Aside from the fact that the scale of organizing a total society in a nonmarket way is of a different order of magnitude than addressing a single, even vast, corporation, internal corporate calculations under capitalism have an advantage that centralized socialist planning would not have: they have external market prices and market-driven standards by which to measure themselves.
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More fundamentally, corporate planning is based on structures that give management the flexibility and authority to allocate and employ labor. To plan in a way that is instead based on worker control involves a completely new productive force — the capacity to democratically administer and coordinate workplaces. This fading away of the state is, as well, rooted in how we understand the nature of states.
This is more than a semantic issue. It is to concretizing this challenge that we now turn. At the heart of finding a way to manifest social property is the tension between planning and markets. But markets are also fetishized when they are rejected as an absolute and treated as having a life of their own independent of those underlying relations.
Mises’ battle against monetary socialism
The place of markets under socialism is a matter of both principle and practicality — and dealing creatively with the contradictions between the two. Some markets will be banished under socialism, some welcomed, and some reluctantly accepted but with constraints on their centrifugal antisocial tendencies.
Rejecting markets in favor of leaving decision-making to the central planners comes up against the fact that, as the Soviet central planner Yakov Kronrod noted in the s, economic and social life are simply too diverse, too dynamic, and too unpredictable to be completely planned from the top. No amount of planning capacity can fully anticipate the continuous changes encouraged by socialism among semi-autonomous local groups, nor — given that many of those changes occur simultaneously with repercussions upon repercussions across workplaces and communities — respond without pronounced and disruptive lags.
Such incentives bring market-like problems in a different form, one that may not even include some of the advantages of formal markets. Albert and Hahnel likewise reject markets but look to planning administered from below. Their creative and meticulous model is based on elected representatives from workplace collectives meeting with representatives from suppliers, clients, and the affected community. The community must be there because it has a stake in workplace decisions on the consumption side but also because of the impact of those decisions on roads, traffic, housing, environmental conditions, etc.
Together these interested parties develop mutually agreed upon plans and since such plans would most likely not immediately match the broader supply and demand conditions in the economy, an iterative process of repeated meetings to come closer to balance could, they argue, ultimately close the gaps. This might work in specific cases, and perhaps become more significant over time as shortcuts are learned, computing innovations expedite the procedure, and social relations are built up.
But as a general solution it is simply not viable. The context of scarcity, various interests, and no external arbiter of any kind is likely to lead to unending conflict rather than a comfortable mutual consensus.
Markets will be necessary under socialism. But certain kinds of markets must be unequivocally rejected. This is especially so for commodified labor markets. The argument runs as follows. Individual capitalists plan, capitalist states plan, and workers as consumers also plan. This original sin of capitalism is the foundation for the broader social and political degradations of the working class under capitalism. Yet the question of reallocating labor remains and, if workers are to have the right to accept or reject where to work, this implies a labor market of sorts.
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But this would be a labor market of a very particular, limited, and decommodified kind. Based on the need to attract workers to new sectors or regions, the central planning board would set higher wages or more favorable housing and social amenities , adjusting them as needed if the workforce falls short. Within the wage framework set by the central plan, the sector councils could likewise raise wages to allocate workers across workplaces or into new ones.
Workers could not, however, be fired nor lose work through competitive closures of workplaces and should there be a general shortage of demand relative to supply, demand could be stimulated or worktime reduced as the alternative to the creation of a reserve army to discipline workers. Alongside commodified labor markets being out of bounds so too must capital markets be prohibited.
Choices over where investment goes are choices about structuring every facet of our lives and shaping future goals and options. Economic indices can be brought into making such decisions, but the common rationale for such indices — their ability to compare alternatives based on a narrow range of monetary economic criteria — is offset by the unquantifiable complexities of assessing what is to be valued. And though credit will exist under socialism in terms of providing credit for consumers, funds for individual or small co-op start-ups, or workplace collectives dealing with the gaps between buying and selling, financial markets based on the creation of financial commodities would have no place.
On the other hand, who can imagine a socialism without a marketplace of coffee shops and bakeries, small restaurants and varieties of pubs, clothing stores, craft shops, and music stores?
If the underlying conditions of equality are established so these markets are about personal preferences not expressions of power, there is no reason to be defensive about welcoming them. It is when we turn to the commercial activities of workplace collectives that the role of markets takes on their greatest, and most controversial, significance.
Outside of self-employment and co-ops with a handful of workers providing local services, workers control but do not own their workplaces. The workplaces are social property; ownership resides in municipal, regional, or national state bodies. Workers hold no workplace-based marketable shares to sell or pass on to their families — there are no private returns to capital under socialism. If demand for the goods or services produced fade, the collective would be integral to conversion plans to other activities. Those working get pay for their work based on hours worked and the intensity or unpleasantness of the work.
Everyone, employed or not, shares in a social wage — the universally free or near-free collective services distributed according to need e. Employment would bring higher pay but, depending on postrevolutionary conditions and politics, the social wage plus a living income would make self-employment or work in a small co-op a practical option.
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In the absence of income from capital, and with the social wage carrying great weight relative to individual consumption, the effective variation in the conditions of workers will lie in a relatively narrow, egalitarian range. On reasonable assumptions the value of the social wage — free health care, education, transit, childcare, and subsidized housing and culture — would be at least three times that of individual consumption.
In this context, there will be concerns that prices reflect social costs such as environmental impacts, but beyond that there seems little cause for socialist angst over workers using their individual earnings to choose which particular goods or service they prefer. Nor is there much reason to worry about the existence of credit. With basic necessities essentially free, housing subsidized, and adequate pensions in retirement, pressures to save or borrow would largely be limited to different time preferences over the life cycle e.
