Market Socialism

Description

Summary from the Wikipedia article at http://en.wikipedia.org/wiki/Market_socialism

"Market Socialism is an economic system in which the means of production are owned either by the state or by the workers in each company (meaning in general that "profits" in each company are distributed between them: profit sharing) and the production is not centrally planned but mediated through the market . Its central idea is that the market is not a mechanism exclusive to capitalism and that it is fully compatible with collective worker ownership over the means of production — which is one of the fundamental principles of socialism.

Proponents of market socialism argue that it combines the advantages of a market economy with those of socialist economics. The theory is fundamentally contradictory to orthodox Marxism.

Proponents of market socialism include economist John Roemer and philosopher David Schweickart, whose version of market socialism is called " Economic Democracy".

Versions of Market Socialism

David Schweickart

From http://www.solidarityeconomy.net/2007/03/02/economic-democracy-vs-parecon/:

"I argue that “the market” is not in fact a unitary mechanism, but should be disaggregated into three markets: a market for goods and services, a labor market and a capital market. I argue further that it is those latter two markets–the labor and capital markets–that do the most damage under capitalism and hence need to be replaced. I argue that a competitive market for goods and services, while not wholly benign, is vastly preferable to alternative allocative mechanism, whether they be centralized planning a la the Soviet union or the decentralized, participatory planning of Albert and Hahnel.

Let me set out the basic institutional structures of what I call Economic Democracy, a model of socialism I consider to be vastly superior to both capitalism and the Soviet model of centralized, command socialism. And to Parecon. The basic model has three fundamental features.

- Enterprises are governed democratically by their workers. Ultimate authority rests with the workforce, one person, one vote. Workplace democracy is the replacement for the capitalist labor market

- Enterprises compete for customers in a relatively free market. That is to say, the market for goods and services is carried over from capitalism.

- Capital markets are replaced by what I call “social control of investment.” Funds for investment are generated from a capital-assets tax, a flat rate tax imposed on all enterprises–not from the private savings of wealthy individuals. These funds are allocated, first to regions on a per-capita basis, and then to public investment banks in the regions, which are responsible for allocating these funds for

a. public capital projects,

b. existing enterprises wanting to expand production or upgrade their technology and

c. individuals wanting to start up a new enterprises.

I propose several other features in what I call the “expanded model” of Economic Democracy. I won’t discuss them here, but for the sake of completeness, let me note that Economic Democracy would also include

- The government acting as employer-of-last resort

- A quasi-capitalist sector comprised of small businesses and perhaps a sector of entrepreneurial capitalist firms,

- A policy of “socialist protectionism” that blocks low-wage competition from poor countries but rebates the tariff proceeds to those countries.

I have argued at length, in various books and articles, that such an economic structure would be at least as efficient as capitalism, more rational in its growth, more egalitarian, better able to cope with the ecological challenges we face, and vastly more democratic." (http://www.solidarityeconomy.net/2007/03/02/economic-democracy-vs-parecon/)

The market as a civilisational achievement

By Elston Gunn at http://www.solidarityeconomy.net/2006/09/07/the-left-the-market-and-the-struggle-for-socialism/

"The market is an achievement of human civilization that both predates capitalism and will persist for a long time even if capitalism is replaced by another system. It is truly system neutral - a place where politics and different values contend for influence and hegemony. Capitalism has taken the power of the market as a tool for its influence to new heights, and demonstrated the cruelty of its “market reality.” A socialist society would use the power of the market to extend democracy and promote sustainable development.

To truly build a powerful revolutionary left, we must recognize that the market is not simply synonymous with Low Road capitalism.

The dominant trend in today’s left regards the market only as a capitalist construct. This simplistic view reflects the intellectual superficiality of this trend on the left, as well as the powerful influence of the traditional Soviet and social democratic model for socialism that sees only the state as the defender and protector of society.

The extension of this thinking is the one-sided view that the people (businessmen and women, employers, etc.) and the structures, like the “corporation,” that emerge in the market are only tools of capitalism and have no role in a socialist transformation of society.

The simplistic generalization that sees the “corporation” as the enemy is the most destructive intellectual construct in our movement. It denies us critical alliances and diverts us from information and work that are fundamentally important and productive in building a competitive model to the neo-liberal capitalist policies.

Of course, we have corporate enemies that must be exposed and blocked; but there are important tactical and strategic corporate allies in the business community that we must align with and bring into our movement.

These include part of the 8 million privately held small companies that must find local solutions and partnerships if they are to survive. This includes innovative technology people and environmentalists that truly are inventing essential new technologies for the next century. And this includes leaders in the investment community truly committed to sustainable development." (http://www.solidarityeconomy.net/2006/09/07/the-left-the-market-and-the-struggle-for-socialism/)

Discussion

Market Socialism is unworkable

• Shleifer, Andrei; Vishny, Robert. Pervasive shortages under socialism. RAND Journal of Economics. 1992 Summer; 23(2):237–246.

Available from: http://www.economics.harvard.edu/faculty/shleifer/files/pervasive_shortages.pdf. (Accessed 2012 Jan 31. Archived by WebCite at http://www.webcitation.org/6577P5JXK)

Shleifer and Vishny argue that shortages of consumer goods arise under market socialism because of self-interested behavior on the part of bureaucratic managers who control production. In a typical market-socialist economy, marginal income from manipulation of production arises primarily from bribes taken for illicit access to scarce goods and services, and is proportional to the difference between their fixed official price and the market-clearing price. Thus, rent-seeking motives induce bureaucrats to maximize this difference, which is accomplished by keeping fixed official prices as low as possible, while restricting production quantity so as to maximize the market-clearing price. Shleifer and Vishny conclude that pervasive shortages are a predictable consequence of market socialism, and are due principally to corruption, rather than to classical explanatory factors such as impaired price equilibration. Implicitly, they conclude further that market socialism is unworkable. While this conclusion is premature, their argument is otherwise compelling, and poses a serious problem that must be addressed if market socialism is to be viable.

Key Books to Read

• After Capitalism (Rowman and Littlefield, 2002) - ISBN

• Market Socialism: The Debate Among Socialists, coauthored with Bertell Ollman, Hillel Ticktin and James Lawler (Routledge, 1998)

• Against Capitalism (Cambridge University Press, 1993) [Spanish translation, 1997; Chinese translation, 2003])

• Capitalism or Worker Control? An Ethical and Economic Appraisal (Praeger, 1980)

See also the book on Self-Managed Market Socialism