Last week’s post on political economy attracted plenty of disagreement. Now of course this came as no surprise, and it was also not exactly surprising that most of the disagreement took the shape of strident claims that I’d used the wrong definition of socialism. That’s actually worth addressing here, because it will help clear the ground for this week’s discussion.

The definition I used, for those who weren’t here last week, is that socialism is the system of political economy in which the means of production are owned by the national government. Is that the only possible definition of socialism, or the only definition that’s ever been used? Of course not. The meanings of words are not handed down from on high by God or somebody; the meanings of words are always contested among competing points of view, and when a word has become as loaded with raw emotions as the word “socialism” has, you can bet that every one of the definitions you’ll be offered is slanted in one direction or another.

That’s just as true of the definition I’ve offered, of course, as it is of any other. I want to talk about who owns the means of production in society, since this is arguably the most important issue in political economy, and it so happens that socialism, capitalism, and many other systems can be defined quite neatly in this way. A century ago, when it was still acceptable to talk about systems of political economy other than capitalism and socialism, the definition I’ve proposed was one of the most common. You don’t hear it very often now, and there’s a reason for that.

Since 1945 the conventional wisdom across most of the world has insisted that there are two and only two possible systems of political economy: socialism on the one hand, capitalism on the other. That’s very convenient for socialists and capitalists, since it allows both sides to contrast an idealized and highly sentimental picture of the system they favor with the real and disastrous failings of the one they don’t, and insist that since the two systems are the only available options, you’d better choose theirs. This allows both sides to ignore the fact that the system they prefer is just as bad as the one they hate.

Let us please be real. In theory, socialism is a wonderful system in which the workers own the means of production, and people contribute what they can and receive what they need. In practice, as seen in actual socialist societies? It sucks. Get past the rhetoric, and what happens is that the workers’ ownership of the means of production becomes a convenient fiction; an inner circle of politicians controls the means of production, and uses it to advance its own interests rather than that of the workers. Centralized bureaucracy becomes the order of the day, fossilization follows, and you end up with the familiar sclerosis of the mature socialist economy, guided by hopelessly inefficient policies mandated by clueless central planners, and carried out grudgingly by workers who know that they have nothing to gain by doing more than the minimum. Eventually this leads to the collapse of the system and its replacement by some other system of political economy.

In theory, equally, capitalism is a wonderful system in which anyone willing to work hard can get ahead, and the invisible hand of the market inevitably generates the best possible state of affairs for everyone. In practice, as seen in actual capitalist societies? It sucks. Get past the rhetoric, and what happens is that social mobility becomes a convenient fiction; an inner circle of plutocrats controls the means of production, and uses economic power backed by political corruption to choke the free market and stomp potential competitors. Monopoly and oligopoly become the order of the day, wealth concentrates at the top of the pyramid, and you end up with the familiar sclerosis of the mature capitalist society, in which the workers who actually make the goods and provide the services can’t afford to buy them, resulting in catastrophic booms and busts, soaring unemployment, and the rise of a violent and impoverished underclass. Eventually this leads to the collapse of the system and its replacement by some other system of political economy.

Yes, this is as true of capitalism as it is of socialism. Unrestricted capitalism has already collapsed once—the aftermath of the Great Depression saw it replaced by social democracy, socialism, or fascism over all of the industrial world—and we didn’t begin to return to it again until the Reagan-Thatcher counterrevolution of the 1980s. Now that we’ve gotten back to something fairly close to unrestricted capitalism, we’ve got all the same spiraling dysfunctions that brought things crashing down in the 1930s. The possibility that it could end the same way, with a similar quota of armbands and jackboots, is rather hard to dismiss out of hand just at the moment.

At the same time, the notion that we can fix the current mess by exchanging capitalism for socialism doesn’t bear close examination. We know how socialism works out, just as we know how capitalism works out. As previously noted, both of them suck. The obvious solution—unthinkable these days, oh, granted, but obvious—is to look for other options.

The best way to do this, it seems to me, is to pay attention to the core similarity between capitalism and socialism. Both systems reliably end up dominated by massive bureaucracies—corporate bureaucracies in the former case, government bureaucracies in the latter—and the bureaucracies do so stunningly bad a job of getting people the goods and services they need that it becomes necessary to paper over the gaps with propaganda and police violence. There’s a reason for the similarity, and it’s one that people who studied political economy a century and more ago had no trouble at all recognizing: in capitalism and socialism alike, control of the means of production is concentrated in too few hands.

Promoters of socialist systems like to pretend that if the means of production are owned by the government, they’re really owned by the workers, but I trust none of my readers are simple-minded enough to fall for that bait-and-switch tactic. In the same way, promoters of capitalist systems like to pretend that if the means of production are owned by stockholders, a little old lady who has five shares of Microsoft has just as much effective ownership as Bill Gates; here again, the old bait-and-switch tactic gets a hefty workout. In socialist systems, control of the means of production is kept within a small circle of upper-level bureaucrats; in capitalist systems, control of the means of production is kept within a small circle of upper-level plutocrats.

