In Search of Economic Justice

Economic Justice and Democracy: From Competition to Cooperation

Robin Hahnel

New York: Routledge, 2005


Robin Hahnel has written an important book that will be of real value to all libertarian socialists (a term he uses very broadly to cover anyone who wants to replace capitalism with a system characterized by the direct control of workers and consumers over their own economic activities).


     The book is divided into four sections. In the first section, Hahnel examines the concepts of economic justice and economic democracy in an effort to get the Left to have a clearer sense of what its aims ought to be. He also tries to dispel various myths that, he argues, have debilitated movements for economic justice and democracy in the past. Part two is a critique of capitalism, of Communism (using the term as popularly understood: the single-party states with centrally-planned economies, exemplified by the Soviet Union), and of social democracy, as well as an analysis of where libertarian socialism went wrong.


     In part three, Hahnel examines democratic postcapitalist visions. He analyzes market socialism and community-based economics and finds them both lacking. He summarizes the vision that he favors, participatory economics, describing and defending its main features and adding two new aspects to the model that he and Michael Albert have elaborated in many other writings.{1} In the fourth and final section, Hahnel proposes a general strategy for the Left — a way to reach the goal of a society of “equitable cooperation.” His strategy combines working for reforms — though in a particular way — with constructing and being part of experiments in equitable cooperation within capitalism.



I. Economic Justice and Economic Democracy


The general argument of the chapters on economic justice and economic democracy will be familiar to those acquainted with Hahnel’s and Albert’s writings. Almost everyone supports the notion of economic justice, but there are many different ways to define the term. To conservative defenders of capitalism, economic justice means everyone should be remunerated according to the value of the contribution of their physical and human capital — that is, according to the value of their capital and their personal skills. In this view, it is perfectly fair that the good-for-nothing, ignoramus with a huge inheritance earns more than the hard-working genius who comes from poverty. There is widespread agreement that this notion of economic justice is morally repellant (witness the campaign commercials of billionaire Michael Bloomberg that go to great pains to show that he “earned” rather than inherited his fortune). An alternative definition that is often used — even by some on the Left (most market socialists, for example) — is that people should be remunerated according only to the value of the contribution of their personal skills: their intelligence, their athletic ability, or what-have-you. If your personal characteristics benefit society a great deal you deserve more than someone whose personal characteristics benefit society only a little.


     But many differences in our contribution to society are the result of genetic differences over which we have no control. If it offends our sense of right and wrong that the good-for-nothing heir has riches that he did nothing to earn, then it ought to be just as problematic to compensate people on the basis of their intelligence, which they likewise inherited and did nothing to earn.


     To be sure, schooling and training can enhance the value of one’s genetic endowment, and these can involve a sacrifice that ought to be compensated. Education takes time that could be used for earning money or for leisure. But if society paid students — not just to cover their tuition costs, but a stipend so that they forego no income while at school — then there would be no moral reason to pay those with extra schooling more than others (26).Therefore, argues Hahnel, we ought to define economic justice as compensating people according not to their capital, nor their skills, but to their effort or their personal sacrifice. This is not the same as saying that everyone should receive equal income, but it in fact represents equality at a deeper level. Some people will prefer to be compensated in a higher standard of living, while others will prefer more leisure (including working at a more leisurely pace). There is no reason society ought to impose a single view of the appropriate number of work hours or the appropriate pace of work. Everyone is thus compensated equally, in terms of the sum of income and leisure, with the precise mix of these up to each individual (29, 37).{2}


     Of course, there are many who can’t or don’t work at all: the young, the old, the infirm. Whichever definition of economic justice we use, says Hahnel, we will make exceptions for these people. One other definition of economic justice generalizes this point and proposes that people should be compensated according to their needs. (So, for example, those in cold climates need more heating oil than those in more temperate climates.) Hahnel says compensation according to need and sacrifice is his view of how society ought to be organized, but that, strictly speaking, need is a matter of humaneness, not economic justice. I’m not sure this distinction is compelling, but it’s certainly the case that need alone is a problematic standard. Everyone will agree that food, medical care, and so on, are needs that society must provide. But once we get beyond basic needs, then what? No one needs a DVD player or a stereo or a seat at a basketball game. Are these all absent in a good society? If such things do exist, how are they allocated? Do I need the stereo more than you because I really enjoy music, while you are only a minor enthusiast? If you really like a whole lot of things while I am less of a fan, do you get them all and I none? Certainly the Marxian “each according to their needs” is a just way to dispense life’s necessities. But beyond that, for wants, compensation according to sacrifice indeed seems to represent economic justice.


