Material World: Has Walmart laid the foundations for socialism? (2025)

The Material World column from the June 2025 issue of the Socialist Standard

In their 2019 book The People’s Republic of Walmart: How the World’s Biggest Corporations are Laying the Foundation for Socialism Leigh Phillips and Michal Rozworski argued that, contrary to appearances, modern capitalism is already succumbing to a process of central planning in such varied forms as large-scale businesses, the financial system and the welfare state. This could even imply that the growing dominance of large corporations in the economy, internally organised on the basis of a priori non-market allocation, might somehow herald the decline and, perhaps even, eventual eclipse of capitalism.

In an article in the Jacobin entitled ‘Yes, a Planned Economy Can Actually Work’ they wistfully maintained:

‘Mega-companies like Amazon and Walmart are already using large-scale central planning. We can wield that tool for good. Socialists need to renew our embrace of democratic planning and fight for a real alternative to capitalism’.

And that:

‘We need to use our vast productive resources to better ends – and through politics we can do just that. And as technology allows us to move to a discussion of what sort of planning, instead of whether planning, true democratic control of planning both at the enterprise and government level must be the non-negotiable foundation of our vision’ (tinyurl.com/345jbycw).

However, if a planned economy ‘can actually work’ on their terms, then it would be an economy that has nothing really to do with a post-capitalist society in any meaningful sense of the term.

Essentially, what they advocate is just a sort of democratised version of corporate capitalism. ‘Governments’ and ‘enterprises’ will continue to exist, and business will continue to operate as normal, churning out commodities for sale on a market.

The difference with today is that internally such business will become subject to ‘democratic control’. What enables this is the replacement in such businesses of internal markets by planning – something that Phillips and Rozworski said had already happened to a large extent:

‘Regardless, Walmart engages in large-scale planning without the direct intermediation of markets at scales to make Hayek bristle. Internally, like nearly all firms large and small, it is a dictatorial planned economy: managers tell workers what to do, departments realize goals from on high, and goods flow by fiat. Afloat in the market, Walmart is at once an “island of conscious power,” as Keynes’s collaborator D. H. Robertson put it, and an “island of tyranny,” as the social theorist Noam Chomsky rephrased it.’

According to them, the fact that a business like Walmart, the world´s largest company, operates without an internal market is precisely what makes it relatively more efficient than businesses with an internal market.

Walmart is, of course, a prime example of a large corporation. Its revenue in 2018 was $500 billion – exceeding that of the Soviet Union in 1970 (adjusted for inflation). As an organisation, it makes full use of sophisticated computer systems and comprehensive record keeping, to integrate and manage every aspect of production and distribution amongst its numerous outlets. Using big data analytics, it tracks and targets individual consumers – 145 million in the US alone – identifying patterns of consumer spending and anticipating future trends on the basis of past evidence.

These kinds of developments have been interpreted by commentators like Philips and Rozworski as clear proof that large-scale centralised planning is eminently practicable, contrary to the claims of Mises and Hayek. However, we should be wary of the all too facile way in which these commentators sometimes go about interpreting the evidence. Walmart’s is not an example of central planning in the sense of society-wide planning – obviously. Crucially, as just mentioned, it employs the principle of feedback and of course what Walmart is responding to is the market demand for its products. To its very core, Walmart is a market-based capitalist institution.

Whether a mega-corporation such as Walmart should be held up on purely technical grounds as some kind of template upon which a realisable alternative to capitalism can be built, albeit suitably reconfigured along democratic lines, is highly questionable for many other reasons too. After all, Walmart, like every other such corporation, is essentially a commercial or market-oriented entity and to draw attention to its enormous size and its ability to allocate inputs internally without reference to market principles is, in a sense, a red herring. What such thinking seems to imply is that a post-capitalist alternative will continue to feature something akin to ‘corporations’ – entities legally distinguishable from each other – and under whose aegis production will supposedly be ‘democratically organised’ unlike in capitalism.

This is missing the point completely. There won’t be, and cannot be, such a thing as a ‘corporation’ in a society based on the common ownership of the means of production. The very raison d’être of a corporation derives from its exclusive private or monopoly ownership of the productive assets in its legal possession and, as such, this is wholly incompatible with the very nature of such a society. Meaning it is nonsensical to talk of taking over an institution like a corporation and running it in a different, more democratic, way in a post-capitalist society, when such an institution would simply cease to exist.

Of course, what Philips and Rozworski describe is not society-wide central planning in the sense that Lenin might have had in mind when he talked of turning the ‘whole of society’ into ‘a single office and a single factory’. Nevertheless, just as Lenin´s approach via state capitalism comprehensively failed to deliver socialism in the traditional Marxian sense, there is no reason to think that their approach (via the democratic transformation of big corporations) would fare any better. Of course, one can redefine ‘socialism’ to mean something else, which is what Lenin did – but that doesn’t change anything.

Nevertheless, even granting their description of how Walmart works, we are none the wiser as to how the development of central planning within some corporate behemoth like Walmart is going to assist in laying the ‘foundations of socialism’ any more than the approach advanced by Lenin.

Robin Cox

Blogger's Note:

The People’s Republic of Walmart was reviewed in the June 2019 issue of the Socialist Standard.

Production Values: the laptop (2011)

The Production Values Column from the May 2011 issue of the Socialist Standard

A sideways glance at capitalism through some of its products.  This month: the laptop. 

One of the more vociferous cheerleaders for capitalism and the wonders of the market system (though he seems to have been a bit quieter on that score in recent years) is Thomas L Friedman. Most famously he is the author of the spurious Golden Arches Theory of Conflict Prevention. This is the theory that no countries which both have a branch of McDonalds have been at war. (That this unlikely theory has – on numerous occasions – in fact been found to be false does not seem to have caused him to review the theory).

In his book The Lexus and the Olive Tree, Friedman exalted in the very piece of equipment he was typing his book on. His laptop then, was held up as the epitome of all that is wonderful about capitalism. After all, it comprised hundreds of different parts and sub-components – themselves the product of highly complex production processes and resources from five continents – all magically transported around the world and assembled together in a dozen countries before finally pitching up at his local store when he went to buy it to write his latest masterpiece.

The laptop I am writing on however is no less amazing. While opposed to capitalism, we socialists shouldn’t be afraid of acknowledging how massively complex, sophisticated and impressive is global production and distribution inside capitalism. Indeed it is thanks to the increase in the productive forces of capitalism that we can even consider socialism and production for use to be a practicable next step is human social organisation.

Many ideological defenders of capitalism (and not just Friedman) extol the wonders of the market system as it (apparently) enables all the right bits and pieces to be brought together with just the right timing, to be assembled and placed onto the store shelves. Indeed many members of the working class – who otherwise may have no real enthusiasm for capitalism itself – can feel daunted by the argument of socialists that we should do away with the market system as a means for matching supply with demand.

Of course this fear is to a large part a consequence of the great big convenient untruth that has underpinned debates about capitalism and socialism for almost a century now: specifically that the centralised planning of the Soviet Union is the only alternative to the market system, and somehow has something to do with socialism.

In fact, World Socialists have no time for central committees or 5-year plans. We are opposed to the market system whether it is supposedly “free” or restricted, and whether it is regulated or not. In many ways socialism will be far more responsive to real human needs and genuine preferences. Production decision-making inside socialism – both qualitative (ie how will this be produced?) and quantitative (how much?) – will be far less centralised than the soviet version of capitalism and arguably even “western” capitalism.

We would argue that we can retain much of the (apparently) chaotic, networked decentralised production decisions that are present within capitalism. We should not be daunted by the complexities of industrial production. We can do away with the overarching profit logic of the market, and at the same time have confidence that individual human beings will still express their self-defined needs by going to the local store and taking what they want without the rationing system of money and price. And thereby they – not some planning committee – will enable the dauntingly complex production arrangements that end up in the laptop I am writing this on. Rather than a tribute to the mysterious work of some “invisible hand”, the laptop – like so many products – is a testament to the ingenuity of real, co-operative human hands.

Next month: we shine a light on the crazy world of diamonds

Socialism and Planning: What Can Work (2019)

From the July 2019 issue of the Socialist Standard

The impossibility of ‘One Big Plan’

In any kind of society, people need to plan. Even in the most gung-ho, ruggedly individualist laissez faire society imaginable, there would be plenty of planning. Entrepreneurs would have to plan what and how much to produce, along with the requisite quantities of material and labour inputs needed, in the face of market uncertainty. No large-scale system of organised production can function without planning.

Obviously, this would be true also of a future socialist society though, according to some commentators, what distinguishes socialism from capitalism is not the need to plan but, rather, the number of plans needed. In short, the sheer scale of planning.

In capitalism, literally millions of plans are implemented every day. Most obviously, this is because there are literally millions of separate competing enterprises operating in a capitalist economy – from some giant corporation like Walmart to your local self-employed plumber. Thus, capitalism is a ‘polycentric’ system – meaning it has multiple planning centres or bodies. Those millions of plans are said to mutually adjust to, and mesh with, each other in a quite spontaneous, or unplanned, fashion via the market mechanism and in a way that purportedly benefits everyone in accordance with Adam Smith’s quasi-theological concept of the Market’s ‘Invisible Hand’.

‘Socialism’, argue these commentators, would be very different. Instead of millions of bodies each striving to implement their own plans, there would be just one single planning body and one single vast plan encompassing the totality of production. Meaning there would be conscious, society-wide, ‘central planning’ in the classical sense of this term.

This, it is argued, is because the entire apparatus of wealth production would be socially owned. There would be just one ‘owner’– society itself. However, society-wide planning is not a necessary corollary of social ownership. Even within a large capitalist corporation today, though it is owned by those who hold equity in it (and who thus exert ‘ultimate’ control over it), there are numerous gradations of control below this level of ‘ultimate control’. Different departments or branches of the same corporation often exercise a considerable degree of initiative in planning their activities. Even within each department or branch we see gradations of control in the form of a managerial hierarchy.

Of course, the workers filling the various positions in this hierarchy don’t own the corporation they work for. They don’t exert ‘ultimate control’ over the corporation which is what real de facto ‘ownership’ boils down to – having the final say over the disposal of the corporation’s assets. But they do exercise some control, albeit within certain limits.

The point is that the numerous operational decisions affecting the corporation’s performance don’t all emanate from a single source. Of necessity, a great deal of decision-making is devolved down the managerial hierarchy. Only the most important decisions get to be made at the top.

If a single entity like a corporation today is obliged to implement a ‘polycentric’ model of decision-making, then how much more true would this be of a future socialist society embracing all humanity? Of course, this is not to suggest the organisational structure of a future socialist society would be modelled on that of a hierarchical capitalist corporation.

Lenin once famously depicted a post-capitalist world in The State and Revolution (1917) as one in which, ‘The whole of society will have become a single office and a single factory, with equality of labour and pay’ (he soon enough abandoned the idea of ‘equal pay’ on taking office). No doubt the dictatorial principle of ‘one-man management’ ruthlessly imposed by the Bolsheviks on Russian workplaces would similarly apply in Lenin’s imaginary post-capitalist world. Socialists see nothing appealing about this top-down version of what a socialist society is supposed to look like.

From our standpoint, it is entirely possible to envisage the world’s productive resources being owned in common by the global community yet subject to a complex system of polycentric democratic planning – with multiple plans being implemented at different spatial levels of organisation: global, regional and local – (depending on the nature of the ‘resource’ in question). While under capitalism, ‘planning’ likewise takes a polycentric form, minority class ownership of the means of wealth production invests it with a thoroughly authoritarian character. This is where any comparison with socialism ends.

Common ownership of the means of wealth production eliminates the very possibility of one individual or group exercising economic leverage over another, compelling the latter to comply against its will. In fact, socialism is the only conceivable basis upon which a truly free society can flourish.

Society-wide planning

Nevertheless, the idea still persists in certain circles that socialism would be a system based on society-wide central planning. Let’s examine this claim more closely to see why this cannot be so.

There are literally millions of different kinds of goods produced in a modern economy. Some of these (‘consumption goods’), in order to be produced in sufficient quantities to meet the demand for them, depend on the availability of other goods (‘production goods’) that likewise need to be produced in sufficient quantities to ensure enough of the former are produced. To produce production goods requires yet other production goods to be produced. Sometimes, the number of inputs needed can be truly mind-boggling. For instance, a single Boeing 747 plane is reckoned to have approximately 6 million component parts, supplied by hundreds of suppliers scattered right across the globe.

In an idealised system of society-wide planning, the requisite quantities of all these millions of consumption and production goods that society needs will have to be calculated in advance by the single planning centre and expressed as ‘production targets’ for each and every good within some vast Leontief-style ‘input–output’ matrix or table. Calculating these production targets does not simply involve finding out the aggregate demand for each good; one would also have to take into account the ‘technical ratios’ involved in producing them – something that, in theory, can be done through a method called ‘linear programming’ which we will look at later.

So, if a particular good – A – consists of two components, X and Y, and if it takes 2 units of X and 5 units of Y to produce 1 unit of A, then you will obviously need 20 units of X and 50 units of Y if you want to produce 10 units of A. This could change if your method of producing A changes. Let us say due to some technological innovation it now takes 3 units of X and 4 units of Y to produce 1 unit of A. If you stuck with your original production targets for X and Y – namely 20 and 50 units respectively – you won’t have enough units of X to produce 10 units of A while, at the same time, you would end up with a wasteful surplus of units of Y.

Incompatible with socialism

Looking at this simple example, we can begin to see why this concept of ‘society-wide’ planning is completely incompatible with socialism.

Firstly, it is pretty obviously impractical for any kind of large scale system of production, let alone socialism. To successfully implement this society-wide plan would require the production targets for each of the millions of consumption and production goods to be precisely calibrated and then exactly fulfilled right across the board. Any deviation from any one target would have knock-on repercussions that would jeopardise society’s ability to meet all those countless other targets because of the interdependent nature of modern day production.

Even something as simple as a typhoon in Indonesia or a crop blight in the American Mid-West could seriously disrupt supply chains, resulting in shortages of some goods and surpluses of others. The plan would then have to be completely redrawn and, in the real world, since changes happen all the time, what this means is that the plan would never get off the drawing board. It would need to be constantly revised by the planners.

Moreover, for the plan to be successfully implemented, this would require a moratorium on any kind of technical innovation. This is because technological innovation, as we saw, tends to alter the aforementioned ‘technical ratios’ involved in the production of goods, thereby altering the production targets of the inputs needed.

