[Reader-list] Fwd: What is socialism? By ERIC RUDER

[Venugopalan K M]

*
"..Every severe crisis of capitalism starkly reveals the system’s
bankruptcy and gives rise to debates about alternatives. This crisis
is no different. Alongside tremendous reserves of hitherto undreamt-of
wealth that should long ago have abolished poverty, millions are
thrown out of work and are left destitute. Engels’ commentary on how
the capitalist class, and capitalism itself, has outlived itself
(written in 1877) reads as if it were written yesterday:

  Their political and intellectual bankruptcy is scarcely any longer
a secret to the bourgeoisie themselves. Their economic bankruptcy
recurs regularly every 10 years. In every crisis, society is
suffocated beneath the weight of its own productive forces and
products, which it cannot use, and stands helpless, face-to-face with
the absurd contradiction that the producers have nothing to consume,
because consumers are wanting. The expansive force of the means of
production burst the bonds that the capitalist mode of production had
imposed upon them. Their deliverance from these bonds is the one
precondition for an unbroken, constantly-accelerated development of
the productive forces, and therewith for a practically unlimited
increase of production itself. Nor is this all. The socialized
appropriation of the means of production does away, not only with the
present artificial restrictions upon production, but also with the
positive waste and devastation of productive forces and products that
are at the present time the inevitable concomitants of production, and
that reach their height in the crises. Further, it sets free for the
community at large a mass of means of production and of products, by
doing away with the senseless extravagance of the ruling classes of
today, and their political representatives. The possibility of
securing for every member of society, by means of socialized
production, an existence not only fully sufficient materially, and
becoming day-by-day more full, but an existence guaranteeing to all
the free development and exercise of their physical and mental
faculties—this possibility is now, for the first time, here, but it is
here."
*



ISR Issue 65, May–June 2009
What is socialism?

http://www.isreview.org/issues/65/feat-socialism.shtml

By ERIC RUDER


IN A matter of months, the global financial crisis has dramatically
reshaped the economic and political landscape around the world. The
high priests of global capitalism have scrapped decades of neoliberal
orthodoxy, replacing their denunciations of government spending as
harmful interference in the free market with calls for trillions in
bailout bills and stimulus packages. “The goal is to get the engine of
capitalism going as productively as possible,” Nancy Koehn, a
historian at the Harvard Business School, told the New York Times.
“Ideology is a luxury good in times of crisis.”1

After decades of promoting the gospel of free markets globally and
deregulation at home, the push for deregulation has been replaced—for
all but the most ideologically blinkered—by the gospel of state
intervention. In mid-February, former Federal Reserve chairman Alan
Greenspan, a zealot of free markets, deregulation, and privatization
over the past four decades, acknowledged that a nationalization of at
least part of the banking sector might be necessary to address the
insolvency of major American banks.2 This followed Greenspan’s
admission in October that the crisis, in particular the catastrophic
errors in judgment by U.S. banks that precipitated the crisis,
revealed a “mistake” in free-market economic models. “[There is] a
flaw in the model that I perceived is the critical functioning
structure that defines how the world works,” said Greenspan.3 The
massive injections of capital into the banking system as well as
proposals for hundreds of billions of dollars in economic stimulus
spending have returned Keynesianism to a place of prestige in the
debate about how to manage capitalism.

To illustrate the extent of the political transformation, it’s worth
recalling that the response of many Republicans to the Bush
administration’s rescue plan was to proclaim the imminent demise of
American capitalism. “This massive bail-out is not the solution, it is
financial socialism, it is un-American,” said Sen. Jim Bunning (R-KY)
of the initial $700 billion plan to reassure holders of
mortgage-backed debt and to get the credit markets working again. On
another occasion, Bunning denounced then-Treasury Secretary Henry
Paulson for acting like China’s finance minister. “No company fails in
communist China, because they’re all partly owned by the government,”
he said. “I sincerely believe that Henry Paulson and Ben Bernanke
should resign. They have taken the free market out of the free
market.”4

Perhaps even more compelling is the overnight conversion of
Representative Thaddeus McCotter (R-MI) from free-marketeer to bailout
booster. On September 29, McCotter compared the $700 billion bailout
to the “horrors” of the Russian Revolution. “During the 1917 Bolshevik
revolution, the slogan was ‘Peace, land, and bread,’” said McCotter.
“Today you are being asked to choose between bread and freedom. I
suggest that the people on Main Street have said they prefer their
freedom, and I am with them.”5 But just a few weeks later on November
20, McCotter, whose district borders Detroit, showed up at a Capitol
Hill hearing with auto executives to speak in favor of the bailout for
Detroit’s Big Three auto manufacturers.6 It looks as if McCotter
decided he’d prefer bread to freedom after all.

