David Schweickart’s “After Capitalism”

Against the Current, No. 107, November/December 2003

Mel Bienenfeld

After Capitalism by David Schweickart (Rowman & Littlefield, Lanham, MD, 2002) 256 pages, $70 hardcover, $23.95 paperback.

ARE TODAY’S MOVEMENTS against capitalist globalization and its consequences moving towards a common vision of a new social system?

Among many now discussing this question are the participants in the 1990s debate over whether central planning or a market-based system of socialism represented the best hope for a human future.

One of the theorists most prominent in this debate, the philosopher David Schweickart (of Loyola University in Chicago), has recently contributed a short book in specific recognition that people involved in the growing resistance movement to capital are indeed looking for ways to think about the alternatives.

“After Capitalism” is largely an abridged version of Schweickart’s Against Capitalism (1996). The new book is written for “those who will form the basis of the next great challenge to capitalism” (Preface, xv), rather than for academics, but follows much of the argument presented in the earlier work.

Schweickart wants to show that the primary negative aspects of capitalism — which he sums up as excessive inequality, unemployment, overwork, poverty, lack of democracy and environmental degradation — are necessary results of its structural features, and that a differently structured system which he calls Economic Democracy is viable, practical and superior to capitalism regarding all six of these negatives.

The standard ethical justifications in capitalism’s favor can no longer be raised in its defense, he adds, now that it can be compared to an alternative which is shown to be superior. Replacing capitalism with Economic Democracy, therefore, ought to become the aspiration of those struggling against the system’s evils.

Moreover, Schweickart argues, the transition from capitalism to Economic Democracy will not require a thorough social restructuring and can be carried out on a national scale by way of a few major reforms implemented by an elected radical government.

A “Counterproject”

To socialists, and particularly Marxists, it might seem strange that a book on socialism written for radical activists spends one of its six chapters on a critique of the ethics of capitalist profit-making on the grounds of philosophical concepts of justice, while another analyzes what, precisely, is bad about the six evils mentioned above.

Don’t most radicals know this, and hasn’t it been argued from other perspectives elsewhere? But Schweickart starts from scratch in order to ground his analysis on an original foundation, and his first chapter lets us know his intention to found a new tradition.

Recognizing that the challenge to capitalism involves not just economic, but other issues of social justice and environmental sustainability, he refers to it as the “counterproject.” Within this project, the specific effort to understand the potential for economic alternatives is “successor-system” theory.

It is not clear how the use of these terms contributes to Schweickart’s analysis, unless it is to signal that he is generally going to avoid traditional Marxist methodology and take ideas from various sources as he needs them.

“Fortunately,” he tells us, “we now have sufficient theoretical and empirical resources to construct such a theory. We are vastly better situated than was Marx or even Lenin in this respect, for we have accessible to us not only a century of unprecedented socioeconomic experimentation but also data and conceptual tools that were unavailable to the founding theoreticians of socialism.” (8)

The Critique

To begin his critique of capitalism, Schweickart defines it as a society consisting of three basic components: private ownership of the means of production, a system of exchange in which prices are primarily market-determined, and the condition that most people in the society are wage laborers. A society may have some of these features without others, in which case it is not capitalist.

We apparently are to assume that, in the light of recent experience, the understanding of capitalism as three separable components will suffice to analyze its problems and construct a successor system.

Although Schweickart refers to Karl Marx’s “Capital,” he seems to imply that his successor-system theory need not take into account the many pages Marx spent investigating the properties of commodities and labor that allow the system to function socially, and which give rise to its destructive tendencies.

Marx’s labor theory of value, according to Schweickart, is ideologically useful because it refutes the notion that capitalists have “contributed” something other than labor to the social product, and therefore have earned their profit. He has already told us, however, that successor-system theory does not address, except indirectly, such Marxian concepts as alienated labor, fetishism of commodities, the labor theory of value, or the falling rate of profit. (12)

One may imagine that Schweickart is trying to avoid the terrain of verbose theorists who employ high-sounding phrases but never engage on a practical level. But Marx worked out his concepts to arrive at conclusions about how we can expect the system to develop.

For example, “Capital” argues that commodity production (market-based production) separates the useful, qualitative aspects of human labor from its abstract, quantitative aspects, and that the two aspects (use and exchange) develop together according to distinct, and often conflicting, logics.

