Nia Frome

How is it to be done? (2023)

20 minutes | English | State Capitalism The Crew



There are, broadly speaking, two ways to go about defining socialism. One is more rationalist, exegetical — it begins with Marx’s description of capitalism and negates whatever it takes to be its core components. The other way is more empirical, historical — it takes Really Existing Socialist states at their word and seeks to identify what is distinctly progressive about them. Many partisans of the former approach smugly dismiss the latter, and vice versa. The problem for the former camp is that they can never beat the charge of perfectionism, of lacking realism and so being locked into world-weary pessimism and misanthropy, since fallen humanity keeps failing to push the communism button. The problem for the latter camp is that we can never beat the charge of apologetics — we specialize in support to such an extent that it’s hard for us to stay critical or advance the state of the art. Both errors can be avoided only if we can somehow bring both methods to bear simultaneously. To that end, I’d like to show how a more thoroughgoing rationalism, one that takes more seriously the necessity of beating capitalism, converges on the same results as Really Existing Socialist practice.

To see why this is the case, first assume a capitalist economy, i.e. one in which production is organized by competing firms. Every firm’s goal is to make as many commodities as cheaply as possible and to sell as many of them as possible. Competition isn’t perfect — there are partial monopolies with high degrees of vertical (e.g. Apple) and horizontal (e.g. Amazon) integration — but competitive pressures never let up, even for those with a commanding market share, and no firm can afford to neglect its bottom line. From each firm’s perspective, wages and benefits are costs, its most necessary expenditure but also its most unreliable. [1] Firms have a love-hate relationship with labor, always trying to reduce their intolerable dependence on it, but never quite able to free themselves. The distribution of wages is highly unequal, as is that of every other good — health, safety, freedom, recognition, leisure, etc. For any given worker at any given wage, the more work the firm can squeeze out of them, the better. Costs like pollution and social impact are, for the most part, not borne by the firms that produce them (hence “externalities”), and so not determinant in decision-making. Firms do whatever it takes to open up new markets, secure raw materials, and gain market share, up to and including bribery, intimidation, murder, and state capture. In short: evil reigns.

Marxists have had some success in nailing down the defining features of capitalism’s dysfunctional functioning. Unfortunately, there’s no single culprit that we can call “the root” of capitalism. Instead there’s a tangle of interdependent elements: wage labor, generalized commodity exchange, competitive markets, surplus value, and (speaking more historically) the separation of the producers from the means of production. Firms generate surplus value by hiring wage labor, which presupposes the commodification of labor power. This in turn presupposes the existence of both sellers and buyers of labor power. The former, wage workers, become so through dispossession, by being kicked off their land and deprived of the means of production. The latter, capitalists, are people with money — money that works as a wage only because workers can expect to find all life’s necessities for sale on the market as commodities. But generalized commodity exchange presupposes many firms willing to bring commodities to market, which means competition and an imperative to accumulate surplus value, which imperative seems mysteriously to have birthed itself.

Say you want to abolish this way of doing things. What follows are some preliminary considerations.

Wage labor

The opposite of wage labor is non-wage labor. A volunteer is doing non-wage labor, but so is a slave. What distinguishes the former from the latter is the volunteer’s right to walk away. What wage labor offers is a positive incentive to keep workers from walking away, so as to keep the surplus value flowing. Even if production is no longer organized around maximizing surplus value, though, there are still jobs that more or less objectively need doing. If those jobs don’t get done under socialism, then capitalist relations of production will enjoy greater prestige, and socialism can’t win. Reaching communism therefore means displacing the wage form of motivation with other forms. One labor system that would no longer count as wage labor would be conscription into armies of labor, but this is not very appealing, and makes sense only as an emergency measure, not the norm. That leaves volunteer labor. For work to be done increasingly on a volunteer basis, social validation needs to be made much more widely available and refocused around those jobs that are most necessary. Life’s necessities need to be increasingly guaranteed, reducing one’s dependence on any given employer.

Generalized commodity exchange

Full decommodification [2] consists in the total extension of these guarantees, the rights-ification of consumption. It is unthinkable, however, that such guarantees could be made without massive improvements in productivity. This is what it means to say “Right can never be higher than the economic structure of society and its cultural development conditioned thereby.” [3] The material basis of generalized commodity exchange is the privacy and independence of production, the results of which are socialized only after the fact. Eroding and ending commodity exchange thus requires socializing production before the fact, bringing about transparency and interdependence that transgresses the boundaries of firms. These ties cannot be mediated by commodities but must instead be interpersonal, and they must transmit a logic distinct from that which governs capitalist firms. That logic can only be the logic of use-value, i.e. the rigorously enforced authority of a democratic deliberation about society’s many needs. The privacy and independence of firms, however, plays an important role at a determinate stage of development of the productive forces insofar as it distributes risk — only a supremely rich and powerful state could afford to assume all the losses in an economy, and no socialist state starts out in such an enviable position. Generalized commodity production should be seen, then, as a form of delegation that is historically specific to conditions of underdevelopment.

