Market, State, and Community

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* Book: Market, State, and Community: Theoretical Foundations of Market Socialism. By David Miller. Clarendon Press,



David Miller, from the Preface:

"THIS book contains the fruits of a dozen years' reflection on the question whether it is possible to envisage a market economy that fulfils the core ideals of socialism. Its plan may become clearer if I explain how my thinking has evolved over that period. I began in the early 19708 with fairly ill-defined socialist beliefs that seemed naturally to entail an antipathy to markets as a means of economic co-ordination, a point of view which I suppose is still fairly common. I was shaken out of it by encountering, in the middle part of that decade, various libertarian writings that set out polemically, but still powerfully, the arguments in favour of markets. These encounters left me with two basic convictions. One was that the libertarian position itself—the belief in a minimal state and economic laissez-faire—was ill founded and untenable. The other was that the pro-market arguments found in libertarian writings were none the less strong in themselves, and deserved to convince socialists. To render these two convictions coherent required a two-pronged strategy. The first line of attack was to expose, as clearly as possible, the fallacies of the libertarian position in its various guises, without rejecting its basic insight into the virtue of markets. The second line was to work out a theory of socialism that included a full-blooded, unapologetic commitment to a market economy. I pursued these two tasks more or less side by side for several years. The results can be found in the first and second parts of the book respectively. As these investigations neared their end, a third issue took on increasing significance. What kind of political system would be needed if a socialist market economy was to function in an ethically acceptable way? Answering this question required as radical a break with traditional socialist ideas as did the defence of market socialism as an economic system. The results are presented in the third part of the book, which proposes an account of the politics of democratic socialism."


  • Introduction


  • 1. Freedom
  • 2. Procedural Justice
  • 3. Market Neutrality
  • 4. Altruism and Welfare


  • 5. Consumer Sovereignty
  • 6. Distributive Justice
  • 7. Exploitation
  • 8. Alienation and Communism


  • 9. Community and Citizenship
  • 10. Politics as Dialogue
  • 11 Toleration
  • 12. The Socialist State
  • Conclusion


From the Introduction

(note: the copy-pasting caused some mix-up between the text and the notes, creating a few anomalies in this excerpt)

David Miller:

"My aim in this book is to work out a political theory for democratic socialism, and in particular to defend a certain view of socialism, which I call market socialism, against the challenge posed by the neo-liberal thinkers of the New Right. The practical relevance of such a project should hardly need stressing. Socialist ideas have, over the last decade or so at least, been pushed on to the defensive by the resurgence of neo-liberal—that is, market-oriented, antistate—thinking, to the extent that many have thought to write the obituary of socialism itself. Alongside this movement of ideas, there has been a general shift of public policy away from longestablished forms of economic intervention by the state towards greater reliance on market mechanisms. This has been true not only in Western countries, where markets have always been relied upon to provide most goods and services, but also in Eastern Europe and China, where the recent past has seen a variety of reform movements, all to a greater or lesser extent involving a turn away from central planning towards co-ordination through markets. So much is familiar ground. We do not need to decide how far the shift in policy was a result of a shift in ideas, and how far the popularity of certain ideas stemmed from the fact that they chimed in with developments that were occurring for independent reasons. Granted only that ideas have some influence on the course of events, the need for a radical review of the socialist idea itself, as a political project in the late twentieth century, has become a matter of some urgency. There is a widespread perception that traditional socialist policies have become outmoded; socialist and labour parties that have held on to them have fared poorly at the hands of their electorates, whereas those that have succeeded in winning power, such as the French and the Australian, have done so by studiously distancing themselves from the old ideas. The result has been an intellectual vacuum which can only be filled by a radical redefinition of the meaning of socialism.

