Chapter 6

Real Utopias II:

Social Empowerment and the Economy
Incomplete draft February, 2006

At the center of a socialist alternative to capitalism, in whatever way socialism is

understood, is the problem of the control over the economy. In statist conceptions
of socialism such control operates primarily through state power, in the strongest
version through the direct state ownership of the principal means of production. In
the social empowerment conception of socialism proposed here, the problem of
controlling economic processes is less clear cut. There are multiple institutional
forms working through multiple pathways through which social power can be
exercised over the production and distribution of goods and services.
In all of the specific proposals we will consider here, the institutional designs
for social empowerment leave a substantial role for markets, and thus in one sense
or another they all envision some sort of “market socialism.” This goes against the
grain of traditional Marxian conceptions of socialism as the transcendence not
only of capitalist class relations, but also of the market itself. In traditional
Marxism the harms generated by capitalism as a system of production are
attributed both to the pernicious effects of the market and to power and
exploitation linked to the class relation between capitalists and workers. The
vision of a world beyond capitalism thus revolved around both the move towards
the egalitarianism expressed in the anti-class aphorism “to each according to need,
from each according to ability”, and the aspiration for a rationally ordered
economy in which the production and distribution of goods and services was
organized through some mechanism of collective planning.
Few theorists today hold on to the belief that in a complex, large scale
economy, there is a viable alternative to markets – understood as decentralized,
voluntary exchanges – playing an important role in economic coordination.1

1
An exception is Robin Hahnel who argues in his book Parecon (a contraction of “participatory
economy”) that even a complex global economy can be organized and coordinated through
bottom-up participatory planning rooted in producer and community cooperatives. In his book he
Chapter 6. Real Utopias II: social empowerment and the economy 136

Comprehensive planning, whether organized through centralized bureaucratic

institutions or through participatory decentralized institutions, no longer seems a
viable alternative. This leaves open the extent to which the market operates under
tight or weak constraints of democratic priorities through the state and other
pathways of social empowerment and the precise mechanisms by which the
negative effects of market forces would be neutralized.

I. EQUAL-ASSET MARKET SOCIALISM

John Roemer (1994, 1996) has proposed a model of market socialism that
attempts to eliminate capitalist class relations while retaining almost intact market
mechanisms of economic coordination. By socialism Roemer means a society
within which capitalist exploitation has been eliminated and ownership of the
means of production is held equally by all citizens. Because socialism is not
defined by the specific institutional form within which equal ownership is
accomplished, state ownership becomes only one of a variety of possible forms of
socialism. In contrast to the traditional statist socialist model, Roemer proposes a
mechanism for distributing ownership equally which relies on a stock market and
decentralized decision making rather than centralized bureaucratic administration.

The institutional design

Imagine an economy with two kinds of money that we will call “dollars” and
“coupons.” Dollars are used to purchase commodities, whether for purposes of

spends considerable time talking about how such planning discussions could take place in
neighborhoods and workplaces and then aggregated into more coordinated decisions at higher
levels of social organization. He dismisses objections based on the historical record of attempts at
comprehensive economic planning on the grounds that these all took place under authoritarian,
top-down systems, not participatory processes, and thus the evidence is not compelling. Other
objections – that complexity would overwhelm the information capacities of such planning bodies,
that planning generates perverse incentives, that without meaningful prices generated by markets it
would be impossible to figure out the real opportunity costs of alternative uses of resources – are
also basically dismissed on the grounds that under egalitarian, participatory conditions the actors
would be able to deal with each of these problems. My feeling is that this may indeed be true, but
that the way they would deal with them would be by reintroducing market-like processes and
market-like prices, so that in the end the “planning” would not replace markets but rather would
take place in continual interaction with markets.
Chapter 6. Real Utopias II: social empowerment and the economy 137

consumption or production. Coupons are used in only one kind of market: the
market for shares of corporations. Shares are therefore denominated in coupons
rather than dollars. Dollars cannot be used to buy shares, and dollars and coupons
cannot be legally traded. Coupons also cannot be given as gifts (this is, in effect,
selling them at zero price in dollars) or inherited. Everyone, upon becoming an
adult, is given an amount of coupons equal to his or her per capita portion of the
total coupon-value of the shares in the economy. With these coupons, people
purchase shares in corporations, either by investing directly in the stock market or
by delegating some intermediary – call it a mutual fund – to manage their coupon
investments on their behalf. The ownership of shares, then, gives people the usual
rights of share owning in a capitalist economy – a right to a flow dividends
(which are in dollars and thus can be used to purchase consumption goods) and a
right to vote for the board of directors and perhaps other corporate policies. At
death, all of one’s coupons revert to the common pool, to be redistributed to the
next generation. There is no inheritance of coupons.
In only one circumstance can coupons be exchanged for dollars:
Corporations, when they issue new shares and sell them on the stock market for
coupons, take these coupons to the central bank and exchange the coupons for
dollars, thus acquiring the ordinary commodity-buying money they need for new
capital investments. The Central Bank determines the exchange rate between
coupons and dollars. This becomes a pivotal policy tool for economic planning: if
for public policy reasons, there was a desire to encourage investments in some
sectors over others, the rates of conversion of coupons for investment dollars
could be higher in the preferred sectors.
Most people, being risk-averse, will invest in mutual funds with relatively
balanced portfolios, but some will invest directly in the stock market. Over the
course of a lifetime, therefore, some people will become relatively coupon-rich
and others coupon-poor. Nevertheless, inequalities in coupon wealth will be fairly
muted because no intergenerational transfers are allowed, and because the dollar-
poor cannot act on the temptation to liquidate their coupon holdings for cash. The
proposal thus differs significantly from the coupon distribution schemes adopted
in the 1990s to privatize former state socialist economies, in which there were no
constraints on the right of people to sell their coupons; thus very quickly most
people ended up with no shares and some with high concentrations.
Chapter 6. Real Utopias II: social empowerment and the economy 138

