Notes taken from Bottomore's book "The Socialist Economy: Theory and practice"

Notes taken from Tom Bottomore's Book 

"The Socialist Economy: Theory and practice"

 Introduction: Socialist economy and socialist society

·        Socialism, as a political doctrine and a social movement, has never set itself purely economic aims. From the beginning its ideal was the creation of a new type of society, or, as Gramsci expressed it, 'a new civilization'. Some critics indeed have argued that socialist thinkers, at any rate until the 1920s, largely ignored the question of how a socialist economy would actually function; and Mises (1920, 1922), in one of the most extreme and vitriolic attacks, claimed to show that it would not function at all.

·        There are, to be sure, diverse conception of socialism , but what is common to almost all of them is a conviction of the fundamental importance of the economy in shaping social life as a whole: an idea which found its most trenchant expression in Marx’s social theory. I shall interpret that theory , which have been reformulated, modified and reconstructed by many later thinkers, not as asserting a universal  and strict determination of the political and cultural ‘superstructure’ by economic ‘base’, but as arguing that the manner in which human beings produce and reproduce the material conditions of their existence is  a major factor in the creation of a whole ‘form of life’, or, in Marx’s own words, that the ‘mode of production should not be regarded simply as the reproduction of the physical existence of individuals. It is far more a definite form of activity of these individuals, a definite way of expressing their life, a definite ‘mode of life’.  

·        In modern capitalist society, according to Marx's analysis, the social relations of production, which establish the framework of a distinct mode of life, are constituted by the capitalist ownership of means of production and by wage labour; and the essence of the socialist alternative- not only in its Marxist’s versions - has always been the transformation of private ownership into social ownership, which Marx expressed by referring to a future society of 'associated producers"

·        Hence, in examining the achievements and problems of the present-day socialist societies we have to consider not only what is produced, in what conditions it is produced, and the efficiency of the process of production as a whole, but also how the product of the social labour process is allocated and distributed. There are, of course, great differences between the socialist industrial countries and those socialist countries of the Third World which have only recently embarked on the process of economic development and industrialization; but what is evident in all these societies is the sustained commitment, from the outset, to the widest possible extension of public services education, health care and other welfare services, the provision of housing, public transport and recreational facilities within the limits of their economic resources; and in this respect they have achieved some notable successes.

 

·        The economy, therefore, has a crucial importance in the creation of a socialist society in two respects.

 

First, the social ownership of the principal means of production is intended to eliminate the domination of society by a particular class, and to establish the conditions in which all members of society can participate actively in the management and development of their productive resources, including the use of their own labour power. But this goal of widespread participation has encountered many obstacles in the actual development of socialist societies, and in the past few decades numerous projects and experiments designed to increase participation by a thoroughgoing reform of the economic system have taken shape. These changes, the controversies which surround them, the new directions of socialist thought with regard to central planning, self-management and markets, are major subjects for analysis in the following chapters.

 

Second, an efficient, well-managed, productive economy is an indispensable condition for attaining the broader aims of socialism - the elimination of poverty, increase of leisure time, extensive social services, a high level of education and general culture. But in this respect, too, the existing socialist societies have faced serious difficulties, and ever since the 1920s there has been much debate about the efficiency of centrally planned economies. This question, which will be examined in Chapter 3 below, raises some larger issues, broadly of two kinds.

In the first place, the problem of efficiency may be directly linked with that of participation, and the alleged deficiencies of central planning, as we shall see, may be explained in part by the stifling of initiative, responsibility, choice and decision, among individuals and groups in society at large. But second, we have to consider the notion of efficiency itself in a wider context. Α socialist economy serves a socialist society, and the rationalization of production in order to achieve an ever increasing flow of material goods should not be given an absolute priority regardless of such considerations as working conditions and hours of work, the environment and the depletion of natural resources, or whether what is produced adds appreciably to the quality of life and the level of civilization. These are, however, very complex issues and Ι shall examine them more closely in later chapters.

 

Chapter 1 The nineteenth-century vision

·        The ideas of 'socialism' and 'communism’, and socialist movements, spread rapidly in Europe from the 1830s. It then developed in a great νariety of forms: in socialist doctorine from the Saint Simonians to the Marxists; in social experiments, and the literature about them, inspired by Robert Owen, the Fourierists and many others; in major political movements during the revolutions of 1848 and in the Paris commune; and in social movements which created trade unions, cooperative societies and a host of educational and cultural institutions.

·        Marx and Engels, in the Communist Manifesto (1848) were highly critical of the early 'utopian socialists", observing that because 'the economic situation . . . does not as yet offer to them the material condition for the emancipation of the proletariat’.  But the Utopian element did not disappear from the socialist movement, and indeed it revived strongly towards the end of the century in two widely read and influential novels, Edward BeIIamy's Looking Βackward (1887) and William Morris's News from Nowhere (1890). Ιn both cases the effective functioning of the new social system depended ultimately υpon a radical transformation of human nature, so that the sentiments favourable to peaceful cooperation, social responsibility and non-acquisitiveness became predominant. Morris had little to say in his novel about the economic organization of his Utopia, but Bellamy, on the other hand, devoted much attention to economic questions and conceived the economic structure of the new society as the outcome of the trust movement in American industry: 'the epoch of the trusts had ended in the Great Trust' (1887, ρ. 41). Industry would be centrally directed by the government and production would be carried on by an 'industrial army' in which everyone between the ages of twenty-one and forty-five would serve.

 

·        Although Marx rejected utopian socialism as having been largely superseded by the development of the working-class movement, there were undoubtedly Utopian elements, as well as many unresolved problems, in his own brief and scattered comments on the future 'society οf associated producers".  As Heller (1976, pp. 118-30) has noted, in his conception of this form of society 'Marx is working with an entirely new structure of needs' in which human labour will (a) cease to be 'alienated' (i.e. performed under external compuIsion), and (b) become travail attractif (i.e. 'a field for the self-realization of the human personality' and hence a vital need). But these two aspects are not treated by Marx in precisely the same way in different writings. In the Grundrisse both conditions are met: labour ceases to be alienated and it also becomes travail attractif (as intellectual labour). In Capital, vol. III, however, Marx declares that labour and material condition always remain a ‘realm of necessity’. And the realm of freedom only begins where labour ceases.; all that can be achieved in the spere of material production is a humane organization of the labour process as a cooperative activity and the direction of production to the satisfaction of ‘true social needs’. But as Heller pertinently asks : how can ‘true social needs’ be measured: how can the the diversity of individual needs and their their rapid changes be provided for; who makes the decision about how productive capacity be allocated? On the last point, Marx would no doubt have replied: everyone (i.e. all the associated producers). Yet the difficulties are evident and, as Heller comments: ‘ How can every individuals make such decisions? ‘ Marx did not answer this question, because for him it did not arise . For us, however in our times, it has become perhaps the most decisive question of all”.

·        In the nineteenth century, at all events, the νarious currents of Utopinan Socialist thought played an important part in the creation and development of new types of social organization: the early forms  of  trade unionism; the cooperative factories - described by Marx (Capital, νοl. III, ch. 27) as a new mode of production 'within the old form' - and the broader consumer cooperative movement; and Friendly Societies as a major form of mutual aid. At the same time socialist ideas began to be more widely and systematically diffused through the development of mass political parties. Some of these parties were Marxist; notably those in Germany and Austria, which were growing rapidly by the end of the century and had created for millions of workers a distinctive way of life that has been described as taking on the character of 'a state within a state' (Nettl 1965). Others were created either as the political arm of the trade union movement , concentrating on piecemeal legislative changes to improve the conditions of workers - as was largely the case with the Βritish Labour Party - or more generally as parties which conceived the attainment of socialism as the outcome of a gradual process of economic and social reconstruction rather than a sudden revolutionary transformation.

