Liberals are inhibited, however, from calling into question the institutions of corporate capitalism. This is so, in major part, because they do not see any way to have the great advantages of a (largely) market economy except through acceptance of corporate capitalism.
In fact, however, economic arrangements can be combined in more than one way. As long experience in many countries has demonstrated, societal ownership of large firms can be combined with market competition. Such “hybrids,” of various types, are known to economists under the general rubric of “market socialism.”
It is generally assumed that corporate capitalism in the United States is impregnable. This overlooks, however, one of the great realities of “American exceptionalism”: in the United States, corporate capitalism operates without the cultural constraints that have operated in Western Europe and elsewhere; its “excesses” have therefore been far more difficult to control. There is no inherent bar to these “excesses” triggering an ideological shift within the Democratic Party to some type of market socialism for large firms, with taxing away of great personal wealth.
For specific proposals for a decentralized and pluralistic system of market socialism for large firms (not small businesses), see my A New Program for Democratic Socialism. For land speculation and related issues, see my comparative study, Land Ownership and the Social System.
While “socialism” is supposed to be something evil, vast dimensions of the actual evils in American society can be traced to the absence of such a socialist transformation in the United States.
Three fundamental matters follow below:
Great Economic Inequality and Society
What, exactly, does great economic inequality do to society?
First, it creates social distance, by which, despite many individual wealthy benefactors, the bulk of the wealthy, because of their own circumstances, have little concern for the well-being of other parts of society.
Second, visible examples of great personal wealth promote a climate of economic individualism that sharpens desire, among many at all levels of society, to get rich, in order to "get mine too," legally or illegally. It demotes a sense of community and concern to contribute to society.
Third, it generates political power in a wealthy minority. To believe that great concentrations of wealth somehow do not have this consequence is naive. Yet such wishful thinking pervades the whole liberal tradition because that tradition enthrones private property. It is socialist tradition that has a clear focus on connections between property ownership and political power.
The American Fear of Government
While private wealth can be a direct source of political power, in the United States much of the effective political power of the conservative business community, against the New-Deal tradition, is indirect. It is greatly expanded by a fear and distrust of government, above all the national government, that, in degree, is uniquely American and has characterized large parts of the ordinary population from the outset of the Republic. In its origins, it is spontaneous. But it is perpetually reinforced by massive propaganda, and political financing, from the business community. The current Tea-Party movement is one manifestation, among many others, including the history of "States' rights," of this larger American pattern. The underlying origins of this pattern, however, have nothing to do with present-day conditions, events, or personalities; they are historical.
For these historical origins, see my The American Revolution: A Grand Mistake (Prometheus Books, 2010). This book is not just about the American Revolution; it is a re-analysis of the entire development of the United States down to the present--in relation to popular well-being and social equality.
This work also contains an epilogue on a program for the future that addresses both the economic system and the present American system of government, and spells out the most effective path for reducing this American fear of government.
Economic Systems: What Is the Best of Both Worlds?
A major, and potentially growing, part of American society would welcome an economic system that:
- Preserved the competitive market process for the bulk of the economy;
- Removed the present extreme inequalities of personal wealth and incomes;
- Removed the present political power of a great business oligarchy;
- Avoided any large centralized administrative structure.
This specific issue has never been put, effectively, to the American electorate because of two things that have prevailed among leaders of the Democratic Party--social-economic conservatism (more than a few Democratic leaders are themselves up to their ears in the game of getting rich) and sheer ignorance of the options. Both are promoted by massive propaganda from the business community.
The Option of a Market Socialism for Large Firms
Serious thought among professional economists about a market socialism, i.e. the combination of market competition with socialized ownership, as applied to large firms, dates only from the 1920s. Its exploration had been mostly suffocated in the 19th century by Marxian tradition, which, while highly penetrating in some respects, was generally blind to the societal benefits of competitive pressures on economic enterprises. A similar suffocation occurred in the 1930s within the British Labour Party and other social-democratic parties in Western Europe, and also the (then) socialist Cooperative Commonwealth Federation (CCF) in Canada, because interest in competition was swept aside by the dominant idea of economic planning. Since 1945, however, all this has greatly changed. There is now a large, accumulated, economic literature on market socialism.
If the aims are to avoid any large centralized administrative structure and to ensure a vast pluralism in sources of capital, the best general approach would be thousands of municipally owned investment banks, wholly owned by local governments, but under a system of regulation by the national government.
Under specific proposals by the present author, such banks would receive annual grants of capital on the basis of population from the national government, out of taxation, with progressive taxation of personal incomes and of total personal wealth. These banks would then invest in corporate firms, within a market-socialist sector, and exercise the stock voting rights in them. This would form the basis for a profit-oriented socialism, within such a market-socialist sector. Other measures would ensure ample venture capital and address a range of other issues. The results would not be free of abuses, but, under any reasonable policies, these would not prevent achievement of the basic purposes or be much different from what happens in any case.
This approach would mean a far-reaching pluralism, a role of government similar to existing regulation of financial institutions, full freedom for private promoters to found new firms, preservation of the private character of corporate management, and a gradual process of transition. With such new institutions in place for performing the functions of savings and investment, including venture capital, then great personal wealth could be taxed away without any permanent damage to performance of the economy.
Such market-socialist arrangements could be applied to whatever sectors of the economy are deemed to operate best under a competitive regime. This could be combined, however, with conventional public ownership, including nationalized entities, for utilities, extractive industries, and other special industries, on grounds of advantages of monopoly and/or needs for more direct roles of government.
All these arrangements could be combined with various types and degrees of employee representation in management. This can have significant benefits for equity and productivity, but should not be carried beyond the points where it can be reconciled with reasonable economic efficiency.
Such socialization of all large economic organizations, market and non-market, could be combined with a large sector of small-scale privately owned business. While various types of cooperatives can play a role, they are not any general substitute for private enterprise in the small-scale sectors.
Many Communist regimes long made the great mistake of applying the socialist idea downward to suppress small-scale private enterprise, with great damage to popular economic well-being. Capitalist countries have made the vast, and opposite, mistake of applying the idea of private property upward to large economic organizations, which inevitably leads to extreme economic inequalities and to a great business oligarchy in the political system.
What is needed is a fundamental reordering of the roles of both socialism and private property.
See my A New Program for Democratic Socialism: Lessons from the Market-Planning Experience in Austria; Land Ownership and the Social System; and Perspectives on the Castro Regime, forthcoming as an e-book.