Translation: Dilek Uygül & Jon Rothschild

In the first piece we sought to demonstrate that the view that “socialism is a utopia that cannot be applied” is no more than an ideology injected into society by the educational curriculum ensconced behind the high walls of academia, by NGOs, and by the culture industry and the media. Let us now offer some brief reflection on the question “what sort of socialism?” In this piece we will focus on two interlinked issues. First, we will deal with the argument for market socialism known as the Lange (Lerner – Taylor) 1 solution, referencing Oskar Lange’s two articles published in 1936 and 1937. Second, from a broader perspective, we will draw the contrast between market socialism and socialist planning that goes beyond it, abolishing commodity production.

Lange’s Non-Socialist Socialism

Oskar Lange is one of the most interesting hybrids of academic economics and Marxism. Although he saw himself as a socialist, his wholesale embrace of mainstream (or neoclassical) economic theory led him to put forward a planned-market, capitalist-socialist hybrid model, the main features of which we will discuss below.

Lange, who was unduly attached to neoclassical value theory, accepted Mises’s view that planning based on the labor-time embodied in commodities is doomed to failure. He even went so far as to praise Mises for raising this question. He wrote, “Only technique provided by the modern method of marginal analysis enables us to solve the problem satisfactorily” (Lange, 1937: 142). Let us briefly summarize the concept of neoclassical socialism without inflicting undue pain on the reader who has never had the misfortune to learn mainstream economic theory.

Lange states that the central issue of economics is choosing between alternatives (Lange, 1936: 54). It is interesting that this stance closely resembles the definition “economics is the science which studies human behavior as a relation between ends and scarce means which have alternative uses” (Robbins, 1945: 16), which is still given to students in introductory economics classes. This definition is important in that it reduces economics to a technical study of scarce means and given ends, deliberately sweeping the relationship between humans and classes under the rug. That Lange views economics through this prism more or less gives away the ending of the film just as the opening credits roll.

To solve this most general economic problem we need three parameters: i) a preference scale that determines what is to be produced; ii) knowledge of the terms on which alternatives are offered; iii) knowledge of the available resources. According to Lange, the first and the third points will be experienced in a socialist economy just as they are in capitalism. It’s worth mentioning that Lange’s solution to the first point is based on market demand, since neither the market nor the law of supply and demand is abolished.

The argument ‘if commodities don’t have a price, planning can’t be implemented,’ which lurks under every rock in Mises, corresponds to point (ii) in Lange. Since private ownership of the means of production is ended and thus not subject to market relations, Lange is in a position to present a solution.

In the narrowest sense, (relative) price is the exchange ratio between two commodities. However, viewed from a broader perspective it can be seen as a quantitative relationship between the various alternative options. If there is sufficient knowledge about the technological possibilities that allow for inputs to be converted to outputs, then for each means of production an “accounting price” can be assigned.2 Thus, even if means of production do not have a price in the narrow sense, prices that make calculation possible will nevertheless exist (Lange, 1936: 54f).

From this point on, Lange, accepting the claims of mainstream economic theory, sets up an efficiency contest between his own conception of socialism and capitalist markets. Without going into the technical details, the (theoretical) conclusions drawn from this strange competition can be summarized as follows: i) for consumers, the marginal benefit they draw from spending one more unit of their income is equalized for each commodity, and ii) the firms engaging in production with the aim of maximizing profit arrive at optimal use of resources by equalizing the prices of their products with their marginal and average costs.

Lange trimmed his version of socialism to fit this mold, which is based on all the assumptions and arguments of neoclassical economics, thus creating a ‘perfectly competitive socialism’. It remains only to show how general equilibrium (in other words, mutual equalization of supply and demand in all markets: labor, goods and services, money, etc.), whose existence under the capitalist market was demonstrated only in theory, will be carried through under socialism.

In this kind of market socialism, there are still markets for consumer products and labor; that is, they do not cease to be commodities. Money remains a common measure of value and functions as a means of payment. With regard to these markets, planning is thus exempt from Mises’ criticism that calculation is impossible. As we mentioned in the first piece, accounting prices that would make calculation possible for means of production could also be established. All the obstacles to planning are thereby removed.

