The Road to Socialism: A Choice Between Capitalism and Socialism

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This fading away of the state is, as well, rooted in how we understand the nature of states. This is more than a semantic issue. It is to concretizing this challenge that we now turn. At the heart of finding a way to manifest social property is the tension between planning and markets. But markets are also fetishized when they are rejected as an absolute and treated as having a life of their own independent of those underlying relations. The place of markets under socialism is a matter of both principle and practicality — and dealing creatively with the contradictions between the two.

Types of socialism

Some markets will be banished under socialism, some welcomed, and some reluctantly accepted but with constraints on their centrifugal antisocial tendencies. Rejecting markets in favor of leaving decision-making to the central planners comes up against the fact that, as the Soviet central planner Yakov Kronrod noted in the s, economic and social life are simply too diverse, too dynamic, and too unpredictable to be completely planned from the top.

No amount of planning capacity can fully anticipate the continuous changes encouraged by socialism among semi-autonomous local groups, nor — given that many of those changes occur simultaneously with repercussions upon repercussions across workplaces and communities — respond without pronounced and disruptive lags. Such incentives bring market-like problems in a different form, one that may not even include some of the advantages of formal markets. Albert and Hahnel likewise reject markets but look to planning administered from below. Their creative and meticulous model is based on elected representatives from workplace collectives meeting with representatives from suppliers, clients, and the affected community.

The community must be there because it has a stake in workplace decisions on the consumption side but also because of the impact of those decisions on roads, traffic, housing, environmental conditions, etc. Together these interested parties develop mutually agreed upon plans and since such plans would most likely not immediately match the broader supply and demand conditions in the economy, an iterative process of repeated meetings to come closer to balance could, they argue, ultimately close the gaps.

This might work in specific cases, and perhaps become more significant over time as shortcuts are learned, computing innovations expedite the procedure, and social relations are built up. But as a general solution it is simply not viable. The context of scarcity, various interests, and no external arbiter of any kind is likely to lead to unending conflict rather than a comfortable mutual consensus. Markets will be necessary under socialism. But certain kinds of markets must be unequivocally rejected.

This is especially so for commodified labor markets. The argument runs as follows. Individual capitalists plan, capitalist states plan, and workers as consumers also plan. This original sin of capitalism is the foundation for the broader social and political degradations of the working class under capitalism. Yet the question of reallocating labor remains and, if workers are to have the right to accept or reject where to work, this implies a labor market of sorts. But this would be a labor market of a very particular, limited, and decommodified kind.

Based on the need to attract workers to new sectors or regions, the central planning board would set higher wages or more favorable housing and social amenities , adjusting them as needed if the workforce falls short. Within the wage framework set by the central plan, the sector councils could likewise raise wages to allocate workers across workplaces or into new ones. Workers could not, however, be fired nor lose work through competitive closures of workplaces and should there be a general shortage of demand relative to supply, demand could be stimulated or worktime reduced as the alternative to the creation of a reserve army to discipline workers.

Alongside commodified labor markets being out of bounds so too must capital markets be prohibited. Choices over where investment goes are choices about structuring every facet of our lives and shaping future goals and options. Economic indices can be brought into making such decisions, but the common rationale for such indices — their ability to compare alternatives based on a narrow range of monetary economic criteria — is offset by the unquantifiable complexities of assessing what is to be valued.

And though credit will exist under socialism in terms of providing credit for consumers, funds for individual or small co-op start-ups, or workplace collectives dealing with the gaps between buying and selling, financial markets based on the creation of financial commodities would have no place. On the other hand, who can imagine a socialism without a marketplace of coffee shops and bakeries, small restaurants and varieties of pubs, clothing stores, craft shops, and music stores?

If the underlying conditions of equality are established so these markets are about personal preferences not expressions of power, there is no reason to be defensive about welcoming them.

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It is when we turn to the commercial activities of workplace collectives that the role of markets takes on their greatest, and most controversial, significance. Outside of self-employment and co-ops with a handful of workers providing local services, workers control but do not own their workplaces. The workplaces are social property; ownership resides in municipal, regional, or national state bodies.

Workers hold no workplace-based marketable shares to sell or pass on to their families — there are no private returns to capital under socialism. If demand for the goods or services produced fade, the collective would be integral to conversion plans to other activities. Those working get pay for their work based on hours worked and the intensity or unpleasantness of the work. Everyone, employed or not, shares in a social wage — the universally free or near-free collective services distributed according to need e.

