Markets and Plans: Is the Market Necessarily Capitalist?
Harrington, Michael
China, one has been told since Deng Xiaoping's market-oriented reforms began in the late 1970s, is becoming capitalist. So is the Soviet Union under Gorbachev, similarly with Hungary,...
...So questions of efficiency—sometimes posed as profound choices relating to life and death— are important even in the nonmarket sector...
...It is also necessary...
...As Meidner and his associate, Anna Hedborg, put the LO attitude in a retrospective of the early eighties, "The Phillips curve states propositions about certain economic relations * In "The Relation Between Unemployment and the Rate of Change of Money Wages in the United Kingdom, 1861-1972," Phillips argued that low unemployment led to higher wages (and inflation) and joblessness to a downward pressure on wages...
...In 1938 and 1940, for instance, it was decreed that everyone would have a work book, that no one could leave a job on pain of criminal punishment for "flitting" from post to post, that the first offense of absenteeism would be punished by "forced labor at the place of employment" (which involved a 25 percent cut in wages), and the second offense by a mandatory jail sentence, and so on...
...So we might optimistically hope that rising levels of material satisfaction, even if far short of abundance, will change human motivation and make people impervious to the corruptions that have historically accompanied competition...
...In the retail sector, markets became more and more important, capital markets were created, and some enterprises actually sold stock...
...That was the first capitalist strategy...
...The market is not a sufficient condition for the socialist functioning of self-management, but it is a necessary condition...
...Medical technology now makes it possible to prolong a life of sorts for the very old if major, and rather expensive, investments are made in sophisticated technology...
...Making self-interest — including collective self-interest—the instrument of community purpose will be a contradictory, and even dangerous, idea for the foreseeable future...
...The point is not just to make a critique of a bad theory...
...Of course not...
...In reality, monopoly capital produces that which will yield the largest profit, uses all the wiles of psychology and science to make sure that the consumer chooses what is good for the corporate bottom line, and will generate and satisfy pseudo-needs while desperate human needs—say for affordable housing in the decaying central cities of Britain in the eighties—are not met...
...In the case posed by Stojanovic, a similar solution would be appropriate: Planned policies to see to it that the productivity of worker-managed enterprises would be, in some measure, shared by the society without abolishing the local incentives for that productivity...
...They can doze off in a beatific quietude instead of being constantly concerned for progress toward communism...
...Emphasis added...
...Markets were, Marx held, engines of social inequality, reproducing elite domination as well as physical products...
...The result was a system that by totalitarian pressure could effectively squeeze resources out of the masses of workers and peasants and an economy that, as Mikhail Gorbachev realized in the eighties, had all of the drawbacks that Marx—and Bukharin—had ascribed to capitalist monopoly...
...In the calculated oversimplification of his basic analysis, which generations have mistaken for a flawed description of the real world, it was assumed that raw materials, machines, and finance were all exchanged according to their value and that sellers charged buyers a fair price...
...Whoever accepts in full Marx's first concept has to give up the latter, and vice versa: they are mutually exclusive...
...another in a monopoly or oligopoly system...
...But, as Anthony Crosland suggested in The Future of Socialism, if there were a much more egalitarian society, then, and only then, would the essential virtue of markets really come into play...
...Yet I think Nove misses the possibilities of real-world approximations of that utopia...
...Obviously socialists will at the same time seek to radically narrow the inequality characteristic of capitalist society, which is not, as the system's defenders claim, a functional necessity but a matter of ethos and legitimated greed...
...The fact is that we cannot evaluate, or even describe, the workings of markets independently of the social structure in which they operate...
...I am not sure that is feasible...
...But there are two points here worth remembering: First, that no particular virtue is inherent in "the free market," and indeed, the pressures of a capitalist economy can readily lead to dishonesty in behalf of profit...
...The plan is checked and, to a considerable degree, realized through the market [emphasis added...
...Ambivalence in the Marxist Tradition It may seem strange that I begin an analysis of current and future markets by going back to Marx...
...In the wake of the 1979 changes there were problems and the moderates counterattacked the radicals...
...And consumption goods were manufactured, not in response to demand, but according to a preset planners' decision, which meant that waiting in line to buy items in short supply became a major cause of squandered energy in the Soviet Union...
...There were grave difficulties in the seventies and eighties because of the slowdown in Western growth, and a good part of the success of the Socialists after their return to power in 1983 was the result of an old-fashioned competitive devaluation of the currency...
...At that point, Marx argued, the pursuit of private profit no longer motivates the capitalist to act as the greedy agent of progress by constantly revolutionizing the productivity of the entire society...
...In the West there were computers...
...And the commodity is, of course, not simply a useful good or service but a useful good or service that is produced to be sold on a market at a profit...
...Unfortunately, Das Kapital also provides solid reasons for arguing a contrary proposition: that socialism must totally dispense with markets...
...As John King Fairbank put it, "Anyone who concludes that Chinese agriculture, having seen the light and wanting to be more like us, has gone 'capitalist' is making a grievous error...
...In other words, a modernization that elsewhere has generally produced a new middle class, in China seems likely to produce a local and mid-level leadership that remains essentially bureaucratic...
...Relying on the "general" mechanisms of economic policy, it turned out to be a most fallible instrument of fighting even wage increases...
...The resulting "discipline" of markets must not be vicious, as it is now, where entire communities were sacrificed in Britain under Thatcher in order to make industry "lean" and competitive...
...But the basic decisions with regard to work, production, and consumption were taken by a centralized bureaucracy from on high and almost all the institutions that might mediate between government and citizens were turned into "transmission belts" for official policy...
...And their experience, as the Soviet rehabilitation of Nikolai Bukharin in the 1980s testifies, is relevant to the present and future.* Indeed, the thesis that any reliance on markets is a sure sign of capitalism, so popular in the eighties with regard to China and the Soviet Union, first surfaced in the 1920s under Lenin's New Economic Policy (NEP...
...in the East, the abacus...
...But then, when he turns to his central theory of exploitation, Marx becomes more complex...
...In theory, the resulting wage was the outcome of a bargain between equals, each of whom was "free" to deal with the other...
...In part, that is because the socialization of health care does indeed increase demand as "ordinary" people want the kind of care once available only to the elite...
...In the capitalist theory of "consumer sovereignty," it is the individual in the marketplace who dictates the patterns of production...