Lange’s central planning board closely monitors the balance between supply and demand in the market, and if equilibrium does not prevail, establishes it by adjusting market prices (in the case of consumer goods and labor) and accounting prices (in the case of means of production) by a trial-and-error method. The prices thus determined are imposed on the market, and all new transactions in the new period are vetted on this basis (Lange, 1936: 57ff).

Thoughts on Neoclassical Socialism

Without getting into technical issues, it is worth making a point or two about Lange’s socialism, tailored to fit the model of mainstream economic theory.

In this framework, there is no necessary connection between nationalization of the means of production and socialist planning. In Lange’s model the central planning board is responsible for determining accounting prices and for dictating to firms (each headed by a ‘socialist manager’) the main criterion that they will be loyal to during production. This criterion can be a production scale or a mixture of resources that was determined beforehand instead of maximizing the added value or profit (Lange, 1936: 60ff).

The problem is, however, as follows: individual firms trying to balance prices and marginal/average costs in the light of given prices and criteria will make their decisions based on expectations about how prices and demand are shaped. The risk and uncertainty intrinsic to capitalism and the economic climate that breeds crisis will persist (Dobb, 1972: 126ff).  Thus, thirty years after his first articles, Lange seemed convinced that (with the development of linear and non-linear programming methods) planning in production was necessary, albeit on a limited scale (Lange, 1967: 160).

Second, the argument that firms possessing information on prices will determine the optimal use of resources is entirely based on the presumptions of mainstream economic theory. These presumptions are in flagrant contrast to the results present-day technology has achieved, particularly with regard to economies of scale. On the basis of these assumptions, posited in order to make optimization theoretically possible, consumers maximize benefits and producers maximize profits in a world of neoclassical economics that bears no resemblance to the world we live in as regards information, technology, behavior, and many other things. That Lange’s conception of socialism embraces these assumptions that cast capitalism as a prosperous social order is quite astonishing.

Since income cannot be generated by private property, there would be a significant difference from capitalism with regard to distribution of income. In Lange’s model there are two sources of individual income: workers i) are awarded a wage by the market proportionate to their contribution to production, and ii) receive their share of the remaining social product, which is distributed to them (Lange, 1936: 61). Here, too, the market’s decisive role has not vanished; distribution is left to a regulated market system that, in the best of cases, merely limits inequality.

It is understandable that a reader glancing at this section (or indeed at Lange’s articles) would walk away disappointed. Oskar Lange confined the vision of socialism to a contest with the narrative of capitalism as seen by mainstream economic theory. While claiming that his model was closer to a ‘perfectly competitive market’ than actual capitalism is, he completely ignored the question of socialism in the context of existing relations of production and social contradictions, as well as the need to build it out of the existing society, preferring academic arguments in the neoclassical wonderland.

In the next section we will discuss how the social relations of production created by the market economy determine the character of labor and generate mysteries and alienation, competition in place of altruism, greed in place of solidarity, over-specialized one-dimensional individuals in place of multidimensional individuals capable of realizing and developing their potential, and how all this will be different under socialism. But first let us examine market socialism from a broader perspective.

Socialism: Within the Market or Beyond It?

Arguments for market socialism, Lange’s being just one example, have been put forward on similar grounds but in different forms since the early twentieth century.

In the 1920s Kautsky, who from the outset indirectly referred to money as an indispensable necessity, openly declared that socialism could not be built without the market and money (Kautsky, 1925: 261ff).

Not surprisingly, in the last days of the Soviet Union and after its dissolution, condemning the planned economy became fashionable, and claims that socialism has no choice but to bow to the market spread like mushrooms. In the 1980s, ‘Analytical Marxists’, whose theoretical sorties would make Marx turn over in his grave, missed no chance to jump on this bandwagon, nattering about a socialism in which the shares of big firms are divided among society, shareholders sit alongside workers and representatives of nationalized banks on the boards of directors, and the market and competition are not abolished (Roemer and Pradhan, 1993).

According to another daydream of market socialism, the capitalist class would be eliminated or confined to a steadily shrinking private sector. Firms would be controlled by the workers, and in certain circumstances be the collective property of the workers, who will have taken control of the production process and the product. It is worth noting that in this version, too, commodity production continues and labor-power is still a commodity. In other words, every worker is employed by firms that are in turn managed by workers, and relations between people are mediated by money (Ollman, 1997: 21; Schweickart, 1993).

