Andy forwarded this and requested I blog about it. In it David McMullen, self described retired bureaucrat, makes his case for social ownership of the means of production (his detailed treatment of the topic is here).
He takes the Marxist position that after capitalism has brought society to a high level of economic development it is ready to employ a system where the means of production are owned by society. I guess he means to say we are now ready for this more advanced system as he sites the elimination of routine labor and an increase in “interesting jobs” as indications the economy is ready for such a transition. As for the benefits from such a departure, I can’t do them justice as he can:
However, only social ownership can tap into the new sources of energy and creativity. It will eliminate the alienating nature of work under capitalism which takes out the fun and the desire to do one’s bit for the common goods. And it will eliminate the property walls and conditions of subordination which prevent the development of an effective system of mutual supervision.
A quick refutations come to mind: there is something inherently contradictory in a view that the most successful system ever devised for generating increasing standards of living has performed so well we are finally able to abandon it; or that we would want to.
However, setting aside the desirability of killing the golden goose, the details of McMullen’s proposal are even more confusing. It seems clear that he understands there is no replacement for markets and the ability to organize information. Consider his description of labor and consumer goods markets:
Under social ownership, there would still be markets for consumer goods and for labor power, with workers providing the latter to society in exchange for the former. However, these will be different kinds of markets from what we are used to under capitalism. In the case of consumer goods, suppliers will be there to benefit consumers and not shareholders and extravagantly overpaid executives. In the labor market workers will receive the full value of their output, the total final product of society.
Obviously there are a number of problems here. To call executives extravagantly overpaid and claim in the following breath that workers will receive their marginal product implies that executives don’t currently. Given that competing firms choose to pay these individuals what they do, this implication is suspect. However, it is clear McMullen is unwilling to abandon the market mechanism entirely, but when he strays from those markets in which the proletariat trades its labor for daily bread, and into the complicated workings of capitalism, things become murky. Consider his description of input markets:
In the case of transactions between enterprises where a supplier provides inputs to a user, there is no exchange of ownership. At least, certainly not the sort of change of ownership we associate with a market exchange. “Ownership” is confined to the right of custody and the right and obligation to put resources to efficient use. Furthermore, there is no individual claim on revenue other than as wage earners. There are no “residual beneficiaries” from any surplus revenue.
Here he hits the heart of the calculation problem he claims
to have solved (and stumbles pretty hard).
He begs the efficiency question by merely obliging all to use resources
efficiently. But the point of the
calculation critique isn’t that only a market encourages efficiency: it is that
only a market makes it possible. How
would consumer goods be assigned limited inputs? How would inputs be apportioned between the
production of simple consumer goods and the production of more complex
inputs? McMullen on some level
understands the need for markets, it is clear he doesn’t understand why. While he allows for decentralized markets,
integrated centralized markets transmit to producers and consumers at every
level the scarcity of goods and the value of their potential use. It’s not clear how decentralized markets
would accomplish such a synthesis and distribution of information. The disconnectedness of his system is most
clear in his discussion of a potential monetary regime:
You could have a system of payments which are simply book keeping entries and do not constitute funds that can keep circulating in any sense. In this case, the power to acquire inputs is assigned to enterprises on the basis of expectations of what customers are willing to pay. The enterprise does not seek out funds that already exist such as revenue from past transactions or a loan from a bank. The funds are simply plucked out of the ether as a result of this requirement.
How this power to acquire is created does not matter here. It may be done by an external body, by the enterprise itself or by the enterprise with the approval of or in consultation with some other body. Also how decisions are made may vary depending on the spending involved. For example, they may differ between current costs and investment in new capacity and between small and big current costs.
When funds are received by the input supplier, they simply become a book keeping entry and vanish back into the ether from whence they came. They are not funds that the recipient can spend. Their purchasing power is created in the way just described for their customer. Likewise when the latter finally receive funds from their customers they too vanish. This disconnect between revenue and purchasing power does not seem so odd when we note that inputs generally need to be acquired well before payments for the final output.
Toot toot - that was the people’s crazy train pulling out of Attempt at Reasonville.
I don’t want to keep addressing this point by point, but rather than leaving it here, I want to point out to Mr. McMullen and everyone else who longs for social ownership that, in its unceasing willingness to provide for the desires of its participants, the free market allows for labor ownership. Law firms are almost universally organized as partnerships, the same goes for many financial firms and FedEx drivers are independent contractors who own their trucks and can make more than $100,000. In each of these cases, I would wager there is some efficiency which makes employee ownership superior. McMullen himself suggests a good one, namely, when top down monitoring costs are high. I am sure that the UAW could credit bid with their entitlements, and perhaps an additional collection from members, to own Ford or GM. Just as surely, I know this will likely never happen. There is a very good reason not to work for a company you own: it puts all of your eggs in one basket.
It all boils down to a mistaken equivalence between wages and profits. Enterprise owners earn profit by risking loss while employees exchange their labor for a guaranteed wage. If rather than separate ownership from operation, as capitalism has only relatively recently allowed us to do, McMullen would return to a world in which each man is his own entrepreneur, we could do so. However, he should understand that if “workers will receive the full value of their output”, whether because of their failure or factors outside of their control, the value of their output could be zero. Only when owners agree in advance to contract for the expected value of workers’ output in advance can they bear these risks for their employees.
