Jarno Hazekamp (10349243)
Thesis Future Models of Society: Alternatives to Capitalism Supervisor: Paul Raekstad
June 2017
Master thesis Political Science
University of Amsterdam
Should Rawlsians prefer Market Socialism over
Property-Owning Democracy?
A comparison of the institutional structures of property-owning democracy and market socialism against the background of Rawlsian Justice
Table of Contents Abstract 5 Introduction 6 Thesis 6 Relevance 6 Thesis Outline 7
Chapter I: Rawlsian Justice 9
Original Position & Veil of Ignorance 9
Principles of Justice 10
Institutions 13
Chapter II: Models of Society 14
Property-Owning Democracy 14
Market Socialism 20
Chapter III: Model Comparison 24
Equal Basic Liberties 24
The Fair Value of Political Liberties 31
Fair Equality of Opportunity 33
Difference Principle 34
Difference Principle (1) The unfairness of investment games 35 Difference Principle (2) The position of the least advantaged 39
Some Further Remarks 42
Chapter Conclusion 44
Chapter IV: Maximin Reasoning and Ecological Sustainability 45
Conclusion 52
What I have argued 52
What still needs to be said 53
Abstract
In this thesis I argue that market socialism should be preferred over property-owning democracy. Against the background of Rawls’ theory of Justice as Fairness, I will compare the proposals of Meade and Thomas for a property-owning democracy with the proposal of Schweickart for market socialism. Claiming that both property-owning democracy and market socialism can secure the equal basic liberties and fair equality of opportunity, I argue that market socialism should be preferred on the grounds of the difference principle and the maximin rule. The argument holds that the difference principle is a) not only easier implemented in market socialism than in POD but, b) also brings about a better position for the least-advantaged in market socialism than in POD. The other argument, grounded on maximin reasoning, claims that parties, even outside the original position, would choose market socialism over POD on grounds of ecological sustainability.
Introduction Thesis
This thesis takes on the issues inherent in capitalism, by exploring the qualities of different institutional structures and their capacity for establishing a just society. In particular, the models of property-owning democracy and market socialism are tested in this respect. As a measure of justice, they are tested against the background of Rawls’ Justice as Fairness.
The thesis question that I want to answer is as follows: Given Justice as Fairness, should Rawlsians prefer market socialism over property-owning democracy?
Relevance
Why this enterprise? The answer is twofold. First, the societal importance of institutions and the influence of institutions on society has grown in the last decades, with increasing inequalities caused by capitalism on the global and the national scale, dividing humankind more and more into a capitalist ‘upper’ class and a non-capitalist ‘lower’ class. As
inequalities tend to increase, the problems that these growing inequalities bring with them become more and more urgent. In order to address these global issues, we need to know what causes the problem and how to find a solution. Different alternatives to capitalism have been proposed, each claiming its own strength over the other. Although the debate on different alternatives to capitalism is already substantial and still growing, there is yet a large gap to be filled, for one by comparing the proposed models in different ways and along different lines. This thesis is an addition to the discussion of alternatives to capitalism. The project therefore has societal value. Knowledge about the qualities and tendencies of certain institutional structures will create opportunities for improvement. It might eventually lead us towards a more just society or even a more just world.
Second, this thesis has an academic value. The debate on alternative models such as POD and market socialism has been going on for a while now, but little attention has gone to the connection between Rawlsian Justice and market socialism. Rawls himself does not make a decisive choice between these two alternatives, only stating that both could be satisfactory, in principle (Rawls 2001: 138). Subsequently Rawls leaves what he calls a ‘liberal socialist’ state aside and focuses exclusively on the qualities of a property-owning democracy. Following this strain of thought, academics have discussed Rawls as a
proponent of POD over welfare-state capitalism.1
I challenge the assertion that Rawls’ theory asks for the implementation of a POD. If it can be shown that market socialism has a greater capacity for reaching and maintaining the right conditions for justice, we have to let go the association of Rawls with POD and instead focus on the institutions of market socialism. It remains a separate question
whether Rawls was right when he proposed his theory of justice, but in the case that he was right and in which we would want to pursue a society according to Justice as Fairness, we would know that market socialism is the best institutional design to bring this about. Thesis outline
In this thesis I am arguing that a society structured along the lines of a market socialist economy is more adequate in facilitating Rawlsian justice than a society structured as a property-owning democracy. To do this, I am making a theoretical argument about the capacity of both models to establish a society as envisioned by Justice as Fairness. I will take on this enterprise by assessing both models of society from a Rawlsian point of view. In order to do this, a few questions must be answered: 1) what does Rawls’ Justice as Fairness contain and what kind of conditions does it require (how can it be brought about and maintained?) This question is addressed in the first chapter, where I will give a short summary of what we must understand by Rawlsian Justice. 2) How do both institutional forms of societal organization work and what are their essential characteristics? This will be the content of the second chapter, where I will analyze the proposals for POD by Meade and Rawls and the proposal for market socialism by Schweickart. I will offer a short but comprehensive summary of both. 3) How do these characteristics do in bringing about and maintaining the right conditions for Justice as Fairness? This last and most important question will be answered in the third chapter.
I will go on to argue that market socialism should be preferred over property-owning democracy. The first reason is that it can more adequately facilitate a society structured along the lines of Justice as Fairness. That is, market socialism secures the principles of justice better. The main arguments I will make to support this claim are that the difference principle is a) not only easier implemented in market socialism than in POD but, b) also brings about a better position for the least-advantaged in market socialism than in POD; The second reason for preferring market socialism over POD follows from the
use of maximin reasoning, which requires parties to choose market socialism over POD on grounds of ecological sustainability. Some other considerations will come by as well. The main argument against my case, formulated by Alan Thomas, claims that market socialism does not meet the first principle of justice on grounds of exploitation and will be addressed in the third chapter as well. I will make the competing claim that both POD and market socialism perform equally well on all principles of justice except the difference principle.
The arguments answer my research question in the following way: if it is true that, while both POD and market socialism perform equally well on the first principle and the principle of fair equality of opportunity, but market socialism performs better regarding the difference principle and maximin reasoning leads us to choose market socialism, then Rawlsian, given that they accept Rawls’ Theory of Justice, should indeed prefer market socialism over POD. If we have established this knowledge, we can disconnect Rawls from POD and focus instead on market socialism.