The return of state intervention

The upshot of this shift in the ideological tectonic plates—combined
with the McCain-Palin campaign’s attempt to smear Barack Obama as a
socialist—has brought socialism into mainstream political discourse
for the first time in at least a generation. What’s more, the smear
failed. Not only did U.S. voters elect a man accused of being a
socialist, but various pundits and experts have aggressively defended
government intervention.

Newsweek’s Washington bureau editor Michael Hirsh praised President
Roosevelt’s salvation of American capitalism in the 1930s with “a
large dose of socialism” and calls on Barack Obama to do the same.
Lexington’s Kentucky Herald-Leader also made the case for socialism,
arguing that

   socialism is not like pregnancy. You can be a little socialist,
and, thank goodness, this country always has been. Otherwise we
wouldn’t have public schools and universities, public highways, Social
Security or Medicare. And, thank goodness, the public resisted
President Bush’s plans to hand Social Security over to the very
financial titans who made out like bandits while crashing the
economy…. Or the years after World War II when a little socialism
built state universities and provided GIs with education benefits that
created a good life for the American middle class. Think back to the
Roosevelt years when a little socialism pulled this country out of the
depths of economic depression and put people to work building parks,
roads, bridges and public buildings.7

A few months later, the cover of Newsweek boldly proclaimed “We are
all socialists now,” and the Nation magazine began a series of
articles on the theme of “Reimagining socialism,” which included
contributions by Bill Fletcher and Barbara Ehrenreich, Tariq Ali,
Rebecca Solnit, Mike Davis, Kim Moody, Dave Zirin, and many others.8

The distinctive feature of much of this public discussion of
socialism—with some exceptions—is that most admirers and detractors
generally share a common (and hollowed out) idea of what socialism is:
namely, state intervention in the economy.9 There is good reason for
this conclusion: for more than a century socialist parties throughout
Europe became parties of government and thus the highest profile
expressions of socialist politics. In the U.S., Norman Thomas, the
presidential candidate of the Socialist Party in the 1930s and 1940s,
argued, “The American people will never knowingly adopt socialism. But
under the name of ‘liberalism,’ they will adopt every fragment of the
socialist program, until one day, America will be a socialist nation,
without knowing how it happened.”10 In this paradigm, economic systems
can fall anywhere along a continuum between capitalism and socialism
based chiefly on the degree of state intervention in, or ownership of,
the economy. This criterion for assessing how “socialist” an economy
is leaves out a critical question: In whose interests is this state
intervention carried out? In fact, the political parties grouped under
the banner of social democracy11 have at various times and places
favored state intervention in the economy, but at other times (and
especially over the last two decades) have pushed for deregulation and
privatization with increasing enthusiasm. Even when they have favored
state intervention in the economy, they have done so on terms that
primarily benefit the owners of capital, even if some benefits flow to
workers as well.

The U.S. financial bailout is a perfect demonstration of the idea that
state intervention doesn’t automatically equal a socialist vision of
society that puts people before profits. Rather, it’s a reflection of
the fact that the scale of the economic crisis requires an institution
that can marshal resources far greater than even the world’s largest
financial institutions are capable of mustering. The use of massive
state intervention to save the big banks, insurance companies,
mortgage companies, and automobile makers while letting the lives of
working people be ripped apart by foreclosures, evictions, inflation,
and unemployment represents an effort to save global capitalism from
its own excesses. Frederick Engels pointed out this dynamic more than
150 years ago and is worth quoting at length.

   [T]he official representative of capitalist society—the state—will
ultimately have to undertake the direction of production. This
necessity for conversion into State property is felt first in the
great institutions for intercourse and communication—the post office,
the telegraphs, the railways.

