The Hayekians Tyler Cowen and Peter Boettke have alerted econobloggers to a recent article by John Roemer: ‘Thoughts on arrangements of property rights in productive assets’.
Roemer has kept quiet on this topic for the past 20 years, having proposed a coupon/mutual-fund model of market socialism back in the early 1990s.
Two decades on, what does he have to say about these issues? On the whole, very little.
Roemer’s impatience and waning interest in the subject had been evident back in A Future for Socialism (1994).
In that book, property relations were candidly described as mere means rather than ends in their own right. They were not intrinsically worthy of attention, whether political or theoretical:
[In] Eastern Europe, many different proposals for what to do about the formerly state-owned firms are currently under debate…
My view is that socialists have made a fetish of public ownership… What socialists want are the three equalities [of welfare and self-realization, political influence and social status]; they should be open-minded about what kind of property relations in productive assets would bring about those equalities… The link between state ownership… and the three equalities is tenuous, and I think one does much better to drop the concept from the socialist construction….
Another instance of the fetishism of public ownership is the position common among socialists that the public should decide, presumably through some kind of representative democracy, how to use the economic surplus (or, as economists say, how to determine the rate and sectoral distribution of investment)…
[But if] there were a full set of futures markets, if externalities associated with investment were small, and if people’s preferences were formed under conditions of equal opportunity, I would have little objection to determination of investment by the market…
In sum, I view the choice of property rights over firms and other resources to be an entirely instrumental matter; possibilities for organizing such rights should be evaluated by socialists according to the likelihood that they will induce the three equalities with which socialists are concerned.
Previously, as late as 1989, Roemer had seemed to think such doctrinal matters were essentially settled and non-negotiable. Revision or amputation of these fundamental socialist principles, unlike many others, was deemed unnecessary.
Roemer himself still retained the classical enthusiasm for socialized industry, to judge by his article from that year, ‘Public ownership and private property externalities’. There, exhibiting little of the latter diffidence, he lined up dutifully behind public ownership, calling for the ‘abolition of capitalist private property… not simply the particular distribution of it that exists in capitalist societies.’
‘Market socialism’, in its 1989 definition, and even later, meant: ‘(a) public ownership of the means of production and (b) private ownership of skills and labour.’
Yet, as with many other left-wing intellectuals, Roemer’s political beliefs and professional networks were transformed abruptly during five years in the late 1980s and early 1990s.
Thus, amid the collapse of European Stalinism, Roemer would present his 1994 book as a blueprint for ‘feasible socialism’:
The countries where the opportunity costs of adopting market socialism are the least are, I believe, those that have formed in Eastern/Central Europe and out of the Soviet Union since 1989. These countries face a momentous task of institution building, no matter what kind of market system they will have, and one could argue that the costs of designing a coupon stock market, a bank-centric monitoring system, and constitutions that adequately shelter economic institutions (banks, firms) from state interference would be no greater than the costs of building a capitalist system along Anglo-American lines…
[I]ntroducing the kind of market socialism advocated here in some of these states will perhaps be politically possible in a few years… I think, as well, that this kind of transformation is not out of the question in China or Vietnam, or perhaps in Cuba.
This was recognizably wishful thinking, and unsurprisingly events did not turn out as Roemer had hoped.
An unkind reader (Jon Elster?) might suggest that Roemer could not candidly admit to himself or his readers how irresistibly the political and ideological wind was blowing in the direction of capitalist restoration, for to do so would have exposed his own work as just one more unexceptional instance in the general market-embracing process.
Roemer’s market-socialist vision did not provide any group with political inspiration, left behind no adherents, and is long forgotten. (It proved itself of momentary use to some. When in 1995 the British Labour Party abandoned its own ‘fetish’ for nationalized industry, two of its house intellectuals, writing in New Left Review, acknowledged Roemer’s coupon model as kin, if not direct inspiration, for Tony Blair’s ’new politics of ownership’).
Roemer subsequently shifted intellectual territory, devoting himself to innovative work in political science. As a kind of minor post-Rawlsian, he also did some less groundbreaking work on distributive justice
The latter field now provides occasion for him to revisit matters long neglected.
This latter term, vague and short on institutional specifics, was introduced by Rawls as a possible ‘alternative to capitalism.’ It is flexible enough to have been adopted by Margaret Thatcher (indeed, its roots lay in British anti-Labourism). On anyone’s reading, whatever substance the term might have lay in the compound adjective rather than the noun it modified. Lately it has been rediscovered as fertile material for political philosophers, generating much learned commentary.
Roemer starts his new article on familiar old ground. If exploitation arises from asset inequality (differential ownership of productive resources allows the wealthy to appropriate the labour effort of employees) he imagines what would happen if everyone owned his or her per capita share of capital goods:
In thinking about alternatives for the arrangement of property rights in the United States, it is useful to begin with some facts.
In 2007, before the financial crash, the total market capitalization of US stocks was $51 trillion. There are approximately 114 million households, and so if those corporate assets were to be owned in equal shares by households, each would own about $449 000 in corporate equities. The share of capital income (profits, rent, interest and proprietors’ income) in national income is around 25%, but this oscillates over time.
Thus, under an egalitarian distribution of capital assets, and assuming profitability and labour supply remained about the same as now, each household would earn about one-fourth of its income from capital. If we take the average real rate of return on capital to be 4%, then each household would earn about $18 000 per annum from returns on its equity portfolio.
This would, in particular, have a substantial impact on poverty.
In the 1980s Roemer had presented this scenario as ‘people’s capitalism’, in which there was no abolition of private property per se, but only a correction of its unequal distribution.