     There are many other proposed principles of economic justice. John Rawls’s difference principle{3} says that inequality is justified only if it improves the condition of the worst off. Hahnel argues that the Rawlsian principle under at least one plausible interpretation could be a potent argument against both capitalism and market socialism. But more generally, Hahnel notes that Rawls implicitly assumes that efficiency is to be valued more than equality. Yes, we might agree that a society where one person made $55,000 and everyone else made $50,000 is preferable to a society in which everyone made $10,000, but Rawls requires us also to prefer a society where one person makes a billion dollars a year and everyone else makes $10,001 a year to a society where everyone makes $10,000. If there is a trade-off between efficiency and equality, says Hahnel — though he doubts there is — then people should have the right to decide democratically which they prefer, rather than automatically assume, as Rawls’s difference principle does, that efficiency should be determinative.



Turning to economic democracy, Hahnel asks how we should make decisions. Letting each individual decide things for him or herself makes good sense when the decision affects only the individual in question. But it makes no sense when one person’s decision affects others. Likewise, majority rule — which weighs the opinions of everyone equally — is appropriate when everyone is affected equally by a decision. But it is quite inappropriate when different people are affected differently, perhaps some not at all and some a great deal. True democracy, says Hahnel — what he calls “economic self-management” — occurs when people have input into a decision proportional to the degree they are affected by it. Markets tend to promote the “everyone decides for themselves” view of democracy, ignoring the extent to which your decision, for example, to emit some pollutant into the atmosphere might affect others. And “even the most democratic version of central planning conceivable would still deny people economic democracy by failing to let those who are more affected by a decision have more say over that choice” (55).


     This definition of economic democracy offers important insights, but I think Hahnel underestimates the difficulty in operationalizing it. He writes:


“Of course it will never be possible to arrange for decisions to be made in ways that every person enjoys perfect economic self-management, any more than it is possible to ever achieve perfect economic justice no matter how well an economy is designed to promote justice.” (54)


But it seems to me that institutions for realizing economic justice are far more easily constructed than those for economic self-management. The participatory economics model he describes in part III of the book provides a reasonable approximation to economic justice; I’m not sure the same can be said about self-management, as I will discuss below when I consider his model in more detail.


     Hahnel believes that the Left has been burdened by its lack of clarity over the meaning of economic justice and economic democracy. He argues as well that there are a variety of myths that the Left has long held that it ought to jettison if it hopes to make progress. It is not the case, he says, citing the work of Nobuo Okishio, that there is an inevitable tendency for the rate of profit to fall, leading to capitalist collapse.{4} “Despite a number of attempts by die-hard Marxists during the 1970s and 1980s to rescue the falling rate of profit crisis theory,” notes Hahnel, “by the end of the century” the theory was rejected by “virtually all open-minded political economists” (58). “Nor, unfortunately,” Hahnel observes, “does capitalism nurture the seeds of its own replacement in ways most 20th-century progressives believed it would. It does not generate a growing, homogeneous, working class whose economic activities lead them to see the advantages of seizing and managing the means of production themselves” (61-62).


     More controversially, Hahnel argues that the common Marxist view that there are only two classes that we need concern ourselves with — capitalists and proletarians{5} — ignores the class of “coordinators,” the professional/managerial class that has interests antagonistic to both capitalists and workers. As long as the Left fails “to recognize that a class of coordinators could rise to ruling class status in public enterprise economies,” Hahnel rightly argues, it will be unable “to understand the non-socialist nature of the so-called ‘socialist’ economies” (64-65). If there are only two classes, and the capitalists are expropriated, then obviously the workers must be in control (though perhaps it’s a “deformed” workers’ state, or some other contortion). Lenin and Trotsky were not Stalin. But when Lenin said “We want the socialist revolution with human nature as it is now, with human nature that cannot dispense with subordination, control and managers” and that piece-work, much of Taylorism, and “unquestioning submission to a single will” are necessary for modern large-scale industry; and when Trotsky declared that socialism is expressed “not at all in the form in which individual economic enterprises are administered,” they were reflecting the perspective and interests of the coordinator class, not the working class.{6}