   If the crises demonstrate the incapacity of the bourgeoisie for
managing any longer modern productive forces, the transformation of
the great establishments for production and distribution into
joint-stock companies, trusts, and State property, show how
unnecessary the bourgeoisie are for that purpose. All the social
functions of the capitalist has no further social function than that
of pocketing dividends, tearing off coupons, and gambling on the Stock
Exchange, where the different capitalists despoil one another of their
capital…

   But, the transformation—either into joint-stock companies and
trusts, or into State-ownership—does not do away with the capitalistic
nature of the productive forces. In the joint-stock companies and
trusts, this is obvious. And the modern State, again, is only the
organization that bourgeois society takes on in order to support the
external conditions of the capitalist mode of production against the
encroachments as well of the workers as of individual capitalists. The
modern state, no matter what its form, is essentially a capitalist
machine—the state of the capitalists, the ideal personification of the
total national capital. The more it proceeds to the taking over of
productive forces, the more does it actually become the national
capitalist, the more citizens does it exploit. The workers remain
wage-workers—proletarians. The capitalist relation is not done away
with. It is, rather, brought to a head. But, brought to a head, it
topples over. State-ownership of the productive forces is not the
solution of the conflict, but concealed within it are the technical
conditions that form the elements of that solution.12

The capitalist case for state intervention

Though they don’t use Engels’ terms, the chief proponents of global
capitalism accept this basic insight. Thus, the Financial Times has
consciously attacked the free-market ideologues that it usually
defends.

   Does this rescue mean the end of private financial capitalism? Of
course not. Although the size of the crisis requires an exceptional
response, this is but the latest in a long line of banking crises and
state rescues. Nationally owned banks seem likely to be a reality in
many countries for a decade...

These leaders are not putting capitalism to the sword in favor of the
gentler rule of the state. They are using the state to defeat the
marketplace’s most dangerous historic enemy: widespread depression.
And they are right to do so.13

Likewise, George Bush sought to comfort free-market hardliners as he
announced the plan to follow the lead of European central banks by
injecting capital into the U.S. banking system through stock purchases
in financial institutions. “These measures are not intended to take
over the free market, but to preserve it,” Bush told reporters.14
Obama struck a similar tone at the G20 summit in London, speaking
about the need for coordinated stimulus plans internationally: “Each
country has its own constraints, its own political rhythms and what we
want to make sure is that everybody is doing something...and that we
are prepared to step into the breach should current efforts prove
inadequate.”15

Columnist E.J. Dionne described the Obama approach as a “novel blend
of opposing ideas,” but his observation essentially boils down to a
strained acknowledgment of the same tendencies identified by Engels.
“Describing what Obama is up to leads quickly to sentences freighted
with contradictions,” wrote Dionne. “He wants to regulate the market
more tightly in order to save it. He thinks big government is required
now if we are to return to a less-restricted economic system later.
You might say that he is using collectivist means to capitalist
ends.”16

The immense scale of state intervention shouldn’t be understood as an
assault on capitalism, so much as an alternative method for managing
it. That doesn’t mean that the capitalist class isn’t disappointed by
the need for a growing public sector. Under normal conditions, U.S.
corporations push for deregulation and free markets because this makes
it easier to maximize their profits. Deregulation of the energy
industry, for example, allowed Enron to make big profits by
manipulating the supply of electricity, until its sham accounting
practices and bad bets brought it down. Likewise, the lack of
government oversight let the mortgage industry and a shadow banking
system create huge markets in securities trading based on subprime
loans, which no investment bank or hedge fund could refuse to
participate in if it wanted to keep pace with its rivals.

The bailout of various financial firms and nationalization of the
banks, however, is nothing more than a way to use the taxes paid by
the working class to absorb the losses incurred by Wall Street’s
gamblers. On April 1, Nobel Prize-winning economist Joseph Stiglitz
described Treasury Secretary Timothy Geithner’s plan this way:

   Some Americans are afraid that the government might temporarily
“nationalize” the banks, but that option would be preferable to the
Geithner plan. After all, the FDIC has taken control of failing banks
before, and done it well. It has even nationalized large institutions
like Continental Illinois (taken over in 1984, back in private hands a
few years later), and Washington Mutual (seized last September, and
immediately resold). What the Obama administration is doing is far
worse than nationalization: it is ersatz capitalism, the privatizing
of gains and the socializing of losses. It is a “partnership” in which
one partner robs the other. And such partnerships—with the private
sector in control—have perverse incentives, worse even than the ones
that got us into the mess.17

Despite all the free-market ideologues who prattle on about America’s
foundation in free markets, state intervention in the economy is a
persistent feature of capitalism, both in the U.S. and around the
world. “Over the last century, the federal government has occasionally
nationalized railways, coal mines and steel mills, and has even taken
a controlling interest in banks when it was deemed to be in the
national interest,” according to the New York Times.18 Sometimes,
these takeovers took place during times of war to facilitate
production and distribution for military purposes. But the federal
government has also seized failing companies and banks—for example,
the 1984 takeover of Continental Illinois Bank and Trust, then the
seventh-largest U.S. bank—when such collapses threatened to impact the
rest of the economy. During the Great Depression of the 1930s, the
administration of Franklin Roosevelt bought shares in thousands of
banks, undertook massive spending to stimulate the economy and imposed
a series of regulations on the finance industry (a number of which
were repealed under the presidency of Bill Clinton, thus opening the
way for the rapid growth of a shadow banking system that triggered the
current crisis).