As such, workplace or community credit unions, or for that matter a national savings bank may, under nationally supervised conditions and interest rates, mediate credit flows between lenders and borrowers with no threat to socialist ideals. Yet while the authoritarian market discipline imposed under capitalism will no longer exist, workplace collectives will still generally operate in a market context of buying inputs and selling their goods and services or, if the final product has no market price, of measurable output targets.
Incentives to act in socially sensitive ways such as operating efficiently consequently remain necessary. This would take the form of a portion of the surplus generated by the collective going to its members as collective goods housing, sports, culture or income for private consumption. This brings a mechanism for bringing opportunity costs into decision-making, such as how valuable an input is if used elsewhere and how valuable others consider the final product.
This however also re-introduces the negative side of markets: the incentives involved imply competition, which means winners and losers and therefore non-egalitarian outcomes. Moreover, if those workplaces which earn a larger surplus were to choose to invest more, their competitive advantages would be reproduced. With this comes the downgrading of other priorities: a tolerable work pace, health and safety, solidaristic cooperation, democratic participation. At the extreme, the competitiveness fostered becomes a backdoor to labor-market-like pressures on workers to conform to competitive standards.
We turn, in the next section, to whether the use of markets can, via institutional innovations, be adapted to limit such negative thrusts of markets. Though planning and worker control are the cornerstones of socialism, overly ambitious planning the Soviet case and overly autonomous workplaces the Yugoslav case have both failed as models of socialism.
Nor do moderate reforms to those models, whether imagined or applied, inspire. With all-encompassing planning neither effective nor desirable, and decentralization to workplace collectives resulting in structures too economically fragmented to identify the social interest and too politically fragmented to influence the plan, the challenge is: what transformations in the state, the plan, workplaces, and the relations among them might solve this quandary?
The operating units of both capitalism and socialism are workplaces. Under capitalism, these are part of competing units of capital, the primary structures that give capitalism its name. These sectors are, in effect, the most important units of economic planning and have generally been housed within state ministries or departments such as Mining, Machinery, Health Care, Education, or Transportation Services.
These powerful ministries consolidate the centralized power of the state and its central planning board. Adding liberal political freedoms transparency, free press, freedom of association, habeas corpus, contested elections would certainly be positive; it might even be argued that liberal institutions should flourish best on the egalitarian soil of socialism. But as in capitalism, such liberal freedoms are too thin to check centralized economic power. As for workplace collectives, they are too fragmented to fill the void.
The central planning board would still allocate funds to each sector according to national priorities, but the consolidation of workplace power at sectoral levels would have two dramatic consequences. First, unlike liberal reforms or pressures from fragmented workplaces, such a shift in the balance of power between the state and workers the plan and worker collectives carries the material potential for workers to modify if not curb the power that the social oligarchy has by virtue of its material influence over the planning apparatus, from information gathering through to implementation as well as the privileges they gain for themselves.
Key here is a particular balance between incentives, which increase inequality, and an egalitarian bias in investment.
Nationwide priorities are established at the level of the central plan through democratic processes and pressures more on this later and these are translated into investment allocations by sector. The sector councils then distribute funds for investment among the workplace collectives they oversee.
Rather, the investment strategy is based on bringing the productivity of goods or services of the weaker collectives closer to the best performers as well as other social criteria like absorbing new entrants into the workforce and supporting development in certain communities or regions. That partiality to equalizing conditions across the sector would no doubt lead to resistance from some workplaces.
The tension between the need for incentives and commitment to egalitarian ideals would reflect practical realities. It would be conditioned by the extent to which socialist ideals have permeated the workplace collectives and sectoral councils and the self-interest of some workplaces opposed to intensive competition.
But this would be balanced by ongoing concerns about efficiency and growth. Without facing strong sticks and carrots such as the prospects for either bankruptcy and profit offered by a competitive market , firms might well display low levels of innovation.
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As a result, a planned economy would likely lag behind surrounding capitalist economies, and their members would tend to lose faith in it. High levels of cooperation and willingness to innovate could still exist if sufficiently many individuals in this society possessed a strong sense of duty. Actual experiments in centrally planned economies have only partially approximated the best version of it.
Thus, in addition to the problems mentioned above which affect even that best version , they have displayed additional defects.
For example, the system introduced in the Soviet Union featured intense concentration of political and economic power in the hands of an elite controlling a single party which, in turn, controlled a non-democratic state apparatus. Despite its successes in industrializing the country making it capable of mobilizing in a war effort to defeat Nazi Germany , the model failed to generate sufficient technical innovation and intensive growth to deliver differentiated consumer goods of the kind available within advanced capitalist economies.
Furthermore, it trampled upon civil and political liberties that many socialists would themselves hold dear. Responding to such widespread disempowerment, a second model for socialist planning has recommended that planning be done in a different, more democratic way. First, the means of production would be socially owned. Second, production would take place in firms controlled by workers thus fostering democracy within the workplace. Fourth, in a solidaristic fashion, remuneration of workers would track their effort, sacrifice, and special needs and not their relative power or output—which would likely reflect differences in native abilities for which they are not morally responsible.
Finally, and crucially, economic coordination would be based on comprehensive participatory planning. This would involve a complex system of nested worker councils, consumer councils, and an Iteration Facilitation Board. Various rounds of deliberation within, and between, worker and consumer councils, facilitated by this board, would be undertaken until matches between supply and demands schedules are found—with recourse to voting procedures only when no full agreement exists but several promising arrangements arise.
This would turn the economy into an arena of deliberative democracy. This proposal seems to cater for the full palette of socialist values stated in section 4. Importantly, it overcomes the deficits regarding freedom displayed by central planning. Critics have warned, however, that Parecon faces serious feasibility obstacles.