Pragmatic Utopia #35: The Cost of Joining the Club

Protest of the World Trade Organization in Seattle, 1999

There’s a relatively familiar criticism of globalization that goes: unrestrained globalization is bad because it undermines national sovereignty and forces poorer countries to do things that aren’t in the best interests of (most of) their people. In its most sophisticated form, this criticism is associated with people like Joseph Stiglitz (Globalization and its Discontents) and Dani Rodrik (The Globalization Paradox). Recently, in assessing the effects of trade with China on post-industrial parts of the United States, many commentators (and both political parties, to varying degrees) have generalized the criticism, dropping the word “poorer.” Globalization can be bad for any country.

If you think about it, though, this critique shouldn’t be unique to globalization. It sounds like a specific case of the broader charge that market outcomes are often undesirable and should be regulated. In domestic politics, this obvious fact has been acknowledged (in general, if not in many particular cases) since the British Factory Acts of the early 19th century. Collective oversight of our international relationships is comparatively underdeveloped. As David Grewal puts it: “The central tension in contemporary globalization is that everything is being globalized except politics.” In this light, he observes, debates about globalization are really just extensions of the old debate about whether it is better for people to engage with one another as private individuals or, by contrast, as citizens with equal shares in a collective decision-making process.

Grewal’s book Network Power is an effort to give us a better framework for talking about globalization and connecting it to other forms of coordination (like markets and democracies). He defines globalization as “the rise to dominance of shared forms of social coordination or international standards that enable us to coordinate our actions on a global scale.” Prominent examples of such standards include: the English language, the gold standard, the World Trade Organization’s membership rules, and multilateral treaties like the failed Multilateral Agreement on Investment of the 1990s. The rise of such standards is often “double-edged,” Grewal observes, in that it allows diverse participants to cooperate through one channel while threatening the elimination of all others. Coordination standards become more valuable as more people use them, so it’s common to see a sudden exodus from a losing standard (e.g. a dying language) as everyone clusters to the presumptive winner. You’re just describing network effects, you might interject, and indeed that was one of my early reactions to the book. But I think what Grewal is really doing is turning network effects political.

A few chapters in, Grewal reveals his true ambition: to intervene in the oldest debate in social theory (itself the child of the oldest debate in philosophy), the one between structure-focused and agency-focused accounts of social life. The old way of thinking about power was straightforwardly agentic: I exercise power over you by making you do what I want. This is sometimes called the power of sovereignty, including by Foucault, who famously sought to replace it. Foucault argued that the more important form of power in modern life isdisciplinary power, which is diffuse, invisible, and all-pervasive, enacted not by the sovereign but by our collective circumstances, norms, and even our consciences. Grewal insists that we must make more room for individual action than this.

The problem is not with agency, he argues, but with assuming that relationships of power must always resemble political sovereignty. In the case of globalization, they distinctly do not. The concept of network power can “help us see how individual actions can create structures [e.g. networks] that in turn limit individual agency in a way that resembles the more familiar exercise of power by one person over another.” This type of power relationship he termssociability. Sociability is voluntaristic; it’s raw human interaction (fighting, cooperating, trading) prior to the construction of a political sphere. With this concept in hand, Grewal can give his best definition of globalization: that which “extends and deepens relations of sociability at a global level without the concomitant construction of a global sovereignty.”

The problem with network effects, in Grewal’s view, is that they give adopters little choice but to participate. He cites the philosopher Serena Olsaretti, who wrote: “A choice is voluntary if and only if it is not made because there is no acceptable alternative to it.” And once a standard is selected, there is no going back. The linguist Ferdinand de Saussure may have been the first to recognize this: “Once the language has selected a signal, it cannot be fully replaced by any other…The community, as much as the individual, is bound to its language.”

Grewal says there are two types of consequences of being forced into a popular network: interest concerns and identity concerns. These roughly map onto Charles Taylor’s phrase, “Freedom to get what you need / freedom to become who you are.” Interest concerns arise when less powerful actors are forced to accept a bad deal because it’s the only one on the table. This is one way to characterize the widespread criticism of investor-state dispute settlement (ISDS) provisions in trade agreements (like TPP), which give multinational companies the opportunity to sue countries for harming their investments (e.g. by enacting environmental protections). As much as lefty Americans complained about the ISDS clause in TPP, I bet the American trade representatives were the ones insisting on the clause. Lots of multinational companies are owned by American investors. I suspect the government of Peru, for example, would much rather have signed a version of TPP without any ISDS.

Identity concerns seem even more fundamental to the working of network power. Because networks are often winner-take-all, every alternative option will lose out. Few of us mourn Friendster and MySpace, but we do lament the decline of local and regional languages. In general, Grewal observes that globalization tends to enhance some forms of universalistic recognition (notably, the idea of human rights) while diminishing more local, solidaristic “communities of value.”

How to remedy the consequences of network power? One common approach you see is the effort to withdraw from networks. Grewal argues that this is unrealistic and even counter-productive: people (and countries) only enter these networks in the first place because they need each other. Instead, he concludes that the best bet is to provide multiple alternative channels of access. One way to build alternative channels is to make networks non-exclusive. Another way is to make networks compatible with one another, like how any two languages can be mediated by translation. In a world with ubiquitous, low-cost translation services, no one would need to give up the language of their grandparents.

Network Power includes commentary on topics you would expect like international trade agreements, investment standards, and technological standardization. On globalization, Grewal praises Dani Rodrik as one of the best critics of hardcore free trade ideology, which treats trade as an end in itself rather than a means to development. This reminded me to pre-order Rodrik’s upcoming book, Straight Talk on Trade. But in general, I found the theoretical framework I’ve been discussing to be the most interesting, original contribution. I’ve been exposed to social network analysis in a few classes, and one debate that always arises is whether there is any theory of networks or just a method of characterizing networks, nodes, and their position therein. Grewal doesn’t speak much to the literature on networks from sociology, probably because that literature is very concerned with an agent’s exact position within a network while Grewal is mostly concerned with whether you’re in or out. And while it may seem simplistic, I think treating network membership as dichotomous helps unlock much of Grewal’s insight. If the costs of staying out are high, people will sacrifice a lot to get in.

Grewal’s theory of networks is clearly applicable to antitrust policy in the context of platform monopolies: Google, Facebook, Amazon, and perhaps Uber. Each giant has achieved critical mass in its domain, initially for intrinsic reasons (quality) but now increasingly for extrinsic ones (it’s where all your friends/customers/drivers are). In the past I’ve discussed the idea of regulating these platforms as public utilities, e.g. by requiring nondiscrimination between their own products and others or by imposing common carrier obligations. Using Grewal’s framework, this approach would address interest concerns–everyone would get equal access to the dominant networks–but not identity ones. It is tempting to conclude that diversity is not a realistic value when it comes to platforms; that they work best when everyone gets together on a single protocol.

