Market Socialist Delusions of Fair and Just Markets
Review by Salvatore Engel-Di Mauro
Numerous apparently viable alternatives to capitalism have been proposed and discussed since the collapse of the USSR, when the bourgeoisie began inundating the world with propaganda about the absence of an alternative to “the market.” Anarchists need to be well-informed rather than dismissive of these currents in order to counter and discredit tendencies that distract people from the task of toppling the present state-based, capitalist world-system.
“Market socialism” (not to be confused with existing economic policies in China) is one such political platform that must be attacked for its reformist orientation. Supporters of market socialism pretend that an egalitarian society can be achieved without much social struggle by rectifying, through state intervention, the inequalities inherent in capitalism. For them, the issue of social equality is merely a matter of increasing the equitable—fair, but not necessarily equal—distribution of wealth, while simultaneously preserving the market as a mechanism for allocating resources, which does not measure efficiency in terms of equality, but in terms of profitability.(1)
The reactionary nature of market socialism results from two fundamental flaws. First, because it is not concerned with establishing the conditions for social equality, it does little to counteract capitalism’s distribution of resources in favor of the few at the majority’s expense. Second, it relies on the state as a guarantor of an equitable market-based distribution system. This latter problem demonstrates the poverty of market socialism alternatives in that its proponents tend to see the world only in terms of state or market institutions. The two recent volumes reviewed here introduce and clarify existing theories of market socialism and provide excellent summaries of the critiques and political implications of the concept from both mainstream and leftist views.
Emergence of a Rhetorical Device
According to Yunker, broadly speaking, proponents of market socialism attempt to reconcile market efficiency with equity. “Equity” is a current euphemism for the levels of social inequality acceptable to most social scientists and policy makers). This reconciliation typically involves state ownership of most land and capital related to large-scale production and otherwise minimal governmental control over productive enterprises (i.e., the devolution of smaller-scale production to company bosses). The hallmark of a market socialist system would be the appropriation of unearned income (rent, interest, profits) by the state, which has the task of evenly redistributing such income among the members of the public. Here the exclusionary nature of citizenship is a salient problem).
The idea that a market could be socialist springs from the “calculation debate” among Central European economists, such as Lange and von Mises, in the 1920s. The debate centered on whether existing “socialist” systems (e.g., the USSR) were more or less efficient than capitalist systems at establishing the correct market prices for goods and services. Lange envisioned a “Central Planning Board” (CPB) as the principal mechanism for setting prices, which would receive regular inventory reports from all businesses and harmonize prices to the scarcity or abundance of each commodity produced. The CPB would also preempt the emergence of monopolies by creating new businesses in a market sector when one company became dominant in that sector. It would also guarantee the efficient allocation of new investment resources.
Lange and others of his ilk, who believed that economic inequality fostered the higher efficiency in the distribution of goods and services, wished to provide a socialist equivalent to a perfectly competitive capitalism (which has never really existed). Crucially, this marked the abandonment of the notion of exploitation based on surplus-value extraction (the profits appropriated and controlled by the capitalists) in favor of adopting the reactionary assumptions of neoclassical economics.(3) The idea of market socialism, devoid of any fundamental critique of capitalism, was thus from the outset a rhetorical device to justify the state as the sole vehicle for creating the conditions for greater social equality and for affirming “the market” (i.e., a regulated capitalism) as the only system capable of maximizing the efficient allocation of resources.
The Many Faces of Market Socialism
Although the most well-know in academic circles, the Roemer-Bardhan model is but one of several. J.A. Yunker identifies three market socialist approaches that have been proposed to improve upon Lange’s earlier position. The first is Yunker’s own position on market socialism, which he names “pragmatic socialism.” This model retains capitalist market institutions, but establish[es] a revenue redistribution mechanism to correct economic inequality. Due to the increasing separation of enterprise ownership from managerial control in late capitalism, the crucial issue in Yunker’s scheme becomes one of providing a set of incentives for corporate managers—rather than owners—to maximize productivity, “efficiency,” or innovation. Under such a regime, the majority of citizens would not have right of ownership over land, warehouses, industrial plants, real estate, etc. (also known as capital property), except for that pertaining to small-scale enterprise. This would be the case because large-scale property would be publicly owned and returns on property, such as rent, would be redistributed among citizens as dividends.
A second approach to market socialism can be categorized as “service socialism”, whereby profit maximization (maximizing the amount of money made above the costs of production and distribution after the sale of commodities) is replaced by caps on production or on revenues (company incomes) through state planning, regulation, and incentives. The literature on the nationalization of principal industries is frequently associated with this approach. In contrast, a “cooperative socialism” view would involve employees governing enterprises for their own benefit, but wider economic arrangements would remain under the ultimate control of the state. This notion departs considerably from both anarcho-syndicalist and Marxist ideas, as employees in firms characterized by a high organic composition of capital(5) would receive higher incomes than employees in enterprises based on more labor-intensive production methods, a situation that would maintain or even increase economic inequality.
The Market in a Socialist Society
Ollman criticizes the very notion of the viability of market socialism and sees a central problem of capitalist society in the alienation of people from the commodities they consume. He argues that the culture created through market exchange fabricates desires and needs for commodities, atomizes people, and mystifies the relationship between people as a relationship among things. Such a culture would be incompatible with socialism and so should not be part of a transformation process toward a socialist society. Ticktin takes a much stronger stance against market socialism by viewing the two terms as mutually incompatible by definition. This “definitional nonsense,”(6) is due to the fact that he defines socialism by the relative degree of democratic planning in a context of abundance, the absence of money and exchange-value (value based solely on what can be bought and sold in the market), and global socialism. The market, on the other hand, is equated with capitalism, a sort of socially divisive system that is decaying and being “artificially maintained.”
A Socialism of Capitalist Inefficiency
and State Repression
Yunker’s “pragmatic” socialism merely presents a neoclassical economics approach under a socialist veneer. First he misidentifies the main charges against capitalism and then misdiagnoses the core problems of capitalism. In his estimation, the “traditional or historical critique of capitalism consists of three key elements: a) capitalism is responsible for devastating business depressions; b) capitalism produces an unacceptable level of income inequality; c) capitalism perpetuates the inequity involved in the highly unequal distribution of an unearned property return.”(7) But these are actually not the “traditional or historical” critiques of capitalism at all. The usual basis for rejecting capitalism is the inequality in the control over the means of production and the illegitimacy of private property. Concepts such as surplus-value extraction, alienation, egalitarianism, monopoly capital, to name but a few, are completely alien to Yunker’s fictitious “traditional or historical critique of capitalism.” It is startling to see a “pragmatic” socialist ignore the main critiques leveled at liberal democracies by socialists of many different backgrounds, from anarchist to Marxist. The diagnosis that directly follows such statements is even more perplexing. “It is proposed,” so continues the “pragmatic” socialist, “that of these three, the first is no longer strongly relevant, the second is valid only insofar as it overlaps the third, and in fact only the third is unambiguously and without qualification still valid and applicable in the present day.”(8) According to Yunker, then, capitalism is not responsible for devastating business depressions anymore. If this is so, one wonders, then, to what century does the “present day” refer, since the 1997 crisis in East Asia and the current recession, which have meant the denial of basic subsistence to millions, have occurred very recently and in direct connection to world capitalism. Lastly, the overlap between Yunker’s “traditional” critiques “b” and “c” is again a function of Yunker’s ridiculous misinterpretation of the actual critiques of capitalism, such as the unprecedented, structural, and widening chasm between the wealthy and the poor. It is not about unacceptable levels of income inequality, but about the unacceptable existence of economic inequality in the first place—inequality which is produced by the expropriation of resources from the masses through the institution of private property for the accumulation of wealth for the few.
In the end, all market socialist models reduce political alternatives to state and market controls over resource allocation. They contribute to the typical market inefficiencies that result from individualistic investment decisions (at the expense of the wider public through bail-outs and unemployment). And they concentrate on notions of distribution and efficiency without questioning property relations, the social processes of production (i.e., the everyday repression of unremunerated houseworkers, expropriation of the means of subsistence of the many to favor the wealthy few, exploitation in the workplace, the lack of democracy over resource use and distribution), and knowledge formation (i.e., who gets what sort of education, whose knowledge counts and for what, and other matters that escape the feeble imagination of most academics).
In contrast to the unsupported arguments and leaps of logic in the market socialist camp, mainstream opponents of market socialism live more pleasantly in a fantasy world where the capitalist market exists independently from the national states that have been pivotal in its development and are crucial to maintaining it. It is only by negating historical and empirical evidence that mainstream economists can claim perfect competition and the most efficient allocation of resources as the hallmark of capitalism. Minimal to no state intervention is the typical recommendation for solving market problems, even though such intervention is essential to the existence of capitalism and the very basis of private property is unthinkable without a strong state creating appropriate legislation and enforcing it through the courts and the police.
In spite of their efforts to repudiate such specious argumentation, the Marxist critics Ollman and Ticktin fail to question the very premises of capitalists’ power; that is to say state repression by threat or use of violence. This repression enforces and reproduces—through property laws and the education system, for instance—the market mystification that Ollman rightly but insufficiently critiques. More disconcerting, like market socialists, the Marxist critics disregard unpaid work and the environmental devastation that never appears on the balance sheets of companies’ profits and losses. They fail to grasp that one of capitalism’s main contradictions is the reduction of all values to that (partially) calculated through (some) human labor, while simultaneously making human labor itself increasingly redundant through the mechanization of production.9 In addition, they underestimate the extent to which the state is an elite-based social structure founded on inequality (if they even consider the state a problematic institution!). It is by overlooking these general contradictions and omissions that these Marxist critics miss the opportunity to expose the reactionary underpinnings of market socialist ideas of which anarchists should also beware.
Market socialism is therefore no alternative to capitalism. It reinforces the existing social order by trying to reform the system, using the state to introduce different economic policies, rather than changing it through a revolutionary social struggle that would topple the state-based, capitalist world-system. This reactionary emphasis originates from the lack of concern for social equality and the conception of society in terms of markets and states, which necessarily denies the possibility of egalitarian alternatives beyond market and state.