In the 1930s, labor leaders and workers in Spain formed communes where a general assembly elected members of a governing committee. Most of these members performed the same tasks as everyone else, but met at the end of the day to discuss, organize, and plan. Both the committee and regular workers could call for a general assembly meeting. Within the communes there was an emphasis on educating oneself by studying the arts and sciences while off-duty. Workers were paid only for working; there were no handouts. There were thousands of communes and hundreds of thousands of members.^[1]

1931 saw the end of Spain’s monarchy, and in 1936 the Popular Front ousted conservatives from power. The common people celebrated by freeing prisoners, refusing to pay rent to landlords, and seizing land from owners and working it for themselves. When General Francisco Franco attempted to seize power in a coup, Madrid, Barcelona, and most other major cities erupted into violence as the people stole weapons from armories and attacked Franco’s forces. It was a storm of such fury that in many places, like Aragon, Castile, the Levant, Catalonia, and Andalusia, the authorities found that

…they simply not longer existed. The State, the police, the army, the administration, all seemed to have lost their raison d’être. The Civil Guard had been driven off or liquidated and the victorious workers were maintaining order… committees distributed foodstuffs from barricades transformed into canteens, and then opened communal restaurants. Local administration was organized by neighborhood committees, and war committees saw to the departure of the workers’ militia to the front.^[2]  

George Orwell joined the anarchists. He wrote of Barcelona:

It was the first time that I had ever been in a town where the working class was in the saddle. Practically every building of any size had been seized by the workers and was draped with the red and black flag of the Anarchists… Every shop and cafe had been collectivized… Waiters and shop-walkers looked you in the face and treated you as an equal.^[3]

Rudolf Rocker wrote, “Everyone who visited Barcelona…was surprised at the freedom of public life and the absence of any arrangements for suppressing the free expression of opinion.”^[4]

Orwell wrote of Aragon:

I had dropped more or less by chance into the only community of any size in Western Europe where political consciousness and disbelief in capitalism were more normal than their opposites. Up here in Aragon one was among tens of thousands of people, mainly though not entirely of working-class origin, all living at the same level and mingling on terms of equality. In theory it was perfect equality, and even in practice it was not far from it. There is a sense in which it would be true to say that one was experiencing a foretaste of Socialism, by which I mean that the prevailing mental atmosphere was that of Socialism. Many of the normal motives of civilized life – snobbishness, money-grubbing, fear of the boss, etc. – had ceased to exist. The ordinary class-division of society had disappeared to an extent that is almost unthinkable in the money-tainted air of England; there was no one there except the peasants and ourselves, and no one owned anyone else as his master. Of course such a state of affairs could not last. It was simply a temporary and local phase in an enormous game that is being played over the surface of the earth. But it lasted long enough to have its effect upon anyone who experienced it. However much one cursed at the time, one realized afterwards that one had been in contact with something strange and valuable. One had been in a community where hope was more normal than apathy or cynicism, where the word ‘comrade’ stood for comradeship and not, as in most countries, for humbug. One had breathed the air of equality. I am well aware that it is now the fashion to deny that Socialism has anything to do with equality. In every country in the world a huge tribe of party-hacks and sleek little professors are busy ‘proving’ that Socialism means no more than planned state-capitalism with the grab-motive left intact. But fortunately there also exists a vision of Socialism quite different from this. The thing that attracts ordinary men to Socialism and makes them willing to risk their skins for it, the ‘mystique’ of Socialism, is the idea of equality; to the vast majority of people Socialism means a classless society, or it means nothing at all.^[5]

Membrilla was “perhaps the poorest village of Spain, but…the most just.” It had an elected council that established committees to oversee village life. Food, clothing, and tools were passed out equally, and money was abolished.^[6]

Despite many challenges, like government restriction of credit, the socialist communities performed well economically; they even had social projects for the elderly, children, and disabled.^[7] Unfortunately, the Spanish anarchists were bitterly divided over whether to take part in national politics, and those that did were forced into an alliance with political parties (and even Stalin in Russia) to survive against Franco.^[8] In the end, Franco was victorious, crushed the popular movement and the communes, and reigned as dictator for 36 years. The anarchist committees and collectivized workplaces were dismantled “with the same energy as in the U.S.S.R.”^[9] Picasso, who once said, “I am a Communist and my painting is Communist painting,”^[10] depicted the ruin Franco brought to Spain in his drawing The Dream and Lie of Franco.

Picasso wrote in Why I Joined the Communist Party (1944), “I have become a Communist because our party strives more than any other to know and to build a better world, to make men clearer thinkers, more free and more happy.”

Socialism in Spain and the early Soviet Union did not fail because it is in the nature of socialism to fail. It was crushed by external forces. People desire to own their workplaces communally and run them democratically, and can do so successfully indefinitely, but this is unlikely to succeed long-term unless the workers also own the government. A State controlled by the few, by political parties, the upper class, capitalists, authoritarian socialists, or fascists, will pose a severe threat to anticapitalist enterprises.

Marx saw cooperatives as a

…victory of the political economy of labor over the political economy of property. We speak of the co-operative movement, especially the co-operative factories raised by the unassisted efforts of a few bold “hands.” The value of these great social experiments cannot be overrated. By deed instead of by argument, they have shown that production on a large scale, and in accord with the behests of modern science, may be carried on without the existence of a class of masters employing a class of hands; that to bear fruit, the means of labor need not be monopolized as a means of dominion over, and of extortion against, the laboring man himself; and that, like slave labor, like serf labor, hired labor is but a transitory and inferior form, destined to disappear before associated labor plying its toil with a willing hand, a ready mind, and a joyous heart.

But he knew that capitalist political power would stand in the way.

To save the industrious masses, co-operative labor ought to be developed to national dimensions, and, consequently, to be fostered by national means. Yet the lords of the land and the lords of capital will always use their political privileges for the defense and perpetuation of their economic monopolies. So far from promoting, they will continue to lay every possible impediment in the way of the emancipation of labor…. To conquer political power has, therefore, become the great duty of the working classes.^[11]

Today, socialism has reemerged in Spain.

Take the Mondragon Cooperative Corporation, one of Spain’s most profitable companies. Mondragon has 85,000 workers in a network of over one hundred cooperatives. No, it is not a perfect democratic workplace. It owns traditional companies in low-wage countries, where workers are not owners nor voters. Only 40% of its workers are worker-owners, democracy is nevertheless stronger than in capitalist firms.^[12] Yet the ratio between the highest salary and the lowest is 6.5 to 1. In rough economic times, worker-owners decide democratically how much their pay should be reduced or how many fewer hours they should work.^[13] Capitalist dictators are not around to fire people en masse. Further, Mondragon has the ability to transfer workers or wealth from successful cooperatives to ones that are struggling. Mondragon was founded in the 1950s, but not one of its companies went out of business or bankrupt until the board of directors voted to allow one to do so in 2013.

Spain also boasts a “little communist village,” Marinaleda, population 2,700. Since the late 1970s, Marinaleda, located in one of Spain’s poorest regions, transformed itself. It had over 60% unemployment, and many went without food for days. Largely thanks to the efforts of longtime mayor Juan Manuel Sánchez Gordillo—who as mayor organized occupations of military-owned land, the takeover of a palace, hunger strikes, a march across Spain to urge other mayors not to pay city debts, and the raiding of supermarkets for food like rice and beans to help the starving—Marinaleda is often called a utopia. Unemployment doesn’t exist, as anyone can work for the farming cooperative, which divides up profits to all workers, but reinvests surpluses to expand employment. Residents work six and a half hours a day for double Spain’s minimum wage. Crops like wheat are avoided: “wheat could be harvested with a machine, overseen by a few laborers; in Marinaleda, crops like artichokes and tomatoes were chosen precisely because they needed lots of labour. Why, the logic runs, should “efficiency” be the most important value in society, to the detriment of human life?”^[14] The town has a handful of privately-owned enterprises that exist alongside the cooperative. While there is no unemployment here, the region as a whole—Andalusia—has mass unemployment, 36% in 2013 (55% for those 24 and younger). Other towns, like Somonte, have taken note and are copying Marinaleda’s farming cooperative.^[15] After Spain’s housing crash, residents of Marinaleda could get a new home built for free, only paying about $19 a month afterwards for the rest of their lives—the home cannot be sold.^[16]