The parallel to languages and translation suggests one way out. Imagine a world with ten ride-hailing services, all linked on some underlying level thanks to data sharing and an API (indeed, providing the underlying infrastructure is the key to all of Amazon’s businesses). You might prefer to use a particular service–the one that pays it drivers best, the fancy one, the one that specializes in pooling–but if there were no cars available you could seamlessly expand your search to all ten, or some subset. Like with language translation, we might prefer to use our idiosyncratic protocol, but we also want access to everyone within arm’s reach. My ten-Uber hypothetical is probably flawed on many levels, but I share it as an example of how this concept of accessibility helps us think beyond the seemingly inevitable winner-take-all dynamics of networks.

1. Prime time for centralization
Speaking of monopolies, here is Stratechery on the Amazon / Whole Foods acquisition.  It is the only thing you need to read to understand the logic of the deal. Amazon is not so much buying a retailer as buying an anchor customer for its impending Food Supply Chain Logistics business. Once it builds out the back end of a food supply chain well enough to service Whole Foods, it will start selling to other grocers, direct to consumers, to restaurants, to caterers, etc. This is how Amazon functions in every market: build out a service (Prime, AWS) and then open it up to third parties. So from an antitrust perspective, the FTC should ignore the red herring of centralization in the grocery industry (the much-repeated stat is that Whole Foods only sells 2% of groceries) and think about centralization in the food supply chain.  

2. Dream of Cali jurisdiction
I follow a bunch of people on Twitter who share my concerns about monopoly power. Many of them were disappointed by this Supreme Court decision limiting the ability of plaintiffs to sue a company in a given state’s court even if most of them were allegedly injured in a different state. A bunch of people–most of whom are not California residents–sued Bristol-Myers Squibb in California court after being injured by a blood thinner. The Supreme Court held 8-1 that “what is needed is a connection between the forum and the specific claims at issue,” and that there is no such connection between these people and California.

Justice Sotomayor, along with my Twitter friends, bemoaned the likelihood that this decision will make it impossible for far-flung defendants to hold corporations accountable for their nationwide activities. I am inclined to agree, and so this case seems one of those frustrating examples where the desirable outcome can’t be justified by the law and precedent. Sotomayor acknowledges this in taking a realist tack: “What interests are served by preventing the consolidation of claims and limiting the forums in which they can be consolidated?” The majority reassures us that plaintiffs can still bring a mass action against a corporation in its “home” state–in this case New York or Delaware. In response, Sotomayor raises several troubling questions: Where can plaintiffs sue multiple defendants who are headquartered in different states? What about a nationwide mass action against a defendant not incorporated in the U.S. at all?

3. Racism for realists
Scott Alexander defines liberalism as “a technology for preventing civil war.” “Popular historical strategies for dealing with differences have included: brutally enforced conformity, brutally efficient genocide, and making sure to keep the alien machine [liberalism] tuned really really carefully.” This comes in the context of a controversial essayabout racism. I’m tempted not to share the post because I think it minimizes racism, but it’s important to talk about this stuff. On a charitable reading, I think there’s a valuable idea at the conclusion of the essay.  Basically: we should avoid defining racism as pure evil, unintelligible, and unresponsive to reason. Because once you define it that way, violence is the only appropriate response. It’s more useful to treat racism as something very human, present in all of us to varying degrees, that can be changed and mollified over time. We might call this the “realist” approach to racism. I’ve seen it articulated by a number of anti-racist writers; one example is Beverly Tatum, famous for the “smog” and “moving walkway” metaphors. Thanks also to Kate Selker for helpful comments on this view of racism after a long-ago newsletter. I’d be interested to hear your views.

4. Pedagogy and pasttimes
Wonderful old essay from Alan Kay on science education and the way our pedagogy does a better job inculcating an appreciation for stories than an appreciation for logic. On being told that it’s too hard to get children thinking scientifically, he says it’s harder to learn to hit a baseball. “In fact, what really seems to be the case is that children are willing to go to any lengths to learn very difficult things and endure almost an endless succession of “failures” in the process if they have a sense that the activity is an integral part of their culture.”

5. Capital allocation is a myth, volume 481
John Kay: “The paradox of modern capital markets is that although there is less and less need for market activity from the point of view of either the end users of finance, or the investors who are the ultimate beneficiaries of finance, the volume of market activity has increased exponentially.” In this context, it was funny listening to Will Thorndike talking about the most effective CEOs of all time (from a financial perspective) on the investing podcast. In his book, Thorndike profiles eight CEOs who excelled at capital allocation, meaning they were very good at timing dividends and buybacks. There was almost no talk of CEOs making smart capital investments–i.e. the stuff that financial markets are supposed to be facilitating. And to the extent that Thorndike praised acquisitions, it was exclusively for finding opportunities to “reduce headcount.” None of this is how a society advances in the long run.

Pragmatic Utopia #34: Market Domination and Republican Liberty

This week, I have an essay discussing three books that analyze economic affairs from the perspective of neo-republican political philosophy, which is concerned above all with independence from arbitrary power. The books are: a provocative argument that workplaces are dictatorships, a history of 19th century labor reformers who came to roughly the same conclusion, and a reinterpretation of Marx’s Capital that emphasizes its republican features. All three writers–Elizabeth Anderson, Alexander Gourevitch, and William Clare Roberts–cite each other approvingly and seem to be part of a nascent academic movement to build a case for socialism on neo-republican terms. I should apologize to anyone who knows this material for failing to include Philip Pettit much in my discussion; he has been a key (and I think one of the first?) proponent of this republican socialist view, and all three authors build on his arguments. I should have read one of his books, but as is often the case I seem to have stumbled on this topic out of order and will have to absorb the classics by osmosis.

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The Map of Hell by Botticelli, depicting the rings of Hell in Dante’s (and perhaps also Marx’s) Inferno

A lot of academic types I know were very eager for the recent release of Elizabeth Anderson’s new book: Private Government: How Employers Rule Our Lives (and Why We Don’t Talk about It). The premise seemed to offer what many of the best non-fiction books do–a new way of looking at an old topic, so obvious in retrospect that you can’t imagine how we ever saw it differently. In this case, the idea is to think about employers in the same terms we think about governments. That is, as paternalistic authorities that can do much good for us but who run the risk of infringing on our liberties.

Anderson charges the modern workplace with being a “communist dictatorship”: “The economic system of the modern workplace is communist, because the government—that is, the establishment—owns all the assets,and the top of the establishment hierarchy designs the production plan, which subordinates execute. ­There are no internal markets in the modern workplace. Indeed, the boundary of the firm is defined as the point at which markets end and authoritarian centralized planning and direction begin.” For many readers, it may seem inappropriate to apply terms like “communist” and “dictatorship” or even “government” to the private realm. These are terms we use exclusively for states, right?

Anderson recognizes this, and so she builds her argument on top of an effort to undermine the historical and philosophical distinctions between public and private, state and economy. She concludes that a government is “private” with respect to a subject if it can order the subject around while ignoring the subject’s preferences in how it (the government) should operate. What makes something public, conversely, has nothing to do with “the state” but rather with the presence of deliberative, inclusive decision-making. The historical support for this argument involves looking back to the British Levellers (17th century egalitarian movement during the English Civil War), Adam Smith, and Thomas Paine, all of whom conceived of liberty in terms of dismantling social hierarchy. These early modern thinkers were excited about market exchange not as an alternative to government regulation (as modern libertarians might tell you) but rather as an alternative to non-market forms of private privilege: hereditary land ownership, the House of Lords, the state-backed Church, and state-sponsored monopolies. This conception of liberty–as freedom from social hierarchy and the domination it enables–is known as republican liberty. Part of what brought me to Anderson’s book was my growing interest in republican liberty as a potentially useful basis for critiquing economic inequality and the concentration of economic power in our contemporary situation.

Around the time I found Anderson’s book, I came across two other recent books on the history of republican critiques of market society. Anderson’s groundbreaking argument, it turns out, is 150 years old. The original source may well be–what else–Marx’s Capital. This is the argument of William Clare Roberts’s fascinating reinterpretation of CapitalMarx’s Inferno: The Political Theory of Capital. But around the same time, in the United States, workingmen’s groups were arguing that the legacy of chattel slavery remained present in “wage slavery,” and that the private employment contract was not truly free. These 19th century “labor republicans” are the subject of Alexander Gourevitch’s book, From Slavery to the Cooperative Commonwealth: Labor and Republican Liberty in the Nineteenth Century. I must admit that this post would have a better symmetry if I had read one more book, something about Pierre-Joseph Proudhon and his coterie of republican socialists. This is because the labor republicans’ ideas resemble Proudhon’s more than they do Marx’s. In ascending order of radical republicanism, then, I’ll briefly discuss the labor republicans before working up to Marx.

Gourevitch’s project began as an effort to critique the history of republican thought from a Marxist standpoint. Republicanism, after all, emerged from aristocratic origins in Greek and Roman political philosophy. Gourevitch surveys the literature on slaveholding ideology in Athens and Rome and concludes that republican-style independence for some always depended on slavery for others. Landed independence for peasant-citizens was only tolerable if wealthy citizens had access to slave labor (see Finley, Ancient Slavery and Modern Ideology for more on Greece and Rome as slave societies, and on longstanding historiographic neglect of this fact). The same relationship between independence and slavery crops up again in the American South, see for example George Fitzhugh (pro-slavery advocate and, sadly, America’s first sociologist) writing, “To become independent is to be able to make other people support you, without being obliged to labor for them. Now, what man in society is not seeking to attain that situation? He who attains it is a slaveowner.”

Proponents of an egalitarian republicanism can’t be satisfied with these origins! Now, contemporary republicans like Quentin Skinner and Philip Pettit claim that republicanism overcame its aristocratic, propertied origins. But when? Gourevitch set out to poke a hole in their history, but ended up filling it in himself. He suggests that a coalition of American workingmen’s associations, most prominently the Knights of Labor, undertook a radicalization of the republican tradition by extending the accusation of “domination” to the workplace.

The labor republicans’ signature phrase was “wage slavery,” and it was carefully chosen. They understood slavery as a situation of being so economically vulnerable as to be coerced into work, and to have the proceeds of that labor taken away. Before the Civil War, they continually pestered William Lloyd Garrison to add materials on wage slavery to his abolitionist agenda in The Liberator. Even though they were committed abolitionists, this feels a bit like the 19th century version of “All Lives Matter,” and it’s easy to understand why Garrison ignored their requests. After abolition, it was easier for the crusade against wage slavery to take center stage on the “Radical Republican” (i.e. the political party, not the political philosophy) agenda.

Labor republicans argued that workers were coerced or dominated at three stages. First, they were coerced into seeking work, because they lacked the independence of personal land or property. As one prominent labor republican wrote, “If laborers were sufficiently free to make contracts…they would be too free to need contracts.” The second stage, then, was labor contracts written on the employer’s terms. The third stage, most important to the republican critique, was domination inside the workplace within the contract’s inevitably ambiguous terms. The point here is that labor (or more precisely labor power, in Marx’s terms) is a unique commodity. The basic logic of most contracts involves the seller giving over complete ownership and control of the commodity to the buyer. But in a labor contract, the commodity is pure human capacity. So, the labor republicans concluded, the labor contract was necessarily an agreement to give up control over one’s will for the duration of the working day.

Elizabeth Anderson builds much of her argument on this same observation about the broad scope of employer prerogative within contracts, and provides many examples of things modern workers are forced to do because of the power imbalance: have their possessions searched, refrain from using the bathroom during the workday, endure sexual harassment, and so on. Unfortunately, she commingles these aforementioned examples (which I believe to be both serious and widespread) with examples of abuses that seem more anecdotal and peripheral: workers fired for their comments on Facebook or for espousing political positions contrary to the employer’s. It would have been helpful to give some sense of the relative prevalence of these abuses. Private Government includes a series of responses by prominent academics (the book and the responses were originally delivered as a Tanner Lecture series), and it is only in response to Tyler Cowen’s skepticism that Anderson really sharpens her focus on the most serious examples of workplace domination. Cowen suggests that when firms fire people for insensitive Facebook comments, they are usually trying to protect other workers, and more broadly suggests that there is less conflict between firms and workers than Anderson thinks, and more conflict among workers themselves. In general, he thinks workplaces compete on hospitality to attract employees and doubts that work is nearly as tyrannical as Anderson says. Anderson gets the last word, accusing Cowen of being out of touch with the world of low-wage work (e.g. slaughterhouses, home health aides) and generalizing from his highly-educated social circles.

Ultimately I don’t think either Anderson or Cowen presents the most useful evidence on what work is really like these day. I’d suggest an ethnography like Vanesa Ribas’ On the Line: Slaughterhouse Lives and the Making of the New South (slaughterhouse workers) or Seth Holmes’s Fresh Fruit, Broken Bodies: Migrant Farmworkers in the United States (farmworkers) or the old classic, Barbara Ehrenreich’s Nickle and Dimed: On (Not) Getting By in America (clerks, maids, waitresses, health aides) for the reality of low-wage work, low-control work.

Cowen’s other main critique is that Anderson should have given more space to evaluating alternatives to “private government.” Anderson names worker-owned cooperatives (which are public, in her terms) as a preferable alternative to employer-controlled private government, but her book is not the place for a full exploration of the pro’s and con’s of the cooperative form. The labor republicans were also deeply committed to the idea of cooperatives. For them, the cooperative ideal was not just an institutional solution but a manifestation of their highest ideal, solidarity, which they defined as a synthesis of self-interest and virtue, or, alternatively, as the habits required to act collectively for common good. Classical republicanism had generally held that property owners were the most likely people to act virtuously; they had the luxury to do so. The labor republicans flipped this thinking on its head, inventing a “political theory of the dependent classes” that held up propertyless workers as the vanguard of solidaristic virtue. The dependent classes, after all, would have to work together even in pursuit of self-interest.

The idea of worker-owned cooperatives has a long history on the political left. It was the signature recommendation of Proudhon, of the labor republicans, and now of critics like Anderson. The challenge since Marx, however, has been to explain why a cooperative facing the same market pressures and production technologies as a capitalist firm wouldn’t exploit its workers just the same. As William Clare Roberts summarizes Marx’s view, “The [cooperative] separatists replicate the founding gesture of capital, the fantasy that there is some part of the world that can be appropriated a novo without expropriating another.” The labor republicans were aware that a few islands of cooperation in a sea of capitalism would not long endure. The Knights of Labor advocated for a suite of society-wide institutions necessary to support a cooperative system: the nationalization of public utilities, a public bank making cheap credit available to cooperatives, and a nationwide system of labor legislation (e.g. minimum wage, maximum hours). This is all well and good, but it makes you wonder whether we’re still talking about cooperatives and voluntaristic reform or about a socialist political revolution.

