Playing the Market
The start of a new egalitarian politics might be found where you least expect it
G. William Domhoff
Most Americans have believed since the founding of the country that there should be equality, fairness and opportunity for everyone who lives here. American activists have achieved many of their goals through a wide variety of social and political movements, ranging from the New Deal to the civil rights, feminist, environmental, living wage and anti-sweatshop movements.
Average Americans have won these advances against great odds. The economic and political systems mostly operate in favor of the powers that be, giving in to the pressures and rationalizations of the wealthy few and their corporations. Since 1980, these tendencies in favor of the rich and powerful have gotten completely out of hand, generating excesses that haven’t been seen since the fabled Gilded Age of the 1890s. A small percentage of people are doing very well, but most are just struggling to stay even or keep from going under.
The United States is increasingly dominated by a corporate-conservative coalition that is rooted in the ownership and control of large corporations, banks and agribusinesses—which are closely coordinated by shared directors, lawyers and management consultants, even as they compete for profits in the marketplace. This coalition maintains a near-monopoly on respectable expert opinion, which ranges from the mildly liberal to the highly conservative and never questions the fact that the top 1 percent of Americans own almost half of the country’s marketable assets.
None of this means the corporate-conservative coalition has complete and total power, or that its success in each new policy conflict is a foregone conclusion. However, the opposing liberal-labor coalition seldom wins more than a few minor concessions and is extremely difficult to hold together because its members have divergent and sometimes clashing interests, which even leads some of them to side with the Republicans on a few issues. It has far less money to spend on political campaigns than the corporate-conservatives. The liberal-labor coalition also has great difficulty assembling a political majority within the electorate because of the long-standing racial and religious divisions that continue to matter deeply in American life. For all these reasons, freedom of speech, freedom of assembly, the right to organize, and the right to vote matter much less than they otherwise would.
————–
Power is best thought of as running along a dimension that shapes all human interactions and social structures, with egalitarians at one end and dominators at the other. Egalitarians are those who want to minimize arbitrary authority and hierarchy, and who believe that everyone should be accorded the same opportunity and respect in the political, economic, legal and personal realms of life. They deny that some individuals or groups are better than others, although they recognize that some individuals (but not groups) have unusual gifts for activities like art, athletics, music or scientific research. Dominators, on the other hand, think there are inherent inequalities among individuals and groups that justifiably lead to extreme hierarchy and social stratification.
An egalitarian-domination dimension, rather than a liberal-conservative one, better captures the values and energy of those inside and outside of electoral politics who have been the force for liberal and progressive changes. Egalitarians are the people who have been feminists, union organizers, socialists, communists, strong environmentalists, civil rights activists, and gay and lesbian activists as well as elected liberals. Egalitarianism is the underlying value system that animates all of these groups—though they differ greatly among themselves in the policies and strategies they embrace to realize their values. In particular, egalitarians have often clashed with liberals (now called “reformers” by those egalitarians who self-identify as “radicals”) even though both camps are on the same side of the fence.
Egalitarians have always stood for trying to achieve what liberals timidly support, moderates fear is impossible, and elitists actively oppose. Thanks to their moral indignation and prodigious energy, they have been the catalysts for change even when the movements they supported eventually settled for far less than they wanted. Today, all the pieces are there for a strong egalitarian movement. But they have not been used effectively for two reasons. First, they have not been linked by an underlying rationale that shows activists how they all fit together. Second, they have been obscured and distorted by the inclusion of self-defeating methods that should not be part of the picture.
————–
Any thought of creating a detailed utopian vision can only fail, as many historical attempts decisively show. However, it is possible to establish the key principles on which the economic system should operate, and then develop and fight for the programs that implement those principles in specific areas—like health care or working conditions or unemployment insurance—that could make great improvements in millions of lives. But a plausible vision for a better economic future is precisely what egalitarians have been totally lacking since the collapse of socialism as a believable alternative.
