article by Keith Rankin from Pacific World 59 (Dec 2000), pp.30-32
ed. Kay Weir
© 2000 Keith Rankin, Pacific Institute of Resource Management,
PO Box 12-125, Wellington, New Zealand
tel. 64-4-473-6623; fax. 64-4-472-6374; email email@example.com
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by Keith Rankin
To be a 'capitalist' means several things. Capitalists are persons who extol the virtues of capital, or persons who draw their income from the ownership of capital. Thus capitalism means the interests of those who draw most of their income from the private ownership of the means of production, the economic system in which capital is the critical resource, and a philosophical preference for an economic system based on private ownership and self-regulating market forces. It is a mindset. And it is a useful term that conveys to us the spirit of the 19th century in the 'Greater Western Europe' of which New Zealand was (and still is) a part.
Is there an equivalent concept of 'labourism'?
Yes there is. We can think of labourism in much the same way as we think of capitalism. Further, we can understand the 20th century as a labourist century, much as we understand the 19th century as being capitalism's heyday. The trouble is that, while we could think this way, we don't. That lack of definition makes labourism much harder than capitalism to pin down. 'Social democracy', the term we tend to use in lieu of labourism, is a meaningless name of convenience.
Labourism means extolling the virtues of paid work, and it means the emphasis on labour as a source of value in production. It means the interests of those who draw most of their income from wages, salaries or sub-contracting; from the sale of time rather than the deployment of property. Labourism also means the economic system in which labour is the critical resource. In a labourist system, our identities are determined by our jobs, careers, occupations. Labourism is a 20th century mindset. Indeed, labourism as a mindset, inhibits New Zealand's Labour-Alliance government from looking outside of the labour box for solutions to the structural problems that all the world's economically developed nations now face.
Both capitalism and labourism contain potentially fatal contradictions; the seeds of their own demise.
Karl Marx's critique of capitalism (Kapital 1865) suggests that the process of competition is one in which firms compete ruthlessly for 'surplus value'. (Marx's theory is labourist to the extent that he saw labour as the source of the value which capitalists appropriated, but is anti-labourist to the extent that employee status was something that workers needed to be liberated from.) In the struggle for capitalist profit, Marx observed, businesses had to increasingly exploit labour and accumulate capital in order to survive. Firms had to behave more like landlords, increasing their bargaining power over labour through mergers and acquisitions. And they would have to keep reinvesting rather than distributing their profits, in order to keep up with their increasingly powerful rivals. Taken to its logical conclusion, the industrialised economies would become giant corporates without customers.
V.I. Lenin extended Marx's critique in Imperialism the Highest Stage of Capitalism, suggesting that the contradictions of capitalism would lead to nations like Britain aggressively marketing abroad the goods that British workers could not afford. (Interestingly, this line of criticism began with the writings of Edward Gibbon Wakefield - eg England and America  - which Marx read with great care. Wakefield advocated colonisation as a way out of the contradictions already apparent in the industrial capitalism of the 1830s.)
Around the same time that Lenin was writing, Rudolf Hilferding wrote Finance Capital (1912), positing a huge role for international finance in papering over the cracks of capitalism's contradictions by financing global imperialism.
There are many other critiques of capitalism, almost all of which point to a bias towards monopoly, overcapitalisation, underconsumption, and extreme concentration of wealth. Even Thomas Malthus, author in the 1820s of Principles of Political Economy and one of the founders of classical economics, recognised the contradiction of the 'general glut', of poverty amidst plenty. His make-work solution was a precursor to 20th century labourism.
The contradictions of capitalism are real. Nevertheless they were resolved. They were resolved by the emergence of labourism. World War I, suggested by some as an important symptom of the disintegration of capitalism, created some of the preconditions for the emergence of labourism. Labourers had fought the war, and needed political gratitude. Also, labour had become less oversupplied on account of the war. Politically negotiated family wages replaced market wages, for men at least. And the 40-hour workweek became the norm in those unusual inter-war conditions.
Nevertheless, it took the Great Depression of the 1930s to see through the transition from capitalism to labourism. The most important intellect behind the new order was John Maynard Keynes, author in 1936 of the General Theory of Employment, Interest and Money.
Keynes was no working-class hero. He was more offended by the economic waste of unemployment than by its social consequences. Most importantly, for Keynes and his technocratic followers, labourism represented a soft landing for capitalism, an opportunity for evolutionary rather than revolutionary change. World War II removed any residual political barriers to the transition to labourism, enabling social democracy to become an uncontested orthodoxy from the 1940s to the 1970s. It became axiomatic that labour was good, and that labour supplied should be fully utilised, thereby obliging the world's economies to grow at the rate in which their workforces increased, times the rate of labour productivity increase. Thus population growth, increased female participation in the workforce, and gains in output per worker would all contribute to accelerated economic growth. By way of contrast, in the capitalist mindset it was the accumulation of capital (ie retained profits plus household savings) rather than the growth of labour power that generated output growth.