Chapter I: Rawlsian Justice
I want to start this chapter with the reminder that I do not question the Rawlsian approach to justice in this thesis. Rather, I accept the principles of justice and Rawls’ theory in general and use it to compare two possible institutional structures. As it were, I am checking to what extent justice is achieved when the basic structure of society is formed through either POD or market socialism. To be able to do this, I will first give an overview of Rawls’ theory and approach. In chapter two I will analyze the structures of both
economic models, after which in chapter three I will make a comparison between both models in securing Rawlsian justice.
Original Position and the Veil of Ignorance
Viewing society as a fair system of cooperation between citizens regarded as free and equal, what principles of justice are most appropriate to specify basic rights and liberties, and to regulate social and economic inequalities in citizens’ prospects over a complete life? Finding the answer to this question is the primary concern for Rawls (Rawls 2001:41). To do this, Rawls uses a hypothetical-contract situation which he calls the ‘original position’, in which parties, representing groups of people in actual society, find themselves behind a ‘veil of ignorance’. It is a situation of pure symmetry, where the veil of ignorance conceals the contingencies of social life, such as what kind of society people live in, what social class they belong, how the natural lottery has endowed them and what kind of comprehensive doctrines they adhere to. As a result, parties do not know how the people they represent will end up in the distribution, which gives them all the same reasons to implement certain principles. There are no bargaining advantages and the precept of formal equality is satisfied, making the original position fair (872). What is reasonable to one party, is reasonable to all. From a list of possible principles, the parties will choose those which specify fair terms of cooperation and will lead to a well-ordered society of free and equal persons. The guiding rationale for parties in the original position is the maximin rule, which
2 For reasons of legibility, I will abbreviate the references to only the page number, when the author and the
title used are the same as the foregoing reference. When a next reference is made to another author, I will use the whole reference.
states that, under the specific circumstances of the original position, it is rational for parties to choose a set of principles which have the best worst outcome3.
Principles of Justice
With these specific circumstances in mind, the principles of justice that parties in the original position will agree upon will be as follows:
a) Each person has the same indefeasible claim to a fully adequate scheme of equal basic liberties, which scheme is compatible with the same scheme of liberties for all; and
b) Social and economic inequalities are to satisfy two conditions: first, they are to be attached to offices and positions open to all under conditions of fair equality of opportunity; and second, they are to be to the greatest benefit of the least-advantaged members of society (the difference principle). (42-43).
These principles are to be lexically prior to each other, meaning that we must first secure the equal basic liberties before we check for fair equality of opportunity (FEO) and
thereafter the difference principle and also that are no tradeoffs permitted from the second to the first principle, nor from the difference principle to the FEO principle. Under the basic liberties we understand freedom of thought and liberty of conscience, political liberties (voting rights and opportunity for direct participation) and freedom of association, liberty and integrity of the person (physical and psychological) and the rights and liberties covered by the rule of law (44). We must also include under them the fair value of the political liberties, meaning that formal political liberties are not sufficient when the value of those liberties are not secured. Think for example of the disproportionate power of money on politics, which strips the value of the political liberties of those who are less endowed. To secure the fair value of political liberties, measures have to be taken to remove certain kinds of influence on politics. As we will see, POD and market socialism tackle this problem in different ways.
The basic liberties are required for people to develop and exercise their two moral powers as free and equal persons. One of these powers is the capacity for a sense of justice: “it is the capacity to understand, to apply, and to act from (and not merely in accordance
3 I will elaborate on the maximin rule in chapter three, where it forms the ground of one of my argument
with) the principles of political justice that specify the fair terms of social cooperation.” (19). The other moral power is a capacity to have, to revise, and rationally to pursue a conception of the good. “Such a conception is an ordered family of final ends and aims which specifies a person’s conception of what is of value in human life or, alternatively, of what is regarded as a fully worthwhile life” (19). People are equal in the respect that “they are all regarded as having to the essential minimum degree the moral powers necessary to engage in social cooperation over a complete life and to take part in society as equal citizens.” (20).
Now that the first principle is clear, let me explain the second principle, which is divided into the FEO principle and the difference principle. The FEO principle comes down to this: “supposing that there is a distribution of native endowments, those who have the same level of talent and ability and the same willingness to use these gifts should have the same prospects of success regardless of their social class of origin, the class into which they are born and develop until the age of reason” (44). To secure this, society must have a basic structure which prevents excessive concentrations of property and wealth in order to avoid political domination by a privileged class. Free education of a high quality for
everyone is also required.
The difference principle is designed to regulate social en economic inequalities and includes an idea of reciprocity. Reciprocity is understood as “a relation between citizens expressed by principles of justice that regulate a social world in which all who are engaged in cooperation and do their part as the rules and procedures require are to benefit in an appropriate way as assessed by a suitable benchmark of comparison” (49). When in the original position, parties start from a position of complete equality. They then ask themselves whether there are good reasons to depart from strict equality and which inequalities will then be acceptable in what ways (123). Social organization and economic efficiency come into play. The parties would accept inequalities when these effectively improve everyone’s situation starting from equal division. The equal division is the benchmark, from which those who gain more have to do so on terms acceptable to those who gain less, especially to those who gain the least (123).
So we get to the difference principle by taking equal division as the starting point, together with the idea of reciprocity. The idea of reciprocity selects a point of balance between claims of efficiency and equality: “those who are better off at any point are not better off to the detriment of those who are worse off at that point” (124). As the idea is
applied to the basic structure, reciprocity asks that social institutions can only take
advantage of contingencies in native endowments, social position or luck, when this results in an improved position of everyone, including the least advantaged (124). This is because, according to Rawls, native endowment, social position and good or bad luck over the course of a complete life are all not morally deserved (124). The better endowed are still encouraged to train their abilities (we could call this developing their ‘human capital’, which I will come back to later) in order to use them to improve the position for all, especially those of the least endowed.
Now who are the least advantaged? “In a well-ordered society where all citizens’ equal basic rights and liberties and fair opportunities are secure, the least advantaged are those belonging to the income class with the lowest expectations” (59), meaning the lowest expectations of the primary goods of wealth and income over a complete life. This
introduces the idea of primary goods. Primary goods are “various social conditions and all-purpose means that are generally necessary to enable citizens adequately to develop and fully exercise their two moral powers, and to pursue their determinate conceptions of the good” (57). It is important for the setup of the list of primary goods to have the political conception of the person as free and equal and fully cooperating member of society. Under the list of primary goods Rawls distinguishes five kinds of goods: the basic rights and liberties, freedom of movement and free choice of occupation against a background of diverse opportunities, powers and prerogatives of offices and positions of authority and responsibility, income and wealth understood as all-purpose means generally needed to achieve a wide range of ends and, lastly, the social bases of self-respect (58-59). The first three are secured by the first principle and the FEO principle, while the last two are
distributed according to the difference principle. This means that inequalities in income and wealth are to be to the greatest benefit of the least advantaged, which we can check by comparing schemes of cooperation and the position of the least advantaged under each of these schemes. We would then select the scheme under which the least advantaged are better off (59-60). This last statement will form the basis for one of my arguments in the third chapter.
