Socialism: a predictive model

published 01 Sep 2014

In the first part of this article, I discussed the basic socialist worldview and how it differs from the dominant liberal-democratic alternative. This article continues the theme and looks at the merits of the socialist model as a theory of social dynamics.


To recap briefly. The socialist worldview (shown in diagrammatic form above) considers the class struggle between the owners of capital (capitalists / bourgeoisie) and the providers of labour (workers / proletariat) to be the dominant force driving the internal dynamics of modern capitalist societies. The state is controlled by the capitalists and intervenes in the struggle on their behalf.

This worldview is not just a rhetorically useful, if simplistic way of describing society. It makes specific predictions about how modern societies will evolve.The first prediction is that economic conflict between labour and capital will dominate social dynamics in capitalist societies. The second prediction is that the state will act as an agent of the capitalists in this conflict. It has been more than two centuries since "capitalism" emerged and a great deal of evidence has accumulated in the interim which can be used to test these predictions.

Before discussing the evidence, I should be clear about what I mean by "capitalism". There are a large number of theories in circulation which attempt to define the essential characteristics of capitalism in various mutually incompatible ways. Some even believe that it is uselessly vague as an economic category. On the other hand, while nobody may know what capitalism means in theory, more or less everybody recognises what it is in practice. One can identify a broad pattern of political and economic organisation, that is commonly considered characteristically capitalist, which emerged in England during the industrial revolution. Various aspects of this pattern were quickly adopted and adapted by Britain's European competitors and former colonies and subsequently, in a piecemeal and uneven manner, by the rest of the world. Its characteristic features include industrialisation, private ownership of capital, wage-labour, investment markets, strong individual rights and parliamentary democracy. It is strongly associated with the liberal-democratic worldview pictured below. When I talk about capitalism and capitalist societies, I am referring to the broad pattern of economic and political organisation that has been characteristic of the industrialised West over the last two centuries, not any binary theoretical definition which identifies exactly what a capitalist society is.

The pattern spread because it out-competed the alternatives. The growth in productivity that industrialisation brought to Britain's economy, and the military technology that came with it, was the bedrock upon which a globe-spanning empire was built. In attempting to develop similarly dynamic industrial economies, Britain's rivals modified their social systems to include various aspects of the 'capitalist' system, grafting them onto their own existing societies more or less successfully. Those who started earliest and were culturally, ethnically and geographically closest to Britain, went on to build their own empires, dominating their own parts of the non-industrialised world. Those who started latest and were culturally, ethnically and geographically most distant were normally conquered and absorbed as vassal states in one form or another.

While it is historically clear that the capitalist pattern spread due to the success of industrialised England, exactly what was the cause of this success is not so obvious. This historical process, whereby Western Europe came to dominate the world economically and militarily from at least the 18th century onwards, is known as the great divergence. There are many competing theories as to what caused it - some of which hold that England's political and economic system was not in any way significant in their rise to dominance. However, it is at least likely that the economic system played an important role in facilitating rapid industrialisation. Any system that more effectively moves capital and labour from less productive roles to more productive roles will grow faster. Competitive capital and labour markets are reasonably simple solutions which both facilitate and encourage this pro-growth dynamic without requiring exceptionally complex central planning, coordination and administration. Alternative simple mechanisms for encouraging system wide productivity growth are hard to think of.

GDP per capita 1500-1950 The sudden jump from the early 19th century in English GDP per capita. image: Kanguole

The socialist worldview was first properly elaborated in the early 19th century, when industrialisation and the capitalist patterns that went with it had barely started to emerge. Nevertheless, Marx and his contemporaries, awestruck by the great productive forces that industrialisation was throwing up around them, took it for granted that the capitalist system would come to dominate the world. The socialist worldview was based on the assumption that the future would be capitalist. The intervening two centuries have seen capitalist patterns expand into all corners of the world, constantly increasing the proportion of the world's production incorporated into some variant of the system. While the world has become progressively more dominated by capitalism over time, it is a process that is nowhere complete. There is no society that could not be made more capitalist. Even in the most advanced capitalist economies, significant proportions of both capital and labour are allocated to economic activity through systems that do not use capitalist patterns [1]. Therefore, rather than treating it as binary attribute, it is much more accurate and useful to consider capitalism as a relative variable: countries can be more or less capitalist than one another and become more or less capitalist over time rather than being either capitalist or not capitalist.