That’s not something either socialists or capitalists like to talk about, in turn, because once you start looking at who owns the means of production, it really doesn’t make sense to insist that the only choice your society has is either to hand them over to a small coterie of bureaucrats, or to hand them over to an equally small coterie of plutocrats. Most people, considering that choice, will quite sensibly ask why some other arrangement is out of the question—and that is not a question either socialists or capitalists want to answer, or even to hear.

Here again, there’s good reason for that. In a modern industrial society, after all, the people who control most of the wealth are also the people who exercise disproportionate influence over the political system. The choice between capitalism and socialism thus amounts to asking whether you want the means of production in the hands of corporate bureaucracies owned by the elite class, or political bureaucracies controlled by the elite class. “Meet the new boss,” sang the Who, “same as the old boss.” There are other options, and they begin with getting the means of production into many more hands.

What happens if we ask ourselves how control over the means of production can be spread more widely? Why, then we would end up revisiting the lively world of alternative systems of political economy that existed before 1945, when the US and the Soviet Union between them squeezed out every alternative to social democracy on the one hand and socialism on the other, and kept on squeezing. We would find that the question of the ownership and control of the means of production was the focus of vigorous and thoughtful discussion from the second half of the nineteenth century straight through the first half of the twentieth. There were quite a few systems proposed during that time, but those that didn’t gravitate either toward capitalism or toward socialism generally embraced one form or another of syndicalism.

Syndicalism? That’s the form of political economy in which each business enterprise is owned and run by its own employees.

Before we go on, I’d like to encourage my readers to stop, reread that definition, and remember that we’re talking about the ownership and control of the means of production. It’s possible to approach political economy from other directions, sure, and there’s a point to those discussions as well, but—ahem—not when those discussions are used to try to stonewall discussion of who gets to own and run the means of production. We can talk about those other things later.

Okay, with that settled, let’s talk about the most important feature of syndicalism: it’s already been tried, and it works. Right now there’s a very large number of employee-owned enterprises in the United States, and an even larger number elsewhere in the industrial world. They are by and large just as successful as companies owned by stockholders who aren’t employees. There are several different ways to set up a worker-owned enterprise—the two most common are the worker-owned cooperative, on the one hand, and the closely held corporation whose stock can only be owned by employees, on the other—and they’ve been around long enough to have had the bugs worked out. Thus we’re not talking about a pie-in-the-sky system, we’re talking about something with a long and relatively successful track record. You’ve probably shopped at worker-owned enterprises, dear reader; I certainly have.

In a very real sense, syndicalism is what happens when you take the basic unit of a market economy—the individual sole proprietor with no employees, who sells the product of his or her labor directly to customers—and maintain the same relationship with the means of production at a larger scale. In a capitalist society, only the owners of capital own the means of production: the mass of the population, not being rich enough to be able to invest in ownership of the means of production, are excluded from any economic activity other than selling their labor at whatever wages employers want to pay, and buying products at whatever price companies want to charge. In a socialist economy, no individual owns the means of production: everyone is an employee of the state, and the bureaucrats who draft the latest Five-Year Plan in blissful ignorance of shop-floor realities have no more of a personal stake in how things turn out than the working stiffs on the shop floor who have to carry out the dictates of the plan despite its obvious cluelessness.

In a syndicalist society, by contrast, every employee is an owner. Every employee benefits when the business prospers and suffers when the business takes a loss. Every employee has some influence over the management of the business—the usual approach is to have employees elect a board of directors, which then hires and fires the management personnel. Every employee thus has a personal stake in the business—and every business is owned and run by people who have a personal stake in its success. That’s one of the reasons syndicalism works well.

Let’s deal with some of the usual questions at this point. Do sole proprietorships exist in a syndicalist system? Of course. An individual who goes into business for himself or herself is the simplest form of syndicalist economic organization:  a business wholly owned and operated by its one employee. A family business—the sort of thing where Mom and Dad own the business and their kids work there—is also a syndicalist business in miniature. It’s when things get larger than that, and there are employees other than the individual proprietor or the members of a family, that the classic forms of syndicalist ownership come into play.

Wouldn’t syndicalism mean that new employees coming in could simply take over the business and throw the founder out on his or her ear? Not at all, because the way you organize a business in a syndicalist society prevents that. Let’s say you’ve founded a blivet-making business, just you and your blivet press, and you do well enough that you need a second employee. You hire someone, and part of the terms of hire are that she gets a share in the business for each year of employment. The business is worth thirty thousand dollars at the time of hire, we’ll say, so she gets, as part of her compensation package, one share with a five hundred dollar face value each year. This cannot be sold or transferred; it remains with her only as long as she remains an employee of the company; but it gives her voting rights in the shareholders meeting and a cut of the annual dividend. A year after she’s hired, she has one vote in the shareholder’s meeting and you’ve got fifty-nine, so she’s not going to be throwing you out any time soon.

