'Market
Socialism' and the Problem of Planning
"...market
socialism is resolutely anti-capitalist, resting on the fundamental insight
that the capitalist qua capitalist is, in the modern world, functionally
obsolete. Capitalists are no longer needed to raise capital, manage industries,
or create new products or technologies. There are other, better, ways of performing
these functions."
--
David Schweickart, Market Socialism: A Defense.
We
are back then, by a circuitous route, to the question of common ownership
of the means of production, distribution and exchange. Given that the Soviet
Union, with its collapse, brought down with it the credibility of many of
the traditional socialist arguments for the abolition of private ownership
and its replacement by efficient public management of the economy, this would
seem to be a real problem for the Left. However, this is not the complete
picture: bureaucratic management of large state-owned enterprises in a centrally-planned
Command economy does not exhaust the list of possibilities for collective
ownership.
At
this point, arguments for 'Pension Fund Socialism' and its analogues--strategies
for the collective capture of capital through redirected pension investments
and share levies on corporations--feed into the various discussions about
the potential for 'Market Socialism', the quest for a political economy which
"seeks to promote the traditional socialist goals of equity, democracy
and solidarity while maintaining economic efficiency...by retaining one major
feature of capitalist economies--the market--while replacing another major
feature of capitalism--private ownership of the means of production."
Markets,
left to themselves, are powerful engines of inequality. Furthermore, the experience
of the capitalist economies of the advanced industrial world in the period
since the Second World War suggests that, when untrammeled laissez-faire markets
are given their head, they do not necessarily generate economic growth either.
In the past, markets have frequently been dispensed with altogether as design
features of a socialist political economy (on grounds of both equity and efficiency),
the role of the market being given over instead to the state in its development
of an economic plan. Though we may quarrel with it in some ways, H.D. Dickinson's
definition of socialism gives a feel for the central importance of planning
to twentieth century socialists: "socialism is an economic organisation
of society in which the material means of production are owned by the whole
community and operated by organs representative of and responsible to a general
economic plan..."
The
rejection of the market has a fine pedigree: "Within the cooperative
commonwealth based on the social ownership of the means of production,"
Karl Marx wrote in his Critique of the Gotha Programme, "the producers
do not exchange their products." For Marx, paradoxically, an overestimation
of capitalism's potential for a revolution in productivity had removed the
hard edges from the problem of planning by allowing him to ignore the issue
of prices. The Associated Producers, in their abundance, would not trade their
products: they would have no need for market mechanisms of allocation and
exchange because the abolition of scarcity would make considerations of economic
efficiency irrelevant. Thus, crucially, there would be no economic role for
the state (and the state bureaucracy), which could be abolished (or allowed
to wither away) along with the market. But Marx's anticipated capitalist revolution
in productivity failed to fully materialize and, so long as scarcity persisted
(to say nothing of ecological limits), efficient allocation of resources in
production was a necessity. The socialist solution to this dilemma was invariably
some form of economic planning, what Engels described in Anti-Dühring
as "a society which makes possible the harmonious co-operation of its
productive forces on the basis of one single vast plan."
Planning,
however, as subsequently put into practice in the twentieth century did not
have its origins in the socialist movement but rather in 1914 and the military
requirements of the Warfare State--in particular, of the implications for
Wilhelmine Germany of a dependence on raw-material imports. Meghnad Desai
gives a good account:
"Walter
Rathenau, a dynamic young businessman, proposed to the German military authorities
on the second day of the war that they should allocate scarce raw materials
in a properly co-ordinated way. He was immediately absorbed into the German
war machine, and became its first central planner. The idea of planning was
not unknown to economists; the Italian economist Vilfredo Pareto had written
about a fully planned economy, and another Italian economist, Enrico Barone,
had taken Pareto's speculations much further...Rathenau's efforts inaugurated
a practical experience in planned allocation of resources... The Germans called
their experience of a planned war economy 'war socialism.' Here was the first
example of an advanced economy run consciously from the centre: what socialists
had spoken of in vague terms was alive and concrete...But the other belligerent
powers also began to think about some central co-ordination of production
plans and allocation of scarce materials. Trade unions were welcomed through
the portals of power for the first time. There was continuous full employment.
The Gold Standard was suspended. Economies had to be run by committees of
bureaucrats, army staff, and businessmen. International trade was severely
disrupted, and capital movements dried up. A new logic of economy was suddenly
born. There had been wars before and armies had always been like planned economies.
But this was total mass war: nothing could escape the war effort. Although
business stayed in private hands, the market was no longer the logic of the
economy. This was new territory. This was a new phase of capitalism."