Perhaps the best known advocate of market socialism is Alexander Nove, a specialist in the Soviet economy and history of economics. In his aptly-titled book Economics of a Feasible Socialism, which sketches out a complex system in which the market and planning are intertwined, Nove explains why a planned economy is not possible. Since we discussed most of the objections in the first piece (complexity, scarcity of resources, the issue of externality, innovation and technological improvements in the absence of monetary incentives), we will not rehash them here.

In the system Nove proposes, production is carried out by (centrally managed) public enterprises that are fully autonomous but not nationalized, cooperatives managed and/or owned by workers, private enterprises functioning within defined limits, and individuals (artists, journalists, etc.) (Nove, 1991: 192).

Nove, who realized that importing the market and commodity exchange into socialism would bring competition in its wake, drew a distinction between ‘good’ and ‘bad’ competition, claiming that only its positive aspects would be transferred to socialism. Active firms feeling the pressure of competition would have to satisfy their customers, and that would generate phenomena like efficiency and innovation as well. Since customer satisfaction and competition would serve as the basic regulatory mechanism, there would be no need for any extraneous regulation (apart from transparency in labelling, etc.) (Nove, 1991: 194ff).

It is quite impossible to tell Nove’s socialist competition apart from its capitalist counterpart, since under this system, in which the market and the price mechanism that balances supply and demand are preserved, we are still confronted by profit. In Nove’s view profit is not necessarily bad. What socialists criticize is profit usurped by the capitalist class. Since monopolies control prices at will, so long as profit margins do not rise inordinately, (production with the aim of) profit, under the supervision of (socialist) competition, will provide social benefits (Nove, 1991: 203f).

Can Socialism Emerge From the Market?

All the market-socialism proposals touched on above (as well as others we could not deal with) have several points in common: commodity exchange and the price mechanism are preserved; competition continues to function as the driving force and coexists with partial nationalization in the economy; labor-power in search of employment remains a commodity; cooperativism (or firms controlled by and/or belonging to workers in various forms) prevails in production… Let us go through them briefly one by one, examining to what extent they conform to the concept of socialism.

It is worth taking note of certain details Nove fails to mention regarding frameworks of competition that entail the profit motive. The most effective competitive tool used by firms producing similar goods and services is their costs and prices. Competition can be seen as a war of each firm against all others, and price-cutting is the primary weapon in this war (Marx, 1990: 777). Producers who manufacture their products at lower cost than their competitors and can therefore cut prices not only raise their profits by widening their market shares, but also force competitors to increase productivity, on pain of being driven to ruin (Marx, 1991: 295f).3

Up to a point all this sounds fine: firms have to raise productivity, develop new techniques and technologies, and lower prices in order to remain as competitive as possible. In the final analysis the prime beneficiaries of the lowering of prices for goods and services consequent to competition are the consumers. But the other side of the coin remains hidden. Those same consumers are also workers in the firms that have to lower costs, and apart from introducing a technology-intensive production process, the most effective way of lowering production costs is to lengthen or intensify the workday, or in many cases to cut wages outright.

If one thing can be said for the socialism of these proposals (of Nove or the others mentioned), it is that at least there is no place for the capitalist class. The workers (according to one version of this view) will be simultaneously co-owners and managers of the firms they work at. But this arrangement breeds a contradiction. Every improvement in working conditions (making lunch breaks longer, making the workplace safer and more comfortable, having workers engage in varying aspects of production instead of spending the entire day on one operation, etc.) will make the firm less cost-efficient and more vulnerable to competition.

Of course, we might ask ‘why should production workers exploit themselves in a socialist society?’  But the problem we are pointing to here has nothing to do with the subjective attitudes or ethical values of the workers or the individual firms. If firms produce for profit and if workers appropriate a share of this profit as co-owners, then cost efficiency is a must for every firm. Suppose that a firm loyal to the ideal of socialism and the freedom of labor refuses to play the game by these rules. What would be its fate? Nove does not balk at making it clear that bankruptcies will continue under socialism, and that cooperatives that go bankrupt will have to assume responsibility themselves (Nove, 1991: 201).

On this point Nove, apparently realizing that his proposed system sounded too much like capitalism, wrote that he hoped that the principal motivations of competing firms would not be monetary (Nove, 1991: 196). But under conditions in which there is no radical change in the factors dictating the behavior of the protagonists, this hope is but an empty desire. The problem is not ethical but structural in character.

A market is more than a place where commodity exchange takes place, where acts of buying and selling reproduce themselves. As we have pointed out both in the first piece and above, it also dictates certain rules, including rewards and punishments, and most important, it entails a dynamic of its own.

The system that took shape in the period known as capitalism’s golden age (roughly between 1945 and 1973), institutionalized consequent to national class struggles and the international balance of power, narrowed the space ruled by capital and put limits on profitability as a result of rising real wages.

But toward the 1980s the energy built up by capital exploded like a river bursting a dam, and the capitalist reaction known as neoliberalism, beginning in the United Kingdom and the United States, spread throughout the world. This attack by capital, resulting in the defeat of social democracy on a global scale and the dissolution of the welfare state, manifests itself in such diverse realms as the privatization of health care, education, and housing, the steadily intensifying profiteering transformation in cities, and the plunder of natural resources.

In short, the market is expansionist by nature; it infiltrates all social relations and spaces of production that lie outside its own control, seeking to take possession of them. All public space outside the market and all branches of production are exposed to this threat in the mixed model advocated by market socialists (Ollman, 1997: 26).

There is nothing to prevent workers who share in the profits of the enterprises they co-own from creating new spaces for more profit. For instance, if services such as cleaning, maintenance, and repair in a neighborhood are performed by public enterprises, the worker cooperatives might level an efficiency criticism, claiming that the market could provide these services at much lower cost. These spaces would then be commodified by the most ‘democratic’ and ‘participatory’ methods, and the market would expand.

Ollman draws attention to an important point (which is open for debate). The basic mistake of market socialists is that they regard capital as identical to the capitalist class, which is capital’s objectified form under capitalist production. But capital, which is a social production relation (Marx, 1991: 953), can very well subsist within the state structure (state capitalism), or even in worker cooperatives.

Value acquires the status of capital insofar as it expands and functions not to satisfy social needs but to reproduce itself. Satisfaction of social needs is of secondary importance. If need be, capital can even create and define new ‘social needs’ so as to sustain its self-expansion. The relation of capital cannot be reduced to ownership of the means of production; there is also the question of the circulation of value produced in commodity form, returning to the owners of the means of production in the form of capital: in other words, market relations (Ollman, 1997: 29).

This is precisely why Marx viewed worker cooperatives with suspicion. Granted, under capitalist conditions cooperatives bolster workers’ solidarity and shift some decision-making and practical mechanisms to workers, thus partially reducing the alienation they experience and aiding their development as subjects.

In this context Marx wrote that the growth and reinforcement of cooperative labor on a national scale would contribute to the liberation of the toiling masses (Marx, 1864). But we should not forget that these lines were written between 1848 and 1864, a time when cooperatives were first sprouting under capitalist conditions.

Elsewhere Marx himself, while acknowledging that cooperatives do contain signs of a new form within the old, insists that “cooperatives reproduce all the defects of the existing system, and must reproduce them,” and that they create a new contradiction by turning the collectivized workers into their own capitalists (Marx, 1991: 571). Thus, although cooperatives are effective tools for class struggle within capitalism, they entail significant risks for a socialist society.

In short, a system in which a significant section of production is subject to the laws of competition, and private enterprises and cooperatives under workers’ control or ownership engage in commodity production with the aim of maximizing profit will generate results similar to those of capitalism in many respects. The workers who run the cooperatives will lean toward ‘marketable’ products, seek to manipulate consumers, and do their best to widen profit margins by cutting costs.

Yes, in the market-socialist model certain basic needs could be met by the public sector and be kept free of market relations. But many citizens will still find themselves selling their labor-power. As a consequence of competition both between workers and between profit-seeking firms, production, under the pressure of efficiency, will drift away from activities of individual fulfillment toward sectors yielding higher profits. The needs of individuals with greater purchasing power (income) will inevitably be far more fully met. Given the uncertainty intrinsic to the future, individual firms trailing the scent of profit like hound dogs will make short-sighted and wrong decisions. The market will punish unsuccessful (unprofitable) players, giving rise to bankruptcies and unemployment.

In sum, when we ponder the competition that seeps into socialism from the capitalist mode of production along with market mechanisms, the profit motive driving production, the economic uncertainty and alienation, no radical transformation seems in the offing. Many of the models discussed above speak of a market in which extreme injustice in income distribution is barred and the basic needs of all citizens are met. But this barely transcends the welfare-state vision we alluded to earlier. Socialism cannot emerge from the market.

Thoughts on Socialist Planning

It is worth emphasizing yet again that what set Marx apart from the communists that came before him was his insistence that communism was not only necessary, but also possible because of dynamics produced and developed by capitalism. In this sense, the steady socialization of labor, that is, the interconnection of billions of workers in the production process, is the starting point of the debate on communism.

The product (of labor) that is appropriated at the end of the capitalist production process bears the stamp of private property. Labor itself, however, is social in character, being but an individual part of a process consisting of many phases both in the workplace and on a national/global scale, a mere link in the chain formed by the joining together of production processes.

When we buy an Apple product, for instance, we are buying a joint product of workers in more than seven hundred firms in more than thirty countries, from China to Japan, Malaysia to Singapore, the Philippines to Thailand, Israel to Austria, the UK to the US.

These workers are all bound to one another by invisible ties that constitute the essence of the law of value. The social character of labor cannot manifest itself directly but is revealed only through the market, that is, by being transformed into a commodity, being bought and sold for money, entering into a relation with capital in the production process–in short, by assuming the form of value.

Socialist society is characterized precisely by its insistence on abolishing the law of value. Marx says explicitly in his critique of the Gotha Program: “Within the cooperative society based on common ownership of the means of production, the producers do not exchange their products; just as little does the labor employed on the products appear here as the value of these products, as a material quality possessed by them, since now, in contrast to capitalist society, individual labor no longer exists in an indirect fashion but directly as a component part of total labor” (Marx, 2009: 8).

Similarly, in the discussion of commodity fetishism in the first volume of Capital Marx points out that in a socialist society the alienation generated by the market (and by the commodity form) will be overcome (Marx, 1990: 171f., emphases added):

Let us finally imagine, for a change, an association of free men, working with the means of production held in common, and expending their many different forms of labor-power in full self-awareness as one single social labor force. […] Labor-time would in that case play a double part. Its apportionment in accordance with a definite social plan maintains the correct proportion between the different functions of labor and the various needs of the associations. On the other hand, labor-time also serves as a measure of the part taken by each individual in the common labor, and of his share in the part of the total product destined for individual consumption. The social relations of the individual producers, both towards their labor and the products of their labor, are here transparent in their simplicity, in production as well as in distribution.

The added emphases in this quote contain the seeds of Marx’s thoughts on planning and the market under socialism. “Expending their many different forms of labor-power in full self-awareness” is nothing but planning. Marx makes clear that the abolition of the law of value is possible only in a community of free individuals who plan production purposefully and consciously. In these circumstances labor will be socialized in the real and unmediated sense, its allocation based solely on the needs and desires of society.

The (mediated) socialization of labor, the development of detailed plans of supply, production, and sales in all units from small firms to multinational companies, the sharp contradiction between the developing productive forces (the internet, for example) and the character of the products of labor as private property are all objective tendencies that develop within capitalism and make communism possible. In this regard Marx points out that the objective conditions for the sublation (Aufhebung) of capitalism by communism take shape independent of intentions and desires.

So, with the elimination of the market and the price mechanism, how will citizens get their share of the total product? Or, to put it another way, once commodity exchange is abolished, won’t exchange of the products of labor be impossible?

Of course, neither Marx nor today’s communists have any desire to reverse the course of history. Since we don’t want to go back to independent producers working to meet their own needs, mass production will continue in many branches, and the products of labor will be subject to a mechanism of exchange, which in turn makes a vehicle of exchange necessary.

However much Nove may claim in the very first sentence of his book that Marx had nothing to say about socialist society and that what little he wrote was entirely irrelevant (Nove, 1991: 12), both Marx and Engels gave clear answers to the critical questions listed in the paragraph above.

Once the law of value has been eliminated and labor is socialized in an unmediated way, the quantity of social labor embodied in a product will not be calculated with the help of any instrument. In other words, there is no need for a price (Engels, 1954: 429f). As we discussed in the first piece, an hour of any kind of labor (skilled/unskilled), however variable in its particular utility, would be accepted as an hour’s worth of labor.

Thus, when the socially necessary labor-time directly and indirectly required for producing any good or service is calculated, the magnitude materialized as ‘price’ in a market economy is obtained. Ever since Leontief, determining directly and indirectly socially necessary labor-time has become a simple process using input-output tables.

