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On Reality Asserts Itself, Prof. Leo Panitch says it’s a dilemma that the gradualism of European social-democracy and attempts at a more radical transformation have so far both failed; Panitch says a first step towards democratizing the economy is to make finance a public utility – with host Paul Jay
PAUL JAY: Welcome back to the Real News Network. This is Reality Asserts Itself, and I’m Paul Jay. And we’re continuing our discussion with Leo Panitch, who joins us in the studio. Thanks for joining us again, Leo.
LEO PANITCH: Glad to be back, Paul.
PAUL JAY: So, one more time, Leo’s a professor emeritus and senior scholar at York University in Toronto, and co-author with Sam Gindin of Making of Global Capitalism, the Political Economy of the American Empire. We left off saying we were gonna talk about is another world possible, which was the theme of the world social forums, and I suppose many books and articles. I think there used to be, and this is because of the Russian revolution and maybe the Chinese revolution, the thinking always was you’d have some revolution, and you’d have this massive uprising and an insurrection, and here would come socialism and you would nationalize most of everything, and off you would go.
Whether or not that worked in Russia and China … I shouldn’t say whether or not, because in the long run, we know it didn’t. Whether that works in some conditions in some places, perhaps it did to some extent in Cuba, but it’s hard to believe that this insurrectionary model is applicable to a Europe or a North America or any of the advanced capitalist countries at any rate. How do you see a socialist, and I think you have to distinguish between socialist aspects of the economy and a change of which class has political power, because they’re connected, but not necessarily the same. How do you envision that process?
LEO PANITCH: Yeah, you’re right in what you said about the state and perception that you could change things overnight in an insurrectionary revolution that would last. I think the experience has been how hard that is to do and even if change did occur, it occurred in a way that those societies got isolated from the capitalist system. This produced a form of rapid industrialization that was undemocratic. If it was planned, it was centrally planned in an undemocratic manner, and that proved its undoing in many respects.
But the other side of the problem is those socialists who adopted a gradualist perspective, also ran up against the limits. The parties that were parliamentarist, electorist, the social democratic parties, some of whom remain Marxists, until officially at least, until the last quarter of the 20th century. They introduced, in so far as they got elected to government, they introduced certain reforms, which they always presented as building blocks to an eventual socialism, getting beyond capitalism, but those reforms ran up against the limits of being embedded in a capitalist society. So the welfare reforms were structured in such a way, partly due to bureaucratic and capitalist opposition, but also because of the logic of the system, that they didn’t give you enough so that you didn’t need to go back to work or upset the labor market, right.
And the nationalizations, in so far as they occurred in some crucial industries, they were usually of industries that were failing. The state would take them over. They were run in a fashion that didn’t allow for workers’ control because it would always be said that the workers would give away the secrets of the industry or the corporation to competitors, and anyway workers aren’t capable of running such complex things. So, they were statist in their form, not democratic, and increasingly oriented themselves to be competitive. And as these reforms, these public institutions didn’t have an enormous base of support, initially they did. And in so far as there were fiscal problems, tax problems inside capitalist states, they would say, “Well, we need to open up those arenas to capital accumulation,” which becomes the basis of public-private partnerships, but also the privatizations that we’ve lived through.
PAUL JAY: And many of the reforms have since, of Thatcher, Reagan and others have gone away.
LEO PANITCH: Have been reversed, that’s right. In a sense, you can say also the New Deal reforms in the United States. They reach their limit in a dynamic capitalism. The regulations on the banks, which people saw as a means of controlling finance after the Great Depression. Well, the banks within a dynamic capitalism through the ’50’s broke through those old New Deal reforms of the 1930’s. So then the challenge became, well in order to even hold onto the reforms, we need to go beyond them and start taking capital away from capital.
Start taking the investment decisions, as I said yesterday or before, rather, of what’s to be invested, how it’s to be invested, what’s to be invested in, into a collective democratic sphere. And that wasn’t done. In fact, that was seen as upsetting the deal that these gradualist parties had made with the capitalist classes. They’re not gonna agree to you taking their businesses away from them. That was even true in Sweden.
So far as globalization happened, it happened all the more. The big corporations in those societies were investing around the world. They weren’t reinvesting their profits domestically. That wasn’t even true in Sweden. Electrolux by the ’60’s was investing its profits much more in the Italian electrical goods’ industry than reinvesting in Sweden, despite wage restraint from the unions in order to hold onto that investment.