So as I’ve indicated at multiple points, Marx had a critique of the employer-employee relationship that is complementary to yet deeper than the one found in other republicans concerned with domination at work. Ordinarily I would leave discussion of Capital for another day–it’s a big enough subject in its own right–but Marx’s Inferno fits too nicely into today’s labor republicanism theme. I found this to be an extraordinary book, the most difficult but most rewarding of the ones I’ve mentioned today. Capital is one of those works that has spawned literally tens of thousands of responses, analyses, and exegeses, and while I haven’t read the vast majority of those, I get the sense (in part from David Harvey, who has) that Roberts is really saying something new.

More than one thing, actually. Roberts makes two main claims in situating Capital. First, the structure of Capital is closely modeled on Dante’s Inferno. There are the same number of chapters, grouped into Parts which correspond to progressively deeper rings of Dante’s Hell. The metaphor of capitalism as a “social Hell” was actually quite common in socialist writings of Marx’s time; his choice of the Dantean structure was not just a clever Easter egg (although it is that too) but also a move to appropriate common socialist imagery for his own purposes. And indeed those purposes differed from his socialist interlocutors. Whereas usually capitalism itself was held to be the social Hell, for Marx it is bourgeois political economy; i.e., Hell is other people’s analysis of capitalism. It’s a pretty devastating metaphor when you think about it. It’s why the subtitle of Capital is “Critique of Political Economy.”

And this brings us to Roberts’s second main intervention. Capital is often read as a rebuttal to “classical” British political economy, or the work of Smith, Malthus, and Ricardo. But Roberts argues that it is really a conversation with Marx’s rival socialists: Saint-Simon, Fourier, and especially Proudhon. With the social Hell metaphor and again throughout the book, Marx takes up the socialists’ key terms to use against them. I found this context very helpful for making better sense of Capital than I had before. Marx spends long sections reconstructing arguments that he ultimately disagrees with, so it can be pretty confusing if you don’t have some familiarity with the version of contemporary socialism he’s trying to improve upon.

For Marx, the prevailing socialist analysis of what it meant for workers to be exploited was far too narrow. Socialists identified most of the exploitation occurring prior to any labor contract; poor workers lacking property were forced to seek work. Recall: “If laborers were sufficiently free to make contracts…they would be too free to need contracts.” The ultimate origin of this unfairness was whatever process of “primitive accumulation” led some people to have property and others not. If property ownership were equalized, the wrong of primitive accumulation would be righted, free exchange between equal parties could commence, workers would be paid a fair wage (e.g. determined by the labor theory of value), and all would be well. Not so fast, thought Marx.

To show the true problems with markets–and why the socialist approach wouldn’t solve them–Marx leads us into the first level of his social Hell, the sphere of exchange. This level corresponds to the region of Dante’s Hell associated with sins of incontinence, or lack of self-control: the circles of Lust, Gluttony, Greed, and Wrath. The question this level raises is: why do markets seem to make people behave badly? Roberts observes that early socialism inherited a Christianized version of classical moralism about the sinfulness of market exchange, but also a tradition of republican thought where lack of self-control is a consequence of domination rather than its cause and justification. What Marx wants to do in this section is strip away all moralizing and show why participating in markets robs people of self-control.

The basic argument is that for producers, being sensitive to prices (or to what the market wants) undermines the possibility of deliberate action. Here Roberts reinterprets the famous concept of ‘commodity fetishism,’ which is usually seen as a problem of mis-perception, mistaking social relationships between people as economic relationships between money and things. Roberts thinks commodity fetishism should be understood mostly as a problem of domination rather than false consciousness. In other words, people’s behavior is coordinated and imposed by the market–which is really just an aggregation of everyone else’s voices, weighted by their market power–rather than by a deliberative process where everyone’s voice is equal. Of course, this collective process of coercion is further obscured by the commodity relationship, but in Roberts’s emphasis, the power dynamic is the more important part than the means of its deception.

This argument so far is meant to explain why markets sap the agency of producers. But you’re probably wondering: isn’t Marx supposed to be showing why capitalism is bad for workers? In the next Part of Capital, Marx leads the reader deeper into social Hell–into the sphere of production, which mirrors Dante’s descent into lower Hell, and specifically the circle of violence. Recall that other socialists had located the violence of capitalism occurringbefore exchange, in whatever primitive accumulation put the landless at a permanent bargaining disadvantage. Marx sets up the more challenging goal of criticizing “cleanly generated capitalism,” or the employment of a consenting worker for a fair wage. This is where he defines the exploitation of labor power, by which he means the exploitation of human potentiality. When a worker is hired for a fixed period, Marx says, the capitalist will naturally want to use as much of the worker’s energy, skill, and capacity as possible. Roberts notes that modern concepts like emotional labor or affective labor build off this same insight that the capitalist will eventually use every piece of the worker, physical and psychological. But ultimately, manipulating human nature by force is not the end of the story for Marx. Rather, he concludes that exploitation of labor power is wrong because it sins against the proper nature of labor, which is to produce something of some use or enjoyment rather than surplus value (or honestly, just call it profit) for the employer.

The next section of Capital corresponds to Dante’s sphere of fraud. Here Marx accuses the defenders of capitalism of offering a bait-and-switch on their promise that technology and productivity growth will improve people’s standard of living over time. I suspect much of this section is misguided, but the interesting part where Roberts focuses is Marx’s accusation that Proudhon’s promised cooperation is fraudulent. Proudhon was enchanted by an idea of “collective force,” a sort of increasing returns to scale for which individual wages did not adequately compensate the collective body of workers. As I mentioned earlier, Proudhon’s ideal society would be one of many worker-owned cooperatives, each governed by his principle of mutuality, a sort of social contract for groups larger than a family and smaller than a state. Marx argued in response that workers cannot cooperate without being employed by the same capital. Workers are employed not just by bosses but by the conditions of labor itself, especially machines which demand a certain pace of work, and moreover by the market for which they produce commodities. This is where Marx’s prior analysis of market exchange comes in handy; it suggests that workers can no sooner cooperate than become enslaved to the market, and consequently to enslave one another.

The final section of Capital, which discusses primitive accumulation, corresponds to Dante’s sphere of treachery. In brief summary, Marx minimizes the traditional socialist story that capitalism arose when the first capitalists usurped monopoly ownership of land from their feudal predecessors. In Marx’s cursory historical account, capitalists did not replace landlords so much as crop up between them and landless workers, making both parties dependent on the middleman (the one for cultivation of the soil, the other for a paycheck).