Surely a post-Marxist theorist of economic systems ought to address whether this feature of market production can ever be consistent with democratic forms of economic development, or point out to readers why it can now be transcended.

Class Struggle Disappeared

Schweickart also rejects, at least implicitly, Marxism’s approach to the development of anti-capitalist social forces. The idea of a class struggle is not discussed. Schweickart tells us that “the old models of social revolution . . . are largely inappropriate to . . . advanced industrial societies.”

His own work “will not offer a full-blown `theory of revolution,’” but can provide “plausible transition scenarios” that include a more concrete vision than in the past. (12-13) The role of social movements in these scenarios is not clear.

Schweickart presents a reform program, consisting mostly of government regulations, which can be fought for before a final end to capitalism. One aspect of this program will be legislation supporting and encouraging producer cooperatives, worker buyouts, and worker participation in firms’ decision-making.

He also lets us know that the counterproject must be “well-developed” and “must bring together, at least in collective spirit,” today’s social movements. (177) But in his discussion of democracy under capitalism, he appears to indicate that the abolition of capitalist institutions is essentially a matter of an enlightened citizenry electing a government committed to socialist ideas:

“ [I]n a true democracy, the electorate could alter … basic institutions … Since the ways in which the interests of capital diverge from those of the great majority are not so hard to grasp, a sovereign electorate probably would want to try something else.” (110)

The only mass activity Schweickart mentions in his transition scenarios is the experience gained by workers in running cooperatives. Economic Democracy is instituted after the “landslide election” of a leftist national government. The transition itself will apparently be the work of this government:

“We [the leftist party] have an overwhelming mandate to move beyond capitalism . . . to this ‘Economic Democracy’ we have been promising. What would we do?” (171)

“We,” Schweickart says, would issue a series of decrees, declarations and announcements, “four simple reforms.” (172) Everyone goes back to work as before, with institutional changes implemented by the government’s decrees. This language, in which leaders and activists design and construct the system for a generally passive population, reflects the general spirit of the book.

Schweickart admits the scenario is not realistic, and perhaps too “abrupt” — but considers its primary failing to be that the reforms have not compensated small investors in the financial markets that have just been abolished (and then spends three pages arguing for such compensation).

The labor movement is then mentioned for the first time, two pages before the end of the book. All Schweickart has to say about it is that its role will be “central,” since restructuring the workplace is a main task of the counterproject.

Regarding the nature of the state that first upholds capitalism, and then destroys it, there is no recognition of a problem, and no reference to the Marxist idea that “the emancipation of the working classes must be conquered by the working classes themselves.”

Apparently the political role of members of the organized movement (“counterproject”) is to convince the rest of the population to allow them to put counterproject ideas into practice.

The Model

Nevertheless, Schweickart does attempt to describe for us a social system whose features and consequences he discusses in thorough detail. The theory of Economic Democracy ought to be examined for its own sake. The rest of this review is an attempt to summarize this theory and then critique it.

Schweickart proposes to eliminate (within an individual nation) two of his three structural features of capitalism, retaining the market for goods and services but outlawing “private ownership of the means of production” by means of a socialized investment process.

Wage labor would be eliminated — while maintaining intact a system of competing private firms — by establishing one-person-one-vote democratic management within each firm. In place of a fixed wage rate, profits would be distributed fairly among the workers, and each worker would be motivated to ensure the firm’s success selling in the marketplace.

Investment in plant and equipment is to be funded by means of a tax on the value of existing structures, actually a kind of lease on fixed capital (which may not be privately owned), paid by firms to the state. The tax proceeds are recycled through a system of public banks whose operatives earn their living according to how well they judge both the profitability and employment creation potential of prospective investment plans presented to them.

The banks do not charge interest. They are, however, required to allocate investment funds to geographic regions on an equal per capita basis. Firms whose investment proposals are accepted then use the awarded funds to carry out their plans.

Business credit is essentially abolished, so there are no stocks and bonds. Private savings may exist and be channeled into consumer loans, but the social role of private finance will be small, because capital investment is socialized.

The economy will no longer depend on expectations of a return on financial assets in order to avoid the consequences of sluggish growth or recession. If there are insufficient opportunities for productive and job-creating expansion of capacity, a portion of the social investment fund will be simply be returned to the firms who paid the capital tax, who will then distribute it to their workers (to be spent on consumer goods).

