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Democracy at Work: A Cure forCapitalism, by Richard WolffParamjit SinghPublished online: 22 Dec 2014.

To cite this article: Paramjit Singh (2014) Democracy at Work: A Cure for Capitalism, by RichardWolff, Critique: Journal of Socialist Theory, 42:4, 631-638, DOI: 10.1080/03017605.2014.984505

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REVIEW ARTICLE

Democracy at Work: A Cure forCapitalism, by Richard Wolff1

Paramjit Singh

The word ‘capitalism’ has been famous in academic circles throughout the world for thelast two centuries. The intellectual class has developed its own ways to understand thecomplexity of the capitalist system. Once again, capitalism as an economic system hasbecome the subject of criticism and opposition due to its very nature of acuteexploitation. The failure of capitalism to meet the people’s expectations has againprompted a social resistance movement everywhere. The dissatisfaction of people withlast century’s alternative model, in the form of state capitalism, has strengthened thequestion of an alternative for a better and equitable society in future.

Keywords: Private Capitalism; State Capitalism, Crisis; Alternative; Democracy; WSDEs

Since 2008, the world market has once again been wracked by a degree of economicturbulence unusual in its scope, depth and duration. More or less no corner of theglobal economy has been untouched by this. In the central economies of NorthAmerica, Japan and Europe, this period has been universally demarcated as a majorcrisis, comparable with the Great Depression of 1930s and Stagflation of the 1970s.2

The Occupy movement, which began in the autumn of 2011, has again placed aquestion mark over capitalism as an economic system. The two strategic conceptionsof last century – social democratic parliamentarianism and Soviet-type socialism –have remained unable to emerge as strong alternatives to capitalism. The question ofan alternative again arises in the academic and intellectual atmosphere.Richard Wolff’s latest book, Democracy at Work: A Cure for Capitalism is an

attempt to suggest to us a transition from the exploitative capitalistic organization ofproduction to collective and democratic organization. He offers Workers’ Self-

1 Richard Wolff, Democracy at Work: A Cure for Capitalism (Chicago: Haymarket Books, 2012), pp. 201, $15.2 G. Albo, ‘The Crisis and Economic Alternatives’, in L. Panitch, G. Albo and V. Chibber (eds) The Question

of Strategy (Socialist Register 2013) (London: The Merlin Press, 2012).

Critique, 2014Vol. 42, No. 4, 631–638, http://dx.doi.org/10.1080/03017605.2014.984505

© 2014 Critique

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Directed Enterprises (WSDEs) as an alternative to organize production. This bookseems to be a reaction to the crisis of 2008 and the Occupy movement of 2011. It isbased on the analysis of American capitalism. He refers to the present crisis, whichhit the USA and major capitalist countries of the world in 2007 and still continues asthe worst economic crisis since the Great Depression of 1930s. On the basis ofhistorical analysis, Wolff argues that measures used in the past (particularly those ofthe 1930s), which came out of structural crises, are not possible now for severalreasons. The most fundamental is the 50-year decline and consequent weakening oflabour union movements, along with the unwillingness of the majority of thebourgeois class to consider compromise solutions that would increase their tax rates.He argues that for the last half-century, capitalism as a system has avoided criticismwithin mainstream debate, whereas other institutions—such as school, health caredelivery, marriage, transportation and urban structures, all of which are part of thissystem – have been intensely debated. However, the recent Occupy Wall Streetmovement has raised the question and reopened the debate on an alternative.Wolff divides the book into three parts. The first part deals with the historical

analysis of the crisis of capitalism. The second part explores the problems of earliersolutions and possible alternatives. The last part demonstrates and rationalizes thereal alternative of capitalism in the form of Workers Self-Directed Enterprises(WSDEs).