Lenin
looked on with approval at the German experience, but over the course of the
century the practice of state economic planning--particularly in the Command
economies of the East, but also in moderated form in the Western Social Democracies--raised
a new set of problems: soft budget constraints, information problems, incentive
and entrepreneurial problems, authoritarian tendencies. In the eyes of anti-Soviet
critics on both Left and Right, these came together to form the lineaments
of a grotesque. Here is Michael Harrington:
"The
investment and production decisions were fixed according to planned, quantitative
targets, which facilitated both waste and shoddy goods... [If] a Soviet pin
factory were assigned a quota of so many tons of pins, it would turn out one,
monstrously large and unusable pin; and if it were told to produce a certain
number of pins, it would achieve the numerical goal with a myriad of pins
so thin that they were also useless..."
This
is somewhat exaggerated: in fact, planning brought many successes. Particularly
during the 1930s (when the West languished in Depression) and again in the
'50s and '60s, the Soviet Union achieved remarkable levels of growth. Planners,
then, can plan an entire economy:
"Planners
in the Soviet Union, in Eastern Europe, in China and elsewhere did exactly
that for decades. By concentrating the production of specific products into
relatively few (often huge) enterprises and by issuing production targets
in aggregate form, allowing enterprise managers flexibility in disaggregation,
goods and services were produced, and in sufficient quantity to generate often
impressive economic growth...To cite only the Soviet Union: an economic order
that endured for three-quarters of a century in the face of relentless international
hostility and a German invasion, and that managed to industrialize a huge,
quasi-feudal country, to feed, clothe, house and educate its citizenry, and
to create a world-class scientific establishment should not be called impossible."
Planning
is possible (indeed, vital) under certain conditions and for certain purposes,
but these are not necessarily the same problems we face in building a socialist
society. The planners achieved much, but the limits are obvious from Soviet
history. The alternative, if we are not to abandon socialism altogether, is
to disentangle the conflation of market mechanisms with categories of capitalist
ownership and look at the possibilities of combining (limited) markets
with egalitarian outcomes: in other words, 'Market Socialism.'
Though
it owes a considerable debt to the ideas of Eduard Bernstein and Otto Bauer,
the true father of Market Socialism is the great Polish socialist economist
Oskar Lange, whose 'competitive solution' to the problem of planning emerged
from his famous exchange with F.A. Hayek and Ludwig von Mises--the so-called
'socialist calculation' debates of the interwar years. Lange argued that,
contrary to Mises, it was possible for planners in an economy without capital
goods to calculate approximate prices, and thus to establish simulated markets
and direct socialist enterprises into optimal channels. Since then the debate has continued
to rage, mainly in academic left-wing circles, and a number of theorists (Marxist
and non-Marxist) have developed proposals for a workable Market Socialism,
usually (but not always) involving competing worker- or community-owned enterprises
and social control of investment. Perhaps the two most comprehensive models
are those of David Schweickart ('Economic Democracy') and John Roemer ('Coupon
Socialism'), but there have also been important contributions from such authors
as Alec Nove, James Yunker, Wlodzimierz Brus and Kazimierz Laski, Pranab Bardhan,
Michael Albert and Thomas Weisskopf, among others.
The
basic principle (in Robin Blackburn's summation) is that "Market prices
are not just a delusion but approximate to social cost. They should be revised
to take account of costs they are not good at measuring, such as the using
up of non-renewable resources, but they cannot be entirely disregarded without
unfortunate results. Likewise profit and loss." Beyond that, Market
Socialist models diverge widely, and the question of where exactly to draw
the line on market mechanisms has been an abiding problem. Roemer's 'Coupon
Socialism,' a particularly extreme example, has fully functioning markets
in absolutely every area with the exception of share ownership (where each
citizen has an equal number of government-endowed shares which cannot be bought
and sold with money but only traded for other shares through a system of competing
Mutual Funds); Schweickart's 'Economic Democracy,' on the other hand, (characterized
as "an economic system with three basic structures, worker self-management
of enterprises, social control of investment, and a market for goods and services
[in] contrast with the defining elements of capitalism: wage labor, private
ownership of the means of production, and a market for goods, services, capital,
and labor"), has neither capital markets nor labour markets in the usual
sense, for the good old-fashioned reason that "when the market extends
beyond goods and services to capital and labor, it begins biting the neighbors,
urinating on the carpet, and worse."
What
most of the models do have in common, however, is their embrace of
the transformation of capitalist enterprise into social enterprise, what James
Lawler describes as "a strategy of socialist organization that takes
advantage of trends that are promoted by the self-transforming logic of capitalist
development itself." The market (in Roemer's insight)
"does not perform its good deeds unaided; it is supported by a myriad
cast of institutional characters which have evolved painstakingly over time,
and in a variety of ways, in various market economies...these institutional
solutions to the design problems of capitalism also suggest how the design
problems of socialism may be solved in a market setting."
