Social capitalism: can we assert democratic control over the economy?

Institute for Social Innovation

Could democratic socialism overcome the crises of capitalism? We live in a time of crises – economic turmoil, workplace disempowerment, unresponsive government, environmental degradation, social disintegration, and international conflict. Professor Paul S. Adler (University of Southern California) sheds light on how we can overcome these crises by asserting democratic control over the economy.


David Murillo (Associate professor at Esade): We are truly pleased today to welcome Paul Adler, who is a professor of management and organisation, sociology, and environmental studies at the University of Southern California; former president of the Academy of Management; and more recently one of the promoters of the standing working group on organisation studies in the Anthropocene at the European Group for Organization Studies. He has a truly impressive list of publications – I won't refer to them all but I will show you the book he has just published, The 99 percent econ%my: How democratic socialism can overcome the crises of capitalism. Could you please tell us a bit about this book? What are the main ideas you wanted to convey?

Paul Adler: Thank you, David. First, let me thank you for inviting me to do this. It's a great pleasure to be with you today. In summary, this is a public-facing book. In it, I try to explain why I think we need democratic socialism and how it would work. It's based on a series of lectures I gave a few years ago at Oxford, as part of the Clarendon lecture series. I tried to build on a few decades of research I've done into the management practices of some of our biggest capitalist firms.

I focus on six crises: economic irrationality and cyclical downturns, workplace disempowerment, government unresponsiveness to citizen demands, environmental degradation and the climate crisis, social disintegration, and international conflict. I argue that the root causes of each of them lie in the capitalist nature of our economic system.

I try to show why so long as the core of the economy remains capitalist (firms that employ workers as wage workers competing for profits in the market), neither voluntary corporate efforts of corporate social responsibility nor social nor government regulation can overcome these crises. Even if they can, the crises can be somewhat mitigated by those efforts.

In the book I try to argue that to overcome these crises, we need to reorient production and investment to the needs of the people on the planet. We can't afford to leave decisions about the investment of production in the hands of top managers of enterprises that are driven by the need for profits.

We need to assert democratic control over society's productive resources, both within enterprises, but also across the entire national economy. The big challenge for someone who believes that that's the future is that no one successfully implemented any such system that meets our expectations for democracy, innovativeness, efficiency, motivation... The experience of socialism in the 20th century was a very sorry one, it crossed all those four dimensions.

But in the book I try to argue that we can find something close to a working model of what that might look like in a surprising place, specifically in the strategic management processes used by some of our biggest corporations.

We can't afford to leave decisions about the investment of production in the hands of top managers of enterprises that are driven by the need for profits

As many people have observed, these corporations operate internally on something like a planned economy, with a strategic plan that coordinates their sub-units, their production investment activities, rather than relying on any market-type competition between the sub-units. When they do that, these big corporations face the same challenges a socialist planning would face at a national level. So the firm is sort of in a microcosm, experiencing the same challenges of socialist planning, as we would face at a national level if we tried to implement it.

But my argument is that when we look closely at some of the better practices of strategic management in these big firms, we see some very interesting ideas that should give us confidence that we can manage the whole economy in this democratic and strategically coherent way. I don't believe any of these firms are socialistic.

Under capitalist conditions, strategic management practices are always undermined and implemented early in a very fragmentary way. But if we socialise the ownership of the country's productive resources, then we could imagine democratic councils at the firm level, and at the local and the regional level. These [councils] could use these strategic management processes to decide on our collective social, economic, environmental goals, and how to reach them. And I try to sketch what that world would look like. That's the main idea.

David Murillo: It sounds to me, after reading your book, it truly provides a vision of where to go after the very thorough description of the root causes of our different crises in capitalism. But I guess the question now is how to bridge the gap between the vision and where we are. What is your idea about how to make progress in this direction, besides obviously, learning from what is happening in the private sector and large corporations?

Paul Adler: I spent a fair bit of time in the book trying to work through the main answers to that question, and explain why I don't think they're sufficient, and why we need to go much further in the socialist direction. We all have read so much about corporate social responsibility. There's a lot that more enlightened leadership of our firms can do to mitigate these problems we are talking about.

All of the research seems to support the conclusion that it would be delusional to imagine that through CSR and voluntary action we will overcome the climate change crisis

But all of the research seems to support the conclusion that it would be completely delusional to imagine that through corporate social responsibility and voluntary action – either within the individual firm or even with voluntary associations or firms – we are going to overcome the climate change crisis and somehow obviate the massive cycles of economic collapse that we periodically experience in capitalism, or any of these other big problems we face. Even the proponents of corporate social responsibility usually end up acknowledging this would work a lot better if we also have government regulation.

I spent some time exploring how far we can imagine government regulation of a capitalistic economy, taking us in solving these problems. I tried to explain why while government regulation could certainly do much to mitigate these problems, as long as the prosperity of a country is dependent on the profitability of the private sector, no government can impose the kinds of stringent regulations we would need on business to eliminate these crises.