The rise of state capitalism

Such episodes of state intervention reflect a more general trend in
the development of capitalism and nation states in the late nineteenth
and early twentieth centuries. During this time, the concentration and
centralization of capital led to the first industrial monopolies
(think of the rise of the railroads, oil corporations, and industries
essential to the production of capital goods, such as steel, copper
and other extractive industries). At the same time, the globalization
of the economy created increased competition between national states
over the control of markets, raw materials, and sources of cheap labor
in the less developed world. These dynamics, in the words of Russian
Marxist Nikolai Bukharin, compelled the development of “state
capitalist trusts” as each state attempted to marshal its domestic
resources in order to nurture, develop, and project its own industrial
powerhouses at home and abroad.

This tendency intensified globally in the early twentieth century, but
the extent of this fusion between state and capital differed from one
nation to another. The global economic crisis of the 1930s impelled
these developments yet further as nations attempted to bend all
efforts toward restarting their economies. The command-and-control
economy of the Soviet Union and the state control of the economy in
Nazi Germany represented one end of the spectrum while the New Deal
policies of the Roosevelt era were milder expressions of the same
currents at work.

Thus, in different places and times during the last hundred years,
various nations around the world have relied on state intervention in
the economy to different degrees in order to promote capitalist
development and to deal with other political challenges.

In Europe, upsurges in workers’ struggles forced many countries to use
more aggressive social spending in an effort to co-opt the labor
movement and head off more radical challenges to the capitalist
system. In addition, mobilizing resources on a large enough scale to
rebuild from the devastation of the First and Second World Wars led
many European states to direct investment into critical areas. In the
USSR, after Joseph Stalin and his allies effectively overturned all
vestiges of workers’ democracy and workplace control over production,
the state bureaucracy undertook a rapid development of productive
forces based on the brutal exploitation of the Russian working class,
enabling what had been a backward economy to contend as a world
superpower for a number of decades. Thus, various countries, including
the U.S., have used state capitalist measures to manage both economic
development and economic crisis at various junctures—not as a means to
abolish capitalism but as a means to preserve it.

In fact, even in “normal” times, the U.S. state directs huge amounts
of investment outside the free market—for example, the building and
maintenance of the federal interstate highway system, military
spending, and research and development spending. But because Corporate
America benefits from such investment in many direct and indirect
ways, they don’t see fit to denounce this as “socialism.” Instead,
they see these measures as the state fulfilling the useful function of
maintaining a “healthy business climate.”

The socialist case for state intervention

Just as the capitalist class isn’t agnostic about the question of
state intervention, generally preferring deregulation and
privatization to state ownership of the economy, socialists likewise
are not indifferent to such issues. Even if state ownership does not
in itself accomplish the full socialist program, the neoliberal trend
toward privatizing all manner of formerly public functions—from
schools to airports to roads to parking meters—represents an assault
on working-class interests. Privatization allows corporations to cut
jobs, cut wages, and cut services all in the name of efficiency while
they pocket taxpayer dollars in the form of profits. There is no doubt
that nationalized health care, for example, would be a tremendous
advance over the for-profit, private insurance-based system that, in
the name of profitability, makes it more difficult to get health care
for those who need it most.

Privatization takes the decision-making about such services out of the
public sphere, where these issues can be subjected to political
pressures and political demands, and puts them in the hands of private
entrepreneurs who are wholly unaccountable—unlike politicians who are
subject at least in some limited way to the will of the voters at the
end of the day. Similarly, nationalization of industries under threat
of bankruptcy has historically been a demand of the socialist movement
as a means to save jobs and ensure the provision of needed services.
We should demand that basic necessities of the working class—such as
utilities, for example—be taken out of the hands of private
corporations and nationalized.

In less developed countries, nationalization can serve an additional
function—to expropriate foreign multinational corporations and put the
profits of large industries and indigenous natural resources under the
control of the national state, thus keeping those profits from being
siphoned abroad and instead directed toward domestic industrial
development and social welfare. There is a long tradition of deploying
such defensive measures against imperial domination by radical,
populist, and social-democratic governments around the world—from the
1938 nationalization of foreign oil companies by Mexican President
Lázaro Cárdenas to the 1972 Chilean nationalization of the
foreign-owned copper industry to the 2006 nationalization of Bolivia’s
foreign-owned oil and gas reserves by President Evo Morales.