The upshot of this account is that you can’t explain away capitalism as mere violence, as the traditional primitive accumulation story tends to do. It was the landlords who amassed the modern proletariat through plundering land; all the capitalists did was invite both parties to engage in peaceful exchange. This argument was tailor-made to frustrate Marx’s socialist contemporaries, who tended to frame capitalists as malicious actors. Marx wants none of that moralizing. As I understand it, the crux of Marx’s critique of capitalism is found in the early chapters on exchange, commodity fetishism, and the ways in which people lose their agency to the collective domination of the market. The rest is critique of political economy.

I hope that my discussion of Marx’s Inferno, coupled with my earlier discussion of republicanism, makes clear why this book is framed as a political interpretation of Marx. Roberts sees Marx radicalizing the republican tradition by pointing out a new form of domination: domination by other people, mediated by the market. This critique of domination lines up nicely with Elizabeth Anderson’s definition of private situations. Both might be remedied by restructuring relationships of power as relationships of association. Roberts argues that Marx was more appreciate of deliberative, democratic methods of association than he is usually given credit for. Now, what a deliberative economy might look like is a challenging question; Roberts says Marx would not have approved of central planning, nor market socialism either. The only option that seems plausible (according to Marx’s preferences, not necessarily in any other terms…) would be democratic deliberation over all production decisions. One place you can explore a vision roughly consistent with this is a working paper by Henry Farrell and Cosma Shalizi, “An Outline of Cognitive Democracy.” In the age of Democracy for Realists, this may seem a more than optimistic pursuit.

1. Minnesota magpie
I enjoyed Bob Dylan’s Nobel Prize acceptance speech immensely. He walks you through four of his literary influences–the blues music tradition, Moby Dick, All Quiet on the Western Front, and the Odyssey–sharing the words, phrases, and sounds that stuck in his mind and filtered into his lyrics. It felt like an English class lecture that could get anyone inspired to start reading those books. Then I learned that he appears to have cribbed many of the passages he quoted from Sparknotes, many of which weren’t even in the actual books in the first place. But then also Dylan has been copying and repurposing material without attribution for decades? It’s kind of his process? So I’m not sure exactly how to feel.  

2. The China trap
Withering, scathing takedown of a prominent book arguing that the U.S. and China are doomed to fall into the ‘Thucydides trap’ where a rising power strikes fear into an established power and the two cannot escape going to war. The author shows how there was no such trap in the original Thucydides and why it’s dangerous to adopt this fear with respect to China. Appeasing China in lots of minor confrontations out of such fear is likely to lead to greater trouble down the road. I don’t know enough to weigh in on his China conclusion, but this is worth it for the schooling in ancient Greek history alone.

3. Automation and global labor supply
Excellent Lant Pritchett essay on automation in the context of developing countries already struggling with massive youth unemployment (h/t Alexander Berger). I do not expect to be surprised by people’s takes on this subject, but by taking the international perspective Pritchett made me see it in new light. Much follows from the massive wage multiples between U.S. and, say, Ugandan or Indian workers.  “None of the usual economist platitudes or models about technology and job creation and destruction that use local prices apply in the face of massive distortions to global markets. It is an economically inefficient—not to mention inequitable—use of resources to use the world’s scarce technological and entrepreneurial talent to displace workers who are globally abundant.”

4. Still don’t think BuzzFeed is serious?
This BuzzFeed News investigation on the widespread practice of Russian-backed assassinations in the U.K. is mind-blowing. Assassins connected to Russian intelligence and mafia are routinely killing expats and their British associates who have become enemies of Putin…and the British police are ignoring the obvious evidence and ruling them all suicides. According to anonymous American and British intelligence officials, the British are afraid of starting a fight with Russia and eager to keep the spree of Russian investment in London real estate flowing. Based on my memory of how normal countries function, people should resign over this story. It is a pathetic abdication of the most basic function of sovereignty.

Pragmatic Utopia #33: “Regulating Society by the Market”

A few weeks ago I shared a helpful definition of neoliberalism, from Greta Krippner. Now I’ve finally gotten around to reading the the current authority on the topic: Undoing the Demos: Neoliberalism’s Stealth Revolution, by the Berkeley political theorist Wendy Brown. While reading this book, I couldn’t help noticing that the word remains a vague catch-all in public discourse (and, to be fair, in much academic discourse too). In Noah Smith’s recent essay in praise of neoliberalism, for example, the term stands for some combination of centrism, technocratic expertise, “pro-growth” policy, and a friendliness to markets. Brown would surely agree that these ideas are related to neoliberalism. But she’d rather give a more precise definition: not because the dictionary says so, but because it helps clarify what neoliberalism is different from, and therefore the stakes in supporting or opposing it.

Brown builds her conception of neoliberalism on top of the picture Foucault sketched in his ‘biopolitics’ lectures. If I can leave you with one idea from Brown and Foucault, it would be that neoliberalism is not the same thing as “free market economics” (contrary to much usage). The principle of laissez faire–that the state should leave the economy alone–was the prime tenet of liberalism. Neoliberalism is almost the reverse. It is a strategy of governing via the market, or “regulating society by the market.” For a concrete example, take this essay by my Berkeley colleague Robbie Nelson about how the Obama administration outsourced its mortgage forgiveness program to private companies, letting the market decide which underwater homeowners (all eligible under the program) should actually be granted relief. A second way to state this definition is that neoliberalism substitutes markets for laws as principles for determining what is right, or what actions must be upheld.

A third way to define neoliberalism is in terms of what kind of subject or citizen it assumes. Foucault argues that whereas once sovereigns conceived of their citizens as homo juridicus–a subject with certain rights which must be respected–neoliberal governments conceive of their citizens as homo economicus, a subject who pursues his self-interest. Here Brown makes her most important update to Foucault. She wryly observes that it is as if Foucault considered all of Western political history and somehow forgot to chop off the king’s head. There was an important stage after homo juridicus: homo politicus, the citizen who wrote constitutions and learned to conduct self-government with his neighbors. For Brown, this is the whole problem with neoliberalism: that in abandoning homo politicus, it abandons the hope of individual or collective mastery of existence. The logic here is that political debate is a better (or at least more transparent) mechanism than markets for expressing normative values and especially for raising and responding to disagreements.

Brown uses much of the book to highlight some of the concepts she considers most emblematic of neoliberalism. First, there’s governance: a form of governing that is networked, integrated, cooperative. You’ve probably taught yourself to stop reading whenever you see these buzzwords, but Brown dwells on them and notices a mode of governing where process rules and agents are absent. The upshot, she thinks, is to decenter state sovereignty and make corporations co-responsible for managing public affairs (see the ubiquitous “public-private partnership”). The problem with cooperation is that robs political life of normative debate. So does her next target: “best practices.” The problem with best practices or “benchmarking” is that they replace properly political debates about what is right for a particular community with one-size-fits-all technical engineering.

