A New Program for Democratic Socialism
A New Program for Democratic Socialism Leland G. Stauber Yet socialist ideas, both in the nineteenth century and in the twentieth century, while strong on criticizing capitalist arrangements, have tended to be weak, if not altogether vague, in devising practicable alternatives to traditional private ownership for the bulk of the corporate sector of the economy. There has been for decades growing realization that socialist economies cannot function well without extensive use of competitive market pressures upon firms, within the context of one or another conception of needed regulatory and planning measures by government. One result is growing trends in Eastern Europe, China, and elsewhere toward various types and degrees of market socialism—systems that combine societal ownership of large enterprises with one aspect of capitalism, namely market processes. Another result has been the growth of discussion within various Social-Democratic parties and movements of the political West about possibilities of various kinds of market socialism for large firms in presently capitalist countries. This latter discussion, however, has tended to perpetuate a quality of vagueness, so characteristic of previous socialist tradition, when it comes to concrete institutional structures, as distinct from general social aims and broad principles. A good illustration of this tendency is the recent work of Alec Nove, The Economics of Feasible Socialism. He ably surveys the Marxian legacy, the Soviet experience, and recent reform models in Eastern Europe and China, and then advances his own general conception of an optimal form of socialism, which he (quite sensibly) labels “feasible socialism.” But these prescriptions are cast in the form of broad principles and stop short of any concrete and detailed proposal for any alternative system of ownership that could serve as a general replacement for the capitalist mode of ownership in the corporate sector of modern economies. The purpose of the present book is to fill this void in the present state of socialist thinking and in the awareness of the general public as to what the range of options really is. This means pointing out social possibilities for reconciling efficiency and dynamic economic performance, on the one hand, with far greater equality. These possibilities, it is suggested, have existed in principle all along, from the beginnings of the industrial revolution, but have gone generally unnotieced Because of the grip of inherited ideological doctrines. Here the obstacles to new thinking lie just as much in the inherited belief-system of the United States as in “outmoded dogmas” of the Soviet Union. In both these nations the status quo has been defended by proclaiming there are “only two alternatives.” Soviet leaders portray the options as a choice only between their present system, with minor tinkering, and private ownership-corporate business and centralized, bureaucratic socialism. By distracting public attention from other possibilities, leaders in both nations support existing structures of power by maintaining a climate of ideological psychosis. One of the more difficult questions for modern social science would be to decide which nation has achieved the greater heights on this dimension. Like most other nations, however, the United States has become, and predictably will remain, pervasively entangled in its international environment in an interactive process that is not only political and economic but also cultural. This means America’s own inherited belief system, as it operates for Americans themselves, will be increasingly exposed to comparisons and questionings from other points of view. No human society is inherently immune to change originating in cultural processes by which new ideas, however gradually, creep into the minds of its leaders and people. Paradoxically, in recent years even the most conservative of American governments has actively encouraged trends toward market socialism—when they are located in Eastern Europe and China. It is the purpose of this book to bring responsible discussion of market socialism, of a new type, to the United States itself. In any nation, the bases of social thought are largely unconscious. In the United States, the dominant framework of social assumptions has been the principles of Liberalism, in the broader European usage of that term. These principles include (1) representative government in the political system, (2) private capitalism and private property in the economic system, and (3) a minimum type of social equality, namely equality of legal status, involved in rejection of a hereditary titled nobility and rejection of serfdom and slavery. In regard to inequality of legal status and slavery, the power of Liberalism in American culture is evident, not only in the eventual abolition of black slavery in the United States, but also in the rationale that had been produced for it. Serfdom under the ancient regime in Europe was justified with a view that assumed inherent human inequality. But in the United States few of the antebellum Southern slave holders were really able to justify slavery, in their own minds, with a view that could justify, even theoretically, the enslavement of people of white skin color. The very extent of their own belief that “all men are created equal” forced them to argue that blacks were somehow subhuman and thus to invent a racist doctrine in order to justify slavery within a Liberal culture. With the coming of industrialism and the growth of large business corporations, the underlying Liberal