By the ’80s, it had become clear that a centrally planned economy wouldn’t work very well, even after considerable industrial development and decades of experience with planning. This failure cannot be attributed to a lack of democracy, as some theorists now argue. The problems are economic and sociological, not political. The general failure of a centrally planned economy is a major turning point in the egalitarian project, because it calls socialism into question as the way to realize egalitarian values.
Why is it so hard for many activists to let go of the unworkable idea of central planning as the key to a more egalitarian social system? First of all, the market reduces all human relationships to an individualistic “cash nexus,” to quote Marx, which is nearly the opposite of the collective human values implied by “from each according to their abilities, to each according to their needs.” Then, too, the impersonal market is a snare and a delusion, because it is the most pernicious method ever devised to legitimate the exploitation of labor.
But central planning does not work economically and has strong authoritarian tendencies built into it that do not promote freedom. First, it fails because no one has been able to design methods to analyze the tremendous amount of information necessary to manage a large-scale centrally planned economy that goes beyond a few core industries. Furthermore, the large bureaucratic system created to try to obtain and utilize this information becomes completely inefficient and corrupt in the way many such large organizations often do.
If central planning is a disaster and markets are primarily instruments for exploitation, no wonder egalitarian activists have been unable to project the necessary vision of a better future that would provide renewed energy for their work. Understandably, they simply say the current system is not good enough—but do not offer any alternatives. However, there is more hope than most egalitarians realize.
————–
The idolization of the market as a perfect, self-regulating mechanism that always leads to the best possible outcomes is as far from reality as the hopes of socialist central planners. The claims by free market ideologues that any laws regulating the market hinder productivity, or that greater economic equality inevitably limits freedom, are without significant empirical support. Research shows that markets need guidance from government to operate well, and that there is no inevitable trade-off between equality and efficiency, or between equality and freedom, within a market system. More equality might even mean more efficiency, and it certainly means more freedom for more people.
Most importantly, markets can be reconstructed to make it possible to plan for a more egalitarian economic future. Strong governments can use the market system for planning. Once markets are viewed as administrative instruments for planning, they can serve collective purposes as well as the individual consumer preferences trumpeted by conservatives. There is thus no need for one big planning apparatus. Instead, the planning tools within a reconstructed market system are simply taxes, subsidies, government purchases and regulation. These powers can be potent when applied to markets.
In this light, the annual battle over energy policy in Congress can be seen as an exercise in planning through the market, and as a prototype for the kind of policy struggles that could be waged on other issues. Environmentalists call for higher taxes on fossil fuels, subsidies for renewable energy sources, and regulations that force automobile manufactures and utilities to burn fuels more efficiently and cleanly; they ask the government to purchase heating and cooling systems for its buildings that use renewable energy and to use vehicles that meet the highest standards of fuel efficiency. On the other hand, the oil, coal, automobile and utility companies demand low taxes, subsidies for fossil fuels and minimal regulations relating to efficiency or pollution.
Planning through the market is, in effect, the general strategy adopted by the environmental movement, and it has paid good dividends. Although most environmental programs actually increase the number of jobs, the plans developed by environmentalists call for the government to subsidize any job losses of sudden dislocations through “just transition” programs. For example, one plan developed to cut carbon dioxide emissions in half by 2020, put forward by economists James Barrett and J. Andrew Hoerner, includes a proposal for two years of income and up to four years of education for those who lose their jobs, along with $10,000 in community funds for each job lost. At the same time, their plan to tax carbon and increase the use of renewable energy sources would increase the overall number of jobs. “Just transitions” would be financed by everyone through their taxes—a collective solution to a collective problem.
If the environmentalists’ plans were to prevail, the United States could gradually wean itself from foreign oil and clean up the air and water at the same time. According to this new way of thinking about planning, then, the big issue is winning political power from the corporate-conservative coalition, which is another reason why challenges in the electoral arena are such an important dimension of a full-scale egalitarian movement within a democratic society. Taxes, subsidies, government purchases, and regulations could be used by egalitarians to do planning through the market if they had enough power in the government. The economic issues are not all that arcane. The solutions are there. But the political power has been sorely lacking.
