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Market socialism: oxymoron or just plain moronic?

KFCThese days the ‘99%‘ and ‘Another World is Possible‘ are slogans fluttering atop many a radical social movement. Yet on those occasions activists’ deliberations turn to what a post-capitalist future might look like, there will be a lot of talk about participatory democracy, community networks, the decentralisation of power and so on. The state might (might!) occasionally get a look in as something that can facilitate the building of the new society, but what definitely will not are markets and market-type mechanisms. And it’s entirely reasonable why they should not.

Ostensibly, the world economy has had 35 years worth of free market fundamentalism. The tearing down of tariffs and protectionism has been accompanied by an orgy of privatisation, speculation, and offshoring. Markets are the only political game in town. They have been introduced by hook and by crook into public services. In country after country, tax payers cash have been thrown at markets to lubricate them.

Even more, with the banking crisis, they have saved markets from their tendency to eat themselves. Anywhere and everywhere, markets have proven themselves the handmaidens of the powerful. Obscene wealth concentrated in few hands and environmental destruction condemns them in socialist eyes.

Or does it? I’m no fan of markets for exactly these reasons. Philosophically speaking, socialism, if it is anything is the regulation of a complex, advanced industrial society by its participants. It’s about recognising social life as a conscious, collective endeavour. For socialists heavily influenced by Marx, like me, there is plenty of extra ammunition too. Markets are one aspect of the elemental forces capitalism has unleashed, they are the very instantiation of the estrangement of human beings from human beings.

Capital confronts us in a number of guises. It is an alien power we have to submit ourselves to in the workplace. It, to greater or lesser extents via the medium of employer/boss/supervisor subjects us to diktat and discipline. Capital also confronts us as many capitals. They sometimes compete with each other for our attention, as courtiers coveting our purses and wallets.

They also compete with “our” (employing) capital, threatening to drive it out of business, take it over, make life turn hard; their competition systematically undermines our place in the world, the sense of our security. Yet this is entirely artificial. Markets are the outcomes of purposeful human activity, albeit one where the invisible hand wields an iron rod. Its anarchy is the direct corollary of workplace despotism, the less individual capital can make its own way against other capitals, the more it bears down on its workers to accumulate more. Capital is our monster, the market is its habitat. It is a creature born of our collective powers, which it has subverted and returned to blindly dominate, subjugate and compel.

As with most things Marx-related, there is another side. For all the exposure and critique of commodity fetishism, Marx conceded that in the lower phase of communism after the seizure of power by the immense majority in the interests of the immense majority, for a time those societies may still be grounded in ‘bourgeois right’. In other words, after the glorious day has been and gone there will still be private property, codified law, the inequitable distribution of resource (pay differentials), and so on.

The role of organised proletarians here is to manage society under the circumstances in which they find it and proceed to build socialism using what they have. After the revolution comes reform. Despite socialist hostility to markets, and given the impracticality of leaping from capitalism to the society of associated producers in short order, a red government, be it revolutionary or having come to power as per received constitutional niceties would have to treat with the market economy.

Does a socialist society decide to live with it and change it over time, or rip it all out and begin afresh with a democratic plan – albeit at a price of further social dislocation and conflict?

Market socialism tries to go some way to assuage the understandable level of hostility socialists have towards markets. Market socialism got some impetus from Alec Nove’s influential The Economics of Feasible Socialism, which appeared in 1983. Here, Nove approached issues of institutional design for a socialist society, how its economy might work, and so on. But market socialism as a distinct set of ideas broke cover toward the end of the 1980s.

If one wanted to be uncharitable, it could be read as a left capitulation to the right’s rampant market agenda. Old Labour shibboleths around nationalisation were out of touch and out of time. Bureaucracy was under attack here and in the command economies of so-called actually existing socialism; so groups of thinkers, academics and wonks drawn from the broad Labourist/Fabian tradition looked at markets afresh. And in policy paper after article after book chapter, market socialism was fashioned.

Simply put, markets and capitalism are not one and the same. Markets can neutral allocative mechanisms that can aid socialist development, empowerment and efficiency; but only if they are disaggregated from private ownership of the means of production. Markets yes, capitalism no.

The now forgotten edited collection Market Socialism by Justin Le Grand and Saul Estrin (1989) proved something of a landmark text, bringing together contributions on virtually every aspect of the topic. What united all the papers were some shared basic propositions:

  1. Markets act as self-organising information sharing/incentive indicating economic systems. Ideal typically, price as they appear on the market are the point in which they are sold. This relays information back to the manufacturers that this is the market rate and can reasonably expected to continue selling at that price. But as well as providing information, it acts as incentive too. If x quantity of commodities are sold at that price that allows the firm to recoup costs and yield a profit margin, our producer/supplier rushes more commodities to market to yield more profit, and so on. This is why markets over time can meet a bewildering diversity of need/demand.
  2. There is a relationship between markets and freedom. Markets are economic systems that respond to individual preferences. Employers compete to attract the best staff, brands compete among themselves to sell their wares, in total capital-in-general offers and endless multiplicity of choices. Hence market capitalism inculcates a certain form of subjectivity that is capable of making decisions on the basis of the information available to them and choosing as autonomous, independent beings. The encouragement of critical faculties of a sort does not sit well with authoritarian/dictatorial regimes with liberal market economies. The two cut against one another – either a regime shuts down a market or the critically-minded subjectivities markets have engendered will shut down the regime.
  3. Competition can be a great leveller. It drives efficiency and innovation and cuts out the sclerotic and shoddy. Provided, of course, markets are embedded in an institutional and regulatory context entirely different to those pertaining under capitalism. For example, depending on the rules of the game, markets can theoretically undermine accumulated economic advantage, as per this radical carbon credit trading scheme. Abstracted from capitalism, there is no reason not to believe that socialist market competition cannot deliver the goods, keep the lights on, and have everything running along without the recrudescence of inequalities and private economic power.

