fall victim to the same problem in the long run: overproduction of capital, falling rate of profit, depression, unemployment, and human misery.

This is not an accidental feature. It’s “baked into” the very structure of capitalism: the structure of capitalism as the relentless accumulation of capital, overinvestment, and overproduction. In the end, individual capitalists must squeeze every minute of surplus labor from the workers, not because they’re all heartless, rotten sociopaths, but because some of them are heartless, rotten sociopaths who lead the race to the bottom.

Capitalism has had its chance. It got us out of the poverty of feudalism, and yay! But for more than a hundred years, it has failed to take the next step, to create a world where justice, security, and prosperity are the birthright of more than a privileged few. It’s time for an alternative.

The alternative is communism. Before I tell you what communism is, I want to tell you what it isn’t.

“From each according to his ability, to each according to his needs.” That is the essence of communism, right? If you read Ayn Rand, in her chapter on the Twentieth Century Motor Company in Atlas Shrugged, or if you listen to Thomas M. Magstadt, who wrote my Intro to Political Science textbook, you might think so. By definition, the first thing that a communist government must do is to completely break the connection between the labor people put into the system, and the goods and services they receive from it. It’s a system that, without the enforced equality and deep social bonds of a hunter-gatherer economy, practically begs to privilege parasites and free-riders. But it’s a myth. Before I explain this myth, I want to debunk a few others.

First, it seems obvious that we’re not Russians or Chinese. We’re not Cubans; we’re not Albanians, and we’re not North Koreans. Communism is a fully human construct: there’s no scripture, no prophets, no stone tablets. We don’t have to do everything that the Russians and Chinese did, even the parts that contradict the other parts. In real life, political economy is enormously complicated, and very dependent on the particular historical circumstances of particular places and times. We no more need to be exactly like the Soviet Union in the 20th century to be “communists” than we need to be exactly like the 18th century England of Adam Smith to be “capitalists.” If Lenin, Stalin, or Mao did something we don’t like, we don’t have to do it. We can do communism our way.

Second, communism is not all about absolute equality. In 1961, Kurt Vonnegut wrote the satirical story, “Harrison Bergeron,” depicting a society where, by the use of various handicaps, such as weights for the stronger and blaring radios for the smarter, everyone was literally the same in every way. Communism does not mean making everyone “the same” in every way. People differ in talents, tastes, abilities, preference, and that’s great. Communism means only that our differences never justify exploitation, however obfuscated or rationalized by claims of economic necessity.

Third, communism is not all about a centrally micromanaged economy. This myth has a little more grounding in fact. When Russia and China adopted communism, they were desperately poor and barely industrialized. Russia had been devastated by two brutal wars: the First Imperialist War (World War I) and the Civil War (sponsored and supported by the West). They were a country in ruins, and they faced the certain prospect of a resurgent Germany bent on conquest and genocide. China had inherited a feudal, subsistence agricultural society that had been suffering periodic famines for all of recorded history.

Both countries had to catch up fast or face colonization, subordination, or extinction. They chose the same method that the United States chose to prosecute the Second Imperialist War: a centrally planned and micromanaged economy. And, to no small extent, their strategy worked. Both Russia and China went from poorly-industrialized victims of colonialism to world powers, and they did so in just a few generations.

It’s also worth mentioning that all capitalist corporations (as well as all capitalist governments) centrally plan their internal economies; none, as far as I know, internally use marked-based economics. And in the United States, of course, only a small nomenklatura, popularly known as the “one percent,” set most high-level economic and financial policy.

A communist country can decide to create a centrally planned economy (as can a capitalist country), but that’s not the essence of communism.

I’ve told you a lot about what communism isn’t. With apologies to Rabbi Hillel, I can tell what communism actually is while standing on one leg.

Communism is: “the workers own the means of production.” The rest is commentary.

But the commentary is interesting: how specifically can communism work?

Communism is to capitalism what democracy is to monarchism and feudalism. Under monarchism and feudalism, individuals owned political power. If the people went to the King and said, “Sorry, but we just don’t like how you’re running the kingdom,” the King would reply, “So what? The kingdom is mine. I own it.” Today, of course, we have (to some degree) socialized political power. The people, at least in theory, own the political power, and they permit individuals to exercise that power. Indeed, in November, we may very well tell President Obama, “Sorry, but we just don’t like how you’re running the country.” And if so, he will, mirable dictu, actually step down and hand over power to Mitt Romney. The Presidency – all the government – is ours, we own it, and we choose who gets to use it. There are three elements to making communism work: workplace democracy, government management of the macro-economy, and real political democracy.

First, workplace democracy means that the workers literally own the means of production. If you work at a business, a factory, a restaurant, or a store, you are a part owner of that store. You and your fellow workers democratically control that business. It’s not like capitalist ownership, though: you can’t just stay home and deposit your dividends. If you don’t show up – or if your co-workers don’t think you’re doing your job – you need to go find someplace else to work. And if the workers make bad decisions, well, the business will go bankrupt and they all have to find new jobs. It was, after all, Lenin’s original slogan: “All power to the soviets,” the worker-owned collectives.

Second, we need large-scale macroeconomic coordination by the government. We still need money, and money has been a creation of the government since the beginning of recorded history. We need to allocate money for investment, and give people a way to save and borrow. The only time the banks in not only the United States and the rest of the Western world have ever been anything but totally corrupt was from after the Great Depression to just before the Savings and Loan debacle under Reagan. During that time, banks were so heavily regulated that they might as well have been government agencies. This is an innovation of capitalism that I think communism can heartily endorse.