The state plays an absolutely central role in this model, even though the state
does not own the means of production. The state is necessary to enforce the
“missing market” (to prevent the exchange of coupons for dollars), to organize the
continual redistribution of coupons to each new generation, and to govern the
conversion rate of corporate-owned coupons for dollars through the central bank.
These interventions are essential to reproducing the egalitarian quality of the
model and allocating capital efficiently, but they all involve articulating state
activity to market mechanisms rather than supplanting markets by the state.
A full elaboration of a model of coupon-based market socialism would
require a range of additional institutional details. For example, there needs to be
some mechanism for dealing with small shops and firms that would remain
privately owned, and some mechanism for converting private venture capital
start-up firms into coupon-share public corporations. There would also need to be
an elaboration of how the banking system would work, since people with high
labor market earnings would presumably save part of their income in banks and
banks would make loans to firms. The banking system thus could become a
backdoor mechanism for unequal claims on corporate profits via interest rates on
loans linked to savings assets.

Rationale
Market socialism as modeled by Roemer has two fundamental rationales. First,
coupon-based market socialism directly eliminates one of the central sources of
inequality in capitalism, because inequalities in incomes derived from inequalities
in investments would be greatly attenuated.2 Even if this left unaltered inequalities
in labor market earnings, there would no longer be a strong tendency for
inequalities in labor market earnings to be reinforced by inequalities in unearned
income from investments out of high earnings. But there would also be reasons to
believe that a radically egalitarian distribution of capital wealth would have an
indirect impact on the inequalities linked to labor markets. While there is much
debate on the determinants of inequality in labor market earnings, there is

2
In a Marxian framework this also implies the elimination of most forms of capitalist exploitation,
since capitalist exploitation rests on the exclusion of direct producers from ownership of the
means of production.
Chapter 6. Real Utopias II: social empowerment and the economy 139

considerable evidence that this is significantly shaped by power relations, not

simply the spontaneous forces of competition over skills in the market. One of the
reasons that labor market inequality rose so dramatically in the US in the last
quarter of the 20th century was due to the decline in unions and the weakening of
constraints on corporations to push down some wages and increase the salaries of
executives. If capital ownership was equally distributed in the entire population,
the social forces arrayed against unions and other mechanisms of egalitarian labor
market regulation are likely to be weakened. The equalization of capital
ownership does not in and of itself change the distribution of labor market
earnings, but dynamically it seems likely to predict that inequalities in labor
markets would be reduced as well.
The second principal rationale for coupon-based market socialism centers on
democracy. By eliminating high concentrations of wealth, market socialism
enhances democratic equality in three ways. First, and most obviously, high
concentrations of capitalist wealth constitute a resource that can be deployed
politically. Second, and perhaps less obviously, dispersing share ownership so
widely in the general population should make it much easier to balance priorities
that people have as equal citizens in a polity with priorities they have as owners of
means of production. In a conventional capitalist economy, democratic decision
making is highly constrained by the problems of capital flight and disinvestment
when public policy measures have adverse effects on private capitalist interests.
Market socialism would not completely eliminate economic constraints on
democracy, at least not if competition on a global scale remains a feature of
market economies. But it would reduce the pressures, because there would be
such a close correspondence between the distribution of political votes and
“ownership” votes. Third, for an important range of public policies designed to
reduce “public bads” (the opposite of “public goods”) like pollution,
concentrations of ownership create actors with both a concentrated interest in
producing the public bad and a concentrated capacity to act on that interest. A
wealthy owner of a polluting industry has an interest in and capacity for using that
wealth as a political investment to block anti-pollution policies. Coupon market
socialism, therefore, should increase democratic capacity to reduce these kinds of
public bads.
This scheme can be considered a variety of “market socialism” – rather than
simply a peculiar variety of capitalism – for two principal reasons. First, the state
Chapter 6. Real Utopias II: social empowerment and the economy 140

has a relatively high capacity for planning, albeit planning that works through
market mechanisms. Democratically determined priorities for directions of
economic development would thus have much greater play in coupon-based
market socialism than in capitalism. Second, the exclusion of direct producers
from ownership of the means of production – a central feature of capitalist class
structures – has been largely overcome.

Potential problems
Coupon-based market socialism faces many potential problems of unanticipated
incentive effects. How will risk-taking around innovations be managed? How will
principal/agent problems between stockholders and corporate managers be solved,
given the extremely high levels of diffusion of ownership? To contend with such
problems, coupon-based market socialism will need to develop an elaborate array
of institutional devices for the system to function well, with the potential for many
unintended consequences, incentive failures, principal/agent problems, and so on.
To give just one example, as people age they will want to shift their coupon-based
investments from shares in firms with strong growth potential to firms that pay
out high dividends. This creates the potential for some firms to become “cash
cows,” where people invest their coupons in the firm in exchange for such high-
dividend payouts that the firms drain their assets until the coupon value of the
shares drops to zero. In effect, this would amount to an indirect device by which
people would be able to exchange their coupons for dollars, in violation of the
basic logic of the model. Preventing this would require complex regulations and
apparatuses for monitoring firm behavior. The administrative structure of coupon-
based market socialism may carry many fewer burdens than was required of
classical centralized state socialism, but nevertheless involves considerable
complexity. Because of such complexity it is hard to anticipate what the broader
ramifications and unintended consequences of these arrangements might be.