In the context of collapsing bureaucratic “socialism” in Eastern Europe, the transition in China from Stalin-style commandism to an authoritarian market socialism (or is it state capitalism?), and of Labour’s three straight election defeats on a “traditional” platform, it’s understandable why this emerging set of ideas turned heads.

Market capitalism appears to beat capitalism at its own game. Liberated from private ownership, schematically it promises market efficiency and the ability to meet the niche, individual needs of consumers. Compare and contrast with the USSR and its clients. The bureaucratically planned economy existed only in theory. Behind the imposing edifice of Gosplan, the much admired plan, the “proletarian property forms” were anarchic as any market – except perhaps even worse.

Production targets did not meet demonstrable need. Large firms leaned on bureaucrats for extra resources under the plan irrespective. There was no impulse to quality control, let alone innovation. And at the margins, where the plan broke down not only citizens but entire enterprises traded goods and services on the black market. And, nominally at least, if there is one plan there can only be one agency with the authority, expertise and vision to drive it. That, of course, was the Party.

We should really talk of market socialisms rather than market socialism. There is market socialism of the middle range, like this:

The market socialist wishes, where possible, to reap both the efficiency and libertarian characteristics of markets whilst promoting much greater equality than we presently experience. The market socialist society will inevitable require a strong democratic state … with powers to intervene and regulate where markets fail, with powers to promote competitive conditions and undermine monopolies, and, above all, with powers to promote equality of freedom. (Abell p.80, in Le Grand and Estrin 1989)

There are weak market socialisms that stress what is now wonkishly termed ‘predistribution’ (of which more another time). And there are very strong variants. How does a society in which capital has been expropriated from its owners, ownership and control have been hived from one another (and is strictly enforced), and the typical market actor is a worker cooperative, sound? The state, itself thoroughly democratised, consistently intervenes to ensure the market remains within certain parameters, that it will forever be society’s servant, not its master.

The purpose of this piece is to provide the basic ideas of market socialism in order to explore them further. Socialism might be as far off the political agenda as it has ever been, but there is no reason why the possibility of what an alternative society might look like should not be discussed. After all, if we are serious about socialist politics – if we want it to paint this century in the vibrant tones of freedom from tyranny, inequality, and want socialism has to have answers about what can be done and how things should be done. It’s more than a random shopping list of demands to organise working people behind; it has to link interest and vision together in something credible and so realisable you can almost touch it. This is the spirit in which I’ll be returning to market socialism in the future.


  1. David Ellis says:

    Market socialism is a Stalinist invention also promoted by the more left wing social democrats. It is a meaningless reformist substitute for revolution. Of course when the means of production are socialised there will remain money accounting, wage differentiation and small businesses but these capitalist remnants will be on notice.

    In opposition to feudal absolutism the capitalists proposed the anarchy of markets. But this is not human freedom it is alienation whereby we alienate our ability to act consciously, i.e. actually be free, to invisible forces out of our control. It is an abdication of what human freedom really means. The only freedom markets offer is the freedom to be a c**t and see society and other individuals as merely a means to an end rather than an end in themselves. It is freedom for capitalists and hell on earth for the rest of us.

  2. David Ellis says:

    Marx identified socialism as the lower stage of communism. That point where the old world is not fully overcome. There is no need for further differentiation with this bogus notion of market socialism.

  3. James Martin says:

    Good article. Far too often we see and talk socialism in terms of generalised abstract or narrow particular politics, but forget the economic foundations that must underpin how wealth is both created and distributed.

    The Soviet Bloc economies were never static (although they appeared that way), and there was huge variation over time in terms of how the planned economies worked (or didn’t). And of course Lenin himself was not adverse to using capitalist market mechanisms when needed (the NEP period).

    But it is worth remembering examples like the DDR where right up to the 1970s living standards was in advance of West Germany. Why that balance became inverted is both key to understanding the fall of the Wall and the limitations of a planned economy that lacked genuine democratic input from below, which in turn led to stagnation and alienation.

    Does all this matter now in the UK? Yes, of course. The NHS is being pulled and battered by attempts to marry a socialist command model with marketisation and part-privatisation. If we can offer the real solution that maintains the NHS socialist nature and at the same time introduces workable democratic influence in how its resources are directed at local and patient level then we will have a model of how other key industries (rail and energy for starters) can be nationalised but in a way different to that of the past, and where there is both employee and consumer mechanisms to influence and direct how things are done. Command economy from below if you like, which in turn becomes the mechanism for wealth redistribution elsewhere.

    None of this is to ignore the politics of course, as without political power this economic transformation cannot happen. However, political power without economic control is, as we have found time and time again, an illusion.

    1. David Ellis says:

      Politicallly it was possible in backward Russia to leap over the need for a bourgeois democratic revolution and go straight to the socialist revolution. However leaping over the stage of capitalist economic development proved not possible and the Soviet Union was successfully strangled by imperialism with the help of Stalinism. What was missing from the Stalinised command economies is the same thing missing from Corporate Capitalist economies and the NHS: workers’ democracy.

  4. David Pavett says:

    It is really important to discuss issues like this so thanks to Phil Burton-Cartledge for taking the time to set out some of the issues. The decline of socialist thought, not least in the Labour Party, means that if questions about the nature of socialist society are not kept alive then the default position inevitably collapses to the dogma of capitalist society (what has all too clearly happened to Labour).

    The nature and role of the market in capitalist society is surrounded by a whole series of myths about “freedom”, “innovation” and so on. So it would be perhaps useful to be able to state clearly just what a capitalist market is before we move on to asking in what way market mechanisms might persist, albeit in transformed conditions, under socialism.

    It is easy to decry the impact of “free market” economics – we all do it. What is not so easy is to understand clearly the distance between the rhetoric and the reality. For example Mariana Mazzucato has shown how important the state has been in the leading capitalist states in driving technical innovation (in her book The Entrepreneurial State). Then there is the issue of the development of non-commodity relations which have developed within advanced capitalist societies (e.g. in the health service). There is also the issue of the way markets are manipulated by powerful interests.

    So while rejecting “market economics” we are not, presumably, saying at the same time that we want to remove the ability of individuals to choose for themselves the bread and cheese that they prefer to eat. Neither should we imagine that socially owned production can by-pass the necessity of detailed calculations of labour-time and material costs (however measured). Nove raises the question about the degree to which this is possible in advanced industrial society.

    And then there is the issue (discussed by Nove in his Economics of Feasible Socialism) of democracy, when it is appropriate and when it is not. No one in their right mind wants a local train drivers collective to vote on whether the 9.15 train should leave at 9.00 or 9.30 instead. So there are big issues of organisation, openness and democracy.

    I share P B-C’s respect for Marx but I find it difficult to resist the conclusion that his vision of the simplicity of production and exchange relations in communist society were sketchy in the extreme (maybe rightly so) and that some of his assumptions about how transparent relations would be with the removal of private ownership of the means of production were simple to the point of being simplistic.

    I find all this immensely difficult to think about. I will certainly get hold of the book by Justin Le Grand and Saul Estrin that P B-C mentions. I hope that this discussion will continue here and elsewhere and that it will be extended to other issues of the nature of socialist society.

    1. David Ellis says:

      Democracy stops at the factory gate and the office turnstyle and workers when they go into work are walking into what is basically a tyranny. Committees of all grades of workers should be established in every workplace and industry to challenge for management and argue for social ownership. Worker-elected managers and leaders to replace the shareholder and Old School Tie imposed fat cat executives who treat what they rule as a private trough.

      1. David Pavett says:

        We can all agree that working for objectives which one has no part in deciding is a form of oppression. The issue with respect to the possible role of markets under socialism is surely about where those decisions are taken. Modern industry and commerce has very hierarchical structures and some of those hierarchies areas from purely technical needs (Nove gives the example of the structure of the oil industry in the USSR – but the same argument applies generally). That means that people in a given place will not be able to decide at that level what their tasks are. So, there is a debate to be had about where democracy is required and where it isn’t.

        1. Robert says:

          All we need now is a socialist party, and we will be on our way, to where and what is the question..

          1. David Pavett says:

            Over a century since the founding of the Labour Party, and of socialist parties around Europe (not to speak of the experience of the communist parties), provide ample evidence that simply not liking capitalism and of wishing for a vaguely defined alternative (to be achieved by unspecified means) just won’t work. We need to discuss what socialism means in at least the sort of detail that Phil B-C has attempted above.

  5. Peter Rowlands says:

    Ever since reading Nove’s book I have always thought this to be an important debate, but few have appeared to agree, so well done to Phil for having kicked this off. It is however worh making the distinction between Nove’s concern, which was broadly the extent to which market mechanisms should operate in socialist economies, and the extent to which simulated market situations can be applied to the provision of services which themselves operate on a non market basis.Under Blair this was developed for the NHS and other areas, but most on the left opposed it on the basis that it paved the way for privatisation and was unnecessary in terms of promoting a better service.
    Nove wrote The Economics of Feasible Socialism in the early 1980’s ( I remember hearing him speak about it at a LCC conference in 1984) when the Soviet Union and China were still command economies,and much of the book looks at the operation of their economies. The socialism he advocates is market based, paticularly for small or one person firms, but within the context of substantial state regulation, ownership, control and non market provision.
    In a relatively advanced society a command economy is a non starter( although it may be appropriate for much poorer economies).Nove’s model points the way forward, and more on the left need to look at it.

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