Employment would bring higher pay but, depending on postrevolutionary conditions and politics, the social wage plus a living income would make self-employment or work in a small co-op a practical option. In the absence of income from capital, and with the social wage carrying great weight relative to individual consumption, the effective variation in the conditions of workers will lie in a relatively narrow, egalitarian range. On reasonable assumptions the value of the social wage — free health care, education, transit, childcare, and subsidized housing and culture — would be at least three times that of individual consumption.

In this context, there will be concerns that prices reflect social costs such as environmental impacts, but beyond that there seems little cause for socialist angst over workers using their individual earnings to choose which particular goods or service they prefer. Nor is there much reason to worry about the existence of credit. With basic necessities essentially free, housing subsidized, and adequate pensions in retirement, pressures to save or borrow would largely be limited to different time preferences over the life cycle e. As such, workplace or community credit unions, or for that matter a national savings bank may, under nationally supervised conditions and interest rates, mediate credit flows between lenders and borrowers with no threat to socialist ideals.

Yet while the authoritarian market discipline imposed under capitalism will no longer exist, workplace collectives will still generally operate in a market context of buying inputs and selling their goods and services or, if the final product has no market price, of measurable output targets. Incentives to act in socially sensitive ways such as operating efficiently consequently remain necessary.

This would take the form of a portion of the surplus generated by the collective going to its members as collective goods housing, sports, culture or income for private consumption.

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This brings a mechanism for bringing opportunity costs into decision-making, such as how valuable an input is if used elsewhere and how valuable others consider the final product. This however also re-introduces the negative side of markets: the incentives involved imply competition, which means winners and losers and therefore non-egalitarian outcomes.

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Moreover, if those workplaces which earn a larger surplus were to choose to invest more, their competitive advantages would be reproduced. With this comes the downgrading of other priorities: a tolerable work pace, health and safety, solidaristic cooperation, democratic participation. At the extreme, the competitiveness fostered becomes a backdoor to labor-market-like pressures on workers to conform to competitive standards. We turn, in the next section, to whether the use of markets can, via institutional innovations, be adapted to limit such negative thrusts of markets.

Though planning and worker control are the cornerstones of socialism, overly ambitious planning the Soviet case and overly autonomous workplaces the Yugoslav case have both failed as models of socialism. Nor do moderate reforms to those models, whether imagined or applied, inspire. With all-encompassing planning neither effective nor desirable, and decentralization to workplace collectives resulting in structures too economically fragmented to identify the social interest and too politically fragmented to influence the plan, the challenge is: what transformations in the state, the plan, workplaces, and the relations among them might solve this quandary?

The operating units of both capitalism and socialism are workplaces. Under capitalism, these are part of competing units of capital, the primary structures that give capitalism its name. These sectors are, in effect, the most important units of economic planning and have generally been housed within state ministries or departments such as Mining, Machinery, Health Care, Education, or Transportation Services.

These powerful ministries consolidate the centralized power of the state and its central planning board. Adding liberal political freedoms transparency, free press, freedom of association, habeas corpus, contested elections would certainly be positive; it might even be argued that liberal institutions should flourish best on the egalitarian soil of socialism. But as in capitalism, such liberal freedoms are too thin to check centralized economic power. As for workplace collectives, they are too fragmented to fill the void. The central planning board would still allocate funds to each sector according to national priorities, but the consolidation of workplace power at sectoral levels would have two dramatic consequences.

First, unlike liberal reforms or pressures from fragmented workplaces, such a shift in the balance of power between the state and workers the plan and worker collectives carries the material potential for workers to modify if not curb the power that the social oligarchy has by virtue of its material influence over the planning apparatus, from information gathering through to implementation as well as the privileges they gain for themselves.

Key here is a particular balance between incentives, which increase inequality, and an egalitarian bias in investment. Nationwide priorities are established at the level of the central plan through democratic processes and pressures more on this later and these are translated into investment allocations by sector. The sector councils then distribute funds for investment among the workplace collectives they oversee.

Rather, the investment strategy is based on bringing the productivity of goods or services of the weaker collectives closer to the best performers as well as other social criteria like absorbing new entrants into the workforce and supporting development in certain communities or regions.

That partiality to equalizing conditions across the sector would no doubt lead to resistance from some workplaces. The tension between the need for incentives and commitment to egalitarian ideals would reflect practical realities. It would be conditioned by the extent to which socialist ideals have permeated the workplace collectives and sectoral councils and the self-interest of some workplaces opposed to intensive competition.