Such
an innovative approach would seem, on the face of it, to hold out endless
possibilities for socialist renewal. Unfortunately, the many interesting and
workable models for a Market Socialist economy that have been put forward
are usually unaccompanied by any suggestion whatsoever of a plausible political-economic
strategy for getting there. Meanwhile, committed socialist politicians and
activists flounder about before the advancing neoliberal tide, desperately
in search of a programme, often reduced, in the new climate of rampant inequality
and social revanchism, to promising a kinder, gentler management of their
constituents' downward mobility on the basis of an ethic of comparative scarcity.
The theoretical and political wings of socialism are like ships that pass
in the night, while the absence, on the Left, of widely-discussed, concrete
and coherent proposals for a twenty-first century socialist political economy
is used by apologists for the status quo to confirm their lazy mantra that
"There Is No Alternative", typified by the back-handed tribute to
the persistence of Marx's ideas that appeared in a recent issue of The
Economist:
"Nowhere
in the "Manifesto", or anywhere else in his writings, did Marx take
the trouble to describe how the communism he predicted and advocated would
actually work...[A] cartoon is almost all Marx ever said about communism in
practice. The rest has to be deduced, as an absence of things he deplored
about capitalism: inequality, exploitation, alienation, private property and
so forth. It is striking that today's militant critics of globalisation, whether
declared Marxists or otherwise, proceed in much the same way. They present
no worked-out alternative to the present economic order. Instead, they invoke
a Utopia free of environmental stress, social injustice and branded sportswear,
harking back to a pre-industrial golden age that did not actually exist. Never
is this alternative future given clear shape or offered up for examination."
These are serious challenges. In the past, the socialist movement was able
to draw considerable strength from the widespread conviction that socialism
was in some sense 'inevitable,' that 'history is on our side.' No more. The
old line about not needing to cook up recipes for tomorrow's kitchens has
worn thin, and is in danger of discrediting the struggle for a better society.
G.A. Cohen, in his snappily-titled If You're An Egalitarian, How Come You're
So Rich?, highlights a number of problems with what he terms "the
obstetric metaphor" in Marxist teleology, the idea that, in Rosa Luxemburg's
words, history "has the fine habit of always producing along with any
real social need the means to its satisfaction, along with the task simultaneously
the solution." Certainly, Marx himself
took different attitudes to capitalist development at different times. But
the flip side of this (to risk a tautology) is that any solution we are able
to fashion to the problem of the transition to socialism can only be fashioned
from the current range of possibilities, and with the tools we have available.
We
should look, then, among the institutions of late capitalism for the outlines
of their successors. This view would seem to find endorsement in Marx's own
thinking, as he looked around and, even back then, began to discern the outlines
of a possible future. In his Inaugural Address to the International Working
Men's Association, after praising the recent passage of the Ten Hours Bill,
he went on to say:
"But
there was in store a still greater victory of the political economy of labour
over the political economy of property. We speak of the cooperative movement,
especially the cooperative factories raised by the unassisted efforts of a
few bold 'hands.' The value of these great social experiments cannot be overrated.
By deed, instead of by argument, they have shown that production on a large
scale, and in accord with the behests of modern science, may be carried out
without a class of masters employing a class of hands; that to bear fruit,
the means of labour need not be monopolized as a means of domination over,
and of extortion against the labouring man himself; and that, like slave labour,
like serf labour, hired labour is but a transitory and inferior form, destined
to disappear before associated labour plying its toil with a willing hand,
a ready mind, and a joyous heart."
The
danger, as ever, is discouragement and resignation. Meghnad Desai, in Marx's
Revenge, begins with a rigorous and tough-minded engagement with the historical
failures of 'Statist Socialism' but collapses at the end into little more
than a pale pink version of the liberal argument that the only hope lies in
a rising capitalist tide that will lift all boats:
"Capitalism
has not just survived: it has been rejuvenated, and shows no prospect of imminent
collapse, or even ageing. This is the totally unpredictable outcome of the
twentieth century. It is still unbelieved in many circles. Many point to the
injustices, inequities and costs of the new dispensation. Others wish for
a return to the heyday of Keynesianism...There is no rival mode of production
on the horizon as a viable alternative. Capitalism is the only game in town.
The contest is between rival versions..."
This
is the worst kind of defeatism, and at exactly the point when growing resistance
and opposition to capitalism is bursting forth from all directions. The Left
intelligentsia needs to stop crying into its beer and return to the ideas
offensive. Immanuel Wallerstein, in New Left Review, outlines a four-part
programme for this era of systemic instability and capitalist restructuring
which consists, in the first three instances, of "a process of constant,
open debate about the transition and the outcome we hope for...short-term
defensive action, including electoral action...[and] the establishment of
interim, middle-range goals [such as] ever-widening decommodification."
Fourthly, and most significantly, Wallerstein argues that:
"We
need to stop assuming what the better (not the perfect) society will be like.
We need to discuss it, outline it, experiment with alternative structures
to realize it; and we need to do this at the same time as we carry out the
first three parts of our programme for a chaotic world in systemic transition..."