By the 1960s, however, the contradictions of labourism were becoming all too apparent. Rising productivity levels - arising in large part from the adoption of new technology - suggested that the future should be and could be a leisure society.1 Problem was that the inchoate leisure society paradigm contradicted both the moral foundations of labourism and the scarcity presumption of capitalist and labourist economics. How could there be economic justice in a world in which the creation of jobs is no longer deemed an essential goal of economic policy? Despite the obvious fact that rentier capitalists (persons living solely from their investments) were being paid despite their not working, the idea of a future in which the majority (or a large minority) of the population might receive an adequate income without fulltime paid work was anathema to those who extolled the virtue of labour.
At the same time that we started to seriously consider a leisured future, a neo-Malthusian environmentalist movement was emerging. While mainly a backlash against rapid population growth, we started to reconsider the natural environment as a depreciable factor of production. A form of environmentalism emerged as a 'natural' successor to capitalism and labourism. That form extolled the virtues of the natural environment that labourist growth was threatening.
Environmentalism, like capitalism and labourism, can have multiple meanings. Thus environmentalism can also mean the attribution of the environment as the source of the surplus value over which capitalists and workers scrapped. As such, it can stand for an interest, the public interest. Like capitalism and labourism, environmentalism represents a factional interest; an interest in which everyone has an equal stake. Environmentalism represents the assertion of public property rights. The environment, like labour power and private property, is an income generating asset, a collective property right that serves as an alternative basis for the distribution of surplus value.
As labourism had its revolutionary (eg Marxian socialism) and evolutionary (eg Keynesian) forms so does environmentalism. We can see the revolutionary form, a rejection of capitalism and labourism, in the Seattle anti-WTO (World Trade Organisation) demonstrations of November 1999, and in the anti-globalisation demonstrations in Melbourne in September 2000.
Evolutionary environmentalism now manifests itself as Natural Capitalism, by, among others, Paul Hawken.2 It has the potential to become something much bigger.
Environmentalism is not new. Under the name of 'physiocracy' - or the 'agricultural system' as Adam Smith called it in 1776 - environmentalism became the big economic idea of the 18th century. Physiocracy literally means 'the rule of nature'.
The physiocrats (under the tutelage of François Quesnay, a French doctor) argued that the 'land' was the source of all surplus value. While capital (ie tools) and labour might be required to transform natural resources into useable and valuable forms, the value of those products net of the labour and capital cost was attributed entirely to the land. At the national economy level, this surplus value was known as the produit net, the net product.
In the context of the pre-democratic politics of 18th century France, the net product, attributable to the land, became the property of the landlords; hardly a recipe for an egalitarian society. But, even in that context, there were two important qualifications to this rationalisation of aristocratic privilege.
The first was the physiocratic concept of publicness or sovereignty. Sovereignty was embodied in a king who was deemed to own all of the environment that had not been privatised as landed estates or peasant holdings. This public domain was the public property of the crown rather than the private property of the monarch. (Most monarchs would additionally own one or more private estates.) The physiocrats estimated that 33% of the net product represented the public revenues of the sovereign, meaning that 33% of the economic surplus was public revenue which could in principle be distributed to the population either as a social wage (ie collective services such as protection, health care or education) or as cash.
The second qualification was to question the basis for private property. Pierre-Joseph Proudhon, Marx's 1840s' anti-capitalist rival, said in What is Property that "property is theft", meaning that all land had once been public, but had been privatised through military or political means. Thomas Paine in Agrarian Justice (1797) argued that individuals should be publicly compensated, by way of two kinds of one-off dividend, for public land appropriated from their ascendants. The first dividend, a kind of capitalised family benefit, would be paid to individuals on reaching the age of 21. The second would be a capital sum paid out at retirement age which, if invested, would provide a pension.
What matters is that there are three fundamental resources that drive our economic system: private property (capital), private labour, and the public environment. Over the last three centuries, each has been emphasised, in turn. Since the 18th century heyday of the physiocrats, the public environment has been taken for granted: assumed implicitly to be valueless because it had no price. Under capitalism and labourism, the owners of capital and the owners of labour arm-wrestled for shares of the net product (or surplus value); for shares of the economic cake attributable to the environment.
Under capitalism, private property owners claimed the net product for themselves. Under labourism, the working class claimed a substantial share of the net product. In doing so, they saved the capitalists from the fate towards which they were heading. Labourism generated a mass market for the goods and services that the capitalists wished to sell for profit.
Under environmentalism, the public owners of the environment claim the entire net product, rather than allowing it to be appropriated by capitalists and/or wage workers. As in physiocracy, capitalists and workers are only able to lay claims to income arising from the contributions of their property or their labour.
In a 21st century context the term 'public environment' in preferable to 'natural environment'. While accepting that much of the natural environment has been privatised - eg as freehold land - the term 'public environment' recognises that much of the environment is man-made rather than God-made. So, if we want to consider a new form of environmentalism, we should do more than defer to nature. The terms 'public environment' or 'public domain' lead to a somewhat broader environmentalist vision than those of Quesnay and Hawken.
