I'd say that syndicalist organization is best, from the perspective of informational issues outlined by Hayek and from the perspective of individual liberty. The informational issues outlined in The Use of Knowledge in Society, are a feature of vertical (hierarchical) information flows, and can only be overcome by horizontal communication between relatively autonomous actors. This is achieved both by markets and by the federalist organization of syndicalist unions.
I really think a healthy mix of both is necessary. Employee owned firms and employers, in some mix determined purely by market forces (instead of the employer favoring state influences that predominate today) would maximize both the productivity of the economy and the achievement of justice in society over time.
Employees only need organize where employers have already organized, and vice versa. A more dramatically decentralized system of economic management is possible where the good faith exists such that no organization above the level of economic necessity exists.
Several reasons:
Firstly and fundamentally, I think it's because where wage-labor predominates the disposal of value created in production rests primarily in the hands of the owner/management rather than the workers who created the value (this is because wage-labor is a power relation where the boss is lord and master while the worker is subjected to the bosses control) and hence the workers perceive the value they create as "not my money" while it actually isn't the boss's money. This power differential and is at the core of the irrationalities of capitalism.
I could have sworn you were one of the ones here intelligent enough to have seen past the Marxist veil.
This depends on the notion that value is the result of labor, rather than a psychological tick based on the subjective preferences and goals of the individual economic agent. Without a labor theory of value, the Marxist critique of capitalism falls to pieces.
Secondly, in order to maintain wage-labor as the predominant form of production it is necessary for the state to constantly and massively intervene in the labor market, so as to keep the price of labor artificially low and the supply of labor artificially high. If not for this government regulation and intervention workers would use their liberty to associate to form unions which would restrict the supply of labor and hence raise wages to the point that workers could start buying means of production and independent artisans and businessmen themselves. Since the labor market is never allowed to approach equilibrium beyond a certain point this failure ripples through the entire price system.
'Restrict the supply of labor', that is, 'cause unemployment'. This is another mark of the weird Hegelian way of looking at things: Looking at people as members of groups and classes. Where the group or class benefits, obviously the person benefits. But this isn't true. Throwing some into unemployment in order to benefit 'the working class' really just harms those unemployed to the benefit of those employed.
The proper role of organized labor is to:
1. To re-normalize the negotiating process when employers attempt to organize (that is, form employment cartels) and fix the offered wage.
2. Provide services to their members, including things like credit unions, health insurance, unemployment insurance, educational services, and whatever else their members might desire.
3. To, perhaps, act as centers of communal association, where other organizations (such as churches or hobby/sporting associations) do not already do so.
Thirdly and most immediately, in the Minskyian scenario that Shevek outlined, speculative risk taking is fairly key. The failure speculative enterprises is what sets off the general collapse as jobs are lost and with those jobs the spending of income and the multiplier effect of that spending. If the workers of any enterprise had an equal say and stake in that enterprise, then these speculative enterprises would be greatly reduced (but still present). Crazy schemes that will fail and novel schemes that will turn out solid will both be less able to attract the human capital/labor force that they need, but the system will be much more stable for that and the novel schemes will prove themselves in time in the more stable environment.
The thing is, speculative enterprise is
almost all enterprise. Uncertainty in the market is all pervasive, an omnipresent condition of investment and economic activity in general. Speculative enterprises are failing
all the time, there's a constant background of bankrupt firms entering liquidation and new ones with unpredictable futures being founded.
The problem, and the general form of the business cycle, is that there's a sudden
burst of these failures, an alignment of many failures all at once. Shevek outlined the reason for this very well when he noted that it's related to uncertainty about future demand, and that was the whole point of my explanation on the relationship between the interest rate and the periodicity of investments.
It's not something that 'just happens', it's something with definite causes that aren't a necessary condition of market economies. When central banks (or similar institutions in the distant past) manipulate the monetary base without the widespread, accurate knowledge of the manipulation amongst the users of the monetary base, then knowledge of future demand is distorted and so are the economic plans of those who supply future goods and services.
Edit: So, what do you mean when you say Capitalism?
Depends, what do you think I mean?
IMO our categories for speaking about this kind of stuff are hopelessly inadequate.
I'll usually happily use 'capitalism' to refer to a free and open market, but then I can see a use for 'capitalism' that isn't quite that. I think I could see 'capitalism' being used to refer to the current regime that overly favors employers through the use of a system of centralized corporate economies established by statutory law and monopolies in a few, key sectors. In that case a 'free market' and 'capitalism' aren't actually the same thing, and a 'capitalist market' cannot be free.