basis of American ideology is evident in the Progressive Movement of the pre-1914 era and the New Deal of the 1930s. Both were large-scale reform movements directed against business political influence. Neither, however, directed their attacks against the principle of private property. This commitment has been a matter of faith and celebration rather than of critical thought about is social and political consequences, and the actual range of alternatives to it. European Liberalism, the real content of what has been labeled “the American way of life,” has always contained a profound contradiction between its rhetoric of equality and actual social inequalities, passed on from generation to generation, deriving from economic inequality. In Europe this contradiction has led to all the modern varieties of socialist politics, because the protracted struggle of Liberal middle classes against the aristocratic class principle raised the issue of equality and set in motion a spirit of equality that did not stop with critique of aristocratic institutions. It prompted large parts of society, including significant parts of the middle classes, to view and judge private capitalism also by the criterion of social equality. With the transplantation of European Liberalism to the western hemisphere, the same contradiction, in reality, was transplanted with it, But in North America, quite unlike Latin America, the absence of a hereditary nobility and of Europe’s struggles of social revolution against it meant this contradiction has operated in a less class-conscious atmosphere and without a tradition of social revolution. The result in the United States has been not the reality, but the illusion and pretense of a classless society. What, then, of alternatives? If private ownership of the whole corporate sector within modern economies were to be replaced by some form of socialized ownership, a host of evils would have to be avoided, if the aim is to preserve the economic advantages of a market economy and protect the institutions of political democracy. No sound design for such an economic system can be developed unless these evils are systematically identified and thoroughly understood. For this purpose, this book makes unorthodox, but eminently functional, use of the case-study method, in order to examine these problems intensively and in depth. A major part of this book is a case study of nationalization in Austria. The subject of this part of the book, however, is not the history of nationalization in Austria per se, but problem-oriented analysis of it. In this inquiry, Austria is treated not a s a model for a program, but as a laboratory for analysis. The primary purpose of this inquiry is not to assess how well Austria’s arrangements for public ownership in Austria. By and large, they work quite well. The primary purpose, rather, is to identify systematically evils that would occur if certain traditional forms of public ownership, namely supervision of firms directly by ministries or by government-owned conglomerate holding companies, were used for a far larger scope of socialized ownership, namely replacement of traditional private ownership in the whole of the corporate sector. From the resulting analysis, in turn, a program is developed which, the author submits, effectively short-circuits all the evils conventionally attributed to socialism and reduces them not to zero, but to an order of importance no different from the impurities and abuses that occur anyway in government regulation of securities markets and private financial institutions, which is a kind of government role necessary in any market economy, no matter how it is owned, This program differs radically from the present Austrian arrangements, and departs radically from the prevailing and inherited assumptions of the world’s democratic Labor and Social-Democratic parties. This program, the author suggests, thoroughly removes the present rationale for maintaining both private corporate capitalism and its concomitant, and aristocracy of wealth, aside from allowing opportunities for individuals to get rich. It is open to defenders of the present system to devise some new rationale for it, or to reformulate their defense of it. But to do so, they will have to go back to their drawing boards and think-tanks. For the purpose of this kind of inquiry, Austria is ideally suited as a laboratory for several reasons that have hitherto attracted little notice,; to wit: In Austria the political accident of the German assets reparations issue at the end of World War II ultimately led to an unusually large nationalization in 1946, which has been retained because of the success of the Austrian Socialist Party in blocking most denationalization efforts after the end of the four-power occupation in 1955. The result is a sector of public ownership of industrial firms, as distinct from “utilities” alone, that is unusually large by comparison with most Western European countries. This extensive outright socialism has operated in the context of deeply established political democracy and quite high levels of governmental and entrepreneurial capabilities. During World War II Austria suffered extensive destruction and economic dislocation, and this led Austrian governments in the immediate postwar period to utilize extensive economic planning measures and a degree of direct governmental involvement in the economy that is unknown in the experience of the United States and many other industrialized countries. The record of this experience offers opportunity to probe both the positive possibilities and the limitations