The idea is that the principles of justice as fairness lead to stability in a well-ordered society. Stability is essential for a political conception of justice. “In order to be stable, a political conception of justice must generate its own support and the institutions to which it leads must be self-enforcing” (125). This means that citizens growing up in such a
well-ordered society think of the institutions as just and do not want to violate or renegotiate the terms of social cooperation, given their present and prospective social position (125). Because there are always gains in income or wealth to be made by one group at the
detriment of another group, we need other reasons to counterbalance these considerations. Rawls notes three such reasons, the first being the educational role of a public political conception. The second is the recognition of the more advantaged that they are already advantaged through their native endowments and that the idea of reciprocity grounded in the basic structure lets them develop and enjoy these advantages provided that they use them to improve the situation of the worst off (126). Third is the encouragement of mutual trust and cooperation by the knowledge that the contingencies in people’s lives, which affect their relative bargaining position, are not used to improve positions of individuals or groups, but to improve the positions of all within a society (126). When the institutions of society fail to implement the principles of justice successfully, thereby not generating its own support, the basic structure of society will be unstable (88-89). The importance of this statement comes back in chapter three, where is discuss the unfairness of investment games.
Institutions
By the time A Restatement was published, Rawls had spent some considerable amount of thought on the institutions that are capable of satisfying his two principles of justice. He states that the ideal descriptions of only two regime forms have this capability: property-owning democracy and liberal socialism.
“Both a property-owning democracy and a liberal socialist regime4 set up a
constitutional framework for democratic politics, guarantee the basic liberties with the fair value of the political liberties and fair equality of opportunity, and regulate economic and social inequalities by a principle of mutuality, if not by the difference principle.” (Rawls 2001: 138).
The other three major known regime forms, laissez-faire capitalism, welfare capitalism and state socialism with a command economy, are incapable of satisfying the principles of justice, as their ideal description goes against one of the principles (137-138).
4 Liberal socialism is Rawls’ term for market socialism. In the remaining of the thesis I will use the more
On the choice between POD and market socialism Rawls states that “when a practical decision is to be made between property-owning democracy and a liberal socialist regime, we look to society's historical circumstances, to its traditions of political thought and practice, and much else. Justice as fairness does not decide between these regimes but tries to set out guidelines for how the decision can reasonably be approached.” (139). Now, although Rawls states that both POD and market socialism could succeed in establishing a well-ordered society as in justice as fairness, in his chapter about institutions he continues talking about POD, while leaving market socialism aside. It is not clear why Rawls does this, but we can assume that he thinks that, because POD is closer to capitalism, most capitalist societies could more easily make the transition to POD than to market socialism.
To be clear: this thesis is a critical test of the assertion that both POD and market socialism are equally qualified for successfully implementing the principles of justice and establishing a well-ordered society of free and equal people according to justice as fairness. In the next chapter, I will explore the characteristics of both models, after which, in the third chapter, I will make a comparative case of both models.
Chapter II: Models of Society Property-Owning Democracy
We can split up the tradition of POD into two streams: the inegalitarian and the egalitarian versions. The inegalitarian ones, as articulated by Belloc and defended recently by, amongst others, Ackerman and Alstot, I do not discuss, as they explicitly do not incorporate the measures necessary for securing an egalitarian distribution like the difference principle. The egalitarian versions, of which I will discuss the proposals of Meade and Thomas, do want to secure an egalitarian distribution of capital. I will thus focus exclusively on these egalitarian versions of POD, for the inegalitarian versions are by definition never going to reach Rawlsian justice.
My analysis of POD starts with Meade, who did his research on competitive market mechanisms and the influence of property on income. Meade compares the efficiency versus the distributional aspect of price and comes to the conclusion that inequality in the ownership of property poses a problem for distributional justice. Seeing how huge the inequalities are in developed countries when writing the book, he pleads for a society in
which the ownership of property is equally distributed over all the citizens and in which a large part of the personal income comes from that distributed property (Meade 2012: 40). This leads him to the idea of a POD. He identifies what he thinks are factors that influence equality of property and income. Birth rates, demographic factors and already owned property are among them. Next, Meade proposes measures that are to equalize the income from property, the first measure being an annual property tax.
An annual tax of a progressive character which is based not on the level of total income, but upon the value of the total property owned by the taxpayer is the tax which would most directly militate against large properties with the least adverse effects upon incentives to take risks and enterprise with one’s capital. This tax like all progressive direct taxes is bound to reduce the level of private savings; it reduces the ability to accumulate capital by the richest citizens who are the most able to save. (Meade 2012: 53).
The second equalizing measure is a progressive tax on the transfer of capital wealth and property on death and inter vivos (54). There are different ways to implement such a tax, but Meade prefers one which distributes the wealth of the person who has deceased or wants to transfer money among as many people possible who have the least property owned (58). Thirdly, Meade recognizes the importance of education as a substantial factor on earning power. He proposes to facilitate education on the same level for everyone, as this will improve the earning power of those who would otherwise be subjected to lesser education and, therefore, to a lesser chance at higher earning powers5 (59). The last measure Meade talks about is the use of eugenics to influence population growth and birth rates, which I will not discuss any further as this controversial measure is dropped by other proponents of POD and does not come back in Thomas’ version. It is also in no way relevant for the connection to Justice as Fairness.
So in bullet points Meade proposal for a property-owning democracy contains the following measures:
1) Death duties/ inheritance tax. 2) The above extended inter vivos.
5 We could call this an investment in ‘human capital’. This comes back in Thomas’ version, where he explains
3) Progressive annual tax assessed on capital wealth for generating substantial budget surplus or investment in public forms of property.
4) Encouragement of institutional forms to make easier and more profitable the accumulation of small properties.
5) Development of educational policies to equalize chances in life. 6) Eugenics.
What remains unclear, however, is exactly how a more equal distribution in privately owned property could be pursued and what it would look like. For example, if progressive taxes are implemented, what rates do they have, to whom would it be distributed and at what time? Is there any form of bequest possible? How do we transfer ownership of property? Also, how much investment must go into public forms of property. These kind of questions remain unanswered by Meade.