History as Capitalist Crisis

Capitalism, like all other systems, displays a variety of forms. If we examine thehistory of last century, we can easily visualize the four types of capitalism (liberalcapitalism, state capitalism, state regulated welfare capitalism and neoliberalcapitalism). Prior to the Great Depression of the 1930s, laissez fair economic doctrinedominated the capitalist economic system. The 50 years of progress under laissez faircapitalism in the United States and Europe produced extremes of wealth on one sideand extremes of poverty on the other. The rapid industrialization and urbanizationprocess has transformed the agricultural masses into the urban proletariat. Due tounavoidable poverty and deprivation, organized and militant trade unions weredeveloped along with socialist and communist groups as an important political forcein the 1930s. This deepened the capitalist economic crisis into a social and politicalcrisis in many countries. In the 1930s, Franklin D. Roosevelt (FDR) took over thepresidency of United States and changed his policies (due to the Great Depressionand the strengthened forces of active labour organizations) in order to savecapitalism.The Great Depression provoked the formation and immense success of the

congress of industrial organizations (CIO). The CIO organized millions of industrialworkers into a union for the first time, bringing about the greatest unionization wavein US history. Along with the CIO, a variety of socialist and communist groupsbecame active. They criticized business and capitalism more and more intensely.

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Those actions prompted and enabled FDR to present big business and richer citizenswith a plan. FDR believed higher taxes on big business could be used to meet themajor social welfare demands of the CIO, socialist and communist groups andthereby save the capitalist ownership and production system. FDR warned the bigbusiness and rich class that if they disagreed, they would soon face a population ledby increasingly anti-capitalist forces seeking much more fundamental change to thesystem. The ideas of FDR resulted in a split amongst capitalists. The portion thatsupported FDR and his strategy was sufficient to win Roosevelt the political supportthat he needed to carry through his major commitment to establish state-regulatedwelfare capitalism.FDR succeeded in building a partnership to construct a kind of social democracy in

the USA, a genuine ‘New Deal’. This partnership launched the social security system,public pensions, unemployment insurance, job creation, and so on, during thedepression years. It saved US capitalism from the risks of insufficient private sectordemand and from major social conflicts between the devotees of capitalism and anangry working class (p. 6). But during the post Second World War period, capitaliststrategies to destroy the New Deal coalition became the prevailing theme. A portionof capitalist, upper income and business groups along with backers of the Taft-Hartley Act formed a rightist coalition in order to place restrictions on labour unions.The re-formation of an old coalition between the capitalist class and variousconservative religious, racist, regional, media and patriotic organizations played akey role in undermining the ‘New Deal’. The new right-wing coalition demonizedgovernment as the ultimate cause of all social evils, such as the African-Americancivil right movement, the feminist movement, and changing family conditions,attitudes and sexual mores. This right-wing agenda, along with the neoliberaleconomic philosophy of Milton Friedman and his followers of the Chicago Schoolremains successful and has dominated US politics from the late 1970s to thebeginning of the 2007 recession.Regan in the USA and Thatcher in Britain shifted capitalism back towards a

relatively more laissez faire path in the form of neoliberalism. During the 1970’s, thecentury of rising real wages came to an end, due to changes in the labour marketfrom both the demand and supply side. The combination of computerization alongwith the other labour-saving technology, exported jobs, women surging into thelabour market, and a new wave of immigrants, ended the period of rising wages in theUSA. Due to the stagnation of real wages, the working class dream of a decent life,housing, cars, appliances, education, recreation and vocations ended. Households inthe USA turned to the only remaining way to live, i.e. borrowing. The housing loan,auto loan, or education loan becomes an important component of rising householdand consumer debt. Widely quoted statistics showed that when the Great Depressionhit in 1929, the average US family has debts that were roughly 30 per cent of itsannual income. In 2007, according to the Federal Reserve, the comparable numberwas well over 100 per cent (p. 46). Employers, who earned huge profits from stagnatingreal wages, started lending back to the workers via Asset-backed Securities (ABS).

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For 30 years (roughly from 1970s onwards), these interconnections generated enoughgain in the forms of rising debt-based consumption for the masses, and rising wealthfor the employers and the rich, to reproduce the system. Workers’ debt levels,however, combined with the stagnation of real wages to erode the workers’ capacityto service their debts. When this capacity was exhausted, a growing number ofworkers defaulted on their debt obligations. So did the major banks and many ofthose who had issued and owned ABS, credit default swaps and other speculativeinstruments tied directly or indirectly to the value of workers debts. Very quickly, thecapital market, increasingly interconnected across the world by the previous decadesof globalization, spread the impact of the US credit collapse internationally (p. 48).The heavy cost of this crisis, both directly and indirectly, was paid for by the commonmasses through deterioration in their personal lives and declining governmentservices and protection. Wolff highlights that the USA government has provided $700billion for the treasury to use, chiefly to pull the capitalist system out of crisis in twoways: the first entailed buying ‘troubled assets’, i.e. ABS, and especially badlydepressed mortgage-backed securities, from banks and other institutions. The secondinvolved the major use of a troubled asset relief programme for buying shares inbanks and other corporations, such as General Motors, AIG, Citigroup, etc. In thisway, the government has socialized the crisis by buying debt and mortgage backedsecurities of private banks and corporations without any accompanying agenda ofnationalizing the banking system.Wolff argues that throughout all the above ups and down in the capitalist system,

some aspects of it have changed a great deal, but one aspect that has remained nearlyconstant is the class structure of production (the internal organization of enterprises)(p. 79). In all forms of capitalism: private capitalism (prior to the Great Depression),state capitalism (the experience of Soviet Union), state-regulated capitalism (the eraof the welfare state in the United State and Western Europe) and neoliberalcapitalism (presently dominating the USA, Western Europe, and spreading towardsemerging economies), the word ‘capitalism’ is common, because in all these forms theinternal organization of productive enterprises is the same. In capitalism, the demandto overcome a crisis of one kind leads to the transitioning to another crisis, becausethe problems of capitalism are structural and systematic.

Different Outlook with Shared Internal Organization

The history of the last century is marked by two major wars (the First and SecondWorld Wars), the struggles of colonies for decolonization and two major revolutions(the revolution of the Soviet Union and China) for a socialist alternative. Owing toradical moves towards a socialist structure by some nations and efforts to maintaincapitalism by others the human race was divided into two major camps (capitalistand socialist) particularly because of their ideological differences regarding socio-economic development. Wolff, in the second part of book, makes an attempt to provethat although both camps rationalized their efforts and ideological differences from

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each other and endeavoured to show their superiority to each other, realitydemonstrated that the internal organization of both systems was almost identical.In his first effort in this direction, Wolff scrutinizes the major problems of

private capitalism. Under the rule of private capitalism, the decisions regardingwhat to produce, where to produce and how to produce remain with a small group.They impose their decisions on the majority of workers who are involved in directproduction activities. In other words, the directors in private capitalism are capitalists,and workers (whether they are involved in direct production, or indirectly facilitatingthe production and sale of produce) are excluded from important decisions. Inprivate capitalism, capitalists do not hesitate to enhance rates of profitability, nomatter how risky or costly it is for human beings, animals or the environment. In asociety where the private capitalist organization of production prevails, the workers –the vast majority of people – must live with the result of capitalist decisions indirecting enterprises (p. 91). The collusion of big corporations under privatecapitalism not only hijacks the economy of the nation but also determines itspolitics. The collusion has developed the political culture in which money trumpsdemocracy. For example, in the United States, politics remains utterly dependent onfinancial contributions to candidates, political parties, lobbyists, think tanks andspecial committees.In the next chapter, Wolff presents the key difference between capitalism and past

attempts at socialism. In capitalism, private property dominates, and the means ofproduction are privately owned. Whereas in socialism, productive property issocialized and becomes the property of the people as a whole – and it is thenadministrated by the state for the people as a whole. The second difference is basedon the management of resources and output. In capitalism, resources and outputs aredistributed by means of market exchange. In socialism, national planning is the majordriver of distribution of resources and outputs. In other words, private property andthe market are the key economic institutions defining capitalism, whereas stateproperty and planning defined the socialist alternative.After the rise of the Soviet Union in the early 20th century, socialism was

considered a strong alternative to capitalism, and the Soviet model was referred to asthe role model for a socialist alternative. But socialism as an economic and politicalsystem cannot be sustained. The history of the Soviet Union (the leader of socialistcamp) ended in capitalism, and the same has happened in other countries that turnedtowards socialism during the 20th century. This transition has shaken theorists whobelieved in socialism as a higher, irreversible stage of social development.Thus, what causes the failure of socialism is an important question, which Wolff

addresses in this part of the book. He analyses the internal structure of capitalism andsocialism on the basis of production and distribution. Who produces and whodistributes the surplus product is a fundamental question. If socialism claims to be adifferent system, then it must clearly differentiate itself from capitalism in terms ofhow surplus is produced and distributed. Regarding the difference between capitalismand socialism, Marx argued that socialism differs from capitalism because in a

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socialist economy those who produce the surplus (workers) themselves appropriateand distribute it. The producers and appropriators of the surplus are then identical.But the last century’s experience of socialism was not much different from capitalismwith regards to organization of the surplus. The 20th century experience of the SovietUnion and its followers was not socialism but rather state capitalism, where workersproduced the output and the surplus was appropriated by the state and distributed bystate planning.Wolff reasons that the 20th century’s socialist societies, like private capitalist

societies, were undemocratic and marked by social inequalities. In socialist societies,too, the exclusion of the mass of workers from directing their workplaces producedalienation and nurtured resentment (p. 111). Therefore, there is an essential connectionbetween the radical reorganization of production, and real democracy. Real democracycan be built only when we institute economic democracy at work. Both privatecapitalism and state capitalism (or so-called socialism in last century) lacked realdemocratic practices at the core of economic progress, i.e. within the workplace.

The Question of an Alternative

Many have long dreamed that an alternative to capitalist irrationality can berationally arrived at through the mobilization of human passion in the collectivesearch for a better life for all.3 But after the breakdown of the Soviet Union andChina’s move towards the market economy, Fukuyama’s notion of the ‘End ofHistory’ became very popular. Most intellectuals became Fukuyamean, propagatingneoliberal capitalism as the finally found model of the best possible society, with noalternative beyond this mode. But in 2000, Hardt and Negri re-started the debate onan alternative to capitalism.4 In 2008, Alain Badiou (one of the most prominentFrench philosophers) made this debate more intense by writing ‘The CommunistHypothesis’, in which he discussed the question of an alternative.5 Harvey, whilefollowing Marx’s accounts of how capitalism arose out of feudalism, presented a co-revolutionary theory to build an alternative society.6 Resnick and Wolff have alsojoined the discussion on an alternative by recommending a Marxian approach thatwould not aim to reform capitalism by either increasing or decreasing state economic

3 D. Harvey, ‘The Enigma of Capital and the Crisis of This Time’, Available at http://mrzine.monthlyreview.org/2010/harvey270910p.html, 2010.

4 For details see Hardt and Negri’s work, which they have written as a series: Empire (Cambridge: HarvardUniversity Press, 2001);Multitude: War and Democracy in the Age of Empire (London: Hamish Hamilton, 2005);Commonwealth (Cambridge: Belknap Press, 2009).

5 For detail see A. Badiou, ‘The Communist Hypothesis’, New Left Review, 49 (2008), pp. 29–42.6 As Marx argues, social change arises through the dialectical unfolding of relations between seven moments

within the social body politic. It includes the technological and organisational form of production, exchange andconsumption; the relation to nature; social relation between people; mental conceptions of the world, embracingknowledge and cultural understanding and beliefs; labour processes and the production of specific goods,geographies, services or affects; institutional, legal and governmental arrangements; the conduct of daily life; andthe activities of social reproduction. See D. Harvey, The Enigma of Capital and the Crisis of Capitalism (London:Profile Books, 2011).