Another macroeconomic task the government can do is implement capitalist economist L. Randall Wray’s concept of the employer of last resort. The government will employ at a basic wage everyone who is willing and able to work and unable to find a better private job. This will, by definition, always keep unemployment zero by definition, and act as an “automatic stabilizer.” When the private economy is doing well, people leave the basic wage jobs for better-paying jobs in private businesses; when the private economy is doing poorly, the government uses the excess labor to create public goods, keeping people’s demand high enough to allow the private economy to recover.

Finally, we need to have truly democratic government. This is probably the most difficult step. Today there is no such thing as a true democracy, where the people make the decisions; what we have are democratic republics, where the people elect those who make the decisions. A republic is an improvement on a monarchy, but its problem that the elected officials are always captured by the capitalists. A republic embodies what Marx called “the dictatorship of the bourgeoisie,” which doesn’t mean a literal dictatorship, i.e. one absolute ruler, but rather a government that is the creation of the capitalists and protects their interests. What we need instead is “the dictatorship of the proletariat,” again, not a literal dictatorship, but rather a government that is the creation of the workers and protects the interests of the workers.

It’s kind of difficult to have three hundred million people vote every time we want to decide whether to allocate investment to a grocery store or a coffee shop. The key to a truly democratic government is delegate representation, rather than trustee representation. In delegate representation, the model of the Paris Commune, which Marx wrote about in The Civil War in France, representatives are always immediately accountable to their constituency. The constituency can change the delegate’s vote or can immediately recall the delegate. Delegates must, therefore, operate under absolute transparency. Furthermore, delegates must maintain strict avoidance of conflict of interest: it should never be possible for a delegate to ever get as rich as we allow private people to get.

The devil is, of course, in the details, which I don’t want to get into for a couple of reasons. First, I’m running a little short on time. But more importantly, communism means democracy, which means that you will have to work out the details. I, and others like me, can help out, which is why I’m presently studying economics and political science, but you, the working people of the nation and the world will need to make the decisions on exactly what kind of business, society, and government we want.

In conclusion, I want to address the quotation I mentioned earlier, “From each according to his ability,” etc.. The easiest way is to simply quote Marx in context, from his Critique of the Gotha Programme.

In a higher phase of communist society, after the enslaving subordination of the individual to the division of labor . . . has vanished; after labor has become not only a means of life but life's prime want; after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly -- only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs!

“From each according to his ability, to each according to his needs” is not the method of communism, it is the goal. And it’s a goal hardly unique to communism.

For example:
I see us free . . . to return to some of the most sure and certain principles of religion and traditional virtue – that avarice is a vice, that the exaction of usury is a misdemeanour, and the love of money is detestable, that those walk most truly in the paths of virtue and sane wisdom who take least thought for the morrow. We shall once more value ends above means and prefer the good to the useful. We shall honour those who can teach us how to pluck the hour and the day virtuously and well, the delightful people who are capable of taking direct enjoyment in things, the lilies of the field who toil not, neither do they spin.

That’s not Marx or Lenin; that’s John Maynard Keynes, widely considered the founder of modern capitalist macroeconomics, writing in 1930 in his short work, Economic Possibilities for our Grandchildren.

I’m a communist because that’s the kind of world I want. And I’m a communist because I do not believe capitalism get us the rest of the way there.

5 comments:

  1. Larry,
    I found this very insightful, and incredibly helpful (it presented communism in terms that I--for the most part-- actually understand). I think the fear of communism comes from our widespread and flawed perceptions of what it truly is. This fear might also stem from our uncertainty--you wrote, "you, the working people of the nation and the world will need to make the decisions on exactly what kind of business, society, and government we want." That's might be a scary thought to some. Anyway, I'm going to share this. I hope that's OK.

    ReplyDelete
  2. Anyway, I'm going to share this. I hope that's OK.

    Of course! Please do. All my work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 2.5. You are free to reprint any of my work for free according to the terms of the license.

    ReplyDelete
  3. theObserver7/19/12, 9:31 AM

    *sticks up hand*

    I don't understand this bit :

    "Marx’s key insight is that workers do not trade their labour; they trade their labour power, the ability to perform labour. And labour power has a cost: the socially necessary abstract labour time to feed, clothe, house, etc. the workers to enable them to work, as well as to allow them to pop out and rear new baby workers.

    The cost of labour power is less than the labour afforded: it takes less than one day’s labour to create one day’s labour power. The difference is the surplus value of labour. And the surplus value of labour is the source of profit. That’s all that’s left over to be profit, real profit; that’s all the capitalist can consume or invest."

    So labour power is the ability to perform labour. And labour power comes with the socially constructed cost of feeding etc workers. The cost of labour power is less than the labour afforded.

    When you say 'costs', we are talking about costs to the employer class or costs to society ? The costs to employers to have workers with the ability to perform labour is less than the labour afforded ? But less what ? Labour power has less cost than the cost of labour provided ?

    If labour power is the ability to perform labour, how do you "create one day's labour power" ? I don't understand how the ability to perform labour can be compared to labour itself. They seem like two completely different categories so my brain can't compute statements like "it takes less than one day’s labour to create one day’s labour power".

    ReplyDelete
  4. theObserver: Good question. I'll explain in more detail as soon as time permits. Stay tuned.

    ReplyDelete
  5. I've replied here: Labor and labor power. It's a nontrivial concept, so please feel free to ask as many questions as you like.

    ReplyDelete

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