The kind of questions above have been taken up by others trying to specify exactly how such a property-owning democracy must look like and be brought about, amongst whom Alan Thomas came up with the latest and one of the most detailed versions. His
Republic of Equals (2017) deals with the specifics and details about how property-owning
democracy should work and defends his version against other models. Below I will explain his vision, on which points it coincides and on which points it differs with the model proposed by Meade.
Thomas defends a liberal-republican theory of justice, which combines Rawls’ theory of justice with the Roman conception of freedom as non-domination. He argues that a POD is the unique model capable of satisfying the conditions of justice. Thomas’ POD has some features characteristic for his model and on which he differs with Meade. First of all, his arguments for POD follow from a different source than with Meade. Thomas tries to combine liberal political philosophy with republican political philosophy to form a coherent liberal-republican argument for POD. The republican thought deals with freedom as non-domination, built on the ideas of Pettit. The liberal part of the argument stems from Rawls’ Theory of Justice, which poses the requisites an institutional structure must meet to be able to secure justice as fairness. Another dissimilarity between Meade and Thomas is the abandonment of eugenics in Thomas’ model. Some further differences are found in the details, for which I will focus on the model of Thomas.
Now the similarities between both models are mostly found in the ways of taxation that facilitate a more equal distribution of capital. Progressive taxation of real-estate and
capital gains are also essential for Thomas in reaching equality (in this case meaning equal access to capital). The development of educational policies to equalize chances in life, which was a feature for Meade, is further enhanced by Thomas, as he makes this part of developing people’s ‘human capital’. In Thomas’ model, the notion of human capital plays a central role. We could understand human capital as the valuable proficiencies within individuals, such as talents, capabilities, knowledge and the like. It is different from material capital, such as property, and financial capital, such as wealth. Rawls understands it as ‘knowledge and understanding of institutions, educated abilities and trained skills’ (Rawls 2001: 140). Human capital is something that can be developed and nourished under the right circumstances and with the help of proper education. Because of this, a high-quality free public education and a high-quality free public healthcare system, which are to guarantee the development and adequate protection of human capital, are both essential features of Thomas’ Pod (Thomas 2017: 115, 118). Human capital is valuable on its own, but it also increases the chances of attaining the other types of capital. That is, it will help people do well on the markets.
About the economic conditions of POD, Thomas says the following:
Concentrations of private wealth will be preemptively dispersed, the economic conditions of the different representative groups will be intertwined in the way captured by Rawls’ assumptions of chain-connectedness and close-knittedness, and class animosity will thereby be reduced. All inequalities will be permissible
according to a public conception of justice that each citizen will endorse, thus reducing class conflict and increasing solidarity (Thomas 2017: 114).
The universal access to and holding of capital in a POD is intended to bring an end to political domination by the elite (the elites being the owners of large capital who use their capital to influence politics). When everyone holds capital, the virtues of character traditionally associated with them, like self-sufficiency, prudence, far-sightedness, and immunity from improper influence, will be disseminated among all citizens (114-115). This universal access to capital could be achieved though progressive taxation, demogrants and diffusion of the ownership of the means of production.
Thomas uses Roemer to show how the ownership of the means of production could be disseminated among citizens though coupons (246-252). Although Roemer called his model a coupon-based market socialism, Thomas’ thinks it is actually congruent with a form
of POD, because there is still privately owned capital, which is dispersed among the people with the main aim to prevent “a small group exerting disproportionate economic and hence political power” (247). The aim of Roemer’s proposal is to distribute capital in the forms of coupons, which can be used to buy stock on the coupon market, a market separated from the existing markets. The normal market economy still contains profit-maximizing firms, each with a management appointed by directors. People could still invest money in these kinds of firms, just as under capitalism. Next to these (small) private firms, there are public firms in which people are not allowed to invest money (247). These public firms get their capital from public banks, which monitor the management. The profits, however, go to individual shareholders, who can buy stock with coupons on the coupon market. Each individual gets an initial share of coupons from the government to invest freely. The amount of coupons each individual receives initially is the same for everyone in order to secure equality. These coupons can be used to buy shares and receive profit from those shares, or banked to receive interest (247). Workers in a certain company could also be shareholders of that company, but do not need to be. They could also decide to buy shares of companies other than where they themselves work. The coupons are tradable on the coupon market, but cannot be traded in for money, nor can coupons be bought with money. This is to prevent the wealthy from attaining the majority of shares. Upon death, all coupons are returned to the state, inhibiting inheritance of coupon stock and thereby preventing inequality (247).
This should lead to, first, effective monitoring of company performance through coupon value-fluctuation; second, to a change in political economy by preventing the wealthy to build up large stakes in equity (248). In effect, the dispersal of capital ownership should lead to people having diverse sets of ‘capital interest’ that will no longer be in conflict with social democratic values, as opposed to large equity owners using their
concentrated power to influence politics against social democratic values under the existing capitalist system. To prevent the time-horizon problem, which holds that people might still want to collect high yields from their coupon bundles in a short time, taking into
consideration age and consumption preference, Roemer proposes to pool coupons into funds where the fund member are to represent a certain demographic spread (249).
This kind of Roemerian distribution of coupons will lead to a certain kind of equality between all citizens, to the accountability of firms, to the protection of social democratic values and lastly to financial independence for each citizen. People are not
entirely reliable on wage labor as opposed to under market socialism. However, profits from shares in the coupon market are only a part of the total income for individuals, meaning that citizens could still receive wage from labor or income from investment on the private market.
Although Thomas likes the general idea of Roemer’s coupon ‘socialism’, he differs on the degree of involvement of the State. The State has a large role in Thomas’ POD, where for Roemer it does not. Thomas’ proposals for capital diffusion include a society-wide unit trust fund (as within Meade) where the State invests in all capitalized companies on behalf of all citizens and some form of individual control of equity (which could be in the form of coupons). It does not only bring about capital diffusion, but maintains it generation upon generation and works on maintaining the stability of the system (Introduction xx).
Now, the internal structure of firms under POD is slightly ambiguous. We can expect that most firms will have about the same structure as they do now under capitalism. The idea of worker-controlled firms, which are essential to market socialism, exists also in the tradition of POD, their role is somewhat controversial. Rawls’ for one notes that “Mill’s idea of worker-managed cooperative firms is fully compatible with property-owning democracy” (2001: 176). It is compatible, but not mandatory. Thomas’ version of POD also does not include mandatory worker-controlled firms, as he attacks this idea on grounds of exploitation (which I will discuss extensively in chapter three), but other versions of POD do include such a mandate, such as the model proposed by Jeffrey Reiman (2012). According to Thomas, worker-controlled firms, which are an essential characteristic of the market socialist model I discuss, are possible in his POD and will arise spontaneously “as a result of market forces and personal choices because the diffusion of capital strengthens the market power of the individual and, thereby, strengthens their right of exit” (2017: 216).