II. SOCIAL ECONOMY

The term “social economy” has been used to cover a wide range of economic
forms. Sometimes it is simply identified with the “non-profit sector”; other times
it includes co-operative enterprises even if they produce for markets and compete
with capitalist firms. Sometimes it is defined in strictly negative terms as non-
state and non-market enterprises. Some writers, like the Quebec social economy
Chapter 6. Real Utopias II: social empowerment and the economy 141

activist Nancy Neamtam, include a specific set of internal organizational

properties in the definition. A social economy enterprise, she writes, is one that:
aims to serve its members or the community, rather than simply striving
for profit; is independent of the State; establishes a democratic decision-
making process in its statutes and code of conduct, requiring that users and
workers participate; prioritizes people and work over capital in the
distribution of revenue and surplus; bases its activities on principles of
participation, empowerment, and individual and collective responsibility.3
I will define the social economy quite broadly as economic activity that is
directly organized and controlled through the exercise of social power. Social
power, recall, is powered rooted in the voluntary associations of civil society and
based on the capacity to organize people for collective action of various sorts. The
social economy involves the production and distribution of goods and services –
economic activity – organized through the use of such social power.4
This definition does not imply that every organization or enterprise in the
“non-profit sector” is fully part of the social economy. Some non-profit
organizations are basically arms of capitalist corporations or the state, rather than
associations formed in civil society. Others have large endowments of capital
which provide them with the resources needed to engage in their productive
activities. Their control over economic activity is therefore based more on their
use of economic power than their deployment of social power (i.e. power rooted
in collective association in civil society.) What this suggests is that many
organizations will have a mixed or hybrid character: they are examples of social
economy activities to the extent that they are rooted in the associational life of
civil society; they are statist or capitalist organizations to the extent that their

3
Neamtan, Nancy. "The Social Economy: finding a way between the market and the state", Policy
Options, July/August 2005, pages 71-76.
4
This definition does not require that the internal organization of a social economy activity be
necessarily democratic and participatory, although for the social economy to serve as a pathway
for a general process of enhancing social empowerment this may be important.
Chapter 6. Real Utopias II: social empowerment and the economy 142

power to engage in the production and distribution of goods and services is based
on state power or economic power.5

The Quebec Social Economy

One of the most vibrant examples of an emerging social economy is in the
Canadian Province of Quebec.6 While Quebec has a long history of producer
cooperatives in various sectors and other economic activities which could be
broadly considered part of a social economy, the term only became part of public
discourse over economic alternatives in the mid-1990s. The pivotal event was a
“Summit” meeting convened by the Provincial Government in1996 to deal with
long term problem of unemployment and economic development in Quebec. At
this summit a wide variety of organizations from civil society and the economy
were invited to participate. Such “corporatist” policy forums are a familiar thing
in many countries with strong social democratic or catholic-corporatist traditions.

5
This acknowledgement that many organizations engaged in the production of goods and services
“in” civil society have a hybrid character is analogous to the problem discussed in chapter 4 that
economic structures as a whole typically have a hybrid character, combining capitalist, statist, and
socialist elements. This of course makes the analysis of the social economy more difficult since
much social economy activity requires direct state subsidy or capitalist subsidy to function well.
6
This discussion draws heavily from the following works: Mendell, Marguerite, Levesque,
Benoit, and Rouzier, Ralph (2000) "The role of the non-profit sector in local development: new
trends", Paper presented at OECD/LEED Forum on Social Innovation, August 31, 2000;
Marguerite Mendell (2002) "The Social Economy in Québec: Discourses and Strategies" in
Bakan, Abigail, and Macdonal, Eleanor (eds), Critical Political Studies: Debates From the Left.
Kingston: Queen's University Press, pages 319-343; Mendell, Marguerite (2002) "The Social
Economy in Québec: Discourses and Strategies" in Bakan, Abigail, and Macdonal, Eleanor (eds),
Critical Political Studies: Debates From the Left. Kingston: Queen's University Press, pages 319-
343; Neamtan, Nancy (2005) "The Social Economy: finding a way between the market and the
state", Policy Options, July/August 2005, pages 71-76.; Jean-Louis Laville, Benoît Lévesque and
Marguerite Mendell (2005) The social economy. Diverse approaches and practices in Europe and
Canada; Neamtan, Nancy, and Downing, Rupert, 2005. "Social economy and community
economic development in Canada: Next steps for public policy", Chantier de l'économie sociale
issues paper, September 19, 2005.; Mendell, Marguerite (2005) Empowerment: What’s in a
Word? Reflections on Empowerment in Canada with Particular Emphasis on Quebec.; Neamtam,
Nancy (2005) Building The Social Economy: The Quebec Experience Presentation at Seminar
organised by Euresa Institute Stockholm, Sweden March 29-30, 2005.
Chapter 6. Real Utopias II: social empowerment and the economy 143