·        By the end of the century the outcome of these reforming activities came to be seen by some socialists as an important element in the changes in capitalist society which required a more ‘gradualist’ conception of the transition to socialism. One of the most influential formulations of this view appeared in a series of articles on ‘problems of socialism’ by Bernstein (1896-8), subsequently expounded more comprehensively in a book (1899) which set off the ‘revisionist debate’ among Marxist socialists. Bernstein’s arguments were directed primarly against ‘economic collapse’ theory of demise of capitalism and the advent of socialism and against the conception of an increasing polarization of classes, accompained by intensifying class conflict in capitalist society. In the last chapter ο! his book Bernstein discussed 'the tasks and possibiIities of social democracy’ in the Iight of his revision of Marxist theory. and dealt with three issues. First, he drew attention to the importance of cooperative organizations as 'the easiest accessibIe form of association for the working class' (ρ. 125) which 'bear in themselves enough of the element of socialism to develop into worthy and indispensable Ievers for the socialist emancipation' (ρ. 187), though he was critical of those conceptions - Utopian in his view - which regarded producer cooperatives as the principal way of organizing socialist production (ρρ. 109-20), Second, Bernstein emphasized the role of democratic institutions and the activities of numerous independent seIf-goveming assocίations in the movement towards socialism: 'the conquest of the democracy, the formation of political and social organs of the democracy, is the indispensable preliminary condition to the realisation of socialism' (ρ. 163). Third, he noted the significance of municipal socialism in the advance towards a socialist society and as a field of fruitful activity alongside the parliamentary struggle.

·        Bernstein had been greatly influenced by the ideas οf the Fabian socialists (with whom he established close relations during his exile in EngIand from 1888 to 1901) which were another major factor in the revision οf socialist conceptions at the end of nineteenth century. The main tenets of the new conception were set out in a historical essay by Sidney Webb. Ιn the first place it was evolutionist (explicitly related to the theories of Comte, Darwin and Spencer), and in consequence 'gradualist': 'Νο philosopher now looks for anything but the gradual evolution of the new order from the old, without break of continuity of abrupt change of the entire social tissue at any point during the process' (1931, ρ. 29). The Fabian thinkers, therefore, were totally opposed to all Utopian or 'catastrophic' views of the transition to socialism: 'history shews us nο example of the sudden substitution of Utopian and reνolutionary romance' (ibid). Webb then continued by associating the socialist movement with democracy: 'The main stream which has borne European society towards Socialism during the past 100 years is the irresistible progress of Democracy' (ρ. 31); and he summarized his view by saying that socialists now realize that 'important organic changes can ΟΠΙΥ be ... democratic, and thus acceptable to a majority of the people, and prepared for in the minds of all ... gradual, and thus causing no dislocation, however rapid may be the rate of progress', and in Britain at any rate, 'constitutional and peaceful', (ρ. 32). Webb also laid stress upon municipal socialism (and Bernstein followed him in this respect), observing that 'it is the municipalities which have done most to "socialize" our industrial life' (ρ. 47).

·        Βut the growth of socialist parties brought another change beyond the increasing involvement in reformist politics and the adoption of a more gradualist outlook. The eventual socialist economy came to be conceived more explicitly in terms of the nationalization of major industries and the introduction of centralized economic planning, while the ideas οf cooperative production and self-management by the 'associated producers' were largely dismissed as Utopian fantasies. By the beginning of the twentieth century the socialist parties, whether they were Marxist or not, had reached very similar conclusions about how a socialist economy should be organized through the nationalization of major industries and centralized economic planning.  But there was Iittle experience of operating publicly owned industries, outside the Iimited field of municipal enterprise, and the projects for socialist reconstruction were couched in very general and abstract terms, without much consideration in detail of the problems that might emerge. It was recognized, tο be sure, that the future society could not be completely planned in advance (and for that reason Utopian schemes were rejected);

·        Karl Kautsky (1902, ρ. 105) in his essay on “the day after the revolution" expressed very clearly the view that after the conquest of political power 'problems will arise of which we know nothing and many with Which we are occupied today will by that time be solved. New means to the solutions of these different problems will also arise of which we today have no suspicion’. Kautsky went on, however, to examine more closely than was usual among socialist thinkers some of the immediate problems that might be encountered in constructing a socialist economy one of these was the incentive to work, which he thought would depend partly on working-class discipline, though this would be 'democratic discipline' presupposing a 'democratic organization of labour' and a 'democratic factory' (p. 126); and he also noted that there would be various forms of social property  national, municipal and cοοperative while private property could still exist in many means of production (p. 127). But the effects of this working-class discipline would also need to be complemented by making work itself more attractive, reducing the hours of labour and improving conditions in the workplace (p. 128). These were ideas that had already been briefly formulated by Marx, though as the discussion by HeIIer, cited earlier, indicates, the problems are more complex than was foreseen by socialists in the nineteenth century.

 

·        Kautsky also expounded very clearly the role of money in a socialist economy.

 Money is the simplest means known up to the present time which makes it possible in as complicated a mechanism as that of the modern productive process, with its tremendous far-reaching division of labour, to secure the circulation of products and their distribution to the individual members of society. It is the means which makes it possible for each one to satisfy his necessities according to his individual inclination (to be sure within the bounds of his economic power). As a means to such circulation money will be found indispensable until something better is discovered. To be sure many of its functions, especially that of the measure of value will disappear, at least in internal commerce. (p. 129).

 

·         He then went on to discuss how the incomes of workers might be increased under socialism, pointing out that because of the need for investment and public expenditure there would be 'none too much remaining over from the present income of the capitalist to be applied to the raising of wages' (ρ. 136), and emphasizing as the main factor a rapid expansion of production. This, he argued, could be achieved mainly by a rationalization of production which would concentrate it in larger, more efficient plants, and by the elimination of economic crises. But Kautsky, unlike Marx in the Grundrise, did not specificaIIy include the progress of science and technology among the important factors affecting the productivity of labour, and he did not therefore discuss the question of how technological innovation would be organized in a socialist society, or whether it might be impeded by the development of a bureaucratic system of state management.

·         In the last part of his essay, however, Kautsky did suggest some variations and limits in the socialization of production. He made clear, first, that there would be municipal and cooperative enterprises alongside the large state owned concerns; and second that not all production would be socialized, and many individual producers would remain active. Apart from agriculture, where Kautsky stressed the important role of small farmers, a major sphere for the development of small-scale and individual enterprises was, in his view. that of ' intellectual production" The educational system and scientific research would need to be nationally organized, but in the arts and Iiterature free individual activity must prevail. and Kautsky summed up his ideas in the phrase 'Communism in material production. anarchism in the intellectual' (ρ. 183).   

 

·         Although socialist thinkers. as Ι have illustrated. became increasingly preoccupied with the question of organizing and managing an economy based upon the socialization of large-scale enterprises, and relying to a great extent upon central planning. Utopian ideas did not vanish completely from the socialist movement. In particular, the idea of self-management by the 'associated producers' remained potent and assumed new forms; for example, in the French syndicalist movement. which also strongly influenced the workers' movement in Italy and Spain, in the American Industrial Workers of the World and in the guild sociaIist movement in Britian.

 

Somewhat later, towards the end of First world war, the idea of self management received a new impulsion from the emergence of workers and soldiers councils and the development of came to  be called the ‘council movement’. Karl Renner (1992) analysed this phenomenon in terms of an opposition between a ‘purely political democracy’ and ‘economic democracy’, characterizing the ‘council system’ as one in which political functions or political significance are assigned ‘to colectiviness which are formed by the common interest of an occupation’ a status group, or a class’; and besides citing the example of the Russian 'dictatorship οf worker’s, peasant’s and soldier’s councils (which he did not examine further) he discussed the work of the Webbs on industrial democracy, and the ideas of Guild Socialism in Britian . Renner recognized the importance of what he called 'voluntary economic democracies' (such as the trades unions, cooperatives and Friendly Societies), but he concluded that the role of the state and politica1 democracy were crucial and paramount in regulating conflicts of interest between various sectional groups in society, and he did not directly address the issue of worker’s self-management, which was nevertheless very prominent in those sections of the council movement that focused attention on the 'factory councils' as a means of achieving industrial democracy (Bauer 1923, Bricianer 1978, Gramsci 1919-20, Pribicevic 1959).

 

·         The idea of self-management as an essential feature of socialist society has remained vigorously alive up to the present time. One reason for its continued, and even growing, influence in socialist thought is undoubtedly the increasing dissatisfaction with some of the consequences of bureaucratic administration of state-owned enterprises in capitalist countries, and still more with the authoritarian and cumbersome management of the whole economy in socialist countries; a dissatisfaction which concerns both the human relations within the enterprise or industrial sector, and, in varying degrees, but most obviously in some socialist countries, the overall efficiency of the system of production and distribution.

Two issues have been crucially important in this debate the extent to which effective participation in management can really be achieved in enterprises which differ greatly in size, complexity and technological sophistication; and the ways in which individual enterprises should be related to the national and international economy through central or regional planning or through market mechanisms (more or less strictly regulated).

