This article appears in the August 2024 issue of The American Prospect magazine. Subscribe here.
The most distinctively American contribution to the world’s philosophical tradition is pragmatism. Developed by Charles Sanders Peirce, John Dewey, and others in the late 19th and early 20th centuries, pragmatists typically approach classic philosophical questions from the angle of usefulness and practicality. Peirce famously summarized it like this: “Consider the practical effects of the objects of your conception. Then, your conception of those effects is the whole of your conception of the object.”
Whereas other philosophies attempt to uncover the fundamental nature of existence, truth, or thought, pragmatists tend to set such questions aside. “Truth cannot be out there—cannot exist independently of the human mind—because sentences cannot so exist, or be out there,” writes philosopher Richard Rorty in Contingency, Irony, and Solidarity.
Socialism has not been distinctively American at all throughout its history. But maybe by directing it through a pragmatic lens, we can make a case for how it can function here, and indeed how it has functioned elsewhere in the world. This won’t be a perfect fit, but in keeping with a pragmatic viewpoint, it may at least be something we can live with.
Morality and Value
The most prominent socialist tradition, of course, is Marxism, whose basic argument is that capitalism is based on the exploitation of the labor of the working class, and will undermine itself thanks to its inherent contradictions, ultimately leading in dialectical fashion to a socialist revolution.
I think this is a fundamentally flawed approach. Marx’s theory is built on Hegelian dialectics, and is incommensurate with arguments in which a moral standard is outlined and then strategies to achieve it worked out. As Polish philosopher Leszek Kołakowski writes in Main Currents of Marxism, the working class has “no need of a separate imperative telling them that they should strive for liberation in general or that freedom from oppression is a good thing.”
The economic institutions of America and the world are so flagrantly unjust that one doesn’t need a metaphysically and logically airtight theory to justify radical reforms. It is howling injustice for a handful of oligarchs to control nation-state-sized hoards of wealth while millions go hungry. Economic institutions should be rearranged to produce the most equal practical distribution of resources. That’s enough to get started, without the need to wait for the system to collapse of its own weight.
Before any kind of detailed program, we need a rough story of how an economy can work. Marx’s labor theory of value (LTV) comes directly from classical economists David Ricardo and Adam Smith. If labor produces all value, then it follows that capitalist profits are all appropriations of labor’s surplus.
There are several objections to the LTV from a pragmatist standpoint. First, Marxian value is impossible to measure. Workers use tools and machinery, which are of course produced by other workers. You can account for this by separating out the labor time used to make the tools, but of course those workers used tools as well. For a pragmatist, this is a lot of complicated, pointless abstraction.
The upshot is that workers are being exploited, which can be easily demonstrated on other grounds. For instance, because a traditional firm is organized as a dictatorship, with the boss able to fire any of his employees on a whim, the worker’s time and energy is necessarily exploited.
Furthermore, if labor produces all value, one can easily conclude that laborers are the only ones who deserve to enjoy that value. Lenin and Stalin argued along these lines; the biblical aphorism “He who does not work, neither shall he eat” was inscribed in the Soviet constitution. But at any one time, about half the population is not working, and most of them are children, seniors, disabled people, students, carers, and the unemployed. These are not capitalist exploiters, and yet they need income too.
The Social Product
What I’ll call the “social product” consists of everything associated with an economy above the level of subsistence hunting, gathering, or farming, where significant cooperation becomes necessary. This includes virtually everything in our modern economy, even food. Workers are centrally involved in the social product, of course, but so are raw materials, infrastructure, money, credit, the legal system, customers, and many other factors.
I’ll even admit that entrepreneurs can, in certain circumstances, be quite important to the process. By all accounts, Bill Knudsen, a top executive at Ford and General Motors in the early 20th century, and later one of the central architects of the American war machine in the 1940s, was instrumental in the development of the modern automobile assembly line. However, I do deny that a capitalist business owner is necessary for the economy to function. The core functions of Knudsen and those like him are leadership and innovation, which do not require one or a few persons to own the entire firm.