But this would be balanced by ongoing concerns about efficiency and growth. Over time, to the extent that the ideological orientation is strengthened and material standards rise, this would be expected to facilitate a greater favoring of equality. Closing the performance gap between workplace collectives would especially be reinforced by significantly centralizing research and development though some might still be workplace specific and sharing the knowledge across the sector rather than seeing it as a private asset and source of privilege.

There are no omnipresent threats of job loss and layoffs, the high level of universal benefits leaves people far less dependent on earned income, and the sectoral councils regulate disparities between workplaces. Inside the reincarnated workplace, basic rights do not vanish when the border into the workplace is crossed. The rigid division of labor, including the rigidities built in by labor in its self-defense, becomes an open field of experimentation and cooperation.

1. Socialism and Capitalism

With workers given the time, information, and skills to regularly participate during worktime in planning production and resolving problems, it becomes possible to finally imagine a decisive blurring of the historic separation between intellectual and manual labor. It would flow into the local community and beyond, raising democratic expectations of all institutions, especially the socialist state. This new social authority of the working class, materially reinforced by the weight of the worker-led sectoral councils in influencing and implementing the national plan, corrects a previously missing check on the central planners and establishes the footing for assertive initiatives from below.

In this world without capital or labor markets, with tight institutional constraints and countermeasures against subsuming labor power to the discipline of competition, it could credibly be argued that the commodification of labor would be effectively done away with.

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The introduction of worker-elected sectoral councils as powerful new institutions outside the state suggests reframing how we think about socialist planning. And, as we shall see, though there is a degree to which the central plan is sharing its power with other structures, this does not necessarily mean a loss in its effectiveness as a planning body. They also include markets as an indirect form of planning and, with the critical role of the sectoral councils in constraining market authoritarianism, planning also extends to internal workplace relations.

And they include a spatial dimension supplementing the sectoral emphasis. The dominant anxiety over organizing the material conditions of life and the practical fact that so much of social interaction occurs through work all the more so if workers are intimately involved in planning that work gives a special weight within the layers of planning to the economy. But the importance of the social and cultural, of the urban and its relationship to the suburban and rural, demand a spatial layer of planning. There is, in this regard, a history of on-again off-again experiments in the former Soviet Union with regional decentralization.

The devolution of the spatial to the regional and sub-regional, like the devolution of ministries to worker-controlled sectors, would allow the otherwise overloaded center to concentrate on its own most important tasks and bring planning closer to those most affected by, and most familiar with, local conditions. Along the way it would vastly multiply the numbers potentially able to participate actively in planning. Some of this might be eased by including community representatives in the sectoral and workplace planning mechanisms.

As socialism matures and productivity is increasingly expressed in reductions of working hours and increased leisure, the role of such councils — with their emphasis on rethinking streetscapes and city architecture, expanding the provision of daily services, developing sociality, encouraging art and cultural expansiveness — would, in line with the ultimate goals of socialism, be expected to gain in comparative prominence relative to the more narrowly conceived demands of economic organization.

To this would be added the role of political mechanisms to establish national goals: ongoing debates at all levels, lobbying and negotiating between levels, and contested elections revolving around future direction which — because of its importance and genuine openness to public direction — would hopefully bring the widest popular participation.

And the very dispersal of power makes the importance of a coordinating body, even if less directly hands on, even more critical. In fact, even as the planning board sees some of its functions shifted elsewhere, this may lead to the board having to take on certain new functions such as monitoring and regulating markets, introducing new mechanisms for revenue generation in the unfamiliar world of extended markets, and transforming education curriculums to incorporate developing the popular capacities essential for the explosion of active democratic participation in planning.

It will likely also be the case that, since the central planning board will still control the allocation of investment resources to the sectoral councils and regions, it will be able to leverage the administrative capacities now existing outside the formal state to help implement the central plans.

Hayek considered it a truism that that without private property and no labor and capital markets, there would be no way of accessing the latent knowledge of the population, and without pervasive access to such information, any economy would sputter, drift, and waste talent and resources. For socialism, on the other hand, the active sharing of information is essential to its functioning, something institutionalized in the responsibilities of the sectoral councils. The knowledge of workers, the vast majority of the population and the ones with the most direct experience in work processes, is of no interest to him.

In contrast, a primary purpose of socialism is to liberate and further develop the creative potentials of working people and that includes the maximum mutual sharing of information. Followers of von Mises similarly foreclosed the possibility that entrepreneurship could take place in a variety of institutional settings. Yet even under capitalism, the history of technological breakthroughs was always about more than a series of isolated thinkers suddenly seeing lightbulbs flash above their heads. This is not to imply that a socialist state will inevitably be as innovative as the American state has been, but rather that greed need not be the only driver of innovation.

An empirical observation seems appropriate here. Over the past three decades, US output per worker has grown by about 2 percent per year much slower over the last decade alone. And if anything, socialism would be expected to raise the growth of labor quality as it prioritizes the development of popular skills and capacities.

This would mean an average growth in productivity of around 1. In a competitive capitalist environment, firms whose productivity lags risk being chased out of business. But in a socialist context, lagging productivity implies slower growth but is not necessarily catastrophic. The gap would be even smaller if we allowed for the potential productivity gains of workers cooperating to overcome problems, and for the often-unheralded significance to productivity improvements of the systematic dispersal of existing knowledge which, as noted, can come into its own once the barrier of private property is removed.

Economists have, increasingly of late, come to admit to some of the problems in the glorification of markets; the problems were too obvious to ignore. The hitch in this is that the so-called externalities at stake here include such things like the environment and the impact of markets on inequality, popular capacities, and substantive democracy — outcomes that are the very stuff of life.

This has emerged most popularly in the case of the environmental crisis, with its challenges to the consumerist culture and commodification of nature underlying capitalist markets and the practical concern to introduce widespread planning to address the scale of the environmental threats. This may or may not turn out to be the case, but its assertion is neither persuasive nor necessary. Intuitively, it is a stretch to assert that a social system with a wide range of goals of which the development of the productive forces is only one, will surpass a society consumed by the singularity of that goal.

But we also know that we would quickly lose our audience if in order to rebuke Sanders we were to use the language of statistical analysis behind the Gini numbers: regressions, coefficients, cohorts ….

The modern mix of capitalism and socialism Column: The modern mix of capitalism and socialism

Some of us who battle socialism tend to focus on the moral and economic hazard of egalitarian policies and their mistaken views of the human person. Others engage in discussions about Scandinavia. When we bring Scandinavia into the debate, as Bernie Sanders often does, the simplistic analysis on both sides of the political spectrum is insufficient for fruitful dialogue. Those who like the Scandinavian model call it socialism, but they color it with democratic language.

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On the other hand, many who dislike socialism—as well as some Scandinavian leaders—claim that the Scandinavian model is not socialist. Advocates from both sides speak past each other. This is not new—it has been happening for at least a decade, and it calls for a more refined and extensive analysis than what I can do here. All honest observers know how different human beings are, how unequal, when it comes to productivity. What few people know is that major builders of communism agreed. But their policies show that they believe in the Marxist dream of a classless society.

On the topic of Scandinavian socialism, which Sanders also brought up, I expect socialists and capitalists will continue to speak past each other. A new narrative has been spreading in recent years that Sweden was almost a capitalist paradise, then came socialism, and now they have anti-socialist repentance.

Senator Bernie Sanders describes his views as being "Democratic Socialist". In the majority of the countries that rank in the top twenty in economic freedom there is basic coverage for health care paid through taxes. In several parts of the world, state universities are free or governments pay for most of the costs. That explains, in part, why the most socialistic among the Democrat presidential primary candidates are in a competition to see who can offer more free stuff to voters, paid for by taxes on the rich. I welcome and will join those who combat the new marketing effort to sell socialism.

But simplistic reasoning, demonizing the enemy, choosing when to praise or condemn the social-democrat consensus in Sweden and Scandinavia—and worse, communist China—will not advance the pro-freedom cause. There is a genuine, true social nature and inclination in the human person. I believe, however, that a free economy is much more consistent with social cooperation than are social democratic schemes. As we do not have adequate tools to measure cronyism and its socio-economic costs, I do not know if it is getting worse or, conversely, better.

The Road to Socialism: A Choice Between Capitalism and Socialism The Road to Socialism: A Choice Between Capitalism and Socialism
The Road to Socialism: A Choice Between Capitalism and Socialism The Road to Socialism: A Choice Between Capitalism and Socialism
The Road to Socialism: A Choice Between Capitalism and Socialism The Road to Socialism: A Choice Between Capitalism and Socialism
The Road to Socialism: A Choice Between Capitalism and Socialism The Road to Socialism: A Choice Between Capitalism and Socialism
The Road to Socialism: A Choice Between Capitalism and Socialism The Road to Socialism: A Choice Between Capitalism and Socialism

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