Capitalism Without Capitalists

March 23rd, 2011  |  Published in Political Economy, Politics, Socialism, Work  |  7 Comments

One thing that has long bothered me about many socialist and Marxist critiques of capitalism is that they presume that a system based on the accumulation of capital presupposes the existence of capitalists–that is, a specific group of people who earn their income from investment, rather than by working for wages. It is totally possible to imagine a system in which profit-making private enterprise still exists, the economy is based on profit-seeking and constant growth, and in which the entire population works as wage-laborers for most of their lives. I always figured the most likely candidate for such an arrangement was some kind of pension fund socialism. But today, Matt Yglesias gives another similar path. He’s discussing something from Felix Salmon about how the rich increasingly have access to lots of investment opportunities that are closed off to ordinary investors, and he says:

[T]he right thing to do is to just directly think about the issue of how best to ensure that everyone obtains the financial benefits of equity investments. And the answer, I think, is sovereign wealth funds. That’s how they do it in Singapore and conceptually it’s the right way to do it. An American version of Singapore’s Central Provident Fund would be much too large for any market to absorb, but the US share of world GDP should shrink over time and it’s conceivable that there would be some way to work this out on the state level to create smaller units. A fund like that would render the public listing issue irrelevant, since it would clearly have the scale to get in on the private equity game. This would, needless to say, entail injecting a hefty element of socialism into American public policy but I’m always hearing from smart conservatives how much they admire Singapore.

This points in the direction of an ideal type of society in which all businesses are owned by sovereign wealth funds of this type, which are used to pay for public services. So everyone works at a job for a wage or salary, and contributes some of their paycheck to one of these funds, just as they now contribute to pension funds. The returns from the funds are then used to pay for things like retirement, health care, education, and so on. Yglesias jokingly refers to this as “socialism”. And by certain classic definitions, it is: the capitalist class has been abolished, and the workers now own the means of production (through their sovereign wealth funds).

But in many other ways, of course, this is not how socialism was traditionally conceived. In particular, you would still have profit-seeking companies competing with each other, and they would still be subject to the same kind of discipline they are now–the shareholders, which is to say the sovereign wealth funds, would demand the highest possible return on their investment. So at best, this is a kind of market socialism. But while there are people who take on the task of the capitalist–the employees of the sovereign wealth funds–they don’t make up a capitalist class, because they aren’t investing for their own personal profit. Indeed, we’ve already moved a long way in this direction, which is why Peter Drucker was talking about pension fund socialism in 1972.

Of course, we do still have actual capitalists, and getting rid of them would be a long and difficult process. But the important point about capitalism without capitalists is that in many ways it isn’t any better than capitalism with capitalists. You still have to sell your labor power and submit to a boss in order to survive, so alienation persists. Since firms are still competing to deliver the highest returns to their shareholders, there will still be pressure to exploit employees more intensely and to prevent them from organizing for their rights. Exploitation goes on as before, and it will be all the more robust insofar as it is now a kind of collective self-exploitation. And on top of all of this, the system will still be prone to the booms and busts and problems of overaccumulation that occur in today’s capitalism. It was, after all, public and union pension funds that bought many of the toxic mortgage-backed securities during the housing bubble.

All of this is why it is analytically important to separate the conceptual framework of capital and wage labor from the concept of capitalists and workers. In the system I’ve just described, capital and wage labor still exist, and still define how the economy works. But now each person is simultaneously a capitalist and a worker, in some degree or for some part of their life. Thinking through the inadequacy of such an arrangement is, for me, a more accessible way of thinking through the arguments of people like André Gorz and Moishe Postone. They argued that the point isn’t to get rid of the capitalist class and have the workers take over: the point is to get rid of capital and wage labor.

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  • Nemi

    I don´t se why you wouldn’t call this (market) socialism. This is more or less what James Yunker (“pragmatic market socialism”) proposed a long time ago.

    • Peter Frase

      Well sure, you could call it market socialism, and others have–I think I suggested that in the post. The main thing I wanted to do by calling it “capitalism without capitalists” was to reframe the argument, by pointing out that this model doesn’t actually address many of the things that are objectionable about capitalism.

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  • Brian

    If you can have capitalism without capitalists, can’t you also have capitalism without alienated labor?

    Specialization, hierarchical management, and mass production all make work suck, to put it crudely, but they make workers more productive. And if firms are subject to market competition, more productive firms will drive the less productive firms out of business — if they pay their workers the same wages.

    But if labor markets are competitive (a big if), then firms with more productive workers and less pleasant working conditions will have to pay their workers higher wages. So firms that do not subject their workers to productivity-extracting techniques will not be driven out of business, because they will have lower labor costs.

    To borrow your phrase, this points in the direction of an ideal type of society where workers earn lower incomes (because they’re less productive) but have more autonomous, fulfilling work experiences, with partial democratic self-management or minimally intrusive hierarchical management, better working conditions, etc., but are still selling their labor power to a profit-seeking firm.

    Of course, if your objection is to the very fact of monetary exchange, then my argument is not responsive.

  • John E Miller

    Is it really desirable to get rid of the capital part of the equation? I mean what would replace it?

  • Jacob Richter

    i like this “market-socialist” state-capitalist proposal, so long as it is presented as a transitory model.