In demanding such nationalizations, however, the left calls for these
institutions to be placed under democratic workers’ control. This is
essential because such nationalized institutions continue to operate
within a wider capitalist context and therefore must be subject to
pressure from below to answer to the needs of the working class rather
than capital.

The socialist case against the market

So if socialism isn’t simply state control over important parts of the
economy, what is it? First, it should be said that a socialist society
would indeed need to nationalize key industries in order to replace
the irrationalities of capitalist finance with a more rational way of
directing investment. The Financial Times editorial board’s own
defense of the banking industry is an indictment of the irrational and
crisis-prone nature of capitalism:

   Modern capitalism needs well-functioning banks. Businesses and
individuals need liquidity and an effective means of turning their
savings into productive investments. But banks perform this function
by making bets on the future. This is the purpose for which they
exist—but it makes them inherently unstable. They tend to overextend
themselves in the good times and are overcautious in the bad,
exacerbating booms and busts. The reason we insist on keeping our
economic systems built on these trembling fault lines is that they are
normally so effective at this job of intermediation.19

This passage beautifully captures the anarchy of the free market.
Capitalism’s lifeblood depends on finance capital granting credit to
firms seeking to make new investments. But when bankers get together
and decide whether to finance a proposal put before them by a
particular firm, they do so without regard to any consideration except
whether they can expect to have their loan repaid with interest.
Likewise, companies don’t produce any goods except those they expect
to be able to sell profitably on the free market.

This dynamic carries with it three fundamental problems. First, those
goods that people need, but are too poor to afford, simply won’t get
produced. So even if there is a need for more food to be produced or
more houses to be built, if the hungry and the homeless have no money,
they also have no way of making their demand “effective”—and thus, no
profit can be made from producing such goods for the market.

Second, the rational deployment of society’s productive forces in
pursuit of broadly agreed-upon social goals is constantly frustrated
by the allocation of capital investment according to market
mechanisms. For example, scientists have identified various
sustainable strategies to address the increasingly dire threat to life
on Earth posed by climate change and other ecological pressures. But
implementing these strategies constantly runs up against the
entrenched economic and political clout of the corporate titans that
dominate key industrial sectors such as transportation and energy. The
strategic thinking and long-terms plans of these entities are
dominated by only one concern—how to make a profit. In the infamous
words of Bethlehem Steel CEO Donald Trautlein, “We are not in the
business of making steel. We are in the business of making money.”
Every CEO must always remain acutely aware of this basic point—or risk
the corporation’s financial ruin. The production of goods isn’t
undertaken because of the usefulness of the goods in question.
Steel—or whatever commodity—is only an incidental means to achieve
another goal, namely the selling of the good on the market in order to
realize profit.

Third, competition between rival firms means that in good times, every
firm must rush to produce more goods, grab as large a share of
expanding markets as possible and attempt to undersell the
competition. Failure to do so will leave any individual firm with a
smaller mass of profits to undertake the next round of innovation and
investment. But investment into a particular type of production must
be made today, while the products of that investment are sold some
time in the future—in some cases, years in the future. For example, in
the case of automobile production, investments made today require
years of building up assembly lines, supply chains, and production
facilities to bring them online. But if every auto company is rushing
to take advantage of a perceived increase in demand, by the time they
all get their cars to market, they can produce a glut. The seemingly
shrewd decision to extend credit to a big auto producer now suddenly
looks bad when excess supply means that all the cars that have been
produced can’t be sold profitably.

In a similar fashion, the current financial crisis is the product of a
rush by investment firms to take advantage of the housing bubble by
making loans to homeowners at high interest rates that seemed certain
to be repaid—so long as the bubble continued to expand. Every kind of
hedge fund, investment bank and financial institution found it
impossible to resist investing in the high-yield bundles of these
loans—precisely because if they didn’t, their return might look anemic
compared to rivals that were enjoying handsome rewards. Now that the
housing bubble has burst, and these investments have become so toxic,
the banks fear making loans to anyone, unsure of whether the potential
borrower may be the next to go down, and hence unable to repay the
loan.

