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How a socialist planned economy could work
"FROM EACH according to ability, to each according to need" - this is how Karl Marx characterised the way a socialist economy will work. But far from being preposterous or utopian, as the supporters of capitalism argue, such a vision of socialism is a practical and realisable alternative to the horrors of the market system. PETE DICKENSON explains.
THE COLLAPSE of the planned economies in Eastern Europe ten years ago resulted in a tidal wave of pro-capitalist market propaganda against so-called socialist economies. Politicians and economists alike argued that planning was dead and that the 'free market' of capitalism was triumphant.
All of these individuals had a vested interest in upholding the capitalist system which accumulates private property and profits for an elite in society while the mass of the population struggle to survive.
Capitalism is a system that works on privilege and coercion. but its defenders argue that it is the only economic system that works.
This has caused many workers also to be sceptical about whether socialism could work. The Stalinist soviet economies were a caricature of socialism, which initially achieved economic growth but lacked the workers participation and democracy that would have allowed a genuine socialist democracy to thrive. Instead the bureaucratic elites that controlled those societies drove the economies to collapse.
Now sections of workers, increasingly disenchanted with capitalism, are looking for an alternative socialist way of organising the economy. So what are the general principles on which a genuine, democratic socialist economy will be built?
Where will the resources for a socialist planned economy come from?
THIS IS a question that is commonly asked and the answer can be divided into several categories:
a) By the elimination of unemployment. We now have again what Marx called 'a permanent army of unemployed' in the advanced capitalist countries. In Britain in the present 'boom' the jobless rate is still nearly two million, whose cost in terms of lost production and benefit payments has been estimated at £5,000 a family per year.
Even at the height of an upturn industry never works at full capacity. A planned economy will be able to guarantee work for everyone, with retraining provided to make sure the new jobs are meeting the needs of people, democratically determined.
b) Luxury expenditure for the rich will be ended. The capitalist experts are always keen to point out that ending the wealth of the rich will not solve the problems of society, because however obscenely well off they are, there are not enough of them to make a big difference. Nevertheless, the rich do consume 5% of national income which amounts to £40 billion a year in Britain, a significant sum that would begin the process of transforming the NHS.
c) Ending arms spending. On a world scale the waste of resources on arms is vast, reaching nearly $1 trillion each year at the end of the cold war - approximately $1,000 a year for every family on the planet. This money would be a big first step in lifting the majority of the world's population out of grinding poverty.
Although redeploying millions of highly skilled arms workers will be a formidable task, under capitalism such a transformation will never take place. This is because the reason for arms expenditure will not disappear, ie the hostility between rival capitalist countries, and because the market system could not plan the transfer of resources needed due to its anarchic nature.
d) Eliminating the waste of capitalism. The world is dominated by a handful of multinational corporations who duplicate expenditure in research and development, spend unnecessary vast sums on advertising and design products with planned obsolescence. For example, rival drug companies spend billions on developing varieties of pain killers with marginally different effectiveness.
e) Freeing the creative power of the working class. Workers in the market system have no incentive in putting in their energies to help out the bosses. But in a socialist society it will be possible to release the creative instincts of employees because no fundamental conflict of interests will exist.
It is often said by management theorists that the real experts in any firm when a problem needs to be solved are the workers themselves.
Although a factor which is difficult to quantify, in the long run this will be a very significant advantage of socialism.
What is Socialist Planning?
WHAT DOES planning actually consist of? It is allocating resources of labour and materials for the production of goods and services for the benefit of society as a whole, rather than to make profits for the capitalists. It will operate at three levels, nationally (and internationally), at industry or sectoral level and at the individual enterprise.
a) The overall performance of the economy will be decided at the national (and international) level. There will be targets for productivity growth, investment, consumption etc, which will be determined democratically by institutions created after the overthrow of capitalism. Here the decisions about the priorities that society wants to have, for example between health expenditure or housing, will be made.
b) Industry or sectoral level. It will be necessary to determine consumer demand for the goods or services of that particular industry and to organise the efficient exchange of materials and semi-finished products with other sectors eg from suppliers.
The determination of demand will be done by obtaining information from powerful, democratically representative consumer bodies and by using the very sophisticated tools for market research developed under capitalism. To organise the movement of goods between industries, avoiding bottlenecks, it will be possible to use the techniques, such as operational research, developed by the big capitalist monopolies to plan the complex movement of goods between their operations around the world.
c) Planning at the enterprise level. The methods mentioned in above will also be used here to determine consumer needs and preferences. It is also likely that as far as enterprises making consumer products are concerned (as opposed to capital goods - machinery etc used in the production process - manufacturers) a type of market system will be retained in the early stages of the transition from capitalism.
This could operate through small businesses or worker co-ops, but only within the framework of a nationalised economy. If the market sector was too large it would threaten to impose its inherent inequalities onto society.
What do the critics say about it?
SINCE MARX'S day, and particularly since the Russian Revolution, academics have written libraries full of books about why socialism won't work.
One of the main criticisms is that planning the efficient allocation of resources is impossible because of the vast complexity of modern industrial society, where millions of economic transactions take place every day. However, most of these economic interactions are between enterprises, they do not involve consumers, and it is quite clear that present-day multinational firms conduct planning of a similar complexity all the time.
The activity of the multinationals answers a further criticism that the operation of supply and demand to determine price is the only efficient way to proceed in the exchange of goods. In their international operations companies like General Motors simply allocate resources between countries and factories without reference to the market.
As far as planning for consumer needs are concerned the key point is that active democratic institutions should exist that can compel the planning bodies to respond to their demands. In addition to this, techniques such as market research and using the internet will ease the tasks faced by future socialist planners.
It is important, though, not to exaggerate the role that will be played by the internet or look for a 'technical fix'; the existence of democratic institutions will be paramount.
The role of democratically elected and powerful consumer bodies will also make sure that shoddy goods are not produced and that quality is maintained. Here as well the advances in modern production management techniques can be applied, since the future socialist society will inherit, unlike the Soviet Union, a quality culture associated with the highest levels of technique developed by capitalism.
The quote from Marx at the beginning of this article implies that there will be a super-abundance of goods and services under socialism which will not require rationing by price (and therefore the existence of money) as under capitalism. This is completely feasible once the constraints imposed by the market system are removed and the creative energies of the working class unleashed.
The concept of super-abundance, however, raises one of the most serious criticisms of the socialist project, namely environmental destruction caused by consuming energy and resources at the rate of the advanced capitalist countries.
Socialism will not work unless the standard of living of the world's poor majority is raised to that of the industrialised countries causing energy consumption to rise very sharply. This will not result in environmental disaster however.
In the first place, there is an enormous waste of energy in the industrialised countries, particularly in the USA. Without affecting living standards, energy consumption could be reduced by up to 50% if appropriate investment is made.
Secondly, using fossil fuel is the key problem. Expansion will have to be based on other sources of energy. The technology for this exists now in the form of wave, wind and solar energy, but it will need huge investments to implement the change.
Under a socialist planned economy, a large impetus will be given to the development of science and technology leading to new non-polluting energy sources being developed.
Although the introduction of a democratically planned socialist economy will not be without difficulties, it is important not to exaggerate them since the doubts arise largely because the barrage of hostile propaganda from the capitalist class. The arguments for a new way of organising society will find a growing and receptive audience in the coming years.
In The Socialist 24 March 2000: