Economics Exposed: Do we need the market mechanism? (1987)

The Economics Exposed column from the September 1987 issue of the Socialist Standard

Defenders of capitalism claim that the market mechanism is the only way of distributing goods across a modern global society. Without profit and loss, without buying and selling, they say. how could we organise production? If all goods and services were available free, as they would be in socialism, then how could we make decisions about what to produce and when, how and where to produce it?

At the moment these decisions are taken on the basis of reducing costs to a minimum, in order to maximise profit. The money system allocates values to every conceivable useful or useless item, allowing us to make comparisons between options, always on this basis of reducing cost. Cost, in turn, relates to labour time and hence the attempts of major companies to make "rational" capitalist decisions also show their results in the dole queues.

Socialism will do away with this whole system of relative values and with the price tags which express them. Instead, in a system of production for use. not profit, the focus will be on whether a given production process is geared to serving human needs. Does it result in meeting human requirements? In many cases, people may well prefer a form of production which is less intensive. cheap and "productive" in capitalist terms. In a socialist society, the democratic framework would be developed for such choices freely to be made.

And what about the question of consumption? Champions of the market system tell us that goods have to be supplied in response to how people are "choosing" to spend the paltry pocket money referred to as wages. In socialism, goods will still be supplied in response to people's expressed preferences, and these preferences will still be made ultimately clear by what people choose to take from the shelves of the stores. The difference would be, however, that in a sane society such choices would be made freely rather than under the artificial conditions of scarcity and effective rationing which cloud and distort the picture today.

Modern technology has been used already to develop stock control methods which could usefully be adapted for use in a socialist system of distribution. In a number of large chains, when an item is bought and passes through the cash desk, it is automatically recorded as sold and this information is relayed by computer to the department which deals with ordering further supplies. This can even be organised so that the level of output in a factory is informed by the same information. Once a certain amount of stability has been reached in the levels of "demand", a self-regulating system can develop in which all production levels are constantly monitored and are tied directly to the levels of consumption observed at local stores. This also, of course, encompasses the issue of personal choice, as a range of goods would be in those stores, and the popularity of each would be reflected in the computerised information received.

The existence of a buying and selling system. of money and of profit and loss, hinders and complicates the process outlined here. In contrast, a socialist system of free access would allow needs to be catered for freely in this way. Likewise, the existence of competition between productive units and between distribution outlets makes a mockery of any attempt to efficiently deliver, to humanity as a whole, the best that can be provided by modern production methods. Socialism will involve using co-operation on a world-wide scale to quantify human needs in real terms (not "money terms") and to provide for those needs swiftly.

Clifford Slapper