Some enthusiasts for central planning argue that the exponential increase in computing power in recent years now makes the concept quite feasible. However, this is to misunderstand what the problem is about. It is not the lack of sufficient computing power that makes the concept impractical but, rather, the attempt to apply it to the real world when the latter is constantly changing. Saying that ‘the plan’ can be rapidly adjusted to accommodate any change in the real world means simply that it loses its quality of being a ‘plan’ – something that is supposed to guide production in an a priori sense. The application of such computing power then becomes simply the means of tracking, rather than initiating, changes in the real world. This is a very useful faculty to have but it does not technically amount to ‘planning’.

Secondly, and more importantly, the very nature of socialism itself rules out the concept of society-wide planning. The two outstanding features of a socialist society that are relevant here and spring directly from the very fact of common ownership of the productive resources of society are, firstly, that individuals will have free and unfettered access to society’s stock of goods and services and, secondly, that they will freely and voluntarily cooperate to produce these things.

Society-wide planning flies in the face of both these core social practices. To take the demand side of the equation first, how can one possibly ascertain in advance what people want if their appropriation of goods is self-determined? It is not logistically feasible to carry out a global survey of over 7 billion people and then compile a list of production targets for the considerable array of consumer goods they might want. It would also be completely pointless given that what individuals want can change from day to day. This is to say nothing of the fact that the global population can expand or contract.

Instead of free access, what a centrally planned economy would have to institute is some form of universal rationing. People will need to be told what they can consume even if they had earlier been able to vote on the matter. Very likely, this would lead to an asymmetrical distribution of power in favour of a bureaucratic elite tasked with devising and implementing this system of top-down rationing and ensuring compliance. Creeping corruption and re-emergence of some kind of class-based society would be the probable outcome.

Then there is the supply side of the equation – specifically, the labour inputs needed to produce what society wanted. To ensure that, the planners would have to impose some form of compulsion requiring workers each to perform a certain quantum of labour (in order to meet the Plan’s multiple targets) as a condition for gaining access to the goods and services they needed. Not only that, these workers would also have to be subjected to a compulsory division of labour to ensure the proportionate application of labour inputs required to meet all those production targets specified in the Plan: you couldn’t just choose what work you wanted to do, or when.

As the Bolshevik, Leon Trotsky, revealingly noted in 1920:

  If we seriously speak of a planned economy, which is to acquire its unity of purpose from the center, when labor forces are assigned in accordance with the economic plan at the given stage of development, the working masses cannot be left wandering all over Russia. They must be thrown here and there, appointed, commanded, just like soldiers … Deserters from labour ought to be formed into punitive battalions or put into concentration camps.

Exactly. What socialist could possibly endorse this capitalist apology for a workhouse system? As one commentator has noted, Trotsky’s recommendations are reminiscent of the Poor Laws enacted in Elizabethan England to combat the problem of vagabonds and beggars, as the rising bourgeoisie saw it, driven off the land by the Enclosure Acts and deprived of a means of living (‘Capitalism and Planning’, Libcom)

The voluntary nature of work carried out by the freely associated citizens of a socialist society would thus have been utterly obliterated. In short, we would have regressed back to something very much like a system of waged slavery that is the hallmark of capitalism.

(Next month the need for feedback).

Robin Cox

Link to Part 2.

The Market Didn’t Always Exist (2015)

From the May 2015 issue of the Socialist Standard

The Inca Empire lasted a couple of a hundred years and according to Terence D’Altroy of Columbia University, in a 2007 PBS interview, ‘In terms of square miles, we’re probably talking something like 300,000 square miles’ with a population as high as 12 million. They built elaborate cities and created terraced farms on the mountainsides, all connected by a road network equivalent to about three times the diameter of the Earth and far superior to what the Conquistadors were accustomed to back in Europe.  And all this was achieved without money or internal markets.

In ‘The Incas: New Perspectives’, Gordon Francis McEwan writes: ‘Each citizen of the empire was issued the necessities of life out of the state storehouses, including food, tools, raw materials, and clothing, and needed to purchase nothing. With no shops or markets, there was no need for a standard currency or money, and there was nowhere to spend money or purchase or trade for necessities.’

The Incas had a centrally-planned economy which lasted a lot longer than the Soviet Union’s command economy. Every Incan was required to provide labour-tribute to the state and in exchange for this labour levy, they were given the necessities of life. However the Inca Empire was not a classless society and not everybody had to perform this compulsory work. Nobles and their courts were exempt, as were other prominent members of Incan society.

The Inca Empire was optimised to prevent starvation rather than to foster commerce and the ayllu was the center of economic productivity. Each ayllu specialised in the production of certain products depending on its location. For some of them this would be agriculture as they would be closer to fertile lands. Agricultural ayllus produced crops that would be optimised for the type of soil. Their output would be given to the state which in turn would redistribute it to other locations where the product was not available. Surplus would be kept in collcas, storage houses along the roads and near population centres. Other ayllus would specialise in producing pottery, clothing and virtually anything necessary for everyday living which would be distributed by the state to other ayllus.

The use of the land was a right that individuals had as members of the ayllu. The curaca, as the representative of the ayllu, redistributed the land to each member according to the size of their families. The dimensions of the land varied according to its agricultural quality and it was measured in tupus, a local measurement unit. A married couple would get one and a half tupus, for each male child the couple received one tupu and for each female half a tupu. When the son or daughter started their own family each additional tupu was taken away and given to the new family. Each family worked their land but they did not own it, the Inca estate was the rightful owner. The land was used to provide subsistence food for the family.

There were three ways in which collective labour was organised:

• The first one was the ayni to help a member of the community who was in need. Helping build a house or help a sick member of the community were examples of ayni.
• The second was the minka or team work for the benefit of the whole community. Examples of minka were building agricultural terraces and cleaning the irrigation canals.
• The third one was the mita or the tax paid to the Inca. Mita workers served as soldiers, farmers, messengers, road builders, or whatever needed to be done. It was a rotational and temporary service that each member of the ayllu was required to meet. They built temples and palaces, canals for irrigation, agricultural terraces, roads, bridges and tunnels. This system was a balanced system of give and take. In exchange the government would provide food, clothing and medication. This system allowed the empire to have all the necessary produce available for redistribution according to necessity.

Yet whenever members of the Socialist Party suggest that we wish to create a co-operative moneyless society without private property nor a wages system, we are smugly lectured that it is not a viable objective, that it is unrealisable and we are being utopian in our aspirations. Socialist writers have shown that we are products of our environment, particularly of the economic system in which we live. People living under feudalism thought it natural and fixed, just as people living under capitalism believe it too is natural and eternal. If people’s ideas and their societies changed in the past they certainly can change again in the future. That is why socialists are given to optimism when we read of non-market economic systems such as the Inca having once existed even though the one we envisage would be classless, non-coercive and democratic.

ALJO

Planning in Russia (1966)

From the December 1966 issue of the Socialist Standard

Planning is in great fashion at the moment. In France planning is state policy and here in Britain the National Plan is still awaiting the starter’s gun. According to the Labour Government once the economy is correctly set it will improve in every aspect. Time will show.

The Russians like to think that the popularity of planning throughout the world is due to the success in the growth of their own economy, although Professor W. W. Rostow has provided evidence that economies expand, in the period when capital formation is difficult, at about the same rate whether they are planned or not. It would seem that if planning in Russia was successful there would not be any need to change its basic character. Yet what do we find? Without doubt a decline in centralised control!