This system, Schweickart argues, will be essentially free of the negative aspects of capitalism, though it will not be perfect. Extreme inequalities (but not all inequality) will be eliminated. Democratic management will result in solidarity among workers, limiting both the tendency to lay off workers whenever a firm’s sales have declined and to move work to other regions or countries in search of cheaper labor.

The incentive to increase firm size in order to increase profits will be absent, since higher profits will have to be shared among an increased number of workers. Firms will therefore tend to be smaller, and competition will only be over incremental market share, without an incentive to drive competitors out of business.

Eliminating extreme wealth and giant conglomerates will democratize both the information media and the electoral process, and the fear that financial markets will react poorly to social welfare spending will no longer be a concern.

Unemployment itself will no longer serve its perversely useful function of disciplining the work force, because inter-firm competition already establishes a clear motivation for each worker to strive for high levels of productivity in order to increase his/her share in profits.

Severe recessions caused by “investment strikes” on the part of property owners will no longer occur. Workplace democracy will increase social solidarity, reducing divisiveness between social groups and encouraging the human tendency to take care of those less able to engage in productive labor.

Finally, without capitalism’s imperative to “grow or die,” production will no longer be undertaken for its own sake, allowing the concern for the environmental consequences of unrestrained growth to be harmonized with the need for human well-being.

Democratic Management and a Market?

Schweickart is envisioning an economy of locally based firms of modest size whose competitive behavior is consistent with a concern for their home communities and the general public welfare.

He doesn’t tell us how today’s global economy of national and international enterprises (in telecommunications, agribusiness, raw materials supply, manufacturing, information technology, entertainment, etc.) is transformed into this community-based economy, nor does he seem aware that such a transformation might be an issue.

After his “four simple reforms” — the abolition of interest and dividends, legally instituted democratic management of firms, the creation of a national investment fund financed by a capital assets tax, and the nationalization of banks — he tells us that “virtually all businesses keep doing exactly what they did before.” (173)

Of course, he doesn’t mean exactly what they did before, since their motivation has now changed. Schweickart is quite categorical about the consequences of democratic management. “[D]emocratic firms have no interest whatsoever in lowering labor costs,” he argues. “Successful worker-run firms, unlike their capitalist counterparts, do not possess an inherent tendency to expand.” (128-129; italics in original)

But despite Schweickart’s systematic discussions of the contrasting features of capitalism and Economic Democracy, he has not really examined how a market system functions.

The only system in history in which economic behavior is primarily conditioned by a market has been capitalism. Competing theories exist to explain how it is that a system of prices develops that can then be relied upon to ensure the activity necessary to reproduce society.

How does it happen in a non-capitalist system? Schweickart doesn’t discuss this. In Marxist terms, he has not confronted the notion that exchange value — a price system — depends on a social process by which all forms of human labor are reduced to a commensurable, quantifiable abstraction.

Instead he believes that certain features (democratic management, social control of investment) can be tacked on to an existing market economy and then used like mathematical axioms to derive the consequences.

Imperatives of the Market

This is not the place for a complete critique of market socialism. Briefly, though, if the market is to guarantee that workers will produce what society needs without squandering or misallocating available labor time, there must be pressure among competing enterprises to undersell one another.

Allotting some workers a smaller share in income, working some harder than others, laying some off, hiring the poor from other regions, etc., remain strategic options in this competitive war, even for “democratic” firms.

Schweickart’s attempt to eliminate wages by turning the social investment fund into a fixed cost and worker compensation into the residual (thus reversing the roles of the two components of social income) will not prevent these strategies from becoming necessary behavior.

Workplace democracy is supposed to minimize exploitative tendencies (and discriminate “between socially useful kinds of competition . . . and socially destructive kinds” [79]), but survival in a competitive marketplace has its own imperatives, and elected managers can and must act to lower labor costs, even with the approval of a segment of the work force.

Without a survival imperative (for firms and individuals alike), there will be no price system. This would be true even if a one-person-one-vote management policy is enshrined in a constitution. But even the continued existence and robustness of such legal mandates must be questioned if economic imperatives militate against them.

Schweickart’s argument that Economic Democracy has no “grow or die” tendency rests on the contention that there is no benefit to increased profits when they must be shared among a larger labor force. But here he has not examined the reasons increased profits are important under capitalism, or even explained capitalism’s growth tendency.

He has instead attributed capitalists’ search for profit simply to their personal desire for ever-increasing wealth. As has often been pointed out by radical and non-radical economists, however, capitalist profits — even if distributed as dividends — represent essential financial strength that allows firms to get the edge on their competition (as well as giving them a positive incentive to expand).