 

·         Αn important part of the debate concerns the political institutions of a socialist society, and above all the question of democracy, pluralism and individual liberty; but the economic structure of socialism which is linked in many respects with the political problems, remains a crucial issue and is the principal subject of this book. In assessing the current rethinking and restructuring of socialism we do not need to adopt either of two extreme positions: one which clings obdurately to past formulae and to the idea of a sudden miraculous transformation of human nature and society on 'the day after the revolution '; or one which rejects almost the entire past along with any Utopian vision, in favour of accommodation to what seems immediately, or in the short term, feasible.

 

Chapter 2 Marxist conceptions of a socialist economy

·        Marx referred only in the most genera! terms, and on rare occasions, to the socialist mode of production, as that of the 'associated producers', or as the 'self-government of the producers', and in the Grundrisse (pp. 704-6) as an economy, such as had already begun to develop under capitalism, in which the 'creation of real wealth ... depends upon the general state of science and the progress of technology' and 'general social knowledge has become a direct productive force" For the most part, later Marxist thinkers, at the end of the nineteenth century and in the first decade of the twentieth century, continued to describe the socialist economy mainly in terms of a progression into public ownership of the large scale enterprises and financial institutions which had become increasingly dominant in the capitalist economy, without considering in any detail how these public corporations would be managed or precisely how a centralIy planned economy would function.

 

The period from 1900 to 1914 was unfavourable to the emergence of a realistic theory of socialism because one wing of the socialist movement was committed to Marxism which offered no basis for such a theory, and the other wing was too much under the influence of the historical and institutionalist schools ... to be greatly interested in any sort of theoretical analysis.

Gradually, however, in the new conditions resulting from the growth of large working-class parties, which needed to present more detailed economic and social policies in their programmes, and especially after the Russian Revolution, which made the construction of a socialist economy an urgent practical question, Marxist thinkers were obliged to consider more carefully and thoroughly the nature of economic institutions and mechanisms in a socialist society.

 

·         In this reorientation of thought the experience of the 'war economy' during the First World War played an important part, and was analysed in various ways, Karl Renner (1916), in a series of articles on 'problems of Marxism', argued that the war economy had accelerated a process of 'the penetration of the private economy down to its elementary cells by the state' and the emergence of 'control of the whole private sector of the economy' by willed and conscious regulation and direction’, concluding that society had 'entered an era of state economy , , . though entirely within the framework of the capitalist economic order". The socialization of the economy had taken an unforeseen course, in which, for the time being, the principal agents were 'all-powerful national states" and this posed new problems for the socialist movement. At the same time there is apparent in Renner's discussion a concern about the 'all-powerful state' ; this concern was later expressed much more strongly by Hilferding (1941), after the experience of Stalinist regime in the Soviet Union and the National Socialist regime in Germany, in his thoroughgoing revision of the Marxist theory of state.

 

·         Quite a different aspect of the war economy was given prominence by Otto Neurath in articles published between 1916 and 1920, more particularly after his experience as the creator and president of a central planning office in Bavaria in 1919. He described this experience in a lecture given to the Sociological Society of Vienna (1920). and began by observing that:

 

At the beginning of the revolution people were as unprepared for the task of a socialist economy in Germany as they had been for a war economy when war broke out in 1914 .... The German Social Democratic Party had not worked out  an economic programme and was unable to put forward clearcut demands for socialization .... The technique of a socialist economy had been badly neglected. Instead, only criticism of the capitalist society was offered .... That was why, when revolution broke out, a commission for socialization had to be called to discuss the basic principles. Longwinded, sterile debates took place, showing disagreements of all sorts, without producing a uniform programme.

 

His conception of a socialized economy was outlined in articles on the war economy and on the immediate post-war attempts at socialization which were collected in a volume entitled Through The War Economy to the Natural Economy (1919). In one of these articles (1917) he argued that the decline of the free trade economy was accompanied by the advance of an 'administrative economy' orientated towards an economy in kind, which 'seems to incline towards the furthering of a certain uniform shaping of the economic organization, based on centralized measures'. In a later report (1919) delivered to the Μunich Worker’s Council, he set out more fully his idea of a socialist economy:

 

The total organization whose creation we discussed can raise the economic efficiency of the order of life only if it possesses απ adequate economic plan. It is not enough to know the possibilities of production and consumption as a whole, one must be able to follow the movement and fate of all raw materials and energies of men and machines throughout the economy [and for this purpose] we need universal statistics which, in coordinated surveys, comprise whole countries or even the world ... Economic plans would have to be designed by a special office which would look on the total national economy as a single giant concern. Money prices would not be important for its surveys, since within the framework of a planned economy such prices, as long as they continue at all, are fixed in an essentially arbitrary manner by associations, by the state or by other authorities, whereas previously they were automatic results of competition, The central office for measurement in kind, as we might call the office mentioned above, would have as one of its tasks the presentation of the economic process at any given time, but above all would have to design the economic plans for the future .... We must at long last free ourselves from outmoded prejudices and regard a largescale economy in kind as a fully valid form of economy which is the more important today in that any completely planned economy amounts to an economy in kind. To socialize therefore means to furthur an economy in kind …. In a large scale economy in kind, in a socialist economy, money no longer is a driving force . No longer is there a ‘net profit’ for which production occurs. Money could remain at best as a token for a claim on all sorts of goods and services which the individual consumer is given to enable him to arrange his consumption.

 

·         Neurath went on to consider some specific problems of a socialized economy: in particular, 'economic efficiency' - which he saw as being decided by direct comparisons and judgements (made by the economic central office and the people's representatives) of the desirability of alternative projects and plans and what he called 'substitute incentives', largely in terms of bonuses for higher output, which involved a trend towards 'technicism".

His writings, up to the early 1920s, were the most forceful expression of the idea of a socialist economy as a 'moneyless' economy, which had, according to Landauer (1959, ρ.1636) 'the value of a bold intellectual experiment which ... calls into consciousness the reasons for valid opinions', and also provoked 'the appearance of the new, aggressive school of anti-socialists', led by Ludwig von Mises, though its ideas were consonant ‘with suggestions made by Max Weber’. Mises insisted on the need for an accounting system based upon value units in any complex society, and his critical assault on socialist planning was the principal source of the 'calculation debate' of the 1920s and 1930s, which will be considered in Chapter 4 below.

 

At this point, however, it is worth noting that Neurath's conception of 'calculation in kind' is significant also from another aspect, since in principle it enables economic planning to take into account the use, as between generations, of non-renewable natural resources (raw materials and energy).

 

·         After the Russian Revolution the principal Marxist discussions of economic planning took place in, or with reference to, the Soviet Union. The Soviet planning experience, in its particular historical context will be examined in the next chapter. Here, Ι shall confine myself to the discussions among Marxists in the period from the First World War to the 1930s, which also related to the attempts at partial planning in some West European countries and the consequences of the war economy.

As Ι noted earlier, Renner (1916), in his articles on 'problems of Marxism" had drawn attention to the great expansion of state intervention in the economy and raised questions about how the activities of the interventionist state could be transformed in a socialist direction; and later, Hilferding (1927) argued that post-war capitalism had moved towards an ‘ Organized economy' in which the 'capitalist principle of free competition' was replaced by 'the socialist principle of planned production', and that the present generation faced 'the problem of transforming with the help of the state, which consciously regulates society - an economy organized and directed by the capitalist into one which is directed by the demοcratic state" The Austro-Marxists clearly conceived the socialist economy as one in which production would be dominated by large state enterprises, with public ownership of the financial institutions as a major element, and directed by a central plan, and this was also, as we have seen, the view of Neurath, who was broadly in sympathy with them and contributed regularly to their journal Der Kampf.