What was rather special about the 1996 summit in Quebec, however, was the
inclusion of social movement organizations, community organizations, and other
grass-roots civil society associations in the dialogue.
Out of this meeting came a set of concrete policy proposals for the state
and action plans for civil society to enhance the vitality of the social economy in
Quebec. Many of these proposals have subsequently been adopted. They involve,
among other things, making it much easier for non-profit associations engaged in
social economy activities to acquire the necessary financial resources, through
government grants, indirect subsidies, or access to credit; the creation of a social
economy agency within the provincial government; the consolidation of an
umbrella organization in civil society, the Social Economy Workshop, to
coordinate strategies for deepening the role of the social economy. While the
social economy in Quebec is still only a small part of the total Quebec economy,
it is firmly rooted institutionally, growing in importance, and broadly accepted as
desirable.
Two examples illustrate different ways in which the social economy in
Quebec functions. The first example is childcare services. Childcare services can
be organized through four basic ways. First, it can be organized within personal
networks of family kinship and friends. This is certainly the most common way
traditionally that childcare is provided. Second, it can be organized through
markets, either by for-profit capitalist daycare centers, or by self-employed
individual childcare service providers. This is the primary way nonfamily
childcare services are provided in the United States. Third, the state can directly
provide childcare services, as in France. Finally, the services can be provided by
civil society associations of one form or another. This is the Quebec solution.
The Provincial government guarantees universal childcare at a charge of
seven Canadian dollars per day, but it does not directly run daycare centers.
Rather, it provides subsidies to daycare co-ops run jointly by daycare workers and
parents, so that (in principle) the combination of the parent charges and the state
subsidies provide a living wage for the childcare providers. Crucially, the rules
governing these subsidies make them available only to childcare service providers
organized as nonprofit cooperatives, thus blocking the entry of capitalist firms
into this market. Capitalist childcare services are not prohibited from operating in
Chapter 6. Real Utopias II: social empowerment and the economy 144

Quebec, but they do not receive the social economy subsidy that underwrite the
financial security of the coops. [note: get further details on the structure]
A second example is non-medical homecare services for the elderly. This is a
more recent innovation, launched in 2001 [check date]. Quebec, like most
economically developed places, faces a series of difficult issues around the care of
the elderly which are seen as increasingly pressing with the ageing of the
population and increased life expectancy. As elderly persons becomes less able to
take care of themselves, one option is for them to move into retirement
communities and nursing homes. Depending upon the location of such facilities,
such moves can be extremely disruptive of social networks and, in any case, are
generally very expensive. An alternative is for various kinds of services to be
created to provide the kind of on-going support that make it possible for the
elderly to stay in their homes. This would include things like housecleaning, meal
preparation, shopping assistance, and odd jobs. Such services are provided on a
fairly wide scale in Quebec through the social economy. As described by Nancy
Neamtam, four years after this initiative was launched, the network of nonprofit
and co-operative home care businesses across Quebec
employs 6,000 people, half of whom were previously unskilled welfare
recipients. By offering over 5.6 million hours of home care services to
over 76,000 clients, the majority of whom are over 75 years old, these
organizations have created jobs, taken pressure off public sector services,
delayed institutionalization for many elderly people, reduced the welfare
rolls and assured access to home care services in record time to all
communities across the province.7
The clients of this service pay a sliding scale depending on household income
from nothing to thirty Canadian dollars for the service [get details of what this
entails]. As in the childcare case, the Provincial government provides subsidies to
these social economy cooperatives but not to capitalist firms that want to enter the
market.

7
Neamtan, Nancy. "The Social Economy: finding a way between the market and the state", Policy
Options, July/August 2005, p74
Chapter 6. Real Utopias II: social empowerment and the economy 145

Elements of Institutional design for a vibrant Social economy

The range of economic activities that can potentially be organized through the
social economy in an effective manner is quite broad. In Quebec, aside from
childcare and home care services, the social economy already plays a significant
role in recycling activities, sheltered workshops for people with intellectual and
physical disabilities, and housing. In many places in the world, much of the
performing arts is organized in ways that have a significant social economy
component. Health care services are another arena where social economy
organizations play an important, if secondary, role in many places. In the United
States, charter schools and some forms of school voucher programs can also be
viewed as instances of a social economy: the state pays for these educational
services, but they are actually produced by associations in civil society.8
The Quebec experience suggests four elements of institutional design to
facilitate the expansion and deepening of these kinds of initiatives in ways that
would contribute to the broader agenda of social empowerment:
1. State subsidies targeted to the social economy. It is important that the state play
an active role in facilitating the growth and stability of social economy enterprises
through subsidies. This means more than simply removing obstacles for
cooperatives that result from imperfections in conventional credit markets that
make it more difficult in general for worker co-ops than for small capitalist firms
to get loans.9 Given the not-for-profit norms of social economy organizations, for
social economy co-ops to get access to adequate sources of capital requires
subsidies of one sort or another.
Furthermore, the rules of the game for such subsidies should block access to
them by capitalist firms. A reasonable objection by capitalist firms is that this
gives social economy cooperatives an “unfair” competitive advantage in certain

8
These examples from the United States, of course, indicate that social economy initiatives may
not always be progressive. School vouchers in particular are generally a strategy for defunding
public education rather than advancing a general process of radical democratic egalitarian social
empowerment.
9
The typical problem faced by worker coops is the lack of collateral for bank loans. The result is
that coops have to pay higher interest rates even when they have a good business plan. Bank loans
also force coops to orient their activities more towards profit-motives than they would otherwise
do, which distorts the social economy character of the enterprise.
Chapter 6. Real Utopias II: social empowerment and the economy 146