So, you’re in a dilemma, Paul. What you’re identifying is that there’s no rapid breakthrough into a new world, but what’s also been proven is that there’s no gradualist step-by-step reform. It was always assumed that you got the reforms. You’d build gradually. You’d eventually get to socialism for those who wanted to get there. Most of them gave up on it, of course. And that’s also a dilemma. How do you get to a different society, an egalitarian, collectivist, democratic society? Well, people are still trapped in it. Your own supporters, your own base of support, are still trapped within the system. They’re dependent on the system for their basic living, for their needs. How do you do this in a way that builds platforms while you’re reproducing the system to yet be able to eventually go beyond it?
And that’s the tremendous dilemma that we’ve got to find a way out of because the system, as we know, I call it advanced capitalism, advanced inequality. It used to be assumed with a mixed economy, these governments that introduced reforms, advanced capitalism gave you a more just capitalism than the 19th century, a more inclusive capitalism. We now live in a capitalism that is not only irrational and crisis-ridden, but is increasingly unequal. People used to reject Marxism because Marx argued that there would be increasing Immiseration for the working classes under capitalism, and that didn’t look sensible in the 1950’s. Far from it. On the contrary, what we’re seeing in the 21st century, is advanced inequality, and that’s even the case in those newly developing capitalist countries where, although the standards of living are rising in some of them, like in China for the majority of people. The growth in inequality far, far outstretches that rise. The inequality’s grotesque in those societies.
PAUL JAY: I’m no expert in Marx, but my understanding is part of what is supposed to create the conditions for socialism, which if I understand it correctly is born within the womb of capitalism, is that capitalism develops big monopolies, very efficiently rationalize internally, but around it is a society in anarchy, in chaos and such. But also that capitalism kind of has to exhaust itself. You talk about dynamic capitalism during the ’50’s and ’60’s, this whole post-war period.
At some point, and I guess my question is, are we in or nearing that point? Is there so much wealth in so few hands and so much inequality that we’re actually approaching a place where capitalism actually loses its dynamism and actually is more at this stage of exhausting itself than we’ve ever seen before, and or is the way capitalism deals with that, if we’re getting there, is another massive, to use Marx’s phrase, destruction of the productive forces? In other words, there’s another big war and then it gets to be dynamic again rebuilding out of the rubble.
LEO PANITCH: I think to begin where you began, it was very much the view of the great mass social democratic parties that developed before World War I, as they accommodated themselves to getting to capitalism gradually. Getting to socialism gradually, sorry. That developments inside capitalism were making it easier. That as you got large organizations, large corporations, you were getting a collectivization of capitalism within capitalism. And it was on the basis of those large collective corporations and banks that you could easily take over and have a planned society because these corporations themselves and their links with the banks were such that you could see that they were engaged in planning in each of their particular sectors.
That was, I think, a narrow view precisely in so far as even monopolies and oligopolies are competing with one another. They’re competing with one another over profits, even if they’re not competing with them over price. They’re competing for where capital will move, what the stock exchange value will be, where financiers will move their finances around the world, etc. Moreover, they are organized in such a fashion as precisely to take expertise away from the workers. To take the capacity to be able to democratize those organizations away from the working people. And that’s true even when they get unionized. They can engage in collective bargaining with the union leadership, but the type of what goes on in terms of managing the labor process is very much turned to the control of the supervisors, the managers, etc. And that’s the deal the unions make in order to get wage increases when they can.
So there’s no tipping over into anything we would in any sense recognize as democratic socialism. In today’s world, I think you’re right to say that the new technological revolution we’ve gone through will be very important to getting to an eco-socialism. Given the climate crisis we’re in, given the complexity of today’s capitalist economies, what seemed impossible in the form of economic planning now becomes possible. The kind of heavy handed centralized cumbersome economic planning of the Soviet or Chinese systems. This would seem to be a technological development that ought to facilitate the making of collective decisions and the planning of integrated production and investment.
PAUL JAY: And you could also change how public ownership is exercised. It doesn’t have to be all in the hands of one centralized party. You could have it at so many different levels of society.
LEO PANITCH: Hopefully that’s right, with important inputs. That wouldn’t also require people constantly need to be meeting at the factory or neighborhood level to decide what their basic needs are, etc., which that’s always been one of the problems with popular conceptions of socialism. I don’t want to attend that many meetings where we’d have to decide every particular thing about the economy. So, yes I think the technological revolution facilitates that.