 

·         Ιn the event, the Austro-Marxists and the Austrian socialist party (SPO) never had the opportunity to implement their economic plans for the country as a whole, but in Vienna, where the socialists were in power until 1934, another aspect of socialist planning was evident in their achievements in providing working-class housing, health and welfare services, and cultural facilities, and in bringing about major educational reforms (Bauer 1923, Gulick 1948. νοl. Ι, chs 10, 13-16, 18). This was important in giving prominence to an essential element in socialist planning; namely, the organization of production to satisfy basic human needs for the whole population. and a new, more equal division of social welfare. Equally important was the Austro-Marxist criticism of the course  taken by the Russian Revolution, best expressed by ΟΙΙο Bauer (1923) in his book on the Austrian revolution, where he also qualified the idea of a centrally planned and managed economy through his advocacy of works' councils:

 

Only this self-education in and through the practice of works' councils will create the prerequisites for a socialist mode of production. The example of Russia, where the democratic organization of industry which was attempted immediately after the October Revolution soon gave way to bureaucratic state capitalism, demonstrates that only bureaucratic state socialism which merely replaces the despotism of the employer by the despotism of the bureaucrat is possible so long as the workers lack the capacity for self-government in the labour process .... As an instrument of proletarian self-government in the production process the works’ councils constitute a preliminiary stage of the socialist mode of production. Consequently, their creation and development is a more important preparation for a socialist system οf society than any forcible act of expropriation, if the results of the latter are no more than state of municipal undertakings administered on bureaucratic lines. (p. 166).  

 

·         Much of the Marxist discussion of a socialist economy in the early 1920s was preoccupied with the question of the role of works' councils, and more broadly with workers' self-management, in relation to a centrally planned and managed economy - not only in Austria, but in Russia (especially through the activities of the Workers' Opposition, in which Alexandra KoIIontai took a leading part), in Germany, in Czechoslovakia and in Italy (notably in Gramsci's articles on the Τurin factory councils) - and the discussion has revived vigorously in recent years. But from the mid 1920s tο the 19305 Marxist theory came to be dominated partly by the controversies in the Soviet Union and their repercussions elsewhere, partly by the 'calculation debate' provoked by antisocialist critics.

 

The 'industriaIization debate' took place between 1924 and 1928,2 and the main protagonists were Bukharin and Preobrazhensky, though many other leading economists also took part. Bukharin, who had fervently supported the economic policy of 'War Communism', invoIving the extension of nationalization and direct control of the whole economy, and presented a theoretical justification of it in his Economics of the Transformation Period (1920), changed his views radically after the introduction of the New Economic Policy (ΝΕΡ) which Lenin persuaded the party to adopt at the end of the civil war and foreign intervention, as a means of restoring the shattered economy. In a series of articles from the end of 1924, Bukharin now advocated, for the agricultural sector of the economy, a liberalization of trade and a relaxation of the restrictions on hiring labour, but at the same time a strong effort to promote peasent cooperatives. In the interim he argued, ‘ We have to tell the peasantry all its strata: get rich, accumulate, develop your economy’ since this along with a liberalization of foreign trade, would have a stimulating effect on the deνelopment of industry and industrial investment, and would make possible a reduction in industrial prices. These policies as a whole, Bukharin argued, would promote general economic growth.

 

Preobrazhensky (1926), on the other hand, emphasized the importance of rapid industrialization to overcome the 'goods famine' and to absorb the surplus agrarian population; he noted that this must take place on the 'new technological basis' which required an ever increasing amount of capital per worker. But this posed a massive problem of accumulation, and the crucial part of Preobrazhensky's work was his formulation of a 'law of primitive socialist accumulation' (by analogy with Marx's description of 'primitive capitalist accumulation' in the early stages of the development of capitalism), which involved the suppression of the 'Iaw of value' governing competitive markets and the imposition of 'forced saving' on the peasantry, mainly through monopoly pricing by the state. But Preobrazhensky introduced several qualifications into his argument, recognizing that the policies he advocated faced major problems and contradictions, not least the danger of a 'peasants' strike'; and in a later statement of his position he concluded that 'the sum total of these contradictions shows how strongly our development toward socialism is confronted with the necessity of ending our socialist isolation, not only for political but also for economic reasons, and of leaning for support in the future on the material resources of other socialist countries' (Erlich 1960. ρρ. 55· 9). What Preobrazhensky did not foresee, as he acknowledge in his speech to the seventeenth party congress in 1934. Where he also renounced his law of primitive socialist accumulation as ‘a crude analogy with the epoch of primitive capitalist accumulation’ was the forced collectivization of the peasantry carried out by Stalin, as a means of accumulating the resources for rapid industrialization.

 

·         The industrialization debate involved a complex of economic and political issues such as Marxists in Western Europe, beginning with Marx himself, had never expected to confront: the industrialization of a backward economy and the construction of 'socialism in one country'; the maintenance of working-class dominance and Bol-shevik rule in a society which had three million industrial workers and eighty million peasants; the constant threat, or fear, of military intervention by the capitalist powers. Hence, a considerable gulf emerged between the preoccupations of Soviet Marxists and those in the West, and this was widened by the division in the international working-class movement between the old social democratic parties and the new communist parties.

 

·         It was, however, the implementation of a central plan, which had its first beginnings in 1921, as the introduction of ΝΕΡ, with the creation of the State Planning Commission ('Gosplan'), that mainly interested socialists elsewhere, and from this aspect there was not such a great difference between the concerns of Western Marxists and Soviet Marxists. But the former found themselves increasingly involved in a theoretical defence of the possibility of central planning in an advanced industrial economy, against the criticisms of anti-socialist economists such as Mises and Hayek.

 Here, it should be noted that the external conditions of the debate changed dramatically between the end of the 1920s and the mid-1940s, in the first place as a result of the profound economic depression in the capitalist countries, which was interpreted by many Marxists as a 'final crisis' preceding the collapse of capitalism, and in sharp contrast the ruthless collectivization of agriculture and rapid industrialization in the USSR, which made possible its victory in the Second World War and its post-war emergence as an industrial and military superpower. Second, the outcome of the war was an expansion of the Soviet form of socialism into Eastern Europe, a strong Soviet influence on the development of socialism in China and in some Third World countries, and in Western Europe a considerable extension of public ownership, increased state intervention in the economy, and an apparent movement towards democratic socialism, though this was soon checked by a vigorous revival of capitalism aided by the Marshall Plan.

 

ΒΥ the end of the 1940s Marxist conceptions of a socialist economy had settled fairly clearly into a pattern in which central planning and state ownership and management of a wide range of industrial enterprises and financial institutions held pride of place; but this began to change in the 1950s.

 

In Yugoslavia the system of workers' self-management was introduced, and a 'socialist market economy' emerged. Then, very gradually, the highly centralized economies in other East European countries began to change, and the process of decentralization and development of a controlled market economy has accelerated rapidly in the past decade. Marxist conceptions of a socialist economy have now become quite diverse and it is very evident at present that no single view holds a clearly dominant position.

 

 

Chapter 3  Τhe experience of planning since the First World War

·         The first socialist planned economy was created in Russia after the revolution of October 1917. It could hardly have appeared in less favourable circumstances, in a predominantly agrarian and backward society, debilitated by three years of war and then by civil war and foreign intervention. In the event, as the revolutionary wave in Europe subsided or was quelled, they were forced into the policy of 'building socialism in one country', which required above all massive and rapid industrialization. The earlier period of Soviet economic development has been well documented in numerous studies, and here Ι shall only briefly summarize the principal stages.

 

·         The first stage that of “War Communism", was largely determined by the civil war, foreign intervention and the resulting chaotic condition of society. Following the nationalization and redistribution of land and a brief period of workers control, state ownership and control of industry and financial institutions were rapidly extended, along with a ban on private trade, and the whole economy moved towards an economy in kind, a  moneyless economy in large measure no doubt as a consequence of the civil war and the prevailing disorder, but also theoretically justified and advocaed by Bukharin (1920) and others.

 

By 1921  industrial production had fallen to about one-third, agricultural output to less than two-thirds, of the 1913 level, and foreign trade had virtually collapsed. At this stage, and particularly after series of peasant risings and Kronstadt sailor’s revolt of March 1921, Lenin concluded that  a major change in economic policy was necessary, the first step being the replacement of the confiscation of peasant surpluses by a food tax in kind (later, in 1924, a money tax) which was set at a lower level than the previous requisitions. The peasants became free to trade as they wished with the rest of their produce, private trade was legalized and then expanded rapidly, along with a strong revival of private manufacturing. This New Economic Policy (ΝΕΡ), as it came to be called, was 'a form of mixed economy, with an overwhelmingly private agriculture, plus legalized private trade and small-scale private manufacturing' (Nove 1969, ρ. 86). But at the same time, in 1921, a State Bank was established, which together with the Commissariat of Finance eventually succeeded in ending the massive inflation, and stabilizing the currency, a central planning commission ('Gosplan') was created, and there was a steady expansion of state trusts in manufacturing and trade. ΒΥ 1925 both industrial and agricultural production were recovering rapidly.

