People’s World Series on Socialism
Everyone seems to be talking about socialism these days, but what does it mean? That was the question asked by Susan Webb in one of our most popular and widely-shared recent articles. Millions of Americans are considering alternatives to a system run by and for the 1 percent. They are taking an interest in socialism, a word that has meant a great many things to activists, trade unionists, politicians, and clergy around the world over the last century and a half. The article below is one of a series on socialism, what it can mean for Americans in the 21st century, and how we might get there. Other articles in the series can be found here.
Recently, Missouri Senator Claire McCaskill declared, “It is very hard for most Americans to see how socialism would cure the problems we are facing right now.”
She is right.
Of course it’s hard for Americans to see how socialism can solve our problems when, by and large, they don’t know what it is. Why would they?
“Socialism” has long been a dirty word in America. It is ignored in our educational system and shunned within respectable political conversation. It is often hurled as a pejorative descriptor, meant to dismiss ideas rather than encourage exploration and consideration of them.
Frankly though, it’s hard for me to see how we can really cure the problems facing us without socialism.
Of course, to even have this discussion we need to get clear on what socialism is, a question made urgent by Sanders’ lightning-rod campaign and McCaskill’s patently obvious need for education on the matter.
In order to understand what socialism offers as an alternative to our current socio-economic arrangement though, we have to first understand the specifics of that system we call capitalism. I once had a student ask me, “What is capitalism?” It was one of my favorite questions ever raised in my classroom. What the befuddlement of his classmates revealed was that even those who voiced feelings one way or the other about capitalism could not, in any substantial way, spell out its basic features and characteristics.
It’s a big question, almost as big as the question, “What is socialism?”. Instead of trying to answer these queries in a comprehensive way, I’d like to start sketching an answer by taking up the issue of wages. Approaching the challenge in this way brings us to the heart of the differences between capitalism and socialism. It allows us to look at these two complex ideas in terms of their economic principles and social values. After all, the “wage” is a chief way we value people and the contributions they make to the world.
When I was watching the second Democratic debate with my nine-year-old son Elijah, the candidates were asked what the minimum wage should be. I think Clinton said $12 and Sanders said $15. I don’t know what O’Malley said. Elijah threw out some number, $12 I think.
When I asked him how he came up with that, he said it shouldn’t be so high that it would cause businesses to close. (I don’t know where he heard this, but it wasn’t from me.) I asked him if he really thought a company like McDonald’s, which generates billions in profits, couldn’t afford to pay its workers more. After all, don’t those fast food workers earning minimum wage play a rather consequential role in producing the wealth of the company?
At the heart of this discussion is the question of how wages are determined – indeed, how value is determined – in a capitalist market economy. I’m not really sure how often most people have really reflected on this issue.
To provide a concise, clear, and incisive answer to this question, I’d like to turn to Albert Einstein. In his May 1949 essay “Why Socialism?” in Monthly Review, the famed physicist wrote:
“Insofar as the labor contract is ‘free,’ what the worker receives is determined not by the real value of the goods he produces, but by his minimum needs and by the capitalists’ requirements for labor power in relation to the number of workers competing for jobs. It is important to understand that even in theory the payment of the worker is not determined by the value of his product.”
Key here is that in both capitalist theory and practice, the wage a worker is paid does not correspond directly to the market value of what she or he produces. Rather, as Einstein says, the worker must earn at least enough to survive day-to-day and come back to work tomorrow. They won’t earn more than that as long as there are others competing for the same job.
In short, the capitalist theory of wages is that we won’t pay you any more than we can get the next guy to do the job for. There have always been capitalists who try to find ways around paying even enough to meet the “minimum needs” Einstein talked about. There are plenty of workers out there today – such as those at Walmart – who have to count on government assistance such as food stamps and Medicaid to meet their “minimum needs.”
To highlight this gap between wages and the value produced, consider a recent study by the marketing firm MVF Global which examined the top 100 companies and the “true value” of each of their 20.8 million employees. The study determined that, on average, each employee generated $1.3 million for their employers.
The “geniuses” who work at Apple stores, for example, earn $29-55,000 annually and generate on average $1.9 million each for the tech giant. The average Walmart retail employee earns about $15,000 annually while generating up to $225,000 for the company. Most striking of all is the situation of the average oil worker at Phillips 66 who took home about $77,000, but generated an astounding $11.3 million in revenue!
Of course, revenue is not pure profit. It also has to cover the costs of doing business – machinery and equipment, raw materials, utilities, rent, transport, and marketing – so we can’t suggest a worker should necessarily earn the full revenue they generate. The larger point, though, as Einstein stressed, is that under capitalism, the wage a worker earns comes nowhere close to the actual value of their contribution.
The logic of shortsighted capitalists is to reduce wages as much as possible – to, in economic terms, respect the work as little as possible and make the workers’ lives as impoverished and minimalist as possible.
I wonder if the average person in our society really understands that this is the dominant morality that animates our economy and shapes how we treat each other. The determination of wages – of value – isn’t typically explained to us in this way. It is, in fact, the reality of capitalism’s value system and economic practice, however.
By contrast, a socialist system, as I understand it and would hope to see realized, would operate on the general premise articulated by a pair of 19th century German philosophers: “From each according to their ability, to each according to their needs.”
The idea is not exclusive to Marx and Engels, however; there are other takes on it as well. There are societies considered socialist by many, such as Denmark, oft-invoked these days, which has a market dimension and a mixed economy allowing for the accumulation of individual wealth beyond need.
The basic idea behind socialism, though, is that social resources belong to all and all should share in them at least to the point of meeting their basic needs. The labor of the farmworker picking the fruits and vegetables we eat is as essential to our lives as that of the teacher who educates our children or the doctor who heals us.
Now, at this point in the discussion, the question is often raised, “What about lazy people who won’t work?” This is a huge question, and for now I am going to defer tackling it for now.
What I do want to say about that frequent objection here, though, is that it shouldn’t let us off the hook from asking why people who clearly work hard 40 hours per week generating wealth for others somehow still deserve to earn less than a subsistence wage. Or why, in many cases, they have to forego adequate access to healthcare. Or why they don’t have their basic needs met. This issue of “human nature” and whether or not people will work and contribute to the world without coercion or incentive does not absolve us of answering these tough questions.
To my understanding, socialist theory asks us to consider some basic questions: Why would we want to undermine the life of someone on whom we depend for our own life? Why would we want to settle for a system whose central goal is to give people as little as possible for the work they do – work which we collectively need them to do? Why settle for a system that makes their lives as difficult as possible and willfully creates deprivation that makes for horrible social environments and living conditions?
We can talk about issues of economic efficiency in terms of production and distribution, but right now I simply want to raise this values issue, putting in stark relief the values of capitalism (which I don’t think most Americans seriously reflect upon) and the values of socialism (which by and large Americans don’t understand).
Do we really think people who contribute what they can deserve to be homeless, under-educated, hungry, and lacking basic medical care?
The theory of wages informing capitalist economics answers “Yes!” to this question, suggesting that the economic objective of capitalists is to pay as little in wages as possible, regardless of the consequences.
The socialist worldview assigns a basic value and respect to human life and to all the work people do make our very interdependent lives possible, recognizing that, as the good Reverend once said, “All labor has dignity.”