markets. This objection was raised in Quebec, for example, for the targeted
subsidies which facilitated the rapid growth of social economy home care
services. The response to this is that the subsidy is a way of recognizing the
positive social externalities that come from the cooperative, nonprofit
organization of production in the social economy. This is especially crucial in
care-giving services in which the profit-motive is in inherent tension with the
values of nurturance and care. The capitalist logic of meeting needs is that it is
only worth doing when you can make a profit from doing so: I help you because
its good for me. The social economy logic of meeting needs is other directed: I
help you because it is good for you.10 The widespread existence of cooperative
needs-oriented production of such services contributes positively to supporting a
socio-cultural context that affirms these values. If this is indeed a positive cultural
externality of needs-oriented production, then in the absence of a subsidy less of
this public good will be produced.
2. Development of Social Economy Investment Funds. While state subsidies are
crucial for the social economy, in the long term it is also important for the social
economy itself to develop internal mechanisms for raising funds and directing
them to innovative social economy projects. In Quebec in a limited way unions
have contributed resources to create a social investment fund for this purpose. If
the social economy is to expand to become a major source of employment and
economic activity, then new financial instruments for social economy savings and
investment need to be devised.
3. Network of networks. At the dynamic center of the elaboration of the Quebec
social economy is an organization, the Social Economy Workshop (the Chantier
de l’économie sociale), that describes itself as a network of networks. The
membership of the board of directors of the Chantier includes representatives
from networks of different kinds of cooperatives and nonprofit organizations,
community development groups and a variety of the larger social movements. The
Chantier is basically a deliberative forum for problem-solving over social
economy issues and has played a crucial role in new innovations in the social
economy. It is precisely the kind of institution that enables the heterogeneous set

10
This formulation of the contrast comes from G.A. Cohen’s essay, “Back to Socialist Basics”,
New Left Review, XXXX
Chapter 6. Real Utopias II: social empowerment and the economy 147

of projects and organizations in the social economy to coalesce into an enhanced

form of social empowerment.
4. Participatory Democratic forms of organization. The goal of enlarging the
social economy is not simply that in and of itself this is a good thing because it
contributes to improving the lives of people. The social economy is also one of
the important pathways in the broader project of social empowerment in which
the ultimate goal is broad social control over the economy. For this to occur, the
social economy needs to be a setting within which solidarity and social cohesion
is enhanced and broader notions of the collective good is practiced. This is one of
the main reasons why cooperatives are such a central form of production in social
economy activities: cooperatives affirm the emancipatory values of
egalitarianism. More generally, a social economy organized along participatory
democratic forms of governance is likely to contribute more consistently to the
wider agenda of social empowerment.

Potential Problems
Two central problems face the expansion of the social economy as a pathway to
increasing social empowerment: the problem of the involvement in the social
economy of inegalitarian, exclusionary associations in civil society, and the
problem of the distortion of the social economy by capitalist market relations.
Inherent in the construction of a social economy is the problem of potentially
exclusionary and inegalitarian associations in civil society. Engaging in needs-
oriented social production within the associational context of civil society is no
guarantee of embodying the central emancipatory values of democratic
egalitarianism.
In the United States there is a range of initiatives that satisfy the general
conditions for the social economy and yet have at best an ambiguous relation to
the emancipatory project of social empowerment. School vouchers are probably
the best example.11 In a fully developed school voucher system, all parents are

11
The existing publicly funded voucher programs in the U.S. are quite limited, being heavily
targeted to poor minority children who otherwise would go to extremely bad public schools, and
are therefore supported by some progressives within minority communities. The strongest political
support for vouchers, however, comes from right-wing social forces that see it as a way of
ultimately shifting public funding from state run schools to religious schools and private schools.
Chapter 6. Real Utopias II: social empowerment and the economy 148

given a voucher worth a certain amount of money which they give to whatever
school, public or private, their child attends. School choices function like a market
where the money follows the students. Schools compete with each other for
students. Good schools – the argument goes – will attract many students and
thrive; poor schools will either improve under pressure or disappear. The
competition of the market will do its magic and schooling will improve. In so far
as the private schools are organized by associations in civil society – which is
generally the case – a voucher system for funding education can be viewed as a
way of channeling resources into the social economy.
In the American political and social context of the early 21st century, while the
small existing voucher programs may help a few poor children exit disastrous
schools, the broader proposal to universalize vouchers is supported primarily by
anti-state conservatives who see vouchers as a way of undermining state run
education by transferring public funds from public schools to privately run
schools through the choices of parents. Particularly since these proposals
generally allow private schools to charge tuition on top of the voucher payments,
this in effect becomes a state subsidy to high priced private education.
There is no automatic way that a growth state transfers, incentives and
subsidies to underwrite the social economy can avoid these kinds of pernicious
policies. It is crucial, then, that specific rules are instituted in the state support of
social economy projects that ensure its universalistic and egalitarian character.
Whether or not this would happen, of course, would depend upon the strength of
progressive political forces in shaping the rules under which such state support
would operate. Sam Bowles and Herb Gintis, in their book in the Real Utopias
Project, propose a radical egalitarian design for school vouchers, for example,
that would mitigate some of these problems.12 Their proposal would institute a
quite generous voucher system, but prohibit schools from “topping up” the
voucher funds with any other source of funding – from tuitions, gifts,
endowments, etc. This means that the vouchers cannot become a subsidy for
expensive private schools for the rich. They also propose a system for having

The special voucher programs for the poor are a kind of Trojan horse strategy top establish and
normalize the principle in the hope of drastically expanding it in the future.
12
Samuel Bowles and Herb Gintis, Recasting Egalitarianism (real utopias project, volume III,
London: Verso: 1998).
Chapter 6. Real Utopias II: social empowerment and the economy 149

vouchers be worth differing amounts to schools depending upon the existing

demographic characteristics of the students already in the school and the
characteristics of the child with the voucher. The voucher of a poor child, for
example, will be worth more to a school with lots of middle class students than to
a school with mainly poor children. This creates incentives to schools to have a
diverse student body. And finally, they propose a fairly strong licensing and
monitoring procedure to insure schools receiving vouchers adopt certain broad
curricular standards. These rules would not eliminate all of the potential problems
in a voucher system, but they would avoid its inegalitarian and exclusionary
potentials.13
The second general problem faced by attempts to significantly expand and
deepen the social economy concerns its articulation to capitalist markets. As is
well known, when producer co-ops are successful there is a strong tendency for
them to evolve into firms that look increasingly like capitalist firms. For example,
longstanding members in successful co-ops often tend to support hiring new
employees rather than increasing co-op membership when expansion is needed
since they do not want to dilute their ownership stake in the business.
Furthermore, the common need to acquire loans from banks to deal with various
contingencies puts pressure on co-ops to act more like profit maximizing firms.
More generally, operating in a market context where the rhythm and pressure of
the market are generated by capitalist dynamics makes it difficult for social
economy firms to reproduce themselves as egalitarian, needs-oriented enterprises.
Again, these are reasons why strong rules by the state are needed to protect
the economic space for the social economy to flourish. This will inevitably be
politically difficult. Whenever the development of this space is successful and
social economy enterprises thrive, then capitalist firms will want to enter the

13
Bowles and Gintis are mainly concerned with reconciling equality and efficiency in their
institutional designs. They believe that a certain amount of competition – in this case among
schools for vouchers – does enhance efficiency since it puts pressure on schools with poor
performance to change. They are less concerned with the implications of alternative institutional
designs for questions of collective power. In my judgment they underestimate the potentially
destructive aspects of competition among schools and neglect alternative mechanisms for
improving school “efficiency” (educational quality) through stronger forms of democratic
participation in school governance. For a discussion of these points, see Erik Olin Wright, chapter
in Recasting Egalitarianism.
Chapter 6. Real Utopias II: social empowerment and the economy 150

market and fight the rules which exclude them from the subsidies and other
supports. The needs-oriented character of production and the social and
egalitarian priorities of the participants will also, almost inevitably, expose them
to criticism for not being efficient, for operating under “soft budget constraints”.
This means that a successful social economy in a capitalist system will always
face corrosive pressures both from the market and from the political framework
within which it operates.

III. UNCONDITIONAL BASIC INCOME

The basic mechanism

The idea of unconditional basic income has a long pedigree, but has recently been
revived, particularly in European discussions (Van der Veen and Van Parijs 1986;
Purdy 1994; Van Parijs 1992; Standing, 1999). The proposal has come under a
variety of names: universal basic income; demogrant; citizen dividend. While the
details may vary, the basic idea is quite simple: Every citizen receives a monthly
living stipend sufficient to live at a culturally defined respectable standard of
living, say 125 percent of the “poverty line.” The grant is unconditional on the
performance of any labor or other form of contribution, and it is universal –
everyone receives the grant as a matter of citizenship right, rich and poor alike.
Grants go to individuals, not families. Parents are the custodians of minority
children’s grants.
With universal basic income in place, most other redistributive transfers are
eliminated – general welfare, family allowances, unemployment insurance, tax-
based old age pensions – since the basic income grant is sufficient to provide
everyone a decent subsistence.14 This means that in welfare systems that already
provide generous antipoverty income support through a patchwork of specialized
programs, the net increase in costs represented by universal unconditional basic
income would not be extraordinary, particularly since administrative overhead
costs would be so reduced (since a universal basic income system does not require

14
Other kinds of universalistic programs – like public education and health care – would continue
alongside universal basic income. The proposals for basic income do not claim that it would
replace all forms of state subsidized consumption, only income redistributive programs.
Chapter 6. Real Utopias II: social empowerment and the economy 151

significant information gathering and close monitoring of recipients’ behavior).

Special needs subsidies of various sorts would continue – for example, for people
with disabilities – but they are likely to be smaller than under current
arrangements. Minimum wage rules would be relaxed or eliminated: There would
be little need to legally prohibit below-subsistence wages if all earnings, in effect,
generated discretionary income.
The universal basic income is paid for out of general taxation. This means
that while everyone receives the grant as an unconditional right, some people will
be clear net contributors since their taxes will rise by more than the basic income,
and others clear net beneficiaries.

The rationale
Universal basic income has several very attractive features from the point of
view of radical egalitarianism.15 First, it significantly reduces one of the central
coercive aspects of capitalism. When Marx analyzed the “proletarianization of
labor,” he emphasized the “double separation” of “free wage labor”: Workers
were separated from the means of production, and thus were separated from the
means of subsistence. The conjoining of these two separations is what forced
workers to sell their labor power to obtain subsistence. In this sense,
proletarianized labor is fundamentally unfree. Unconditional, universal basic
income breaks this identity of separations: Workers remain separated from the
means of production (these are still owned by capitalists), but they are no longer
separated from the means of subsistence (this is provided through the
redistributive basic income grant). The decision to work for a wage, therefore,
becomes much more voluntary. Capitalism between consenting adults is much
less objectionable than capitalism between employers and workers who have little
choice but to work for wages. By increasing workers’ capacity to refuse

15
Some egalitarians have objected to universal basic income on the grounds that it constitutes a
form of exploitation of those who produce by those who live entirely off of the grant. Defenders of
universal basic income argue that this is a misdescription of the process by which a surplus is
produced and distributed in a complex society. For a discussion of this issue, see Elster (1986) and
Widerquist (1999).
Chapter 6. Real Utopias II: social empowerment and the economy 152

employment, basic income generates a much more egalitarian distribution of real

freedom than ordinary capitalism.16
Second, universal basic income is likely to generate greater egalitarianism
within labor markets. If workers are more able to refuse employment, wages for
unpleasant work are likely to increase relative to wages for highly enjoyable
work. The wage structure in labor markets, therefore, will begin to reflect more
systematically the relative disutility of different kinds of labor rather than simply
the relative scarcity of different kinds of labor power. This, in turn, will generate
an incentive structure for employers to seek technical innovations that eliminate
unpleasant work. Technical change would therefore have not just a labor-saving
bias, but a labor-humanizing bias.
Third, universal basic income directly and massively eliminates poverty
without creating the pathologies of means-tested antipoverty transfers. There is no
stigmatization, since everyone gets the grant. There is no well-defined boundary
between net beneficiaries and net contributors, since many people and families
will move back and forth across this boundary over time. Thus, it is less likely
that stable majority coalitions against redistribution will form once basic income
has been in place for some length of time. There are also no “poverty traps”
caused by threshold effects for eligibility for transfers. Everyone gets the transfers
unconditionally. If you work and earn wages, the additional income is taxed, of
course; but the tax rate is progressive, so there is no disincentive for a person to
enter the labor market to acquire discretionary income.
Fourth, universal basic income is one way of valorizing a range of
decommodified care-giving activities that are badly provided by markets,
particularly care-giving labor within families, but also within broader
communities. While universal income would not, by itself, transform the
gendered character of such labor, it would counteract the inegalitarian
consequences of the fact that such unpaid labor characteristically is performed by
women. In effect, universal basic income could be considered an indirect
mechanism for achieving the “wages for housework” proposals by some

16
The call for “real freedom for all” is the central justification for basic income proposed by
Philippe van Parijs (19xx).
Chapter 6. Real Utopias II: social empowerment and the economy 153

feminists: recognizing that care-giving work is socially valuable and productive

and deserving of financial support.17
Fifth, a secure, unconditional basic income potentially will increase the
collective power of organized labor, and thus contribute to the broader agenda of
social empowerment of popular social forces. This increased power of labor, of
course, also poses a problem for basic income, for the fear of such increased
collective power is one of the reasons why basic income is likely to be strongly
opposed by capital.
Finally, universal basic income can be viewed as a massive subsidy to the
social economy. One of the main problems that collective actors face in the social
economy is generating a decent standard of living for the providers of these
services. This is, of course, a chronic problem in the arts, but it also affects efforts
by communities to organize effective social economy services for various kinds of
caring activities – child care, elder care, home health care. Basic income
substantially solves this problem. Basic income can be viewed as mechanism to
transfer part of the social surplus from the capitalist market sector to the social
economy, from capital accumulation to what might be termed social accumulation
– the accumulation of the capacity of society for self-organization of needs-
oriented economic activity.

Problems
Two issues typically are raised by skeptics: the problem of labor supply, and the
problem of capital flight.
A universal basic income is feasible only if a sufficient number of people
continue to work for wages with sufficient effort to generate the production and
taxes needed to fund the universal grant. If too many people are happy to live just
on the grant (either because they long to be couch potatoes or simply because they
have a strong preference for non-income-generating activities over discretionary

17
The net effects of universal basic income on gender inequality are ambiguous. On one hand, the
grants go to individuals, not households, and this reduces inequality between men and women.
The grants also provide income for unpaid care-givers, and this too will disproportionately benefit
women. On the other hand, universal basic income could reinforce the gendered division of labor
within care-giving, making it harder for women to resist pressures to assume full responsibility for
such activities.
Chapter 6. Real Utopias II: social empowerment and the economy 154

income) or if the necessary marginal tax rates were so high as to seriously dampen
incentives to work, then the whole system would collapse. Let us define a
“sustainable basic income grant” as a level of the grant that, if it were instituted,
would generate a sufficient labor supply to provide the necessary taxes for the
grant. The highest level of such grants, therefore, could be called the “maximally
sustainable basic income grant.” The empirical question, then, is whether this
maximally sustainable level is high enough to provide for the virtuous effects
listed above. If the maximally sustainable grant was 25 percent of the poverty
line, for example, then it would hardly render paid labor a noncoercive, voluntary
act, and probably not reduce poverty dramatically.18 If, on the other hand, the
maximally sustainable grant was 150 percent of the poverty level, then a universal
basic income would advance the egalitarian normative agenda significantly.
Whether or not this would in fact happen is, of course, a difficult empirical
question to study and depends upon the distribution of work preferences and
productivity in an economy.19
Apart from the labor supply problem, universal basic income is also
vulnerable to the problem of capital flight and disinvestment. If a high universal
basic income grant significantly increases the bargaining power labor, and if
capital bears a significant part of the tax burden for funding the grant, and if tight
labor markets dramatically drive up wages and thus costs of production without
commensurate rises in productivity, then a universal basic income could well
precipitate significant disinvestment and capital flight. It is for this reason that
socialists have traditionally argued that a real deproletarianization labor power is
impossible within capitalism – that the necessary condition for sustainable high-

18
Even a miserly grant might have positive anti-poverty effects by constituting a kind of wage
subsidy to the low end of the labor market. Such a grant would function something like the earned
income tax credit currently in place in the United States, or like a modest negative income tax, as
proposed in the early 1970s.
19
It is very difficult to make credible estimates of these effects because they are likely to involve
significant nonlinearities and dynamic interactions. It is thus very difficult to extrapolate from the
effects of existing earnings subsidy programs to generous basic income grants, or even from low-
level grants to high level grants.
Chapter 6. Real Utopias II: social empowerment and the economy 155

level universal basic income is significant political constraints over capital,

especially over the flow of investments.20

IV. SOCIAL CAPITALISM [THIS SECTION IS INCOMPLETE]

The expression “social capitalism” refers to a wide range of institutional

mechanisms through which social power rooted in civil society directly impinges
on the exercise of capitalist economic power, especially in capitalist corporations.
The most widespread example of this is, of course, labor unions. Unions are
secondary associations and while they organize workers in the economy – in firms
and labor markets – their main source of power comes from their capacity as an
association to mobilize people for collective action, and in this sense they are also
part of civil society. When unions are heavily regulated by the state and their roles
in governance of economic power are restricted to collective bargaining over
wages and limited aspects of working conditions, then the social empowerment
enacted through unions is quite weak. But in some times and places unions have a
much more expansive role and modify the functioning of capitalism in significant
ways.