This is what the Financial Times means when it states that banks “tend
to overextend themselves in the good times and are overcautious in the
bad, exacerbating booms and busts.” Nevertheless, the Financial Times
asserts, banks “raise living standards” while state control over
investment tends to “sacrifice efficiency and growth for stability.”20
With the current financial crisis destroying housing equity, creating
unemployment, and producing a huge bill to be paid by taxpayers, the
claim that banks “raise living standards” ought to make the editorial
writers blush—unless they mean to make the more obvious point that
banks raise living standards for bankers.

The question, then, is not just nationalization under capitalism—where
workers merely trade one boss for another—but complete socialization
of production under popular, democratic control.

Socialism from below

In a society where all of the means of production are socialized,
blind market forces would be replaced by democratic planning. The
accumulated savings of society would not be handed over to a class of
people, unelected and unaccountable, to invest for the purpose of
their private gain. Instead, the economic output of society would be
used to address the social needs of the producers. The critical
determining factor of whether state ownership of the means of
production (or the means of finance) has a socialist character depends
on the answer to a simple question: If the state controls the economy,
who controls the state?

The Obama administration’s state intervention in the economy today is
designed to preserve decision-making power for the owners of banks and
corporations. And in any case, the principle that the state will use
in deciding how to exercise its ownership stake will be to maintain a
“healthy business climate,” not to put the needs of workers and the
poor first.

This is not surprising, given the completely incestuous relationship
between the state and private business, with a steady flow of
businessmen into government jobs and then back again. Robert Rubin
began as a co-chairman of Goldman Sachs, worked as Clinton’s treasury
secretary, and then went on to work for Citigroup. Henry Paulson was
CEO of Goldman Sachs before he became Bush’s treasury secretary.21
Obama’s top adviser, Lawrence Summers, who was also a treasury
secretary for Clinton, “earned more than $5 million last year from the
hedge fund D. E. Shaw and collected $2.7 million in speaking fees from
Wall Street companies that received government bailout money.”22
Because of its economic clout, the capitalist class can exert control
over the state even when politicans and government bureaucrats are not
on corporate payrolls. It is simply “common sense” in Washington that
what is good for Wall Street is good for America.

The working class exerts its power, first through its ability to shut
down production—the strike weapon. But if it is to assert its
collective interests on society as a whole and against the employers
as a class, it must seize political power. Only after the working
class has seized political power can it begin to reorganize production
and distribution in such a way as to gradually abolish the market and
production for profit’s sake, and replace those relations with a
purely socialized system of planning.

As Karl Marx and Frederick Engels put it in the Communist Manifesto:

   [T]he first step in the revolution by the working class is to raise
the proletariat to the position of ruling class to win the battle of
democracy. The proletariat will use its political supremacy to wrest,
by degree, all capital from the bourgeoisie, to centralize all
instruments of production in the hands of the State, i.e., of the
proletariat organized as the ruling class; and to increase the total
productive forces as rapidly as possible.

   Of course, in the beginning, this cannot be effected except by
means of despotic inroads on the rights of property, and on the
conditions of bourgeois production; by means of measures, therefore,
which appear economically insufficient and untenable, but which, in
the course of the movement, outstrip themselves, necessitate further
inroads upon the old social order, and are unavoidable as a means of
entirely revolutionizing the mode of production.23

Marx and Engels then list a number of measures that would facilitate
the placing of society’s productive infrastructure at the disposal of
a new workers’ state, including a steeply progressive income tax, the
abolition of inheritance rights, the centralization of credit through
nationalization of the banks, and the steady extension of the state’s
command over the key sectors of industrial and agricultural
production. Thus, the state could set about directing economic
activity to address, first, pressing social needs and, over time,
progressively more ambitious goals in the realms of consumption,
education, art, and so forth. Marx and Engels continue:

   When, in the course of development, class distinctions have
disappeared, and all production has been concentrated in the hands of
a vast association of the whole nation, the public power will lose its
political character. Political power, properly so called, is merely
the organized power of one class for oppressing another. If the
proletariat during its contest with the bourgeoisie is compelled, by
the force of circumstances, to organize itself as a class, if, by
means of a revolution, it makes itself the ruling class, and, as such,
sweeps away by force the old conditions of production, then it will,
along with these conditions, have swept away the conditions for the
existence of class antagonisms and of classes generally, and will
thereby have abolished its own supremacy as a class.
   In place of the old bourgeois society, with its classes and class
antagonisms, we shall have an association, in which the free
development of each is the condition for the free development of
all.24

>From here to there

What does it mean to say, as Marx does, that workers must achieve
political power? It does not mean winning a majority of seats in a
congress or a parliament. Such institutions represent a truncated
democracy at best. History is full of social-democratic parties whose
efforts at achieving electoral success have blunted their
revolutionary vision, and who, having achieved parliamentary position,
have adapted to, rather than fundamentally altered, capitalism. If the
state is, as Engels describes it, “essentially a capitalist machine,”
then surely the working class needs a different kind of state in order
to effect a social transformation. The complete socialization of
production and distribution requires workers to erect their own
democratic state on the ruins of the old that seizes control over
production and distribution and reorganizes these spheres of economic
life along socialist lines.

