Democratic Socialism in the Era of Ocasio-Cortez and Sen. Sanders

Democratic socialism has been more in the news lately since the most popular American politician — Senator Bernie Sanders — and a rising star in the progressive movement, Alexandria Ocasio-Cortez (who won an upset victory in a primary vs. an incumbent New York House politician) both profess to be democratic socialists. With this being the case, it is worth examining what the ideology represents and how it’s being used.

Democratic socialism (at least by what it should mean by definition) at its core means the democratic control over the means of production. This would mean that instead of institutions such as factories, banks, and media companies being controlled primarily by a small group of (often wealthy) people pretty much functioning outside of democratic controls, there would be much more stakes of shared ownership among the public. Under such an ideology, many more people would, for example, have the authority to join together and hire and fire their managers instead of the other way around.

When Ocasio-Cortez and Sanders mention democratic socialism though, they don’t usually say much about democratizing the distribution and organization of production. In truth, what they’re usually referring to is what’s called social democracy — letting the means of production still be controlled pretty undemocratically in capitalistic fashion, but at least in a way that also includes significant government intervention benefits for the general public. This includes a national healthcare system (which all OECD countries besides the U.S. and Mexico have), decently high taxes on rich people, educational costs being covered by the government, and a variety of other social programs such as paid maternity leave.

In the United States, subscribing to social democracy is often regarded as being pretty far left on the political spectrum. This is really just a reflection of the immense rightward shift of U.S. politics since the 1970s though. For one example, Republican president Dwight D. Eisenhower of the 1950s was a strong supporter of both unions and the New Deal social welfare programs implemented under president Franklin Roosevelt. Eisenhower said that those who didn’t accept the New Deal programs didn’t belong in the political system, but not accepting those programs has now become the norm among Republicans and among many Democrats as well. That Eisenhower would today be regarded as clearly on the left side of the political spectrum truly says a lot about American political discourse.

In terms of socialism, older Americans tend to associate socialism with the Soviet Union. The problem with that is that the Soviet Union practiced state socialism — there wasn’t any democratic distribution of resources there. The Soviet Union was in large part a dungeon for a lot of its people that provided some minimum subsistence benefits to let many of them survive.

And it should be noted that the achievements of the Soviet Union were when it was able to use the power of the state to direct people and resources to useful developmental ends, such as its space program. In the 20th century, it grew quickly from a largely poor and illiterate society that had been invaded multiple times to a world superpower for a few decades, and whatever criticisms of the USSR, there is something to be learned there. It’s a similar parallel to why China has grown and continues to grow as fast as it does — a fairly efficient use of resources (evidently quite powerful), even if the conditions that’s done under happen to be cruel.

The Soviet Union replaced the employers that hold so much power in capitalism with state officials. This didn’t change the fundamental dynamic of workers being quite disempowered, and in many ways made the situation in the Soviet Union worse than it would have been under capitalism. Democratic socialism seeks to absolve the everlasting struggle between the employer and employee, those who own and those who don’t, and in truth the ideology has never been tried much at scale. There are reasons to think that it would be a better way to organize society, such as research showing that today’s employees become more productive when given more autonomy, but there isn’t enough data to know for sure. The experiment of having a large worker cooperative sector of the economy could be run, just like the massive experiments of tax cuts for the rich have been run multiple times, although that’s obviously rather dangerous — it may actually provide a significant benefit to the lives of average working people.

It should also be noted how puzzled some people in the media are by young Americans’ embrace of socialism over capitalism. A now well-known Harvard study that was conducted in 2016 — and was redone once since the ones commissioning it were stunned at the results — showed that 51 percent of young Americans rejected capitalism and 33 percent preferred socialism.

This isn’t really an acceptance of socialism — it’s more of a rejection of capitalism. Young people in general have a vague awareness that the system isn’t working real well for them. Letting the money speak, real wages (wages with respect to inflation) in the United States have been almost entirely stagnant for decades. The only times most workers have seen real wage gains since the late 1970s have been in the later 1990s and over some of the last several years. Both of these periods had tight labor markets from the Fed allowing interest rates to remain low. In the 1990s it was because Alan Greenspan was a somewhat atypical economist and, for some reason, bucked the mainstream of his profession by allowing interest rates to remain low — in other words, something akin to dumb luck. In recent years it was because the Great Recession forced the Fed to drop interest rates to zero and near zero in order to provide a stimulus to the economy (in other words, a massive disaster had to happen).