Such a rethinking ought ideally to be carried on at two levels. At one level there are issues of policy: how best can the basic aims of socialism be put into practice, given a modern industrial society in which most citizens enjoy what is by historical standards an extraordinarily high level of personal freedom and welfare? At another level there are questions about the basic aims themselves: what are the fundamental aims of socialism, and how are they to be justified? Most of my argument here takes place at this second and more abstract level, although always with at least half an eye on the policy questions. Towards the end of the book I come back more directly to the practical meaning of socialism and the question whether it has a political future at all. Although an ideal treatment would run smoothly from basic premisses to practical conclusions, I do not make much apology for this focus on matters of principle. In the political context outlined above, there has inevitably been a good deal of'revisionist' writing on the Left, roughly on the model (in Britain) of Anthony Crosland's The Future of Socialism, first published some thirty years ago.1 Much of this literature is worthy and sensible, but it tends to be flabby when dealing with conceptual and ethical issues. The cause of the libertarian Right, on the other hand, has been aided by such works of undoubted intellectual power as Nozick's Anarchy, State and Utopia, Hayek's Law, Legislation and Liberty, and Oakeshott's, On Human Conduct, all published within a short space of time in the middle igyos.2 Even if one is critical of the positions taken in these books, there is no escaping the fact that they do advance arguments of a suitably basic kind for a libertarian position in politics. They need to be taken seriously as political theory which starts with conceptual and moral argument and derives conclusions from this about the proper role and constitution of the state that turn out to be radically at variance with prevailing practice. Anyone who believes that the conclusions are wrong is obliged to show with some care where the premisses are at fault, or where the intervening chain of argument is defective. I attempt to do this in the first part of the book, where the central tenets of libertarianism are scrutinized and (I hope) rebutted. I use 'libertarianism' here as a blanket term for political philosophies which hold that the state should be more or less confined to the minimal role of safeguarding persons and their property, including unlimited rights of private ownership. In the society envisioned by libertarians, everything would be handed over to market mechanisms, supplemented where appropriate by charitable schemes to help those unable to fend for themselves. Some libertarians would be prepared to relax this to the extent of permitting the state to provide a limited range of public goods (such as a public road system) and perhaps a safety net in the form of income supplements for the very poor. Others would diverge in the opposite direction, arguing that even personal protection can be provided on a market basis without any call upon the state.3 These internal differences will not be my concern. My focus is the broad claim that a good society can be built entirely around private property and market mechanisms. I want to examine the arguments used to support this broad claim and to show where they are deficient. One of libertarianism's great sources of strength is what might be called its theoretical monism. Everything appears to stem from one central and fundamental insight. On closer inspection this appearance turns out to be largely illusory. For one thing, different libertarians centre their thought in different places— Nozick and Hayek, for instance, take up contrasting positions in moral philosophy.4 For another, even a thinker as purportedly monistic as Nozick turns out in practice to rely in different places on different sorts of argument—sometimes defending freedom of exchange, for instance, in terms of people's absolute rights to do what they wish with their possessions, sometimes in terms of its efficiency as a means of satisfying preferences. Nonetheless the appearance of simplicity and coherence persists, and it invites us to ask whether a political theory that aims to compete with libertarianism ought not to aim for a similar monism. This largely explains, I believe, the attractiveness of John Rawls's book Theory of Justice both to social-democrats and to non-Marxist socialists. Here, it seems, is a book whose conclusions are nonlibertarian (they are liberal in the American sense, socialdemocratic in the European sense) based on a single, persuasive central idea. Despite the allure of monism, it must be rejected. When we think seriously about a political matter, it is rarely the case that we light on some single guiding principle that alone will resolve the issue. Instead we find that we have to arbitrate between several competing values, none of which we feel inclined, on reflection, to abandon. The solution we choose will be the one that on balance gives us the most of what we value—or to put the point in a quasi-technical way, that puts us on the highest feasible indifference curve, representing our preferences as between various combinations of the values at stake.6 Nor can the slope of these indifference curves be deduced from some general theory. We must rely simply on our judgements about where the balance should be struck between considerations such as freedom, justice, and aggregate utility in particular cases, and try to fit these judgements into a consistent pattern. My strategy in the present book is to take these considerations one at a time and see what they imply about the shape of our social institutions. The overall aim is to show that market socialism represents an attractive mix of values that are widely shared among our contemporaries. It matches the aspirations of our age. I do not try to single out one crucial or decisive argument for that system. Nor do I try to show that the values I call into play are timeless or transcendent. My view of the political theorist's role in relation to the society he is examining is close to Michael Walzer's: the theorist's job is to offer a critical interpretation of the understandings and commitments that he shares with his fellow citizens.7 He cannot reasonably aspire to stand apart from his society and ground his case on abstract principles of universal validity.