This approach has several benefits beyond historical accuracy. Firstly, it is possible to define reasonable proxies whose dynamics will reliably mirror the dynamics of the waxing and waning of capitalism, without having to define all of the characteristics of the capitalist pattern. For example, the more an economic system uses competitive markets to allocate labour and capital to productive activity, the more capitalist it can be safely considered to be. Secondly, the broad historical pattern of the expansion of capitalism is well known, and for the most part uncontroversial. It is fairly easy to identify the historical spread of capitalist industrialisation as it is very closely related to current economic development. Similarly, differences in the historical rates of expansion of capitalism between countries tend to be obvious in the long run.

In order to demonstrate that the socialist model is a useful model of capitalist society, with some predictive power, we should be able to show not only that that the social dynamics which it predicts actually happened in the historical record, but also that these social dynamics emerged in a pattern that mirrored the broad outlines of historical capitalist expansion.

Class conflict

The first prediction of the socialist model is that, as countries adopt modern capitalist economies, the struggle between workers and capitalists over how the income from production should be distributed will come to persistently dominate the country’s internal political dynamics.

When we look at the historical record, we see that as capitalist industrialisation spread, the way that people thought about politics changed profoundly. A new basic axis of political division emerged: capital versus labour, right versus left, socialism versus conservatism. This division became the basic prism through which politics was viewed. Political questions of all sorts were increasingly framed in relation to this spectrum. Most political parties, governments and even voters came to define their political positions primarily in relation to the left-right axis.

The primacy of the left-right political axis emerged first in those countries such as France and Britain where capitalist industrialisation first emerged. The importance of the divide, as a determinant of political parties and governments is greatest in countries where capitalism has the deepest roots and weakest in countries where it has had only a superficial influence, such as in many parts of Africa, where religious, ethnic and provincial divisions are more important axes around which political divisions define themselves.

Class conflict in the streets image: libcom.org

The emergence of the left-right political axis as the most significant determinant of political parties and positions, in a pattern that mirrors the historical expansion of capitalism, provides significant support to the predictions of the socialist model. But it is far from the only evidence to support the model's predictions. During the period of capitalist expansion, manifestations of direct conflicts between labour and capital became far more common: mass trade unions and workers parties, strikes, lock-outs, workers’ insurrections and proletarian revolutions spread in a pattern that mirrored the expansion of capitalism. Meanwhile, the historical record also clearly tells us that, with the spread of capitalism and the increasing importance of the labour-capital conflict in political dynamics, other social divisions (ethnic, religious, provincial, land-tenancy based) came to be less significant as sources of political identity and conflict. Once again, this trend closely mirrors the historical pattern of capitalist expansion.

It is worth pointing out that the increasing dominance of the conflict between capital and labour in social dynamics is very difficult to explain through the liberal democratic world-view. If there was a persistent economic conflict between the general interests of workers and capitalists, given a society which even vaguely enacts the democratic will of the people, one would expect it to be decisively resolved in favour of the far more numerous workers.

From the perspective of hindsight, It is easy to imagine that predicting the centrality of class conflict to capitalist political dynamics was trivial, but it was not at all obvious in advance that things would turn out like that. The socialist model was not randomly arrived at, it was derived from a theoretical analysis of some of the fundamental features of capitalist economies.

The flexibility of income distribution

For any given capitalist productive process, involving labour and capital as inputs, there are few intrinsic constraints on how the value produced is divided between the providers of labour and the owners of the capital. The wealth produced could conceivably be divided in an arbitrary number of ratios and there is a clear and obvious conflict of interest between capital and labour in choosing a particular one. If you were to take two capitalist economies, one of which allocated 10% of income to the owners of capital, and the other of which allocated 40%, there would be no difference in the short term functioning of the systems. Most importantly, the basic competitive incentive structures, which drive capitalist growth, would be unaffected. The long term dynamics would be different due to effects on accumulation, consumption and so on, but the system would keep on working in the same basic way.

