Market vs, planned socialism

Justin Schwartz jschwart at
Mon Nov 7 08:02:07 MST 1994

On Sun, 6 Nov 1994, Andrew Hagen wrote:

> On Sat, 5 Nov 1994 Steve.Keen at unsw.EDU.AU wrote:
> > I, like Justin, would like to see how the "next socialism" would avoid
> > the problems the "last socialism" generated. Apart from Allin and Paul's
> > attempts to show how computers could take the place of markets (which
> > covers only allocation, not production), all I have seen so far on this
> > list are frankly embarrassingly idealistic notions of a socialist nirvana.
> The problem is one of democratic organization and thus it is ridiculous to
> attempt to map out ahead of time exactly how such a society will work and
> why it will be in equilibrium with the rest of the world, particularly
> because there is no such thing as equilibrium in history--everything
> changes.
> To produce a model showing how a democratic economy would work would not
> only point to the undemocratic nature of the model, but also fall victim
> to the trap of bourgeois ideology which holds that everything can be
> reduced, atomized, and understood on a wholly abstract level. The devil
> _is_ in the details, and it's not the problem right now anyway.
> __
> Andrew Hagen                              hagena at

1. Andrew falls into the classic Marxist error of refusing to write
recipes for the cookshops of the future on the grounds that modeling a
possible economy of the future is ipso facto anti-democratic. This is a
mistake for at least two reasons:

a. It's not undemocratic to discuss how a hypothetical system would work.
What would be undemocratic would be to insist that one's model be imposed
on unwilling people in the future. But that is not the point or aim of
modeling exercises in the current debate about alternatives to capitalism.
The point is rather to grasp what the alternatives are and what
consequences they might have. Obviously future revolutionaries and
organized workers will have to choose their own alternatives and we,
radical intellectuals today, could not dictate to them even if we wanted
to. Which I presume we do not. But to discuss in detail what might be on
the menu is not to limit the choices.

b. A main obstacle to radical organizing today is that ordinary workers
who are dissatisfied with the way things are do not see a feasible
alternative which would be better. They think that the alternative to
capitalism is Stalinism, which is not better. It is no good at all to say,
with Andrew in a previous post, we do not advocate Stalinism. People want
to know just what it is you do advocate and why it would be better.
Answering these questions requires modeling, precise, specific, and, yes,
abstract characterization of your preferred alternative, and argument that
it would avoid the problems with Stalinism and capitalism. Of course, once
drawn into the process, ordinary workers will suggest or demand
modifications in the models. But no one will even consider alternatives
to capitalism unless these are placed on the table in enough detail to
have a sense of their dynamics, advantages, and disadvantages.

c. Tom complains in an earlier post that market socialism is
anti-democratic compared to his transitional program and encourages
workers to leave decisions up to me (or MS technocrats), who will merely
tinker with the market. I do not see what is antidemocratic or
discouraging of popular participation about the demand that workers should
control the firms in which they work, electing their own managers and
deciding about the division of the firms' profits, or about the idea that
investment be made by democratically accountable authorities. If that is
mere tinkering with the market, well, hurrah for mere tinkering. But I
doubt whether capitalists will agree that it is mere tinkering. As to
whether MS is more or less democratic than a transitional program, I guess
it depends on the program, eh? But even there, you have not only to make
demands but to say how they will be implemented under your preferred
system. If you think that cutting the workweek in half is a good thing but
unrealizable under capitalism, people will want to know how you can do it
under socialism. This requires modeling.

2. Tom and Andrew both think that markets cannot be honestly regulated by
the government, that they "naturally" tend to take over the state and
prevent any restriction on profitability. This is something of an article
of faith with them, as they have not presented any arguments for it except
to endorse some problems I pointed out with capitalist regulation.

a. All markets have always been heavily regulated; in fact, it's
questionable whether "pure" unregulated markets could operate at all.
Indeed, the state constitutes markets by assigning and enforcing property
rights. I think this may be part of Chris' point, following Hayek. The
idea of "government intervention in the market" is a myth: not that it
doesn't occur, but in that markets are not a separate sphere in which the
government intervenes from the outside. The question is not whether
governments can regulate, intervene, and be involved effectively, but how
they do so and to what end.

b. Tom and Andrew worry that since markets generate inequalities stronger
firms will use their market powers (even under MS) to affect outcomes in
their favor in an unjust way. This is a legitimate concern, but with
regard to the socialist character of MS and its stability you have to ask
what the interests of these firms are. They do not have interests in
reducing profit shares to cooperators, degrading skills, harming work
conditions, lengthening hours, polluting the local environments where they
work, or doing a lot of things which capitalists firms have an interest in
doing. They do have an interest in suppressing potential or actual
competition, but after all antitrust regulation works reasonably well even
under capitalism. Tom worries that they have an interest in overturning
socialist laws preventing the sale of labor power so that they can become
capitalists outright. There may be some interest in this, but since the
cooperative clauses of the constitution will be both the basis of their
own power and wealth and very popular especially among workers in weaker
firms, protecting their rights too, the counter-tendencies are likely to
be stronger.

c. Tom and Andrew both hold up an idealized and unspecified democratic
planning in opposition to the problems they see with MS. It is presumed
without argument that no groups in DP will have an anti-social interest
and that democracy in DP is unproblematic and will fix all problems. Of
course this is all false. The planners, to start with, have an interest in
their own power and prestige; they may favor regions or ethnicities they
like, never mind family, and will be further corruptible by both the
managers in important industries who misappropriate parts of their product
for their own ends and by wealthy participants in the black markets which
will burgeon in response to planning failures.

Andrew claims that democracy guarantees that there will be no black
markets, but fails to see that even if the popular will is clearly
expressed, the calculation problem raises questions about whether it can
be implemented. The Mises-Hayek critique is thus a difficulty for
democracy under DP. And finally, expressing the popular will is not so
easy. The Arrow problem remains (it is not solved by decentralization),
and insofar as decentralization solves problems of participation in a
large society, we still have the problem of coordinating the decentralized
units in a democratic way, that is, planning. After all, decentralization
is a feature of markets!

3. Andrew worries about Keynesian measures in MS. Will there be business
cycles? Can they be offset by countercylical financing? Where does the
government get the money? Won't printing money be inflationary? How bad is
that anyway? These are good questions, pitched at the right level of
detail for discussing models of socialism. I wish pro-planners would
specify their models in enough detail to allow such questions to be asked.
However, rather than answering these here, I will note a couple of other
things. First, Keynesianism does not exhaust the ways to deal with any
cyclical tendencies in a MS economy. There is also more or less direct
planning, along the lines of Japan's MITI: MS isn't afraid of planning, it
just regards planning as inadequate by itself. Second, Keynes' own
repetoire is not limited to throwing money at the economy. There are in
addition the tax and interest rates which can be fidgeted. In general I
think that what the right set of tools would be depends on figuring out
whatever sources of instability (cycles, inflation) might exist, and
locating their cause.

David Schweickart has a rather long but good discussion of these matters
in his Against Capitalism.

4. I still await the kind of argument that would persuade me that we can
do better than MS, namely a defense of DP which answers the calculation
problem. If Tom prefers to use me as whetstone to sharpen his wits for
polemic among other true believers against the errors of the infidels
rather than to produce the case which I would in fact like to see, he's
probably going to get bored with this pretty soon.

Waiting eagerly,

--Justin Schwartz


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