In The Plan and Initiative by S. Pervushin it is pointed out that planning takes place in capitalist economies. Each organisation plans its own expansion in the light of the market conditions, and the state controls different parts of the economy through its expenditures and in raising income to meet them. According to Pervushin, the actual implementation of a national economic plan requires a “unity of purpose. In other words, all society, or the majority of it, must strive to one and the same goal . . . This can only be achieved by the socialisation of the means of production.” These conditions, he asserts, exist in Russia. Further, in bourgeois capitalist countries planning must fail because “the mistakes made by one economic unit spread like a chain reaction to many others, and in the end often cause disruption of the whole economy.”

But what has been happening in Russia? According to Pervushin, despite a definite correlation between the different branches of the economy, a correlation which is established beforehand and strictly observed, errors arose due to wrong planning, short-comings in the functioning of various organisations or industries, or, finally, unfavourable natural conditions.

Kantorovich, in his book The Best Use Of Economic Resources, was much more explicit. He writes of “substantial shortcomings,” “considerable losses,” “idleness of labour and equipment,” “rush work” and the “greater use of manual methods and consequent lowering of labour productivity.”

Yefim Manevich, in Voprosi Ekonomiki (Economic Problems) in 1965, reported the “accumulation of a considerable labour surplus” in Moscow, Leningrad and Odessa which was extending into rural areas. At this time, summer 1965, the Communist youth paper, Komsomolskaya Pravda, was suggesting the break-up of the system of collective and state farms into smaller units farmed by groups of half-a-dozen peasants and their families, with a minimum of state interference, who would keep the profits from the sale of their cash crops. Whilst the argument against collective and state farms was their unwieldy size and inefficiency, family farming would help to solve the problem of rural unemployment.

Meanwhile, in Russian industry the Liberman thesis was gaining ground. Liberman, a Kharkov economist, argued that the economy cannot function effectively without the profit motive. The introduction of the “Liberman system” means that factory direction in parts of the consumer goods sector of the economy will have much greater freedom to plan output and fix prices according to market conditions. Management will also have greater autonomy in the raising of capital for improving or reconstructing their factories. They will plan separately as in the western economies, and, according to Pervushin’s quotation above, will fail for their errors will react on each other.

Actually there is little new in this situation, for it is largely a case of Russians recognising what before was the unspeakable. In Russia at the moment it is not profit that is new, but a decline in state control. The planners have failed.

In backward emergent capitalist countries state control is inevitable when only the state can raise capital in large lumps and co-ordinate economic activity to promote future expansion. Once development takes place, and capital is easier to obtain, pressures arise to break down the centralised control. This is what is happening in Russia. Industrialists are seeking freedom from political control.

So as Russia retreats from control, the western powers increase the amount of it. It would appear that for advanced capitalist communities some state control is necessary today. But whether control of the economy is being relaxed or tightened, in neither case is it Socialism.

Ken Knight

The Planners of Capitalism (1942)

From the July 1942 issue of the Socialist Standard

Socialists have had to contend with multifarious groups and parties that held, and hold yet to-day, the view that every inroad of the capitalist state into the realm of industry is a step in the direction of Socialism.

Seeking support on those lines is the major party —the Labour Party—which stands for the nationalisation of the main industries of the country, with compensation for the owners at a fair rate of interest by giving them government bonds, equal to their assessed capital. The Labour Party has been influenced by such people as the Fabians in the shape of G. B. Shaw and the Webbs, who have contributed much to the doctrine of State control, along with the I.L.P. which, in the past, declared that it would convert the Labour Party to Socialism, by which it really meant State-capitalism, and even now is only critical of Russian State-capitalism on democratic grounds.

A later arrival was the “Communist” Party, which made the wildest claims for the “dictatorship of the Proletariat” that they declared was in operation in Russia.

But the “Workers’ State" picture has somewhat faded over the years until to-day sociologists have some difficulty in differentiating the State system in Russia from that of Nazi Germany. The question now arises as to why the Labour movement plumps for State control of one kind or another. In the first place, State control can be viewed as being in line with the centralisation and concentration of capital, “for capitalist development had its genesis in the expropriation of the pigmy property of the many into the huge property of the few,” and State boards, corporations, trusts, nationalisation and the like are but parts of the higher evolved capitalism.

Illustrating this is the statement of the Board of Trade and the Minister of Food that there will be the closing of half of the retail shops by midsummer this year which means that some 300,000 “small man" businesses will be “telescoped,” and their trade taken over by the bigger organisations. (News Chronicle, April 6th, 1942.)

This “freeing” from the world of business of a type that has attempted to rise above the proletariat, that has given his children a better education, forms a nucleus from which come the sometimes brilliant men with ideas who flow into the parties of the “left," and as trained writers, intellectuals and professionals, make well thought out schemes for the planning of capitalism, motivated, you may be sure, by the prospect of filling the requisite posts in its administration. Against the planners, the Tories, representing the solid property owners, and holding high office in the state for decades, appear reactionary to the suggested new order of things, and resent the move to superannuate them to a back seat politically. For against the Tory conception that a man’s worth—his substance—is the amount of property he owns the embarrassing newcomers have the “revolutionary” cry of “equal opportunity,” and declare that ability should he the test of a man’s right to income, so away with private property. Let the State take over for Socialism now! Whilst this haggling goes on as to which type of capitalism should be adopted, and who is to run it, the great majority of “base” mechanics, the proletariat, must be thinking that they have a role to play in this era of change and are fearful that totalitarianism and State capitalism are of one piece, that their liberty, and thus of humanity, depends on what part they play.

We declare that we Socialists have earned the right to be listened to, for of all sections of the working-class we have been true, whilst the concept of Socialism has been distorted, and used as a cover to march our class from one morass to another, their labour-power bought and sold like merchandise, their children snobbishly belittled.

We still propagate that you must abolish the wages system, must fashion a society to your needs, a class-less society, where mankind passes from the realm of necessity to the realm of freedom. Will you hear us? 

Frank Dawe

North Korea: Capitalism in a Mao Suit (2017)

Book Review from the November 2017 issue of the Socialist Standard

Unveiling the North Korean Economy by Byung-Yeon  Kim (Cambridge University Press, 2017)

The global system of capitalism takes various national forms, including the ‘state capitalism’ in North Korea that has been passed off as ‘socialism’.

North Korea presents an image to the world as a society existing in a sort of Stalinist time warp, embodied in the very appearance of its latest ‘supreme leader’, Kim Jong-un, who fills out his Mao suit with the same corpulence as his grandfather, Kim Il-sung, and even tops off the look by paying him a hairstyle homage.

The main development within the country that has gained the attention of the outside world is its nuclear weapons programme. But people’s everyday lives within the country are still shrouded in considerable mystery. A general lack of information about economic and social life in the DPRK (Democratic People’s Republic of Korea) makes it hard to know what is going on. And the government, which has not published a statistical yearbook since the early 1960s, is content with this situation.

Two important sources of information about the DPRK have been the approximately 30,000 North Korean refugees living in South Korea and the companies (mostly Chinese) doing business with North Korean firms. A book published this year, Unveiling the North Korean Economy by Kim Byung-yeon, draws on surveys from those two sources to uncover the state of the North Korean economy and ponder where it may be headed. The subtitle of the book, ‘Collapse and Transition’, refers to the period of extreme crisis the DPRK underwent after the end of the Soviet Union and to its current transition that the author views as a gradual shift from ‘socialism’ to capitalism. 

Capitalism by another name

Before looking at some of the findings of the book, it’s necessary to say a word about the author’s belief that the DPRK is a ‘socialist’ country. For Kim, the state ownership of the key means of production, combined with the existence of central planning, is sufficient for an economic system to merit the label ‘socialism’.