...For one of the sources of socialist productivity should be precisely that liberation of creativity, which is, under capitalism, smothered by the antagonistic relations on the shop floor...
...But doesn't that show that the communists are, willy nilly, driven to accept the classic capitalist discipline, with its special cruelty toward those at the bottom...
...Let me be specific on how this implies the use of both planning and market principles...
...For the latter requires that the enterprise—private or public, large or small—have the possibility of coming up with new ideas and products...
...But the basis of a truly modern system, particularly in the age of automation and the computer, is "intensive" growth, an exponential increase in productivity that rests upon the facility of both human beings and machines...
...And, much more important, his basic political values, his commitment to freedom and human emancipation, are simply at odds with the consequences that follow from his own analysis of socialism as a centrally planned society or a progressive monopoly...
...For despite the moratorium there was an upward "wage drift...
...Generalizations about the meanings of markets in the abstract are, then, all suspect...
...If, however, all decisions were taken by central planners, even if they were working under the instructions of the people, one would lose that new source of productivity...
...Second, Trotsky and Bukharin were right, as at least a portion of the present Soviet leadership has tacitly acknowledged (in Bukharin's case, the admission is even spoken aloud...
...Did Lenin actually go that far...
...There were job retraining, public works employment, a sophisticated system of identifying new openings, aid to employers in creating new jobs, subsidies to cover the moving costs of those who had to go to a new region, and, in many ways, last and least, unemployment compensation...
...Marx, I am afraid, is a major source of the contemporary confusion, not the least because he provides solid authority for contradictory positions...
...What is particularly relevant here is that socialism is defined as a monopoly—a democratic, socially con...
...Arendt's book came out when Stalin was still alive, in 1951...
...I.H...
...Translated into Swedish: the plan decommodifies the labor market and treats workers as human beings but it does so in response to signals from that labor market...
...These texts provide clear warrant for the notion that, under the radically changed circumstances of a socialist-tending society, markets would have an utterly different meaning than under capitalist laissez-faire...
...This does not mean that there were no markets under Stalin...
...In order to keep up the pressure on the bureaucrats, Bukharin said, they must be driven to meet the needs of the people...
...Stalinist planning—a * I regard Stalinism as an "anti-socialist 'socialism,'" as a system of bureaucratic collectivism and do not see its history as part of the socialist tradition...
...I insist that, in the dimly foreseeable and utterly international future of, say, the next fifty years, markets can be an important instrument of free choice rather than of perverse maldistribution if they are reorganized within a socialist context...
...That would obviate one of the greatest gains that could come from that structure of ownership—namely, the encourageWINTER • 1989 • 67 ment of independence on the part of workers...
...In a major report to the Party Central Committee in February 1986, for instance, the Soviet leader told his colleagues that "we must radically change the substance, organization and methods of the work of the financial and credit bodies...
...Are these businessmen any better than the thugs who peddle dope to street kids...
...It is these assumptions that must be changed...
...Most persons with such pacemakers didn't need replacements through surgery, but in some cases "doctors had recommended that the devices be removed...
...In Britain, he notes with approval, National Health has emphasized "improving quality of life through primary-care medicine and well-subsidized home care and institutional programs for the elderly rather than through life-extending acute-care medicine...
...and quite different in a communist dictatorship...
...In at least three areas, then—the efficiency of the nonmarket sector, the relations between decentralized democratic enterprises, and consumer choice—markets have an important role to play in the new socialism...
...it allowed the Soviets to create an industrial infrastructure in the space of a decade...
...Under such circumstances, private profit makers will try to "cream" off the affluent functions in a given sector and graciously allow the state to socialize the remaining losses...
...And a little later Fairbank writes, "the Deng reforms are not bringing Western-style capitalism to China, except for the state capitalism of corporations that make deals with foreigners, but rather they are bringing an expanded form of what might be called 'bureaucratic socialism...
...So labor markets under capitalism, based on economic rather than political coercion, forced workers to "freely" sell their labor power at a fair value that produced more for the capitalist than it cost...
...Indeed, under capitalism they inexorably tend to turn into their opposite: It is the "historic tendency" of competition to culminate in monopoly...
...They benefited from a policy directed not to their gender but to the inferior position to which the "normal" workings of markets would have assigned them...
...That generalization applies to the area in which there is the most obvious case for socialist markets: consumer choice...
...In a sense, the superficial dichotomy of plan and market, an abstraction par excellence, is the heir—usually unwitting—of a central tradition in capitalist thought...
...The physical brutalization of the working class literally threatened its biological existence and thereby the future of the system itself...
...The necessity of such a surplus product takes the form of profit in, and only in, capitalism...
...But for the world as a whole, economizing is clearly on the agenda for any time frame suitable to serious analysis...
...So, please, a little less baloney about the virtues of "free enterprise" and a little more honesty about the way antisocial behavior can crop up here, there, and everywhere...
...The positive aspect of Swedish policy was well stated by Jacques Attali in 1978, a time when he, and the entire French socialist movement, was quite critical of "mere" socialdemocratic solutions...
...If this were simply one more example of a superficial journalistic dichotomy—either a society is planned and socialist or relies on markets and is capitalist—it would not be too bothersome...
...There was an attempt to mobilize the economy by a state that absorbed all of society into its dictatorial political system...
...Some radicals wanted to go further...
...And one of the consequences of this political struggle was that capitalism now oriented itself toward "relative" surplus value, toward getting more out of each hour of work rather than simply extending the hours...
...This they cannot do under contemporary capitalism, so that one of the basic socialist critiques of the prevailing system is that it systematically rigs and frustrates the free choice it claims as its greatest virtue...
...And, under conditions that must be carefully specified, free choice—without quotation marks—would have a completely new, and potentially positive, significance in any foreseeable transition to a socialist society...
...In a 1932 essay, "The Soviet Economy in Danger," he wrote, The innumerable living participants in the economy, state and private, collective and individual, must serve notice of their needs and of their relative strength not only through the statistical determinations of plan commissions but by the direct pressure of supply and demand...
...Democratic socialism was "Western," largely confined to a European ghetto...
...The private enterprise attack on socialist universality is, it should be noted, an inherent tendency of a society that is no longer entirely capitalist but certainly not yet socialist...
...That "efficiency" will be defined in a different way than under capitalism—to express social goals and not just private interest— is obvious...
...When that happened, the government decreed that individual peasant families, under the "household responsibility system," could— after paying their taxes, selling a quota of their output to the state, and meeting fees to the collective, which still owned the land—dispose of their surplus in any way they wanted...