It is recognizable as Rawls’s model of property-owning democracy, and less so as Roemer’s own blueprint for market socialism.
In the latter scheme, public ownership was, though mutilated beyond recognition, nominally preserved. Roemer had defined his market socialism as ‘a politico-economic mechanism embodying competitive politics, market allocation of most goods, and public ownership.’
(In the conclusion to A Future for Socialism, he repeatedly spoke of ‘nationalization of private assets’ as a step ushering a society towards his market socialism. Elsewhere he emphasized the ‘reorganization of property rights’, rather than simply their redistribution. With Pranab Bardhan he declared: ‘We take public ownership, in a wider sense, to mean that the distribution of the profits of firms is decided by the political democratic process—yet the control of firms might well be in the hands of agents who do not represent the state.’)
It is true that a distinction between the two schemes, Roemer’s market socialism and Rawls’s property-owning democracy, is hard to maintain. In the early 1990s Roemer exerted little effort to deny their practical equivalence. In any case, his own stated views obliged him to carry on as though the precise arrangement of property relations was irrelevant: what mattered were the downstream consequences for egalitarianism.
Thus he declared early in A Future for Socialism: ‘This work was not initiated by the socialist movement but by the publication of John Rawls’s book, A Theory of Justice, in 1971.’
But Rawls, for one, insisted that ‘property-owning democracy’ was something distinct from the market-using economic arrangement he called ‘liberal socialism’.
And Roemer, in 1994, found it both meaningful and congenial to use the appellation ‘market socialism’, and to assert, with some adamance, that ‘socialism remains an ideal worth pursuing’, and moreover worth preserving as a distinct kind of egalitarianism not otherwise provided for.
He continued to refer to himself as a Marxist, not a liberal egalitarian, and did not publicly resile from previous statements like: ‘[The] Marxist negation of “unequal ownership of the means of production” is not “equal but private ownership of the means of production.”‘
Twenty years later, however, the political setting warrants less compunction than before. Roemer thus goes further, saying his vision had, like Rawls’s, simply ‘intended to maintain approximately equal corporate ownership by households.’ In A Future for Socialism he had merely proposed a system of property relations that was ‘what we currently have, except… egalitarian.’
Having retrospectively given his scheme the name ‘property-owning democracy’, Roemer now declares himself ‘skeptical of further pursuing the approach I proposed in 1994.’
Tyler Cowen is not quite correct to describe this as Roemer’s recantation. It is instead a peculiar mix of revisionism, confession and apostasy: What I said was not what I claimed to be saying at the time, and anyway I don’t believe it (“Which part?” “None of it!”) any more.
Roemer proceeds thereafter in rambling and discursive fashion, making breezily gnomic assertions about what is feasible and what is desirable, and rarely slowing to provide evidence for his claims:
[There] appear to be three alternatives for the way in which firms can be owned, which might deliver a more egalitarian distribution of income: state ownership, worker ownership, and household ownership.
The efficiency of state ownership continues to be debated. A number of industries, in a number of countries, have done well under state ownership: steel in Korea, insurance in Germany, oil and railroads in a number of countries, retail liquor in Canada, many sectors in China, and banking in Taiwan and some other countries. The key seems to be to give a good deal of autonomy to the industry, that is to shield it from political interference. As a template for the economy as a whole, it is probably not workable.
One of the very important developments of the late twentieth century was that the composition of the richest tranche of the US population changed. A very significant portion of the income of the very rich now comes from salaries, not from capital. It is earned income, in IRS terminology.
These people are the upper management of corporations, both financial and industrial, movie stars, some athletes, some highly paid professionals, and I conjecture that, for the most part, the salaries of these individuals are competitively determined. No one would challenge this claim with respect to movie stars or athletes, but many would challenge it for corporate management. I think it may well be true of their salaries as well.
It’s that sort of article. More formal or technical argument may well have been out of place, but it is remarkable that after his long hiatus Roemer did not feel obliged to be more seriously minded about the topic.
Were there no criticisms from the left he might have addressed? Was A Future for Socialism marred only by its author’s excessive political optimism and radical fervour? Do the only ‘problems that one must face if one wants to design a property-owning democracy in which the distribution of ownership of firms remains quite egalitarian’ arise from a ‘culture of greed’ existing in the contemporary United States?
Roemer today is ‘not eager to defend’ A Future for Socialism. Has he outgrown it, or have events rendered its proposals outdated? There are good reasons to imagined him satisfied with its consequences, though the book failed in its explicit aim of ‘designing the next wave of socialist experiments’.
In the late 1980s many left-wing academics found themselves in a professional bind. They had made large Marx-specific investments (the sunk costs incurred in acquiring specialized knowledge about property relations, classes, modes of production, etc.).
The time, effort and money put into this training were designed not for general scholarly purposes. The skills learnt were suited for a particular world in which socialism and social democracy were serious prospects and could be discussed, with people much like themselves, in polite collegial conversation, while also providing opportunities for deployment outside the university.
With the collapse of Stalinism and social democracy/labourism, these dedicated skills were suddenly much less valuable. Such specialized expertise could not easily be redeployed, especially in economics and political science departments. Specific investments could either be written off at a loss, or put to alternative use, if the latter could be found.
Engaging in speculation about market socialism and ‘transitology’ thus served a purpose for people like Roemer. It allowed them to deploy their available skills in an academically respectable manner, smoothing out the switching costs while gradually converting to mainstream social science.
Once this transition was achieved, it became apparent that their preoccupations now lay permanently elsewhere. The topics of the past became the past, no longer meriting sustained concern. What had been a hasty and undignified rush for the exit would henceforth discourage any return to collect belongings or settle arrears.