19 June 2018

There’s nothing wrong with socialism – as long as it’s voluntary


The view from the Marxist side of the tracks often follow the topsy-turvy logic of something created by Lewis Carrol. Often, they work better if viewed as a mirror image.

Take, for example, the claim by Richard Wolff that “capitalism is the reason your employer is screwing you over”. According to Wolff, workers’ cooperatives are very much better than capitalist forms of organisation.

There’s nothing wrong with cooperatives per se. But Wolff’s demand that the coops gain access to outside capital is where his argument starts to go wrong. After all, the only useful definition of capitalism is a system in which access to outside capital happens.

One of the primary objections to capitalism is the boilerplate insistence that the worker, in a capitalist system, doesn’t gain the full value of her labour. This is exploitation and something must be done about it.

The argument has a major logical fault: it is a two-way street, for the capitalist doesn’t gain the full product of the use of their capital either, meaning that the capitalist is equally exploited.

It is the addition of capital to labour – as standard Marxist theory argues – which produces greater productivity and thus higher wages. But that does mean that the addition of capital benefits the worker, our capitalist is not gaining all of the value from the use of the capital.

If one is exploitation then so is the other.

However, Wolff is on firmer ground when it comes to cooperatives. It is true that workers gaining a portion of the profits can work. Wholly employee-owned organisations are more productive. John Lewis thrives even in today’s tough retail environment and there are US worker-owned supermarket chains as well. They do just fine competing with the capitalist Walmart just as Waitrose does against Tesco and the equally capitalist Sainsbury’s.

The greater commitment from workers that own a piece of the pie might also explain why absolutely every tech business in the world is paying staff in some combination of wages and equity.

Socialism therefore works. At least voluntary socialism does work sometimes and it’s habitual now to mention Mondragon as an example of industrial companies which succeed as worker owned organisations. But the two important words there are voluntary and sometimes.

For example, an employee owned integrated steel company is going to be a rare beast. It’s unlikely that 10,000 workers are going to have a couple of billion in capital to build one and they’d be fools not to diversify if they did.

Employee ownership should, in theory, work well when it is human capital that is the vital ingredient in the recipe, less so when it is physical such which matters.

The voluntary part should be obvious. If people desire to organise themselves into less and more communal forms of production then good luck to them.

There are however two errors to be avoided. The first is the logical, perhaps definitional, one: to start to insist that these workers coops must gain access to outside capital in some manner. That is the definition of capitalism.

The second is more important. It’s true, as above, that worker ownership works better sometimes and more capitalist organisational forms better elsewhere. What we need is a method of sorting through what works best when – and that’s where the market comes in.

The decision about what’s the best form for a specific task is not something to be derived from theory in advance, it’s emergent from market competition.

We’ve thus an interesting observation to make about that claimed superiority, of performance at least, of the socialist form. If it were truly more productive always and everywhere then it would have taken over the economy already.

The same is true of the capitalist alternative. That neither has shows that each have their merits. We also don’t know when and where this is going to be true in the future. We’ve got to let people get on with it and see then, don’t we?

Or as we might put it, market freedom trumps our other concerns here. The calculating engine of market competition tells us which form of organisation is indeed more productive for a certain task in a time and place. As long as we have freedom of organisational form plus market competition we’ll continue to find out.

Tim Worstall works for the Adam Smith Institute and the Continental Telegraph