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Alternative models

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Advocating for an "alternative economic system free of capitalism's structural flaws", economist Richard D. Wolff says reform agendas are fundamentally inadequate, given that capitalist corporations, the dominant institutions of the existing system, retain the incentives and the resources to undo any sort of reform policy. For example, Wolff goes on to say:

The New Deal–era taxes on business and the rich and regulations of enterprise behavior proved vulnerable and unsustainable. The enemies of the New Deal had the incentives (profit maximization) and the resources (their returns on investments) to undo many of its reforms after World War II, with ever-greater effect in the period since the 1970s. They systematically evaded, then weakened, the taxes and regulations of the New Deal, and eventually, when politically possible, eliminated them altogether. Business profits funded the parties, politicians, public relations campaigns, and professional think tanks that together shaped the real social effects and historical decline of government economic regulation. Examples include the destruction of the Glass-Steagall Act, the current assault on Social Security, the shift in the federal tax burden from business to individuals and from upper- to middle-income individuals, and so on.

According to David Schweickart, a serious critique of any problem cannot be content to merely note the negative features of the existing model. Instead, we must specify precisely the structural features of an alternative: "But if we want to do more than simply denounce the evils of capitalism, we must confront the claim that 'there is no alternative'—by proposing one." Schweickart argued that both full employment and guaranteed basic income are impossible under the restrictions of the U.S. economic system for two primary reasons: a) unemployment is an essential feature of capitalism, not an indication of systemic failure; and b) while capitalism thrives under polyarchy, it is not compatible with genuine democracy. Assuming these "democratic deficits" significantly impact the management of both the workplace and new investment, many proponents of economic democracy tend to favor the creation and implementation of a new economic model over reform of the existing one.

For example, Dr. Martin Luther King Jr. claimed "Communism forgets that life is individual. Capitalism forgets that life is social, and the Kingdom of Brotherhood is found neither in the thesis of Communism nor the antithesis of Capitalism but in a higher synthesis. It is found in a higher synthesis that combines the truths of both". Regarding the gap between productivity and purchasing power, Dr. King maintained:

The problem indicates that our emphasis must be two-fold. We must create full employment or we must create incomes. People must be made consumers by one method or the other. Once they are placed in this position, we need to be concerned that the potential of the individual is not wasted. New forms of work that enhance the social good will have to be devised for those for whom traditional jobs are not available.

According to historian and political economist, Gar Alperovitz: "King’s final judgment stands as instructive evidence of his understanding of the nature of systemic challenge — and also as a reminder that given the failures of both traditional socialism and corporate capitalism, it is time to get serious about clarifying not only the question of strategy, but what, in fact, the meaning of changing the system in a truly democratic direction might one day entail."

Trade unionist and social activist Allan Engler argued further that economic democracy was the working-class alternative to capitalism. In his book, "Economic Democracy", Engler stated:

When economic democracy – a world of human equality, democracy and cooperation – is the alternative, capitalism will no longer be seen as a lesser evil. When the working class, not a revolutionary party, is the agency of social transformation, change will be based on workplace organization, community mobilizations and democratic political action. The goal will be to transform capitalism into economic democracy through gains and reforms that improve living conditions while methodically replacing wealth-holders' entitlement with human entitlement, capitalist ownership with community ownership and master-servant relations with workplace democracy.

Assuming that "democracy is not just a political value, but one with profound economic implications, the problem is not to choose between plan and market, but to integrate these institutions into a democratic framework". Like capitalism, economic democracy can be defined in terms of three basic features:

  • Worker self-management: each productive enterprise is controlled democratically by its workers.
  • Social control of investment: funds for new investment are returned to the economy through a network of public investment banks.
  • The market: enterprises interact with one another and with consumers in an environment largely free of governmental price controls. Raw materials, instruments of production and consumer goods are all bought and sold at prices largely determined by the forces of supply and demand.

In real-world practice, Schweickart concedes economic democracy will be more complicated and less "pure" than his model. However, to grasp the nature of the system and to understand its essential dynamic, it is important to have a clear picture of the basic structure. Capitalism is characterized by private ownership of productive resources, the market, and wage labor. The Soviet economic model subordinated private ownership of productive resources to public ownership by collectivizing farms and factories. It further subordinated the market to central planning—but retained the institution of wage labor.

Most proposed models for economic democracy generally begin with democratizing the workplace and the ownership of capital. Other proposals advocate replacing the market with some form of planning, as well.


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