Calculation Problem Again

Justin Schwartz jschwart at
Tue Nov 1 13:58:15 MST 1994

On Tue, 1 Nov 1994 tgs at wrote:

> Justin,
> As you know, I still don't have the capacity for a line-item veto reply
> So here's what I remember:
> 1) Since when is anybody saying that the market's failure to adjudge
> externalities means that LTV is wrong?  One of McNally's biggest themes
> is precisely this point--can't judge externalities.  But this is a moral
> critique of a completely a-moral concept--price.  This seems really
> convoluted.

Not what I was saying. I was granting the existence of market failures,
something not relevant to the truth of the LTV.

> 2) On the practicality of state regulation, as my ol' professor Marshall
> Berman would say to a Stalinist in his class, you say A I say B, you say
> A.    As i come up with clinching argument after clinching argument, all you
> do is say, well the state can solve that.  The state's whole capacity to
> solve ANYTHING vis the market is what I'm questioning.

But the state does solve, or mitigate, problems with the market. That's
one reason we struggle for social democratic reforms. We do, don't we?
Face it, if we woke up in America with what they have in Germany or Sweden
we'd think the revolution was over and we won. (This is an exaggeration.)

> 3) Is it market or is it class?  Markets create capitalist classes: that's
> the whole point.

Actually this is not so clear. In Marx's own historical account it is
markets plus state action in the form of enclosures, etc. There's nothing
automatic about it, which is one reason we had markets for tens of
thousands of years before we got capitalism.

> 4) First you say,look at Western Europe, where it worked.  then you come
> along to the part in my message where I say, look at Western Europe,
> where it's falling apart.  So you make up excuses for your panacea.
Of course the social democratic welfare state in Western Europe is under a
great deal of pressure. Still, you mentioned China, and whatever the
difficulties of the European model, these are trivial compared to the
Chinese case. Anyway I am not a social democrat. I do not think that
regulation of the capitalist market is a stable solution. But regulation
of a socialist market is another story.

> 5) Look at Marx and Keynes, by Mattick: he shows how, while initially, during
> the secular boom period, state intervention can appear to resolve the
> crises of the market, all it does is stimulate what investment it can.
> As the secular decline period sets in, this becomes impossible: the state
> acts rather now, not as a stimulus, but as a drag upon production.  It
> is precisely this positive moment in the fall of the rate of profit that
> obscures the negative moment of state intervention for market socialists:
> leading them to believe that the welfare state is ushering in the Golden
> Age.

Mere Keynesianism won't work because the state cannot ensure productive
investment by capitalists. Nothing can. That's why we have to get rid of
them and have investment directly run by the state. But if investment
doesn't faces constraints of profitability, you get inefficiency and waste
on an even greater level.

> 6) Of course, your resistance to McNally is based ultimately upon your
> rejection of LTV.

No, it's based on my dislike for argument by assertion and quotation. Even
if I thought the LTV were true I would not be persuaded by McNally's
unsupported claims and promissory notes.

  So those of you who have offered those wonderful supports
> (the juan guy last night was absolutely standout theoretical wizardry!  Wow,
> I'm not kidding, juan really has a gift for this kind of thought, makes
> me very envious) have gotta' keep pluggin' away.
> 7)Let's keep this dialogue as Socratic as possible.  Refer me to as little as
> possible: I'm pig ignorant on previous discussion.  Explain as much as you
> have the patience for.  I appreciate it.

Fair enough. I mentioned the Schweickart-Arnold debate about whether
market socialism would degenerate into capitalism (Economics and
Philosophy 1987). Arnold maintained that it would for two reasons:

1. Market competition would force income differentials as firms competed
for scarce managerial talents, and

2. Would force abandonment of self-management because hierarchical
management is more efficient.

Schweickart and I reply:

1a. Who says managerial talent is so scarce? Why do income differentials
amount to class distinctions? In fact they're a lot flatter in most places
than in the U.S. Anyway, class is about ownership, not income. If the
workers own the means of production through the state and the capitalists
don't, highly paid managers are just highly paid managers. Moreover, David
Gilboa pointed out in the Review of Radical Political Economics,
Fall-Winter 1992, that if the income now paid out to stockholders--roughly
1/3 of the total, after wages and other costs--goes to the workers, they
retain income rights no matter how highly managers are paid. Finally, if
workers have the power to hire and fire managers, the latter are
subordinate to them.

Arnold now concedes these points.

2a. The evidence is overwhelming that self-management and worker
participation is never any less efficient, from a technical point of
view, in terms of productivity, than hierarchical management, and often
more efficient. So there would be no pressure for ending self-management.
This data does raise interesting questions about why self-management isn't
more common in capitalism, but I have a story about that. Another time.

The upshot is that degenerative tendencies, on the best story about their
existence, are unsubstantiated.

Finally, I would like to hear less market-bashing and more explanation of
how planning can work better.

--Justin Schwartz


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