In what follows I will not discuss the conventional role of unions even though
this is an aspect of social capitalism. Instead I will focus on a number of less
familiar institutional designs and proposals which have the potential to constitute
significant additional pathways to social empowerment.

1. Socially Empowered Pension Funds

There already exist in capitalist societies large pools of capital that are controlled
by public and quasi-public bodies. Endowments of public universities and pension
funds of unions and governmental units are typical examples. Modest efforts
occur, from time to time, for these kinds of capital pools to be used to impose
social constraints on investment. Perhaps the best-known example was the

20
See Wright (1994, Chapter 7) for an extended discussion of the argument that socialist
institutions are a necessary condition for a sustainable universal basic income. I no longer think
that my arguments in that essay are entirely compelling.
Chapter 6. Real Utopias II: social empowerment and the economy 156

concerted effort to divest university endowments from investments in South

Africa during the apartheid period. From time to time, certain kinds of pension
funds, have also vetted investments on the basis of some criterion of social
responsibility. More radically, in the 1970s in Sweden Unions and the Left of the
Social Democratic Party proposed that union-run wage-earner funds be used to
gradually over time gain significant control over Swedish corporations. The
proposal came under concentrated attack and was modified to such an extent that
the final version lost these radical features.
The question, then, is whether a broad institutional redesign of the rules and
practices governing such public capital pools would enable them to play a much
more significant role in constraining capital, of imposing democratic direction and
social priorities on accumulation. In particular, pension funds already constitute a
vast pool of capital, and under various proposals to convert existing pay-as-you-
go tax-funded public pensions into asset-based pension schemes, this pool is
likely to increase significantly in the future. Is there a way of organizing and
funding such large, national public pensions in such a way that they can be used
proactively to discipline corporations and reduce the capacity of capital to escape
public regulation? Should such designs emphasize the power of “exit” by
restricting investments to “socially responsible” firms, or should they also use
“voice” by investing sufficiently in “bad” firms that the fund could have some
real say in the behavior of the firm? Can such political uses of pension funds be
reconciled with the dependence of people on revenues from the funds for their
retirement? And can such redesigns of the power-relations linked to pensions
simultaneously enhance democratic capacity to shape capitalist investment and
resolve the fiscal dilemmas of pensions provision in an aging society?
four proposals:
1. socially screened investment
2. shareholder activism: increase the stake
3. share levy system to dilute ordinary shares
4. socially controlled venture capital funds
Chapter 6. Real Utopias II: social empowerment and the economy 157

Robin Blackburn’s proposal elaborates an institutional design constructed

around what he calls a “share levy” on corporate profits which would channel
resources to various kinds of collectively controlled pension funds. A share levy
is a kind of tax on profits, but a tax paid through the issue of new shares rather
than cash. It therefore does not directly affect the cash flow of a corporation but
has the effect of transferring a small part of ownership of the firm to the pension
fund in the form of shares. Over time, Blackburn argues, this would lead to a
significant increase in the potential control such funds could exert over large
corporations.

2. CODETERMINATION
3. WORKS COUNCILS
4. WORKER OWNERSHIP: ESOPS AND COOPERATIVES
Chapter 6. Real Utopias II: social empowerment and the economy 158

Appendix: Additional Clarifications on the social economy

The following is a discussion of some theoretical issues in the discussion of
the social economy which I initially included in the chapter and then dropped.
This material may appear in an appendix, or be dropped altogether.

Another way of thinking about the social economy is in terms of the character of
the norms which orient the economic activity. I have been emphasizing the forms
of power deployed in the control over economic activities, but economic activity
is also regulated by norms – morally grounded principles of behavior that both
shape the motivations of actors within economic interactions and shape their
expectations about how other people will behave. Two dimensions are relevant
here: first, whether the economic interactions are governed mainly by norms over
the rights of different categories of people, or by norms over their legitimate
needs; and second, whether the justification for the relevant norms is seen as
resting primarily on private interests or public interests. Taken together these two
dimensions yield four types of normative contexts for economic interaction as
illustrated in Figure 6.1.

Figure 6.1
NORMATIVE GROUNDING OF
ECONOMIC ACTIVITY

Normative basis for

Economic interactions
rights needs

State Social
Justification public
economy economy
of norms
Capitalist Household
private
economy economy

In these terms the social economy shares with economic interactions within the
household norms centering on the fulfillment of needs: for the household this
Chapter 6. Real Utopias II: social empowerment and the economy 159

concerns needs of family members, for the social economy, needs of members of
some relevant community. This is in contrast to economic activity in both the
state economy and the capitalist economy, where the norms governing economic
activity are grounded in rights: property rights in the case of the capitalist
economy, citizenship rights in the case of the state. The social economy shares
with the state economy a justification for the norms governing economic
interaction in terms of their relevance to the public interest; whereas both the
capitalist economy and the household economy justify their norms on grounds of
private interest.