Liberalism against capitalism

We have had this argument forever, and it is high time that the problem was more productively reframed..

both the community and the individual has access to capital in theory, but it is also true that success gains superior access, both rightly and also unfairly.  success itself is ill defined.  what has made it worse is that decision making is mediated weakly often as not.

On the face of it, we can do much better.

Accessing capital is still as easy as printing money and also taxing it back somehow.  This is also known as magic.

Mediating through application of the Rule of Twelve is my contribution to overcome the deep imbalance produced by the BIG Man rule.  This at least fully engages the natural community.

These other memes are all artifacts of Big Man rule and their limitations are obvious.  At best yo get weak arguments

Liberalism against capitalism

The work of John Rawls shows that liberal values of equality and freedom are fundamentally incompatible with capitalism

Steel mill, Youngstown Ohio, 1953. Photo by Library of Congress/Getty

Colin Bradley  is a philosopher and legal scholar. He is completing a PhD in philosophy at Princeton University, and is a Furman Academic Fellow at New York University School of Law.

https://aeon.co/essays/what-can-we-learn-from-john-rawlss-critique-of-capitalism?u

Completed in 1910, the renaissance revivalist Mahoning County Courthouse in Youngstown, Ohio would make any city proud. Its Honduran mahogany, terracotta, 12 marble columns and 40-foot diameter stained-glass dome stand testament to the region’s turn-of-the-century success as a moderate industrial power. Across Market Street, the humbler federal courthouse completed in 1995 invokes a then-au courant corporate office-building style: concrete and panelised stone relieved by blue-black glass, with decorative squares and circles scattered here and there.

The Thomas D Lambros Federal Building and Courthouse is named for Judge Thomas Demetrios Lambros (1930-2019), native son of Ashtabula, Ohio, who in 1967 was appointed to the federal bench by the US president Lyndon B Johnson. The website of the US General Services Administration remembers Judge Lambros as ‘a pioneer in the alternative dispute resolution movement’ – arbitration, as it is generally known. But the people of Youngstown and the Mahoning Valley might remember Judge Lambros for a different reason.

Lambros presided over a fiercely contested lawsuit in 1979-80 filed by 3,500 steelworkers laid off by United States Steel Corporation’s Youngstown Works plant – part of a wave of closures across what we now call the Rust Belt. The lawsuit was an avowedly desperate effort to compel US Steel to sell the company either to the city or else to the workers who, hopefully with federal loans, would continue to operate the plant and keep sending paychecks to the thousands of families depending on them.

In an early hearing, Judge Lambros made a remarkable – revolutionary, almost – suggestion to the workers’ lawyers. They might have a shot if they argued that the people of Youngstown had a ‘community property right’ accrued from the ‘lengthy, long-established relationship between United States Steel, the steel industry as an institution, the community in Youngstown, the people of Mahoning County, and the Mahoning Valley in having given and devoted their lives to this industry’. Because steel production had become such a central part of community life, the judge suggested, the community arguably had a right to decide what happened to the steel mill.

The suit failed. When called upon to issue a ruling in the Youngstown case, Judge Lambros turned on his own suggestion. There just was no precedent in US law to say that the workers or the people really had such a ‘community property right’. Lambros was torn between his moral sense that they should have one, and his professional duty as a judge to find that the law (then as now) recognised no such right. Youngstown Works shuttered for good.

Judge Lambros’s profound ambivalence reflects a contradiction that seems to lie at the heart of liberalism. On the one hand, the promise of a liberal society is of a society of equals – of people who are equally entitled and empowered to make decisions about their own lives, and who are equal participants in the collective governance of that society. Liberalism professes to achieve this by protecting liberties. Some of these are personal liberties. I get to decide how to style my hair, which religion to profess, what I say or don’t say, which groups I join, and what I do with my own property. Some of these liberties are political: I should have the same chance as anyone else to influence the direction of our society and government by voting, joining political parties, marching and demonstrating, standing for office, writing op-eds, or organising support for causes or candidates.

On the other hand, liberalism is usually uttered in the same breath as capitalism. Capitalism is a social system characterised by the fact that private persons (or legal entities like corporations) own the means of production. Combined with liberalism’s protection of rights and liberties, this means that, just as I get to decide what to do with what I own (a 2004 Hyundai with a busted A/C unit and squeaky wheel bearings), so did the legal entity US Steel get to decide what to do with what it owned: the Youngstown Works.

Liberalism’s apparent commitment to capitalism threatens to prevent it from delivering on all that it promises. To see this, it is important to remember that formal political processes do not exhaust the way our society governs itself. One of the main tasks for a society is to organise economic production. We humans are a species that makes stuff. We make tools, dwellings, food, art, culture, more little humans, and much else. Moreover, we usually do this together, as a joint activity. Such cooperative production inevitably produces a division of labour: some hunt while others gather; some fish while others sow; some design artificial intelligence while others squeegee windows at the stop light.

When societies industrialise, achieving economies of scale and the capacity to purchase cutting-edge technologies needed for profitable production becomes extremely expensive. So expensive, in fact, that it is possible only for a relatively small number of people or entities to do it. This leads not just to a division of labour, but to a class-stratified society. Some people – capitalists – own the materials or technologies that produce society’s wealth, while other people – workers – have to work for the capitalists in exchange for a wage. In such a class-stratified society, capitalists not only make the important investment decisions that guide society’s overall direction, but they are also effectively private dictators telling their workers what to do, when to do it, what to wear, when to pee, and what to post online. Given liberalism’s defence of the capitalists’ rights to do all this, it is hard to see how liberalism might reliably achieve its goal of bringing about a society of equals in which we all have a share in our collective governance. Hence the contradiction at its heart, and Judge Lambros’s ambivalence.

Liberals rarely question the basics of political economy like who owns what and lords it over whom

The political-economic background of the Youngstown closure is an object of ongoing controversy among historians, economists and sociologists. All agree that it was part of the phenomenon of ‘globalisation’. But whereas the former US president Bill Clinton – whose administration oversaw the construction of the Lambros Federal Building – could declare in 2000 that globalisation was ‘the economic equivalent of a force of nature’, nobody seriously believes that anymore. Under US leadership (itself a response to Chinese rivalry), the world is turning toward ‘neomercantilism’, embracing strategies whereby governments protect domestic industries while intervening mightily in markets, imposing carrots and sticks to steer private investors toward targeted economic goals like place-based investments in green technology.

This means that the way society organises production has re-emerged as a contested political issue. But it does so in a fractured ideological moment. Liberalism’s hegemony is perhaps at a nadir. Populist authoritarians and ‘illiberal democrats’ have attracted a surprising level of legitimacy and support, while post-liberal ideologies look ahead to new possibilities. Critics on the Left and the Right offer two main visons of the near-future. On the Left, critics suspect that the return of industrial policy might be less than the ‘new economic world order’ its proponents tout it to be, reflecting liberalism’s inability to get to the root of capitalism’s problems. Those who hold this view, like the economist Daniela Gabor, see legislative efforts like the US president Joe Biden’s Inflation Reduction Act (IRA) or the European industrial policy proposed by the French president Emmanuel Macron as merely underwriting private profit-making by using the state to ‘de-risk’ some capital investments, making them safer for capitalists who reap massive rewards with little downside. Some socialists even go so far as to suggest that Biden’s IRA is a regression to a kind of feudalism. On the Right, some so-called post-liberals, like the political theorist Patrick Deneen, hope that an industrial policy focused on restoring blue-collar manufacturing jobs to the US heartland will turn out to be a revolutionary first step toward throwing out liberalism with all its (hypocritical) aspirations for individual liberties and social equality.

This dichotomy ignores the possibility of a liberal anticapitalism. This may sound like an oxymoron. Neither liberals nor their critics disentangle liberalism from capitalism (though some historians have begun to). Most liberals even emphasise the happy marriage between the two. Among those liberal egalitarians who stress the redistributive New Deal as liberalism’s moral core, few seriously grapple with big issues of political economy. Liberals advance institutional and procedural solutions – ‘structural change’ to representative processes, expanding voting access, etc – but rarely question the basics of political economy like who owns what and lords it over whom.

That makes it all the more surprising that liberalism’s greatest philosophical exponent, John Rawls, developed a sustained, systematic and principled argument that even the most humane, welfarist form of capitalism is incompatible with the possibility of achieving liberalism’s deepest aim: free people living together in a society of equals. These arguments should be much better known.

Contrary to a common caricature of his views, Rawls does not reduce politics to technocratic nudges and tinkering with marginal tax rates. Liberalism is a philosophy of the ‘basic structure’ of society. The basic structure includes a society’s fundamental institutions: not only political structures like constitutions (where they exist), but also markets and property rights. Everything is up for moral assessment, not just considered abstractly, but with respect to how different institutions interact with one another and with ordinary human behaviour, over the course of generations.

‘Everything’ here includes the basics of political economy like who makes what and who owns what, and who decides. Crucially, for Rawls, this includes the way society organises the production of goods and services. Focusing on the inequalities and domination that arise from the way capitalism empowers a small group to control how we produce society’s wealth, Rawls argues that no form of capitalism can ever cohere with the liberal ideal of a society of equals. Social equality and basic liberties will always be thwarted by it.

Rawls’s corpus is complex and contested. But we don’t need to agree with him on everything. Even if we ditch the larger Rawlsian apparatus and the many tweaks he made on particular topics after the publication of A Theory of Justice (1971), he stated the core of a liberal, anticapitalist political economy, and never abandoned the conviction that a liberal society must overcome capitalism.

For Rawls, liberalism revolves around two ideals: society as a fair system of cooperation, and people as free, equal, capable of acts of joy, kindness and creativity; and disposed – if not always without reluctance – to cooperate with one another to flourish. Rawls shows that these ideals lead to principles that we can appeal to in designing, improving and maintaining our basic political and economic structures.

Capitalism is an economic system with three features. First, Rawls said it is a ‘social system based on private property in the means of production’. It allows almost unfettered private ownership of not only personal property, but also the highly valuable and productive industrial and financial assets of a society – what Vladimir Lenin in 1922 called the ‘commanding heights’ of the economy. Second, it allocates access to private property primarily via markets. This includes markets in goods, markets in financial products, and markets in labour. That leads to the third feature: most people – workers – try to earn enough to support themselves or their families by selling their labour for a wage to a capitalist who owns the means of production.

As a result of this, capitalism is an economic system that produces a class-based society and division of labour. This is what Rawls’s liberal anticapitalism targets, focusing on the obstacles that a class-stratified society of owner-capitalists and workers poses to a genuinely cooperative and emancipatory liberal society. Rawls argues that capitalism violates two core tenets of liberalism: the principles of social equality, and of extensive political liberty. Moreover, reforms that leave the capitalist core in place are unlikely to be stable. Let’s look at each of these in turn.

Social equality

One component of social equality is fair equality of opportunity. Your chances at attaining or succeeding in any valued role should not depend on aspects of your birth or circumstance over which you had little or no control. All current societies fail to meet this: race, gender, religion, disability, sexuality and other circumstances favour the chances of some over others. Likewise, in a class-stratified capitalist society, whether you or your parents own productive assets significantly determines your life chances. So, fair equality of opportunity is unlikely under capitalism. I say ‘unlikely’ because it is possible that a capitalist welfare state could promote equal opportunity by investing heavily in education and healthcare.

But even a society that fulfilled equal opportunity would still fall short of the full ideal of liberal equality. More difficult to specify but infinitely more powerful than equal opportunity is the value Rawls called ‘reciprocity’. This is the idea that it matters that we are, are seen by others as, and see ourselves as, fully participating members of society, on equal footing and status with other participants. Capitalism makes reciprocity impossible because it requires a division of labour that prises apart the ‘social roles and aims of capitalists and workers’. Consequently, Rawls said, ‘in a capitalist social system, it is the capitalists who, individually and in competition with one another, make society’s decisions’ about how to invest its resources and what and how to produce. This makes it hard for workers to see themselves as active participants in directing society because, well, they aren’t (with the limited exception of voting in a ballot every few years).

Capitalist make important decisions on behalf of society, yet their interests diverge from those of the working class

This is what the people of Youngstown learned when the owners of US Steel decided to move the factory away. Likewise, today the CEO of McDonald’s can tell his employees that ‘we’re all in this together’ until he’s blue in the face, even though he gets more than 1,150 times what they do per hour and makes all the decisions about how they spend their time. When this is true, ‘society’ simply feels like something we are ‘caught in’ rather than something we are making and sustaining together, Rawls wrote in Political Liberalism (1993).

Such capitalists make important decisions on behalf of society, yet their interests diverge from the interests of the working class. This is a form of social domination. Rawls worried that those who do not own the means of production will be ‘viewed both by themselves and by others as inferior’ and will likely develop ‘attitudes of deference and servility’ while the owners grow accustomed to a ‘will to dominate’. This conflicts with a true ‘social bond’ between equals, which calls on us to make a ‘public political commitment to preserve the conditions their equal relation requires’, as he wrote in Justice as Fairness: A Restatement (2001).

Political liberty

Capitalism is also inconsistent with the basic liberal value of political liberty. Political scientists have been arguing for some time that advanced democracies like the United States and Western Europe are probably better characterised as oligarchies, since their policies bear almost no relation to the interests of the poor when these deviate from those of the wealthy. The usual suggested solution is to ‘get money out of politics’ by reforming campaign finance rules.

But the Youngstown Works story suggests something even deeper. The steelworkers actually enjoyed considerable political support in their fight. They were represented by President Johnson’s former attorney general, Ramsey Clark. Meanwhile, the Youngstown City Council, the Ohio State Legislature, and the US House Committee on Ways and Means all took some action on their behalf. But, as Judge Lambros finally conceded, none of these were a match for the power of capital.

Anticipating the economist Thomas Piketty’s claim in Capital in the Twenty-First Century (2013) that capitalist societies ‘drift toward oligarchy’, Rawls argued that economic and political inequality ‘tend to go hand in hand’, and this fact encourages the wealthy to ‘enact a system of law and property ensuring their dominant position, not only in politics, but throughout the economy’. The wealthy use their dominant position to set the legislative and regulatory agendas, monopolise public conversation, hold political decision-making hostage by threatening capital flight, and engage in outright corruption. Reforming campaign finance rules to keep money out of politics is perhaps an important start in curbing this tendency. But it’s just a start.

Rawls was sensitive to Karl­ Marx’s criticism that liberal rights might be empty or merely formal – naming protections without really providing them. In response, Rawls insisted that rights to political participation must be given ‘fair value’. In A Theory of Justice, he observed that the full policies needed to protect political liberty ‘never seem to have been seriously entertained’ in capitalist societies. The reason is that the conversion of economic inequality to political domination happens quickly. ‘Political power rapidly accumulates’ when property holdings are unequal, and the ‘inequities in the economic and social system may soon undermine whatever political equality might have existed’. Ensuring political liberty therefore requires us not just to restrict the use of money in politics but, in Rawls’s words, ‘to prevent excessive concentrations of property and wealth’ in the first place.

Altering property rights goes near the heart of capital’s power

As Piketty and his colleagues have shown, today’s stupefying level of inequality has two primary sources: massive income inequality aided by lower top-marginal tax rates, and a high rate of return on capital compared with returns on labour. Compound interest for the rich keeps making the rich richer as the poor get relatively poorer. Rawls argued we need to address both: the first via taxation and wage controls, and the second by altering the ‘legal definition of property rights’.

It is easy to overlook how radical this latter proposal is. As the legal scholar Katharina Pistor has shown in The Code of Capital (2019), capitalism relies on the legal definition of property rights. Not all property rights accumulate at the rapid rate of capital, nor confer on their owners as much control over other people. Altering property rights therefore goes near the heart of capital’s power. This could take the form of recognising ‘community property rights’ of the sort that Judge Lambros suggested and then backed off from. Or it could involve separating the capitalists’ ownership rights over factory equipment, say, from the rights to manage how that equipment gets used, reserving the latter rights for the workers who actually use it. Liberalism may protect property of some kind, but not necessarily give the turbocharged property rights that capitalists enjoy today.

Stability

But can’t we just reform capitalism piecemeal along social-democratic lines to alleviate these problems? Rawls says no: reformed capitalism would just swiftly revert back to inequality and domination. This is the problem of instability. We must ask of any proposed regime, like a reformed welfare-state capitalism, whether it ‘generates political and economic forces that make it depart all too widely from its ideal institutional description’. To assess a conception of justice or an institutional arrangement intended to satisfy it, we need to consider how the political, social, psychological and economic dynamics it is likely to foster will play out over time.