Additionally, it’s probably pretty irrational to regard capitalism as the only or most viable economic system. It’s just an economic system, but those who reject it are often deemed heretics. In America there are plenty of debates, but for a few generations at least, the debate over the fundamental distribution of resources has been to a significant degree left out.

One view on that though is that this debate between capitalism and a different economic system isn’t really necessary or prudent, and that it would be better to have the debate over how markets are structured and to advocate for structuring them in ways that don’t redistribute income upward. Good Keynesian economists that primarily represent the working class may tend to advocate this view. That may admittedly be a better way to help the modern working class, but will there nonetheless be a massive cost to future generations if capitalism is maintained?

Imaginative Exercise in Spending $450 Million for the Public Interest

An interesting approach to how $450 million could be spent. I’d do it differently myself — I’d probably look to create public interest organizations that would lobby Congress intensely on issues with majority public support, and/or create a credit union that would provide low interest loans to democratic worker enterprises, to help show the viability of an economic system better than corporate capitalism.

In any case, I think we all should use our imaginations more, and this is an exercise that could demonstrate how.

Somehow, some way, someone paid $450 million, after buyer’s fees, for Leonardo da Vinci’s Salvator Mundi at Christie’s last Wednesday. Believed to be the last work by the artist in private hands, the painting’s price smashed all previous records. Since the price also seemed more on par with the education budget of a medium-sized country, Artsy asked a range of leaders from the arts, economics, bioethics, and development to tell us how they’d spend $450 million.

I have to decide whether I would use this money to try to end drug patents or copyrights. Since it is too early in the morning for such a weighty decision, I will put both on the table.

To do in drug patents, I would put up the money for nine orphan drugs trials. These cost around $50 million each, according to recent estimates from James Love, the director of Knowledge Ecology International. I would put all the trial results on the web so that other researchers and doctors would have the full benefit of this information (this would be subject to restrictions preserving the privacy of patients—economists know how to do this). This means they would know whether the drug is more effective for women than men, whether other conditions (e.g. arthritis or heart disease) had an impact on its effectiveness, etc. As it stands now, the drug companies only disclose information that helps them market their drug, so this should be a powerful precedent of how good science could be done. I would then place the successful drugs in the public domain so that they could be sold as generics from the day they approved. This would mean that instead of selling for $300,000 for a year’s treatment, the next cancer breakthrough drug (most new cancer drugs have orphan designations) can sell for $300. This will help to demonstrate the incredible corruption of our patent system in financing drugs. We have needlessly created a problem of drug affordability that would not exist with a more rational method of financing research.

On the copyright side, the point would be to show that there can be alternatives to copyright monopolies to financing creative work. My dream is a tax credit where each person would have some amount (e.g. $100 a year) to support the creative worker(s) of their choice. They could also give this money to an intermediary that supports creative work (e.g. an organization that supports blues musicians or writing mystery novels). The credit is modeled after the charitable contribution tax deduction, except it’s a credit. To get the money, creative workers or organizations have to register, like 501(c)3 do, just saying what it is they do. In this case a condition for getting money through the system is that a creative worker is ineligible for copyright protection for their work for a period time (e.g. 3 years) after getting the money.

With my $450 million, I would propose to try this at the city level, giving out $45 million a year for 10 years. The idea is that a city would run this with the requirement that recipients would have to physically be present at least eight months a year to be eligible to get the credit from the city’s taxpayers. This should turn the city into an artistic mecca, since musicians, playwrights, and other creative workers would want to make extra money, and also win more tax credits, by doing their work in the city.

I would take bids from different cities seeing how much they were willing to put up and how appropriate they might be to serve as a model. (Think of the bidding to be Amazon’s headquarters.) The result should be a large amount of new creative work that is available at zero cost over the web and a thriving city that took the leap.

Basis of Democracy in the Economic System

A general and basic idea of democracy is that if a significant decision affects you, there’s a role you should have to be involved with it. The major point to be made about democracy in the world today though is that almost all of the world’s economic systems are undemocratic. This raises the question of, if democracy is so important, then why shouldn’t the economic system — and not just the political system — be democratized?

