s/r home  | issues  | authors  | 21 contents

Synthesis/Regeneration 21   (Winter 2000)

Community Based Economics:
A Real Alternative to Eco-socialism?

by Tom Smith, Park Slope Greens

Today, many Green "populists" are for "community-based economics." What does that mean? It does not mean the unregulated corporate capitalism we have today. But neither does it mean socialism. Populists, rightly, oppose the despotic pseudo-socialism which developed in the old Soviet Union. But they also oppose community-based, democratic eco-socialism. According to its supporters, such as myself, community-based socialism (CBS) would have room for small businesses (though none for corporations), and would be based primarily on small workers' cooperatives. But relations between these cooperatives and businesses would not be competitive, market relations. Instead, our economic relations would be democratically planned and controlled by the community as a whole. Populists, however, would argue that CBS is an oxymoron; that socialism will always lead to tremendous bureaucracy and inefficiency.

Community Based Economics (CBE) is based upon small businesses, and maybe cooperatives. But there are two important differences between CBS and CBE. CBE would allow for corporations, as long as they are government-regulated. Most importantly, CBE is a market-based rather than a democratically planned economy. Such a small business-based market economy would supposedly permit us to avoid the problems of corporate capitalism and bureaucratic socialism.

Green populists like Paul Hawken, writing in his The Ecology of Commerce, want to keep the market. They accept Adam Smith's idea that private property and competition for profit are natural and good. Hawken agrees with Smith that government cannot be substituted for or even interfere substantially with capitalist competition. Hawken writes, "When the guardian syndrome—governance—intrudes with its hierarchical, bureaucratic assumptions into the realm of commerce, it founders, because it is no match for business in quickness and creativity." Hawken claims that small business is the greatest locus "where new ideas and diversity arise and are processed into growth," and that small businesses must serve the public, because they can never be powerful enough to manipulate the public or control the government. But even "the monoculture of corporate capitalism," according to Hawken, is more creative than government.

Green populists…accept Adam Smith's idea that private property and competition for profit are natural and good.

In my opinion this is a fantasy. In the first place, it is a myth that competition is the source of innovation today. As Noam Chomsky has pointed out, the development of such things as personal computers, the internet, and a host of other innovations was too costly and required too much long-range planning to be left up to big, let alone, small, business. (1) Instead, these things were developed by government, chiefly by the Pentagon, which then handed over these innovations to private "innovators" like Bill Gates for a song. As a source for innovation and creativity, governmental planning, even bureaucratic planning by a capitalist government, has been far superior to market forces. (2)

Second, we do not need any more "growth." In fact, if we want to live in an ecologically sustainable society someday, and solve problems such as global warming and pollution, we are going to have to learn how to live without much of our present industrial technology—not "innovate" more of it. (3)

Third, there is nothing "natural" or ecological about private property, capitalist competition, or the profit motive. Naturally, human beings, their labors, their societies, are communal. Primitive, tribal society was, as Marx wrote, communist. As human society developed the capacity to create a surplus, various forms of property and privatization arose, so that an elite class could claim that surplus for itself, and thus exploit the labor of the rest of us. In primitive society, human beings recognized the simple fact that since we all labor together, since we are interdependent, we ought to share the fruit of our labor.

...it is a myth that competition is the source of innovation today.

Private property must be seen as part and parcel of the development of class society. This is a story of exploitation and oppression: even though you worked to create the surplus, I get to keep it. It is mine, not yours, because my class owns the state (bureaucratic despotism). Or I own you, your body itself, as a slave (ancient society).

In feudal society, we once again share the land in common, but because I am lord of the manor, because of my aristocratic social status, I have the right to collect, from my serfs, a substantial portion of the agricultural surplus. In capitalist society, private property comes into its own, so to speak, as the culmination of this historical process of class exploitation. It meant, first, that aristocrats and the capitalist landlords (the gentry) got to enclose the commons as their private property, and kick the serfs off of it. As the livelihood of the peasantry became more precarious, they worked as part-time laborers in their own homes, or in mills and mines, for capitalists. When they finally lost their land completely, the farmers moved to the cities in massive numbers. Thus they became prey to the industrialists. Because the industrialists owned the factories, they were the only people who could give workers any livelihood. So they could force the workers to work for very low wages in horrible conditions.