In the end, why does POD stick to its most essential difference with market socialism, the private ownership of capital (in the forms of material, financial and human capital)? According to the tradition of POD, capital forms the basis of individual
independence. It establishes the basis for self-respect and creates a safeguard against domination by others (Thomas 2017: 145). Holding of capital, it is claimed, grounds the virtue of self-sufficiency and has an educative effect on persons because of the connection with the virtue of prudence. Next to that, a great portion of life expectancy is influenced by
the past through inheriting capital (146). However, because inheriting the past through capital usually means inheriting advantages that stem from inequality, inheritance must be constraint (148). The republican side of Thomas’ liberal-republican conjunction is evidently present in this part of the argument for POD: to avoid domination by others, we need to have independent standing and a certain level of self-sufficiency. The only way to guarantee this self-sufficiency is when everyone has equal access to capital holding.
To summarize the characteristics of POD, in the models of Meade and Thomas capital must stay privately owned, but needs to be dispersed more equally. Progressive taxation of real-estate and capital gains, the distribution of capital via demogrants and the ‘predistribution’ via Roemerian coupons are the measures that need to take care of this dispersion. Constraints on inheritance are also necessary to prevent the concentration of wealth and thereby perverse influences on the political sphere. The focus on human capital and the adequate development of it by all citizens, made possible by free high-quality education and healthcare, is also essential for POD, as to disperse all types of capital and
equalize chances in life.
Market Socialism
For the market socialist model, I will use the proposal as defined by Schweickart (2002). As Thomas’ version of POD is, of all POD models, the one closest to Rawls’ ideal basic structure, Schweickart’s version is the one closest to it of all the market socialist models. Schweickart calls his model Economic Democracy (henceforth ED), which I will call it throughout this chapter as well. Throughout the rest of the thesis when I talk about market socialism I refer to Schweickart’s ED.
Schweickart developed his model of ED to attack the flaws of capitalism, through the framework of successor-system theory.6 Capitalism, according to Schweickart, carries six fundamental defects, those being massive inequality, demoralizing unemployment, unnecessary overwork, excruciating poverty, nationally and globally, lack of real democracy and systematic and sustained environmental degradation (18, 88). Although Schweickart’s work is not a direct attack on POD, Schweickart believes POD does offer not the right means to achieve the ends he wants, namely a solution to the defects of capitalism.
6 According to Schweickart an adequate successor-system theory must meet four criteria: 1) Present and
defend an alternative model. 2) Illuminate the major economic experiments of this century. 3) Clarify our understanding of various economic reforms and help formulate additional reform possibilities. 4) Envisage a transition from capitalism to the model successor-system. (2002: 9).
What does Economic Democracy look like? Three basic features are at the core of the model:
- Worker self management: Each productive enterprise is controlled democratically by its workers.
- The market: These enterprises interact with one another and with consumers in an environment largely free of governmental price controls. Raw materials,
instruments of production, and consumer goods are all bought and sold at prices largely determined by the forces of supply and demand.
- Social control of investment. Funds for new investment are generated by a capital flat assets tax and are returned to the economy through a network of public investment banks. (47).
Economic Democracy aims at abolishing private ownership of the means of production and wage labor, but also at retaining the market.
So one of the most distinctive features of Schweickart’s market socialism is the mandatory form of company management through worker control. Worker self
management means that corporate decisions are made on a one-person, one-vote basis. This includes what to produce, how to operate, how the management is structured (elections, boards, etc) and how to scale remuneration (taking into account age, function, responsibility, etc.) However, this does not mean that the workers own the means of production. They are instead owned by society as a whole. Workers can use (by renting) the capital assets of society according to their own ideas, but they do not own these productive forces (48). To rent these capital assets, firms pay a capital flat assets tax, which goes into society’s collective investment fund. Next to paying the capital assets tax, firms are required to maintain a depreciation fund in order to protect the value of capital stock entrusted to them. Every firm must set aside a certain part of their profits to be used for repairing, replacing or improving their capital assets. This is necessary to counter the devaluation of the capital that occurs through the use and wear of such capital. The depreciation fund is size-dependent. The larger the firm, the more capital assets are supposedly rented, meaning that the firms depreciation fund must also be larger (48).
So firms are worker controlled and the market is free to work at a competitive level, with only minimal restraints by the State. However, as measure to secure general equality there is a nationally specified minimum per capita income for each citizen, which acts like a
minimum wage. If a firm cannot meet this minimum, it must declare bankruptcy and workers need to move elsewhere. If workers cannot find a job at another firm, the government will offer them a position until they find other work (48). The State thus acts as the ‘employer of last resort’. These two features, the nationally specified minimal income and the State being the employer of last resort, will prove to be important in the
comparison between POD and market socialism in the next chapter.
Although ED makes use of competitive markets for regulating the economy, labor is not a cost for firms as it is under capitalism. Under capitalism, wage labor is a cost of production: company profits are cut by whatever labor costs have to be paid. It is why wage labor under capitalism is kept as low as possible. Under ED, what workers receive is not the cost of their labor, but what is left after deducting the firm’s costs, including the depreciation funds and capital assets tax. These profits are then distributed amongst the workers via a democratically decided scale. The distribution will probably be one that is as equal as possible, although top executives and management could still be granted a higher pay, because of their effectiveness in leading the company. Recognition of talent,
productive contribution and demographic factors can also be included in the distribution. Effective remuneration and recognition can be a way to attract the right people for the job, thereby increasing profits, which in the end increases the income of all workers of the firm, because of the simple fact that there is more to distribute.
How about investment? As I have said, under ED all investment is social
investment. All material capital is owned by the State and a collective investment fund is generated through the income from the capital assets tax. This social investment could go a few distinct ways. One extreme is a democratically accountable planning board, which locates all the funds according to a detailed plan. This is not the same as a planned economy, as a democratically accountable planning board will not make a plan for the entire economy, but only for new investments. It would be more like how Japan and South Korea used ‘market conforming’ investment planning during their periods of most rapid development (51). The other extreme is that the funds go to a network of public banks, which will lend the funds to firms as capitalist banks would do. Schweickart thinks the best way to allocate social investment lies somewhere between these extremes (51). A mix of market and non-market criteria needs to make sure concerns for justice and efficiency are in balance. This means that the public funds will be distributed according to a principle of
fairness first7, after which competition is introduced to promote efficiency (51).