There is a further respect in which the argument advanced here runs parallel to Walzer's. Walzer has the interesting idea that a just society must be made up of a number of distinct institutional spheres in which goods are allocated according to radically different principles. Detailed examination of this idea must await another occasion, but meanwhile the basic point, that value pluralism implies institutional pluralism, can be taken on board. The implication here cannot be strict, since it is not intrinsically incoherent to suggest that one and the same institution might serve several different values. As an empirical matter, however, it turns out that to obtain the best combination of the values we share, we need a range of institutions that counter-balance one another—one institution making good the deficit of others in promoting a particular goal. I shall illustrate this shortly in the case of market socialism. The insight that to do justice to the plurality of basic values we need to create an institutional balance has found its clearest expression in the liberal tradition, but it is an idea that democratic socialists must now embrace. In contemporary debate, it is the libertarian Right who most often present themselves as the champions of a simple-minded monism. We should not try to respond to this challenge by being equally simple-minded in turn. An adequate political theory of socialism must acknowledge complexity, both in its ethical foundations and in the institutional framework it recommends.

I have presented market socialism as an alternative both to libertarianism and to older forms of socialism which I have claimed to be outdated. My next task is to explain in greater detail what is meant by this idea, and how it stands in relation to the socialist tradition as a whole. But before presenting a brief sketch of market socialism as an economic system, one procedural objection must be set aside. It is sometimes disputed whether a socialist should be in the business of discussing possible versions of socialism at all. There is a tradition, stemming from Marx, which holds that the job of the socialist intellectual is simply to hasten the downfall of capitalism by a remorseless exposure of its deficiencies. The shape of future socialism is determined by historical forces outside the conscious control of anyone in the present age. Many socialists do indeed work to this job description. They attack this or that feature of capitalism, and 'socialism' becomes simply a compilation of negatives (no exploitation, no war, no environmental destruction, no subordination of women, etc., etc.). No attempt is made to integrate these undoubtedly desirable aims into some coherent account of the economics and politics of an alternative system. But whatever the justification for such a stance on the part of Marx himself, faced as he was with some of the wilder fantasies of the Utopian socialists, it is no longer either intellectually defensible or politically advantageous to maintain it. Socialism is no longer an unsullied ideal; faute de mieux, people will identify it with the unattractive form of statism that has emerged over the last half-century in Eastern Europe. Moreover the potential recipients of the socialist message are no longer the proletariat of Marx's conception (real or imaginary) with nothing to lose but their chains. The working class has a substantial stake in contemporary capitalism, which has provided it both with relative economic prosperity and with highly valued personal and political freedoms (we know too that the manual working class constitutes a steadily shrinking fraction of the total population). A viable socialist programme must convince a broad constituency that these benefits can be preserved and others added to them in a socialist society—and this requires something more than airy anti-capitalist oratory. The case for market socialism can best be introduced by considering briefly the defects of the main existing versions of socialism—namely state socialism as practised in the Soviet Union and elsewhere, and social democracy as implemented to a greater or lesser degree in Western European countries in the post-war period. State socialism attempts as far as possible to substitute central planning for the working of economic markets. Its strength is that it allows the enormous resources commanded by the state to be concentrated on specific projects—hence the considerable achievements of the Soviet Union in heavy industry, armaments, space exploration and so forth. Its corresponding economic defect is that planned production is unable to respond as quickly 8 This was the derogatory term applied by Marx and Engels to early socialists such as Owen, Cabet, and Fourier who drew up detailed blueprints for the socialist communities of the future.

There are, however, other and perhaps more important criticisms to be made. One is that central planning in practice negates democracy. Given the enormous task involved in comprehensively planning a complex modern economy, there is no way to avoid the creation of a large bureaucratic machine. Even if the formalities of electoral democracy can be preserved (an issue on which the arguments seem to me inconclusive), power will inevitably gravitate to those with the specialist knowledge to oversee the planning apparatus. Thus planning of this kind is of its nature elitist. If we see socialism as involving among other things a more democratic political system, we cannot embrace the statist model. At a much lower level, central planning severely restricts the scope for workers' self-management. If the latter idea is to have any serious meaning, it must include a substantial degree of control over decisions about which goods and services are to be produced, the technique of production to be used, the scale of the enterprise, and so forth. But a planned economy cannot function unless such decisions are transferred to the central authority, which must set production targets, pricing policy, employment policy, etc. for each unit of production. Thus the scope for workers' control will be confined to relatively minor matters, such as the number of tea-breaks in a day, which have no noticeable impact on the planners' targets. Equally serious, workers' freedom to change employment will be circumscribed. Although labour can be allocated through a market, using wage incentives, each person's choice is confined to the set of jobs that the planners decide to make available. Someone wishing to exercise a skill or try out a new idea not catered for in the plan will be frustrated.Together with the economic defects referred to earlier, these democratic defects are fatal for state socialism, and in my view justify its poor reputation among ordinary people in the west—a reputation no doubt further sullied by capitalist propaganda, but by no means merely its creature. The social-democratic alternative is much less obviously flawed. Social democracy can be seen essentially as an attempt to use the power of the state to humanize capitalism. The productive advantages of capitalism are to be retained, but some of its human costs eliminated. First, economic management techniques are to be used to smooth out business cycles and maintain full employment, which in turn will increase the bargaining power of workers vis-a-vis their employers. Second, the tax system is to be used to correct the excessive inequalities of income and wealth that an unreformed capitalist economy throws up. Third, a politically funded welfare state is to serve to eliminate poverty, provide for those with special needs, and contribute further to the reduction of inequality. There is no reason to doubt either the practical success or the continuing political appeal of this programme, if compared with a full-blown policy of capitalist laissez-faire which not even the most libertarian of present-day governments would dare to follow. But the social-democratic strategy has increasingly evident limitations as an embodiment of socialist ideals. First, it is no longer clear that Keynesian methods can be used in the desired manner to secure full employment, particularly in a heavily unionized economy. The effect may be inflationary, in which case income redistribution is likely to occur less between employers and workers as such than between weakly organized workers and strongly organized workers occupying strategic positions in the economy. Second, there is substantial evidence that the impact of fiscal measures on the overall distribution of income and wealth has so far been quite limited;

A classic statement of the social-democratic case is Crosland, The Future ofSorialism. In saying this I am of course entering a minefield. There is enormous dispute about which elements should be included in estimates of income and wealth-holding, about the appropriate measure of inequality, and so forth. Even more important, it is almost impossible to isolate the impact of government redistribution from spontaneous changes in patterns of income and wealth distribution caused by demographic, economic, and social factors. There has, for instance, been a slow but steady decline in this century in the proportion of wealth held (in Britain) by the very rich, but it is not clear how much of this change can be explained by government tax policy. If one looks simply at the final outcome, a relevant figure is that the top I 0% of households enjoy post-tax incomes (including both cash and benefits in kind) some ten times greater than those of the bottom 10%. For this figure, calculated for 1985

Such measures are liable either to be circumvented on a large scale, or else to have damaging repercussions on the economy itself—leading to under-investment, capital flight, arid so forth. Finally, although the welfare state has been fairly successful as a means of tackling poverty (in an absolute sense) and of channelling resources to people with special needs, it has been far less successful as a vehicle for overall equality. The reason, in brief, is that freely provided services such as education and medical care may be used more effectively by those who are already better off to an extent which eliminates (and occasionally even reverses) the progressive element in their funding through income tax.14 The danger, therefore, with the social-democratic programme is that it may lead merely to an expanded state sector, with a corresponding increase in the tax burden carried by nearly all social groups but without any very appreciable increase in social equality. The perception of this possibility may account for the recent defection of some groups — skilled workers especially—to parties with more libertarian aims. Market socialism represents an attempt to come to terms with these defects in state socialism and social democracy while still holding on to certain core socialist ideals.

