From New Dawn Special Issue Vol 17 No 4 (Aug 2023)
Listen to debates about economic systems in today’s corporate media and you can count on hearing that the only possible options are capitalism, socialism, or some ungainly hybrid of the two.
You have to pay close attention to figure out that by “capitalism” and “socialism,” the media’s talking heads mean something much more specific than the dictionary definition of these words. There are many kinds of capitalism and many kinds of socialism, but you won’t hear that mentioned these days. Nor will any of the approved voices in schools or the media admit for a moment that there might be other choices outside the two officially approved options.
Gimmicks like this are standard practice in today’s disinformation-rich mental environment. The strategy is always the same. From an entire alphabet of options, the talking heads insist that L and M are the only two that matter and then tell half the population about all the problems with L while the other half hears all about how bad M is. Before long, the people who are afraid of L will rally around M, the people who are afraid of M will rally around L, and nobody will notice there’s a whole world of options from A to Z that they could choose instead. Meanwhile, the people who profit just as easily from L as from M are laughing all the way to the bank.
That’s the delusion that has our economic life in its grip. The only kind of capitalism that gets talked about in the media, the schools and the conventional wisdom is corporate capitalism – a system in which vast corporate bureaucracies control the economy. The only kind of socialism you can expect to hear about, in turn, is state socialism – a system in which vast government bureaucracies control the economy. Since elite insiders circulate freely from corporate to government bureaucracies and back again, it’s a distinction without a difference.
Genuine alternatives would take economic activity out of the hands of both sets of bureaucrats and put it back into the hands of individuals where it belongs. Does that seem hopelessly utopian? For most of human history, that’s how economic affairs were managed. The Tweedledum and Tweedledee of corporate capitalism and state socialism is a very recent creation. Less than a hundred years ago, most people knew there were other possibilities. It’s past time for a reminder that things can be different.
In the paragraphs below I’ll discuss a few of the alternatives.
Three Alternative Systems
Cooperativism. This approach has already been put to work over much of the world with excellent results. The only reason you haven’t heard about it is that the people who profit from society as it is don’t want you to. As the name suggests, cooperativism is a system in which cooperatives – voluntary associations of individuals – own and control the mainsprings of economic life. There are two categories of cooperatives in a cooperativist system, worker cooperatives and consumer cooperatives, and they each deserve a few words of explanation.
Worker cooperatives are already found all through the world’s industrial nations; most worker-owned companies (and there are a lot of those) are run this way. In a worker cooperative, the employees own the business and elect a board of directors that hires and fires the people who fill corner-office roles. There are many ways to run a worker cooperative, each with its own strong and weak points. If you look into the print and online literature on cooperative organisation you can find ample information on the options, and many countries have associations of cooperatives that are eager to help new co-ops get started.
Consumer cooperatives are less common than they used to be, but you can still find them, and you can also start them. The simplest form of consumer cooperative is a buyers club, in which a group of people buy groceries and other wholesale products and split the cost, cutting out as many middlemen as possible. Once a consumer co-op gets going, if its members want it to expand, it can add members, raise the money to open a storefront and mutate into a consumer-owned store. Again, the members elect the board of directors, which does the hiring and firing.
A cooperativist system would look almost identical to what we see in the industrial world today, except that it would be run for the benefit of everybody. There would still be factories, stores, and the rest of it – but the profits would go to the people who work in the factories and shop in the stores, not to a kleptocratic elite, and management would be answerable to the workers and shoppers, not to the same elite class. The result? Economic democracy.
Distributism. This system was created by Christian thinkers who paid attention to the way that centralisation of the means of production leads to economic problems. Distributists recognised that Marx was right to criticise the idea of putting ownership of the economy in the hands of a tiny minority of rich people but wrong in thinking that things would improve by handing control of economic assets to a tiny minority of well-connected government officials. The distributist idea is that the best way to get the engines of economic activity into the hands of workers is to see to it that each worker owns his or her own means of production.
The main focus of distributism is using public policy to maximise the number of small businesses in the economy. In a distributist system, farming is in the hand of small-scale family farms, and most businesses are sole proprietorships or small partnerships. That spares businesses the need to pay for the corporate bureaucracies that eat up so much value these days, and it also maximises job creation – small businesses on average are far better engines of job creation than big ones. All this may sound thoroughly retro, but these days there’s a movement of technodistributists who argue that modern technology makes factories an anachronism and propose a radical decentralisation of work empowered by the latest technology.
How best to encourage the distribution of the means of production is a topic that’s generated a great deal of debate in distributist circles. E.F. Schumacher, the dissident economist whose book Small is Beautiful was a central guide to economic alternatives before it got memory-holed by the system, pointed out that much of the problem lies in the deliberate production of excess complexity, which keeps small businesses from competing with the big corporate players. A focus on simpler technologies, less bureaucratic regulation (which always favours big firms over small ones), and an end to government subsidies for big firms – these steps can tilt the playing field in favour of small firms and distribute the means of production to the producers.
Social Credit. This has nothing to do with the Chinese “social credit” system, and it wouldn’t surprise me if the Chinese system was given its English name to keep people from looking into the original. A century ago, everyone knew about social credit. It was the most promising alternative economic system being discussed at the time, and its fans ranged across the political spectrum from Catholic socialist Dorothy Day on the left to arch-conservative author J.R.R. Tolkien on the right.
Social credit was worked out by a British economist and engineer, C.H. Douglas, who paid attention to the role of debt and credit in driving the wildly unbalanced distribution of wealth in capitalist societies. He showed that businesses under corporate capitalism inevitably pay out less in wages, salaries, and dividends than the value of the goods and services they produce. Add that up across the board, and it’s mathematically impossible for consumers to buy everything the economy produces without running up unpayable debt. That’s what drives economic crises and makes corporate capitalism hopelessly unstable.
There’s a great deal more to the system, but a rough sketch of the practical consequences is that under social credit, banking is a public utility rather than a for-profit industry; banks are publicly owned, and they provide money the way public utilities provide water and electricity, without generating debt in the process. (Do we really want the government to pay rich people for the privilege of issuing currency? That’s what today’s system of money creation amounts to.) Under social credit, there’s also a national dividend paid out annually in equal shares to every citizen to make up for the imbalance in purchasing power so that consumers can afford to consume everything that producers produce.
Are cooperativism, distributism, and social credit the only alternatives to the mess we have now? Not at all. There are many others. Put a little time into researching alternative economic systems and you’ll find plenty of options other than corporate capitalism and state socialism. The sooner that fact starts to filter through the crawlspaces of today’s society, the sooner the momentum for change will start to build.
Worlds Beyond Money
The systems we’ve discussed all assume a money-based economy like the one we have today. A more radical option starts with recognising that too much economic activity depends on money. At most other points in history, the majority of people produced much of what they consumed by their own labour, using resources and tools they owned and controlled, and so most economic activities went on without money being involved. The household economy is one good example of this. If you cook for yourself, grow your own vegetables, and do your own home repairs, for example, that contributes mightily to your welfare but it doesn’t involve money changing hands.
That’s why industrial nations have done everything they can think of to convince people to abandon the household economy. If a transaction involves money, after all, the government can demand its share, and plenty of corporations have a chance to extract a profit from it as well. If you produce goods and services for your own use, by contrast, nobody profits from your labour but you. If you do the same thing for your family, again, government and corporate grifters are cut out of the loop. In most economically healthy societies, something like half of all value is produced in the household economy: that’s a lot of production freed from the grip of a corrupt and abusive bureaucratic system.
We can take things further than this, however. In The Wealth of Nations, Adam Smith criticises the notion – as common in his time as in ours – that money is the same thing as wealth. He points out that a country’s wealth consists of the product of its natural resources and collective labour. In another place, though, he defines wealth as anything that can be valued in money. These definitions don’t conflict with one another; rather, they make the crucial point that money is not wealth. It’s the yardstick by which modern cultures measure wealth. This ought to be the first thing we teach children about money, though of course it isn’t.
One major problem we face in today’s industrial economies is that the yardstick has been fiddled with to prop up the power of a bureaucratic elite. It may well be possible to come up with a yardstick less vulnerable to fiddling – that’s what the cryptocurrency movement is trying to do. It’s also possible, however, to carry on a great deal of economic activity without bringing money into the picture at all.
This is something that every economic textbook in print tries to trick you out of realising. That’s what lies behind the explanation for why we use money, which appears in textbooks somewhere near page 6. It runs like this. There’s a plumber and a pig farmer who want to do business with one another, see, but the plumber’s Muslim and the pig farmer has nothing to trade but pork. Add money, and voila! The farmer sells his pork to other people and uses the proceeds to pay the plumber, who uses it to buy halal meat. Everyone’s happy – well, except for the pigs.
It all seems very logical until you think about it for ten seconds. Notice how the explanation assumes that the plumber, the pig farmer, and everyone else only have a single economic function. The plumber doesn’t, as most people did a century ago, grow some of his own food in his own back garden. The pig farmer doesn’t, as most people did until even more recently, do most of his household repairs himself. Both of them are defined by a single function: the pig farmer can only produce pork, the plumber only plumbing. That’s why the pig farmer somehow never thinks of raising lambs in a spare pasture so that he has something to trade to the local Muslim community, and the plumber never thinks of having his share of pork sent to a non-Muslim doctor, say, to pay for his family’s medical care.
All the textbook explanation proves, in other words, is that if you have a money economy, it probably does need some kind of money to make it work. It’s not surprising that this isn’t the explanation textbooks draw from it, of course. Whenever you use money, you pay rent for the privilege; some of the rent is called interest, some is called taxation, and there are plenty of other forms that the rent takes, but it all amounts to the elites and their bureaucracies taking an unearned cut of every economic transaction, and getting rich on the proceeds. Thus the schools and media have every reason to try to convince people that there are no alternatives.
From Here to There
Corporate capitalism, state socialism, and the uneasy mix of the two that’s standard in most industrial countries these days have a tight grip on most economic activity. Getting free of them won’t be a quick or easy process. However, most of us can take some steps away from the current system right now, and many of those have an immediate payoff.
The first and most important of these is to pay attention to your own economic choices and notice how often you’re being tricked into spending money. Remember that when you do something for yourself, you get all the value produced by your labour; if you spend money for it instead, other people extract a cut. Put a few minutes into calculating how much time you spend working to earn a dollar, and then ask yourself – is what they’re trying to talk you into buying worth that many minutes or hours at your job? Most of the time, no, it’s not.
It’s also worth finding out what skills your friends, family members, and other people you know have, and see if it’s possible to barter with them for goods and services. In healthy societies, a huge amount of economic activity takes place by exactly this sort of informal exchange – person A does garden work for person B in exchange for a haircut, person C cleans person D’s house once a week in exchange for bottles of homebrewed beer, and so on. While you’re at it, if you’re short on skills that will give you something to barter, learn one and get good at it.
Many people are convinced they can’t do this sort of thing because they have so little free time outside of work. I’ll give you a hint: working for an employer isn’t your best bet since employers profit by giving you as tiny a share of the value of your labour as they can get away with. If you work for yourself, you’ve got a much better chance of keeping the value of your labour. During the Covid shutdowns, many people figured this out, which is why the authorities in so many countries are yelling about labour shortages right now. Contribute to the labour shortage by finding a way to make a living without being somebody’s employee, and you’ll also be contributing to a better world.
You can also use your own choices to help support alternative economics. There are plenty of worker-owned cooperatives these days; you can buy from one instead of handing over your money to their corporate rivals. There are plenty of sole proprietorships and small businesses along the distributist model, too; support those instead of big corporations and everyone but the kleptocrats benefit. For that matter, a buyers club can enable you, your family, friends, and neighbours to get things at wholesale prices, cutting another batch of corporate grifters out of your life. Social credit isn’t scalable in the same way, but it and the other alternatives can be pursued in another way: by getting the word out.
The most important step, after all, is to help other people find alternatives to the mindless drudgery and exploitation that the current economic system provides to its inmates. Corporate capitalism and state socialism aren’t the only possible economies; they’re the options that allow today’s elites to rake in the most unearned wealth, but that’s only an advantage to the elites. Look into other options, learn about them, and spread the word. That way lies a less abusive, more creative, and more humane form of economic life.
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