what about inequalities between firms (market socialism)

Justin Schwartz jschwart at freenet.columbus.oh.us
Fri Nov 4 09:12:10 MST 1994

On Fri, 4 Nov 1994, Andrew Hagen wrote:

> Justin Schwartz writes:
> > Let's call it cooperative
> > production, or I'll get nasty and start calling democratic planning
> > "Stalinism with a human face."
> Market socialism is "cooperative production?" Isn't that ambiguous
> terminology?

Well, this model of MS is cooperative (based on cooperative firms). Not
all of them are. Roemer's is not.

> Could I suggest a very simple rule of thumb before this list sees the
> farcical repeating of history and splits into different factions? We call
> each other by friendly names. No one wants to be a fascist, or known as
> one, and no one wants to be a Stalinist, or known as one.
> "Come on guys! We're all on the same side."  ;-)
Thanks. So no more "producer capitalism," eh?

> Justin Schwartz continues about market socialism:
> > Yes. They aren't fired, since they're their own bosses, but if they're not
> > making money, they will want to either reorganize or do something else.
> What if these workers are doing something fairly important, like mainting
> the national electrical power grid? What if they are the only ones
> providing an essential service in a remote area--an area where the market
> is unprofitable? What if this particular firm produces components vital to
> an entire industry, like an Intel, yet due to the high cost of meeting the
> payroll is awash in red ink? Do we allow an entire industry to be harmed?
Of course not. First, some necessary services--electrical power is a good
example--will not be marketed at all. Nor will things that ought not be
marketed in the first place, like health care and education. Mainly
consumer goods and producer goods will be marketed. As to "Chrysler"
cases, when something's too important to fail, that's where you rely on
the government to fix it. This is the classic role of the state in a
market society--to provide public goods the market won't.

> > Do you
> > mean that under [...] democratic
> > planning, that inefficient and unsuccessful production units will just be
> > carried by everyone else? Why isn't that waste and exploitation?
> No. The response to highly inefficient sectors under planning would be
> decided upon democratically, but I would argue that such a society should
> either cut out the cancer, if the industry is not socially valuable, or
> invest heavily in the sector if it were. The fresh capital would
> eventually be able to solve the efficiency problems or circumvent them.

So pretty much the same as in market socialism. Incidentally throwing
money at a bad enterprise won't fix the problems, typically, unless what's
wrong is undercapitalization.

> Justin Schwartz continues, remarking on market socialism again,
> > This is a problem. Better off firms will lobby on their own behalf. Though
> > I don't see how it is problem with regard to unemployment. Unlike in
> > capitalism, where there's structural pressure to create high unemployment
> > to keep down wages, in market socialism there is none. No one wants low
> > profit shares (the analog to wages) and no one benefits by unemployment.
> > So any undue influence of better off firms in the market will not tend to
> > create structural unemployment.
> This is certainly an advantage of market socialism.
Well, bless. Someone concedes a point!

> One question, and I don't want to be mean. No structural unemployment and
> a little frictional unemployment would occur under market socialism, but
> what about cyclical unemployment?
> Would market socialism have business cycles? Why not? What happens when
> demand fails? If a program of Keynsian spending is called for, who buys
> the bonds to service the governmental debt? You can't just print money!
Actually this is not so clear. Depends on your theory of the business
cycle whether market socialism would have such cycles. Insofar as they
depend on private investment and the animal spirits of capitalists--their
willingness to invest--it would not have them. Demand can be kept up in
part by a high basic income provided to all, paid for from taxes, also
because their is little downward pressure on profit shares except that due
to a desire to make cheaper stuff. Keynesian spending, incidentally, need
not require purchase of bonds. Part of Keynes' point was that the
government can indeed stimulate the economy by spending money it doesn't
have, generating economic activity which it can tax to pay for the spending.

> > Labor is not commodified under the version of market socialism I advocate.
> > In the strong version of the model, it is illegal to buy or sell labor
> > power, capiche?
> Thanks for saying this. I, for one, had no idea.
> Again, however, your defense of market socialism rests on the effectivity
> of regulation. Without it, what's to prevent a cooperative with extra
> capital, pent-up demand in a market in which they dominate, and little
> productive capacity to build an illegal sweatshop factory in a Third World
> country and hire labor power there? Would not the fellows of the
> cooperative realize more profit from their covert Third World operations
> than by expanding production domestically? Won't they have an incentive
> to circumvent or ignore such regulations?

Well, that would be illegal, And it is true that whether this could be
enforced depends on effective law enforcement.

> The point is, you can't just assume regulation will work. We need a
> convincing explanation of how regulation in market socialism will be
> qualitatively different than that in capitalism.

Actually regulation, when it is actually tried, works pretty well in
capitalism. Too often the regulation is not funded or enforced, as with
OSHA, but you can look at the increase in gas milage in your car as an
instance of effective regulation.



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