The key lies in the popular masses forming, in the course of resisting
capitalism, counter-institutions that begin first as organs of
collective struggle, but which are able potentially to evolve into
alternative institutions of state power.

This may sound like a compelling, but ultimately utopian fantasy, but
there is a rich history—often hidden from view by the work of
historians who focus more on heads of state than on the struggles of
regular people to shape the world around them—of such
counter-institutions springing up again and again as an organic part
of workers’ struggles. At the high points of working-class uprisings
during the last century and a half—from Paris in 1871, to Russia in
1917 and Germany in 1918, to Hungary in 1956, to Chile in 1973 and
Iran in 1979—workers who organized inspiring fights against capitalist
exploitation also set up workers’ councils (called by many different
names, but in essence fulfilling the same function) to coordinate
their efforts. At the same time, these formations gave workers a means
of carrying out production under their own control and insuring that
the products of their labor were used to feed and sustain their
challenge to the status quo rather than supply the defenders of the
old order with the resources to defeat the workers’ councils and the
vision of a new society they represented.

Workers’ councils at the school, hospital, warehouse, and factory
level would be essential to give workers a say in the day-to-day
running of their workplaces. Each workplace council would also send
elected delegates to coordinate decision-making on an industry-wide
and economy-wide basis. Because these delegates would be drawn
directly from and accountable to the base, because they would be paid
the same as the rest of the workers in that workplace and known by
their co-workers, and because they would be recallable if they failed
to exercise the will of those who elected them, such councils would
give workers the ability to have a real and deciding say in every
aspect of society.25

Needless to say, the political and business establishment in these
examples didn’t relinquish their wealth, power, and privilege without
a fight. Thus, achieving workers’ democratic control over production
requires a confrontation with the state to succeed in the long run.
Nationalization of the banks and other institutions are essential in
the effort to create a society based on democratic planning; but that
nationalization will be nothing more than a form of state capitalism
unless it is organized under the democratic control of the majority.

As a result, the transition from capitalism to socialism can’t be a
gradual or incremental process by which the state enacts reforms and
progressively takes ownership of more and larger chunks of the
economy. Rather, socialism represents a radical break with the present
system—and depends on the active struggles of workers and their
subsequent engagement with every aspect of governing society in their
own interest, under the guiding principle of human need before
corporate greed.

Every severe crisis of capitalism starkly reveals the system’s
bankruptcy and gives rise to debates about alternatives. This crisis
is no different. Alongside tremendous reserves of hitherto undreamt-of
wealth that should long ago have abolished poverty, millions are
thrown out of work and are left destitute. Engels’ commentary on how
the capitalist class, and capitalism itself, has outlived itself
(written in 1877) reads as if it were written yesterday:

   Their political and intellectual bankruptcy is scarcely any longer
a secret to the bourgeoisie themselves. Their economic bankruptcy
recurs regularly every 10 years. In every crisis, society is
suffocated beneath the weight of its own productive forces and
products, which it cannot use, and stands helpless, face-to-face with
the absurd contradiction that the producers have nothing to consume,
because consumers are wanting. The expansive force of the means of
production burst the bonds that the capitalist mode of production had
imposed upon them. Their deliverance from these bonds is the one
precondition for an unbroken, constantly-accelerated development of
the productive forces, and therewith for a practically unlimited
increase of production itself. Nor is this all. The socialized
appropriation of the means of production does away, not only with the
present artificial restrictions upon production, but also with the
positive waste and devastation of productive forces and products that
are at the present time the inevitable concomitants of production, and
that reach their height in the crises. Further, it sets free for the
community at large a mass of means of production and of products, by
doing away with the senseless extravagance of the ruling classes of
today, and their political representatives. The possibility of
securing for every member of society, by means of socialized
production, an existence not only fully sufficient materially, and
becoming day-by-day more full, but an existence guaranteeing to all
the free development and exercise of their physical and mental
faculties—this possibility is now, for the first time, here, but it is
here.26

Eric Ruder is in the editorial board of the ISR. He is also a frequent
contributor to Socialist Worker (www.socialistworker.org).