It’s worth considering how much “evidence” is necessary in a book like Brown’s. There are two main ways to do theory, both on display here. The first way is to offer a close reading of other theorists, reconstructing and then improving upon their arguments. That’s what Brown does vis-a-vis Foucault. The second way is to generalize about the real world, inductively generating a theory based on one’s analysis of events, headlines, and case studies. This kind of empirical inspiration seems especially important for Brown’s argument, given that her topic, neoliberalism, is a recent, bounded phenomenon. Brown’s deepest engagement with contemporary texts comes in a chapter on the neoliberal takeover of law, which she finds in Justice Kennedy’s opinion in Citizens United.  This analysis was a great start and I’d love to read more like it. I suspect we will one day get a full book parsing the rise of neoliberal reasoning in jurisprudence. In her discussion of governance/benchmarking/etc, Brown offered less evidence that these concepts really operate the way she says.

I appreciate Brown’s definition of neoliberalism because it helps us think more clearly about when markets are the right mechanism for addressing public problems. The mistake of neoliberal thinking, in Brown’s view and mine, is that it assumes markets are desirable ends in themselves. You can see this reasoning at work in the HAMP loan modification program, in the Obamacare exchanges, in funneling retirement savings into private 401(k) plans, and in the most utopian rhetoric about charter schools. With Brown’s definition, you can reject this thinking without abandoning the usefulness of markets entirely. The key question remains: can people govern markets democratically? Is there political–that is to say, deliberative–recourse when markets continually fail to produce satisfying outcomes? Brown’s deepest worry is that in a society populated only by homo economicus, there would not even be a language in which to ask these questions.

1. Piketty, critics, and friends
After the Piketty, there’s the After Piketty. Subtitled The Agenda for Economics and Inequality, this is an edited volume with contributions from over twenty social scientists evaluating the lessons and implications of Piketty’s Capital in the 21st Century. The first thing to say is there should be more books like this! After a piece of work as obviously important as Capital, researchers should take time to digest and reflect on it before moving on to the next thing. I can’t summarize all of the contributions, so I’ll focus on one thread.

Recall that Piketty argues that capital’s share of income is rising and will continue to rise. When I last wrote about Piketty, I mentioned Matt Rognlie’s influential critique. His critique was an updated version of the theory John Maynard Keynes described as the “euthanasia of the rentier:” namely, that as wealth grows more concentrated, the relative rate of profit should decline even faster (and thus capital’s share of income should sink back toward labor’s). You can think of it as diminishing returns to investment, or see Brad DeLong for abetter discussion. But Piketty argues that we should move past Keynes’ and Rognlie’s neoclassical, supply-and-demand framework and instead look at the historical data, where he observes that the rate of profit has been more or less constant at 4-5% for centuries, even across varied levels of capital concentration.

How can this be? Piketty doesn’t really say. In his formal model, the operative assumption that leads to this conclusion is an elasticity of substitution between labor and capital greater than one. But in a useful contribution to After Piketty, Devesh Raval shows (as did Rognlie) that the elasticity is almost certainly much lower than one. So perhaps the answer lies outside a neoclassical model. This is where Suresh Naidu takes us in “A Political Economy Take on W/Y,” which I thought was the best essay in the volume. Naidu senses a “wild Piketty” struggling to break free from the chains of neoclassical economics. This is his attempt to liberate him. In Naidu’s view, capital “is a set of property rights entitling bearers to politically protected rights of control, exclusion, transfer, and derived cash flow.”  To understand the wealth/income ratio, you need to examine the details of labor bargaining power, corporate concentration, and the rate at which financial markets capitalize expected future income as present wealth. By manipulating these parameters, capitalists might be able to maintain a fixed rate of profit even as capital grows more concentrated.

Naidu’s view of capital is also very helpful for making sense of the distinction between capitalists and “supermanagers,” the high-paid executives who are responsible for the rise in income inequality (rather than wealth inequality) in Piketty’s data. Some of the contributors to After Piketty say: if inequality is driven by supermanagers, the story is reallyabout differences in human capital, and the solution is just (what else!) a better education system. To the contrary, Naidu points out that executive bonuses aren’t really labor income. They vary with corporate profits, and are thus an indirect product of the firm’s noncompetitive position. He suggests we should think of a continuum of capital-like contracts, from fixed wages up to full ownership, with executive pay somewhere in the middle.  

I was pleased to see, in the book’s concluding essay, Piketty himself agreeing with my perception of the best chapters. He enthusiastically claimed the “wild Piketty” title Naidu had suggested. He also praised David Grewal’s contribution, on the historical legal foundations of capital’s consistent rate of profit. Grewal describes capital as a social relation: “What [Piketty] has estimated is not a physical stock of stuff so much as the market valuation of the extent of capitalist privilege,” instantiated in a range of assets from houses to machines to software. Piketty agreed with Naidu and Grewal’s effort to reframe the elasticity debate to a debate over the institutional (that is, political) climate for capital. I am eager to see what kind of research this framing can accommodate.

2. Why should we care about education?
Freddie deBoer has mostly stopped blogging about politics and started (resumed?) blogging about education, and it is excellent. I could link to several very good posts in the last month, but this one is probably the most important, as it states his general worldview on public education, to which I am very sympathetic. It starts with an anecdote that concludes: “I laughed and told her that if teachers only did things that we knew had a meaningful impact on grades and test scores, they wouldn’t have anything to do.” This sometimes gets Freddie accused of being an edu-nihilist:

“It’s true: I believe that the degree of assumed plasticity of outcomes for both individual students and groups of students at particular performance bands has been broadly exaggerated in our educational debates. That is, I think what’s plausible in terms of improving quantitative outcomes through education-specific policy interventions is far more limited than the “no excuses” rhetoric lets on.”

But we also need to remember that “schools perform a set of vastly important social functions that have nothing to do with standardized tests or even with learning as traditionally defined – including housing, and often feeding, children in a safe environment for half their waking day, providing them with socialization and the ability to form meaningful peer-group relationships, and providing the only support for those with developmental and cognitive disabilities that many families will ever be able to take advantage of. ”

In this view, education is good because it’s one of the most direct redistributive programs we have and because it plays a crucial function in socializing citizens. How would we spend our time and money if most education reformers believed this??

3. This week in John Dewey
Over the next few months I’m taking something of a deep dive into pragmatist philosophy and social theory. One starting point was a biography of America’s most important pragmatist philosopher: John Dewey and American Democracy by Robert Westbrook. Suffice it to say I’m a big fan of Dewey. Because I found so many aspects of his thought deep and relevant, I’m going to share snippets in each of the next few weeks. Some extremely basic background: John Dewey was a philosophy professor and social reformer active from the 1880s to 1950s. He grew up in a progressive Christian family but ultimately replaced his religiosity with a devotion to democracy as a kind of civic religion. Other major interests were education, the relationship between psychology and philosophy, dismantling dualist metaphysics, art, and socialism.

Dewey is often introduced as a theorist of democracy. This is of course true, but somewhat misleading. Dewey’s strength was not in the analysis of political institutions. During his career, he sparred continually with “democratic realists,” including Walter Lippmann, who doubted that the people could govern effectively or even deliberately, and tended to favor expert management. Such realism is very much alive today: see Democracy for Realists, one of the hottest political science books in recent years. Dewey did not have a persuasive rebuttal on the realists’ terms.