————–
Once markets are accepted as a necessity for the production and distribution of most products and services, it is possible to really hone in on the areas where they don’t work the way politically conservative free market economists say they do. Here, there is much support from moderate and liberal economists. Even the most extreme free marketers, the libertarians, admit there are “market failures.” Important issues in social life where the market cannot get values right can also be used as a battering ram against the anti-government ideology of low taxes employed by the corporate-conservative coalition to stifle government spending for the social services everyone needs and wants.
For example, the whole area of health care is a “market failure.” People don’t have the time or expertise to shop around when they are sick, so it is difficult to have much “consumer choice.” No one could possibly save enough to pay for the care needed during a catastrophic illness. Not just anyone can deliver health care, so there are “barriers to entry.” Most of all, of course, health care providers cannot make a profit if they have to treat people who cannot pay, which means they would have to let such people sicken or die instead of helping them. The result in the United States is an inefficient private insurance system with a bigger bureaucracy than the government would have if all the bills were paid by Medicare.
By drawing on the experience of other democratic capitalist countries, it is also possible to show convincingly that a reconstructed market system could be much more open and flexible than the current U.S. model. For example, many different types of enterprises could compete in the market, not just privately owned corporations. It is possible to conceive of a fully functioning market system based on consumer-owned cooperatives, or state-owned firms, or a combination of cooperative, state-owned and private companies. At the least, government agencies could own companies that enter into highly concentrated markets and provide competition. In essence, this is what the New Deal did when it created the Tennessee Valley Authority to produce electricity and fertilizer for the underdeveloped areas along the Tennessee River. The price-gouging utilities controlled by holding companies in New York protested mightily; but the southern Democrats saw them as Yankee exploiters, and that was the end of it.
————–
Needless to say, a reconstructed market would not put an end to the wage system, so it would not satisfy those influenced by classical Marxist theory. But planning through the market could be used to decrease the degree of exploitation that currently exists by making wages higher, work more humane and employment a political right. Better unemployment benefits and guaranteed health insurance would also reduce exploitation through the wage system. Within this context, those who decry the alienation created by markets should think about the fact that a majority of Americans express satisfaction with their jobs even under present conditions. This suggests they would find them even more positive in a reconstructed market system with genuine protections for working people.
The heresy for egalitarians is to admit that markets can have the virtue of being a decentralized form of coordination and control that does expand opportunity for most people. Yes, they can also make it possible for the owners of income-producing private property to gain the power to dominate government. But by their very nature they leave open the possibility that government can limit the power and rewards of ownership through taxes, subsidies, government purchases and regulation. Government can also create competitive public enterprises to compete with privately owned companies and tax incomes and wealth far more than it is doing now, without disturbing the functioning of the market.
On balance, then, markets are more useful than not and can provide a starting point for developing new egalitarian policies and programs. It therefore makes sense to talk about reconstructing the “market system” and figuring out ways to democratize it. It makes sense to think about Congress setting out general plans for energy conservation and health care, and to develop separate agencies to carry out these plans. The models here are the Social Security Administration and the Environmental Protection Agency. Only right-wingers live in dread of such agencies, which could serve people even better if they were backed by higher budgets and an egalitarian majority in Congress.
Pessimism is no more warranted than belief in inevitable victory. No one would have imagined that a New Deal would emerge out of the Republican ’20s and the Great Depression, or that a moribund union movement could be revived at the same time through a combination of liberal legislation and courageous activism by rank-and-file leaders. Neither did anyone expect that a militant new civil rights movement would emerge from black churches and traditionally black universities in the early ’60s.