 

The political considerations were twofold. In the first place, civil war and foreign interventions had only recently ended, the Soviet Union was still encircled by hostile capitalist powers and one major aspect of economic planning necessarily related to military defence. In a speech delivered in February 1931 to leading personnel of socialist industry, Stalin (1955, ρ. 41) observed: 'We are fifty or a hundred years behind the advanced countries, We must make good this distance in ten years, Either we do it, or we shall go under", It was an astonishingly accurate prediction, The forced industrialization undertaken in the 1930s was a major factor enabling the Soviet Union to withstand, and eventually turn back, the massive assault by Nazi Germany in 1941, which involved for the rest of the war four-fifths of the whole German armed forces. The second political element in the industrialization programme concerned the relation between classes. The Bolsheviks had led a successful 'proletarian revolution' based upon a very small industrial working class in alliance With a very large peasantry, and it was apparent to all of them that the existence of millions of Peasant households engaged in independent production, along with the growth of private small-scale manufacture and private trade during the ΝΕΡ period, continually recreated the conditions for a revival of capitalism and constituted a threat to the development of socialist socicty, even though, as Bukharin argued, the Bolshevik continued to occupy the 'commanding heights' of the economy. The policy of forced industrialization which began with the First Five Year Plan in 1928 was then complemented by the forced collectivization of agriculture to eleminate, or at least severely restrict, independent peasant production.

 

Finally, the purely economic consequences of rapid industrialization were essential to achieving the social aims of a socialist society by raising living standards, ensuring full employment, and expanding the social services; all of which depended upon sustained economic growth. There had, of course, been some extension of economic and social planning in the European capitalist countries after the First World War. The war economy accustomed people to much more extensive state intervention and regulation of production, and there were many who considered that this experience would lead gradually towards a socialist system. With the defeat of the revolutionary movements, however, very little in the way of socialist planning survived outside the Soviet Union.

 

·         The greatest change came with the economic depression that began in 1929. In the first place this gave a new vigour to the socialist criticisms of capitalism, and to the advocacy of :a planned economy to deal with mass unemployment and poverty. Α considerable literature οn planning developed, well exemplified in Britain by the writings of Wootton and Durbin.

 

Wootton (1934) first examined the Soviet planned economy, then made a fairly detailed comparison between planned and unplanned economies, and concluded with a discuss on of 'the conditions of successful economic planning', in which she emphasized as the first prerequisite 'knowledge and the ability to use that knowledge' (ρ. 303) which in turn required the creation of a general planning commission able to ‘ draw up plans and to supervise the execution’. She then went on to ‘difficult questions’ of socialist planning such as the degree of dependence on, or independence of, a price mechanism, and the role of economic motives in a socialist society.

 

Durbin, in his essay on 'the importance of planning' (1935. republished with later essays οn planning in Durbin 1949), observed that 'it would be almost true to say that "we are all planners now''. The collapse of the popular faith in laissez-faire has proceeded with spectacular rapidity in this country and all over the world since the War' . But he then distinguished two kinds of planning:

(a) as 'meaning simply the intervention of the Government in a particular industry at a time when the greater part of the economy still remains in private hands', and

(b) that 'which results in the general supersession of individual enterprise as the source of economic decisions'.

 In his later discussion he rejected the idea οf rigid long-term plans which could not be quickly amended to take account of changes in human tastes, technical inventions and so on. and defined planning generally as an 'extension of the size of the υnit of management and the consequent enlargement of the field surveyed when any economic decision is taken'. Durbin then considered the aims of socialist planning, replied to some major criticisms of planning, emphasized the importance of centralized monetary control, and sketched the institutions necessary for democratic socialist planning.  

 

Α Marxist study , Britain without Capitalism (1936) presented a sustained criticism  of the  capitalist organization of the economy and outlined an economic system for a “Soviet Britain”, taking as its explicit model the Soviet economy.

 

·         In fact, the pressure exerted by the growing socialist movement was making itself felt already in the 1930s, and there was an increase in planning in several countries. One notable example is Sweden, where the Social Democratic Labour Party (SAP) came to power in 1932, and has been almost continuously in power over since. Social democratic rule has not brought extensive public ownership, but it has greatly increased public sector spending and the degree of state intervention in the economy, creating gradually a very advanced form of 'welfare state'; and more recently the sphere of public ownership has begun to be enlarged in an original way, through the development of employee investment funds.

 

In the United States the New Deal, as Roosevelt had indicated in his inaugural address in March 1933, involved an extension of state intervention, first in a reform of the banking system then in a rationalization of industry, initially through the National Industrial Recovery Act; a reorganization of agriculture (which included, as the boldest measure of the New Deal experiment, the creation of a large public corporation, the Tennessee Valley Authority); and an ambitious programme of relief for the unemployed carried out mainly by the Works Progress Administration, which spent vast sums of money on public works of all kinds. In Britain, οn a much smaller and less imaginative scale, state intervention also increased, mainly in the form of measures to rationalize agriculture and some industries (notably iron and steel) and the provision of subsidies (for example, to shipping).

 

This trend towards greater state intervention and regulation, and partial planning, at least in the sense of rationalization, gained momentum with the approach of the Second World War. In Britain, the advent of a Labour government in 1945 made possible an extension of public ownership by the nationalization of some major industries, and an expansion of social services, notably through the creation of a national health service. Elsewhere, as a result of particular circumstances, there was also an extension of public ownership;  in France, where enterprises owned by callaborators with the German occupation forces were nationalized and in Austria, where many enterprises which were German property during the period of Austria's incorporation in the Third Retch were confiscated by the Allied occupying forces and then remained in public ownership when they were returned to Austria between 1946 and 1955. In Germany itself the policy of 'co-determination' created an element of workers' participation in the  management of privately owned enterprises, and generally increased the influence of the trade unions and the Social Democratic Party.

 

·         The experience of planning from the First World War to the years immediately following the Second World War indicates that three different kinds of planning have influenced the development of modern societies.

 

First, there is the planning associated with the war economies of the First and Second World Wars, which, as Ι have argued, showed the feasibility of planning and also provided practicaI experience of the operation of planning mechanisms. After both wars planning and state intervention in the economies of the European countries continued at a higher level than during the pre-war period, and this was especially the case after the Second World War, partly because of the extension of planning which had already taken place in the inter-war years to cope with the economic depression, and partly because of the increased strength of the socialist parties and trade unions in Europe at the end of the war.

 

Second, there is the partial planning, involving rationalization, government subsidies, some public ownership, and in general a greater state involvement in the regulation of the economy, which developed in the capitalist countries (including the United States) during the depression of the 1930s and continued, especially in the West European countries, in the period of reconstruction after the Second World War. This corresponded broadly with what Hilferding (1927) called Όrganized capitalism', and what orthodox Μarxist-Leninists later referred to as 'state monopoly capitalism '. Subsequently, the notions expressed in these two conceptions of the development of advanced capitalism were merged to some extent in the concept of corporatism, which I shall consider later in this chapter.

 

Third, there is the comprehensive planning, resting on public ownership of the major means of production, exemplified by the Soviet economy and extended after 1945 to Eastern Europe, as well as being adopted as a model, in greater or lesser degree, by many Third World countries. This kind of comprehensive planning had an important influence, in various ways, on the changes taking place in capitalist countries after 1945. Thus, in Britain the Ρost-War Labour government introduce, what Devons referred to as 'planning by economic survey', publishing in 1947 the first annual Economic Survey, which had an introductory chapter on economic planning followed by an outline of three sets of plans which the government intended or hoped to implement. Similarly, in some other European countries, more comprehensive types of planning  were envisaged and partly implemented. Furthermore, as Tinbergen points out, 'some national planning was imposed on all member countries of the Organization of European Economic Cooperation (OEEC), created to administer the European Recovery, or Marshall Plan, which started operations in 1948'.

 

While the war economies do clearly form a very distinct category, in spite of some variations between countries, the categories of 'partial' (or 'capitalist') and 'comprehensive' (or 'socialist') planning should not, in my view, be regarded as absolutely distinct and exclusive. There are, in the predominately capitalist countries, degrees of planning which may tend, in some countries and during some periods, towards a more socialist form of economy; and on the other side it is increasingly evident that comprehensively planned socialist societies may undergo modification by the introduction of market mechanisms and an enlargement of the sphere of private enterprise, while the major part of economic production remains firmly in the public sector.

 

·         The rest of the chapter will be devoted to an examination of he experience, and experiments in, socialist planning since the end of the Second World War.