So, if we can determine the time necessary for a good to be produced, after what sort of exchanges and by whom will it be consumed in a socialist society? That is, what will take the place of money and the acts of buying and selling? Market socialists say that the price mechanism is irreplaceable both for coordinating exchange and for allocating resources in conformity with supply and demand. But if socialism by definition abolishes the value form, goes beyond commodity production, and socializes labor in the real sense, then market socialism cannot be anything but an oxymoron, a contradiction in terms.

In The Poverty of Philosophy Marx denounced Proudhon for claiming that exploitation will disappear if commodities are exchanged on the basis of labor-time (Marx, 2008: 46-85). The first volume of Capital was written to explain that exploitation would continue even under conditions in which commodities are exchanged at prices proportionate to their labor-values.Many Marxists, including Kautsky (Cockshott and Cottrell, 1993: 23f), read this criticism as implying that calculation and coordination based on labor-time was impossible under socialism. But Marx makes clear that determining price by labor-time under capitalist commodity production (in other words, when the products of labor bear the stamp of private ownership) cannot solve the problem.

Once the means of production are socially owned and labor assumes its social character and is allocated by democratic planning, the socially necessary labor-time required for production of goods and services can very well be used to coordinate consumption (Marx, 2009: 8):

Accordingly, the individual producer receives back from society — after the deductions have been made — exactly what he gives to it. What he has given to it is his individual quantum of labor. For example, the social working day consists of the sum of the individual hours of work; the individual labor-time of the individual producer is the part of the social working day contributed by him, his share in it. He receives a certificate from society that he has furnished such-and-such an amount of labor (after deducting his labor for the common funds); and with this certificate, he draws from the social stock of means of consumption as much as the same amount of labor cost. The same amount of labor which he has given to society in one form, he receives back in another.

All forms of labor are considered equal, so, for instance, a worker who put in twenty-five hours that week could take the 25-hour social-labor certificate (today we might think of these as digital, uploaded onto a card) to one of the centers where consumer goods are stored and take away goods produced with twenty-five hours of social labor.

It may be asked: How is this transaction different from commodity exchange, and what’s the difference between labor certificates and money? There is a clear qualitative difference. To begin with, when, for example, a 10-hour labor certificate is accepted for a given quantity of goods, it will be like a cashed check. In other words, once the handover or exchange occurs, the certificate in question is nullified. In that sense, it is different in character from money, which serves as a vehicle for a continuous process of circulation, accumulation, and transformation into capital.

Second, money, as the alienated form of buying power appropriated by individuals as the result of a market distribution mechanism, bears with it a series of mysteries. Under capitalism it brings power, status, and wealth, and individuals resort to any means to acquire it and thus increase their personal wealth, including manipulation, sabotage of others, theft, corruption, and bribery. Money represents buying power precisely because social labor is divested of its product, that product is stolen from the worker. Workers therefore see money as the only means of recovering the product that’s been taken from them.

Under socialist conditions, in which the production process is transparent and its relation to consumption direct, no such mystery or alienation exists. Producers know how long they have to work to acquire the consumer goods they want, and they make their own decisions as free individuals in the truest sense. The eradication of the market’s intervention will simultaneously banish income uncertainty and anxiety about the future.

Participatory Planning

It is worth taking a closer look at the expression ‘free individuals in the truest sense’. We explained above that the principle of equality plays a central role in the socialist planning we advocate. In whatever branch of activity, an hour’s labor will be just an hour’s labor, so that citizens will be able to work in the sphere of production of their choice, free of the pressure of competition, unemployment, and anxiety about the future. Subject to certain conditions, they could even change their branch of labor whenever they pleased, one-dimensional individuals thereby being replaced by well-rounded ones not alienated from their labor (and the products thereof), defining their potential on the basis of their own desires and talents, pursuing self-realization.

In the sphere of consumption, those goods and services involving what we might call “basic needs,” like food and drink, housing and clothing offering some minimum of comfort, health, education, and transportation will not be part of the sphere we have called ‘handover’ at all, but will be every citizen’s basic right by definition, theirs free of charge. No doubt the contents of this basket will be determined not just physiologically, but by historical and cultural factors as well. There would be no technical difficulty in recalculating its content at given intervals by polling all citizens (or a sampling of them).