As these examples show, change can start tomorrow or 50 years from now. New opportunities to create positive social changes are arising all the time. The cracks and fissures in the powers that be were exploited in the past and could be exploited again.
Average Americans have won these advances against great odds. The economic and political systems mostly operate in favor of the powers that be, giving in to the pressures and rationalizations of the wealthy few and their corporations. Since 1980, these tendencies in favor of the rich and powerful have gotten completely out of hand, generating excesses that haven’t been seen since the fabled Gilded Age of the 1890s. A small percentage of people are doing very well, but most are just struggling to stay even or keep from going under.
The United States is increasingly dominated by a corporate-conservative coalition that is rooted in the ownership and control of large corporations, banks and agribusinesses—which are closely coordinated by shared directors, lawyers and management consultants, even as they compete for profits in the marketplace. This coalition maintains a near-monopoly on respectable expert opinion, which ranges from the mildly liberal to the highly conservative and never questions the fact that the top 1 percent of Americans own almost half of the country’s marketable assets.
None of this means the corporate-conservative coalition has complete and total power, or that its success in each new policy conflict is a foregone conclusion. However, the opposing liberal-labor coalition seldom wins more than a few minor concessions and is extremely difficult to hold together because its members have divergent and sometimes clashing interests, which even leads some of them to side with the Republicans on a few issues. It has far less money to spend on political campaigns than the corporate-conservatives. The liberal-labor coalition also has great difficulty assembling a political majority within the electorate because of the long-standing racial and religious divisions that continue to matter deeply in American life. For all these reasons, freedom of speech, freedom of assembly, the right to organize, and the right to vote matter much less than they otherwise would.
————–
Power is best thought of as running along a dimension that shapes all human interactions and social structures, with egalitarians at one end and dominators at the other. Egalitarians are those who want to minimize arbitrary authority and hierarchy, and who believe that everyone should be accorded the same opportunity and respect in the political, economic, legal and personal realms of life. They deny that some individuals or groups are better than others, although they recognize that some individuals (but not groups) have unusual gifts for activities like art, athletics, music or scientific research. Dominators, on the other hand, think there are inherent inequalities among individuals and groups that justifiably lead to extreme hierarchy and social stratification.
An egalitarian-domination dimension, rather than a liberal-conservative one, better captures the values and energy of those inside and outside of electoral politics who have been the force for liberal and progressive changes. Egalitarians are the people who have been feminists, union organizers, socialists, communists, strong environmentalists, civil rights activists, and gay and lesbian activists as well as elected liberals. Egalitarianism is the underlying value system that animates all of these groups—though they differ greatly among themselves in the policies and strategies they embrace to realize their values. In particular, egalitarians have often clashed with liberals (now called “reformers” by those egalitarians who self-identify as “radicals”) even though both camps are on the same side of the fence.
Egalitarians have always stood for trying to achieve what liberals timidly support, moderates fear is impossible, and elitists actively oppose. Thanks to their moral indignation and prodigious energy, they have been the catalysts for change even when the movements they supported eventually settled for far less than they wanted. Today, all the pieces are there for a strong egalitarian movement. But they have not been used effectively for two reasons. First, they have not been linked by an underlying rationale that shows activists how they all fit together. Second, they have been obscured and distorted by the inclusion of self-defeating methods that should not be part of the picture.
————–
Any thought of creating a detailed utopian vision can only fail, as many historical attempts decisively show. However, it is possible to establish the key principles on which the economic system should operate, and then develop and fight for the programs that implement those principles in specific areas—like health care or working conditions or unemployment insurance—that could make great improvements in millions of lives. But a plausible vision for a better economic future is precisely what egalitarians have been totally lacking since the collapse of socialism as a believable alternative.
By the ’80s, it had become clear that a centrally planned economy wouldn’t work very well, even after considerable industrial development and decades of experience with planning. This failure cannot be attributed to a lack of democracy, as some theorists now argue. The problems are economic and sociological, not political. The general failure of a centrally planned economy is a major turning point in the egalitarian project, because it calls socialism into question as the way to realize egalitarian values.