of economic planning—a central issue in socialist tradition. Subsequently, the felt need for extensive planning declined, and Austrian governments have experimented with not just one, but a range of devices for putting publicly owned industrial firms on a autonomous and more or less commercial basis close to that of privately owned firms. The record of this experience offers opportunity to probe both the possibilities and the deeper dilemmas of a market socialism—another central issue in contemporary socialist thought, and the central focus of the present book. All these characteristics of the Austrian experience make it possible to isolate and probe in depth, through detailed evidence and illustration, the more inherent dilemmas of social ownership of large firms—as distinct from effects of political authoritarianism, economic or cultural backwardness, commitment to comprehensive central planning and vested interests of large governmental planning bureaucracies, or government takeovers of sick firms and industries. Much conventional thinking about socialism has failed to disentangle these factors. The primary emphasis is on administrative realities, an area where socialist theories have often been especially weak, and particularly on the effects of differing ownership arrangements upon the politics of subsidies. This, in the author’s judgment, should be one central criterion for evaluating any proposal for some form of socialism. But the treatment of Austria also reaches beyond this area, and is deliberately structured to bring out a variety of other dimensions of the Austrian evolution and experience that are significant for the overall political issue of democratic socialism in regard to large firms. Some of these other dimensions are as follows: 1. Detailed evidence buttresses a fundamental social critique of the capitalist mode of ownership for large firms, in terms of elimination of social privilege. 2. For American readers, the book is designed to bring out differences in cultural attitudes about governmental activity and about socialism as a instrument of social change, and to expand understanding of the real causes of such cultural differences. Chapter 2 and much of chapter 3 are designed to do this. Here Austria is in many respects a microcosm of the larger European pattern and of the history of Social-Democratic parties generally. Conversely, for European readers this material can improve understanding of the real causes of the hostility so many American feel toward both governmental activity and socialism, in principle. 3. Chapter 2 similarly advances a theory about political development in regard to sources of conservatism and change in any nation’s political life, and this contention is restated at the end of the last chapter. The conclusions here, which point to the real importance of ideas in politics, are critical both of traditional Marxism and of conventional descriptions of liberal-democratic political systems and point to genuine possibilities of change in all countries, including the United States. 4. The German assets issue in Austria is examined in chapters 3 and 4. This issue, however, is not discussed merely as background to enable the reader to understand the situation of an unusually large sector of public ownership (in which conservative businessmen and Socialists sitting on the boards of directors of firms were jointly charged with figuring out how to make socialism work); rather, the issue is deliberately treated in detail for an important additional reason: Many (not all) Austrian Socialists have long misrepresented the real origins of the large nationalization of 1946, which had nothing to do with any socialist ideology, in order to dramatize the idea of economic planning. The treatment of this subject, and of related climates of opinion within the Austrian Socialist Party, gives an intimate picture of an emotional tendency that is pervasive within socialist parties in many countries of the world, namely a compulsion to embrace economic planning as a mystique, as distinct from a subject of strictly pragmatic thought and rational discourse. Understanding this emotional complex is central to the issue of a market socialism. 5. Though this is a derivative, not a central, focus of the present book, attention is given to Austria’s system of wage –price intervention as an instrument if improved management of the business cycle and performance in export markets. While various Communist regimes have, through painful experience, been learning more of the usefulness of material incentives and market mechanisms, Western capitalist societies have been learning , also through painful experience, that the degree of social cooperation in restraining wage demands has a far greater bearing on the efficiency of a “market” economy than was earlier supposed. The Austrian record is consistent with other indications that a market socialism for large firms, by avoiding extreme economic inequalities, offers a social and political context for macroeconomic management that is far more functional for that purpose than the usual pattern of private corporate capitalism. The date on Austria, while providing a comprehensive picture for the period covered, have not been carried forward to the present. To do so would add nothing of significance for the purposes of this particular work, which examines the effects of large choices in institutions and the design of wholly new institutions that differ radically from those in Austria. In any case, the institutions discussed here have not undergone any basic changes since the period covered