PAUL JAY: Especially [crosstalk 00:13:52] the question of doing this.
LEO PANITCH: [crosstalk 00:13:52] it leaves us, exactly. But it leaves aside the question of power.
PAUL JAY: Let me just frame it. Artificial intelligence for whom?
LEO PANITCH: Artificial intelligence, yes of course. And even then, are you developing capacities on the part of people, regions, municipalities, to be able to operate the technology in a way that suits their interests? Right now, of course a lot of this is highly centralized increasingly in the centralized dominant corporations. You’re seeing what began as a competitive industry constantly becoming more and more centralized into the dominant corporations that control the internet. You might very well say that if we could build the type of political organizations that could win enough support to go into the state and have the capacity to change the state, and win support inside the State amongst public employees for taking over those industries. That would involve the military not being called to the side of whatever particular large corporation taking over.
PAUL JAY: It doesn’t have to go like that. I mean, it can also go, especially at times of crises when stocks … Some of these companies that crashed in ’07, ’08, they were virtually bankrupt. The State could have stepped in, paid them what they were worth instead of bailing them out.
LEO PANITCH: Well, the State couldn’t have without changing itself.
PAUL JAY: That’s the issue. It goes back to who has power.
LEO PANITCH: It isn’t only who has power.
PAUL JAY: But just let me finish. It’s not you’ve got to go in and seize and nationalize, you can do it within the rules of existing law. You can certainly nationalize, but you can also create new public ventures with public money that could compete with private. There’s nothing illegal about that.
LEO PANITCH: That becomes a very different conception. There’s two problems here. One is in order for the State to take it over, you need very different type of State’s institutions. The Federal Reserve, the Treasury are structured to reproduce Wall Street. That’s what they do. If you ask them to take over and insert Wall Street into what would become a public utility, they would not have a conception of how to do that. You’d have to develop the capacities, the knowledge, the skills, and the orientation and interest on the part of the public employees there to want to do this. This is not an easy thing.
PAUL JAY: And sure. If you’re looking at a real United States and a real moment we’re in, at a national level in terms of federal politics, I can’t even imagine that.
LEO PANITCH: Exactly.
PAUL JAY: But at a city level, at a state level-
LEO PANITCH: But here’s the second point, Paul.
PAUL JAY: I can start to imagine some pieces of it.
LEO PANITCH: Right. You would need however an infrastructure of finance and planning capacity for that to be viable at a municipal or state level. So if you look at Jeremy Corbyn’s very popular manifesto in the labor party, or its alternative models of ownership report that was just discussed at a labor party conference 10 days ago. They imagine a national investment bank, and then regional investment banks that would support cooperatives, municipal enterprises, etc. And that would be necessary and much more sophisticated than a notion of, well let’s set up co-ops everywhere and these will be the seeds of socialism. Without thinking about the infrastructure needed to fund these to make them viable, etc.
PAUL JAY: And give them some scale.
LEO PANITCH: Exactly. And give them some integration with one another in terms of the value chains that we would link them together, and so on. That said, when you conceive of these as competing with other capitalist enterprises, then the logic of capitalist competition enters. I’m not of the view that you can’t have a market in a socialist society, but there’s a market and a market. There’s the type of market that is a capital market. The type of market that is about competition for investment. The type of market that turns calculations about what’s to be invested into how much profit are we making, turns the definition of efficiency into how much profit are we making. And if you’re putting an individual public enterprise into competition with those kinds of firms, with that kind of logic, the tendency becomes, and this is what’s happened often with publicly owned banks, is that they get absorbed into that competitive logic.
And that applies, as well, to the degree of democracy within them. My god, we can’t let the workers be on the board because they might tell our competitors what our strategy is. That’s the argument they’ll always make. So, there are limits to conceiving things this way. Now, in so far as we aren’t gonna change the world overnight, I can see that one has to concede certain strategies of this type. I think where one begins, I think is actually trying to take whole sectors into the public sphere, like the nationalization of the utilities, energy, water-
PAUL JAY: In Ontario, you have the Ontario Liquor Board, Liquor License Board. I can’t remember the exact formation. Ontario government controls beer, controls wine, the stores are excellent on the whole. They’ve done comparisons between the Ontario public system with the Alberta private system, and the Ontario system wins on just about every level.