1 Steve Lohr, “Intervention is bold, but has a basis in history,” New
York Times, October 13, 2008.

2 Krishna Guha and Edward Luce, “Greenspan backs bank
nationalization,” Financial Times, February 18, 2009.

3 Martin Crutsinger, “Greenspan says flaw in market system,” ABC News,
October 23, 2008.

4 Matthew Benjamin, “Senator Bunning says Paulson acts like socialist,
should resign,” Bloomberg, September 9, 2008.

5 John Bresnahan, “McCotter compares bailout to Bolshevik Revolution
in Russia,” The Crypt blog on Politico.com, September 29, 2008.

6 In fact, McCotter sounds like a champion of the working class in his
speech at the hearing, www.youtube.com/watch?v=U7YBjjLKLd0.

7 Editorial, “Takes a socialist to know one,” Kentucky Herald-Leader,
October 31, 2008.

8 Jon Meacham and Evan Thomas, “We are all socialists now,” Newsweek,
February 16, 2009; “Reimagining socialism,” Nation series began March
4, 2009.

9 Some of the contributors to the Nation series, such as Mike Davis,
Kim Moody, Dan La Botz, and Dave Zirin, do not share this view.
Nevertheless, virtually all of the mainstream discussion, and a lot of
the left discussion, equate socialism with state ownership.

10 Cited in Donald Boudreaux, “Is Barack Obama really a socialist?”
Christian Science Monitor, October 30, 2008.

11 A note on terminology is useful here, given the evolution of the
term “social democracy” in the socialist tradition. The ISR uses the
terms “socialism” or “revolutionary socialism” to distinguish the
tradition of “socialism from below” from the most common forms of
“socialism from above,” namely Stalinism and social democracy (though
many in mainstream political discourse use the term “socialism” to
refer to present-day social-democratic parties that have established
themselves as “responsible” reformist parties of government around the
world). Before the First World War, the terms “socialism” and “social
democracy” were used interchangeably, and the Second International was
made up of member parties from around the world, including the
Bolshevik Party in Russia (the First International was the
International Workingmen’s Association joined by Karl Marx and
Frederick Engels in 1864). But the Second International fractured in
1914 as its member parties supported their own governments in the
First World War, leading Lenin and a handful of other revolutionaries
to form the Third International. And to emphasize their commitment to
the revolutionary internationalism of Marx and the principles laid out
by him and Engels in The Communist Manifesto of 1848, Lenin and the
Third International often described themselves and their movement as
“communist.” After 1917, the Third International set up communist
parties around the world to help spread the revolution, but after
Stalin’s conquest of power in the late 1920s, the term “communism”
came to be associated with the Stalinist distortion of the Third
International’s principles.

12 Frederick Engels, Socialism: Utopian and Scientific (New York:
International Publishers, No Date), 66–8.
www.marxists.org/archive/marx/works/1880/soc-utop/ch03.htm.

13 Editorial, “Nationalize to save the free market,” Financial Times,
October 13, 2008.

14 Jeannine Aversa, “Bailout becomes buy-in as feds move into
banking,” Associated Press, October 14, 2008.

15 Interview with Barack Obama, Financial Times, March 30, 2009.

16 E.J. Dionne, “The Nobelists vs. Obama and Geithner,” April 2, 2009,
www.truthdig.com/report/item/20090401_the_obama_enigma/.

17 Joseph Stiglitz, “Obama’s ersatz capitalism,” New York Times, April 1,
2009.

18 “Intervention is bold,” New York Times.

19 “Nationalize,” Financial Times.

20 Ibid.

21 Simon Johnson, “The quiet coup,” Atlantic Monthly, May 2009.

22 Jeff Zeleny, “Financial industry paid millions to Obama aide,” New
York Times, April 4, 2009.

23 Karl Marx and Frederick Engels, The Communist Manifesto: A Road Map
to History’s Most Important Political Document, Phil Gasper, ed.
(Chicago:Haymarket Books, 2005), 69–70.

24 Ibid., 71.

25 For a more thorough elaboration and defense of the idea of
democratic socialist planning than space allows here, see David
McNally, Against the Market (London and New York: Verso, 1993); and
Ernest Mandel, “In defense of socialist planning,” New Left Review
159, September–October 1986, 5–37, www.newleftreview.org/?view=928 and
at reality.gn.apc.org/econ/Mandel.pdf.

26 Engels, Socialism: Utopian and Scientific, 71–2.

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