By implication it has the following four aims (at least):

(a) to obtain the efficiency advantages of markets in the production of most goods and services;

(b) to confine the economic role of the state in a way that makes democratic government feasible;

(c) to protect the autonomy of workers, both as individuals and as members of selfmanaged enterprises;

(d) to bring about a much more equal Society, 1988); In earlier economic discussion, 'market socialism' came to be used as a term for the system devised principally by Oskar Lange in the 19305, in response to critics who claimed that rational economic calculation was impossible under socialism. The Lange model is best regarded as an adaptation of a planned economy in which enterprise managers are given the freedom to adjust their inputs and outputs according to pre-set criteria, but prices are still determined by a central planning board. As will be seen, market socialism in the sense used in this book involves a more extensive use of markets. Assuming for the moment that these are desirable ends, how may they be achieved? The key idea is that the market mechanism is retained as a means of providing most goods and services, while the ownership of capital is socialized. Consider the following arrangements: all productive enterprises are constituted as workers' co-operatives, leasing their operating capital from an outside investment agency. Each enterprise makes its own decisions about products, methods of production, prices, etc., and competes for custom in the market. Net profits form a pool out of which incomes are paid. Each enterprise is democratically controlled by those who work for it, and among the issues they must decide is how to distribute income within the co-operative. I shall refer to this as the pure model of market socialism. Let us consider in a little more detail what its ground rules might be. Enterprises hire capital from the investment agency at a fixed rate of interest and subject to certain conditions. They have rights of use in the capital that they hire, but not full rights of ownership. This means that the value of their fixed assets must be maintained: capital cannot be treated as income, nor loaned to other enterprises. There must also be bankruptcy rules: enterprises that cannot provide their members with a subsistence income must, after a certain period of time, be wound up, with the workers transferring to other co-operatives. Each enterprise must maintain its democratic form. It is entitled to expand, but only by taking on additional workers as full members with equal voting rights. This is equivalent to a ban on the hiring of wage labour. Subject to this constraint, however, co-operatives may adopt whatever internal management structure they prefer. They will no doubt wish to have executive committees, committees for specialist tasks, etc., depending on their size and the nature of their business. Workers have a free choice of which enterprise to apply to join; equally, enterprises can choose whether to take on new members or not. On the exit side, there are to be no compulsory redundancies, but workers can choose to leave if they wish, probably after an agreed-upon period of notice. The effect of these provisions is to create a labour market in which pay differentials within each co-operative can be expected to reflect the return to different skills and responsibilities across the economy as a whole—although a co-operative which opted to depart from this pattern (say, in the extreme case, paying all members equally) would be at liberty to do so. The investment agencies are given a somewhat complex task to perform. As the custodians of social capital, they have to strike a balance between potentially conflicting demands. On the one hand, they must allocate it efficiently, investing extra money where the marginal returns are likely to be greatest. On the other hand, they must take account of wider social factors, for instance the employment needs of particular regions. Their relationship with individual co-operatives is also a delicate one. In order to reach intelligent investment decisions, they need to know a good deal about the future production plans of each co-operative. At the same time, it is essential that the autonomy of the cooperatives is preserved, and that the investment agencies do not acquire surrogate management functions. This makes the question of how the investment agencies should be constituted (whether as public bodies, private banks, etc.) a key one for market socialists. There is as yet no consensus about the answer; I shall return to the issue briefly in Chapter 12.