Schweickart notes that under his version of market socialism each region gets its fair share. Schweickart sees fair share as (prima facie) per capita share, meaning in proportion to the population (51). First, each region of the country and each community within each region get their part of the national investment fund. More populated regions thus get bigger shares. This is because otherwise, if one for example based the investment on the efficiency of a region, which is largely affected by its specific history, inequalities will grow through the effect of pumping capital to already capital-intensive areas and draining capital from areas that are performing less. Capital-intensive regions do not necessarily receive more investment under ED. If investment is less than what they pay in capital asset taxes, they can compensate for this through their price mechanisms. Capital-intensive regions can just ask a higher price for their product than other regions (53).
Within the communities the allocated funds are then distributed to public banks. This could be organized such that banks that do well, meaning that they make good investment decisions and have a high success rate, get a bigger part of the distribution than banks that do less well. However, in Schweickart’s model the number of firms serviced by the bank and the rate of increasing employment are important factors as well. Allocated funds that cannot be absorbed by local firms need to go back to the region from which is came, to be invested elsewhere. This gives communities and banks incentives to create entrepreneurial agencies, seeking new opportunities for investments and startups.
On each level of government, decisions must be made about how much capital of the funds generated from the capital assets tax is to be used for the public sectors and how much for the market sectors. This is to be done democratically by the legislative bodies (55). What remains is passed down to the next level. So the funds go from the national level to the regional, then to the communal and lastly to public banks, which distributes grants to firms.
To conclude, Schweickart’s model of market socialism has three essential features: worker-managed firms, a competitive market, and public investment. The amount of democracy inherent in the firm is substantial, as the economy is regulated both by
democratically chosen government policies, as well as by democratically worker-managed enterprises. Investment per capita share will inhibit growing inequalities between regions,
7 Schweickart does not mean the difference principle here, but we could, of course, distribute the public
funds according to a principle akin to the Rawlsian difference principle. This is completely plausible under MS.
while the democratic structure of worker-management, together with the national
minimum income and the State as being the employer of last resort, stimulates equality on the individual level. Now that I have discussed the characteristics of both POD and market socialism, I will set up the arguments for my case in the next chapter.
Chapter III: Rawlsian Justice: Comparing the Models
Having described both POD and market socialism in the previous chapter, this chapter is dedicated to comparing the models in accordance to Rawls’ theory of justice as fairness. I will start by comparing the extent to which the principles of justice are successfully
implemented. As I claim that the first principle and the FEO principle are secured by both models, I make the distinctive case with the difference principle. In this thesis I assert that the difference principle is better implemented in market socialism and that market
socialism also secures a higher position of the least advantaged than POD does. Before I make the argument on the difference principle, I first discuss Thomas’ claim that market socialism is not compatible with the principles of justice on grounds of exploitation. Equal Basic Liberties
Before I discuss Thomas’ argument, recall what Rawls understands as falling under the equal basic liberties. Under the basic liberties we must understand freedom of thought and liberty of conscience, political liberties (voting rights and opportunity for direct
participation) and their fair value, freedom of association, liberty and integrity of the person (physical and psychological) and the rights and liberties covered by the rule of law (Rawls 2001: 44). Thomas claims that his model of POD secures the equal basic liberties and the fair value of political liberties by (pre)distributing material and human capital among its citizens to prevent the concentration of wealth and political power by a privileged group. I think it is true that the basic liberties as defined by Rawls are indeed secured in such a POD. The fair value of the political liberties, which is normally violated by the perverse effects of concentrated wealth on the political sphere, is also sufficiently protected through the dispersion of capital. The core element of a POD, the (pre)distribution of capital among its citizens, is thus an efficient measure against violations of basic liberties. It is on this point, however, that Thomas attacks market socialism. I will now discuss his critique of market socialism and respond to each criticism accordingly.
In chapter 8 of Republic of Equals, Thomas deals with the debate of POD versus market socialism. Thomas thinks market socialism has some institutional advantages concerning background justice, but he states that these institutional advantages arise spontaneously when successfully implementing POD in society (Thomas 2017: 216). According to Thomas, market socialism need not, and even cannot, be mandatory for achieving an institutional background that secures the principles of justice. The main argument for dismissing mandatory market socialism to achieve Rawlsian justice is that it brings new opportunities to for people exploit each other (217, 244). To illustrate these arguments of exploitation, Thomas relies heavily on the work of N. Scott Arnold, who has criticized market socialism in his work from 1994. A consequence of the newly accessible opportunities for exploitation, if you take exploitation seriously, is a defect in the basic scheme of liberties and freedom in the choice of occupation (which we could see as the fair value of association according to Thomas). This would mean that market socialism is incompatible with the first principle of justice (218). At least, that is what Thomas wants to convince us of. But is he right? In the following section I will analyze his argumentation and respond accordingly to his criticism of market socialism.
So the argument is that mandatory market socialism is exploitative, and because it is exploitative, it is not successfully implementing the principle of equal basic liberties in the basic structure of society. Therefore it is incompatible with Justice as Fairness. Now why is market socialism exploitative according to Thomas? As I have said, Thomas refers to Arnold when expressing his thoughts about the nature of market socialism. Arnold treats exploitation as something that can occur when there is an undervaluation of someone’s productive contribution by someone else, which means that the respective person does not get the fair value of his contribution. The fair value of one’s productive contribution can be measured as the value one’s labor would realize on a competitively efficient market (225). To receive the fair value of one’s labor is then to receive what it would be worth under a competitively efficient market. When one receives less than this, we could speak of an undervaluation of his labor. It then becomes exploitative when someone enters a
transaction where their contribution is undervalued while two further conditions are met. First, the exploited person must have no other realistic alternative, meaning that the
alternative cannot be excessively costly. Second, that value is realized from the exchange by the transactor; that some other agent is actually extracting the value (225).
this kind of exploitation. First off, workers could exploit other workers through wage compression (227). Because all the workers of a cooperative are the ultimate decision-makers and the residual claimants (as in Schweickart’s model) the pay rates will also be decided democratically. The argument is that in this collective decision the less productive will exploit the more productive by undervaluing their contribution. As Thomas puts it: “The self-serving biases of the worse off will see them exploitatively undervalue the productive contribution of the more talented while overvaluing their own.” (227).