in this book. Finally, the key elements in the program proposed in the present book may be adumbrated here. A long-standing trend in modern corporate capitalism has been the growth of institutional investors. It would be only a small step in logic, but a large step in social democratization, to replace ownership by individuals in large firms altogether with ownership by municipally owned investment banks, as a new type of institutional investor under regulation, but not direct control, of the national government, with public financial inducements for venture capital from them, alongside other provisions for venture capital, while retaining stock and bond markets, existing private institutional investors, and the entire competitive market process fort the bulk of the economy. This approach would have far-reaching social and political implications: 1. A far-reaching decentralization of operative power, to thousands of autonomous financial institutions, could be achieved within the framework of socialized ownership of large firms. The entire idea that extensive socialism is necessarily incompatible with political democracy falls to the ground. 2. Extensive socialism on the plane of ownership can be combined with deliberate rejection of the “control” that has loomed large in socialist tradition. For the bulk of the economy, the purpose of societal ownership of large firms is completely severed from planning. “Private enterprise,” as a managerial concept, and free founding of new firms by private promoters would proceed undisturbed. 3. The proposal advanced in this book is neutral with respect to the basic decision on the optimal mix of market and planning elements in the economy. That decision would be made first, and different types of ownership for different sectors of the economy would then be fitted around it. A proposed system of municipally owned investment banks applies only to a market socialist sector, which, however, would presumably be the bulk of the corporate parts of the economy. Technical considerations for or against various kinds of planning or other governmental intervention are beyond the scope of this book, and are irrelevant to its purpose. The proposal allows for whatever may be deemed the appropriate mix of markets and governmental intervention. 4. Within the market socialist sector, the proposal advanced in this book is neutral with respect to governmental intervention for economic or social purposes. The purpose of a proposed capital-market mechanism, as a separate institution, is to maximize the public visibility of governmental intervention when it occurs in order to keep subsidies exposed to political debate. The absence of such a institution has been a key weakness in much of the socialist tradition. 5. The proposed new ownership structure is neutral with respect to employee participation and power in management, and is designed to keep ownership on the one hand, and employee participation in management on the other, separate as political issues. The proposal allows fully for pragmatic experimentation with a range of types of employee participation, but the overall proposal, for large firms, rejects the syndicalist formula on the grounds that it underestimates the importance of professional management for economic performance. 6. The proposed system of municipally owned investment banks involves genuine problems of regulation. But none of the problems appears insurmountable. Impurities and abuses would occur, but these need not be of an order of importance different from the abuses that occur anyway. Securities markets and financial institutions must be regulated in any case. 7. The economic functions of an aristocracy of wealth would be effectively duplicated by new social institutions, removing any economic need for great economic inequality, and proposed tax measures would work a gradual but far-reaching leveling of large personal wealth and very high income. 8. From the point of view of equality, the proposed ownership institutions would be more effective than any situation of widespread equity participation by individuals in large economic enterprises, for the latter situation maintains the idea of speculative investment by individuals and the idea of pursuit of large personal wealth as a large element in the overall political culture, with corresponding effects on tax policies. Property institutions have systemic effects, and much of American social science has operated to obscure this one. 9. For the reasons stated in chapter 1, the political experience of such change in the American social structure at home would work far-reaching changes in the dominant American outlook and produce major shifts in the larger pattern of American policies in both domestic and foreign policy areas. Among other things, it would lower the level of ideological tension between the United States and the Soviet Union and lower the intensity of military competition attributable to it—and simultaneously expand the capability of the United States to compete with the Soviet Union on the political plane in many areas of the world by occupying more of the intervening ideological space. Politics is human choice of basic purposes. The Progressive-New Deal tradition in the United States has directed a vast part of its struggles against things that are, in reality, effects of the traditional institutions of private corporate capitalism and the absence of previous experience in transforming those institutions in socialist directions. In the long run, it is always open to the Democratic Party to alter the rules and deal, not just with symptoms, but with causes.