Indeed, there are examples of highly successful noncapitalist firms owned by the state, their workers, or their customers, particularly in the Nordic countries, which have the most real-world experience with a democratic, pragmatic form of socialism. Last year, I reported on S Group, a massive consumer cooperative business in Finland. There I found a culture of highly professional managers who had modernized and upgraded its business practices, taking it from accounting for about 15 percent of the Finnish grocery market to almost half. They were well paid, but not by American standards. Tesla CEO Elon Musk, for instance, recently got a one-off pay package of something like 55,000 times the annual salary of the S Group CEO.
For a pragmatic socialist, antitrust is a critical tool, not an enemy school of thought.
There are further background conditions necessary for economic activity that most people take completely for granted. Modern manufacturing, for instance, requires scientific theories and evidence that have been painstakingly built up over centuries and written down, so we don’t have to perpetually rediscover them. If you are designing or building anything, you’ll need to determine what size the pieces should be. Weights and measures have also been standardized over centuries and today can be assessed using highly accurate tools that cost only a few dollars. Remove any one of these (and no doubt many other) pieces of economic architecture, and the economy would cease to function.
Therefore it is not possible even in principle to determine which portion of economic production is produced by labor, or capital, or raw materials, or whatever else, since each one is a but-for requirement necessary for the whole operation. It is the entire system in concert that produces the social product. In other words, it doesn’t actually matter where the social product comes from exactly. Because of this, everyone deserves the most equal possible share of the social product, not only because we are all equal citizens, but because virtually everyone participates in its creation in some way, at some point.
I find this vastly more plausible—and far less complicated—than the labor theory of value, or neoliberals’ marginal productivity theory, or anything else. Of course economic production depends on workers, able leadership, raw materials, machinery, built-up technology, and who knows what other stuff. In addition, it underlines a point that I think is rather underappreciated on the American left: The functioning of economic systems of production, whether capitalist or otherwise, is extremely dependent on complex technical details, above all government policy frameworks. The ultimate destination of the social product is based on millions of conditions: the kinds of businesses and who owns them, the number and character of competitors, the rate of taxation on all the various kinds of income, state rules and regulations, the population and income level of the public, and so on.
Whether a market exists is often much less important than how it is structured and regulated. This is informed by a lot of Prospect reporting. Our special series on pricing, for instance, explored how something so seemingly straightforward as the price of something can vary wildly depending on business behavior and regulation. Economists typically picture prices as being set through an auction with open offers from sellers, and open bids from buyers. But the internet and constant data-gathering from surveillance advertising allows companies to use price discrimination—that is, charging each person the absolute maximum the company estimates they are willing to pay, using an endless array of surveillance dossiers. If this were to become the norm for every price, it would render nearly all traditional economic theories of price, including supply and demand, completely useless. But the government could head off this disastrous future by protecting online privacy or banning surveillance advertising.
AP Photo
Entrepreneurs like the developers of the assembly line can be critical to creating social product, but are not necessary for an economy to function.
The financial system deserves special attention, because while sundry financial products can be used to finance new productive investment, they can also be used to finance unproductive boondoggles, or suck the life from existing productive investment. The great housing bubble of the mid-2000s saw Wall Street handing millions of loans to people who could not pay them back, eventually causing an economic crisis. Or I’ll once more cite Prospect reporting on how parasitic vulture capitalist firms have ruined regional hospital chains, thousands of local newspapers, Red Lobster, and many others. Heavy regulation on the financial sector—or the state directly funding wanted investments, as the Biden administration has done with clean energy—is necessary to get financiers to behave.
This is why for a pragmatic socialist, antitrust is a critical tool, not an enemy school of thought. Public options are a useful tool for curbing corporate power, but regulatory safeguards can also do the job. Insofar as businesses operating in a market are part of the economy—and given the undeniable success of at least some businesses in producing high-quality goods and services, there is every reason to grant them some space—we will need an elaborate regulatory state to get them to function properly.
Elsewhere, I’ll freely admit that markets are an unsuitable tool. In home insurance, you are charged precisely what you are statistically expected to claim, plus some profit for the insurer. But in health care, many people have severe or chronic conditions that are certain to cost much more than they could possibly pay. In a pure health insurance marketplace, such people would find themselves uninsurable, and quickly thereafter, dead.
Market-based health care policies like Obamacare rely on a bewildering array of regulations that add great expense and complexity and still don’t work particularly well. American health care is by far the most expensive in the rich world, while the health outcomes of the American people are mediocre to appalling.
A pragmatic socialist judges economic institutions not with reference to some abstract metaphysical notion, but by what results they produce in practice. Markets are a technology—a form of government planning—that are useful in some areas if properly controlled, but less so in others. Neither markets nor anything else deserves pride of place in the socialist economic toolbox.
What Is to Be Done?
The objective of pragmatic socialism is to equalize the distribution of resources as far as practically possible. How far, you ask? Well, let’s give it a try and see how far we can get! Luckily, there are working practical ideas in other countries and even the United States itself to provide inspiration.
The first thing is to help rebuild the union movement. The National Labor Relations Act should be overhauled to require sectoral bargaining, meaning union contracts will be negotiated on an industry-wide basis rather than at each individual shop, and the resulting contract will be extended to every firm regardless of union membership. Stiff penalties will be levied on employers who refuse to negotiate. Second, build a proper welfare state. This will provide an income source to all categories of nonworkers mentioned above, and equalize incomes between households with different numbers of nonworkers. Welfare programs for each category of nonworker—a child allowance, disability and unemployment benefits, a pension for the elderly—will virtually eradicate poverty. Medicare for All will ensure universal health care, and paid family leave, a child allowance, and public day care will enable citizens to have whatever size of family they want.
U.S. policymakers are obsessed with means-testing the welfare state, to prevent anyone deemed undeserving from qualifying. But you can just as easily ensure that with stiff and progressive taxation, particularly on the rich. The point is to raise revenue from the broad population to fund the welfare state, while also legally prohibiting the accumulation of vast wealth.
Third, rebuild the regulatory state. The government must ensure the safety of transportation, the cleanliness of water and air, the purity and nutritiousness of food, swift punishment for scams and fraud, and so on. The regulatory state in America does a lot of good, but it is unforgivably slow and dysfunctional, primarily due to a lack of state capacity.
U.S. society may be more primed for pragmatic socialism than people think.
As a motivating example, two years ago I traveled to the Faroe Islands to report on their tax system, which tracks every wage payment through a central database, automatically takes out any tax owed, and adds any owed benefits. Ordinary workers never have to think about it, businesses don’t have to bother with payroll processing, and the government has almost perfect real-time economic data. That’s good government.
Fourth, democratize property. Wealth ownership in America is hideously concentrated—the top tenth of American households own 67 percent of all wealth, the top one-hundredth 30 percent, and the top thousandth 14 percent. The bottom half, meanwhile, own a whopping 2 percent. The fact that about a third of national income accrues to capital owners makes property a gigantic engine of inequality. Taxing large fortunes out of existence is one remedy. Or we could nationalize various firms, or require publicly traded firms to hand over part or all of their stock to their workers, as the Bernie Sanders campaign suggested in 2020.
But the simplest and most effective strategy, as Matt Bruenig argues, would be to levy a variety of taxes and use the proceeds to build up a social wealth fund. Eventually, the government would own most of the country’s stock, and pay out the returns as a citizen dividend to every American equally. Alaska has a similar fund (built up with oil revenues rather than ordinary taxes, but the principle is the same), and it is both immensely popular and greatly reduces inequality. A rapidly growing share of American wealth is already held by index funds, where investors simply own a representative slice of the stock market. Morally, there is every reason to spread out the capital income resulting from wealth ownership, and practically, the institutions are already there and functioning.
All this may sound like neoliberal, technocratic “government by experts.” But the problem with technocracy is a conflation of morality with technical competence. Experts can only give you a menu of options, along with their particular upsides and downsides. They cannot tell you which option is morally best—which may be a more expensive one. As British economist John Maynard Keynes remarked in 1942: “Where we are using up resources, do not let us submit to the vile doctrine of the nineteenth century that every enterprise must justify itself in pounds, shillings and pence of cash income, with no other denominator of values but this.”
Real-World Models
We don’t have to reach for a real-world example of this kind of setup. The Nordics make a good starting place for this discussion, given how many of my ideas were lifted wholesale from those countries. I have already mentioned the national co-op arrangement in Finland and the highly efficient tax administration of the Faroe Islands.
On the one hand, we have the long reign of the Swedish Social Democratic Party, which started in 1932 but ultimately ended in the 1970s thanks to capitalist opposition to the party’s Meidner Plan, which had been gradually building up “wage earner funds” filled with company stocks and managed by the state. After the 1976 loss, the party moderated and did something of a neoliberal turn. On the other, we have Norway, where the state actually has built up a majority share of the national wealth through its tremendous social wealth fund, and maintains direct ownership of numerous large companies, with no evident problems. Finland and Denmark are somewhere in the middle.
In my view, Nordics are very unusual, and in Norway in particular the resources for its social wealth fund are mostly based on revenues from North Sea oil. Nevertheless, they are a proof of concept that extremely stiff taxation, an ultra-generous welfare state, and collective ownership of most national wealth are not only possible, but compatible with a cutting-edge wealthy economy. By and large, they are just as productive and innovative as America. It shouldn’t be ignored that America has the largest set of natural resources in the world, and thus the raw materials to carry out this program.
When we examine the history of where the Nordics got where they are today, we find a great deal of contingency, opportunism, and most of all hard work. Contrary to popular myth, for instance, these countries have not always been egalitarian paradises. At the turn of the 20th century, Sweden was one of the most unequal countries in the world, with a voting system where the rich literally got more votes. But when the electoral system was reformed in 1910-1911, leading to universal suffrage in 1921, the Social Democrats eventually took power and wrenched down the share of wealth held by the top hundredth of Swedes from 60 percent to about 20 percent. (They stayed in power for the next 44 years.)
Finland’s S Group did have the advantage of having been established for decades, but by the 1990s it was severely dysfunctional and verging on bankruptcy. It took a lot of grinding work to build it up to where it stands now.
What we can question is whether Nordic pragmatic socialism can be instituted elsewhere, especially in the largest countries, given the dominance of global capitalism. The Meidner Plan faced opposition from the Social Democratic Party’s own finance minister, in part because he feared a loss of confidence in money markets. The relentless undertow of capitalism can tend to undermine pragmatic socialism, even when pragmatic socialists are the government.
Norway, thanks largely to oil revenues, has engrossed three-quarters of its national wealth into state-owned institutions.
However, established socialist institutions, especially the welfare state, tend to be so popular that conservatives hesitate to demolish them. It’s not a guarantee, but it does help. Conservatives were in power in Norway from 2013 to 2021 (after which the Labor Party retook power), but did not tear up its welfare state, nor attempt to give away its social wealth fund to the rich. Additionally, a strong union movement serves as a check on state power. Finland recently elected a sharply right-wing government, but its proposed welfare cuts and attacks on union rights led to a massive strike wave. Even the Trump administration could not repeal Obamacare.
Certainly the U.S. does not have the same strength of labor unions or a large cooperative movement as in the Nordics. Moreover, the homogeneity of Nordic society does make it somewhat easier to pitch egalitarian solutions; indeed, immigration has become a flashpoint in countries like Denmark. Translating that to a multicultural society like the U.S., where out-group fearmongering accompanies any and every attempt to reduce inequality, will be a serious challenge.