Hawken and other populists claim that there was a period in American history, before the Civil War, when private property meant something different. They claim that ante-bellum America was a golden age, when small businessmen and yeoman farmers were free, before the government stopped keeping a tight rein on corporations, before the Gilded Age, when corporations were treated instead as persons with unlimited rights to do anything they wanted to the community. If only the government had retained this control, we would still live in a golden age. By getting government to reassert this control, we can live in it again.

...before the American Revolution, small farmers did not prevail over the economy.

Let's examine, first, whether this era ever really did exist, and second, whether it is likely that it could have been sustained, or could be sustained now.

Ante-bellum America: A Golden Age?

As Lewis Corey writes in The Crisis of the Middle Class (1935), before the American Revolution, small farmers did not prevail over the economy. Instead, "Out of economic progress and diversification, and the breakdown of the earlier primitive class relations arose a big bourgeoisie comparable to the British, . . . The colonial scene was increasingly dominated by merchant or commercial capitalists, who acquired great wealth from trade, the traffic in Negro slaves, and money-lending. An oligarchy of big merchants ruled ruthlessly in the commercial provinces and shared power-as dominant partners, however-with planters in the South and big landowners in the North." (4)

In the Jacksonian era, we do indeed see a great deal of easy credit forwarded to small state banks, and then to entrepreneurs, merchants, fledgling manufacturers, and farmers. But the result was an economic crisis as early as 1836, as all this small-business competition overheated the economy and led to a collapse.

As the history of such depressions, which continued throughout the nineteenth century, makes clear, the kind of economy that Hawken would like to see, made up of many small firms competing with each other to provide the same services and sell the same products, would be a far more wasteful way of organizing production than the present corporate structure. (5) And as Thoreau wrote in Walden, the typical small farmer of ante-bellum New England, under the pressures of competition, saw his farm as nothing but a money-making enterprise: "his farm where everything has a price; who would carry the landscape, who would carry his God, to market if he could get anything for him." (6) So much for the populist notion that small-business is inherently eco-friendly.

Corey writes that before the Civil War, the ranks of an exploited proletariat swelled to 2 million by 1859. To sustain their production, farmers went into debt to merchants and banks, and lost their farms. Factories were built in the countryside, and a population of impoverished and exploited rural workers developed. Many of these came into the cities, to work in factories there or to become part of the desperate urban poor. There was a great deal of exploitation and misery in America during what the populists consider to be a golden age. As historian Bray Hammond writes, Jacksonian individualism, far from expanding freedom for all, simply created a new, more aggressive elite:

It opened economic advantages to those who had not previously had them; yet it allowed wealth to be concentrated in new hands only somewhat more numerous than before, less responsible, and less disciplined. There were unenterprising and unpropertied thousands who missed entirely the economic opportunities with which America was thick. There was poverty in the eastern cities and poverty on the frontier. (7)

Hawken's notion that corporations were ethical in their practices in ante-bellum America, because they derived their right to exist from limited government charters, is false. As economist Michael Perelman writes, "despite the high-minded public purpose of the corporation" during this period, "those who won corporate charters often did not act in the public interest. Instead, they were generally people who took advantage of their close ties to government officials." (8)

...before the Civil War…farmers went into debt to merchants and banks, and lost their farms.

As Corey writes, "Out of these relations [i.e., private property, competition for profit] arose the big property of the old merchant capitalists and the still bigger property of the new industrial capitalists." This created forces which the small-propertied middle class found impossible to control. Though they helped to develop it, capitalism could not allow small farmers to survive. The rise of speculation, industry and trade, along with the increasing complexity and cost of industrial technology, made the rise of corporate power inevitable.

