11-12-08, 9:51 am

Principles of a MORE SOCIALIST economic reform program for today's capitalism:

1. The market mechanism is an effective control device for a myriad of unimportant decisions, and as an arbiter of the economic value of a commodity. But it fails important equity, efficiency, and stability tests.

2. A sophisticated, complex and dynamic financial system such as ours must play an essential role in enabling scientific and technological revolutions to emerge, be tested, and successfully be deployed throughout society. However, this process is inherently so destabilizing that serious depressions and greatly aggravated class conflict are its natural consequence. Thus: finance cannot be left to free markets.

3. Decentralized markets are particularly unstable and inefficient for an economy in which capital investment constitutes a significant portion of private national product, and investment goods are expensive to produce.

4. Under capitalism, financial resources will not be risked on large-scale, long-lived capital assets without protection against market forces. Public control, if not outright ownership, of large-scale capital intensive production units is essential.

5. A MORE SOCIALIST form of capitalism will be more stable than a LESS SOCIALIST form. The greater stability comes from the counter-cyclical impact of government deficits in stabilizing profits. However, if a MORE SOCIALIST form of capitalism is not going to be inflationary, its government must have the taxing and fiscal authority to hold back profits through budget SURPLUSES when and if inflation rises.

6. The historical emphasis (since the New Deal) on investment and 'economic growth' rather than on employment as a policy objective is a mistake. A full employment economy is bound to expand, whereas an economy that aims at accelerating growth through devices that induce capital intensive private investment may grow, but will also be increasingly inequitable in its income distribution, inefficient in its choice of technologies and techniques, and unstable in its overall performance.

7. The employment strategy of a MORE SOCIALIST form of capitalism would be as follows: a) The development of public, private, and in-between institutions that furnish jobs at a non-inflationary base wage, for any person laid off from the private economy. b) Remove all barriers to labor force participation (for example social security penalties). c) Modify the structure of transfer payments (unemployment compensation, AFDC-type payments, etc) to accommodate government as the employment of last resort. d) Retraining privileges equivalent to military service for all. e) Access to national health care coverage. f) Enhanced public retirement protection. g) In a full employment economy, compensation for increased productivity can include SHORTENING THE WORK DAY, especially in the lower third of the income scale. The most challenging policy and administrative challenge implied in these principles is, of course, the 'base wage.' By guaranteeing full employment, government effectively sets the economic floor for any and every member of society. It must take care that advances in the floor -- surely the greatest promise of sustained economic productivity growth -- not fall prey to the temptations of 'great leaps forward,' which would lead to an inflationary spiral -- and ultimately a crash.

We can meet this challenge.

MORE SOCIALISM lies on the path to recovery from the economic crisis, for sustainable growth, including the foundations of well functioning markets for billions of goods and services.