LEO PANITCH: This comes, of course, out of the 19th century aversion to alcohol. So basic-
PAUL JAY: But yet something similar with auto. You have public auto insurance, and there’s models. It’s not that, and they’re not so democratized. They have the same form with a union and a relationship with an employer, but they do do something, which I think is rather critical. You know, you sit in Baltimore for example, where we are, and you talk about what would happen if you had a progressive takeover of Baltimore. Where would you find revenue to fund social programs and fund co-op investments and such? There’s only so much you’re going to ring out of taxes, especially in Baltimore, is a massive fight over the non-profit sector here that doesn’t pay real estate tax.
But starting to develop some of these publicly owned socialistic sectors that raise revenue and build capacity for building other kinds of public ventures. There’s some kind of transitionary process to a public Amazon, which is a longer term goal. You need federal power to do that.
LEO PANITCH: I think one can, is gonna have to conceive that at some level. And I think your point about building capacities in this process is crucial. The building capacities means, in fact, building the capacities to run, to democratize those kinds of public institutions to expand them as expressions of collective decision making and collective desire, the articulation of collective needs and the meeting them. And for the most part, the public enterprises we know within capitalist societies have failed to do that, have not done that. So it is itself, of course, an enormous challenge to do it, but that’s not to say it can’t be done and it shouldn’t be done. And I think what you’re envisaging is very important that way.
That said as well, I do think because of the importance of finance in contemporary capitalism, for these to be viable, you would have to turn finance into a public utility.
PAUL JAY: It’s critical. Public banking is at the core.
LEO PANITCH: It’s not a matter of just breaking up the banks, and it’s not a matter of having this public bank or that co-op bank, etc. because they have to be integrated into the financial networks of Wall Street, the city of London, etc. in order for them to be able to function. So, you really have to have some conception of the finance function socialized and collectivized. The trouble with that is that it’s so trans nationalized that so many parts of the capitalist economy are dependent on them doing what they do, doing the kind of speculation that is nevertheless functional for this tremendous integrated international trade that we have with the large multinational corporations.
What Corbyn faces in Britain, what a labor government will face in Britain, even if they took over the British banks, is what do you do then about Goldman Sachs and Deutsche Bank? What do you do about the fact that so much of the British economy is dependent on the sale of services, of financial services, of financial commodities, and that’s what their trade surplus is. If you introduce capital controls in that type of society, the British pound would collapse overnight. People would need to conceive what their standard of living is in a different way, as they will when we deal with the climate crisis adequately. How quickly can you do that?
So, we are back to building the type of organizations who are capable of educating in such a way that people will change themselves in the process of making change, because it’s not just a matter of making the change out there. Given the degree of struggle engagement complexity that we’re talking about, people have to change themselves through a revolutionary process, even if it’s a gradual one. That’s a cental insight, it seems to me, of socialist theory.
These kinds of parties were, in the classis days, engaged in class formation. Marx said, “The first task of the communist party is to turn the proletariat into a class.” That was an educational process, right. They didn’t have the notion that workers are born with socialism in their genes. Of course they aren’t. So even the gradual process that we’re talking about has got to be one, maybe more than the other, of people changing themselves in the process of engaging in these gradual steps. That’s the task before us.
I’m not pessimistic that there will not be many, many attempts of this kind in the 21st century to do precisely this. They will face the enormous powers of reaction that we’re talking about inside the state post capitalists who are protecting their wealth and their capacity to fulfill their greed. They’ll also have to face the problem, even in the case of the United States, as Canada’s being done in one country. To what extent does there have to be simultaneous developments that are inspiring one another, learning from one another, and then coordinating the type of capital controls that would be needed in order to make this work. Coordinating trade, not stopping trade, but planning trade.
This is what the agenda is. It’s an enormous one. And part of our problem is … I run into this repeatedly. I’ve organized conferences with very creative economists in which I’ve asked them to address themselves to the question of what would it mean to turn the financial system into a public utility? Very few people are giving this any thought.
PAUL JAY: Well, this is the end of this series, but it’s just the beginning of another conversation.
LEO PANITCH: Always glad to talk about these things with you, Paul.
PAUL JAY: Thanks very much. And thank you for joining us on Reality Asserts Itself on the Real News Network.