Meeting the basic needs of all citizens will require a mandatory workday of a certain length to produce these goods and services. Shortening this mandatory part of the workday would mean lengthening free time, the true locus of individual freedom (Marx, 1991: 959). In a planned socialist economy with guaranteed full employment–that is, with no unemployment and greater use of capacity–lowering the mandatory workweek in stages to 20 or 25 hours within a few years would be a simple matter.

In view of the agricultural, construction, communication, transportation, and textile technologies that will be inherited from capitalist society and the existing stocks of products, we can predict that few, if any, problems will arise in the spheres of food, housing, clothing, and transportation. In the case of education and essential health-care, we may assume that the formation of new facilities and cadres will take longer, but significant progress should be registered within ten years.

So, citizens will have to work a certain number of hours to meet society’s basic needs. Individuals will decide how many additional hours they will work daily or weekly by examining the labor-time socially necessary to produce the goods and services they want to receive beyond their basic needs. That is, people who want a personal car rather than relying entirely on public transportation, or crave some special kind of cheese, can satisfy their ‘special consumption’ desires by contributing the amount of labor-time embodied in these products.

It is possible that consumption patterns will change radically in the absence of the market, competition, and the profit motive. Production for profit rather than social needs requires non-stop consumption, the creation of new desires beyond social needs, and the steering of consumption toward consumerism. Paul Mazur, one of the partners of Lehman Brothers, had this to say as early as the 1920s, as mass production emerged in the United States: “We must shift America from a needs to a desires culture. People must be trained to desire, to want new things even before the old has been entirely consumed. We must shape a new mentality in America. Man’s desires must overshadow his needs” (Lubin, 2013).

But in a socialist society that has gone beyond the market and commodity production, individuals not subject to hunger or homelessness, with no anxiety about losing health and education services and not subjected to constant salvos of advertising and marketing will very likely shun consumer madness. (Parenthetically, we may wonder what those who yammer about ‘wasted resources’ and claim that planning means waste might say about global advertising expenses of $500 billion in 2016 (Handley, 2016), an amount equivalent to total Swedish GDP, the world’s twenty-third largest.)

So how will it be decided what and how much will be produced beyond basic needs in the sphere of consumer goods? How can planning be done in the absence of a price mechanism coordinating supply and demand and reflecting the relation between the two?

The relevant literature offers a surfeit of answers. Let’s look at one of them briefly as an example. Cockshott and Cottrell point out that Lange’s accounting prices can be useful exactly in this context. Exchange will occur via labor certificates based on the socially necessary labor-time required for the production of goods and services. The supply and demand relation can easily be tracked by an online network connecting all the centers (stores) where exchange takes place. Then the relevant information can be forwarded to higher levels of planning agencies.

When supply and demand are balanced, the accounting price will be equal to the socially necessary labor-time that goes into the production of the given good. The ratio of accounting price to labor-time is then equal to one. If demand exceeds supply, the accounting price would rise, increasing this ratio, and conversely in the opposite case. Within each period, the plan, depending on the ratio of accounting price to labor-time, would increase the production of goods whose ratio was greater than one and reduce production of those whose ratio was less than one (Cockshott and Cottrell, 1993: 29f).5

Apart from this, the question of the shares of social product to be dedicated to growth, research and development, the widening or narrowing of the basket of ‘basic goods’, etc. can be determined through democratic participation.

General trends can easily be detected through surveys in which all citizens participate. What with all those boring forms we fill out year after year for purposes of employment, insurance, health care, and so on, it’s not hard to imagine that people will agree to file online surveys at given intervals reporting their requests both to local agencies and to the center for allocation of resources.

Of course, much more than questions like ‘what percentage of resources should be set aside for growth?’ these surveys, which will share information from earlier periods in percentage form, will ask citizens in which spheres they demand change and by what margins (Campbell, 2002: 31f).

Coordinating all aspects of planning and decision-making over a wide geographical area from a single center is neither realistic nor desirable. Decisions on issues concerning a given workplace should be made by those who work there. Making decisions like where to build new housing in a given neighborhood or city, or what routes new roads should take, from a single center is likewise out of the question.

But if we keep in mind that an economy is an organic structure, its branches of production interdependent (in terms of raw materials, intermediate goods, and other outputs), it seems clear that communication and oversight mechanisms linking individual workplace councils, local councils, and the other units is required.

