William Mandel replies ( wasRe: William Mandel on Cuba, Brazil and Venezuela and socialism v. capitalism?)

Henry C.K. Liu hliu at mindspring.com
Mon Dec 30 13:09:31 MST 2002

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William Mandel wrote:

          There is no such thing as market socialism, Oskar Lange and others to
the contrary notwithstanding.

That is correct, because there is no such thing as free
markets.  Markets are an interaction of financial power, no more no
less.  Capitalism doe not operate in markets, but in monoploies.  That
is why the need for regulated markets arises to save capitalism from
political self destruction.  All political economies are
utopias.  Thus for William Mandel to dismiss socialism merely on the
ground of utopianism does not wash.  He rejects socialism purely on
personal disillusion grounds, not from logic. It is similar to one who
rejects love because of a failed relationship. The list of
capitalism's failures is longer than that of socialism.  That fact
that it has survived during the 20th century does not prove its
superiority, any more than the spread of AIDS proves the desirability
of the disease. Capitalism is best compared with narcotics, its little
pleasures demand the surrender of one's life.

Price in fact is the most manipulated component in trade. That is the
fundamental flaw of market fundamentalism. Friedrich Hayek's rejection
of socialist thinking is based on his view that prices are an
instrument of communication and guidance, which embodies more
information than each market participant individually processes. To
Hayek, it is impossible to bring about the same price-based order
based on the division of labor by any other means. Similarly, the
distribution of incomes based on a vague concept of merit or need is
impossible. Prices, including the price of labor, are needed to direct
people to go where they can do the most good. The only effective
distribution is one derived from market principles. On that basis,
Hayek intellectually rejects socialism.

The only trouble with this view is that Hayek's notion of price is a
romantic illusion and nowhere practiced. That was how the native
Americans sold Manhattan to the Dutch for a handful of beads.

In Hayek's social philosophy, value and merit are and ought to be two
distinctly separate issues. Individuals should be remunerated purely
on the basis of value and not in accordance with any concept of
justice, whether it be the Puritan ethic or egalitarianism. Hayek went
so far as to deny that the concept of social justice had any meaning
whatever, on the basis that justice refers to rules of individual
conduct. Since no rules of the conduct of individuals can determine
how the good things of life should be distributed, the question of
justice is moot. Since a free market is the natural outcome of a
multitude of individual decisions, how the market decides is
amoral. Yet basic human needs such as safe shelter, food, health care
and education are not distributional issues. The world's economy can
supply every human being with adequate needs, but for the "market".

But according to Hayek, a spontaneously working market, where prices
act as guides to action, cannot take account of what people need or
deserve, because it operates according to a neutral distribution
system that nobody has designed. Such a distribution system cannot be
just or unjust. And the idea that things ought to be designed in a
"just" manner means, in effect, that one must abandon the market and
turn to a planned economy in which somebody decides how much each
ought to have. And the price for that justice is the complete
abolition of personal liberty. So, in the name of liberty, the world
is forced to go hungry while economies suffer overcapacity.

Hayek's free-market ideas have been applied to much of unregulated
globalization in recent decades, and the socio-economic damage is now
very visible. Not withstanding Hayek's repugnant social philosophy,
even his "scientific" claims on the effectiveness of free markets has
not been substantiated by events. A transaction requires a buyer and a
seller at a price. It is easier for a camel to go through the eye of a
needle than for both buyer and seller to be satisfied with any given
price. One side of a "win-win" transaction is always an idiot.  All
economies are planned. Some are planned through "market" mechanism in
order to deny societal values, while others are planned according to
societal values. Demand, in the sense neo-classical economists use the
term, has to do with untainted market forces. Yet the manipulation of
demand against market forces is widely practiced. It is intervention
against "free" markets. Free marketeers consider the unseen hand of
government as intervention, but the unseen hand of price setters as a
cannon of natural laws.

Henry C.K. Liu

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