Why is it so hard for many activists to let go of the unworkable idea of central planning as the key to a more egalitarian social system? First of all, the market reduces all human relationships to an individualistic “cash nexus,” to quote Marx, which is nearly the opposite of the collective human values implied by “from each according to their abilities, to each according to their needs.” Then, too, the impersonal market is a snare and a delusion, because it is the most pernicious method ever devised to legitimate the exploitation of labor.
But central planning does not work economically and has strong authoritarian tendencies built into it that do not promote freedom. First, it fails because no one has been able to design methods to analyze the tremendous amount of information necessary to manage a large-scale centrally planned economy that goes beyond a few core industries. Furthermore, the large bureaucratic system created to try to obtain and utilize this information becomes completely inefficient and corrupt in the way many such large organizations often do.
If central planning is a disaster and markets are primarily instruments for exploitation, no wonder egalitarian activists have been unable to project the necessary vision of a better future that would provide renewed energy for their work. Understandably, they simply say the current system is not good enough—but do not offer any alternatives. However, there is more hope than most egalitarians realize.
————–
The idolization of the market as a perfect, self-regulating mechanism that always leads to the best possible outcomes is as far from reality as the hopes of socialist central planners. The claims by free market ideologues that any laws regulating the market hinder productivity, or that greater economic equality inevitably limits freedom, are without significant empirical support. Research shows that markets need guidance from government to operate well, and that there is no inevitable trade-off between equality and efficiency, or between equality and freedom, within a market system. More equality might even mean more efficiency, and it certainly means more freedom for more people.
Most importantly, markets can be reconstructed to make it possible to plan for a more egalitarian economic future. Strong governments can use the market system for planning. Once markets are viewed as administrative instruments for planning, they can serve collective purposes as well as the individual consumer preferences trumpeted by conservatives. There is thus no need for one big planning apparatus. Instead, the planning tools within a reconstructed market system are simply taxes, subsidies, government purchases and regulation. These powers can be potent when applied to markets.
In this light, the annual battle over energy policy in Congress can be seen as an exercise in planning through the market, and as a prototype for the kind of policy struggles that could be waged on other issues. Environmentalists call for higher taxes on fossil fuels, subsidies for renewable energy sources, and regulations that force automobile manufactures and utilities to burn fuels more efficiently and cleanly; they ask the government to purchase heating and cooling systems for its buildings that use renewable energy and to use vehicles that meet the highest standards of fuel efficiency. On the other hand, the oil, coal, automobile and utility companies demand low taxes, subsidies for fossil fuels and minimal regulations relating to efficiency or pollution.
Planning through the market is, in effect, the general strategy adopted by the environmental movement, and it has paid good dividends. Although most environmental programs actually increase the number of jobs, the plans developed by environmentalists call for the government to subsidize any job losses of sudden dislocations through “just transition” programs. For example, one plan developed to cut carbon dioxide emissions in half by 2020, put forward by economists James Barrett and J. Andrew Hoerner, includes a proposal for two years of income and up to four years of education for those who lose their jobs, along with $10,000 in community funds for each job lost. At the same time, their plan to tax carbon and increase the use of renewable energy sources would increase the overall number of jobs. “Just transitions” would be financed by everyone through their taxes—a collective solution to a collective problem.
If the environmentalists’ plans were to prevail, the United States could gradually wean itself from foreign oil and clean up the air and water at the same time. According to this new way of thinking about planning, then, the big issue is winning political power from the corporate-conservative coalition, which is another reason why challenges in the electoral arena are such an important dimension of a full-scale egalitarian movement within a democratic society. Taxes, subsidies, government purchases, and regulations could be used by egalitarians to do planning through the market if they had enough power in the government. The economic issues are not all that arcane. The solutions are there. But the political power has been sorely lacking.
————–
Once markets are accepted as a necessity for the production and distribution of most products and services, it is possible to really hone in on the areas where they don’t work the way politically conservative free market economists say they do. Here, there is much support from moderate and liberal economists. Even the most extreme free marketers, the libertarians, admit there are “market failures.” Important issues in social life where the market cannot get values right can also be used as a battering ram against the anti-government ideology of low taxes employed by the corporate-conservative coalition to stifle government spending for the social services everyone needs and wants.
For example, the whole area of health care is a “market failure.” People don’t have the time or expertise to shop around when they are sick, so it is difficult to have much “consumer choice.” No one could possibly save enough to pay for the care needed during a catastrophic illness. Not just anyone can deliver health care, so there are “barriers to entry.” Most of all, of course, health care providers cannot make a profit if they have to treat people who cannot pay, which means they would have to let such people sicken or die instead of helping them. The result in the United States is an inefficient private insurance system with a bigger bureaucracy than the government would have if all the bills were paid by Medicare.
By drawing on the experience of other democratic capitalist countries, it is also possible to show convincingly that a reconstructed market system could be much more open and flexible than the current U.S. model. For example, many different types of enterprises could compete in the market, not just privately owned corporations. It is possible to conceive of a fully functioning market system based on consumer-owned cooperatives, or state-owned firms, or a combination of cooperative, state-owned and private companies. At the least, government agencies could own companies that enter into highly concentrated markets and provide competition. In essence, this is what the New Deal did when it created the Tennessee Valley Authority to produce electricity and fertilizer for the underdeveloped areas along the Tennessee River. The price-gouging utilities controlled by holding companies in New York protested mightily; but the southern Democrats saw them as Yankee exploiters, and that was the end of it.
————–
Needless to say, a reconstructed market would not put an end to the wage system, so it would not satisfy those influenced by classical Marxist theory. But planning through the market could be used to decrease the degree of exploitation that currently exists by making wages higher, work more humane and employment a political right. Better unemployment benefits and guaranteed health insurance would also reduce exploitation through the wage system. Within this context, those who decry the alienation created by markets should think about the fact that a majority of Americans express satisfaction with their jobs even under present conditions. This suggests they would find them even more positive in a reconstructed market system with genuine protections for working people.
The heresy for egalitarians is to admit that markets can have the virtue of being a decentralized form of coordination and control that does expand opportunity for most people. Yes, they can also make it possible for the owners of income-producing private property to gain the power to dominate government. But by their very nature they leave open the possibility that government can limit the power and rewards of ownership through taxes, subsidies, government purchases and regulation. Government can also create competitive public enterprises to compete with privately owned companies and tax incomes and wealth far more than it is doing now, without disturbing the functioning of the market.
On balance, then, markets are more useful than not and can provide a starting point for developing new egalitarian policies and programs. It therefore makes sense to talk about reconstructing the “market system” and figuring out ways to democratize it. It makes sense to think about Congress setting out general plans for energy conservation and health care, and to develop separate agencies to carry out these plans. The models here are the Social Security Administration and the Environmental Protection Agency. Only right-wingers live in dread of such agencies, which could serve people even better if they were backed by higher budgets and an egalitarian majority in Congress.
Pessimism is no more warranted than belief in inevitable victory. No one would have imagined that a New Deal would emerge out of the Republican ’20s and the Great Depression, or that a moribund union movement could be revived at the same time through a combination of liberal legislation and courageous activism by rank-and-file leaders. Neither did anyone expect that a militant new civil rights movement would emerge from black churches and traditionally black universities in the early ’60s.
As these examples show, change can start tomorrow or 50 years from now. New opportunities to create positive social changes are arising all the time. The cracks and fissures in the powers that be were exploited in the past and could be exploited again.
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G. William Domhoff is the author of Who Rules America? and The Power Elite and the State. He lives in Santa Cruz, where he is a sociology professor at the University of California.