The Cybersyn project, which provided a cross-country computer network linking autonomous workplaces, local workers councils, and a center, was established in Allende’s Chile. The system allowed information to flow from center to local area and vice versa and was meant to function as outlined below, except that the socialist government was overthrown by the September 11 fascist coup before the project was fully implemented, and Chile was instead turned into the first laboratory of neoliberalism.

By interconnecting 500 nationalized factories to one another and to a ‘main computer’ via a telex system, the project aimed to track production outputs through a real-time information flow. Daily production targets at individual factories would be determined by the workers, and only when a given factory exceeded or fell short of the target for a given interval would it be given a warning from the center. The measures required to rectify the situation would be left to the decision-making mechanisms of the factory’s employees, and the center would intervene if production could not return to the desired level in a predetermined period.

The information sent from local to center was encapsulated in a few variables like energy and raw material usage, output, and the contentment of the workers. The central system gathering this data would project future simulations using input-output charts of past periods and would predict the possible outcomes. Central computers housed in what was called the operations room would be the brains of the system, issuing warnings about problems that were persistent or of pressing urgency (Medina, 2011).

Coincidentally, the mathematician and cybernetics specialist Viktor Glushkov came up with a similar idea in the Soviet Union in the 1960s, arguing that a significant share of planning problems could be solved by a cross-country computer network, but despite many years of effort, he was unable to win the support of the Khrushchev or Brezhnev governments (Gerovitch, 2008).

In view of the power and planning capacities of present-day computers, the speed of online systems and information flow, and the fact that everyone comfortably uses tablets and smartphones, it should not be at all difficult to set up a system embracing an entire economy and providing both horizontal and vertical information flow.

This would not only strengthen self-governance on the workplace and local level, but would also enable the effective use of the economy’s entire power and capacity, connecting the local areas both with one another and with the center.

Conclusion

In our first piece, we hope to have refuted the claim that ‘socialism is technically impossible’, dealing one by one with arguments which, however widespread they remain today, are in fact no more than Cold War relics. Socialism is neither technically impossible nor inefficient, nor is it so one-dimensional as to be reduced to a question of efficiency.

In this piece we have dealt with the mixture of market and planning known as market socialism, commonly encountered among today’s (academic) socialists, seeking to demonstrate that in fact these folks sacrifice socialism on the altar of preserving the market.

In the last section of the piece we argued that socialism—both as conceived by its founding thinkers and as a historical project—is possible only in a planned economy that goes beyond the market and commodity production and abolishes the law of value.

Because of the already considerable length of this piece, unfortunately we could say nothing about the political forms entailed by the idea of socialist planning or the shapes participatory planning might assume. Subjects like the transition to socialism (and from socialism to communism), domestic labor, the raising of children by society, care of the elderly, the handling of ecological aspects of planning decisions, and similar subjects remained beyond the scope of this piece as well.

Nevertheless, we hope to have distilled significant arguments in defense of the present state of communism and its appeal in all realms of ideological struggle, from homes to schools, universities to workplaces, the press to social media. Perhaps the best conclusion a reader could draw after this arduous piece would be to think again about these lines of Marx and to recall that the seeds of socialism have already ripened in the society in which we live (Marx and Engels, 2004: 53):

[…] While in communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticize after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic.

Original Text is Here

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THE DEBATE ON PLANNING IN A SOCIALIST ECONOMY – 1: THE INCOHERENCE OF LIBERAL IDEOLOGY

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NOTES

1. Although this solution is generally identified with Oskar Lange, Fred Taylor (Taylor, 1929) and Abba Lerner (Lerner, 1934 and Lerner, 1938) also opposed Mises and Hayek from a very similar standpoint.

2. Various names–“accounting price,” “shadow price,” “multiplier”–were given to the values derived from solutions to programming problems.

3. Those interested in how actual competition works, in contrast to that of the perfect market (and of the imperfect market visions that arise from it), should see Shaikh, 2016: Sections 4-8.

4. Purely for this reason, in the first Volume prices were assumed to be proportional to labor-values, while in the third this assumption was abandoned, thus giving rise to the absurd claim of a ‘discrepancy between the first and third volumes of Capital’ by anti-Marxists from Böhm-Bawerk on down. This was no discrepancy, but simply a different level of abstraction.

5. Due to constraints of space and the technical nature of the subject, we will not go into the possible problems of this approach.

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