     Another Left myth, says Hahnel, is the belief that the economy is always the decisive factor, with sexism and racism being merely problems within the superstructure. Hahnel calls this problem economism, “attributing unwarranted importance to economics in some way or another” (65). This is a useful point. Hahnel notes that “to assume that economic forces and class struggle are always most important is unwarranted, to reduce explanations of war, gender oppression, and racial discrimination to economic motives is untenable, and to demand that oppressed racial and gender groups always subordinate their struggles to the class struggle is unconscionable” (66). But Hahnel overreaches, I think, when we says that economism “can take the form of referring to a society as ‘capitalist’ when it is also patriarchal and racist” (65). But societies which have these three characteristics are also heterosexist, authoritarian, and able-ist. I’m not sure we need to say all these things each time we refer to a particular society. So why use the term “capitalist” as the general-purpose designation? Since all current-day societies are racist, sexist, heterosexist, able-ist, and authoritarian, these terms don’t distinguish between one group of countries and another, while the term capitalist does. Despite this overstatement, Hahnel’s general argument that we should avoid reducing everything to economics is a valuable one.



II. Capitalism and Communism


In part two, Hahnel offers powerful critiques of capitalism and Communism, as well as of the practice of social democracy and libertarian socialism in the 20th century. Hahnel is not content to show that many people are suffering under capitalism; he aims to establish as well that the intrinsic workings of capitalism lead to unjust, undemocratic, and inefficient results. Hahnel compellingly demonstrates that the capitalist market doesn’t provide what people want, in part because it’s a system of “one dollar, one vote” (79). When initial conditions are unequal — as is typically the case under capitalism — even “voluntary, informed, and mutually beneficial exchanges” taking place under competitive conditions “will still be coercive and lead to inequitable outcomes” (81). Capitalism undermines political democracy, not just economic democracy. Capitalism is profoundly inefficient (defining efficiency not as the simple volume of output, but socially-valuable production), and inherently plagued by externalities and biased price signals. And even if capitalism worked perfectly, it would distribute the costs and benefits of economic activity in a manner inconsistent with economic justice (92).


     The first post capitalist societies were single-party states with central planning. Much of the horror of these societies was due to their dictatorial political systems, and it is widely assumed that their economic systems were terrible failures as well. In fact, says Hahnel, “after decades of outperforming their Western capitalist competitors, growth rates in the centrally-planned economies had dipped below Western growth rates by the beginning of the 1980s,” but they weren’t in economic crisis. “After 1985 the Soviet economy was in crisis because it was in a never-never land between an old system and a new one that was never successfully put into place” (104-05).


     This doesn’t mean, however, that central planning doesn’t have serious theoretical and practical difficulties. Hahnel argues that central planning has a strongly antidemocratic bias with a tendency toward inequality and inefficiency. This would be true, he says, even if the central political leadership were elected. In even the best version of central planning, planners send down questions, gather up information from production units (and perhaps consumers), and then send down production orders which must be carried out. But the preferences of producers and consumers are not a given; they can only truly be formulated if everyone knows the impact of their choices on others. Under central planning, however, there is no information flow except from down to up. Moreover, to assure conformity to the plan, central planners have to be able to hold managers accountable, but this can’t be done if the managers are democratically controlled from below. There is thus a tendency for the center to favor giving increased power to managers over workers as a way to make sure that the plan gets carried out.


     In the real world, central planning has further problems. There is a strong incentive for managers to lie to the central planners. Since managers get punished for failing to meet their output quotas, it pays for them to underreport capabilities. This either leads to plans based on false information or else, as often happened, the central planners have their own staff of experts to determine the accuracy of the information from each plant, which is wasteful and encourages the development of a police-state. Hahnel summarizes:


“Combined with a more democratic political system and redone to closer approximate a best case version, centrally planned economies would have done better than they did. But they could never have delivered economic self-management, and would have always been susceptible to growing inequities and inefficiencies as the inevitable effects of differential economic power appeared.” (101)


     Social democracy is another economic approach, which in Europe at least was quite successful in some respects. Hahnel notes that the “golden age of capitalism” was primarily attributable to the influence of social democrats (109). But despite its “important accomplishments,” social democracy also bears a major responsibility for the failure of democratic socialism in the 20th century (109). The problem was not, says Hahnel, that social democrats pursued reforms. Yes, reforms did make capitalism less harmful while leaving its fundamental institutions intact. But that is not a reason, insists Hahnel, to eschew reforms. No, the problem for Hahnel is how the reforms were pursued. For social democrats, reforms were everything.


