As we saw in my last post, the system of funding in ED consist in a general tax over the capital assets of companies; the resultant income is later distributed by the state to a myriad of “social banks”. Schweickart itself recognized in his book "After Capitalism" (2002) the possibility of a system of "laissez-faire" marksoc, but preferred to develop a system of banks that would invest in cooperative companies based in social goals, especially to reach full employment. This alternative laissez-faire system would be structured in the following way:
Banks would be charged a centrally determined interest rate on the funds
they receive. They would be expected to make a profit, that is, to charge more
than the baserate interest, adjusted according to risk. Bank officials, who are
public officials, would be paid in accordance with performance. Banks would
compete, as they do now, trying to balance the riskiness of their loans against
the interest rates they charge. As under capitalism, managers of successful
banks (i.e., the most profitable) would be rewarded, managers whose banks
performed poorly would be sacked. In all cases, bank profits are returned to
the national investment fund. (p.49)
For the
author of this blog, this system constitutes a mix between what I call pure
marksoc and Economic Democracy, since in the later banks are managed by
public officials and not by its own workers, and the State controls part of the
economy through its management of the "investment fund". We
should remember that in Economic
Democracy the workers are not owners of their companies, which belong to
all of society. Workers cannot sell the capital stock and use the resultant money
as income.
Let me
describe some positive aspects of the ED
proposition. In ED investment is proportionally allocated among regions according
to their population. Following
neo-classical economic theory, this allocation would be clearly inefficient, since
profitable companies could lack access to funds while less profitable ones
could receive them because of their location.
Bruno Jossa (2004) is right
to point that labour also moves between regions (albeit more slowly than
capital), thus we could see a population movement towards those regions where
the returns to capital are higher. Per-capita
allocation of investment can mitigate the concentration effect, and it is based
in the principle of fairness. Being that
in ED there is not interest earned
for personal savings, the mechanism of tax over the capital stock of companies
and fair redistribution of investment avoids the “problem of austerity” of
capitalism, because S(avings) can then be
equal to I(nvestment) with some slight
manipulations. Jossa argues that in ED we can dispense through the fiscal
system with both “Keynesian” and even structural unemployment.
Public
ownership and social investment constitute “protective” measures that show an
overwhelming preoccupation about the possible destruction of companies and the
increase of unemployment, preoccupation proper of developed service economies
such as the United States. In my opinion the gains in efficiency (and
happiness) due to real ownership far outweigh the potential costs of the
destruction and reconstruction of companies (still, in a mixed system where
cooperatives and capitalist companies cohabit, this means that we could see our
hopes for the establishment of marksoc
dashed by the degradation of cooperatives and their eventual transformation in
capitalist companies).
Jossa
agrees that banks should be cooperatives in themselves which can pursue
profits, but desires to maintain the per-capita basis of the tax funds`distribution. He also sustains that granting interest for
personal savings (in the form of government bonds) is not a problem in an
economy where workers are also company owners.
Jossa recognizes that letting the banks choose companies according to
expected returns on their loans could greatly reduce the available funds for
the creation of new cooperatives.
However, it is important to note that there is an intrinsic limit to the
size of a cooperative company (depending on the sector). This fact lets horizontal spaces to be filled
by new potential enterprises in a specific market, existing also an interest on
the cooperatives`side to spur other companies to work with along the production
chain, in the way a federation does.
I think
that is important to differentiate between complete ideal models such as ED and the possibilities of reality,
shaped by political conflict and power struggles. The conceptual transition from capitalism to pure marksoc, given its similitudes to
libertarianism and other “free-market” philosophies, seems to be easier than
the transition towards ED at this
moment (2011). The most important problem to solve, if we are going to take the
pure road to a marksoc system, is
how we are going to facilitate the necessary funds for the establishment of the
required thousands of new cooperative companies. If we are right, with minor adjustments our
system can quickly supersede the current “capitalism of chaos and friends in
high places” (how else can it be described?) and from there further changes
towards fairness can be implemented. Am
I too timid to make revolutionary changes?
We should discuss then the desirability of more involvement of the State
in the structure of investment, the fairness principle in investment
distribution, and the future effects this can have in the environment and
personal happiness. Fire away.
Bibliography
JOSSA, Bruno (2004): "Book Review: Schweickart and Economic Democracy", Review of Radical Political Economics (36), pp. 546-561.
SCHWEICKART, David (2002): "After Capitalism", Lanham: Rowman & Littlefield.
For the accumulated Bibliography and the Glossary please click here