 

Let us begin by considering the planned economies of the Soviet υnion and the countries of Eastern Europe. It is generally acknowledged that the rapid industrialization of the 1930s was the crucial factor enabling the Soviet Union to emerge victorious from the Second World War as a major industrial power. According to the virtually unanimous view of Western students, the expansion of the Soviet industrial capacity has proceeded at a rate which is, by any meaningful standard of comparison, unprecedented.' The exceptionaIIy high rate of economic growth was resumed after the war, in the period 1950-8, but it has steadily declined since then, and particularly sharply since the mid-1970s; furthermore, the annual rate of growth has always been very much lower in agriculture, averaging οnly about 3 per cent compared with 6 or 7 per cent in industry.

 

In the new socialist countries after 1945 the imposition of a Stalinist type of planning led to the same massive concentration of effort on rapid industrialization as in the earlier period in the Soviet Union, at the cost of severely restricting consumption in favour of investment. and establishing dictatorial and repressive regimes. This planned industrialization was, for the most part, effectively carried out (most successfully in Chechoslovakia and the German Democratic Republic) and as Wilczynski comments, the share of the European socialist countries (including the Soviet union) in world industrial output:

 

... increased from less than 10 per cent in 1938 to about 3Ο percent in 1970, and in 1978 it was about 31 per cent (but, according to some Socialist estimates, it was 37 per cent). In the leading Western nations basic industrialization took some twenty-five to fifty years to achieve, but in the European Socialist countries, this process was completed in twelve to twenty years. In view of the semi-feudal conditions that they inherited, the absence of colonics, the widespread wartime devastation, western boycotts and the strategic embargo and practically no aid from the capitalist world, their achievements can be described by objective observers as spectacular.

 

This uniform type of planning did not, however, persist for very long. Yugoslavia withdrew from the Soviet orbit in 1948 and began to develop its own system of workers' self-management and Soviet influence in China diminished from the mid-1950s as that Country too embarked on a distinctive course of socialist development. In the Soviet union and the East European countries changes in the economic system began to be made after the death of Stalin, and the need for change became more widely recognized as a consequence of the slowing down of economic growth in the late 1950s and a succession of revolts against the political rulers in seνeral countries from 1953 to 1980. The main features of this process of change are the reorientation of production towards increasing the supply of consumer goods, and more fundamentally, a reconstruction of the whole economic system involving decentralization and the development of elements of a market economy. In the past decade, and especially since the accession to power of Mr Gorbachev in the Soviet Union, the speed of change has greatly increased.

 

·         The slowing down of economic growth since the 1960s, and more particularly since the mid- 1970s, may be explained in part by the maturation of the socialist countries as industrial societies. The high rates of growth in the earlier stages, on this view, reflected the rapid industrialization from a low initial level, and many economists have suggested that their growth rates will eventually settle at the levels characteristic of the advanced capitalist countries (though perhaps without the same degree of cyclical fluctuation); but socialist economists have generally disputed this view, arguing that a socialist planned economy makes it possible to sustain higher average growth rates over the longer term.

 

Economic growth in the socialist countries until the last decade was mainly extensive, that is to say, achieved by bringing into production additional quantities of land, labour and capital whereas in advanced industrial societies it has become increasingly intensive, brought about by technological progress. The need for development based upon the application of new technology was, of course, strongly emphasized by Preobrazhensky in the industrialization debate of the 1920s - as I noted in the previous chapter - and more recently by Richta and his colleagues (1969), who argued, starting out from Marx's conception in the Grundrisse of an advanced modern society in which scientific knowledge and its application has become the major productive force, that intensive growth would be more effectively promoted in the centrally planned socialist economies than in capitalist economies.

 

·         Socialist economic planning is not an end in itself, but is intended to establish the basis of a socialist society, in which the benefits (material and cultural) of rising levels of production are distributed a widely and equally among the population as the general conditions of the time permit. Above all, this has meant in the socialist countries the maintenance of full employment, the eradication of illiteracy and a rapid development of the whole educational system, the provision of free, or very low-cost services in many spheres (housing, public transport, recreational and cultural facilities) and the expansion of health and welfare services.

 

·         The extension of public ownership and a higher level οf government spending οn social welfare greatly enhanced the economic role of the state and by the mid-1970s state expenditure in the advanced capitalist countries generally ranged between 40 and 50 percent of the total GDP (though this, οf course, included rapidly increasing military expenditure, especially in the United States). Ιn no country', however, did the publicly owned sector dominate the economy as a whole. Or  in most cases, the crucially important financial institutions; and the economic system that had emerged by the 1970s was often described as 'corporatism' - a form of ‘mixed economy' which was managed and regulated by negotiation and agreement between the state, the large capitalist corporations and the trade unions - though Marxists were more inclined to define it as ‘organized capitalism’ or ‘state monopoly capitalism’.

 

The development of this system in Western Europe represented a precarious balance achieved between the increased strength of the socialist movement and the resurrection of European capitalism through the Marshall Plan and the economic dominance of the United States. It checked the extension of public ownership and of socialist planning, but at the same time involved much more planning of the economy than in the pre-war period, both in individual countries and on a regional or international level. The ‘march into socialism' seemed indeed to have come to a halt at that 'halfway house' which Schumpeter envisaged as a possible sticking point.

 

Yet the spread of planning is quite evident in many countries. In France, for example, a decree of January 1946 provided for 'a first overall modernization and investment plan for metropolitan France and the overseas territories', and set up planning machinery in the form of a Conseil du Ρlan and a Commissariat General . This undoubtedly played a major part in French recovery and subsequent economic growth, in striking contrast with Britain where no effective central planning machinery was ever established. Another example of very successful Post-War Planning is to be found in Japan, where national economic plans have been prepared by the Economic Planning Agency every two or three years from1955 (Komiya 1975, ρ. 189). Komiya, however, argues that these national plans are not as important as may appear at first and much planning takes place in other ways. 'The Japanese government intervenes widely in individual sectors. Industrial regions ... ', especially through the government offices called genkyoku, each of which supervises a particular industry and is responsible for policies concerning the industry.

 

·         Planning in the capitalist countries differs considerably, of course, from that in socialist countries. where the plans are more comprehensive, more imperative than indicative and involve direct state management of a large part of the economy. as well as having somewhat different objectives insofar as a high priority is given to maintaining full employment and to the provision of welfare services. Nevertheless, there is some convergence through socialist influence.

 

·         From this short historical account of the experience of planning we can reach, Ι think, some initial tentative conclusions: First, that a trend towards economic and social planning established itself in the 1930s and became much stronger after the Second World War; and second, that this extension of planning had a very successful outcome in a marked acceleration of economic growth and the creation of 'welfare states' in much of the capitalist world.

 

 The success of planning may also be judged from the other side by observing that the two least-planned capitalist societies - Britain and the united States – are those which at present confront the greatest economic difficulties and show most clearly the symptoms of decline. At the same time, the comprehensively planned socialist societies have also encountered serious problems and are now engaged in a radical restructuring of their economies. We have next to consider, therefore, the major criticisms of planning, especially socialist planning.

 

Chapter 4 Critiques of socialist planning

 

·         The criticisms of socialist planning - and by extension, of the more limited types of planning in capitalist societies - fall into two main categories:

those concerning rational calculation in a planned economy, and

those concerning bureaucracy, management, incentives and related questions.

 

·         Ι shall discuss first the issues that were raised in the notorious 'socialist calculation debate' of the 1930s. The ground of this debate was established earlier, at the turn of the century, by the Austrian marginalist school, but the members of the School differed considerably in their attitudes to socialism; and Wieser in particular, in developing a 'theory of imputation' to determine the value of means of production in any economic system, helped to prepare the way for models of calculation in a planned economy. As Landauer (1959, ρ. 1624) suggests: 'By elaborating formulae for the determination of the shares of all productive agents in the va1ue of the product, the ''Austrian School" laid the ground for the concept of a national accounting system in a socialist society.

 

Bohm-Bawerk, on the other hand, was a more hostile critic of socialism, especially Marxist socialism. His criticism rests upon his rejection of the labour theory of value and exploitation in favour of a subjective νalue theory, expounded in his work on the theory of interest (1884 and later editions) and his essay (1896) on the third volume of Marx's Capital (to which Hilferding [1904] wrote a notable reply). The core of his argument was that socialism would not achieve all that socialists hoped for, because it would face similar problems to those in a capitalist economy, arising from the scarcity of resources and time-consuming roundabout methods of production, one consequence of which is that a socialist economy would also require a positive rate of interest. Bohm-Bawerk did not assert, however, that a socialist economy would be unworkable, and it was only later, after the Russian Revolution, that this kind of argument became central, its most fervent and intransigent exponent being Mises.