“It is one thing to say: We are committed to democracy above all else. Therefore we promise that as long as a majority of the population does not want to replace capitalism we have no intentions of trying to do so. It is quite another thing to say: Despite our best efforts we have failed to convince a majority of the population that capitalism is fundamentally incompatible with economic justice and democracy. Therefore we will cease to challenge the legitimacy of the capitalist system and confine our efforts to reforming it.” (124)


     Sometimes when social democrats actually had a chance to move toward radical social change, they balked. When Mitterand and his Socialist Party took power in 1982, they carried out their policy of nationalizing many companies. But they determined to pay the owners for the full value of their assets, which meant that the firms had to extract great profits from their employees. This could only be done if the managers behaved just like the previous capitalist managers. And the ruling socialists had to behave no differently from their predecessors. “My job,” declared Alain Gomez, a founder of the Marxist left wing of the Socialist party, CERES, “is to get surplus value” (120).


     In these sorts of situations, says Hahnel, the compromises of the social democrats alienated those who might have been their strongest supporters, making it relatively easy for the right wing to roll back so much of what social democracy had accomplished over the 20th century. And by refraining from discussing the limits of the reforms they pursued, and by neglecting to try to build examples of equitable cooperation that could serve as inspiration, support, and practice for those looking beyond the reforms, social democrats undermined the long-term struggle for fundamental social change.



Libertarian socialists were even less successful. (Though identifying with libertarian socialists, Hahnel considers them “by far the worst underachievers among twentieth century anticapitalists” [137].){7} Hahnel attributes their failure in significant part to a refusal to engage in reform campaigns and movements.


“The principal failure of libertarian socialists during the twentieth century was their inability to understand the necessity and importance of reform organizing. When anti-capitalist uprisings were few and far between, and libertarian socialists proved incapable of sustaining the few that did occur early in the twentieth century, their ineptness in reform campaigns doomed libertarian socialists to more than a half century of decline after their devastating defeat during the Spanish Civil War of 1936-1939.” (138)


     Libertarian socialists well understood the limitations of social democratic reforms, but, suggests Hahnel, this understanding may have led them to give up on reform efforts too easily (152). The question, of course, is how can one pursue reforms in non-revolutionary times without falling into the trap that ensnared social democrats. This is a question that Hahnel takes up in the final section of his book and I discuss it below.


     In a postscript to this chapter, Noam Chomsky notes that libertarian successes were not much based on “reform organizing,” but on “creating the facts of the future within the present society.” And their ultimate defeat, Chomsky persuasively argues, came not from failures in their attitude toward reforms but from violence — by the Bolsheviks in Russia and by Stalinists, fascists, and liberals in Spain. Nevertheless, Chomsky agrees with Hahnel that among some present-day anarchists there is a dismissive attitude toward reforms that don’t overthrow the state.


     Hahnel also argues that while libertarians were right to reject the Leninist view that workers could not achieve more than trade union consciousness without an external vanguard party, some current-day libertarians have gone beyond this to adopt spontaneism — the belief that when the right circumstances arise, leading to a revolutionary crisis, workers will spontaneously establish liberatory institutions. This was not the view, he notes, of the most successful libertarian movements. In Russia and in Spain there was both a long tradition of communal ownership of land and arduous efforts to build alternative institutions over many years. For example, Hahnel, citing Sam Dolgoff, points out that in Spain,


“the intense preoccupation of the Spanish anarchists with libertarian reconstruction of society has been called an ‘obsession’ and not altogether without reason. At their Saragossa Congress in May, 1936 there were lengthy resolutions on ‘The Establishment of Communes, Their Function and Structure,’ ‘Plan of Economic Organization,’ ‘Coordination and Exchange,’ ‘Economic Conception of the Revolution,’ ‘Federation of Industrial and Agricultural Associations,’ ‘Art, Culture and Education,’ and sessions on relations with non-libertarian individuals and groupings, crime, delinquency, equality of sexes, and individual rights.” (145)


     “But what is even more telling,” points out Hahnel, “is that the resolutions debated, refined, and approved” at the Saragossa Congress, “had been worked on by every congress of the Spanish section of the Libertarian International beginning in 1870″ (145-46). This is a record of commitment that many of us on the Left would do well to emulate.