Central to Rawls’s understanding of stability was Marx’s observation in ‘On the Jewish Question’ (1844) that ‘while ideally politics takes precedence over money’, under capitalism, ‘in fact politics has become the servant of money’. It’s not enough to recognise some domain as ‘political’ and to try to summon the ‘political will’ to change it. Political power – the legislative and policymaking power of the state – cannot simply achieve anything it desires. It is constrained by, among other things, the power of capital. It is vital to understand how the dynamics of capital ownership may thwart proposed political interventions. Many of these are familiar: the regulatory race to the bottom fuelled by the threat of capital flight; ‘market discipline’; creditors imposing austerity and structural adjustment on not-so-sovereign nations.

Rawls had little to say about how social organising might challenge capital’s political hegemony, and here perhaps most of all we must look elsewhere for guidance. But he understood that, so long as capital reigns, liberal politics is doomed to be ineffective. Any exertion of political will that leaves in place the political economic core of capitalism will preserve a class-stratified society based on the unequal ownership of the means of production and a destabilising and demeaning division of labour.

At this point, one might wonder how useful all this abstract moral criticism of capitalism really is. On the Right, some may dismiss it as otiose since there is no serious alternative to capitalism, and anyway these moral criticisms haven’t acknowledged capitalism’s primary advantage: its productivity and ability to make more stuff for more people. On the Left, some may suspect that abstract political philosophising is perhaps interesting, but ultimately useless – like a Fabergé egg, as the Marxist political theorist William Clare Roberts described Rawls’s theory: beautiful, well-crafted, but ultimately useless. Capitalism won’t be overcome by convincing ourselves that it is unjust: that requires revolutionary action.

But as advocates of ‘moral economy’, including the legal scholars associated with the Law and Political Economy project acknowledge, there is an important role for moral criticism of political economy of the type that Rawls and others have furnished. This can provide clarity and focus. Especially when empirical information about economic trends is noisy, moral critique provides a kind of compass.

This leaves the question what liberal anticapitalism looks like. Rawls thought there were two, possibly just, types of regime. One, a ‘property-owning democracy’, allows private ownership of the means of production, but only on the condition that private capital is held in roughly equal shares by everyone, preventing the emergence of a significant split between classes of owners and non-owners. This requires hefty wealth and inheritance taxes to spread out ownership of productive assets, and a background welfare state to ensure robust ‘human capital’ by providing both education and healthcare.

Rawls’s liberal critique of capitalism leaves us not with a silver bullet, but with a moral compass and an agenda

The other type of just regime is liberal, or market, socialism. Under market socialism, the state controls the economy overall, but worker-managed firms are left to compete in a closely monitored and adjusted market. This is an attempt to harness the allocative efficiencies of markets and the price mechanism within a socialist system that democratises major investment decisions and prevents private accumulation of significant wealth. Rawls saw in the actually existing socialist states of the 20th century an intolerable absence of political liberty. This is why he insisted that a just socialism would be liberal and should to large extent rely on markets rather than central planning.

But the liberal critique of capitalism that Rawls developed in his later work gives us reasons to be wary still of either of these alternative regimes. It is reasonable to fear, for instance, that markets will simply reproduce the destabilising dynamics Rawls himself identified, as Marx had before him. The Marxist philosopher G A Cohen might well have been right when he declared in Why Not Socialism? (2009) that ‘[e]very market, even a socialist market, is a system of predation.’

This is where Rawls’s liberal critique of capitalism leaves us. Not with a silver bullet, but with a moral compass and an agenda. His critique leaves out some important things. Notably, he had little to say about race and ignored the dynamics of ‘racial capitalism’. No reckoning with capitalism is complete without this dimension. Nevertheless, he helped illuminate the important fact that what we need, and many of us want, are decentralised, cooperative forms of economic production that are consistent with the core liberal values of social equality and basic liberties. But we’ve yet to discover at scale how to have this cake and eat it. Rawls’s work provides little help on this, but fortunately we do not need to rely on his theoretical and philosophical approach in isolation. Here we can turn to social science and to the countless examples of activists and visionaries – from Jackson, Mississippi to Preston, England – developing participatory economics, community wealth-building, and other new and richer forms of what the political theorist Bernard Harcourt today calls ‘coöperism’.

These social experiments are continuations of the efforts of the people of Youngstown in 1980 to claim a right to make decisions about the management of the factory that sustained that community and was sustained by the labour of the steelworkers who operated it, and the women who supported them. These are among small-scale efforts that give us some reason to hope for a more equal and socially just world.