Instead, he urged us to think about democracy not as a system of government but as “a form of moral and spiritual association.”  He was primarily interested in what kind of person you become by participating (or not) in self-determination. “Democracy means that personality is the first and final reality. It admits that the full significance of personality can be learned [only] by the individual…personality cannot be procured for anyone, however degraded and feeble, by anyone else, however wise and strong.” This seems to me a useful foundation for Wendy Brown’s attention to homo politicus. And while this focus on personality may suggest an individualistic purpose of democracy, Dewey’s definition of individuality was deeply social. Everyone has a function–a relationship of mutual adjustment between our own capacities and the environment, which includes other people. Both must adapt to accommodate each other (this synthesis of an apparent dichotomy is a hallmark of Dewey’s philosophy). Thus “It is through association that man has acquired his individuality, and it is through association that he exercises it.”

4. Permanent transformation
Jeremy Adelman has a good, critical reflection on Karl Polanyi and his book The Great Transformation, which I’ve written about before.  The Great Transformation is a favorite text for sociologists who want to be critical about markets, but it’s sort of unsatisfying to that end. First, there are theoretical ambiguities: “On the one hand, Polanyi argues that the liberal age had disembedded the economy from wider social systems. On the other, Polanyi implies that the market always rests on legal, intellectual, and political conditions—that supply and demand never operate freely. Polanyi wants it both ways. Close readers will find themselves chasing the tail of his argument.”

Second, as Michaeljit Sandhu has pointed out to me, Polanyi’s historical account of the causes of the World Wars yields confusing lessons about why, exactly, market societies are bad. Polanyi seems to blame the “double movement” of state protectionism (e.g. going off the gold standard) in response to market societies rather than the consequences of markets themselves. In contrast, he attributes the relatively peaceful “long 19th century ” to rising middle class consumerism. And this is everyone’s favorite anti-market book? Moreover, as Adelman points out, it’s quite strange that Polanyi, a once-Jewish emigré from Vienna, had no sharp words for reactionary nationalism in the run-up to either war.

Polanyi, writing shortly after WWII, thought that the experiment in market fundamentalism was over. He was clearly wrong.
In this essay, Michael Burawoy argues that Polanyi’s blindness to the future should make us question his account of the past, and concludes that mistakes on both ends stem from his failing to take capitalism seriously.Rather than one “great transformation,” Burawoy says there have been three successive waves of marketization. Burawoy thinks that each wave has called for a successively updated version of Marxism, but that is a discussion for another day.



5. Social entrepreneurship for libertarians
I’m not a libertarian, but I can respect this essay from Jason Kuznicki arguing that libertarians should spend less time on theoretical suasion and more time building the kind of voluntary institutions a society would need to be less dependent on government. The main example he talks about is Dominant Assurance Contracts, an idea where a wealthy philanthropist provides the seed money for a Kickstarter-style project. The difference between this and Kickstarter is that if the funding goal is not met, the subsequent contributors would still get to take home a share of the philanthropist’s money, so it’s a win-win for them. It seems like this would create perverse incentives for people to contribute to projects they thought would fail to reach the target and thereby grab the philanthropist’s money for free. Whatever, I don’t really want a world where schools are funded by Kickstarter anyway. But I appreciate people who are trying to build good institutions, libertarians included. 

Pragmatic Utopia #32: Socialized Capital in American History

The last few weeks were the end of my semester, and in the frenzy I didn’t share summaries of everything I read. But today I thought I’d share the result of much of that reading: a little paper written for one of the best classes I’ve taken at Berkeley, on Political Economy in the United States. An important disclaimer: this is a paper about U.S. history, but I am not a historian! Apologies to all historians.

Not being a historian, I felt permitted to commit a minor sin of that profession, which is to choose a topic motivated predominantly by contemporary concerns. As you know from a recent post, I’m interested in “market socialism,” an umbrella term for economic systems that reconcile private enterprise with collective ownership. Thinking about market socialism got me thinking more generally about what happens when “regular people” or “workers” take on a new identity as capitalists. In this paper, I review what historians have uncovered about this phenomenon in the context of American history. The phenomenon (which I think includes everything from cooperatives to pension funds to labor banks) doesn’t have a single name, so I gave it a clumsy one: “socialized capital.” You can look at the (draft!) paper here, and I’ll summarize below (when I quote without attribution, it’s from the paper).

Amalgamated Bank is the nation’s oldest union-run bank and one of the major success stories in the history of socialized capital
The motivation for writing about socialized capital is maybe best depicted by this 2×2, which represents my impression of how we usually talk about achieving the American Dream.

The dominant tradition in the study of American social mobility and individual prosperity is labor history. “Whether Americans have succeeded or failed to achieve economic security, they have often done so as workers.” Within labor history, the most interesting questions often deal with the presence or absence of collective action, i.e. comparing the two left-most quadrants. A second tradition looks at Americans as property owners. Historically this usually meant ownership of land and housing, but a newer trend (“the new history of finance”) explores the importance of household financial assets in supporting consumption and providing security. But one quadrant remains empty: what about collective capital ownership?

You might respond: but public corporations are the very definition of collective capital ownership! Maybe. My suspicion is that shareholders cannot (or do not) exercise enough control to do justice to the word ‘collective.’ But I’m getting ahead of myself; I need to define what I think counts as socialized capital.

“Socialized capital, in my usage, refers to a community’s effort to advance its collective interest by pooling money and allocating it like an investor or a bank. In its ideal form, socialized capital has three necessary characteristics that distinguish it from other forms of capital.

  • First, socialized capital is democratic. The extent of participation may vary, but participants in a collective fund have some input on how the money is to be used.
  • Second, socialized capital seeks holistic returns. Socialized capital funds have investment objectives that are specific to the interests of their members. This feature distinguishes socialized capital from capital that seeks only a financial return without regard for the consequences of its investment on its members in their capacities as workers, consumers, or citizens.
  • Third, as a consequence of the above, socialized capital exercises governance over the non-financial economy. Whether directly as private equity investors or indirectly as shareholders, social capitalists seek to discipline companies to behave in the interests of the fund’s members.”
Few experiments in collective capital ownership have met these criteria. Two challenges deserve particular attention

“First, ownership does not guarantee control...Not only have small-time investors struggled to exert any control over the corporations in which they hold stakes, they have even struggled to control the professional investors who manage their assets.”

Second, capital can yield both financial returns and collateral benefits—but it is difficult to do both at the same time. Some citizen-capitalists have hoped to profit from the financial markets while also lending to favored businesses, inducing demand for their own labor, and enacting pro-worker policies. But difficult tradeoffs arise. Moreover, the very dynamics that make it possible to earn a market return—such as a large pool of contributors with diverse interests, or professional investment management—tend to impede these other benefits. As some citizen capitalists (notably, pension funds) have discovered, the more capital you accumulate, the less there is to distinguish you from the rest of Wall Street. In this way, socialized capital is often privatized right back again.”

In the body of the paper, I show how these two challenges recur throughout seven major episodes of attempted and actual collective capital ownership. I’ll mention each episode briefly.