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intervention, or by regulating or deregulating credit and perhaps other markets.Instead, they would aim to eliminate capitalism in the precise sense of fundamentallychanging the class structure of production.7 Wolff in this book, on the basis of hisunderstanding of the present phase of American capitalism, has suggested one of thebest possible concrete alternatives in the form of WSDEs. Wolff argued that in privatecapitalism, the board of directors, who never worked in the production units, decideswhat to produce, how to produce, what technology to utilize and where to locate theproduction and distribution facilities (p. 117). By contrast, in a WSDE, no separategroup of persons – no individual who does not participate in production ofenterprises – can be a member of board of directors. In WSDEs, the workers whoproduce the surpluses collectively appropriate and distribute those surpluses. In thisway, WSDEs are non-exploitative organizations of production because the producer,appropriator and distributor of surplus belong to same class (i.e. workers ofproduction units or organization). The employees in every WSDE are divided intotwo groups with different relationships to production and distribution of surplus. Thefirst group comprises the workers who produce surplus and who also compose theboard of directors (through democratic measures) in WSDEs. Another group ofworkers includes those who provide the conditions and ancillary services that enablethe surplus producers to function. Wolff calls these workers ‘enablers’. They includethe secretaries, clerks, receptionists, security guards, and so on, who facilitate thenecessary conditions for the first group of workers to produce a surplus (p. 128).Enablers have full rights to participate in the democratic decision making regardingthe production, appropriation and distribution of the surplus.Regarding the ownership of the means of production, Wolff argued that various

ownership arrangements can coexist with WSDEs. With a historical argument fromYugoslavia to Mondragon, Wolff claims that the major point is the internalorganization of surplus production and distribution in WSDEs, which should bedemocratic, and that it can coexist with various forms of ownership of the means ofproduction and the market mechanism. Wolff states that ‘how WSDEs will come tocoexist with private versus socialized productive property, and to coexist with themarket versus planning will not be determined by spurious claims about theircomparative efficiency. It will be determined through the construction of a particular,specific post-capitalist economic system as they emerge in transition from bothprivate and state capitalist system’ (p. 144).Economic democracy in the workplace is a perquisite for political democracy. In

the United States, it is claimed that there is a democracy in the political realm. Butonce an individual enters the economic realm – when they enter the typicalworkplace – democracy is abandoned and totalitarianism runs supreme.8 Thehistorical experience of private capitalism and the state capitalist crisis shows that

7 S. Resnick and R. Wolff, ‘The Economic Crisis: A Marxian Interpretation’, Rethinking Marxism, 22:2(2010), pp. 170–186.

8 J. Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future (New York: W.W.Norton, 2012).

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the exclusion of mass of workers from economic and political participation hasresulted in high costs to both systems (private capitalism during the 1930s and statecapitalism during the 1980s). The exclusion of workers (particularly in the internalorganization of production) from directing activities in the workplace tends to buildin expectations of parallel exclusion in everyday life. So participatory behaviour at theworkplace in WSDEs will enhance participatory democracy in surrounding localities,regions and nations.The concept that Wolff has introduced in the form of WSDEs is no utopia. It has a

real existence.9 The best example of a WSDE is the Mondragon Corporation in Spain,with more than 85,000 worker members and 50 years of history of growth. In the lastchapter, Wolff recommends that WSDEs be used as a central part in the solution ofthe capitalist crisis. It is time for the working classes and their associates to put thetransition to WSDEs on their agenda for social change. A movement for WSDEsshould seek alliances with existing cooperative movements and trade union move-ments to build concrete alternative workers institutions. For this purpose, the ‘organicintellectuals’ of the WSDEs movement can present both practical possibilities, such asthe already working of Mondragon Corporation, and a utopian vision of a real anddemocratic egalitarian society through a concrete examination of the problems ofprivate and state capitalism. As Wolff states, the elaboration and clarification ofWSDEs in theory are one part of a way forward now. Another critical aspect is theconcrete and practical establishment and expansion of WSDEs. Wolff offers apractical policy to help bring WSDEs into being. Together, the theory and practice ofWSDEs compose a powerful and attractive alternative that belongs on a seriousagenda for social change today.The overall impression of this work seems to be revolutionary, however, the

argument and blueprint is surely reformist. Wolff’s book and ideas deserve widediscussion and debate to enhance democracy in the workplace, which is the essentialprecondition for democratic practice in all remaining spheres.

Acknowledgement

I am grateful to Professor Richard Wolf for sending me this remarkable book.

9 At his website, www.democracyatwork.com, Wolff offers more than 100 examples of WSDEs.

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