However, as numerous Socialist Standard articles have pointed out, the nationalisation of certain means of production is simply a change in the form of ownership, not the negation of property rights to bring social wealth under the common control of all members of society. Ownership remains under restricted control, in the hands of state bureaucrats and the heads of firms. And since the aim is ‘economic growth’ (capital accumulation), not the direct satisfaction of human needs, as democratically determined by the members of society themselves, any ‘planning’ carried out under this system is geared toward that end.

The history of the twentieth century should make clear that nationalisation of industry and the existence of planning do not threaten capitalism in the least. What capitalism could not exist without, rather, are such economic forms as money, profit, wage labour, and commodities—all of which are present in the DPRK. So we cannot help but conclude that the DPRK is capitalist, not ‘socialist’ as Kim claims, although we refer to it more specifically as ‘state capitalist’ because of the predominance of state ownership.

Kim describes socialism as a ‘grand-scale experiment of an economic alternative to capitalism’ based on ‘human design’, unlike capitalism’s basis in the ‘natural evolution of society’. More specifically, he fingers Karl Marx as the culprit, who apparently ‘designed and initiated implementation of the ideal of socialism’, although Kim doesn’t specify where Marx presented his plan or in what country he began to implement it.

The editors at Cambridge University Press also let Kim get away with stating, without any reference, that Marx (who was anything but a moralist) ‘believed that capitalism was the “root of all evil”’ and ‘wrote’ that ‘central planning as the coordination mechanism can be designed to maximise both economic growth and social fairness’.

If Kim had read enough Marx to at least get his quotes right he might have gained the basic understanding of capitalism needed to recognise its existence in the DPRK. Nevertheless, the facts on North Korea provided by the author confirm that fact.

A ‘plan-less’ planned economy

Even though the existence of ‘central planning’ is one of the reasons cited by Kim for defining the DPRK as ‘socialist,’ his book demonstrates that such planning has been limited and full of contradictions from the outset. 

Kim argues that even after the DPRK, under Soviet tutelage, nationalised large enterprises and collectivised agriculture in the early 1950s, the leaders ‘lacked the necessary requirements’ to establish a ‘fully working, centrally planned economy’ since they did not have reliable data on nationalised forms or the institutions and technocrats needed to direct the system. This situation grew even worse after the Soviet Union reduced its technical help and subsidies later in the 1950s due to worsening bilateral relations after Khrushchev’s criticism of Stalin (denounced by the DPRK and China as ‘revisionism’).

Kim notes that the weaknesses in the DPRK’s planning capacity forced its government to rely on the mass mobilisation of the population to meet certain production goals. One example was the ‘Chullima Movement’ from 1958 to 1961 that sought to speed up production, much like China’s ‘Great Leap Forward’. Such mass mobilisations have been more common in the DPRK than China, and the author views them as evidence that ‘the country is unable or unwilling to devise and implement coherent central planning’.

Adding to the confusion of planning is the existence alongside the central plans of the Juseok Fund and ‘on-the-spot guidance’. In the early 1970s, Kim Il-sung introduced the Juseok Fund to ‘ensure a sufficient supply of inputs for high-priority sectors’. The fund is administered by the top DPRK leadership and is used to ‘circumvent the bureaucracy associated with central planning’ and lessen its power. The fund is also related to the practice of ‘on-the-spot’ guidance, where the ‘supreme leader’ tours a production site and issues specific directives.

Kim points out how the arbitrary intervention by the supreme leader in the planning mechanism ‘actually disrupts the allocation of resources and production in accordance with the plans’ and is thus ‘incompatible with the centrally planned economy’. Firms prioritise the imperatives of the Juseok Fund and on-the-spot guidance over the central plans.

The author uses the odd expression of a ‘plan-less planned economy’ to describe this situation, which suggests that the anarchy of capitalist production also reigns in North Korea.

State-owned, profit-driven

Just as ‘central planning’, upon closer scrutiny, turns out to have been chaotic, so do we find that the DPRK’s state-owned firms are by no means monolithic or exempt from the profit motive.

The author notes the many distinctions among the nationalised firms, which are ‘classified into several categories (i.e. Special, 1st, 2nd, 3rd, etc.) in terms of their size and their importance in the national economy’. There is also a distinction between ‘national’ firms that are ‘directly controlled and supported by the central planning body, and the lower priority ‘regional’ firms that belong to regional governments.

In addition to the various categories of firms, there are other distinctions regarding the state institutions to which firms are connected. As the DPRK gradually decentralised its enterprise sector, firms became connected to one of four state institutions: the army, the Workers’ Party, the cabinet, and the regional governments. The largest share of the resources produced in North Korea’ are controlled by either the Party or the army, which have their own affiliated trading companies. This disintegration of the economy into those four institutional sectors, the author argues, means that ‘central planning has been virtually destroyed in North Korea’—confined only to a few areas.

The decentralisation of state-owned firms was accelerated in the early 1990s as a response to the severe economic crisis that followed the collapse of the Soviet Union. The author lists four key changes that emerged out of the crisis: (1) ‘Implicitly’ allowing trading in markets, (2) Opening the DPRK economy to the outside world and creating Special Economic Zones, (3) Decentralising the planning process to the level of firms and districts, (4) Allowing firms to have more autonomy for decision making.

Another aspect of decentralisation has been the liberalisation of foreign trade. Already in the late 1970s the DPRK began to permit certain large firms to engage in trade with foreign companies. A second wave of foreign trade decentralisation in the early 1990s allowed trading firms to ‘plan and execute foreign trade for themselves on the basis of their output capacity and economic conditions’. And the third wave of decentralisation, starting in 2002, made it possible for trading companies to directly sell imported good to consumers.

According to the author, ‘the decentralisation of foreign trade meant the de facto destruction of the central planning system’ because the autonomy to engage in foreign trade ‘implied that central planning could no longer control all the activities of these bodies’. Apart from the firms in the Special category, which ‘are given inputs in accordance with central planning’, all the other firms ‘must seek their own means of survival’.

Existing alongside that ‘official economy’, wherein nationalised firms are scrambling for profits, is an enormous ‘informal economy’. The author claims that North Koreans earn 62.7 percent of their ‘individual total income in the informal economy’ and obtain 59.7 percent of their food and 67.4 percent of their consumer goods through markets rather than the rationing system and official channels. Another remarkable characteristic of life in the DPRK is widespread bribery and corruption. The author writes that the ‘average spending on bribes in total household expenditures from 1996 to 2007 was 8.95 per cent, which translates into 6–7 per cent of GDP’.

In short, the closer one looks at the reality of state-owned firms, not to mention the huge informal economy, the clearer it becomes that profit is the driving force of production, as in every other capitalist country.

What was state capitalism?

The findings of Unveiling the North Korean Economy make it perfectly clear that the DPRK today is not ‘socialist’, probably even according to the author’s narrow view of that concept as centring on state ownership and central planning. But one still might wonder why industry was nationalised and agriculture collectivised in the first place. Why, in other words, was state capitalism (or what the author calls ‘socialism’) adopted as an economic model in many countries?

It’s no accident that most of those countries were only at the outset of capitalist development, with huge peasant populations and little heavy industry. In other words, they were in a position not unlike that of Japan or Germany in the mid-nineteenth century. And just as the state in those two countries drove industrialisation, so was it a driving force of capital accumulation in China and North Korea in the mid-twentieth century. 