By the time she’s put in thirty years, she owns half the original value of the company, but of course by then you’ve retired, and your shares are the basis of your pension. (Your shares revert to the company when you retire, remember—they can only be owned by employees—but your pension makes up for the income.) In the meantime, as the business grows and you bring in more employees, they also start earning shares on the same basis. A hundred years down the road the business you founded is a thriving blivet firm with three hundred fifty employees, all of whom are part owners, and each new employee starts out in the same place as your first hire, working for a year and getting that first share. Again, this was all worked out a long time ago.

Can you fire someone in a syndicalist company? Of course, if they’re not doing their job, or do something that deserves termination. That’s why the employees elect a board of directors, and the board hires management: so there’s somebody who’s not on the shop floor who can take responsibility for hiring and firing, and the other tasks management has to do. A management team that tries to offshore jobs to Third World sweatshops is going to be out on its ear in a hurry, of course, because the board of directors has to worry about being thrown out by vote of the employees; in the same way, any board of directors that tried to pay a management team the kind of absurdly kleptocratic salary packages that management thinks it deserves in today’s America had better empty its desk and pack its bags in advance. When every employee has a personal stake in the success of the enterprise, though, firing somebody who’s not pulling their weight, or is a problem in some other way, is rarely a controversial issue.

Now, the big one: could such a thing actually happen? Of course it could, for the same reason that unrestricted capitalism gave way to social democracy, socialism, and fascism across the industrial world in the 1930s. Capitalism, as we discussed last week, has a self-destruct button wired into it:  as the distribution of wealth becomes more and more imbalanced, the production of goods and services stops being profitable, speculative booms and busts replace investment in productive activity, and sooner or later the economy hits a crash devastating enough that the voters turn to somebody who promises to replace unrestricted capitalism with something else. We’re arguably not that many crises away from such a moment here in America right now.

That’s why it’s time to start talking again about the alternatives to capitalism and socialism. Since, as already noted, both of them suck, and the third alternative most often tried back in the 1930s—fascism—sucks even more, other options are worth considering.

It’s worth noting that classic social democracy is also an option. That’s the system we had in the United States from 1932 to 1980—a period, please note, when this country achieved the highest standard of living and the widest distribution of wealth and income in its history. As mentioned in last week’s post, social democracy balances the power of government against the power of the corporations. It’s an unsteady balance, and eventually breaks down when the wealthy forget that limiting the excesses of the capitalist system is the one thing that keeps them from being strung up from lampposts, but during the time that it works, it sucks less than either of the two alternatives that get all the air time these days.

It’s also worth noting that syndicalism comes in many flavors. Those of my readers who happen to be Roman Catholics will want to check out distributism, the specifically Catholic version of syndicalism, which draws its basic principles from encyclicals issued by Leo XIII and Pius IX in the nineteenth century, and was worked out in some detail by G.K. Chesterton in the early twentieth. Those who aren’t Roman Catholics, or sympathetic to Catholic moral doctrines, will probably not find it to their tastes, because it incorporates quite a bit of conservative Catholic morality; I mention it here partly because I have quite a few readers who are either Catholic or comfortable with Catholic moral thought, and partly as a reminder that syndicalism isn’t necessarily associated with the political left—you’d have a hard time convincing anyone who knows the first thing about Pius IX or G.K. Chesterton that either man was a leftist.

There are other versions, ranging from anarchosyndicalism on the extreme left to national syndicalism on the extreme right. The version I tend to favor, as previously noted, is democratic syndicalism: the system of political economy that combines a syndicalist economy with a politics based on constitutional representative democracy. I also favor a firm distinction between public utilities, which are best owned and operated by local governments, and private businesses, which are best owned and operated by the people who work for them; readers of my book Retrotopiaalready know that I consider banking to be a public utility rather than a private business, but that’s a matter for another post.

Is what I’ve just very roughly sketched out a perfect system? Of course not. In the real world, there are no perfect systems.  Every possible system of political economy will inevitably turn out to have glaring flaws, for the simple reason that human beings have glaring flaws. The best we can hope to achieve is a system that sucks less than the ones that have been tried so far.

I think that’s potentially within reach, even given the many other pressures on the United States and industrial society in general as we lurch through the opening phases of the Long Descent. If such a thing is going to be possible, though, the first step is to break out of the mental rut that insists that the only choice we’ve got is between capitalism and socialism, two systems that both unquestionably suck. Attention to the ownership of the means of production is one tolerably effective way to leave that rut and start exploring the vast and interesting spaces outside it.


Teaser photo credit: Model of Robert Owen‘s visionary project for a cooperative settlement.