Market socialism
Horvat, Branko
Disagreements may arise because of differences in opinion and evaluation or because of differently known and understood facts and logic. I sympathize with the spirit of Thomas Weisskopf 's essay...
...The statement is based on a widespread confusion...
...Differing specifics concerning the two systems lie in the social organization of large enterprises that produce about two-thirds of total national output...
...It is true that markets cannot work without clearly defined property rights...
...In short, market implies ownership but not necessarily a private one...
...Proprietorships and individual farming are completely compatible with socialism...
...Let me illustrate the problem with a comparison...
...It is usually not observed that the basic control of the two corporations is performed by the market, and therefore the market is important for socialism (that is, an organized and not laissez-faire market...
...As I have written extensively elsewhere on the issues raised, I shall confine myself to a brief explanation...
...cultural factors and technology were not conducive to it...
...Weisskopf writes: "Although the replacement of private with social control and income rights at the enterprise level is what most clearly distinguishes market socialism from [market] capitalism...
...I sympathize with the spirit of Thomas Weisskopf 's essay (Dissent 1992), but I want to make three specific comments about the second type of disagreement...
...If external shares represent more than 50 percent of total capital, a hostile takeover is possible, the incompetent management and individual troublemakers will be fired, the failing firm reorganized, and then the prevailing labor-managed administration re-established in the same way as is done in capitalist firms...
...Private dividends are compatible with socialism, as is interest on saving deposits that represents an equivalent exchange of past and present labor time for increasing productivity...
...Weisskopf also says that "market socialist enterprises are clearly not subject to hostile takeovers, so their managers don't face the same ultimate threat as managers of capitalist firms...
...Who is the owner of the firm is largely irrelevant as far as the market is concerned...
...That is in fact a tautology...
...In other words, ownership may be private, collective, state, or social...
...If we have a well-organized (and also not ideologically dominated) market, it will be advisable to select the most efficient type of ownership by market competition...
...These enterprises are organized as various sorts of corporations...
...0 248 • DISSENT...
...The firm owns property and the firm may be owned by nonprivate entities without jeopardizing the operations of the market, including activities of the capital market...
...The firm is registered with the court, engages in all productive, selling, and financial transactions autonomously, hires (and fires) labor and capital, reaps profits, and repays its debts...
...Besides, this is not a place to engage in a technical analysis...
...The private corporation is controlled by largely self-appointed management and is privately owned...
...This is neither true nor is the statement exhaustive...
...In every market economy (capitalist, socialist, or any other), 246 • DISSENT Communications the primary owner is the firm...
...Whether it will be also more efficient in real life depends on cultural factors, including the entire institutional setup...
...But I restrict myself to purely economic elements, because they are usually not well understood...
...Are they conducive to socialism today...
...Probably everybody will agree that capitalism is economically more efficient than slavery...
...Naturally, economic democracy and social relations play an important role, and the organization of firms is bound to influence the organization of the society profoundly...
...The latter is taken as an ideological justification for the legalistic fiction that the owners (shareholders) control it...
...In ancient Rome all essential ingredients of capitalism existed: private ownership and Roman law regulating transactions, market, hired labor, factories, money and credit, foreign exchange and foreign trade...
...Further, Weisskopf contends: "Defenders of capitalism have long argued that markets cannot work properly unless they are embedded in a system of property rights that enables private individuals to own, buy and sell shares in the means of production...
...Now three possibilities exist: (1) either the firm is reorganized and made profitable again and it regains its autonomy, or (2) the firm is sold ("hostile takeover"), or (3) it is proclaimed bankrupt...
...Some sort of hostile turnover is possible when the firm becomes insolvent and the bank or government will not bail it out...
...Therefore, the capital distribution is completely egalitarian and the dividends are expressed in the increasing standard of living...
...The latter means that every citizen owns one virtual share of national capital, which cannot be either bought or sold...
...In a sense the market was more universal than the present market because apart from the commodity and money markets there was also a market in human beings...
...If the internally generated surplus is not sufficient for investment undertaken, the corporation may issue external shares (as well as issue bonds or borrow from the bank...
...The potential owners are private individuals, partners, members of a cooperative, workers in a workerowned enterprise, state and parastatal entities, or society as a whole...
...Generally, one may note that a socialist firm is potentially more efficient than a capitalist firm...
...If a firm suffers losses that no longer can be covered out of reserve funds, and workers apply for guaranteed income that no longer can be covered by the firm itself, the firm will be put under receivership, labor management suspended, and a temporary manager appointed by a specialized SPRING • 1993 • 247 Communications public agency...
...A social corporation has an internal fund of socially owned capital that may be expressed in shares kept by the corporation...
...Besides, labor control is somewhat more efficient than control by absentee owners, and therefore a social corporation will be more efficient than a private corporation, as a rule...
...But there is also a third possibility, which reflects the greater flexibility of a labor-managed economy...
...The implication that this necessarily implies private ownership is a non sequitur...
...Why not...
...Proprietorship evolved into the private corporation, and the state enterprise evolves (or will evolve) into a social corporation...
...The social corporation is controlled (somewhat more realistically) by the employees and is socially owned...
...And yet capitalism did not develop...
Vol. 40 • April 1993 • No. 2