A New Program for Democratic Socialism Leland G. Stauber Yet socialist ideas, both in the nineteenth century and in the twentieth century, while strong on criticizing capitalist arrangements, have tended to be weak, if not altogether vague, in devising practicable alternatives to traditional private ownership for the bulk of the corporate sector of the economy. There has been for decades growing realization that socialist economies cannot function well without extensive use of competitive market pressures upon firms, within the context of one or another conception of needed regulatory and planning measures by government. One result is growing trends in Eastern Europe, China, and elsewhere toward various types and degrees of market socialism—systems that combine societal ownership of large enterprises with one aspect of capitalism, namely market processes. Another result has been the growth of discussion within various Social-Democratic parties and movements of the political West about possibilities of various kinds of market socialism for large firms in presently capitalist countries. This latter discussion, however, has tended to perpetuate a quality of vagueness, so characteristic of previous socialist tradition, when it comes to concrete institutional structures, as distinct from general social aims and broad principles. A good illustration of this tendency is the recent work of Alec Nove, The Economics of Feasible Socialism. He ably surveys the Marxian legacy, the Soviet experience, and recent reform models in Eastern Europe and China, and then advances his own general conception of an optimal form of socialism, which he (quite sensibly) labels “feasible socialism.” But these prescriptions are cast in the form of broad principles and stop short of any concrete and detailed proposal for any alternative system of ownership that could serve as a general replacement for the capitalist mode of ownership in the corporate sector of modern economies. The purpose of the present book is to fill this void in the present state of socialist thinking and in the awareness of the general public as to what the range of options really is. This means pointing out social possibilities for reconciling efficiency and dynamic economic performance, on the one hand, with far greater equality. These possibilities, it is suggested, have existed in principle all along, from the beginnings of the industrial revolution, but have gone generally unnotieced Because of the grip of inherited ideological doctrines. Here the obstacles to new thinking lie just as much in the inherited belief-system of the United States as in “outmoded dogmas” of the Soviet Union. In both these nations the status quo has been defended by proclaiming there are “only two alternatives.” Soviet leaders portray the options as a choice only between their present system, with minor tinkering, and private ownership-corporate business and centralized, bureaucratic socialism. By distracting public attention from other possibilities, leaders in both nations support existing structures of power by maintaining a climate of ideological psychosis. One of the more difficult questions for modern social science would be to decide which nation has achieved the greater heights on this dimension. Like most other nations, however, the United States has become, and predictably will remain, pervasively entangled in its international environment in an interactive process that is not only political and economic but also cultural. This means America’s own inherited belief system, as it operates for Americans themselves, will be increasingly exposed to comparisons and questionings from other points of view. No human society is inherently immune to change originating in cultural processes by which new ideas, however gradually, creep into the minds of its leaders and people. Paradoxically, in recent years even the most conservative of American governments has actively encouraged trends toward market socialism—when they are located in Eastern Europe and China. It is the purpose of this book to bring responsible discussion of market socialism, of a new type, to the United States itself. In any nation, the bases of social thought are largely unconscious. In the United States, the dominant framework of social assumptions has been the principles of Liberalism, in the broader European usage of that term. These principles include (1) representative government in the political system, (2) private capitalism and private property in the economic system, and (3) a minimum type of social equality, namely equality of legal status, involved in rejection of a hereditary titled nobility and rejection of serfdom and slavery. In regard to inequality of legal status and slavery, the power of Liberalism in American culture is evident, not only in the eventual abolition of black slavery in the United States, but also in the rationale that had been produced for it. Serfdom under the ancient regime in Europe was justified with a view that assumed inherent human inequality. But in the United States few of the antebellum Southern slave holders were really able to justify slavery, in their own minds, with a view that could justify, even theoretically, the enslavement of people of white skin color. The very extent of their own belief that “all men are created equal” forced them to argue that blacks were somehow subhuman and thus to invent a racist doctrine in order to justify slavery within a Liberal culture. With the coming of industrialism and the growth of large business corporations, the underlying Liberal basis of American