III. Vision for the Future


Part three deals with vision for the future. The word “vision” seems to send chills down the spines of many Leftists, conjuring up images of Don Quixote on LSD in place of no-nonsense Marxian scientific socialism.


     Interestingly, the importance of developing a vision of socialism is being recognized by more and more Leftists, the latest contribution being a special Summer issue of Monthly Review.{8}


     The arguments for attending to the question of vision are powerful. First, there is Hahnel’s telling point that Leftists don’t have such a good track record in promising people that what would replace capitalism would be a society worth dying for or living in. As Hahnel and John Bellamy Foster{9} in Monthly Review among others have noted, capitalist apologists have been able to defend the status quo by proclaiming that there is no alternative. If we on the Left can’t answer this challenge, we will never get people to support us.


     A second argument for vision is well put by Michael A. Lebowitz in his contribution to the Monthly Review issue:


“There is an old saying that if you don’t know where you want to go, then any road will take you there. [But] our experience tells us that if you don’t know where you want to go, then no road will take you there.”{10}


     Of course, not all considerations of vision are equally compelling. And while it might seem churlish to use some of the Monthly Review articles as examples, given their welcome attention to the topic of vision, these do illustrate some of the problems that often afflict vision discussions on the Left.


     John Bellamy Foster approvingly quotes Rosa Luxemburg on the importance of democracy (17-18) and he defines socialism as a society controlled by the direct producers (5). Under Stalin, he says, the Soviet Union was neither capitalist nor socialist (5, 11).{11} But then he tells us that in China Mao tried unsuccessfully to combat the rise of a new ruling class emerging out of the Communist Party (CCP) (8-9). But surely Mao — the most powerful member of a dictatorial ruling party — was not a champion of democracy. He was the head of the new ruling class that was the CCP. That his faction within the party lost out to another faction does not make this a struggle against class rule, for democracy, or for socialism. Likewise, Harry Magdoff and Fred Magdoff, who also express their commitment to democracy, favorably quote Mao and Chou Enlai to support their point about the dangers of bureaucratic rule.{12} While not doubting the sincerity of any of these writers’ commitment to democracy, many who have been burned by the Left are going to treat this residual enthusiasm for an absolute and murderous tyrant as discrediting any Left pretensions of supporting democracy.


     Foster also speaks of “Cuban socialism,” with its record of providing healthcare and other social welfare benefits” (10-11), ignoring his own definition of socialism as the direct control of the producers. Yes, Cuba’s health accomplishments are impressive, and perhaps many of Latin America’s poor would gladly trade places with a resident of Havana (though probably not Costa Ricans, who without a dictatorship have a higher life expectancy than do Cubans). Of course the Left needs to insist that Washington keep its hands off Cuba and end its economic embargo, but to confuse the Cuban system with socialism makes whatever we say about a better future suspect.


     Another contribution to the Monthly Review issue is by Bertell Ollman, who has often quoted Oscar Wilde’s line that a map without Utopia on it is not worth looking at.{13} In this article, however, Ollman offers a critique of what he sees as the chief characteristics of utopian thinking. “Most American radicals,” he says, carry a significant strain of utopian thinking in their DNA” (84). “The various social movements,” he charges,


“are particularly affected by the frame of mind that sets out ideals — a pollution-free environment, racial/gender/ethnic equality, an end to hunger, durable peace, etc. — before making any analysis of the encompassing capitalist system, and then offering highly charged moral solutions that blithely ignore what would have emerged from such an analysis.” (84-85)


Strikingly, however, Ollman gives not a single citation to any modern-day individual or organization. Though there are sprinkled references throughout his essay to Saint Simon, Fourier, and Owen, he provides not one specific example of anyone employing utopian thinking in the past century and a half. So his claims are not readily assessed.


     A totally pollution-free environment is indeed utopian in the pejorative sense, but we know this not because of any careful “analysis of the encompassing capitalist system,” but from common sense. An end to hunger seems like a perfectly achievable goal in any modern society, but it’s hard to see why those who have mastered the three volumes of Capital are any better prepared to offer solutions. Achieving racial, gender, and ethnic equality are extremely complex undertakings, but I am aware of few ideal solutions, simplistic or otherwise, being proffered by any of the social movements, and Ollman cites none. As for durable peace, the peace movement frequently calls for this or that armed force to withdraw from this or that country, but it seems to me there is rarely any thought given beyond the immediate war.



Marx, says Ollman, raised six main criticisms of utopian thinking: