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Socialism: Markets, Central Plans, or what?


[This is the twelth essay in a multipart series addressing the surge in interest in and support for Socialism, what the surge means, what it seeks or will seek, where it might extend, and how it might unfold.]

In economies stuff is produced and stuff is consumed. How much and by whom? Workplaces produce this or that. What and how much? We all have incomes. How much can any particular income purchase of any particular item? How does what people want to have match up with what workers want to produce?

Allocation is about how economic actors collectively establish relative worths, how workers settle on what and how much to produce, and how consumers settle as individuals and in groups on what they want to have from the social product. Allocation typically occurs by way of markets or central planning or a combination of the two. But can we combine either markets or central planning or a combination of the two with equitable remuneration, self managing workers and consumers councils, and balanced job complexes to complete the key elements of our preferred socialism?

Central planning was the choice of many self-titled “socialist” (but really coordinator) economies. Central planning is also, with only modest differences, used within massive production units like Boeing and General Motors to allocate diverse products and tens of thousands of workers among many venues.

In central planning, a planning agency seeks and assesses information from workers and consumers and proposes inputs and outputs for all economic units. The units consider their instructions and either carry them out or register problems they think will arise in doing so. The central planners assess the predicted problems and the cycle repeats arriving at its conclusion when the planners no longer seek responses. The process is down go questions (seeking information), up go answers; down go instructions, up go concerns/problems; down go instructions, up goes obedience. In practice there are more details, but nothing that fundamentally alters the logic. 

As central planning has been a key component of most post capitalist economies, it has been subject to relentless criticism by advocates of capitalism, which criticism, however, has for the most part been ill conceived. Mainstream economists claim central planning can’t work. There is too much information, the incentives are screwed up, and so on. Three things were odd about this. First, during a few decades of operations at least according to the critical mainstream economists’ criteria, Soviet central planning worked rather well. Indeed comparing the Soviet Union to countries with comparable development from its inception over the next five decades, for example comparing the USSR and Brazil, the Soviet outcomes were superior in output, development, and many other indices. Second, as noted above, huge U.S. firms, in many cases economically comparable or larger than small countries, have used central planning to internally allocate their workforces among their units for decades, and, again, at least by mainstream calculus have done quite nicely. And third, in technical journals, not popular accounts, mainstream economists acknowledge the workability of central planning. That a massive public lie – central planning can’t  allocate without disastrous results – could be told and sustained shouldn’t be overly surprising. Consider the lie that workers can’t do empowering work, or the lie that owners are highly productive and need to receive profits for anyone beneath to benefit – and so on.

But, if central planning can get things produced and distributed, why not use it for our preferred economy?

In central planning, workers and consumers must ultimately abide instructions planners generate. There is a narrow decision-making top and wide decision-obeying bottom. More, central planners are not interested in having to overcome resistance coming from local units. Central planners therefore do not want workplaces and neighborhoods to be self managed by workers who will resist planners’ directives. Instead, they want to deal with people who have similar interests to them. In other words central planners, who are coordinator class, seek to communicate with others in the coordinator class. That is who they understand. That is who understands them. It involves no undue friction. So, inside firms in centrally planned economies, the old familiar corporate hierarchy and centralized authoritative decision making is vastly preferred, and implemented. This is central planning subverting desires for balanced job complexes and therefore for self management. Even if planners are honest and not immediately corrupted by their power, over time they reward themselves and people like the themselves more than workers per se. Why “people like themselves”? Because the justification for their higher incomes becomes their greater education, training, skills, connections, and decision-making responsibility, and if that justification is to be compelling, it has to be honored for all who have those “credentials,” which means those who centrally plan, but also those who are empowered within local units. 

In other words, the central planners need local agents who will hold workers to norms the central planners decide. These local agents must be locally authoritative. Their credentials must legitimate them and must reduce other actors to relative obedience. Central planning thus, imposes a coordinator class to rule over workers, with the workers, in turn, made subordinate not only nationally, but in each workplace, which is why central planning is not an option for a truly classless economy we are looking to create. 

What about markets? It turns out they too would subvert our other gains. First, markets immediately destroy equitable remuneration since markets reward output and bargaining power instead of only duration, intensity, and onerousness of socially valued work. 

Second, markets force buyers and sellers to try to buy cheap and sell dear, each fleecing the other as much as possible to ensure their own survival. Markets, in other words, generate anti-sociality, not solidarity. We get ahead at the expense of others, not cooperatively with them.

Third, markets explicitly produce dissatisfaction because it is only the dissatisfied who buy again and again, which is what marketers desire people to do. As the general director of General Motors’ Research Labs, Charles Kettering who regularly introduced model changes for GM cars put it: business needs to create a “dissatisfied consumer”; its mission is “the organized creation of dissatisfaction.” The idea was that planned obsolescence would make the consumer dissatisfied with the car he or she already had.

Fourth, prices in a market system don’t reflect all social costs and benefits. Market prices at best take into account only the impact of work and consumption on the immediate buyers and sellers (mediated by their power) but not the impact on those peripherally affected, including those affected by pollution or, for that matter, by positive side effects. In other words only the direct buyer and seller enter into the market exchange – not those affected at a distance. This means markets routinely violate ecological balance and sustainability, much less stewardship. They subject all but the wealthiest communities to a collective debit in water, air, sound, and public availabilities.

Fifth, markets also produce decision making hierarchy, not self management. This occurs not only due to market-generated disparities in wealth translating into disparate power, but because market competition compels even council-based workplaces to cut costs and seek market share regardless of the ensuing implications. To compete, even workplaces with self managing councils, equitable remuneration, and balanced job complexes have no choice but to insulate some employees from the discomfort that cost-cutting imposes – so that those people can then figure out what costs to cut and how to generate more output at the expense of worker (and even consumer) fulfillment, but not at their own expense. In other words, to cut costs – and otherwise impose market discipline – even starting with councils and balanced job complexes, market logic causes a coordinator class to emerge above workers which in turn accrues ever more power to itself and obliterates self-management and equity.

That is, under the pressure of market competition, any firm I work for must try to maximize its revenues to keep up with competing firms. If my firm doesn’t do that, then we lose our jobs. So we must try to dump our costs on others. We must seek as much revenue as possible – even via inducing excessive consumption. We must cut our costs of production – including reducing comforts for workers and unduly intensifying labor. To relentlessly pursue all these paths to market success, however, someone has to not suffer the pains these choices induce, so they will freely impose them. So even in a firm that is initially committed to self management and balanced job complexes, if we must operate in a market context our roles will over time impose on us a necessity to hire folks with appropriately callous and calculating minds such as those that business schools produce. We will then have to give these new callous employees air conditioned offices and comfortable surroundings. We will finally have to say to them, okay, cut our costs to ensure our livelihood in the marketplace. In other words, we will have to impose on ourselves a coordinator class, not due to natural law, and not due to some internal psychological drive, but because markets will force us to subordinate ourselves to a coordinator elite we accept and welcome, lest our workplace lose market share and revenues, and eventually go out of business.

Some will claim that all these market failings are not a product of markets per se, but of imperfect markets that haven’t attained a condition of perfect competition. This is a bit like saying that the ills associated with ingesting arsenic occur because we never get pure arsenic, but only arsenic tainted with other ingredients. On the one hand, calling for perfect markets ignores that in a real society there is literally no such thing as frictionless competition, so of course we will always get imperfect markets. But even more important, it also ignores that the harmful effects of markets do not diminish when competition is made more perfect – they intensify.

Historically, the closer economies have come to a pure market system – without state intervention and with as few sectors as possible dominated by single firms or groups of firms, and with as few unions as possible – the worse the social implications have been. For example, there have rarely, if ever, been markets as competitive as those of Britain in the early nineteenth century, yet, under the sway of those nearly perfect markets, young children routinely suffered early death working long days in the mills of the time. The point is, well-functioning markets get various economic tasks done but otherwise do not promote excellence in any form. They do not resist – and they even facilitate – cultural and moral depravity. As a result, seeking an economy that can deliver equity, solidarity, diversity, and self management means rejecting markets as a tool of allocation.

The allocation problem that we face in trying to conceive a good economy is therefore that (as could be seen in the old Yugoslavia and Soviet Union) even without private ownership of means of production, markets and central planning subvert equitable remuneration, annihilate self management, horribly mis-value products, violate the ecology, impose antisocial motivations, and impose class division and class rule.

This is precisely the kind of thing our approach to thinking about economics attunes us to. It is a case of particular institutions – markets and central planning – having role attributes that violate our aims. The same held for the corporate division of labor, discussed earlier, and for private ownership of productive assets. Their roles too violated the values we favor. That is why we had to transcend them. And now we see the same holds for markets and central planning.

Allocation is the nervous system of economic life. It is both intricate and essential. To round out a new economic vision we must conceive a mechanism that can properly and efficiently determine and communicate accurate information about the true social costs and benefits of economic options, while giving to workers and consumers influence over choices proportional to the degree they are affected. This will be the aim of the next essay in this “socialism” series.

5 Comments

  1. avatar
    Michael May 7, 2019 12:55 pm 

    To Mark,

    Of course, people act largely because of the system or culture of which they are part. There are many things that are important, including the leadership of the country, which includes many who shape perspective–politicians, media, educators, those who are rich and command resources and production, etc. There are other elements, too. Much of what we are in the US still derives from European colonization, conquest, wiping out indigenous people in earlier history, building and economy over centuries with millions of slaves, and on and on. Learning how we got to where we are is crucial and takes work. There are many authors that can help you in your work and this website, too.

  2. avatar
    Michael May 2, 2019 11:23 pm 

    Briefly put, “a new person” refers to a new man and woman, whose ideals and aims do not take from many to enrich the few. And when I say “what an undertaking,” it is an exclamation, “What an undertaking!” Perhaps greater than we can accomplish, but I still foolishly hold out hope.

    • avatar
      Mark Evans May 3, 2019 8:58 am 

      Thanks Michael!
      The reason I asked is because I have, more recently, become interested in this question.
      If you think that the general public’s ideals and aims are what you say they are then I can see why you think that the transition would be such an undertaking. But is that the case? Is this what the research shows? Are people really carrying those ideas and aims around in their head or are they just acting rationally in an irrational system? Perhaps the very same people would act very differently in a very different system?

  3. avatar
    Michael April 24, 2019 2:15 pm 

    Economics is about production, producing what consumers and shapers of wants, desires. In capitalist systems, material ends, products, constitute the end-game. If socialism is to become a reality it calls for a new person, one whose wants serve generous, decent, fair, equitable ends and enable the individual to advance in ways that benefit all. Greed, selfishness, and competitiveness must be at least blunted. What an undertaking.

    • avatar
      Mark Evans April 25, 2019 9:21 am 

      Hi Michael,
      I’m interested in your comment when you say “a new person” and “what an undertaking”. Could you say a little bit more about this?

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