Competitive markets

In a pure market economy, firms’ only incentive is profit. Competition between them creates a race to the bottom in terms of wages, working conditions, and all kinds of negative externalities. A reduction in competition is necessary if we are going to see firms make decisions in a more pro-social way. That, or competition according to different metrics than sheer value extraction. Limiting competition is known in other contexts as nationalization, cartelization, monopoly, or favoritism. Interference with the market has a bad reputation for reducing efficiency. But this commonplace, like most others, grossly oversimplifies a hotly debated issue. Some authors question the priority of efficiency as a value (as compared to, e.g., redundancy or resilience), others counterpose productive to allocative efficiency (where gains in the latter under socialism may outweigh losses in the former), and others argue that planned economies do just fine even in terms of productive efficiency. What is uncontroversial is that, insofar as the position of a firm in the economy is secured, it can afford to pursue objectives that are not merely cutting costs. [4] Which firms deserve this “securing” and which firms need to focus on improving efficiency are political matters, to be negotiated democratically rather than unaccountably and spontaneously through market-mediation. In capitalist economies, “winners” earn the right to dabble in non-profit activities only insofar as they have previously demonstrated their ability to ruthlessly serve the bottom line. In a socialist economy, political incentives reward and cultivate other virtues, even in institutions.

Surplus value

Some people believe that socialism means the abolition of surplus value. The simplest way to do this would be to divide all of a firm’s profits among the workers. This would not, however, do away with generalized commodity exchange or the resulting competition. Co-ops by themselves don’t do away with commodity exchange, and competition follows from commodity exchange — if you’re imagining co-ops you’re imagining commodities. Workers would still find themselves competing against other workers, obliged to work longer hours, push themselves harder, and cut costs at any cost, or else be punished by the market. [5] Empirically, worker-owned and -managed co-ops in capitalist economies often fall behind for precisely this reason, since they tend to reinvest a smaller part of their revenues than capitalist firms do. [6] [7] This is because it’s easier for a capitalist to bilk workers than it is for workers to bilk themselves. In the aggregate, such chronic underinvestment is acceptable only if other countries aren’t hell-bent on outcompeting one’s own, i.e. if the whole world is socialist.

Another approach to the abolition of surplus value would focus on the distinction between surplus value and surplus labor or surplus product. The fact that people work more than is strictly necessary to keep themselves alive — i.e. perform surplus labor — is not specific to capitalism. Any society must perform surplus labor and produce a surplus product to provide for those of its members who can’t work. In class society of any kind, work far exceeding these requirements is done to enrich and empower the ruling class. What is specific to capitalism is surplus labor’s appearance as value, as money, a quantity that is freed from all quality because it can stand in for any of them, indifferently. Surplus value extraction is the primary motor of capitalism. A one-dimensional magnitude lends itself to single-minded maximization. “Value’s self-valorization” is an introverted, narcissistic, solipsistic obsession. Money’s indifference, the abstractness of abstract labor, infects production and dehumanizes it. Socialism, rather than abolishing surplus labor, seeks to democratize the ends to which it is put, demoting the question of its magnitude to one consideration out of many, along with e.g. the length of the working day, what products get made, how they’re made, and who gets them. Socialism rehabilitates firms, making their revealed priorities match our own. [8] The means of production must cease to be ends in themselves through better (more participatory, holistic, long-term, etc.) accounting and management. “Externalities” must cease to be external.

This does not mean that economic growth in the traditional sense becomes irrelevant. Any single country where socialism takes root faces a scenario analogous to that faced by a single worker-owned firm competing against capitalist ones. In this situation, no one — especially not the poor — can afford to disdain economic growth, which is a matter of survival. Socialism cannot beat capitalism except through protracted economic war.

The producers and the means of production

One (very abstract) proposal runs as follows: simply hand the factories over to the workers. Say this happens. Do I have a share in every factory, or just the one I work at? If it’s just the one I work at, then its value rises and falls along with my factory’s place in production as a whole, and I can still become a pauper overnight. Can other people deprive me of my share? If they can, then my ownership is alienable, insecure — it’s not hard to imagine my losing everything. If they can’t, then their ownership doesn’t much resemble “ownership” as presently defined. To deliver the means of production into the immediate and exclusive possession of those workers who operate them permits neither democracy nor planning, but instead reproduces the disorganization that typifies market domination, and its attendant inequalities. The means of production are “mine” only when I have full confidence that they work for me, that my ownership is inalienable because it is backed by all society, which shares my same interest. [9] Thus universal ownership is necessarily mediated rather than immediate. The reunion of the producers and the means of production can only be brought about through class organization on first a national and subsequently an international level. Armed with a monopoly on the legitimate use of force and the entire state apparatus at its service, the working class can progressively reunite itself with the means of production. That this process is uneven, focusing first on the commanding heights of the economy, rather than uniform and immediate, as in the imagination of anarchists, should come as no surprise.