...That is indeed a profoundly capitalist notion and the new socialism should reject it out of hand...
...Sometimes this takes relatively mild forms, as with the admitted guilt of the Beach Nut company in watering down its juice products...
...If, a believable joke reported, a Soviet pin factory were assigned a quota of so 60 • DISSENT many tons of pins, it would turn out one, monstrously large and unusable pin...
...The contract system [Fairbank's translation of the "household responsibility system"] must be seen as the latest phase of statecraft, how to organize the farmers in order to improve their welfare and strengthen the state...
...But even leaving morality aside, this kind of "planning" was laying the groundwork for the economic crisis of the seventies and eighties...
...But isn't it true that markets, even under optimum socialist conditions, inherently encour age self-seeking and even greed...
...The question then is, how does one economize in socialist fashion...
...The collective farms were required to deliver their crops to the state at less than their cost of production...
...So is the Soviet Union under Gorbachev, similarly with Hungary, Angola, Vietnam, and all the other economies that were once centrally planned and have now introduced markets to achieve efficient production...
...In Stalin's day, however, there was little or no relief from bureaucratic commands backed up by a repressive state...
...And that meant that the unions should have a conscious policy of reshaping the outcomes of the labor market...
...Searle & Co...
...In part, this was an appropriately negative response to the means-testing of social programs in the depression...
...For one of the most imaginative socialist attempts to deal with that problem— and one of the most creative illustrations of the use of markets within a planning framework— might become germane to the communist reformers...
...Industrial enterprises were made more autonomous and they, too, could decide how they used their surplus...
...In every one of them, save the United States, basic health care is collectively financed and provided without reference to income—and that process will, and should, continue...
...Bukharin was a champion of "socialism at a snail's pace," which would make use of market incentives...
...In theorizing about this phenomenon, Hannah Arendt wrote in her influential Origins of Totalitarianism that "total domination succeeds to the extent that it succeeds in interrupting all channels of communication, those from person to person inside the four walls of privacy no less than the public ones which are safeguarded in democracies by freedom of speech and opinion...
...Partly through malevolence, partly through innocence, these economies are labeled "socialist," even though for many years now democratic socialists have assailed both the politics and economics of the communist dictatorships...
...command economy operated bureaucratically from a single center—was, he rightly thought, a political and economic disaster...
...The problem is, Mandel's model requires heroic consumers who would be willing to attend endless meetings in order to assure that they get exactly what they want...
...In fact, Marx argued, it forced capital to seek more profits by increasing productivity, by working labor intelligently rather than working it to death...
...But before turning to those specifics, it is important to locate the very possibility of a democratic socialist dialogue with communist reformers in a much larger context...
...Stalin, however, settled the political argument by force and in the process liquidated both Trotsky and Bukharin...
...Nove is quite right to reject this automated utopia as a guide to the formulation of socialist policy in the contemporary world...
...The economic and structural sources of that ideological geography have not been abolished simply because communist reformers have changed their attitudes toward markets...
...It is only in that system that the surplus is the property of private individuals or corporations, which carry out the social function of depreciation and investment in order to maximize their own interest...
...Serious scholars employ this facile distinction...
...So there must be room in the new socialism for initiative from the base and one of the ways of encouraging that is precisely through markets that will reward—in the sense I have just defined—the most innovative producers...
...How, it might be asked, can policies designed to defend workers against the impact of capitalist markets be used as a model for the socialist future...
...Our economic administrators," he went on, "work for the proletariat, but they are not exempt from human weakness...
...under given institutional and economic policy assumptions...
...China remains, for all of its material progress, a very poor country, subject to the vicious antisocialist constraints that Marx outlined well over a century ago...
...Emphasis added...
...scious monopoly, but a monopoly nevertheless, a system without effective markets...
...That policy was definitively adopted in 1951...
...Stalinism terrified its external enemies as well as its own people...
...In 1986, two years after Safire's discovery of "capitalism" in China, 68.7 percent of the industrial output came from the state sector, 29.2 percent from collectives, and 0.3 percent from private enterprises...
...Mao died in 1976 and there was an interregnum that lasted until Deng took control in 1979...
...Let me cite two instances—no doubt extreme but with a certain symptomatic value—of what can happen under "the free market": On September 9, 1988 a federal jury found G.D...
...And so long as the producers and/or the ecosphere are not violated in the process, such a society will, on grounds of solidarity and social justice, be as concerned with efficiency as is capitalism...
...The antisocialist press gleefully reported that the Soviets were making the transition from communism to capitalism because they had turned to market forces, a judgment that proved to be spectacularly wrong and about as substantial then as it is now...
...In a democratic socialist society constrained by scarcity and committed to the global abolition of poverty, the surplus product would be socially and democratically allocated...
...That is what the Soviets now refer to as "extensive" growth and it corresponds to the period of "absolute surplus value" when capitalism thrived by working people to the edge of death...
...Wage restraint also posed the incongruous issue of unions policing workers' demands rather than fighting for them...
...Isn't it inescapably clear, then, that the system is defined by markets...
...And that situation will most certainly obtain for the foreseeable future...
...Thus the announcement of "the emergence of capitalism" in China or the Soviet Union is made triumphantly as a proof that the eternal verities have again prevailed...
...But despite the utopian content of both the Great Leap and the Cultural Revolution (the latter directed against the evils of bureaucracy that Mao saw writ large in Soviet society), the mode of leadership was still quite Stalinist...
...The Soviet Union is obviously at a higher economic stage but the institutional weight of its Stalinist history puts an enormous limit upon change...
...And the actual functioning of some of the most important contemporary markets— the capitalist world market that integrates North and South, for instance—are viciously and completely at odds with the virtues still 56 • DISSENT imputed to them...
...This tactic was adopted on "trade union," not feminist, grounds but it was one of the reasons why women in Sweden were to reach near parity with men...
...I want instead to generalize from this rich experience to an overall socialist attitude toward the relationship between plan and markets...
...One of the aims of the Swedish unions was, precisely, to counteract the market outcome according to which workers in advanced companies get higher wages than those in less successful industries...
...The official economists predicted, of course, that such a move would destroy capitalism...
...But in 1983 there was another period of reform with enterprises given much more latitude to take initiatives on their own, a strengthening of the "household responsibility system," and a new emphasis on foreign trade...
...That means the cheapest prices for the mass of consumers, which can only be delivered if the costs of production are kept to an absolute minimum...
...As far back as the 1920s, the industrial unions of Sweden, the Swedish Labor Federation (LO), had declared their concern with the low-paid workers of the land and the forests...
...About Trotsky we need not speculate...
...As the system falters, the working class, which needs more productivity in order to raise its own living standard, becomes the economically dynamic class...
...He quotes Lenin: "Now we have the right to say that the simple development of cooperatives . . . becomes identified for us with the development of socialism itself...
...They could solve this problem either by becoming more productive—which would raise the efficiency level of the entire economy—or by going out of business...
...That requires a concern for the quality of work that slaves, or driven workers, will never exhibit...
...Mao had turned on the Soviets as early as the late fifties...
...The evidence is ambiguous...
...As a result of this savage process, "every limit of morality and nature, of age and gender, of day and night, was destroyed...
...In any dynamic society this side of total abundance, there must be, over the not-so-long run, a surplus from the productive system...
...toward the creation of two separate systems of medicine: a publicly financed one for those at the bottom and the middle of the income distribution...
...But at the very same time, Marx's "political concept of socialism consists of a free association of self-managed work and social communities based on horizontal relations of equality...
...Still, one can understand why someone in Poland might think Milton Friedman's brand of laissez-faire attractive...
...Far from it...
...it involves the health of thousands of women...
...Nove, I think, overstates this counterposition and Mandel projects a vision of democratic planning that is at least possible...
...But it goes beyond that...
...Prior to the adoption of the active labormarket policy, particularly in 1949-50, the Swedish unions had effectively experimented, like their counterparts throughout the West, with an "incomes policy" as a way of dealing with the problem...
...Where, then, was the source of profit...
...This means many things...
...I am quite sure it is not desirable...
...And a market is a market is a market...
...Local labor exchanges were created under the direction of a national Labor Market Board...
...There is no doubt that, with the rise of the mass standard of living in advanced capitalism in the West, millions have been liberated from the primordial struggle for necessities and have freely chosen paths of culture, learning, and service...
...Yet possibilities are opened up, not the least because no one knows where reform will lead...
...But at the same time, the Swedes did not abolish the labor-market mechanism itself...
...And in his critique of the Stalinist planners in The Revolution Betrayed, Trotsky commented that the obedient professors managed to create an entire theory according to which the Soviet price, in contrast to the market price, has an exclusively planning or directive character...
...All one needs to do is to choose the libertarian Marx over the centralist Marx and then confront reality instead of texts...
...sometimes it can take the callous form of endangering human life, as with Searle and Cordis...
...In the Soviet Union under the Stalin model, for instance, there was a surplus product that was not assigned to a class of private capitalists, but rather was allocated by a class of bureaucrats who made sure, as Trotsky well put it, that the one thing the plan did not ignore was their own well-being...
...This is the planned, market-less society with a vengeance...
...More broadly, Nove is right if one is serious about decentralized social ownership...
...If one assumes that the worker produces enough to "pay back" his or her wage during only a portion of the working day, then an obvious way to increase profits is to extend that WINTER • 1989 • 57 working day...
...WINTER • 1989 . 61 Contrary to Arendt's 1958 speculation that the event was a momentary aberration, the antiStalin campaign was most marked between the Twenty-Second Party Congress of 1961 and Khrushchev's downfall in 1964...
...Either, Alec Nove argues, there is a centralized and authoritarian plan for the allocation of resources, or there must be markets...
...At the same time, the old-line Soviet conservatives, committed to defending the very structure of the state, are right: It is extremely difficult to segregate economic and political change, to embark on a course of liberalization in the one sphere without opening up the other...
...It was this reality that gave rise to the theory of "totalitarianism," the idea that a totally controlled society without any real sources of internal opposition had actually come into existence...
...This threatens one of the greatest socialist triumphs over the "logic of capital...
...Clearly, Gorbachev has decided to take seriously the need for "intensive growth," productivity, qualitative rather than quantitative measures of output and the use of market criteria in investment policy...
...It is that mix which is relevant to a new international socialism which could make a contribution to democratization in the East...
...In Setting Limits, the bio-ethicist Daniel Callahan argues that, in the name of other health and social priorities, one cannot make such an openended commitment to maintain life without regard to cost...
...The workers sold their labor power like any other commodity...
...Lenin's remarks on the importance of cooperatives, Bukharin said, "puts us in the presence of a program that is totally different [from the perspective of state capitalism...
...Yet this system, for all of its intolerable human and social costs, "worked," i.e...
...Indeed, that geographic dimension of the ideological quarrel was one of its most disturbing aspects, as Willy Brandt openly admitted when he became president of the Socialist International in 1976...
...The adoption of market criteria of efficiency by communist reformers could, we have just seen, mean that workers will lose their jobs in inefficient plants...
...Socialist construction is unthinkable] without including in the planned system the direct personal interests of the producer and consumer, their egoism—which in its turn may reveal itself fruitfully only if it has in its service the customary reliable and flexible instrument, money...
...he cut consumption, turned the state into an absolute monopolist that financed the industrialization of the society precisely by the super profits that could be derived thereby...
...This means, as Jacques Attali suggests, that there must be room for failure in a socialist society...
...When the National Health system was created by the 1945 Labour government, it was established as a universal entitlement...
...Ironically, Marx gets into this contradiction in the process of once again making the point that markets do not have a fixed, immutable 58 • DISSENT content...
...Markets are obviously not acceptable to socialists if they are seen as automatic and infallible mechanisms for making decisions behind the backs of those who are affected by WINTER • 1989 69 them...
...Does this mean that democratization will follow quickly and inevitably upon markets...
...In another essay, published in 1925, Bukharin speculated that in his final writings Lenin WINTER • 1989 59 had broken with his theory that the road to socialism was along the path of state capitalism, i.e...
...But at the same time, we know that the youth of the West in the sixties, sometimes proclaimed as a "post-materialist generation," were often as acquisitive as their elders, different only in what they coveted, not in coveting, disdaining suburban comforts and exalting consumer electronics...
...The landlords, still furious with the industrial capitalists for having abolished agricultural protectionism in order to cheapen the price of bread and thereby the subsistence wage, were willing to make common cause with the reformers and the workers and to join in a campaign to put a limit on the working day...
...there is an economic "human nature" that exists throughout history even if it is imperfectly developed in precapitalist societies...
...q Faulty Pacemakers and False Arguments 1Ne hear a lot these days about the virtues of "the free market," some of it from ideologues who want to dismantle what remains of the welfare state in the United States, but some of it from people in Eastern Europe who are utterly and rightly fed up with the overcentralized, bureaucratic and inefficient economies from which they suffer...
...and there was a nonaligned Third World, in which, in most cases, "socialism" had strong authoritarian tendencies...
...A whole range of options was made available for dealing with the specific conditions of an enterprise or industry in a given area...
...Marx thought that ultimately there would be so much abundance that "economizing" would no longer be necessary...
...This was one of the many reasons why it was superior—economically and even morally— to the brutal exploitation of the past...
...And it opens up the possibility, in a society that, for all of its manifold faults, has prided itself on guaranteeing a job to every citizen (even if inefficiently), that unemployment, or at least firings, would become a necessary concomitant of market policies...
...There is no reason to depict these policies as Utopia in action...
...An incompetent cooperative or an ineffective management in a socialized industry wastes human skills and materials that could be put to a better social use and, as the Swedish socialists have understood within the context of capitalism, there must be socially acceptable ways of putting an end to such activities...
...And that then opens it up to the attack of "privatizing" conservatives...
...We will never know...
...indeed, many are honest...
...If there was no possibility of internal change within the Stalinist empire, that made a hawkish cold war policy of "liberation" all the more logical, since there was no hope that, as the original American "containment" theory of 1947-48 held, time and history would eventually soften Soviet policy...
...At that point, "the surplus labor of the masses has ceased to be the precondition for the development of universal wealth and the nonlabor of - the few is no longer the precondition of the development of the universal power of the human brain...
...In a 1924 polemic, Bukharin raised the problem of the "tendency toward monopoly" in Soviet society...
...This is not a matter of a kitchen gadget...
...it cannot eat its seed corn...
...There were political consequences...
...There are two aspects to these statements by Trotsky and Bukharin...
...As formulated in the anticipation of automation in Marx's Grundrisse, science applied to economic ends would so exponentially increase productivity that there would no longer be the possibility, much less the necessity, of measuring and compensating contributions to output in terms of hours of labor expended...
...but he was equally emphatic that, on the road to that final goal, it was necessary to have a sound currency to measure the market value of investment costs and consumer goods...
...In the Light of European Socialism At the very outset, it is necessary once again to acknowledge "Swedish exceptionalism," which, in the case of the active labor market policy, is particularly strong...
...The most dramatic break with Stalinist orthodoxy took place in China, not the Soviet Union, under the leadership of Deng Xiaoping...
...So far, the attack on the market is straightforward and principled...
...But it is only with the rise of capitalism that commodity production—market production—becomes the dominant activity of an entire society...
...Where people produced for their own needs—in families, tribes or self-contained communities—there was misery as a result of the low level of economic development and periodic hunger and famine when the harvest failed or the fishing gave out...
...The aim, then, is a socialism that makes markets a tool of its nonmarket purposes...
...Commodities, Marx argued, have existed ever since human beings, in the mists of time, went beyond subsistence production and began to make things to exchange with one another...
...But so long as there is scarcity and discretionary income, so long as there must be a social concern with economizing inputs and therefore linking performance and success, just so long is there a necessity for material incentives...
...Marx gave capitalism enormous credit for having similarly raised the level of economic development by the savagery of "primitive accumulation" and denounced the process as morally vicious...
...But it has a relevance to the socialism of the future...
...The resulting hostility was not based on misunderstanding...
...But the labor move 64 • DISSENT ment, the LO concluded, should favor the universalistic principle that there should be the same pay for the same expenditure of effort throughout the entire economy...
...The new socialists can, and should, argue that their policies would lead to the liberation of markets from the manipulation to which they are subjected under capitalism...
...It was the result of local conditions, of piece workers making more money, of entire new categories of labor coming into the market, and other factors that escaped the macro-economic net...
...In fact, a conception of the relationship between markets and plan is implicit in this Swedish history that could be quite relevant to the new socialism of the twenty-first century...
...But it is at least possible, and even plausible, that before he died the Bolshevik leader sensed the dangers of centralization in a command economy, what he called "a bureaucratic utopia...
...But perhaps the glee is excessive and the hosannahs for "the free market" unwarranted...
...The goal was not to tolerate even subsidized joblessness, but to find useful work for every single citizen...
...The answer was formulated by two union economists, Gosta Rehn and Rudolf Meidner, and it was taken up by the LO...
...China, one has been told since Deng Xiaoping's market-oriented reforms began in the late 1970s, is becoming capitalist...
...In that case, the logic of capital takes on a communal form within the framework of the market...
...Here the issue is not whether there are to be markets, but what kind of markets, with what kind of consequences...
...This was an attempt to make the case that Stalinism was an inherent tendency of any socialism, even a democratic socialism, a proposition refuted by every event that has occurred since it was first stated...
...That is, the unions voluntarily accepted a two-year moratorium on wage increases and took much of the responsibility for dealing with inflation upon themselves...
...That trend cannot be successfully combated simply by appealing to egalitarian value systems (although in Britain in the eighties, it is clear that there is enormous political support for national health...
...I am not proposing that the new socialism project a market utopia...
...Not necessarily...
...That, he said, could indeed allow the state to get an extra profit without any effort at all...
...And it was, of course, made all the more acute by the fact that most of the effective democratic socialist parties in the world were European and supported the Atlantic Alliance in the cold war...
...To answer that question we go back to some ABCs...
...It was the consequence of a real-world conflict between fundamentally different conceptions— and the actual practice—of how to organize, not simply society, but the world...
...It would also put the state in conflict with the least efficient enterprises, which would not be able to meet the requirements of profitability...
...In the labor market...
...Hunger could be abolished in the next period even if scarcity cannot be, not least because the world already has the capacity to feed itself...
...However, I don't want to go into the actual workings of the system in any detail...
...Sometimes critically important ethical problems, which deserve to be dealt with in a calculus more humane than that of profit and loss, are involved...
...Instead of mass unemployment and depression, there was full employment and the danger of inflation...
...They are also critical if the new socialism is to commit itself to decentralized forms of social ownership that open up new spaces for personal freedom and creativity as well as providing for the possibility of bottom-up control of the economy on a human scale...
...The insightful—and heterodox—Yugosla vian Marxist, Svetozar Stojanovic, has made a most important point in this regard...
...That is, Mao believed that he could "write" on the Chinese people, whom he compared to a blank page...
...It also affected both the solidaristic wage policy and the efficiency of a national economy that was very much oriented toward competition on the world market...
...But it was not until 1936, with the metal workers taking an important role, that the notion of a "solidaristic wage policy" came to the fore and only in 1951 was it decisively formulated...
...still another in a democratic welfare state...
...In the United States, with its two-tier health structure, there has been a tendency to invest in the high-tech care of those who can pay for it...
...Even more dispiriting, not a few of these rebels became well-adjusted members of societies with chronic poverty and unemployment...
...In 1979, for instance, the Swedes devoted only 10 percent of the labor-market funds to jobless benefits, compared to 31 percent for retraining, 13 percent for support to cooperating employers, and 45 percent for other measures to help the individual find new work...
...Those markets, Marx continues, are pernicious...
...And in an analysis of a historic event of enormous importance for his theory, Marx went on to show that that eventuality had taken place...
...Hundreds of millions of dollars worth of these pacemakers were sold before the Food and Drug Administration charged four executives of Cordis with filing false statements about their product...
...But there were not such things as overproduction and underproduction, no economic breakdown that oc cuffed because there was "too much" to be sold at a profit...
...At the same time that this market process regularly plunged masses into a social abyss, it enormously increased the wealth of the successful rich...
...Indeed, Thatcher tried to quintuple its role and in many cases the assault on public health is being led by corporations from the socially backward United States...
...The labor market can be consciously shaped so that there are more opportunities for socially meaningful work that do not require heroic sacrifice...
...It was, and is, one of the great accomplishments of European social democracy to have removed the minimum necessities of health care from market allocation...
...But Trotsky, who was then Bukharin's principle antagonist and the chief defender of "planning" as against "markets," also recognized that the latter had a critical role to play throughout the entire period of transition...
...But, particularly if one is serious about the commitment to abolish world poverty, there must be a discipline...
...Without them, they argued, the system would become bureaucratic, wasteful, inefficient, and incapable of satisfying those basic human needs that were supposed to be the driving force, and the proof of the moral superiority, of the new economy...
...Of course socialism will be marked by the expansion of nonmaterial incentives, by the degree to which people will strive for excellence on social grounds or simply because it is its own reward...
...But isn't the result of that the danger of parasitism and stagnation...
...For it is simply impossible to demand initiative and creativity from a labor force that, the moment it leaves the job, is not allowed to think aloud and to discuss freely...
...But even though the Bolsheviks before Stalin, including Lenin, approved measures that laid the basis for the later tyranny, they were in the 1920s sincere and committed Marxists, however wrong, and their experiences do belong to that tradition...
...The prejudice for the private over the public is, after all, an artifact of a system that carefully favors the former over the latter...
...This theme—that the replacement for the capitalist profit motive was the drive to satisfy consumers—was shared by Preobrazhensky, Trotsky's economic theoretician, who differed with Bukharin only in being much more confident that it would be effective...
...Small wonder that matters get confused...
...And we must be sensitive, not simply to the material meaning of such a development, but to its moral capacity to transform "human nature" as well...
...The opening chapter of Das Kapital defines the "commodity" as the very basis of the capitalist system...
...A particular example is relevant here...
...Stalin, of course, did exactly the opposite of what Bukharin and Trotsky proposed, i.e...
...The stone tool of paleolithic humanity is an embryonic form of capital, the precursor of an automated factory...
...In putting these considerations in their larger context I will assume that the reality of the next half century or so will be nonutopian...
...When Karl Kautsky concluded that in the good society workers would not have the right to change their jobs at will—because there would be no labor markets— he had solid grounding in Marx at the same time as he was contradicting the latter's vision of a truly free and communitarian association of the direct producers...
...The slave laborers of the Gulag could be, and were, driven to dig canals because the productivity of a person with a pick or a shovel is not of great moment...
...How the Bolsheviks Coped, or Didn't The first socialists to confront reality, in the sense of actually taking responsibility for the organization of an entire economy, were the Bolsheviks...
...It is possible to make the initial physical investments in modernization in a brutal way...
...And there are not a few socialists who believe that tolerating markets may be a political necessity but still somehow represents a surrender of rectitude, compromising the basic vision...
...According to that concept, the unions would use their bargaining power to reduce the wage differentials within the working class by maximizing the gains for the lowest paid in negotiations with the employers...
...The investment and production decisions were fixed according to planned, quantitative targets, which facilitated both waste and shoddy goods...
...And isn't this objection reinforced by the fact that those policies were adopted as pragmatic, trade-union responses to a specific economic problem...
...and if it were told to produce a certain number of pins, it would achieve the numerical goal with a myriad of pins so thin that they were also useless...
...That they are 68 • DISSENT antithetical to a society based on solidarity and cooperation...
...Intentionally misrepresented . . ." (New York Times, September 10, 1988) Searle looks positively benevolent, however, when compared to the Cordis Corporation of Miami, which pleaded guilty to selling heart pacemakers it knew were defective...
...In 1956, Khrushchev gave his famous speech in which he began to acknowledge the bloody historical record...
...Trotsky was ultimately committed to the vision of a planned society that would dispense with markets...
...Hardly was the tyrant dead than some of the most repressive features of the regime were modified...
...constraints of conscience operate in almost any society...
...The aim, she said, was to make "every person incommunicado...
...But exactly how a stratified economy, run by a single party, which uses markets to forward its own planned policies, qualifies as "capitalist" is a mystery...
...It was only with the dominance of commodity production that poverty resulted from glut...
...That was the theoretical basis in almost all of the Keynesian countries of the 1960s for the notion that there was an inevitable "trade off" between full employment and price stability, something that Keynes himself believed and that Phillips had documented as a historical fact during a century of British experience...
...In its plea [of guilty]," reported the New York Times, August 31, 1988, "Cordis admitted that it had intentionally misled buyers about the quality" of the pacemakers...
...Even in the most extreme days of his rule, people bought consumer goods with money...
...The definitive split between those two ideologies occurred in the 1930s, when Stalin appropriated a socialist rationale to create a new, antisocialist system...
...The blueprints produced by the departments must demonstrate their economic efficacy through commercial calculation...
...But that opened up the possibility that, if one changed the circumstances under which the wage bargain was made, the market outcomes would be different...