Basically, the argument can be reduced to the statement that equalized
remuneration is exploitative if there is a difference in productive contribution. However, the two conditions of Arnold above must also be satisfied to count as exploitative. So the argument continues, stating that workers under market socialism do not have a real alternative. Thomas supposes that a worker under market socialism cannot just leave the firm if he or she is not satisfied with the pay he or she is receiving. Market socialism, contrast POD, has a loss of individuals’ right of exit, which makes them vulnerable to this kind of exploitation (227). People would lose their right of exit, because the employment market is not dynamic enough. This is so because first, to be hired by another firm, those workers must reach a consensus on hiring you. Second, entrepreneurs will be less likely to start up new cooperatives as they have to share profits with coworkers. Third, there will be wide variations in income in cooperatives on an annual basis and there is no public
valuation of companies via the stock market (227). The labor market, the argument goes, becomes too thin. A second consequence of this ‘thinning out’ of the labor market, next to the reduction in people’s right of exit, if we follow Thomas, is that the fair value of the freedom of occupation is not secured (228). Thomas claims that, even if freedom of occupation is not a basic liberty according to Rawls, we can derive freedom of occupation from a basic liberty like the freedom of association (228). This freedom of occupation then loses it’s fair value (meaning that people can effectuate the liberty and not only formally hold the liberty) under mandatory market socialism, because the labor market becomes ‘too thin’. Although all people might carry the freedom of occupation under market socialism, if the labor market is so thin that in reality people do not have a enough choice on where to work, this freedom then loses its value for most people. In addition to claiming this, Thomas goes on to claim that Rawls was wrong to say that only political liberties should have their fair value secured. In Thomas’ view, freedom of occupation does also a fair value which must be protected.
How good is this argument against market socialism? There are two assumptions in the overall argument, the first being that market socialism is exploitative, the second that any model with an exploitative nature or tendency is incompatible with Rawls’ first principle of justice. I do not take issue with the second assumption. I do however, take issue with the first. When Thomas uses the work of Arnold to show how market socialism is exploitative, he refers to the limited ‘right of exit’ of employees under market socialism (227). For the reasons explained above, Thomas assumes that the market in market socialism is a ‘thin’ market. Individual employees who are not satisfied with their democratically decided remuneration cannot just go work somewhere else. But here Thomas omits to note something critical, for there are solutions to this perceived problem readily available. In Schweickart’s model, which Thomas has in mind when criticizing market socialism, the State is also the ‘employer of last resort’ (Schweickart 2002: 48). This means that people always have the choice to go work for the State. Also people who have become unemployed because their firm has let them go or because their firm went
bankrupt can be employed by the State. With the State being such an employer of last resort, the right of exit of all individuals is increased. We cannot say that people have no ‘realistic alternative’, because they have. Because the State will generate an individual income that is at the level of the maximized minimum, it is not an excessively costly option for someone to go for.
Now opponents might argue that the State cannot be the employer of last resort for everyone. Of course, this is true. Not every individual can be employed by the State, as then there will be no competitive market left. This will, however, not be necessary. With a generally healthy market, most individuals will not need nor want to go work for the State, as their income will be the same or higher with their current job in the worker-managed firms. We have no reason to deny that market socialism is capable of bringing forth and maintaining such a healthy market.
Opponents of market socialism, such as Arnold, might still think democratically decided remuneration distributions under worker-managed firms are exploitative, even if the first condition of the lack of a real alternative is not met. They might argue that, the alternative being the minimum level of income, people who contribute more within a firm, but are remunerated equally as those who contribute less, are still exploited. However, when this turn is taken, the argument becomes one against equality in general. If we accept this thought, when people are contributing on different levels, the more contributive must
always be paid more. Striving for equality then becomes similar to striving for exploitation of the more talented, the harder workers and the more productive contributors. This is in direct conflict with Rawls’ difference principle, which strives for the most egalitarian distribution, only allowing for inequalities when those are beneficial to the position of the least advantaged. Also, if this road is taken, POD itself will be highly exploitative. As POD, as well as market socialism, strives for a distribution that is egalitarian, be it via other means, it will violate the fair value of labor as defined by Arnold. Nicholas Vrousalis also notices this conflict in his review of Thomas:
Note, first, that if Arnold's account is sound, then Thomas's POD is exploitative. Under POD, the after-tax income of some will fall well short of the value of their “productive contribution" […]. They are therefore exploited. So either POD is inherently exploitative, or Arnold's definition is false. (Vrousalis, forthcoming).
Stating that receiving less than the fair value of one’s labor is exploitative will disqualify both POD and market socialism. As of this, Thomas must drop this line of reasoning if he wants to defend POD.
But let us envision how worker-managed firms under market socialism would reason. It seems rational and reasonable for workers to think of a distribution that allows the more contributive to receive more income. They have some capabilities that make them a valuable asset to the company. They might be more talented, more enthusiastic or they might be just harder workers. Having these kind of people in the firm will make the firm more successful, generating a higher income per employee. Therefore it is rational for the workers to decide democratically that the more productive or those who work at higher or more demanding functions will receive more income than the less productive, while retaining the highest possible minimum. This kind of rationale is always inherent in a competitive market structure and will provide extra security of income for those people who are more productive. If they really are that much more productive, they could threaten to leave the firm and go work somewhere else. Such productivity will be recognized and valued by other firms, which gives them, again, a greater right of exit.
Thomas argues for another possibility for exploitation under market socialism , when he discusses how Arnold uses the argument that workers of especially large
they rent from society, to create a conflict of interest between workers (who do not own the capital) and society (who does own the capital) (Thomas 2017: 232-234). This would lead to the exploitation of tax payers by the worker-managed firms.
But here, again, Thomas omits to mention the solutions that have been already currently developed. One such remedy is Schweickart’s proposal to implement a depreciation fund, which is demanded of every cooperative so as to secure the maintenance and value of the capital used by the cooperative. The idea is that every firm must set aside a certain part of their profits to be used for repairing, replacing or improving their capital assets. This is necessary to counter the devaluation of the rented capital that would occur through the use and wear of the capital. Such a depreciation fund is size-dependent. The larger the firm, the more capital assets are supposedly rented, meaning that the firms depreciation fund must also be larger. The more capital is rented, the larger the depreciation fund needs to be (Schweickart 2002: 48). This proposal in Schweickart’s model counters the argument posed above by Thomas. Although it might be that large cooperatives have an incentive to use short-term policy and devalue thereby the capital the rent from society, the implementation of a depreciation fund as found in Schweickart’s model will keep them from doing so.
The argument for exploitation of the tax payers by worker-managed cooperatives is strengthened, Thomas argues, by the ‘moral hazard problems’ market socialism faces through society’s control of public investment (Thomas 2017: 235). Instead of pumping investment into areas that are most likely to yield a return, funds are directed to areas that are on the political agenda, most likely areas that are performing badly. Combined with market socialism’s goal of full employment, this creates a structure where companies can be saved from going bankrupt with the aid of public funds. Within such a structure, a
cooperative can easily exploit the system by being reckless with the capital assets they rent, as there is less risk to fail, go bankrupt and lose employment (235).
The problem with this argument is that it doesn’t recognize the true goal of public investment. It is true that with market socialism, society may find it better to invest a larger part of public funds into areas that are having socio-economical problems. Investment does not always need to go where the probability for a large return is the highest. The goal of market socialism is to make society more just and a part of this is securing a high level of equality. When some areas are recognized of being in need of more economic stimulus, society can act accordingly and decide democratically what part of public fund could be
used to provide this stimulus and increase the position of those people living in such areas8. On the other hand, when firms are showing themselves to be reckless, inefficient or
inherently flawed, providing no account of improvement, society will cut off future investment and those firms will go bankrupt. We could use the model as proposed by Schweickart, in which the national investment fund gets allocated first to regions and communities according to their per capita share, after which communities will distribute it to public banks. Local businesses can request a grant from the local public bank to invest in the firm.9 Over this grant the capital assets tax must be paid, just like over the firm’s other capital assets (Schweickart 2002: 54). To get this grant a profitable project proposal must be presented, preferably one which promises increased employment (56). Because firms are transparent in their performance, a certain level of success and effort is necessary in order to maintain existence. Public banks can recognize those firms that are not worthy of investment, when they do not present a profitable proposal or when the initial grant does not deliver enough return via the capital asset tax. They could then cut off further
investment. This model gives firms enough incentive to perform well and precludes abuse of public investment funds as denoted by Thomas.
To summarize this part on the comparison between POD and market socialism: Thomas claims that market socialism is not as capable of reaching Rawlsian justice as POD is. His argument for dismissing mandatory market socialism is that market socialism is exploitative and therefore violates the first principle of justice. Thomas builds on the arguments of Arnold to explain why market socialism must be exploitative. The definition they use involves a notion of contributive undervaluation accompanied by two conditions, that of the lack of a realistic alternative and that of value extraction by the transactor. They argue that under market socialism, people could be exploited through wage compression. The less productive will as a collective undervalue the more productive while overvaluing themselves. The more productive have no realistic alternatives to go and work somewhere else, because they will have a strongly decreased ‘right of exit’. This follows from a
supposed ‘thinning out’ of the labor market under market socialism. The freedom of occupation that Rawls supposes to exist under market socialism, is actually jeopardized. There is only formal freedom, but the fair value of that freedom is not secured.
8 Schweickart’s prima facie per capita allocation allows for these kinds of considerations (Schweickart 2002:
53).
9 In After Capitalism, Schweickart notes that it might be necessary for large enterprises to have access to
additional funds on greater scale. This might call for the need of public banks on the regional or even national level (2002: 56). The idea, however, stays the same as discussed above.
I have countered the argument by noting that the loss of ‘right of exit’ can be solved by Schweickart’s proposal for the State as the ‘employer of last resort’. The result is that Arnold’s first condition for exploitation is not met, meaning that the accusation of market socialism being exploitative has to be dropped. A possible counterargument from POD could be that we do not need the condition of having no realistic alternative to speak of exploitation, but is refuted by the notice that this line of argument holds a contradiction to Rawls’ second principle. It then becomes an argument against equalization of
remuneration in general, which goes against the difference principle. Also, if this view is held, POD is subject to the same exploitative tendency as market socialism, as they are both seeking to establish more equality.
Thomas further states that (large) cooperatives have an incentive to devalue the capital they rent from society with short-term policies, creating a conflict between workers in a firm and society. This argument is countered by Schweickart’s solution of
implementing a mandatory depreciation fund. Lastly, Thomas stresses the ‘moral hazard problems’ market socialism faces with the allocation of public funds, which he thinks will generate recklessness and a lack of accountability within firms. This last argument I addressed by noting that the democratic structure of the allocation of public funds is one of the strengths of market socialism and that both fairness and efficiency are secured by the way public funds are distributed from the national level to public banks and from the banks to individual firms.
So it seems that market socialism has not been successfully dismissed by Thomas, as the claims brought against market socialism do not hold to be irrefutable. Both POD and market socialism are equally able to secure the equal basic liberties for all. What Thomas’ argument did do, is show where we need to put special attention to when we decide we want to establish a market socialist society, for example of the kind proposed by Schweickart. Exploitation is always something we want to avoid. I have shown that, with the policies characteristic of Schweickart’s model, we can.
The Fair Value of Political Liberties
As I have noted in the first chapter, the first principle of justice includes not only political liberties, but also the fair value of those political liberties. It requires that the political liberties, such as voting rights and opportunities to participate directly or hold officice, are not merely formal, but are really equal for everyone. This usually requires measures to
prevent the perverse influences of concentrated wealth on the political agenda. Although POD takes measures to increase the fair value of political liberties for everyone by
preventing the concentration of economic and hence political power of the wealthy, there are still concerns that the fair value of political liberties is not entirely secured under POD. Thomas himself acknowledges this when he says that ‘with this dispersal of concentrated control, the wealthy may continue to have greater practical “value” to their liberties or more control over the political process, but their motivations have changed’ (Thomas 248). It is difficult to see how much control the wealthy still remain to have under POD, but the recognition of the possibility emerging is already disconcerting. Securing the fair value of political liberties by ‘changing motivations’ is a difficult venture and seems somewhat naïve. If we make a direct comparison to how market socialism performs on this requirement, we can assert that market socialism triumphs. Within government, be it on the national, regional or communal level, democratic structures are ubiquitous. From the smallest scale, the communities, citizens are incentivized to participate and take interest in politics. From down at the bottom up to the top of the chain, people have real opportunities to
participate in and influence the political domain. As all investment is public and needs to go through these democratic structures of allocation, there is no lop-sided influence coming from the market or industries. The effect of wealth on the political agenda has been nullified.
Next to this, there will also be democracy in the ‘political’ sphere of the firm. Within firms there is a separate political domain, where, under capitalism and POD, the owners of the firm and the shareholders have political say. In market socialism, the workers have a say via the one-person, one-vote structure. As the role of the firm does impact citizens’ life heavily, it is most appropriate and beneficial to the fair value of political liberties that workers of a firm have democratic control.
Admittedly, I have sketched the ideal picture of how market socialism works. In reality, corruption seeks its way into politics on the individual level. However, the structure of market socialism does best in preventing unequal leverage on the political and securing the fair value of political liberties for all, especially if we take into account the psychologies that Justice as Fairness should generate within the citizenry.