In Natural Capitalism Hawken et.al. describe the environment as an economic "envelope". An alternative word would be "common". The danger of both words is that they sharply differentiate public from private property. That differentiation can lead to the prevailing view that the (taken for granted) surplus value arising from the contribution to production of public domain resources is a kind of free lunch over which capital and labour may fight a class war. Such an undervaluation of the public domain has been called a "tragedy of the commons". Opportunistic individuals have every incentive to plunder a free public resource.
A contrast to the plunder of the commons is Henry George's 1870s' interpretation of physiocracy.3 Under this view, income tax should be abolished and all public revenue would derive from public property rights (eg the "land taxes" that were mooted in the 19th century). Georgist economics (geoeconomics) has a wide following today, especially in California, but also in the New Zealand Green movement. (Physiocracy in various guises has always had strong advocates in New Zealand. Usually it has been linked to farmer politics - the agricultural system - rather than to the protection of nature.)
What economic resources are in the public domain other than the natural resources - air, rain, rivers, oceans, forests, ozone, sunlight - that we depend on for our survival? Public domain resources include most of our knowledge and technology (intellectual capital), our cultures and religions, our infrastructural networks (including our public roads and the substantial public stake in regulated monopolies such as our telecommunications network), our institutions (which include government and that public space we call the market) and laws, our gifts (eg the voluntary sector, donations of blood, the work of parents in raising a new generation of workers, and creative endeavours such as writing, composing, inventing), our social capital (eg our willingness to trust and do business with people we don't know), and, not least, the Internet (especially the world wide web, which has become perhaps the most important medium of public giving).
The view I wish to promote is that, despite privatisation of state owned enterprises and public domain assets, the contribution of the public domain to the economic cake as we understand it (GDP - gross domestic product) has become increasingly important and that therefore the claim by the public owners of the public domain for a rising dividend is valid. Dividends paid out of public revenue are necessary in order to resolve the problem of income concentration in a high-productivity economy.4
Rather than abolish income tax, as many environmentalists argue, we need to see income tax in a new light. Rather than thinking of it as a tax on labour, we can think of all income tax (company and personnel) as the income share (royalty) payable by producers to the sovereign (ie the sovereign people) for the economic use of all public domain resources.
This means that income tax revenue never was a part of somebody's wages or profits; it means that before-tax incomes, as we know them, are a convenient fiction. It also means that, so long as the public domain expands relative to privately owned resources, then the share of GDP going to the Crown in the form of income tax should be increasing. The size of the tax take should reflect the value of the public domain, and not the extent of government expenditure. Just as the increased income share to labour enabled labourism to resolve the dilemma of capitalism, an increased income share to the public owners of the environment is needed to avert the paradox of labourism which obliges us to work longer and harder in response to improvements in labour productivity.
So how might environmentalism work in practice?
Firstly, environmentalism is an accounting exercise. While, the income tax we pay should not be accounted for as a part of our private incomes, our individual shares of public revenue should be accounted for as individual income. Hence any of our share of public income that is not distributed to us in cash as a benefit, pension, tax credit or tax rebate should be accounted for as 'donations' for the provision of collective services such as defence, public education, public health care, care of the natural environment.
Secondly, any inequities revealed by the accounting exercise would be corrected for. For example, people with low private incomes should not be donating a bigger amount of their publicly-sourced income to, say, defence than should people on high private incomes. The tax credit system that would be required to even out these inequities could be called, among other things, a universal basic income. In a highly capitalised society, a universal basic income might be enough, on its own, to support an individual in modest comfort.
Thirdly, the economic value of public domain resources relative to private capital and labour would be tested through the political process. A voter swing to the left would be indicative of an upwards valuation of the environment as an income-earning resource. Environmental resources can only be valued this way - and not by technocratic analysis - because all valuation is subjective.
This is not the place to go into further detail about an environmentalist solution to the contradictions of pure capitalism and pure labourism. Rather, I conclude here by asking: "what better incentive is there to nourish the public commons than to draw income from them?" When we know that the environment sustains us and our descendants, we make that extra effort to care for the environment.
1 An important precursor to the leisure society paradigm that emerged in the 1960s was the late 19th early 20th century work of Simon N. Patten. Perhaps his best known book is The New Basis of Civilisation. The best writing about Patten is Daniel Fox's The Discovery of Abundance (1967).
2 Natural Capitalism (1999), by Paul Hawken, L. Hunter Lovins, Amory Lovins.
3 George's Progress and Poverty (1879) is his best known work. But it was Protection or Free Trade that he dedicated to Quesnay and his physiocrat followers.
4 An interesting presentation of this argument, coming from one of Keynes original disciples, James Meade, is Full Employment Regained?: an Agathotopian Dream (1995).