Real life

The foregoing considerations explain the basic strategy of both the Communist Party of China and other Communist parties in power. [10] The first prerequisite for carrying out such a strategy is to establish a people’s democratic dictatorship, because a bourgeois dictatorship will never allow the needed steps to be taken. Substantive, rather than merely formal, democracy requires that the government track the interests of its citizens closely. These interests are both short-term and long-term, but the government’s job is to specialize in defending shared and general interests, those that are collective and lasting rather than mutually exclusive and passing. Substantive democracy therefore requires hierarchical elections in which money plays as small a role as possible and several levels of selectivity insulate the highest bodies, filtering out short-term particular interests. Political freedom for the capitalist opposition cannot be guaranteed, since this may very well contravene the interests of the majority — consider any number of imperialist coups, color revolutions, and lawfare carried out against socialist governments.

This account of socialism is rare in that it has the support of both rational deduction and empirical precedent. Even its enemies can confirm that Really Existing Socialism acts this way. A recent paper by American political scientist Daniel Koss describes how the Communist Party of China “formally institutionalised Party authority over the most important business decisions” in the commanding heights of the Chinese economy, specifically the banking sector. [11] According to Koss, “reforms at the top of the Party-state hierarchy, tighter cadre management and the strengthening of Party committees within companies create new vectors of influence.” These “new vectors of influence” — what I called, in a previous essay, “direct ties [that] cut across the divisions between firms” [12] — have enabled the Party to turn the banking sector into one that “looks beyond competitive performance” to the satisfaction of democratic demands, making it into an instrument of the general interest wielded by the Party.

According to Koss, “discipline inspections in Xi’s second term since 2017 have been pursuing a much broader agenda of enforcing Party-building and discipline that reaches far beyond anti-corruption.” This “beyond” refers to “poverty alleviation campaigns and rural revitalization”, but there is no reason in principle for it to stop there. The Chinese people have other long-term interests, and Koss argues that “the transformation of Party authority in the banking sector offers a useful angle to understand how, going forward, Party authority may transform China’s political economy in other sectors as well.” Political sovereignty over the economic sphere is the exact opposite of capitalism. Here’s how US Secretary of State Antony Blinken describes the situation: “Unlike US companies and other market-oriented firms, Chinese companies don’t need to make a profit — they just get another injection of state-owned bank credit.” [13] Treasury Secretary Janet Yellen agrees that “China’s government employs non-market tools at a much larger scale and breadth than other major economies.” [14]

Decommodification in the form of guarantees cannot run ahead of the state’s ability to cover losses. This ability grows in step with the state’s logistical, organizational, and technological achievements over a long time frame. What can be done in the short term? “Seizing the means” seems straightforward enough, but it is by no means the only one of many possible “despotic inroads on the rights of property.” [15] These rights, especially the right to hold value’s self-valorization as an overriding priority, the right to pursue one’s own benefit indifferent to and insulated from everyone else’s, are the toxic essence of capitalism. Their consecration is humanity’s degradation. Socialism, the democratization of the economy, is simultaneously the multiplication of our means of contesting and controlling what has hitherto been known as the private sphere. [16] Democracy needs mediation and centralism to articulate itself clearly, a fact that only the laziest and most abstract rationalists neglect. Socialists cannot settle for empty truisms — we must be tenacious in our pursuit of the concrete.

[1] Marx calls these costs variable capital, where “variable” is a synonym of fickle, changeable, capricious. 

[2] “From each according to their ability, to each according to their need” 

[3] Karl Marx, Critique of the Gotha Programme (1875), I. [web] 

[4] The state might be thought of as the firm that cheats the most and thus faces the least competition. 

[5] Marx said mixed things about cooperatives, but at his harshest he saw co-op workers as nothing more than collective capitalists. 

[6] Ermanno C. Tortia, “Capital as common-pool resource: Horizon problem, financial sustainability and reserves in worker cooperatives” (December 2021), ScienceDirect. [web] 

[7] Major & Preminger, “Overcoming the capital investment hurdle in worker-controlled firms” (November 2019), Journal of Participation and Employee Ownership. [web] 

[8] In a previous essay I compared this rehabilitation to Gollum’s. [web] 

[9] The capitalist state does do this for capitalists: “The California Supreme Court just ruled against Kuciemba on the basis that a victory, while, in the court’s words, ‘morally’ the right thing to do, would create ‘dire financial consequences for employers’ and cause a ‘dramatic expansion of liability.’” — Nate Bear, 8 July 2023. [web] 

[10] V. I. Lenin, “Concessions and the Development of Capitalism” (1921). [web] 

[11] Daniel Koss, “Discipline Inspections and the Transformation of Party Authority in China’s Banks” (May 2023), Project MUSE. [web] 

[12] Nia Frome, 2021. [web] 

[13] “US Secretary of State Blinken announces China containment policy” (28 May 2022), Geopolitical Economy. [web] 

[14] “Remarks by Treasury Secretary Janet Yellen on the U.S.-China Economic Relationship” (20 April 2023), U.S. Consulate. [web] 

[15] Karl Marx and Friedrich Engels, The Communist Manifesto (1848). [web] 

[16] These means can reasonably be likened to tentacles. [web]