The methods of the state-capitalist system were crude but effective in forging the material conditions and ‘human resources’ required by capitalism. But once state capitalism had swept aside the fetters to capitalist development and achieved rapid industrialisation, the system itself began to impede the ‘efficient’ (profitable) operation of individual capitalist firms.

In the Soviet Union, state capitalism was already reaching that impasse by the 1950s, as reflected in the economic reforms of Khrushchev. But the DPRK and China, still in the midst of their industrialisation, viewed the profitability of individual firms as less important than the pace of overall capital accumulation. Kim Jong-il and Mao Tse-tung denounced the Soviet leaders as ‘revisionists’ or ‘capitalist-roaders’ not merely to save their own skins as dictators but also because the contradictions of state capitalism had not yet become apparent in their countries.

Later, of course, the DPRK and China followed the same path as the Soviet Union, introducing similar economic reforms to give state-owned firms greater autonomy to pursue profit. Marx once wrote, in looking at the development of capitalism in his time, that ‘the country that is more developed industrially only shows, to the less developed, the image of its own future’. And this was the pattern in the twentieth century as well, with every state-capitalist country obliged to eventually implement Soviet-style reforms.

The DPRK leadership is walking the same tightrope, with even less room to manoeuvre because of its rigid political dictatorship. The ‘supreme leader’ and his cohorts recognise that providing too much autonomy to firms could undermine their own political legitimacy. And yet, in the end, even the dictator must follow the dictates of capital.

Michael Schauerte

Money-worship (1991)

Book Review from the April 1991 issue of the Socialist Standard

Hayek and the Market. By Jim Tomlinson, Pluto Press, £24.95.

Hayek has been a notorious life-long opponent of socialism, and not just of socialism but even of relatively mild reformist and trade union attempts to improve working class conditions within capitalism.

After the publication of his book The Road to Serfdom in 1944 nothing much more was heard of him until he re-emerged in the 1970s to provide intellectual ammunition for the Thatcherite wing of the Tory party. So Tomlinson’s short, readable but expensive book can serve a purpose on the principle of “know thine enemy".

An Austrian by birth. Hayek began his political life as a member of that country’s school of anti-socialism associated with the name of Ludwig Von Mises. Mises argued, that without buying and selling, money and prices it would be impossible to make rational decisions about what to produce and how to produce it; production solely for use and without monetary calculation was thus a mere pipe- dream. This was the argument against socialism. But the Mises school went on to argue that, even if buying and selling, money and prices exist, rational economic decisions would still not be able to be made unless prices were fixed by the free play of market forces. This was the argument against state capitalism and reformism (but which they also, either mistakenly or lyingly, called socialism).

Hayek’s main argument was directed at state capitalism and the concept of the central planning of all economic activity. He convincingly showed that the modern productive system was so complicated that it could not be planned from a single centre and that therefore some decentralization and autonomy for producers was a necessity. He went on to argue, however, that this made the market economically inevitable, an argument that is now accepted not only by open champions of capitalism like Thatcher but also by the likes of Kinnock and Gorbachev.

But this conclusion by no means follows, since why is it impossible to conceive of a system in which groups of producers would be responding not to market demand but to real demand as indicated by what people took under conditions of free access? Why could a system of production solely for use not be able to function on the same sort of self-regulating basis as the market is supposed to?

Hayek, however, ruled out this option in advance, arguing that there were only two choices: either free market capitalism or some form of statism. As he wrote in The Road to Serfdom:

The only alternative to submission to the impersonal and seemingly irrational forces of the market is submission to an equally uncontrollable and therefore arbitrary power of other men.

We deny this. The choice is not between the dictatorship of the market and the dictatorship of some state bureaucracy. A free, socialist society without either the market or the state is possible.

Adam Buick

Will socialism be centralised? (1983)

From the February 1983 issue of the Socialist Standard

Capitalist enterprises plan their production as far as possible in line with short- and long-term estimates of "effective” market demand for their products. Within the constraints of market limitations, decisions are taken “centrally” by small minorities appointed by the owners and controllers of capital. Socialist production decisions will differ from this in two major ways. First, in place of “market” demand, the limits of production will be set only by the total, freely expressed needs of people and by the absolute aggregate of available resources. Second, all decisions about production can be freely arrived at and implemented by the people whose lives they affect.

There are a number of reasons for centralisation in capitalism. As a system based on the competitive accumulation between separate units (companies, states), it has a tendency to produce increasingly large conglomerations of capital. With this profitable concentration goes a concentration of housing, employment, and power. Transport costs for getting workers to work and products onto the market are reduced by a dense concentration of population in urban centres such as London, Buenos Aires or Hong Kong. Three-quarters of the North American population inhabits less than two per cent of the land surface area.

The market system is often held up as a free, fluid and balanced arena of enterprise. The truth is the opposite. It is in the nature of the market system that there is an increasing amount of wealth in fewer and fewer companies, fewer and fewer shareholders. Companies or individual investors who fall behind slightly in the rat race go to the wall and fall out of the competition. The bigger, more successful units buy up the smaller units, or what is left of them, and grow larger still. This problem of uneven development operates on an international scale, as well as locally. The parts of the world where capitalism developed first, Europe and America, still contain greater concentrations of capitalist power than many other parts of the world. Several hundred billion dollars are now owed by "underdeveloped" capitalist countries to a handful of more powerful banks and states.

In the market system, the state tries centrally to regulate the competition between enterprises. There is intervention in the market by the state as a centralised expression of the interests of the capitalists as a whole, to try to regulate prices, profit, interest, wages (exchange rates internationally) and so on. The state is also used to exert political control over the working class of the world. Police forces, armies and courts necessarily involve a high degree of centralised power.

The state also often runs power supplies (gas, water, electricity) and transport services, with subsidies where necessary, in order to allow the capitalist class as a whole to control production profitably on a “sound” and safe foundation of reliable services. Again, class interests demand that the capitalist state be a highly centralised power, for the administration of property and accumulation.

There has been a certain amount of debate recently about the conflict between local autonomy and central control. This has included the attempts by some local councils to question the state control exerted by Michael Heseltine, and the London GLC “Fares Fair” policy being ruled illegal. What these developments demonstrate is how much the running of a world-wide profit system depends on the universal submission of social production to the profit-based dictates of the central power in each national state. This link between property and centralised (rather than diffused) control goes right back to the idea of the aristocrat on a landed estate. Sitting in the country manor-house, control emanates from the centre, across the expanse of the territory. The hierarchy of the power structure is reflected geographically. In the same way, ex-colonies which gain political independence such as India, Africa and Latin-America, have tended to remain economically weak in capitalist terms, relative to the old “metropolis” countries in Europe, for many years.

Democratic planning

None of the above factors of market competition, state power and uneven development can exist in socialist society. Democratically planned production in socialism cannot be "centralised". It will be global, conscious, controlled, and it can be described quite unequivocally as “planning” — but this need not imply centralisation. Local, regional and global councils, or other meeting points for the democratic discussion of ideas can be used to formulate and implement dynamic, flexible plans of production to meet needs. These resolutions can be initiated locally, passing through regional and global channels of liaison, and can then return to the local area for local implementation. World projects, such as space travel or the mass production of simple and essential goods such as paper or water, can also be initiated freely, locally, voluntarily, even if their implementation will require global co-ordination. The basis of socialist production is freely available, constantly modified information about what is being produced, where, how much and using what resources.