The United States is an example of a country that practically makes a fetish about valuing democracy, but it actually has never been much of a democracy overall. Voting politically was restricted to white male property owners at the early stages of the country’s formation, and women only gained suffrage nationally from the Nineteenth Amendment in 1920.

Also a revealing insight is that the preferred maxim of the first Chief Justice of the U.S. was that “Those who own the country ought to govern it.” He was referring to the people Adam Smith called “the Masters of Mankind,” who are also known as the small number of people who have amassed immense wealth and resources, typically through unjust advantages they’ve gained at public expense. In a practical sense, that maxim was a bigger part of the country’s early societal formation than actual democratic principles were.

The economic system of slavery is an example of how the U.S. (and other countries that have had it) were undemocratic economically, as slaves while enslaved obviously lack much of a role to participate in decisions affecting them. This should be noted considering that slavery is among the biggest moral failures of the U.S. in its history — with vile racist detriments on the society from it that continue to this day.

Even since the abolition of slavery though, the U.S. hasn’t been much of a democracy. Other countries generally are similar, but I’ll use the U.S. as an example for the sake of what I refer to half jokingly and half seriously as its democracy fetish. The examination of the workplace in a capitalist American corporation is a useful starting point.

The people at the workplace will spend much of their time there, but they will also have little or no role in deciding what happens to the profits of the corporation and what actions the corporation pursues. That would be decided mostly by the board of directors and major shareholders, which are small groups of people who have somehow gained a larger amount of wealth and power. In the U.S., besides the top 1 percent owning 40 percent of the stock market, the top 1 percent there also control the bulk of the shares in corporations not listed on the stock exchange too.

In a capitalist corporation, there is typically an “election” about every year or so to determine the board of directors. Who is placed on the board of directors is determined through a process where one share is one vote. In this vein, a small number of people controlling the bulk of the shares grants them disproportionate power to choose the board of directors, and the board of directors will then subsequently make significant decisions on what happens to a lot of resources and to a lot of people.

Those people undemocratically elected often are placed in those positions not as a result of a meritocracy of deserved power, which — looking at the occupants of the current executive branch and other influential sectors of society — the U.S. largely is not. But still having arrived at the top, this small group of people wielding concentrated power will then usually act as would be suspected, operating economic institutions for their own self-interest, whether that tends to harm the general public or not.

Part of that unjust operation for concentrated power will be based around what happens to the net revenues of the institution. Employing a worker may only pay $10 per hour in wages, but the output of that worker’s value could be worth $50 per hour, which of course isn’t an unreasonable outcome in a society whose wages for the majority of people have been largely stagnant – even with rising productivity – for 4 decades. The costs of maintaining the equipment and facility the worker uses could be an easily covered $20 an hour, which again isn’t an unreasonable sort of example considering that U.S. corporate profits are at record highs.

The remaining $20 is the extra amount of value, and as long as economic institutions are undemocratically controlled by corrupt, concentrated power, the worker won’t have a reasonable amount of say in what happens to that added value. Instead, the $20 would join the exorbitant pay of CEOs and the enormous upward redistribution of income to the rich that’s occurred over the last 40 years.

If the worker, acting with other workers, was much more empowered at the institution, it’s easy to guess how that $20 of net revenue would probably be used. It’d be primarily used in the interests of the workers instead of in the major shareholders and executives, and that multiplied across the society would make a significant difference. Democracy is supposed to mean that the supreme power rests with the public, but it’s easy to see how rare that actually has been in practice.

In a democratic economic system, the workers would have the legal or institutional authority to pick their managers, instead of the other way around. To say it again: In a a democratic worker enterprise, the workers would be able to join together to vote for or against their bosses, which would represent a departure from hierarchically top-down corporations dictating who is hired and fired. It’s rather amazing how many people have never even considered that difference as a possibility, and it’s merely one major difference that democratic worker enterprises (sometimes referred to as worker cooperatives) would make in organizational structures.

