There’s a lot to like in Seth Ackerman’s essay, “The Red and the Black,” even if his argument ultimately fails to convince.

First, and most important among the positives, is his emphasis on talking about utopian goals. After decades of retreat in the face of a resurgent finance capitalism, the Left can no longer rely on the idea that the victory of the working class is inevitable, and that we should focus on organizing to hasten its arrival, before worrying about what kind of society will replace the existing order.

Now that finance capitalism is in crisis, and its failure to deliver its promises is evident to anyone willing to look, the possibilities for progress are opening up once again. But anger against the failures of the existing order can just as easily be channeled into the right-wing tribalism of the Tea Party in the US, or National Front parties in Europe. To quote my own thoughts on utopian vision

Popular anger has boiled over in a string of electoral defeats for the advocates of austerity. But, unlike the right-wing tribalism that has formed part of that backlash, progressive politics cannot, in the end, rely on anger. It must offer the hope of a better life.

Even more importantly, critical analysis of capitalism is no longer enough. If critical analysis were enough to bring about radical change, a socialist utopia would have arrived long ago.

The standard left critiques of capitalism are well established and quite widely shared (more young Americans say they prefer socialism to capitalism than identify themselves as Republicans). Critiques need to be updated as the existing order changes, and improved in response to challenges from the Right, but critical analysis alone is not a basis for progress.

Ackerman is also right to focus on feasible steps towards a radically transformed society. What’s needed here is a willingness to step outside the current bounds of what is politically feasible, and the needs of day-to-day struggles over particular issues, while still offering a way forward that makes sense to ordinary people.

Ackerman’s discussion of the failure of Soviet central planning, and its implications, is accurate and insightful, reflecting a lot of points raised in the recent Crooked Timber event discussing Francis Spufford’s marvelous book, Red Plenty. The central problems weren’t poor productivity, bad incentives or distorted prices, though these certainly played a role. The larger point is that no plan can encompass all the possibilities for innovation that might arise during its operation, let alone assess in advance which will succeed and which will fail. As Ackerman observes, the democratic version of central planning proposed under the name “participatory economics” is even less satisfactory.

On the other hand, his discussion of the marvels of the price mechanism in coordinating the production of a computer is reminiscent of Leonard Read’s “I, Pencil” in its failure to consider the many different modes of social interaction that go into the production of even such a simple commodity as a pencil. Read’s pencil was a product of the mixed economy, and the same is true in spades of the computer. The first electronic computer was designed and financed by the US Army. The programming languages on which it relies were developed mainly in universities, or else in institutions like Bell Labs, financed by the old AT&T monopoly. The Internet similarly came out of the public sector. More recently, a central role has been played by unpaid cooperative efforts like Wikipedia. A notable example, in the light of recent tragic events was the creation of the RSS format by a team including the fourteen-year-old Aaron Swartz.

That’s not to say that prices should play no role in a socialist economy. For lots of purposes, prices work exactly as advertised in a mainstream Economics 101 course. But a large proportion of economic activity (arguably the bulk of it) does not rely on prices. Ackerman notes that much work is done within firms, which constitute miniature command economies, but informal exchanges, publicly provided services and purely voluntary actions are equally important in many cases.

This naive treatment of prices contrasts sharply with one the strongest parts of Ackerman’s essay: his discussion of the twentieth-century social democratic project as a process of decommodification. As he points out,

Schooling, medical treatment, housing, retirement, leisure, child care, subsistence itself, but most importantly, wage-labor: these were to be gradually removed from the sphere of market pressure, transformed from goods requiring money, or articles bought and sold on the basis of supply and demand, into social rights and objects of democratic decision . . . This, at least, was the maximal social-democratic program — and in certain times and places in the postwar era its achievements were dramatic.

As Ackerman points out, this solution proved to be unstable. That’s not because of the impossibility of producing a vast range of high-quality goods and services outside the market, or because innovation was stifled, but because the motor of the system as a whole was profit. He says,

How can you have a system driven by individuals maximizing their profit cash-flows and still expect to maintain the profit-repressing norms, rules, laws, and regulations necessary to uphold the common welfare?

This is an acute diagnosis, but the solution proposed by Ackerman is entirely unconvincing. He suggests, in essence, that all private holdings of equity be compulsorily converted into deposits in publicly-owned banks. Capital markets would then operate much as they do now, except that all the (equity) capital would be publicly owned, and all the profits would accrue to the public.

I have three objections to this. The first is that, while conversion of equity capital to deposits in (government-owned) banks sounds like a modest step if you say it quickly enough, it’s utterly outside the realm of political feasibility. Comprehensive nationalization of banks and financial institutions, a prerequisite of the main intervention, might conceivably be managed, though it seems unlikely. But the second step would require the seizure of assets from everyone with retirement savings, in return for promises of dubious credibility. Even before the broad diffusion of IRAs and similar, such a proposal would never have secured majority support in any democratic country.

The second problem relates to small business. Ackerman’s argument relies explicitly on the separation between ownership and control that characterizes the corporate sector. But the central advantage of small business, one that enables successful competition with giant corporations in many sectors, is that the manager of the business is also the owner and therefore the residual income recipient. For the system to work at all, owner-managed businesses would either have to be suppressed, or exempted from the requirement to convert equity into capital. Either of these options seems unworkable.

The third question is whether anything would be achieved. How would the managers of these publicly owned banks be prevented from behaving exactly as the managers of private financial corporations do today? At least in form, the Blankfeins and Fulds of this world made their fortunes as employees, not as capitalists. Admittedly, the bulk of their incomes took the form of stock options, but this was mainly a tax dodge.

Of course, it’s far easier to criticize policy proposals than to come up with alternatives. However, I have made some attempts to describe the kind of direction in which we should go and it is, in essence, a return to the social democratic project of decommodification, and, in particular, a drastic reduction in the average hours of market work required of people.

Such a project is obviously antithetical to the financialized version of capitalism that has dominated in developed countries since the 1970s. The answer, though, is not to tame financial markets through the socialization of equity, but to cut them down to size. A prerequisite for any positive program is a comprehensive attack on the power of financial markets, including the breakup of all “too big to fail” institutions, taxes on high-volume financial transactions, stringent restrictions on the creation of new financial instruments, and reductions in the share of national income going to the profits of financial enterprises. That’s a radical program, but (unlike Ackerman’s) every element of it is on the table right now, and commands support well beyond the Left.

Here for example are the New York Times advocating the breakup of banks, the European Commission promoting a Tobin tax , the New Yorker on financial innovation and even Business Week complaining about the share of profits going to financial corporations.

Even though I’m unconvinced by Ackerman’s answer, I think he is asking the right questions. After decades spent in a defensive crouch, it’s time to look up at what a great Australian Labor leader called the light on the hill.