There can, of course, be systemic consequences to arbitrarily changing the division of income between labour and capital. If the proportion of income allocated to capital is less than capital depreciation, or if the proportion allocated to labour is beneath subsistence levels, the system will be inherently unstable and will, left to its own devices, collapse. Within these bounds, however, there is huge scope for variation without affecting productivity, in the short term at least.

One of the major contributions of Thomas Piketty’s Capital in the 21st Century was that it examined the division of income between capital and labour in great detail, both theoretically and empirically. Piketty’s data demonstrated this division has been volatile – in 20th century France the proportion of income allocated to capital (after depreciation) varied between as little as 5% and more than 40%. Since 1770, the long-term trend in Britain has varied between 20% and 45%. The important point is that the ratio can vary considerably over time without introducing any obvious instability into the system. It is also worth noting that Piketty demonstrates that the theory of marginal productivity, the orthodox neo-classical model which predicts income distribution, fails conclusively to explain the observed data.

The conflict of interest over income distribution and the variability of the division ensures that it is frequently contested. This contest manifests itself on every level of the productive system: from individual wage-negotiations all the way up to the rivalry of political movements that seek to change the laws in ways that will increase the proportion of income that goes to capital or labour across the whole economy.

Variations in these proportions, at any level of the system, reflect changes in the relative strength of the bargaining position of capital and labour at that level. The proportion of income that is allocated to labour and capital may vary widely and almost arbitrarily in individual transactions, but on any broad aggregate level it varies according to forces that act on broad levels. In particular, changes in supply and demand of labour and capital, changes in laws and regulations governing employment conditions, and changes in the relative levels of organisation and coordination on either side of the conflict, drive broad long-term trends.

Thus, when it comes to its prediction of persistent multi-level conflict between workers and capitalists the basic socialist model of capitalist dynamics has both empirical support and a coherent theoretical basis which stands up well to modern economic analysis.

The nature of the state

image: http://www.socialistparty.org.uk

The second major prediction of the socialist model concerns the role of the state. Over the course of the last two centuries, alongside the emergence and spread of modern industrial capitalism, there has been a broad extension of popular participation in the state’s democratic mechanisms, a broad extension of individual rights protected by the state and a broad extension of publicly funded services, often delivered by the state. There has also been a long-term trend of increasing basic standards of living across the population.

It should be noted that this is as predicted by the liberal-democratic model which considers strengthened democratic rights to be a natural consequence of the prosperity ushered in by industrial production. On the other hand, while none of it is explicitly predicted by the basic socialist model, it is simple to incorporate. Socialists consider that long-term increases in individual rights and standards of living are consequences of the concessions that capitalists have been forced to concede to workers in historical conflicts. It is reasonably easy to trace many of the sources of change, from the eight hour day to the universal franchise, to agreements that emerged from specific episodes of historical class struggle, although there are at least some significant exceptions [2].

It would, in principle, be possible to do a detailed statistical analysis of the historical evidence to determine to what extent the long-term increases in standards of living and individual rights that have accompanied modern industrial capitalism have been the consequence of either the autocatalytic effects of democracy, whereby prosperity and democracy are mutually reinforcing in the long run, or merely a side-effect of the dynamics of the system’s inherent, ever-present class conflict. The historical record is reasonably clear in indicating that class struggle played an important part in this dynamic. It is less clear to what, if any, extent intrinsic positive feedback loops played a part. Thus, while the socialist model does not predict the long-term evolution of democratic rights and services provided by the state, it offers a reasonably plausible, if not necessarily comprehensive, explanation for the observed phenomena.