The book's overall purpose is to take the system just described and examine it in the light of some fundamental ideals of social and political theory. The aim of Part I is to demonstrate that the main arguments advanced to support libertarianism do not in fact support such a system, and may indeed count in favour of market socialism; whereas in Part II I take up some aspects of the traditional socialist critique of capitalism and show that an economy of the kind outlined above is not vulnerable to these criticisms. (Part I, then, aims to convert neo-liberals to market socialism, while Part II tries to rally socialists; the purpose of Part III is explained shortly.) Before launching into this detailed examination, however, there are some immediate questions about market socialism that deserve a brief reply in order to convince the reader that the system envisioned is a serious candidate for scrutiny. One issue is whether workers' co-operatives are an appropriate form for running the whole of industry. Many existing cooperatives operate on a very small scale, and this has led some people to conclude that they are only appropriate in cottage industries. But the co-operative form can in fact work successfully in units of up to about 500 people; obviously as the size of the unit increases, there has to be more formal structure (specialist committees, for example), but there can still be effective democratic control overall. It is interesting to note that, even with the giant corporations that currently exist, the numbers employed in each plant are less than this on average (in a study of the hundred largest enterprises in Britain the figure was 430); moreover, plant sizes have been diminishing quite rapidly, presumably as a result of labour-saving technology. What typically makes the big corporation big is the number of plants it incorporates, not the size of each unit. So, with the very different system of ownership I am envisaging, it would be possible to contemplate the break-up of corporations into autonomous units, which would no doubt in some cases continue to collaborate closely in their production schedules, etc. Advanced technology as such poses no problem for co-operative production, and indeed this arrangement may come most naturally to a work-force most of whom have specialist skills to contribute. What may be more problematic is technical change, in so far as this requires a high rate of membership turnover. A cooperative relies on solidarity building up among its members, and as we have noted will incorporate into its constitution a rule guaranteeing each person job security. Major restructuring would clearly cause difficulties. An established co-operative might well take precautions against this outcome, by for instance instituting a retraining scheme. However, it is better to remain open-minded here, and to concede that there may be industries which, at a particular time, are ill suited to co-operative production. There may, for instance, be room for capital-labour partnerships, enterprises where rights of control are divided between a capital board and a board representing the work-force. In the real world, therefore, we may need to contemplate an impure model of market socialism in which different enterprise forms co-exist, reflecting the special conditions prevailing in different branches of industry. For the purposes of the more abstract discussion in the following chapters, however, I shall continue to work with the pure model. A second issue is whether an economy in which the productive units are co-operatives will display macroeconomic efficiency properties analogous to those of a capitalist economy. If we make the standard (and admittedly unrealistic) assumptions of neoclassical economics, it can be shown that a capitalist economy will gravitate towards a competitive equilibrium that is Paretooptimal (no-one can be made better off without at least one other person being made worse off). Pareto-optimality is only a weak form of efficiency; none the less, since the appeal of market socialism lies partly in its promise of better economic performance than centrally planned economies, it is important that it should be efficient in at least this sense. It can be shown that a cooperative economy tends towards a competitive equilibrium, and indeed that the equilibrium allocation (what is produced, and in what quantities, etc., etc.) is structurally identical to the capitalist equilibrium. The two systems do, however, rely on different equilibriating mechanisms. For reasons that we shall explore in Chapter 3 below, co-operatives will not in general respond to changes in the market in the same way as capitalist firms, since the incentives facing their members are different from those facing the owners of such firms. In certain rather idealized conditions, a co-operative might behave 'perversely', for instance by reducing its output of goods in response to a price rise.18 For the economy to move towards an equilibrium, the crucial condition is that workers can freely establish new co-operatives and liquidate those that are no longer profitable.19 In practical terms, this means that the efficiency of the system will depend on the success of the investment agencies in stimulating enterprise creation.

All of this so far remains at the level of economic theory. If we try to estimate the performance of a co-operative economy in the real world, the difficulty is that we have no full-scale examples to consult. (Yugoslavia, which is sometimes cited in this connection, is a very poor example: even during the period when the Yugoslav economy approximated most closely to market socialism as understood here, prices were subject to political control, cooperatives were not obliged to pay market-clearing prices for their capital, and so forth.)20 It is hard to tell, therefore, whether market socialism would be more or less efficient in practice than capitalism. On the negative side, the absence of private ownership in industry might be expected to deter speculative ventures— enterprises established to produce radically new products, where demand is unknown and returns therefore highly uncertain. On the positive side, the co-operative form, in which each member of the enterprise has a direct stake in the profitability of his firm, should promote efficient working practices, and draw upon the creative skills of the whole membership. On this question of overall efficiency I shall remain agnostic. It is enough to say that there are no strong reasons to expect a market socialist economy to be less efficient than competitive capitalism. The crucial arguments to be deployed in favour of market socialism rely upon other values: freedom, justice, democracy at work. A final preliminary issue is whether market socialism will be sufficiently egalitarian to satisfy socialists. A system of this kind will inevitably generate income inequalities of two kinds: inequalities within co-operatives, stemming from differences of skill and responsibility among the members, and inequalities between co-operatives, stemming from variations in market conditions and economic performance. Inequalities of the first kind are likely to be substantially smaller than those obtaining (even between employees) in capitalist firms, or indeed in state socialist bureaucracies. Co-operatives build up solidarity between their members, allowing them to offset to some extent the scarcity prices that different kinds of labour would otherwise command, given freedom of entry into and exit from firms. Moreover it seems unlikely that the income differences we currently find in capitalist firms can be attributed solely to labour market factors; rather, the commanding role of the top managers of such firms allows them to extract a proportion of profit in the form of income. Where co-operatives have been established, their internal income ratios do not usually exceed three or four to one. As for inequalities between co-operatives, the crucial question is whether such inequalities will tend to persist and accumulate over time, or whether the market can be expected to operate so as to cancel them out in the long term. I give reasons for taking the latter view in Chapters 6 and 7 below. Primary income will not, then, be distributed equally under market socialism, but there is good reason to expect that its distribution will be substantially more equal than under capitalism.24 This primary equalization should not, however, be seen as entirely superseding secondary redistribution by agencies of the state. There will still be a strong case for tax-funded welfare programmes to help those with special needs. There will also be various groups who require a system of income maintenance: the handicapped, those who opt out of the labour market (for instance to raise children), workers in enterprises that temporarily fail to make a profit, and others. Although the most distinctive element in market socialism is the idea of workers' co-operatives using socially owned capital competing in a market, this is not meant to be an exhaustive specification. Market socialism is thus less a straightforward rejection of social-democratic ideas than a more radical and egalitarian development of those ideas. An immediate implication of the points made in the previous section is that a full account of market socialism must involve a theory of the nature and role of the state. Although initially denned in economic terms, market socialism requires political management, not only to ensure that the market works effectively but, at a deeper level, to ensure that the system as a whole conforms to our ethical criteria (for instance in matters of income distribution). But political regulation of the desired kind cannot be conjured up with the wave of a wand. We need an analysis of how the state as an institution may be expected to operate, and how it stands in relation to its citizens. In developing such an analysis, we shall need to draw on the resources of both the liberal and the socialist traditions, since neither tradition provides us with a ready-made answer. The liberal tradition has been preoccupied with the problem of limiting the state's activities: it is a fertile source of ideas about constitutional mechanisms for controlling the power of individuals and groups. But in liberalism there is little understanding of the state as a vehicle of collective identity, as an institution which allows us as citizens to mould the world in accordance with our ethical beliefs. The socialist tradition does, on occasion, recognize this more elevated role for the state, but its view of the workings of that institution tends to be simplistic. There are two main variants. On the one hand we have a picture of the state as a benevolent machine staffed by public-spirited bureaucrats—the picture of the French positivists and the Fabians. On the other hand we have a picture of the state as an assembly of radical democracies, with the collective will emerging spontaneously from citizens gathering all over the country—the view of radicals in the Marxist and anarchist traditions. Neither of these variants, one might say, has an adequate understanding of politics as an activity persisting under