Beyond Kinder, Gentler Capitalism

Elizabeth Warren wants to rein in capitalism's excesses. But when those excesses are baked into the system, we can't rein them in — we have to scrap the whole thing.

Sen. Elizabeth Warren (D-MA) speaks during the Democratic Policy and Communications Committee hearing in the Capitol building on July 19, 2017 in Washington, D.C. Joe Raedle / Getty

Last week, CNN host Chris Cuomo asked self-described democratic-socialist congressional candidate Alexandria Ocasio-Cortez how exactly she planned to pay for ambitious social programs like “Medicare for All, college tuition, maybe even housing.” She answered:

Why is it that our pockets are only empty when it comes to education and healthcare for our kids? Why are pockets only empty when we talk about 100 percent renewable energy that is going to save this planet and allow our children to thrive? We only have empty pockets when it comes to the morally right things to do, but when it comes to tax cuts for billionaires and when it comes to unlimited war, we seem to be able to invent that money very easily.

Her comment hit the nail on the head. Society already has the wealth and resources we need to provide a decent standard of living for everyone. And the vast majority of the population is responsible for the creation of that wealth through work. The problem is one of distribution: resources are concentrated in the hands of a few economic elites, instead of being shared among the workers whose labor created it.

To solve this problem, we need a new way of distributing wealth altogether. We need to replace the way resources are currently owned and transferred with a whole new system — a socialist system.

When I say wealth is concentrated, I mean concentrated. A new report from the Economic Policy Institute surveyed CEOs of the 350 largest US corporations and found that their average compensation in 2017 was $18.9 million, constituting a nearly 18 percent percent increase over the previous year. The average CEO-to-worker compensation ratio was 312-to-1. That’s right, CEOs at major US firms make over three hundred times what the typical worker does.

Furthermore, the top earners have pulled away from the rest of the rich. The CEOs surveyed made more than five times as much annually as other members of the top 0.1 percent. In sum, the report portrays of a breakaway section of the capitalist class whose wealth eclipses even that of their affluent peers.

Meanwhile American workers’ pay stagnates, the cost of living skyrockets, and the dwindling social safety net functions less as the guaranteed foundation of a good life than as a public subsidy for capitalists who refuse to pay their workers a living wage. Bernie Sanders described the situation in an appearance on the Late Show with Stephen Colbert earlier this week:

The greed at the top is really unbelievable. Right now, you have three people with more wealth than the bottom 50 percent of people. You’ve got the top one-tenth of 1 percent owning more wealth than the bottom 90 pecent. You’ve got one guy, Jeff Bezos of Amazon, his wealth is increasing every single day by $250 million, but he pays many of his workers wages that are so low than many of them are on food stamps or on Medicaid.

People are waking up to the absurdity of this state of affairs. In fact, less than half of millennials now report positive feelings about capitalism, preferring socialism instead.

But why let all this runaway inequality color our view of capitalism writ large? Why not, as Elizabeth Warren has attempted with her new bill proposed this week called the Accountable Capitalism Act, merely rein in the excesses of capitalism — to save capitalism from itself?

Well, because the distribution pattern we see now is no accident. It’s what capitalism trends toward, even when we try our best to contain it.

“The distinctive and dominant characteristic of the capitalist market is not opportunity or choice,” wrote Marxist political economist Ellen Meiksins Wood, “but, on the contrary, compulsion” — in particular, the compulsion to compete on the market. To survive, workers are compelled to compete with other workers to sell their labor on the open market, prompting a race to the bottom.

Meanwhile, in order for their enterprises to stay afloat and to keep from becoming workers themselves (a stressful prospect under capitalism), bosses are forced to compete with other bosses to maximize profit, which requires them to squeeze as much labor from workers for as little cost as possible, while also pressuring the state to deregulate industry, cut taxes, and so on.

This compulsion builds inequality into the system and sets capitalism on the road to excess from the start.

Warren’s bill, as explained in Vox, aims to “prioritize workers in the American economic system while leaving businesses as the primary driver of it.” But you can never actually prioritize workers when social relations are premised on the idea that in order to eat, most people must sell their work for a price set by capitalists, and then those capitalists get to keep all the value produced by that labor in excess of wages and other overhead — what we call profits — as a reward for owning the business. That setup prioritizes bosses by nature, and leaves workers fighting over scraps.

You can make some serious headway regulating the capitalist system. And regulations are a good thing — in fact, placing strict limits on existing corporations’ ability to profit will be an intermediate step in any serious socialist plan to replace private ownership with public control. But if you don’t take seriously the prospect that capitalism has got to go, those regulations will be perpetually imperiled.

Notice that at the nadir of economic inequality in this country, in the mid-1960s, the CEO-to-worker earnings ratio was still 20-to-1. That’s still highly unequal. And the wealth bosses were accruing during that period still made them much more powerful than workers. Indeed, they were sufficiently empowered to wage an all-out neoliberal assault on taxes, regulations, and the public sector in the late twentieth century, which lined their pockets and led to the inequality we see today.

The takeaway is that if we don’t fundamentally alter the way production is set up, the capitalist class will always capture the state and claw its way back to dominance, and the majority of people will always get a raw deal.

Saving capitalism is a heavy lift, and an end to inequality and class conflict under capitalism is structurally impossible. So, if we’re going to invest in an ambitious political project, we’re better off setting our sights on a horizon beyond capitalism and on a new economic order, one that’s oriented around public well-being instead of private profits.

Socialism is the name of that alternative economic order. And at its core, it involves recognizing that the resources for a beautiful and fair world already exist thanks to the labor of workers — and that those resources should be spent enriching the lives of the many instead of the elite few.