The new industrial capitalism, with its more efficient but more costly mechanical equipment, required constantly larger amounts of fixed capital. Economic activity became more complex as capital, output and markets became larger and strengthened the need for corporations and banks. The simple society of small producers was doomed to destruction. (9)

The Concentration of Capital and the Corruption of the State

This brief history of ante-bellum American capitalism reveals why Hawken's small-business economy can never be sustained. Competition between firms, as Marx argued in 1844, ensures that capital will concentrate into fewer and fewer hands, while the rest of us will sink downward, lose our property, and become wage workers.

...to be sustainable, every single small capitalist would have to be a saint, would have to give away his profits to his competitors and to the community...

Populists would argue that this gives small capitalists a bad rap—that many shopkeepers, consultants, small farmers whom they know are kindly, benevolent. Perhaps so. But to be sustainable, every single small capitalist would have to be a saint, would have to give away his profits to his competitors and to the community if he started winning too much at their expense. That is impossible. And if we talk about workers' cooperatives, or the various utopian schemes put forward by the populists for broad employee-and-community-shared stock ownership, the same problem applies. With competition for profit, most such cooperatives will eventually go under, while a few will survive.

Competition always intensifies, because the rate of profit tends to fall. Capitalists, big or small, cooperative or corporate, compete with each other on the market, and they do so by cutting their prices. The best way to do this is to replace their workers with machines. This works out for the first capitalist who gets the new technology: he can undercut his competitors. But then his surviving competitors get the same technology. Since profit is based upon human labor, profits, in general, fall, as they get squeezed between falling prices and higher technological costs. As profits fall, competition for profits intensifies.

...competition will always lead to corporate capitalism...

As competition intensifies, there will be a strong temptation for relations even within cooperatives to become hierarchical, for a few "elite" members to drive the rest to work harder, so that the cooperative can compete better, externally. In the case of both small businesses and cooperatives, as they compete with other concerns for survival, their decisions will be based upon profit and survival rather than upon what is good, in the long term, for the environment, the larger community, or even for their own workers and their smaller shareholders.

Populists often argue that the state can step in and stop this process of concentration from happening. Capitalism may indeed have gotten out of control during the Civil War, but we can still make it work, claim the populists. But they are wrong. Just like the small business economy, any state, no matter how democratic, is made up of corruptible human beings, rather than saints. Again, there may be some politicians who are good-hearted, and would try to stop this concentration of power from occurring. But what will be the result? Simply that their unscrupulous competitors will beat them in elections. The more powerful and larger businesses will use their superior wealth and power over the economy to ensure that their candidates will win, so as to distort the electoral process, the law, and the state to favor their own interests.

No matter the starting point, competition will always lead to the corporate capitalism abhorred by the populists. The only alternative to corporate capitalism is community based, democratic eco-socialism.


1. Each personal computer, by the way, requires almost as many tons (15-19) of mined material to produce as a single automobile (25 tons), as well as 33,000 liters of water. And the smaller the computer, the more miniaturized its components, the more difficult it becomes to separate the different metals and thus to recycle. The notion, therefore, that the capitalist economy has "naturally" produced an eco-friendly technology in PCs and the internet simply does not hold water. See Jurgen Malley, "Von Ressourcenschonung derzeit keine Spur," Politische Okologie, No. 49, November-December, 1996, p. 48.

2. See Noam Chomsky, "Power in the Global Arena," New Left Review, July-August 1998.

3. See Saral Sarkar, Eco-socialism or Eco-Capitalism: A Critical Analysis of Humanity's Fundamental Choices (London and New York: Zed Books, 1999).

4. Lewis Corey, Crisis of the Middle Class (New York: Covici Friede, 1935), p. 68.

5. See Michael Perelman, The Natural Instability of Markets (New York: St. Martin's Press, 1999), pp. 131-35.

6. Thoreau, Walden and Resistance to Civil Government (New York: Norton 1992), p. 132.

7. Bray Hammond, Banks and Politics in America, From the Revolution to the Civil War (Princeton, NJ: Princeton University Press, 1957), p. 327.

8. Perelman, p. 127.

9. Corey, pp. 118-19.

Synthesis/Regeneration home page | Synthesis/Regeneration 21 Contents