  • Fraternal societies. In the three decades following the Civil War–“the Golden Age of Fraternity”–36% of adult men were members of a non-profit fraternal society, entitling them to cash benefits in the event of sickness, disability, or death. The most interesting aspect of the fraternals’ story is how they differentiated themselves from corporate insurance companies and why the insurance companies ultimately won out. The irony of the fraternals is that “in order to achieve freedom to use capital in their preferred ways, outside the reach of financial markets and their temptations, the fraternals had to hold no capital.” They simply charged a $1 assessment of all members whenever someone got sick. Insurance companies, meanwhile, convinced their customers that it was desirable to collect a large reserve fund, invest it, and then pay out a reward to lucky policyholders. Insurance transmuted into gambling. I was amused to see in this week’s NYT that Chinese insurance companies are now doing the same thing. Jonathan Levy’s Freaks of Fortune includes a very good introduction to the fraternal movement and its relation to the insurance industry.
  • Populist agricultural collectivism. While the fraternal movement was an urban phenomenon, the Populist movement was the 19th century’s key episode of rural collectivism. Historians love to argue about Populism: whether it was progressive or reactionary, a project of the petit bourgeois or the proletariat, etc.  I was persuaded by two books that emphasize the Texas branch of Populism known as the Farmers Alliance, which sought to free farmers from reliance on Eastern credit by replacing the for-profit financial system with local, state-run development banks that would lend to farmers on friendly terms. In The Populist Vision, Charles Postel shows that the Texas Populists’ ideology, confusing to modern eyes, was both pro-monopoly and anti-bank. They thought small farmers should band together in cooperative cartels (as the California fruit growers did most successfully) and that credit allocation should be a political process subject to democratic oversight. Their financial vision went nowhere, but it bears greater resemblance to 21st century calls for breaking up the banks than anything else I’ve seen in American history.
  • Interwar labor capitalism. The historian Dana Frank (in Purchasing Power) argues that the post-World War I period was the first time in American history when (white) workers were both prosperous enough and well-organized enough to think about “politicizing” their savings. As Frank and others show, workers in the interwar years pooled their money to start cooperatively-owned businesses, buy out the businesses that employed them, and even start union-run banks. The Amalgamated Bank, created by Amalgamated Clothing Workers president Sidney Hillman, was the most successful such project and still exists today (see picture above). This quote from Hillman cut directly to the point: “To enter the banking business seemed the highroad to social control, a peaceful way of penetrating the holy of holies of the capitalist system.”
  • Social Security trust fund. The history of Social Security is a massive topic; here, I focused specifically on issues surrounding the Social Security trust fund, the largest investment fund held by the federal government. During the 1930s as Social Security was being hammered out, the insurance industry and its Republican allies in Congress were horrified by the idea that the federal government might manage a large fund. Most troubling to Senator Arthur Vandenberg was the possibility that it might invest in private securities: “That would be socialism.” As far as I can tell, historians do not think the prospect of such publicly-directed investment (essentially using Social Security like a sovereign wealth fund) was ever taken seriously. I do note that when he first started writing about Social Security in the 1970s, Harvard economist Martin Feldstein (a major proponent of privatization) did talk about investing the trust fund in corporate bonds. It seems to me that the history of Social Security privatization efforts should consider why this possibility–of the government managing the investment choices, rather than spinning off private individual accounts–has been so peripheral.
  • Alaska Permanent Fund. The notion of government as investment manager might be more farfetched if not for the prominent example of the Alaska Permanent Fund, which the state of Alaska has managed and paid dividends out of since 1982. “In one of the most conservative states, the Permanent Fund fuses two left-wing policy fantasies: collective capital ownership and a universal basic income. And while public investment funds have thus far been confined to seven Western states with resource extraction profits, no law of nature prevents such funds from forming on the basis of other tax proceeds.” One interesting theme of the Permanent Fund is that voters have repeatedly rejected efforts to use it for local, Alaska-themed investment projects like taking an ownership stake in pipelines. “The voters’ preferences suggest that across such a large, diverse community, the shared interest in collective capital ownership is limited to the least common denominator. When smaller, more homogeneous groups control an investment fund, more idiosyncratic choices become possible. This has been part of the promise, and occasional reality, of employee-owned pension funds.”
  • Pensions. Pension funds were probably the most important test case for socialized capital in the 20th century. “At the end of 2015, U.S. pension funds held $21.7 trillion in assets and owned over 20% of domestic public company stock.” In 1976, the management scholar Peter Drucker noticed this trend and “set off a debate by claiming that “pension fund socialism” had come to America. If workers owned their stakes in pension funds, and pension funds owned so much of the stock market, therefore workers owned the means of production.” Subsequent analysts of the pension system have sharply disagreed with Drucker’s premise (even perhaps while wishing it were true) because Drucker failed to distinguish ownership and control. Jennifer Klein’s book For All These Rights shows how unions were defeated in their original vision for controlling their healthcare and pension funds. In Labor’s Capital (the best book I’ve found on the pension economy), Teresa Ghilarducci shows how “unions relinquished their demands for joint control of pension assets in favor of bargaining solely over benefits.” Pension funds are invested by professional managers who have little connection or responsibility to the rank-and-file contributors. This is both a legal consequence of the conservative, anti-union bent of the relevant legislation (Taft-Hartley and ERISA), but it is also the “least common denominator” phenomenon: one of the few things all plan members can agree on is a high return. One might think that public employee pension funds might have a more distinctive, leftist investment philosophy, but analyses of CalPERS, the most activist public fund, suggest an approach only slightly less conservative than the mainstream.
  • Union building funds. Even in light of the least common denominator principle, there are rational, self-interested reasons for fund contributors to oppose certain investments. Private equity, which often turns companies profitable by closing plants and firing workers, might be an unwise asset class for unions. On the flipside, unions might wish to invest in industries that tend to employ their own workers. This has been the approach for several buildings trades unions like the national Sheet Metal Workers, who invest in union-built construction projects, and the Union Labor and Life Insurance Company, which operated the only private equity fund (Separate Account P) dedicated to preserving union jobs. These alternative, union-run investment funds are a clear exception to the norm, and the little information I could find on them made it unclear whether they have been able to sustain themselves.
In the conclusion of the paper, I make a few observations about what it means to study socialized capital as a coherent theme across these different moments and episodes. This research necessarily begins in the tradition of labor history. “In their effort to become labor capitalists, workers have naturally discovered tensions between this and other priorities—from collective bargaining, to political action premised on a critique of capitalism itself. An ambitious project might revisit the full history of the American labor movement in the context of unions’ secondary identities as capitalists.”

But to make sense of socialized capital’s limits, one also needs to account for the financial services industry. Insurance companies and asset managers lobby the state to protect their exclusive right to invest certain pools of capital, often under the pretext of responsible, professional management. A closer look at the relationship between professional asset managers and the gleaming pot of retirement savings is probably necessary to understand why “pension fund socialism” never came to pass.

Finally, I would love to see more research on the “motivations and influences under which workers, savers, and retirees have considered (or rejected) becoming citizen-capitalists.” “What do pension holders think about the investment decisions of their fund? What do depositors in the Amalgamated Bank hope their money will accomplish? What do union members expect from union-owned businesses? In both historical and contemporary settings, these questions may shed light on why socializing capital has been only a minor strategy in working class politics, and whether it could be a major one in the future.”