ideology is evident in the Progressive Movement of the pre-1914 era and the New Deal of the 1930s. Both were large-scale reform movements directed against business political influence. Neither, however, directed their attacks against the principle of private property. This commitment has been a matter of faith and celebration rather than of critical thought about is social and political consequences, and the actual range of alternatives to it. European Liberalism, the real content of what has been labeled “the American way of life,” has always contained a profound contradiction between its rhetoric of equality and actual social inequalities, passed on from generation to generation, deriving from economic inequality. In Europe this contradiction has led to all the modern varieties of socialist politics, because the protracted struggle of Liberal middle classes against the aristocratic class principle raised the issue of equality and set in motion a spirit of equality that did not stop with critique of aristocratic institutions. It prompted large parts of society, including significant parts of the middle classes, to view and judge private capitalism also by the criterion of social equality. With the transplantation of European Liberalism to the western hemisphere, the same contradiction, in reality, was transplanted with it, But in North America, quite unlike Latin America, the absence of a hereditary nobility and of Europe’s struggles of social revolution against it meant this contradiction has operated in a less class-conscious atmosphere and without a tradition of social revolution. The result in the United States has been not the reality, but the illusion and pretense of a classless society. What, then, of alternatives? If private ownership of the whole corporate sector within modern economies were to be replaced by some form of socialized ownership, a host of evils would have to be avoided, if the aim is to preserve the economic advantages of a market economy and protect the institutions of political democracy. No sound design for such an economic system can be developed unless these evils are systematically identified and thoroughly understood. For this purpose, this book makes unorthodox, but eminently functional, use of the case-study method, in order to examine these problems intensively and in depth. A major part of this book is a case study of nationalization in Austria. The subject of this part of the book, however, is not the history of nationalization in Austria per se, but problem-oriented analysis of it. In this inquiry, Austria is treated not a s a model for a program, but as a laboratory for analysis. The primary purpose of this inquiry is not to assess how well Austria’s arrangements for public ownership in Austria. By and large, they work quite well. The primary purpose, rather, is to identify systematically evils that would occur if certain traditional forms of public ownership, namely supervision of firms directly by ministries or by government-owned conglomerate holding companies, were used for a far larger scope of socialized ownership, namely replacement of traditional private ownership in the whole of the corporate sector. From the resulting analysis, in turn, a program is developed which, the author submits, effectively short-circuits all the evils conventionally attributed to socialism and reduces them not to zero, but to an order of importance no different from the impurities and abuses that occur anyway in government regulation of securities markets and private financial institutions, which is a kind of government role necessary in any market economy, no matter how it is owned, This program differs radically from the present Austrian arrangements, and departs radically from the prevailing and inherited assumptions of the world’s democratic Labor and Social-Democratic parties. This program, the author suggests, thoroughly removes the present rationale for maintaining both private corporate capitalism and its concomitant, and aristocracy of wealth, aside from allowing opportunities for individuals to get rich. It is open to defenders of the present system to devise some new rationale for it, or to reformulate their defense of it. But to do so, they will have to go back to their drawing boards and think-tanks. For the purpose of this kind of inquiry, Austria is ideally suited as a laboratory for several reasons that have hitherto attracted little notice,; to wit: In Austria the political accident of the German assets reparations issue at the end of World War II ultimately led to an unusually large nationalization in 1946, which has been retained because of the success of the Austrian Socialist Party in blocking most denationalization efforts after the end of the four-power occupation in 1955. The result is a sector of public ownership of industrial firms, as distinct from “utilities” alone, that is unusually large by comparison with most Western European countries. This extensive outright socialism has operated in the context of deeply established political democracy and quite high levels of governmental and entrepreneurial capabilities. During World War II Austria suffered extensive destruction and economic dislocation, and this led Austrian governments in the immediate postwar period to utilize extensive economic planning measures and a degree of direct governmental involvement in the economy that is unknown in the experience of the United States and many other industrialized countries. The record of this experience offers opportunity to probe both the positive possibilities and the limitations of economic