With worker cooperatives instead of top-down, quasi-totalitarian corporations, the government’s dependence on revenue would be different. The general public – with much more use of worker cooperatives – would personally gain higher individual incomes, and that means that the structure of dependence for tax revenues would change from being so dependent on the rich to more dependent on the mass of people. The political ramifications of this are potentially substantial, as most policy today is effectively written by the interests of the wealthy top 1 percent, and to a lesser extent the top 20 or 30 percent. The bottom 70 percent of the U.S. – by wealth standards – tends to be disenfranchised from deciding much in policy, which is clear enough from observing public opinion polls. Majorities consistently poll for universal healthcare, a higher minimum wage, investment in renewable energy to oppose climate change, a carbon tax, measures to break up the big banks, free public university tuition, and higher taxes on the rich, among other measures, but these policies aren’t being implemented across the country. Taking the basic examination of how democratic a country is by viewing public opinion polls is another way of showing how plutocratic (and not democratic) the U.S. actually is.

Much needs to be altered, and it would be with more robust organization that supports majority opinions, which are correct in their findings surprisingly often. As the necessary paths forward to fighting injustice become more urgent, they do tend to become clearer though. Those interested in an improved world should recognize this, as there is a lot currently at stake.

Criminal Plutocratic President Signs Repeal of the CFPB Ban on Prohibiting Class Actions

Add this to the list of reasons Donald Trump sold out his middle class and poor voters. Wall Street is obviously pulling the strings here, which explains the all too true joke of “If you want to talk to Goldman Sachs, call the Treasury Department.”

President Donald Trump on Wednesday signed the repeal of a banking rule that would have allowed consumers to join together to sue their bank or credit card company to resolve financial disputes.

The president signed the measure at the White House in private. Journalists were not present to witness the signing.

The Republican-led Senate narrowly voted to repeal the Consumer Financial Protection Bureau’s regulation, which the banking industry had been seeking to roll back.

[…]

If the rule had been allowed to go into effect in 2019, it could have exposed banks to large class-action lawsuits, a possibility that has taken gotten more attention following the sales practices scandal at Wells Fargo and the security breach at credit company Equifax.

The repeal means bank customers will still be subject to what are known as mandatory arbitration clauses. These clauses are buried in the fine print of nearly every checking account, credit card, payday loan, auto loan or other financial services contract and require customers to use arbitration to resolve any dispute with their bank. They effectively waive the customer’s right to sue.

The New York Times article is wrong when it says that the Obama administration installed “tough new regulations,” however. Dodd-Frank is a weak regulation with lots of loopholes written in by lobbyists, and the important provision of Glass-Steagall that separates depository banking and investment banking hasn’t been reinstated.

Under the Obama administration, no major banker went to prison for their involvement in causing the 2008 crash and Great Recession that harmed many millions of people. The fines imposed by the Obama administration also basically amount to a joke, even if they were several billion dollars. The Federal Reserve granted literally about $16 trillion (close to current U.S. annual GDP of $18.8 trillion) in virtually zero interest loans to big banks. The criminal penalties and fines for the large banks are therefore quite small and inconsequential to the corporate welfare the U.S. government granted them. How those big corporations think of those fines is as “a minor cost of doing business.”

Big U.S. banks such as Bank of America wouldn’t even exist today if the U.S. taxpayers hadn’t bailed them out. Of course, the banks still continue to screw over regular working people by using the government officials they buy to enact policy that’s damaging to the vast majority of the population. This is a technical term in economics and finance known as “screwing people over for higher profits.” The gratitude expressed by these artificial entities of greed and exploitation definitely has to be a finer point of corporate capitalism’s existence, doesn’t it?

What an absurd and horrible method to organize society, to have such a massive base of power around criminogenic financial corporations. It’s clear that results in much of society’s undeserved problems.

Knowing and Rebuilding After the Storms

Here’s a long essay that I found worth reading.

A political system haunted by racial violence and terror. An economy delivering great wealth for the few amid stagnation and indebtedness for the many. A rising millennial generation with deteriorating prospects increasingly willing to put their bodies on the line for something better. A climate catastrophe already beginning to unfold on the flooded streets of our largest cities. With the profoundly troubling events in Charlottesville—and before that in Ferguson, Berkeley, Baltimore, and elsewhere—the ghosts of America’s past have come crowding in. And the ghosts of our future made landfall with Hurricanes Harvey and Irma. Like all such ghosts, these demand a response. We must now produce one that is both deeply moral and capable of getting at the heart of our difficulties. We must overcome the nightmares of fear, hatred, and isolation that have seized our politics with a strategy that can deliver solutions commensurate with the scale of the problems we face.