socialism: both regard the state as a form of public authority that transcends the cut and thrust of political disagreement. In Part III, I attempt to develop a more adequate theory of the state, one whose central notion is that of citizenship. I argue first that citizenship represents the only viable form of society-wide community under modern conditions, and that nostalgic visions of unitary community, still cherished by some socialists, must be abandoned. I go on to maintain that authentic citizenship requires a certain way of practising politics, namely politics as a form of dialogue whose aim is consensus about matters of common concern. This in turn, however, obliges us to think about the issue of how to create a common political culture out of a diversity of private cultures, which has repercussions for our practice of toleration. Finally, I provide a brief sketch of the kind of state that is appropriate to market socialism. The main thesis is that, in order both for citizenship to be practical and for the market to operate effectively, the socialist state must be formally constituted, internally differentiated, and limited in scope. The second and third parts of the book are related in a way which may be familiar to devotees of Hegel but which may otherwise seem puzzling. In Part II much stress is laid on the importance of the market economy in allowing people to flourish as individuals: markets respond to the fact that we are each of us unique persons with distinct tastes and preferences. In Part III the emphasis is laid on community, on bringing about conditions under which we are able to order the world in accordance with our common will. Some may believe that these two horses cannot both be run at once. I disagree. We are complex creatures, needing both to differentiate ourselves from others and live a private life, and to align ourselves with shared traditions and engage with our fellows in the public realm. These impulses— towards differentiation and privacy and towards community and publicity—are differently weighted in different people, but it is rare to find someone in whom either impulse has been completely extinguished. Our present political culture encourages the first impulse at the expense of the second, but it is worth recalling that the conditions for differentiation and privacy are never secure unless at least some people are willing to assume public responsibility. A society without public life cannot be one in which individuality can flourish in safety. Once this point is appreciated, the juxtaposition in this book of arguments for market freedom and for unity in political culture may seem less paradoxical. The book's title is intended to capture the apexes within which its argument moves. 'Market', 'state', and 'community' may be thought of as describing three ways in which people may relate to one another; by extension, they refer to three ways in which people may be provided with goods and services. As participants in a market, people's relationships are those of voluntary exchange. Each obtains what he wants by offering some equivalent benefit in return. As citizens of a state, people's relationships are constituted by formal rules specifying what each is entitled and obliged to do. Goods are allocated by requiring some to provide them and empowering others to receive them. As members of a community, people are related by ties of identity which give rise to informal obligations of mutual aid. Within certain limits, people can obtain benefits simply by calling on the goodwill of fellow-members. We can use this simple matrix to characterize the various positions discussed in the book. Take libertarianism first. Here markets are given a central role to play, with the state's function being merely to enforce the basic rights that the working of markets presupposes. Community is regarded as an optional extra: people may choose to associate in communities and take on special responsibilities if they wish, but there is no reason to build this into the social framework itself. Traditional socialism simply reverses this picture. Markets have no part to play in the good society. They are entirely superseded by state and community in some combination. For the more idealistic socialists, the state was a transitional institution, destined eventually to be replaced entirely by the voluntary ties of community, conceived as extending to whole societies (and even beyond). Those who took a more realistic view saw the state's role as a permanent one. Community was to be applauded, but it could not be relied upon to get the work of society done. Market socialism, in the broader sense now introduced in which it refers to both an economic and a political system, combines these elements in a new way. The market is recognized as the centrepiece of economic life, both for its efficiency as a means of providing goods and services and for its more general liberating qualities. But the market economy cannot function in an acceptable way unless complemented by a democratic state that sets appropriate ground rules, monitors the evolution of particular markets over time, rectifies the distribution of income, and directly supplies a range of public goods. Thus market and state operate alongside one another, and the justification of the whole arrangement depends on this counterbalancing. Community is not relied upon in the same direct way to provide goods and services. Nevertheless, the form of community which I call citizenship is an indispensible element in the socialist state. It is because they share a common identity that citizens are able to reach a genuine consensus on matters of policy; without this underlying identity the other components of the system would fall apart. My task, then, is to show that market socialism is the system that most adequately captures our underlying value-commitments. I begin this task by examining the defects of its main contemporary rival, libertarianism."