No government could afford to impose such stringent regulations, because it would destroy the profitability of vast parts of the private sector, which means jobs would disappear. And that means the government would be out of business very quickly.

So I don't think we have much choice. But in the end, you have to look for a much more radical transformation of our societies and our economies. And you ask, how realistic is that? Is there a realistic path forward that would get us from here to there?

Crises are crucibles in which people's will to make more radical changes can be energised

All I can say is that we will inevitably face crises of various kinds in the coming years; economic crises of the kind that we saw in 2008, or, as we've been experiencing, perhaps another Corona crisis, and environmental crises that will overwhelm many of our cities and regions.

These crises are crucibles in which people's will to make more radical changes can be energised. I would say also political. Even when we put our faith in political leadership that has social democratic, rather than socialist aspirations, as they try to move forward with those modern social democratic programmes, they will encounter strong resistance from the business sector.

And in the face of that resistance, we will have a choice: either to move forward to more comprehensive socialism or to retreat to something less ambitious. And I think in the tension created by that sort of political crisis, we could also imagine that people's will to make a radical change might be galvanised. Unfortunately, I see the path forward as primarily through one or other of these forms of crisis.

David Murillo: Let me now go a bit down in the supply chain. We are part of this system – you and myself – as business school professors in the management profession. What is the collateral for us professors who would like to be committed to this radical change to confront the crisis we have around us? What is our role?

Paul Adler: Good question. I see a few ways to manage this strange tension in our role between working in a business school where our graduates are looking for jobs in the business sector and our role as socialists – if you accept framing it that way.

Our business school programmes should be helping managers navigate the world that they're moving into

Firstly, we train managers, but we also educate them. Our business school programmes should be helping them navigate the world that they're moving into. And as graduates from a business school, they will encounter all of these crises for which there's no simple solution. In our teaching, we have an important role to play in helping them understand the nature of the world they're entering, and the nature of the conflicts and contradictions that they're going to be encountering, so they can navigate them as best they can.

We're not only educating them as future managers. We need to be thoughtful about the variety of pressures they're coming under from within the firm and external stakeholders. But we are also educating them as citizens. They don't only work, they also vote and participate in their local communities. We have a responsibility as business school faculty to keep in mind their education as citizens as well as their training in the technical details of management.

I think education allows us to broaden our students' perspectives. I don't see my role as an educator in indoctrinating students with socialist ideas. I try to present them with competing points of view on capitalist society, and give them a very broad range of views and encourage them to reach their conclusions and find their pathway in the face of these tensions.

As far as research is concerned, I realise there's a lot of pressure on us in our research to become what we call "American boosters" for business, celebrating all the wonderful things that our enlightened business leaders can do. But I don't think we need to. I think we can climb a higher ground if we're not boosters, but we're serious scholars.

We're interested in the difficulties that business leaders encounter when they try to do the right thing. But we're also interested in denouncing the business leaders who don't care about doing the right thing and just want to enrich themselves. But there are plenty of business leaders who try to do the right thing.

I've tried to understand and theorise about the nature of the challenges scholars face, and there's plenty of room for us to contribute to a deeper understanding, and cultivate some awareness of the structural constraints of capitalism. There will be some that we will perceive more clearly if we have in mind an alternative form of the world.

It's very hard for the fish to understand the taste of water. If that's all you have around you, if you can't broaden your frame of reference, then it's very hard to see some very important things about the world you're living in.

So by studying non-capital systems, whether it's feudalism or socialism, I think we can help, in our scholarship, understand better the specific nature of the challenges that managers face. I would say one more thing. Many people who come as business school scholars with a socialist sensibility experience this as something very much more tension-filled than I do. They want to use their position as socialists to denounce all the terrible things about capitalism that they see. And they think that to be a socialist means to spend your time denouncing the terrible things of capitalism.

I think our critique of capitalism as socialists is much more profound. If we also capture the positive things about capitalism that the people to whom we're talking notice, they appreciate the fact that their lives, on average, are a lot better than their great grandparents' lives were.

They remember what their grandparents might have told them about what it was like working in the mines at the age of 15. They know that things have gotten better.

As socialists, we need an account of why things have gotten better under capitalism, without feeling like we're seeding something to the other side by acknowledging capitalism's benefits for working people. I think this problem of what to do and how to behave as a socialist in a business school is much more difficult if you think the only possible posture is one of denunciation. As long as you see yourself as offering a nuanced appreciation of capitalism, for its contributions, as well as its trepidations, then it becomes a lot easier to assume the mantle of socialists in this context.

David Murillo: Excellent. Thanks a lot for this very optimistic view on what we can do with all these systemic crises.

Paul Adler: Thank you, David. Thanks, greatly appreciate the chance.

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