...and probably, plant managers in a communist economy show a similar range of moral behavior, from the notably scrupulous to the shamefully inhumane...
...The Swedish socialists did not retreat in the presence of that last possibility of a plant shutdown (and the relevance to the Soviet problems of restructuring is, I assume, obvious...
...He proceeded to a version of total planning in which the omnipotent state swallowed up not just the economy but the whole of society...
...As Radoslov Selucky, who brilliantly understands this contradiction, has put it, in this context "Marx's economic concept of socialism consists of a single social-wide factory based on vertical [hierarchical] relations of superiority and subordination...
...And the most severe rules were put in place, not under the siege conditions of World War II, but during a period when Stalin was trusting in his deal with Adolf Hitler...
...First, both the "left" and "right" Bolshevik critics of Stalin agreed that markets were an indispensable element in the transition to socialism (if not, to repeat, in the blessed "final state" of socialism itself...
...may well be that the changes now taking place within the communist world define the beginnings of a new era in the relationship between democratic socialism and communism...
...How could the solidaristic wage policy, and all the other social goals of the unions, be made compatible with price stability...
...The French notion of "worker self-managed socialism" (socialisme autogestionaire) was subverted by the events that caused the Socialists to make a radical change of course while in government...
...And what is their behavior but an extreme instance of that maniacal greed that can make capitalism so ugly...
...What is relevant here is that Marx regarded the Ten-Hours Law—only a minimal humanization of the laissez-faire labor market—as nothing less than a "modest Magna Carta," as "the triumph of the political economy of the working class over the political economy of the middle class...
...Second, that constant surveillance, democratic alertness, and steady watchfulness are required in all societies...
...Under "normal" capitalist circumstances, the employees of the most backward sectors would receive lower wages than those who worked for advanced, highly competitive companies...
...Socialists can argue that, in liberating markets from the capitalist context which frustrates their virtues, the visible hand can use the invisible hand for its own purposes...
...Integrate Stojanovic's point with the Swedish labor market experience...
...It is, at this writing, impossible to say how 62 • DISSENT the economic reforms put into practice in the Soviet Union at the beginning of 1988 will change that society...
...Even then, Arendt was convinced that the Khrushchev reforms in the Soviet Union had already run their course, that the system was returning to type...
...And it is of some moment that all of the proponents of this approach understood that, if there is to be genuine grass-roots autonomy, then there must be a market space—modified by planning priorities, of course—in which the democratic enterprises are free to exercise their communal imagination and interact without supervision from above...
...The "Great Leap" was a repudiation of the model of centralized command planning, of giant factories, and a celebration of the utopian potential of the people...
...It will be said, and reasonably so, that most manufacturers are not so vicious...
...On the other hand, "self-management is not only threatened by statism, but also by a utopian image of human nature that leads to the naive expectation that self-managed groups produce rationally, without being challenged by competition...
...In the mid-1980s, the Swedish socialists also addressed this issue...
...The professors forgot to explain how you can "guide" a price without knowing real costs, and how you can estimate real costs if all prices express the will of the bureaucracy and not the amount of social labor expended...
...Let me put my point paradoxically: Only under socialism and democratic planning will it be possible for markets to serve the common good as Adam Smith thought they did under capitalism...
...That assumed that markets per se, without any regard for their context and content, are always capitalist, an over-simplification that is not at all helpful in explaining what is going on in China...
...They proposed to make the market, rather than the plan, the basis of the economy, to have "regulation" rather than control, and to significantly increase political pluralism...
...The point is not so much to propose a model for imitation as to examine a rich example of how socialists can combine elements of democratic planning and market efficiency...
...This draconian attack on the rights of workers was introduced at the initiative of "trade unions" reduced to organs of state discipline...
...the monopoly stage of capitalism...
...There were a number of reasons for adopting this attitude and one of them had to do with a refusal to accept the verdict of the existing labor markets...
...The discussion of the Ten-Hours law, which legally limited the working day in Britain, occupies a central place in Volume I of Kapital because it was the basis of a crucial distinction between "absolute" and "relative" surplus value...
...The content of the market agreement was, then, determined, not by markets per se but by the social conditions under which the markets operated...
...That's probably true...
...But in both Britain and Holland that accomplishment was under severe attack in the eighties...
...they restructured it to meet their priorities...
...But, as Keynes said, the pragmatic, no-nonsense proponents of the simplistic plan/ market dichotomy often repeat abstractions that are more than a century old...
...Society cannot consume all that it creates in a year or a decade...
...A cooperative should be motivated, say, to produce medical technologies that would make the nonprofit health sector more effective and free resources for other purposes...
...And this is particularly important, as Nove insists, in the area of capital goods where the "consumers" consist of other enterprises that must make a self-interested assessment of what they buy...
...There is, he asserted in a debate with a sophisticated "orthodox" Marxist, Ernest Mandel, no third possibility...
...Even more to the point, a careful reading of Das Kapital yields, of all things, a Marxist methodology capable of grasping the positive potential of markets even as that book brilliantly denounces their functioning under laissez-faire...
...I refer to the Swedish active labor market policies...
...What is the point of having a variety of forms of participatory control at the base—in nationalized industries, cooperatives, small private enterprises—if all of the critical decisions are to be made centrally...
...They have introduced reforms that seek to achieve private, market levels of efficiency in the public sector without compromising the basic commitment to services based on need...
...Above all, under the consumer "democracy" of contemporary capitalism, the votes are determined by income and wealth and the market is thus a mechanism for transmitting the desires of the privileged...
...Now, however, the economic environment was completely different from that of the thirties...
...It is to understand the very different relations between planning and markets in various societies and to free the socialism of tomorrow from the assumption that a market in a social order of increasing equality and popular democratic control is somehow as reprehensible as a market that functions to provide shacks for the poor and mansions for the rich...
...In reality, this was a deal between unequals: between a wealthy buyer and a precarious seller trying to keep body and soul together...
...And that offers openings for democratic WINTER • 1989 63 socialism that have not existed for more than half a century...
...in part, it was the assertion of a basic socialist principle that medical care should be a right of the citizen, not of the poor citizen alone...
...With privatization, however, there is a tendency toward the "Americanization" of the entire system, i.e...
...On the one hand, he writes, worker self-management can lead to a "decentralized oligarchy," to an egoism, a sort of collective capitalism, of the democratic enterprise...