Specific State Interventions

On the other hand, when it comes to examining the specific interventions carried out by states and governments, rather than their long-term dynamics, the socialist view of the state asserts a marked superiority in predicting observed behaviour. Since the dawn of industrial capitalism, various states’ security forces have intervened in situations of economic conflict between capitalists and workers on many occasions. The liberal-democratic model would predict that these interventions would, in aggregate, tend to reflect the respective demographic strength of those involved: a very large majority would therefore be on the side of the much more numerous workers. The socialist model would predict that such interventions would almost always be on the side of the capitalists. The accuracy of the socialist prediction is such that the concept of the police and military intervening physically against the capitalists is scarcely conceivable and seems almost absurd.

Dublin Lockout, 1913 The police attack a workers demonstration during the Dublin lockout of 1913 - when the city's private employers locked out their workers to try to force them to leave their union. image: unknown

The interventions of the state in the contest for income between capital and labour are not at all limited to the deployment of the security forces. Virtually all laws and regulations have some influence on the distribution of income between capital and labour among some segment of the population. For example, immigration policies influence labour supply which directly impacts upon the bargaining position of labour; health and safety regulations typically impose costs primarily upon owners of capital. The precise impact of state interventions in capitalist economies on the distribution of income between capital and labour is difficult to measure. What can be stated,with confidence, is that in the huge volume of historical evidence available to us, the desire to protect the position of the economic elite is an overwhelmingly prevalent factor in motivating state intervention in the intrinsic economic conflict over income distribution. The tendency of the state to intervene on the side of capital is evident in “wage-constraint” becoming a standard, public goal of many countries’ economic policies.

"average citizens and mass-based interest groups have little or no independent influence"

The few attempts by social scientists to quantify and test the influence of capital on political decision making, as against that of the democratic will, have strongly supported the hypothesis that capital is overwhelmingly dominant. For example, Gilens and Page of Princeton University just published a paper entitled "Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens". They analysed data on 1,779 policy issues and concluded that "economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence."

The mechanisms by which this influence is exerted are manifold and for the most part well known. The most obvious contemporary manifestation of this influence is the increasingly complex web of lobbyists, PR firms and consultancies that surround – and demonstrably influence – political decision making. The very great majority operate on behalf of some group of capital-owners or other. There are many other levers by which capital exerts influence: from media-ownership, to revolving door appointments between industry and government, not to mention good old-fashioned corruption.

Beyond the contemporary mechanisms, there are structural advantage that the owners of capital enjoy in their contest with labour to influence state policy. Capitalists are fewer in number by an order of magnitude, distribution of wealth forms a natural hierarchical organising mechanism, and they have far more surplus resources, rendering their coordination problem far simpler than that of the large, relatively poor mass of the workers. It takes enormous efforts to organise the great mass of labour to put pressure on any given policy issue or legislative measure: most workers have limited time, resources, energy and interest to devote to political campaigning. By contrast, the surplus resources of capitalists ensure a constant, powerful pressure that acts on every policy issue or legislative change.

Conclusion

Even from a cursory analysis of the evidence, such as has been presented here, it is obvious that the socialist model is a far more accurate model of how modern liberal democratic capitalist societies operate than the liberal democratic model. The importance of class conflict in internal social dynamics and the role of the state in this conflict are predicted by the socialist model but contradict the liberal democratic model. The foresight of the early socialist theorists is impressive in this regard. When the socialist model was first formulated, the industrial capitalism that they talked about scarcely existed outside of England. Not only did they correctly predict its spread to global dominance, but they also foresaw the basic dynamics that would operate within those societies as they emerged.

However, one should not get carried away with the power of the model. It has significant limitations. Furthermore, the manner in which the model has been adopted by socialists has created significant problems both in their ability to analyse the world and in their ability to communicate and persuade others. That will be the subject of the third and final part of this article, which will appear next week.


Notes

  1. For example, labour allocated to housework, which is, to a certain extent at least, indispensable in a modern capitalist economy, is almost everywhere largely organised through family networks - wage systems and markets are still marginal.
  2. It is difficult to see class conflict having been decisive in the extension of certain types of individual rights. For example, gay marriage legislation cannot readily be traced to concessions that have come from disputes between labour and capital.

Comments (2)

francis

excellent overview of the socialist world view model,looking forward to the next instalment

Anonymous

Good read. welcome back.