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Notes

^[1] Guerin, 122, 134

^[2] Guerin, 127

^[3] Orwell, Homage to Catalonia

^[4] Chomsky, Anarchism, 55

^[5] Orwell, Homage to Catalonia

^[6] Chomsky, Anarchism, 100

^[7] Chomsky, Anarchism, 64-65

^[8] Guerin, 128-129

^[9] Chomsky, Anarchism, 54

^[10] http://books.google.com/books?id=OJTKZeXaUvkC&pg=PA140&lpg=PA140&dq=%22a+communist+and+my+painting%22&source=bl&ots=SBRP93ZjFy&sig=jF1BvBvqrZ3iYfGq3sIDHywWhZY&hl=en&sa=X&ei=c5NpU4rNC-mfyQH_vIHgBw&ved=0CDAQ6AEwAQ#v=onepage&q=%22a%20communist%20and%20my%20painting%22&f=false

^[11] See Guerin

^[12] See Wright, 240-246.

^[13] Imagine, 78.

^[14] http://www.theguardian.com/world/2013/oct/20/marinaleda-spanish-communist-village-utopia

^[15] http://www.theguardian.com/world/2013/oct/20/marinaleda-spanish-communist-village-utopia

^[16] http://www.bbc.com/news/world-europe-22701384

In “How Capitalism Exploits Workers,” we saw how capitalism distributes wealth away from the many who create it and into the hands of the few. What went unstated was how this causes economic failure.

To keep the economic system running effectively, wages must rise with profits and productivity. Marx stressed, “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses.”^[1] Economist Nouriel Roubini writes:

At some point, capitalism can destroy itself. You cannot keep on shifting income from labor to capital without having an excess capacity and a lack of aggregate demand…the firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else’s income and consumption. That’s why it’s a self-destructive process.^[2]

In other words, if corporations (the producers) get wealthier and the common people (the consumers) do not, the natural result is too much production capacity and not enough consumption. The people cannot afford the goods of booming industry, goods created by their own labor! The accumulation of profit without a proportionate rise in wages leads to economic contraction, and with it greater poverty for the masses and lower profits for corporations.

The booms and busts of the economy, times of prosperity (for some at least) followed by times of widespread unemployment, falling wages, foreclosure, homelessness, and hunger, are built into the system. “The history of capitalism is a history of periodic lurches into crisis, into the insanity of unemployed workers going hungry outside empty factories, while stocks of ‘unwanted’ goods rot.”^[3] Conservative economists argue crises are caused by government meddling in the free market, such as the swelling of the money supply. While this can indeed have harmful effects (the Federal Reserve printing out billions devalues the dollar and leads to runaway inflation), it is not the cause of economic crises. Neither is government control of bank interest rates, or other forms of State regulation of the free market. The free market puts itself into crisis. It is important to remember there are certain ideologies that are very useful to the wealthy and powerful, and are peddled by them in every sector of society. In an In These Times article, David Harvey writes:

The steady decline in labor’s share of national income since the 1970s derived from the declining political and economic power of labor as capital mobilized technologies, unemployment, off-shoring and anti-labor politics (such as those of Margaret Thatcher and Ronald Reagan) to crush all opposition. As Alan Budd, an economic advisor to Margaret Thatcher confessed in an unguarded moment, anti-inflation policies of the 1980s turned out to be “a very good way to raise unemployment, and raising unemployment was an extremely desirable way of reducing the strength of the working classes… What was engineered there in Marxist terms was a crisis of capitalism which recreated a reserve army of labour and has allowed capitalists to make high profits ever since”…

Many thought that lack of effective demand underpinned the Great Depression of the 1930s. This inspired Keynesian expansionary policies after World War II and resulted in some reductions in inequalities of incomes (though not so much of wealth) in the midst of strong demand-led growth. But this solution rested on the relative empowerment of labor and the construction of the “social state”… By the end of the 1960s it became clear to many capitalists that they needed to do something about the excessive power of labor. Hence the demotion of Keynes from the pantheon of respectable economists, the switch to the supply side thinking of Milton Friedman, the crusade to stabilize if not reduce taxation, to deconstruct the social state and to discipline the forces of labor.^[4]

Despite the reasons the upper class provides, it is the under-consumption caused by low wages and the competition of capitalists that cause depressions. The competitive spending between firms sets the stage for a terrible collapse. As Einstein wrote, “The profit motive, in conjunction with competition among capitalists, is responsible for an instability in the accumulation and utilization of capital which leads to increasingly severe depressions.”^[5]

In years when borrowing rates are low, raw materials cheap, worker wages pitiful, new technology available, capitalists see a chance to increase their profits, expand their businesses and market share, and destroy competitors. They stampede into investment all at once, building new factories, buying new land, technologies, and raw materials, and hiring workers. This is the boom time. Firms benefit from the spending of all other firms. Each firm can sell more to some and buy more from others, and profits rise. Many unskilled workers find employment. Skilled workers often see a rise in wages. Consumers are spending more money. Production takes off, and the economy prospers.^[6]

But all good things must come to an end. Massive competitive demand eventually creates shortages in and thus raises the prices of raw materials, technology, land, available loans, skilled employees, and so on, which starts eroding profits. These increased costs raise the prices of consumer goods, and consumers buy less. During the boom time, after all, most of the new wealth and prosperity went to the capitalists at the top of society. The consumer base benefited a little, but not enough to prevent what’s about to occur. Quickly, the capitalists stampede out of investment. They saw the writing on the wall. Production is scaled back. Workers are fired. Rising unemployment then cripples consumption further – winding down production, cutting pay or hours, and letting employees go all deepen the crisis, rather than pull the economy out of it. Things spiral downward. Depression sets in.^[7]

The result is a huge waste of both our productive capacity and human talent. During the recession beginning in 2008, about 30% of our industrial capacity stood idle.^[8] Excess goods typically go to waste because no profit can be made from them – people cannot afford them. Workers desperately need work, and much work needs to be done to better society, but they will not find it from capitalists. Corporations sit on their money, refusing to invest. National wealth stays with the capitalists, as the pockets of the majority empty to stay alive. More and more people fall into debt, and are forced to compete with millions of others for dismal jobs, forcing down wages further. The larger employers will survive the crises intact, until eventually low interest rates, low worker wages, and cheaper raw materials begin the process again.^[9]

A system where the production of wealth is controlled by the profit-driven few causes economic instability. Since industrial capitalism arose 200 years ago, the advanced capitalist nations of the world have been devastated by crises in each decade. So the U.S. saw depressions in the 1810s, 1820s, and 1830s just as it did in the 1980s, 1990s, and 2000s. Obviously, the increasing interconnectivity between national economies meant countries brought each other into crises like a collapsing house of cards. Globalization ensured global meltdowns.

Marx and Engels are famous for criticizing the crises of capitalism. They wrote in The Communist Manifesto that each economic bust put capitalism on trial:

In these crises a great part not only of existing products, but also of the previously created productive forces, are periodically destroyed. In these crises there breaks out an epidemic that in all earlier epochs would have seemed an absurdity—the epidemic of overproduction. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce.^[10]

“And how does the bourgeoisie get over these crises?” he asks. “On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises and by diminishing the means whereby crises are prevented.”^[11] Scaling back production, massive layoffs, and pay cuts deepen the crisis, rather than helping pull an economy out of it.

This critique is not at all a relic of Marx’s time. In his 2013 article “What Wal-Mart Could Learn from Henry Ford,” former Secretary of Labor and political economist Robert Reich writes of “the basic economic bargain that lies at the heart of a modern economy”:

Workers are also consumers. Their earnings are continuously recycled to buy the goods and services that they and other workers produce. But if their earnings are inadequate and this basic bargain is broken, an economy produces more than its people are capable of buying.^[12]

Reich points out that some executives and owners understood this, like Henry Ford. Socialist Michael Harrington noted the same in his 1989 book Socialism: Past and Future:

Mass production, Ford understood, could not exist unless there was mass consumption. The enormous increase in output made possible by the new technology that he had perfected—the assembly line—simply could not be absorbed by an economy of low-paid workers…

So Ford decided before World War I to pay the incredible wage of five dollars a day and to help buyers finance the purchase of his cars in order to deal with the new challenges of both production and consumption. More than that, Ford tried to persuade his fellow industrialists that, in their own self-interest, they should increase the pay—and the buying power—of their “hands” just as he had done. He succeeded in winning over converts, usually when there was a crisis—the Rockefellers joined the movement when their hired guns outraged the nation by killing strikers’ wives and children in Colorado—and mainly in the ranks of big business…labor historian David Brody called these changes in attitude in the United States “welfare capitalism”…

Ford and welfare capitalism made some prominent recruits—Herbert Hoover, who was something of an avant-garde Republican in the early 1920s, was one of them—but he failed to convince the capitalist class as a whole. Big business was mildly and sporadically receptive, but by and large decency toward the workers, even if it helped stop union organization, was seen as an extra cost, putting firms at a competitive disadvantage. Thus when the crash came in 1929, after a decade that had witnessed an extraordinary rationalization of production, a tremendous increase in capacity and productivity ended, just as Ford had feared, with the masses utterly unable to “buy back” the work of their own hands.^[13]

Ford wrote in his book Today and Tomorrow (1926) that

The owner, the employees, and the buying public are all one and the same, and unless an industry can so manage itself as to keep wages high and prices low it destroys itself, for otherwise it limits the number of its customers. One’s own employees ought to be one’s own best customers… We increased the buying power of our own people, and they increased the buying power of other people, and so on and on. It is this thought of enlarging buying power by paying high wages and selling at low prices that is behind the prosperity of this country.

Economist Paul Krugman writes in “A Permanent Slump?” (2013) that economists are increasingly accepting what Marx predicted in the late 1800s, that our economy is now “an economy whose normal condition is one of inadequate demand—of at least mild depression—and which only gets anywhere close to full employment when it is being buoyed by bubbles…and unstable borrowing.”^[14] Empirical studies support this; for example, a 2014 report from the International Monetary Fund itself confirmed lower inequality is strongly correlated with faster and more stable economic growth.^[15] In 2016, the IMF repeated this warning: “Increased inequality…hurts the level and sustainability of growth.”^[16] The Congressional Research Service looked at 65 years of data and concluded that tax cuts for the rich have no impact on economic growth. Simply giving more money to the rich does not fuel economic growth, as some claim (it will actually do the opposite if the wealth gap grows too large). Economic growth is fueled by the masses, by consumers. Only enriching the poor can bring about economic stability.

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Notes

^[1] Karl Marx, Capital Volume 3

^[2] Economist Nouriel Roubini (2011), from Lee Sustar’s article Why Marx Was Right

^[3] Harman, Economics of the Madhouse

^[4] http://inthesetimes.com/article/16722/taking_on_capital_without_marx

^[5] Einstein, Why Socialism

^[6] Harman, How Marxism Works, 45

^[7] Harman, How Marxism Works, 45

^[8] Richard Wolff, Occupy the Economy

^[9] A People’s History of the World and How Marxism Works, Harman; The Communist Manifesto, Marx and Engels; 23 Things They Don’t Tell You About Capitalism, Chang; Power Systems, Chomsky; Recovery in U.S. is Lifting Profits, but Not Adding Jobs, Schwartz, NY Times 3/3/2013

^[10] Marx, Manifesto, 13

^[11] Marx, Manifesto, 13

^[12] http://www.kansascity.com/opinion/opn-columns-blogs/syndicated-columnists/article332088/What-Walmart-could-learn-from-Henry-Ford.html

^[13] Michael Harrington, Socialism: Past and Future

^[14] http://www.nytimes.com/2013/11/18/opinion/krugman-a-permanent-slump.html?_r=0

^[15] http://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf

^[16] https://www.theguardian.com/business/2016/may/27/austerity-policies-do-more-harm-than-good-imf-study-concludes