To avoid dismissing socialism as a distant future prospect, we must be prepared to think in terms of present institutions being immediately taken over for use by a socialist society. This includes present council and government offices and lines of communication, international bodies such as the United Nations, local community organisations such as housing co-operatives or even tenants' associations, and, perhaps most important of all, companies.

The means of wealth production so often referred to in socialist propaganda are organised at the moment into thousands of separate companies, each with its own head offices, distribution facilities, computers and so on. These networks of centralised power could be democratised for socialist use directly. Once the working class has taken over state power, the problem becomes purely an administrative one. At the moment, the forces of the state are used to defend property, in other words to step in and use violence if this process of democratisation were attempted now. Once the state has been taken over, however, it is a matter of using channels which are currently oneway, in two directions. For example, most companies have communications systems, from computers to notice boards, which allow workers to have handed down to them their wages and instructions. For a democratic control of production, all that is required is that each unit, whether it is a factory, a village, or a region, should comprise sophisticated networks which allow those involved in production to express their views. The desires of producers and consumers can be expressed individually, and collectively through votes in each unit, and these desires can be implemented in consultation with other units.

Clearly, we must consider in greater detail how the transition can be made from the present dictatorship of the boardroom, to the democratic control of society. For example, most companies today employ market analysts to estimate “effective” demand, and advise on production levels. In a socialist society, it may be necessary to elect people with the task of co-ordinating between units and regions, and matching “supply" to “demand". This task is less daunting than it may seem, since the modern computer systems allow inputs and outputs to be constantly monitored and displayed on a screen. Also, if too much of something is produced relative to what people decide they need, it can be stored or disposed of without too much trouble. In capitalism, on the other hand, the “surplus" production of commodities relative to market demand can lower prices, wreak havoc through the world market, and lead to crises and depression.

Clifford Slapper

Beyond Capitalism (1993)

Book Review from the June 1993 issue of the Socialist Standard

In 1968 an article written by a member of the Socialist Party, entitled "Smash Cash", appeared in the magazine OZ. Some years later the author of that article, David Ramsay Steele, was converted to the free market ideas of Ludwig von Mises which he expounds in a book just published, From Marx to Mises: Post Capitalist Society and the challange of Economic Calculation.

Mises (1881-1973) was an Austrian economist whose disciples included Hayek and Lionel Robbins. Early this century, against a background of ascendant Bolshevism, he developed what Steele calls "the most powerful objection that has been made to Marxian socialism". In the 1920s and 1930s, in the wake of the collapse of the Bolshevik experiment of "war communism" (1918-1921), Mises's ideas were widely discussed but from the 1940s began to fade as the fad for Keynesian interventionism grew. But for the failure of, and recent retreat from, Keynesianism itself, Mises might have remained an obscure nonentity. However, the "new groundswell of anti-socialist pro-market opinion" that emerged in the 1980s has prompted a reappraisal of the man — particularly since the collapse of the Soviet empire.

So what is the Misesian objection to socialism? Some of the evidence presented can be summarily dismissed. For example, Steele refers to the failure of "war communism" under the Bolsheviks but the pre¬conditions for socialist revolution did not exist in Russia at the time. The means of production were insufficiently developed to permit a socialist system to function, (even assuming you could have "socialism in one country"). Nor was there the necessary level of popular support to bring it about. Reference to the fatuous claims of "Bolshevik leaders" that they were "abolishing commodity production and money" is irrelevant; you cannot impose socialism on an unwilling (and still largely peasant) population, unaware of what it entails.

Such specious evidence aside, there remains the theoretical argument that there is something in the nature of socialism that makes it inherently untenable. This has two basic components which, though linked, can be separately analysed.

Central Planning

Steele points out that planning as such is by no means incompatible with the market. Within the market there are numerous plans but the interconnections between them are unplanned or "anarchic". The proposal to go beyond planning the parts of production to planning the whole of it, thus requiring a "single vast plan" dispensing with the numerous plans of the market, is what has generally been called "central planning", (though "total planning" might convey the meaning better).

But could a total planning of worldwide production be achieved? Production today is integrated through a complex division of labour. The production of even a simple item is inextricably bound up with the production of numerous other items. When we consider that these in turn require inputs of various sorts for their production, we have an inkling of just how difficult it would be to centrally plan in advance output in every conceivable line of production.

Theoretically, this could be done by constructing a vast "input-output" table. But, for logistical reasons, the best this could achieve is a drastically simplified picture of the input-output linkages that make up a production system; at best the number of items it could handle would probably amount to a few hundred. While each might represent a broad category of goods lumped together for convenience, in reality there are hundreds of thousands of different goods so that any decision made on the basis of such crude aggregated data is likely to result in gross misallocation of resources.

But the problem would not end there for once the Plan has been formulated, assuming it could be, it would require considerable coercion to implement it: how else would it be possible to ensure that targets specified by it were met? This would put it at odds with the democratic nature of a socialist society. Democratic participation would be precluded since this requires informed decision-making whereas no individual can possibly absorb or utilize more than a tiny fraction of the information to operate the whole production system. Inevitably, the power to make decisions would gravitate into the hands of a central administration (or re-emergent state).

According to Steele, "central planning" lies at the very heart of the Marxist vision. Whether Marx and Engels did themselves support Steele's concept of central planning is unclear. Some of their remarks suggest strongly that they did; others suggest the opposite, as Steele himself concedes (p. 316). This ambiguity is well captured by the phrase "anarchy of production". Steele interprets this as pejorative reference to the fact that the total pattern of production is unplanned but it could equally allude to the ungovernable laws of a capitalist economy which manifest themselves through the trade cycle.

A recession occurs not simply because there is unbalanced growth between different sectors of the economy (which might imply the need for centralized planning) but because of the knock-on consequences of such growth within the context of a market economy: an economy-wide contraction of production because the monetary flows are interrupted. As Marx pointed out, it is because of "the very connection between the mutual claims and obligations, between purchases and sales", that disproportionate growth leads to recession (Theories of Surplus Value, Chapter 11, 4c). Once you remove the market you break that connection, then any overproduction of some good no longer has a knock-on effect on the rest of production and can be remedied simply by consciously adjusting output to the level required. In this sense "conscious social control" replaces the "anarchy of (market) production".

Steele tells us that Marx set much store by the supposed tendency towards centralization in capitalism — and thus, following Steele's logic, a steady diminution in capitalist anarchy — since it would lead to the "breakdown of the rationale of capitalist production according to the law of value" (p. 72). Yet, curiously, we find Engels in Socialism: Utopian and Scientific saying the exact opposite, that "anarchy" in capitalism grows to a "greater and greater height". This is hardly consistent with Steele's understanding of "anarchy of production" though it does square with the view that capitalist crises get progressively worse.

Perhaps Marx and Engels were at times inconsistent or muddled on this question. But why should it concern us? We are not dogmatists; if they were advocates of central planning in the sense of total planning, we would dissociate ourselves from this aspect of Marxism, and for the best of reasons: a centrally-planned economy is neither feasible nor compatible with the nature of socialism.

What really matters is not what Marx and Engels may have said, but what a rejection of central planning entails. In a model of socialism in which total production is not centrally planned there would be, as in capitalism (and in Steele's sense of the word) an "anarchic" or spontaneously ordered system of production. But there the similarities would end.

