October 1, 2000
With Responses From
Oct 1, 2000
4 Min read time
We need to focus more on public democratization of capital.
For several decades there has been a major hole in traditional theories of the structural requirements of liberty. Filling this hole is important in its own right; doing so also offers a powerful way for progressives to begin to challenge conservatives on what has historically been their high ground.
Conservatives have commonly argued that the principles of liberty are necessarily linked to capitalism as a system–especially entrepreneurial capitalism. They argue that the institution of individual entrepreneurship helps to disperse power away from the state; that it offers individuals a "place to stand," a certain independence of choice and action; and that it sustains a culture of independence rather than servility.
The notion that real freedom requires the economic independence that comes with the ownership of property was largely taken for granted among the Founding Fathers. Thomas Jefferson held that dependence "begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designees of ambition." For John Adams, too, "equal liberty" required enabling "every member of society" to acquire land "so that the multitude may be possessed of small estates."
Throughout most of nineteenth- and much of twentieth-century America, the entrepreneur (often a small businessman or farmer-capitalist) continued to play a major role in the economy, and the close link between freedom and property-ownership can be found in a wide range of nineteenth century theories of the structural requirements of liberty. In the early twentieth century, Louis Brandeis (along with many others) doubted that "any man [could] be really free who is constantly in danger of becoming dependent for mere subsistence upon somebody and something else."
For at least a century, however, the entrepreneur has been displaced as the central factor in the political economy. The most perceptive conservatives recognized long ago that this displacement presents a fundamental challenge to their theories. Joseph Schumpeter, for instance, famously judged that capitalism would die if entrepreneurial property became marginal in the system: "The perfectly bureaucratized giant industrial unit not only ousts the small or medium-sized firm and ‘expropriates’ its owners, but in the end it also ousts the entrepreneur and expropriates the bourgeoisie as a class, which in the process stands to lose not only its income but also what is infinitely more important, its function."1 With the decline of the entrepreneur in the corporate economy, the traditional structural basis of liberty itself substantially disappeared.
But if the institution of widespread entrepreneurial capital no longer provides for real dispersion of power, an individual place to stand, and a culture of independence, what then?
Some theorists–for, instance, Peter Drucker–have focussed on the job, suggesting that guaranteed employment could be substituted for entrepreneurial property: jobs are (and should be) "becoming a nexus of rights and a species of property."
An even more powerful argument is that a guarantee of income (and we might add, of free time) provides a new foundation for liberty. The late Louis Kelso, a maverick conservative, endorsed this view, as does Philippe Van Parijs. But this focus, important as it is, is still somewhat narrow: apart from Van Parijs’s secondary poverty-related, feminist, and green arguments, the main concern is with providing the individual with structural support for what might be called "real opportunity of choice." The broader arguments suggesting that an absolute guarantee of income is a necessary long-term, system-wide institutional basis for liberty–that an unconditional guarantee, built into the basic organization of the political economy, provides an essential basis for independence–intersect with and complement this argument, but they also transcend it. Academics understand the central issue rather easily in their own world when they defend tenure on this ground: liberty to speak out depends on a guarantee that ones means of livelihood will not be undermined.
Currently the US economy produces approximately $130,000 for every family of four; by 2100, this number will grow, on conservative estimates, at least four-fold. It is reasonable to begin discussing a long-term trajectory in the direction of providing an unconditional guarantee of at least some portion of income as one way to begin to build a new system-wide institutional basis for liberty. (To be sure, transitional possibilities–understood as transitional, and as political compromises–will likely include various forms of work or other requirements.)
A limitation of Van Parijs’ work (and that of most others writing on these matters) concerns how resources are gathered and allocated to achieve the various income guarantees. Van Parijs assumes the framework of a traditional social-democratic welfare state; he assumes in particular that sufficient political power can be mobilized by progressive groups to use the power to tax in order to pay for a basic income. With the decline of organized labor, and of other traditional sources of progressive power throughout the Western world, this hope is fading.
In this connection, it is striking to note that Van Parijs highlights the model of the Alaska Permanent Fund, which in 1999 allocated almost $1,800 per year to each state resident (roughly $7,000 to a family of four). Alaska Fund income does not depend upon taxation but upon directly capturing returns from the public ownership of capital.2Experiments of this kind–and the theoretical work of writers like Kelso, on the one hand, and John Roemer on the other–suggest a need to focus less on the tax/transfer system, and more on various forms of public democratization of capital. Over the coming century such a focus is likely to become a necessary condition of income-related strategies–and, ultimately, of a new structural basis for liberty capable of filling the gap in traditional approaches.
1 Joseph A. Schumpeter, Capitalism, Socialism, and Democracy 3d ed. (New York: Harper & Row, Publishers, 1950), p. 134.
2 Individuals receive payments from the Fund derived from the public investment of oil royalties in a wide range of assets. For further discussion of practical institutional models involving the public and/or quasi-public ownership of wealth, see my "Who Owns Capital?"Boston Review, February/March 1999, pp. 40-42.
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October 01, 2000
4 Min read time