These profits, or the further capital they attract in search of future profits, may be used to apply new productive technology, enter new markets, or encroach on the competitors’ market share. This activity is, once again, a matter of survival; if one firm does not undertake it, the competition will.

Controlling Investment

All this is not supposed to be allowed under Economic Democracy, because investment is to be allocated socially. The “means of production” are still purchased on a market, however, and Schweickart admits it is possible — even with a prohibition on private ownership — for individuals to buy sufficient plant and equipment to start a business.

He suggests that small-scale capitalism may even be allowed in his system. But to prevent small capitalists from becoming large ones, or “socialist” firms from expanding their capacity by means of private purchases, he has to rely on legal restrictions.

Otherwise, after paying their capital assets tax, some firms will find themselves with more profits than others, and use the excess for expansion purposes instead of personal consumption, thereby circumventing the social investment process.

Groups who have pooled their saved money may start a large private business, or lend these savings to others who do so (leading towards a private banking system). An alliance of less successful firms may wage a political fight to lower the capital assets tax and allow them to retain larger profits, arguing that the inhibition of market investment ought not to be so restrictive.

Profits remain a potential weapon in an economic war. Schweickart does not discuss such possibilities. His main concern is to convince people of the possibility of socialism, arguing, so to speak, to his right, and he presents no case against the anti-market left.

He does explain that the alternative of central planning can be criticized on the grounds that it leads to authoritarianism and is fatally inefficient, and he refers his readers to the recent debates over the market for a fuller discussion.

But he does readers and his own case a disservice by presenting no defense against the argument that market socialism is an unstable concept: that, if it can be practiced at all, it tends to degenerate into capitalism, and that the phrase “market socialism” is for this reason a contradiction in terms.

Schweickart has asserted that a set of rules can fully govern the behavior of firms in a competitive marketplace; that an essentially different set of material incentives can emerge from a new legal structure while maintaining basic market imperatives. But he does not examine the social forces that might maintain, or erode, the rules themselves.

What can guarantee that firms are run democratically? Will a regulatory agency monitor them? What political pressures will thereby emerge? What ensures that capitalist practices — hiring disadvantaged workers for (low) pay, or pooling financial assets to start a large private enterprise — will be punished?

How strong are forces tending against democratic management and in favor of private ownership likely to become? Who exactly will constitute the government that stops them?

Materialism and the Future

These, of course, are the questions that would be posed by a historical materialist approach to economic development. Can humanity resolve the market’s contradiction between production for need and production for exchange on the basis of the market itself?

Schweickart proposes to do so, by grafting onto the market a new set of structural features (workplace democracy and socialized investment) and imposing them by means of a set of legal rules. A new, humane direction for socioeconomic dynamics is then determined by deriving it from this structure.

Marxism instead argues the reverse: that the legal rules that are likely to emerge and evolve follow from a society’s socioeconomic dynamics, and that its structural features cannot be understood individually, but only as part of a whole.

Ironically, Schweickart declares himself early in the book to be a historical materialist. He represents historical materialism, though, as the theory that human society tends to progress, as people use their creativity and ingenuity, towards “gaining ever more conscious control over our world and ourselves” (9) — a description that Marx would certainly not recognize.

In returning to the pre-Marxian socialist attempt to solve the problems of the market on the basis of the market, Schweickart has failed to demonstrate how he has become “vastly better situated than was Marx.” So where does this leave us?

Today’s anticapitalist struggles certainly do need an alternative social vision, particularly if they are to take on more of a mass character.

Complete “blueprints” are both impossible and unnecessary. But the project of elaborating what the real experience of a society emerging in the not-too-distant future might be — beyond the phrase “central planning” — is essential to the coherence of these struggles.

The negative association of central planning to failed Soviet-style authoritarian systems must certainly be faced. The argument that “democratic” planning solves the “information problem” faced by those systems must be clarified and made specific. Schweickart’s efforts to show how an alternative system could address a range of contemporary social and economic problems ought to be replicated for a planned economy.

Perhaps, then, Schweickart’s highly problematic attempt to direct the academic discussions of socialism toward activists, and to focus them on specific issues, could be a challenge for those who dispute his vision but share the sentiment that thinking about what happens “after capitalism” is as practically relevant as it ever has been.

ATC 107, November-December 2003