The Dictatorship of the Petty Bourgeoisie

I’m not sure I can adequately summarize Seth Ackerman’s essay on market socialism* (I think John Rawls’ term “liberal socialism” is probably a better one) in the new issue of Jacobin but suffice it to say that involves the idea of public ownership of all large-scale financial assets while retaining separate management of separate firms. If that sounds like the kind of thing you’d be interested in, you should just read it. The interesting issue it raises, however, is much more general than the specific details of the proposal and has to do with how a statist economic system deals with entrepreneurs and small firms:

And while individuals could still be free to start businesses, once their firms reached a certain size, age and importance, they would have to “go public”: to be sold by their owners into the socialized capital market.

Details matter here, of course, but one very plausible consequence of this would simply be to strongly discourage the owners of small firms from pursuing growth. And the big winners from that kind of disincentive to firm growth will be the owners of other small firms that simply aren’t as lucky or well-managed as the growing ones. This is something that arises not only with radical proposals for collective ownership of the means of production. Any time you have a proposal to regulate “big business” while exempting small firms, you’re partially regulating existing large firms and partially granting existing small firm owners protection from expropriation at the hands of rival business owners.

In general, this kind of small business promotion is not such a hot idea. If you look at Europe it’s striking that Greece, Italy, Spain, Portugal, and Poland have lots of people working for small firms while Germany, Denmark, the UK, Latvia, and Finland have few people working for small firms. In other words poorer, lower-wage countries seem to have economies more dominated by small firms. Doug Henwood has emphasized that you see this at the firm level in the United States where small firms pay lower wages and the big/small pay gap gets bigger and more important as move down the occupational status hierarchy.

I’m not sure the reasons for this are fully understood, but it probably has something to do with the fact that as long as you’re going to be bossed around it’s desirable to be bossed around by somebody who knows what he’s doing and can deploy the resources available to him in a reasonably skillful way. When a country prevents the emergence of large pharmacy chains, it’s essentially bailing out inept pharmacy owners. In the short-term, obviously an employee of an inept pharmacy owner would rather have the owner bailed out than lose his job. But in the long-term, cashiers are going to be better off if they can avoid working for idiots which is more likely in a world where idiots can be driven out of business.

* Correction: An early draft attributed the article to Peter Frase.