planning—a central issue in socialist tradition. Subsequently, the felt need for extensive planning declined, and Austrian governments have experimented with not just one, but a range of devices for putting publicly owned industrial firms on a autonomous and more or less commercial basis close to that of privately owned firms. The record of this experience offers opportunity to probe both the possibilities and the deeper dilemmas of a market socialism—another central issue in contemporary socialist thought, and the central focus of the present book. All these characteristics of the Austrian experience make it possible to isolate and probe in depth, through detailed evidence and illustration, the more inherent dilemmas of social ownership of large firms—as distinct from effects of political authoritarianism, economic or cultural backwardness, commitment to comprehensive central planning and vested interests of large governmental planning bureaucracies, or government takeovers of sick firms and industries. Much conventional thinking about socialism has failed to disentangle these factors. The primary emphasis is on administrative realities, an area where socialist theories have often been especially weak, and particularly on the effects of differing ownership arrangements upon the politics of subsidies. This, in the author’s judgment, should be one central criterion for evaluating any proposal for some form of socialism. But the treatment of Austria also reaches beyond this area, and is deliberately structured to bring out a variety of other dimensions of the Austrian evolution and experience that are significant for the overall political issue of democratic socialism in regard to large firms. Some of these other dimensions are as follows: 1. Detailed evidence buttresses a fundamental social critique of the capitalist mode of ownership for large firms, in terms of elimination of social privilege. 2. For American readers, the book is designed to bring out differences in cultural attitudes about governmental activity and about socialism as a instrument of social change, and to expand understanding of the real causes of such cultural differences. Chapter 2 and much of chapter 3 are designed to do this. Here Austria is in many respects a microcosm of the larger European pattern and of the history of Social-Democratic parties generally. Conversely, for European readers this material can improve understanding of the real causes of the hostility so many American feel toward both governmental activity and socialism, in principle. 3. Chapter 2 similarly advances a theory about political development in regard to sources of conservatism and change in any nation’s political life, and this contention is restated at the end of the last chapter. The conclusions here, which point to the real importance of ideas in politics, are critical both of traditional Marxism and of conventional descriptions of liberal-democratic political systems and point to genuine possibilities of change in all countries, including the United States. 4. The German assets issue in Austria is examined in chapters 3 and 4. This issue, however, is not discussed merely as background to enable the reader to understand the situation of an unusually large sector of public ownership (in which conservative businessmen and Socialists sitting on the boards of directors of firms were jointly charged with figuring out how to make socialism work); rather, the issue is deliberately treated in detail for an important additional reason: Many (not all) Austrian Socialists have long misrepresented the real origins of the large nationalization of 1946, which had nothing to do with any socialist ideology, in order to dramatize the idea of economic planning. The treatment of this subject, and of related climates of opinion within the Austrian Socialist Party, gives an intimate picture of an emotional tendency that is pervasive within socialist parties in many countries of the world, namely a compulsion to embrace economic planning as a mystique, as distinct from a subject of strictly pragmatic thought and rational discourse. Understanding this emotional complex is central to the issue of a market socialism. 5. Though this is a derivative, not a central, focus of the present book, attention is given to Austria’s system of wage –price intervention as an instrument if improved management of the business cycle and performance in export markets. While various Communist regimes have, through painful experience, been learning more of the usefulness of material incentives and market mechanisms, Western capitalist societies have been learning , also through painful experience, that the degree of social cooperation in restraining wage demands has a far greater bearing on the efficiency of a “market” economy than was earlier supposed. The Austrian record is consistent with other indications that a market socialism for large firms, by avoiding extreme economic inequalities, offers a social and political context for macroeconomic management that is far more functional for that purpose than the usual pattern of private corporate capitalism. The date on Austria, while providing a comprehensive picture for the period covered, have not been carried forward to the present. To do so would add nothing of significance for the purposes of this particular work, which examines the effects of large choices in institutions and the design of wholly new institutions that differ radically from those in Austria. In any case, the institutions discussed here have not undergone any basic changes since the period covered in this book. Finally, the