 

·         Indeed it was Mises (1920, 1922) who initiated the 'calculation debate" in which Hayek and Robbins on one side, Lange, Lerner and Dickinson on the other, subsequently participated. The core of his argument was that in a developed complex economy, economic (i.e. monetary) calculation with respect to the production of higher order (production) goods as well as lower order (consumption) goods is only possible in a free market which establishes the exchange value of all goods:

 

This argument was elaborated in two directions. First, Mises emphasized that in a free market economy the system of computation by value is employed by every individual member, both as a consumer who establishes a scale of valuation for consumption goods and as a producer who puts goods of a higher order to such use as brings the highest return. But this system, he claimed. 'is necessarily absent from a socialist state', in which the administration can determine what consumption goods are most urgently needed but cannot establish a precise valuation of the means of production. Taking the example of building a new railway, he concluded that the decision, in a socialist society would depend at best upon vague estimates; it would never be based upon the foundation of an exact calculation value.

 

Second, Mises drew a contrast between a static condition of society, in which economic calculation might be dispensed with,  and a dynamic condition (the real life situation of a modern society) in which economic circumstances are constantly changing and ‘ we have the spectacle of a socialist economic order floundering in the ocean of possible and conceivable economic combinations without the compass of economic calculation. His argument concluded with the succinct declaration that ‘Where there is no free market , there is no pricing mechanism, there is no economic calculation’.

 

·         Lange, in the course of his life, proposed several different models of a socialist economy (Kowalik 1987), but the one for which he is best known is that of market socialism expounded in two articles (1936, 1937) which were then incorporated in a book, with additional modifications (arising mainly from critical comments by Α. Ρ. Lerner), together with an essay by Fred Μ. Taylor (Lange and Taylor, 1938). Lange rejected Mises' main 'contention that a socialist economy cannot solve the problem of rational allocation of its resources' as being 'based on a confusion concerning the nature of prices':

 

As Wicksteed has pointed out, the term 'price has two meanings. it may mean price in the ordinary sense, i.e. the exchange ratio of the two commodities on a market, or it may have the generalized meaning of 'terms on which alternatives are offered’.

 ... it is only prices ίπ the generalized sense which are indispensable­ to solving the problem of allocation of resources .... To solve the problem three data are needed:

(1) a preference scale which guides the acts of choice;

(2) knowledge of the 'terms on which alternatives are offered'; and

(3) knowledge of the amount of resources available

 .... Now it is obvious that a socialist economy may regard the data under 1 and 3 as given, at least in as great a degree as they are given in a capitalist economy. The data under 1 may either be given by the demand schedules of individuals or be established by the judgment of the authorities administering the economic system. The question remains whether the data under 2 are accessible to the administrators of a socialist economy. Professor Mises denies this. However, a careful study of price theory and of the theory of production convinces us that, the data under 1 and under 3 being given, the 'terms on which alternatives are offered' are determined ultimately by the technical possibilities of transformation of one commodity into another, i.e. by the production functions. The administrators of a socialist will have exactly the same knowledge, or lack of knowledge, of the production functions as the capitalist entrepreneurs have.  

 

·         Lange outlined his conception of how a socialist economy would function:

ln the socialist system as described we have a genuine market (in the institutional sense of world) for consumers goods and for the services of labour. But there is not market for capital goods and productive resources outside of labours… [and their prices] are thus prices in generalised sense i.e. mere indices of alternatives available, fixed for accounting purposes.   

 

·         Lange went on to argue that, ‘just as in competitive individualist regime’, the determination of equilibrium in a socialist system consists of two parts.

First, on the basis of given indices of alternatives (market prices in the cases of consumer goods and and labour services, accounting prices in other cases) both individuals as consumers and as owners of labour services and the managers of production (assumed to be public officials), make decisions according to certain principles.

Second, both market and accounting prices are determined by the condition that the quantity of each commodity demanded is equal to the quantity supplied.

 

There is also a further condition concerning income distribution, now divorced from ownership of productive resources (except labour) and determined in part by social policy. The managers of production are no longer guided by the aim of maximizing profit, but by rules imposed on them by a Central Planning Board; one rule requiring the choice of a combination of factors which minimizes the average cost of production, a second rule (imposed on managers of individual plants and of whole industries) requiring that output is fixed so that marginal cost is equal to the price of the product (ρρ. 74-6).

 

·         Following this discussion of the theoretical determination of economic equilibrium in a socialist society, Lange considered the actual formation of prices by a method of trial and error, as described in Taylor's essay (ρρ. 51-4), and concluded that 'accounting prices in a socialist economy can be determined by the same process of trial and error by which prices on a competitive market are determined' (ρ. 87).

 

Finally, he reviewed briefly the advantages and disadvantages of a socialist system. The main advantages are, first that ‘only a socialist economy can distribute incomes so as to attain the maximum social welfare’ (ρ. 99), and second, that a socialist economy, would take account of all the alternatives sacrificed and realized in production, including the social overhead costs. Thus avoiding 'much of the social waste connected with private enterprise' as well as the fluctuations of the business cycle (ρρ. 103-6).

 Among the disadvantages of socialism, he mentioned the possible arbitrariness of the rate of capital accumulation, and the prob1em of the efficiency of public officials compared with private entrepreneurs as manager of production, ‘the real danger of socialism’ he concluded, ‘is that of a bureaucratization of economic life’.

·         After the Second World War, however, Lange become more critical of market socialism and those he called the ‘socialist free marketers’; towards the end of his life, he became preoccupied with the question whether socialism would be more successful than capitalism in ensuring rapid technological progress.

 

·         Lange, as Ι noted earlier, discussed the 'more refined form' of Mises' argument developed by Hayek and Robbins, which, he claimed, abandoned the essential point made by Mises in so far as the theoretical possibility of a rational allocation of resources in a socialist economy was no longer denied, and only the possibility of a practical solution of the problem was questioned.

 

Thus Hayek (1935, 1948) in the second of his essays on socialist calculation admitted that it ‘is not an impossibility in the sense that it is logically contradictory’ to determine, in a socialist society, ‘the values and quantities of the different commodities to be produced … by the application of the apparatus by which theoretical economics explains the formation of prices and the direction of production in a competitive system (pp. 152 3). But he then went on to argue that the practical implementation of this procedure would be impossible because of the large mass of data involved. In the first place the collection of these data ‘is a task beyond human capacity’, and even if this difficulty would be overcome, the next step of working out the practical decisions would involve determining hundred of thousands of ‘unknowns’ and hence solving this number of equations, ‘a task which, with any of the means known at present, could not be carried out in lifetime’.

 

Robbins (1934, ρ. 151) depicted the problem in still more dramatic terms:

On paper we can conceive their problem to be solved by series of mathematical calculations. .... But in practice this solution is quite unworkable. It would necessitate the drawing up of millions of statistical data based on many more millions of individuals computations. By the time the equations were solved, the information on which they were based would have become obsolete and they would need to be calculated new.

 

Lange replied to these arguments in his exposition of the method of trial and error, based on the essay by Taylor; a number of other economists, especially after the experience of wartime planning, also rejected the view that national planning would be practical impossibility.

 

Schumpeter (1954, ρ 988-9) also rejected the Hayek-Robbins argument that the solutions of the equations required for socialist planning could not be achieved in practice, and took the position of Taylor and Lange that they could be realized by the method of trial and error.

 

·         In the third of his essays on socialist calculation Hayek ([1940] 1948) examined critically the mechanism proposed for a socialist economy by Lange, and in a similar form by Dickinson (1939),6 which he called the 'competitive solution'. After suggesting that 'much of the original claim for the superiority of planning over competition is abandoned if the planned society is now to rely for the direction of its industries to a large extent on competition' (ρ. 186), he expounded his objections to the method of trial and error as a way of determining the accounting prices of producer goods,

First, he argued that, while such a method might work in a world where economic data remained constant over long periods, it would be greatly inferior to market mechanisms in the real world of continual change where reaching the desirable equilibrium depends on the speed with which adjustments can be made (ρ. 188); he also raised questions about the periods for which the central planning body would fix prices.