Local production

Steele does acknowledge the existence of models that reject both central planning and the market, one being Kropotkin's "anarcho-communism". According to this, "groups of producers (would) govern themselves and federate for occasional common purposes" (p. 217). Such groups would effectively organize production on self-sufficient lines but, in Steele's view, the imposition of local autarky would precipitate a "violent reduction in living standards" (p. 322); it would entail the disintegration of the spatial division of labour and the comparative advantages of regional specialization. Whatever the merits or otherwise of this argument, we do not have to accept that the only alternative to central planning in socialism is localized autarky. In fact the Socialist Party has long argued that socialist production would be carried on at several levels — local, regional and global — though Steele implies incorrectly that this is a relatively recent development and that until the 1980s the Party supported central planning (p. 417).

There may of course be a tendency to produce more things locally in socialism than at present. But given that there will remain a considerable degree of interaction between communities (however defined) in the form of material flows, on what basis will these interactions occur? To suggest that only the market can integrate worldwide production and that "inter-regional movements of goods" cannot be "regulated without trade or prices" is mistaken; it is to fail to distinguish between market-exchange and what anthropologists call "generalized reciprocity" under which goods are transferred between and within communities on the basis of giving and receiving rather than buying and selling.

Generalized reciprocity is a mode of transaction in which neither the value of what is given is calculated (it has no price) nor the time of its "repayment" specified. It thus denotes a kind of social obligation — that we do not simply take from society without giving back something in return — as summed up in the social rule "from each according to their ability to each according to their needs". In this sense, socialism can be characterized as a system of generalized reciprocity.

Economic calculation

Since total planning is an unworkable proposition, it would suffice to show that it was essential to socialism to prove that socialism itself could not work. Steele does not exactly pursue this line of argument; he seems to regard the matter as secondary to his main argument that, in the absence of market prices, economic inefficiency will result, leading to a significant decline in output. This is the so-called "economic calculation argument".

According to this argument scarcity is an unavoidable fact of life; it "applies to any goods where the decision to use a unit of that good entails giving up some other potential use". In other words, whatever one decides to do has an "opportunity cost" — that is the opportunity to do something else which one thereby forgoes; economics is concerned with the "allocation of scarce resources"; the most efficient allocation is one that uses up the least resources in the production of any item and thus leaves the most resources over for other uses, so mimimizing the opportunity costs of producing that item.

Steele provides a hypothetical examples of a "widget" which can be produced by three methods (p. 6): Method A (5 lbs of rubber and 5 lbs of wood), Method B (5 lbs of rubber and 4 lbs of wood) and method C (4 lbs of rubber and 5 lbs of wood). Clearly, B and C are more efficient in terms of resource use than A but how do we know whether B is better than C or vice versa?

According to the economic calculation argument, this requires being able to compare different factors of production, like rubber and wood, and that means reducing them to a common unit. By adding up the total costs involved (expenditure) and the benefits gained (income) in terms of this common unit, we can determine which particular method is most economically efficient by the magnitude of net profit it yields. Of course, there may not be any net profit, in which case it would be uneconomic to produce widgets; the value of resources used up in making them would exceed the value of the widgets themselves and there would be less resources left over for other uses.

According to Steele, such calculations are made possible by virtue of the existence of money; socialism would rapidly regress into chaotic inefficiency unless it can replace money with some alternative that enables society to continue to make such calculations. However, he does concede that capitalist entrepreneurs who make these calculations may often get their sums wrong; given the "anarchic" nature of capitalist production they must rely on shrewd estimates. But what matters is that there is some "objective test of the accuracy of (these) estimates" which profit and loss provides by rewarding those whose estimates are correct and weeding out those whose estimates are incorrect.

Thus, the market process is "self-correcting" while socialism supposedly lacks such a mechanism and has no way of discovering least-cost factor combinations since it has no common unit by which to make cost comparisons. One proposal to get round this problem is that of labour-time accounting with labour time serving as a common unit of cost. But this is beset with numerous difficulties, not the least of which is how do you weight different kinds of labour.

Stock control

There is, however, another proposal which Steele considers which, in fact, turns out to be the definitive answer to the economic calculation argument — namely "calculation in kind". By definition, this assumes that you do not need a common unit of calculation as such a need exists "only where there is commodity exchange". Steele concedes that "some calculations, even within the market, can be done in kind" (p. 86), but believes the scope for this is limited. He also contends that it fails to address, the "fundamental question of how to compare the costs of alternative aggregates of factors" (p. 123), but this only assumes what it needs to prove: that such comparisons are necessary.

Given that socialism will still need to concern itself with the efficient allocation of resources (among other things), how will this be achieved through calculation in kind? The answer rests crucially upon a recognition that production in socialism cannot be totally planned in advance. Steele stumbles over parts of that answer but the long shadow of central planning that pervades his book prevents him from seeing it. This problem is compounded by the fact that the major proponent of calculation in kind to whom he refers, Otto Neurath, was himself an advocate of central planning.

Decentralized production entails a self-regulating system of stock control. Stocks of goods held at distribution points would be monitored, their rate of depletion providing vital information about the future demand for such goods, information which will be conveyed to the units producing these goods. The units would in turn draw upon the relevant factors of production and the depletion of these would activate yet other production units further back along the production chain. There would thus be a marked degree of automacity in the way the system operated.

The maintenance of surplus stocks, as Marx pointed out, would provide a buffer against unforeseen fluctuations in demand (Capital Vol.2) but it would also be relevant to the task of efficient allocation. This is so because of the inverse relationship between the supply of any good and the need to economize or use less of it: the scarcer a good the greater the need for economization.

An analogy might help here. According to the 19th century agricultural chemist, Justus von Liebig, there is a "law of the minimum" whereby plant growth is limited by the availability of whatever nutrient is scarcest — usually fixed nitrogen. Some working principle analogous to the "law of the minimum" would apply to the allocation of factor inputs in socialism.

Suppose that the demand for a good X as registered through the system of stock control rose permanently but that the production of resource A was insufficient to meet this increased demand. In the face of an already committed pattern of factor allocation, the sensible solution would be to search for some more abundant resource B that could substitute for A. At the same time the falling stocks of A would constrain the multifarious users of A to economize on it.

This feedback permits a continual process of discrimination in the use of resources according to their comparative availability. In short, it proves precisely the kind of self-correcting mechanism which Steele claims is the exclusive property of a market system.

Market tyranny

With this claim rebutted, most of what remains of the theoretical argument against socialism falls away. For example, Steele contends that much of the economic activities carried on in capitalism, which socialists regard as wasteful, is in fact "productive". But this is to be expected: if you cannot accept the possibility of an alternative to the market then anything that is functional to the operation of a market economy must, by definition, be "productive". Conversely, once that possibility is accepted the appalling, ever-mounting burden of capitalist waste becomes glaringly evident.

Capitalism, with its obsessive preoccupation with reducing costs is, in many respects the very antithesis of efficient production. We do not refer here only to its obvious structural costs; there is also the important category of externalized costs to which Steele makes barely a passing mention. These arise out of the competitive pressure on capitalist enterprises to pass on — or "externalize" — some of their costs, the repercussions of which, as many documented cases of environmental disasters testify, far exceed any savings that might have been achieved for the sake of profit.

Despite its basic anti-socialist position, this is a book that is both highly informative and lucidly written; it has much to recommend it. But perhaps, ironically, its most enduring value will be as powerful stimulus to fresh thinking about the kind of society we want, a society free of the tyranny of the market.

Robin Cox