But the U.S. does also have its own substantial advantages. Indeed, in many ways the tiny Nordics face a far more challenging economic context. Unlike America, they do not have a gigantic internal market, and so depend utterly on international trade. Unlike America, they do not control the global reserve currency or the pipelines of international finance, and therefore have far less ability to prevent capital flight or chase down tax cheats. U.S. society may be more primed for pragmatic socialism than people think.
History and the Road Ahead
Marx predicted a French Revolution–style uprising in capitalist societies sooner or later as their internal contradictions come to a head. The working class will gradually become the overwhelming majority and will seize power, dispossess the capitalists, and usher in a new classless society largely devoid of political conflict, as there will no longer be any exploiter or exploited classes.
But this hasn’t happened and shows no sign of happening. People working for wages have made up the overwhelming majority of the population in all the original capitalist countries for over a century, yet to this day nothing has produced a left-wing revolution. The Great Depression was something of an exception, but the reforms it ushered in, while noble and overwhelmingly positive, did not end history. Working-class voters are just as likely to vote for liberal or conservative parties as socialist ones—indeed, overwhelmingly more likely, in most countries.
The certainty among Marxist factions in the late 19th and early 20th centuries that the revolution was bound to come was ironically an immensely powerful stimulus to political action, as it gave the socialist movement great confidence. But when the promised revolution failed to appear year after year, decade after decade, the air gradually drained out of Marxism.
Sophisticated Marxists, including Marx himself, make space for contingency and agency. As Friedrich Engels wrote, “The determining element in history is, in the last resort, the production and reproduction of real life … If therefore someone twists this into the statement that the economic element is the only determining one, he transforms it into a meaningless, abstract, and absurd phrase.” While this is certainly more convincing than the turn-crank historical schema of Soviet Marxism-Leninism, it also verges on meaninglessness—akin to saying that economic factors predominate, except when they don’t.
But even if we could somehow isolate what “in the last resort” means precisely, I simply deny that it is possible to predict the grand sweep of history, no matter how vague the formulation is. History is everywhere and always contingent and unpredictable. So long as there are people, they will be fighting and arguing about something or other. As British socialist Tony Benn once said, “Every generation has to fight the same battles again and again and again. There is no destination called justice or democracy and if you catch a train driven by the right man you’ll get there.”
The idea that someday we’ll have a classless society without serious political conflict can create its own dangers. Believers in a final revelation have a nasty habit of trying to make it come true by force. Soviet Communists portrayed themselves as the vanguard of this future utopia, and hence banned all competing political parties as being counterrevolutionary by definition. As a result, the “socialist” USSR became in practice largely the same Russian Empire as before, with a dictatorial ruler, brutal police state, slave labor system, and imperialist foreign policy.
Any reform effort as I’ve outlined above must be done through democratic institutions. Socialists should take whatever they can practically get depending on political conditions, but conversely must be willing to submit themselves to the judgment of the people through elections, and should the verdict be unfavorable, relinquish power willingly. When the socialist movement is weak and the economy is reasonably thriving, as it has been in the United States for most of its history, then piecemeal reforms are likely the best that can be hoped for. When the socialist movement (or similar ones like the labor movement) is strong, and/or the economy is in shambles, like in the early 1930s, then one ought to aim higher.
Ideologically, the key task for American socialists is to convince voters that taxes are not theft, but a way to pay for vital needs that otherwise have to be funded out of pocket. Universal, explicit benefits should be the goal, rather than hiding benefits in the tax code. If that high barrier can be surmounted, much of the rest of the philosophy can fall into place.
The best president in American history, Franklin Roosevelt, was a model political opportunist for the left. Though he was no socialist, he seized the opportunity of the Great Depression to pass the most aggressive set of policies in American history. Whenever opportunity arises from whatever quarter, socialists should be ready with a program to hand.