...But there is still a moral, as well as an economic necessity, to minimize the human and material inputs in production—in the public sector as well as the private—in order to have a maximum surplus product for the work of justice...
...Their chief aim is not to exercise petty control over the work of enterprises but to provide economic incentives and to consolidate money circulation and cost accounting, which is the best possible controller...
...And it is, of course, true that in both the Soviet Union and China reform has come from concerned bureaucrats, none of whom propose mass democratic participation...
...The Soviet state, rather than the international bourgeoisie, became a "fetter" on production and productivity...
...In that perspective, Is the Market Necessarily Capitalist...
...For one of the most effective arguments against socialism, as Oscar Wilde realized long ago, is that it would create a society with interminable meetings...
...And of course this is gleefully taken up by the right-wingers in the capitalist countries...
...In retail, the respective figures were 39.4 percent, 36.4 percent and 23.9 percent, which did indeed mark a significant shift...
...Socialists should not passively wait to see how these ambiguities turn out...
...It is also true that the nonmarket sector can develop inefficiencies of its own...
...In other words, the psychological reaction to a socialist use of markets is not a given, but a policy issue...
...the market transmits the collective demand WINTER • 1989 65 elaborated under the plan to the enterprises...
...But there were also new measures of public employment to deal with the specific problems of youth joblessness...
...This was the drive for "absolute" surplus value...
...But within the context of a plan, markets could be, for the first time, an instrument for truly maximizing the freedom of choice of individuals and communities...
...But before turning to Trotsky's advocacy of markets, two of Bukharin's particularly illuminating insights in this area are worth remembering...
...It is not an accident that Glasnost, with all of its evident limitations, and Perestroika were introduced together...
...Emphasis added.] That means a fundamental reorganization of the State Planning Committee, one of the most powerful bureaucracies in the society...
...a hospital should be able to use its expertise to choose between medical technologies and to pick the one which most meets its needs...
...private financing—and superior care—for those at the top...
...On a more superficial—even frivolous — level, Friedrich Hayek, normally a serious thinker, declared in The Road to Serfdom that the British Labour government of 1945 was a precursor of a totalitarian system...
...Phillips published his famous article on the relationship between joblessness and wages, the Swedish unions had identified what came to be known as the "Phillips Curve...
...negligent in the testing and marketing of its Copper-7 birth-control device, and it awarded $8.75 million in damages to the plaintiff in the case . . . [The jury] concluded that Searle had intentionally misrepresented the safety of the intrauterine device...
...It is, one would think, painfully obvious that Marx equated markets with capitalism and socialism with their abolition...
...At the same time, to repeat an earlier warning, there is no socialist market utopia...
...At the end of 1984, the conservative columnist William Safire wrote in the New York Times that the biggest event of the year had been "the embrace of capitalism" by the Chinese Communist party...
...In Margaret Thatcher's Britain, for instance, 10 percent of health care came 66 • DISSENT under private health insurance policies, and in the discussion of National Health in the eighties there were more than a few who wanted to extend the scope of for-profit care...
...that, as Alec Nove put it, resources would be available at a zero price...
...Attali wrote that "plan and market are two inseparable sites of the encounter between the production of demand and supply: the plan participates in the creation of a market liberated from the logic of capital...
...In the midst of the reforms, for instance, Deng at all times insisted on "four cardinal principles": Marxism-Leninism, Mao's thought, party leadership, and continuation of the existing state structure...
...They proceeded to change the consequences of that market outcome by selective measures that saw to it that the workers would not suffer as a result of shutdowns or rationalization...
...They would function as a decentralized and instantaneous device for registering the needs of people as determined by the people themselves...
...But then, continues Marx, a number of things happened...
...a second edition, with an epilogue to deal with the anti-Stalinist rebellions in both Poland and Hungary in 1956, came out in 1958...
...But the Swedish unions and socialists were not willing to accept periods of unemployment, even at relatively low levels, in order to deal with inflation and to make other social priorities possible...
...Piety about an ambiguous tradition should not, then, keep socialists from seeing that markets can, and must, play a role in the transition to a humane future...
...At a minimum, there must be provision for depreciation and new investment...
...70 • DISSENT...
...Yet it turned out that opposition and criticism had not been abolished as Arendt thought...
...Now, monopolists "fetter" production precisely because they can dictate to markets and are therefore no longer subjected to the discipline of efficiency...
...A merely reformist change in the structure of the labor market could profoundly affect the very meaning of the market economy and even give rise to a new epoch in the history of capitalism...
...The public sector has to respond to the private market attack—to markets—by controlling costs without sacrificing quality or the principle of universalism...
...In the advanced welfare states socialists have already removed critical areas of life from the market economy...
...And even though the Soviet economy was significantly modified between Stalin's death in 1953 and Gorbachev's rise to power in the eighties, the institutional bias remained centralist, quantitative, "extensive," which all but guaranteed the declining growth rates of the last decade and a half...
...communism was "Eastern" and a road of forced modernization for backward economies...
...Whatever unimaginable potential there may be in technology, total abundance will not happen in the next fifty or even a hundred years, which means that it is irrelevant to even the most "long-run" planning...
...At first glance there seems to be no ambiguity...
...Ironically, the refusal to countenance low wages meant that marginal enterprises, which could survive in other economies, were subjected to particular pressure because they had the highest number of the underpaid...
...Ten years before the economist A.W...
...Is that a morally and socially sound use of resources...
...In a system without competition, solidarity turns into its opposite, into parasitism...
...And that leads to what must seem to be a very heretical thought for a socialist: that there must be sources of individual and collective gain in this process...
...The "free choice" of goods, jobs, or investments is one thing in a laissez-faire economy of extreme inequality...
...In short, even though Marx in one persona clearly rejected markets altogether, his methodology allows room for the assumption that the markets of a socialist future need not be anything like the markets of the capitalist past...
...And from on high he engineered a revolution-from-below, a reality that became quite apparent in mid-1968 when Mao turned off the enthusiasm of the Red Guards, which he himself had originally decreed and relied on to enforce his will...
...Dealing with that problem—putting market mechanisms at the service of social priorities rather than in command of the economy—is an area in which democratic socialists have contributions to make...
...Decisions were, in short, still taken on a political basis by small cliques—or by one man—and behind closed doors...
...Efficiency was thus an imperative of the commitment to a higher living standard for all...
Vol. 36 • January 1989 • No. 1