key elements in the program proposed in the present book may be adumbrated here. A long-standing trend in modern corporate capitalism has been the growth of institutional investors. It would be only a small step in logic, but a large step in social democratization, to replace ownership by individuals in large firms altogether with ownership by municipally owned investment banks, as a new type of institutional investor under regulation, but not direct control, of the national government, with public financial inducements for venture capital from them, alongside other provisions for venture capital, while retaining stock and bond markets, existing private institutional investors, and the entire competitive market process fort the bulk of the economy. This approach would have far-reaching social and political implications: 1. A far-reaching decentralization of operative power, to thousands of autonomous financial institutions, could be achieved within the framework of socialized ownership of large firms. The entire idea that extensive socialism is necessarily incompatible with political democracy falls to the ground. 2. Extensive socialism on the plane of ownership can be combined with deliberate rejection of the “control” that has loomed large in socialist tradition. For the bulk of the economy, the purpose of societal ownership of large firms is completely severed from planning. “Private enterprise,” as a managerial concept, and free founding of new firms by private promoters would proceed undisturbed. 3. The proposal advanced in this book is neutral with respect to the basic decision on the optimal mix of market and planning elements in the economy. That decision would be made first, and different types of ownership for different sectors of the economy would then be fitted around it. A proposed system of municipally owned investment banks applies only to a market socialist sector, which, however, would presumably be the bulk of the corporate parts of the economy. Technical considerations for or against various kinds of planning or other governmental intervention are beyond the scope of this book, and are irrelevant to its purpose. The proposal allows for whatever may be deemed the appropriate mix of markets and governmental intervention. 4. Within the market socialist sector, the proposal advanced in this book is neutral with respect to governmental intervention for economic or social purposes. The purpose of a proposed capital-market mechanism, as a separate institution, is to maximize the public visibility of governmental intervention when it occurs in order to keep subsidies exposed to political debate. The absence of such a institution has been a key weakness in much of the socialist tradition. 5. The proposed new ownership structure is neutral with respect to employee participation and power in management, and is designed to keep ownership on the one hand, and employee participation in management on the other, separate as political issues. The proposal allows fully for pragmatic experimentation with a range of types of employee participation, but the overall proposal, for large firms, rejects the syndicalist formula on the grounds that it underestimates the importance of professional management for economic performance. 6. The proposed system of municipally owned investment banks involves genuine problems of regulation. But none of the problems appears insurmountable. Impurities and abuses would occur, but these need not be of an order of importance different from the abuses that occur anyway. Securities markets and financial institutions must be regulated in any case. 7. The economic functions of an aristocracy of wealth would be effectively duplicated by new social institutions, removing any economic need for great economic inequality, and proposed tax measures would work a gradual but far-reaching leveling of large personal wealth and very high income. 8. From the point of view of equality, the proposed ownership institutions would be more effective than any situation of widespread equity participation by individuals in large economic enterprises, for the latter situation maintains the idea of speculative investment by individuals and the idea of pursuit of large personal wealth as a large element in the overall political culture, with corresponding effects on tax policies. Property institutions have systemic effects, and much of American social science has operated to obscure this one. 9. For the reasons stated in chapter 1, the political experience of such change in the American social structure at home would work far-reaching changes in the dominant American outlook and produce major shifts in the larger pattern of American policies in both domestic and foreign policy areas. Among other things, it would lower the level of ideological tension between the United States and the Soviet Union and lower the intensity of military competition attributable to it—and simultaneously expand the capability of the United States to compete with the Soviet Union on the political plane in many areas of the world by occupying more of the intervening ideological space. Politics is human choice of basic purposes. The Progressive-New Deal tradition in the United States has directed a vast part of its struggles against things that are, in reality, effects of the traditional institutions of private corporate capitalism and the absence of previous experience in transforming those institutions in socialist directions. In the long run, it is always open to the Democratic Party to alter the rules and deal, not just with symptoms, but with causes.