[…]

He may stand at the head of some of the most sinister forces in American political life, but the present crisis long pre-dates Donald Trump. Exploding economic inequality, wage stagnation, poverty, deindustrialization, economic and political disenfranchisement, disinvestment—for decades, under Clinton and Obama no less than Reagan and the Bushes, most of the gains from the richest economy in the history of the world have gone only to the very top. Real wages for the vast majority of American workers have been stagnant for at least three decades, while the income share taken by the top one percent has jumped from ten percent in 1980 to more than 22 percent today. In terms of wealth, the top ten percent now command around three quarters of the total, with the richest four hundred individuals amassing more wealth than approximately the bottom 190 million Americans combined. There are also growing disparities between black and Hispanic Americans, on the one hand, and white Americans on the other. Over the past thirty years, for instance, the average wealth of white Americans has grown a fifth faster than that of Hispanic Americans and by more than three times that of black Americans. And all of this inequity has been driven by an economic system addicted to growth, all too happy to “externalize” the consequences for our ecological future.

We are now living the consequences of these dangerous patterns. Many communities are falling into decay, their social bonds dissolving. Violence remains endemic (including shocking levels of violence against women). Civil liberties are eroding. The lives of millions are compromised by economic and social pain. Health inequality is on the rise, with the life expectancy gap between rich and poor people born in 1950 up significantly over those born in 1920. The labor force participation rate has declined for two decades—and is projected to decrease still further. Young people are saddled with ever-growing debt, including (but by no means limited to) a staggering $1.3 trillion in student loans. The incarceration rate has more than quintupled since the 1970s, and remains among the very highest in the world with people of color incarcerated at dramatically higher rates than their white counterparts. Polling on everything from Congress to the media shows a significant fall in public trust. At some point something had to give. This is the context that permitted the monstrous rise of Trump.

[…]

From upstate New York through Pennsylvania, Ohio, Illinois, Indiana, Michigan, and Wisconsin, community after community has been destabilized by waves of deindustrialization. Once-great cities have been thrown away, whole regions left behind, and around five million manufacturing jobs lost since the mid-1990s. From Appalachia to the Gulf Coast, communities denied any alternative path cling tenuously to the false promises of the extractive economy, fueling our planetary carbon nightmare. The terrible political consequences of all this are now coming home to roost.

Trump himself ran hard against neoliberal finance and trade, striking a chord in the abandoned towns of the Rustbelt and rural Appalachia, which proved willing to give him a chance. These are not all the racists of Charlottesville who—clad in golf shirts and khakis or military-surplus gear—resemble more the traditional fascist mix of bourgeois and “lumpen” elements. Rather they include ordinary working families whose anger is understandably boiling over at a system they know is stacked against them. An election-day poll found 72 percent of Americans—a supermajority—in agreement that “the American economy is rigged to advantage the rich and powerful.” Trump flipped a third of counties that had previously voted twice for Obama. We urgently need to rise to the challenge of this profoundly dangerous era of pain and difficulty.

To do so means adopting a multi-pronged strategy for building community wealth and transforming our economies, thereby defusing some of the pressures currently being exploited by right-wing forces. Examples of the power of such strategies can already be found in places where they might least be expected. Kentuckians for the Commonwealth, for example, organized for participatory planning around a post-coal future in Appalachia, fighting for the Clean Power Plan when it was blocked at state level—a prefiguration of the kind of intransigence and indifference we now face at the national level. Greensburg, Kansas became—in a deep red state, under a Republican mayor—one of the greenest towns in the country when the government acted as partner and catalyst to rebuild the town after it was leveled by a tornado. Chattanooga, Tennessee has one of the fastest internet connections in America—thanks to a municipal fiber broadband network whereby public ownership of digital infrastructure is driving local economic revitalization. Such approaches point in the direction, ultimately, of rebuilding a power base—in both red states and blue cities—for a transformative new politics capable of standing on its own feet, operating within ecological limits, and managing our economy for the benefit of the many and not the few.