Second, he deplored the vagueness of both Lange and Dickinson about the actual organization of the various industries and production units, and went on to pose the question of how the central planners would ensure that their rules concerning the determination of prices were effectively implemented. More generally, he considered some of the problems that might arise in the relations between the 'socialist managers of industry' and the planning authorities (ρ. 197).

Finally, Hayek raised the issue, which became central in his later work, of the preservation of personal and political freedom in a planned economy, expressing the doubt that consumers' choice would be an adequate safeguard against what he called 'arbitrary decisions' taken by those who effectively controlled the economy.

 

·         The 'calculation debate' then subsided partly, as Ι have suggested, because of the wartime experience of planning, partly because of the revelation during and after the war of the emergence of the Soviet Union as a major industrial power. More recently, however, in the new climate that has developed in some Western capitalist countries, emphasizing individual enterprise and the supremacy of the market, an attempt has been made to revive debate.

 

·         Lavoie (1985, ρ. 4) argues that the protagonists in the original debate did not seem to comprehend the fundamental paradigm of their adversaries', so that both sides could claim victory, for or against central planning, and the 'standard accounts' of the debate have perpetuated the confusion. His own aim is to set out more rigorously the theoretical paradigm of the Austrian school, especially Mises and Hayek, and from this standpoint to show that their central arguments against socialist planning have not been refuted. Lavoie focuses on the notion of economic rivalry, and interprets Mises' challenge to socialism 'as an argument for the necessity of a particular kind of rivalry in order to achieve complex social production’.

 

After a critical discussion of Marx’s socialism, a restatement of Mises' challenge, and an examination of Lange’s response in terms of ‘trial and error’ method, he goes on to consider the later Austrian rejoinder, and to conclude that Mises had the advantage of the argument in showing that 'the function of this rivalry is to disperse decentralized information' ; and then marshal it, through market prices, for the purpose of overall economic coordination (ρ. 180); whereas the ' trial and error" procedure reduced the choice problem to purely routine behaviour, avoiding all the problems of alertness to new opportunities, of futurity, and of knowledge dispersal' (ρ. 182). Finally, he quotes approvingly Hayek 's ([ 1935] 194, ρ. 179) contention that 'nobody has yet demonstrated how planning and competition can be rationally combined' (ρ. 183).

 

·         Ι shall return in due course to various aspects of Lavoie's thesis after considering the second major type of criticism of socialist planning: namely, that is likely to bring about a condition of stagnation through the bureaucratization of economic life, and more widely of social life in general.

·         Max Weber (1918), in his lecture on socialism, was among the first to argue that the changes in modern society indicated an advance towards the 'dictatorship of the official' rather than the 'dictatorship of the proletariat" and 'If private capitalism were eliminated, the state bureaucracy would rule alone'. Lange, as we have seen, concluded that 'the real danger of socialism is that of a bureaucratization of economic Iife'. Schumpeter (1942, ρ. 206), however, took a very different view. Nevertheless he recognized that bureaucracy gives rise to various problems; in particular its often 'depressing influence on the most active minds', for which there is no simple remedy, and the need for some kind of incentive (beyond 'reliance on a purely altruistic sense οf duty') for the efficient performance of functions, which he thought might be provided partly by monetary reward, but increasingly by the conferment of social prestige.

 

·         Bureaucracy may be conceived, in the first place, following Max Weber, as a superior more rational and efficient - means of administration. In this sense, it is one of the principal elements in that process of rationalization of modern societies which was a central theme in Weber's social theory' (Lowith 1932, Brubaker 1984). But Weber also conceived bureaucracy, in a narrower sense, as a type of domination, having in mind particularly the role of high state officials in Imperial Germany; and, as we have seen, one of his criticisms of socialism was that it would carry such domination to its extreme limit, where 'the state bureaucracy would rule alone"

 

·         In considering the significance of bureaucracy in the socialist countries we have to disentangle these various senses. The general extension of rational administration which is common to all modern societies presents no unique problems in a socialist system, except that the Soviet Union and some other countries had to face initially the difficulties inherited from preceding ramshackle forms of administration; although this was only one part of the much wider problem of creating an educated and efficient labour force at all levels. It was from this aspect of the development of rational administration that Schumpeter expressed his largely favourable view of bureaucratic control of the economy.

 

·         The question of bureaucracy as a type of domination raises other issues. Weber thought of it in terms of domination by high officials in the state administration who had usurped, or were usurping, the functions of politicians … But the type of domination - autocratic or totalitarian  which developed in the Soviet Union, and after 1945 in the other socialist countries of Eastern Europe, was domination by a party, whose leaders concentrated all political powers in their own hands, and in due course in the hands of a single individual rather than by an administrative elite. As this kind of regime became established, however, and after the savagery of Stalin's rule had ended, there emerged a system characterized by the dominance of party and state officials who constituted, in the view of some critics, a 'new class' (Djilas Ι957, Κonrad and Szelenyi 1979). The evolution of the communist parties in the socialist countries exemplifies indeed the process which Weber termed the 'routinization of charisma" as well as the oligarchical tendencies described by Michels, and it was this process, along with the vast expansion of bureaucratic administration to implement central planning, in societies where public criticism and any kind of opposition were rigorously suppressed, which produced the stagnation. inefficiency and corruption that have become the principal targets of current policies of economic and political reform.   <ιΙΙ political po\\'er ίπ thcir own hands, and ίπ due course ίπ the hands of a single ίnιJίνίdual. rather than b)' an administrative elite. As this kind of regin1c became established, however, and after the savagery of Stalin's rule had ended, there emerged a system characterized by the dominance of party and state officials who constituted, ίπ the view 01' some critics, a 'new class' (Djilas Ι957, Κοnnίd and Szelenyi 1(79). The eνοΙutίοn of the communist parties ίπ the socialist countries exemplifies indeed the process which Weber termed the  

 

·         In the 1940s and throughout the post-war period, the critique of socialist planning came to concentrate much more upon the lack of freedom and the totalitarian regulation of all aspects of social life than upon the difficulties of economic calculation, and many socialists, as well as their opponents, elaborated fundamental criticisms of the Soviet model of a planned society. Thus Hilferding (1940, 1941) argued that the Soviet Union was a 'totalitarian state economy' and pointed to the dangers resulting from the great increase in the power of the modern state and the extension of its activities into all spheres of life, which led to 'the subjection of the economy by the holders of state power".

 

 Hayek in the course of discussing Dickinson's (1939) book raised the question of personal freedom in a centrally planned society. In addition to making frequent references to what he always describes as the 'arbitrary' decisions of the economic planners -  though why these should be considered arbitrary, or more arbitrary than the decisions made by many governments in other types of society, is never made clear or even examined - he went on to criticize particularly Dickinson’s  statement that 'in a socialist society the distinction, always artificial, between economics and politics will break down; the economic and the political machinery of society will fuse into one', concluding that 'this is, of course, precisely the authoritarian doctrine preached by Nazis and Fascists'. Later, in what became a very influential tract, The Road to Serfdom (1944), Hayek expressed his opposition to socialism and central planning in still stronger terms. and he has continued, up to his most recent work (1982), to advocate a 'spontaneous' or 'self-generating' order of society' in which the powers of government would be strictly delimited and confined.

 

Aron, in a similar though more restrained fashion, analysed the Soviet Union as a totalitarian regime in which a single party has a monopoly of political activity, an official state ideology is imposed by coercion and persuasion, and most economic and professional activities are subject to the state, or even, in a way, part of it ; and in several essays (notably [1950] 1988, ch. 6) he contrasted the 'unified elite' in the Soviet Union with the plurality of rival elites in the capitalist democracies.

 

·         In the first place, it can be said that the main objections brought forward in the calculation debate greatly exaggerated the difficulties, whether theoretical or practical, of planning; and they seem to have in less validity in the age of super computers. Nevertheless, two issues arising from that debate are still important.

 

One relates to the complexity, especially in terms of the immense variety of goods and services supplied, of modern production; in this context many critics have argued that while central planning may be effective where there is a single clearly defined aim to be achieved - for example, rapid industrialization or the construction of a war economy, accompanied in both cases by severve constraints on individual consumption, choice of occupation, and so on, which are more or less willingly accepted by, or imposed upon, the population in order to attain the goal - it is less effective in developing the production and distribution of the great range of consumer goods and services characteristic of a modern society.

 

Such criticism is also relevant to two other matters.

First, it is clear that central planning and the organization of large-scale production have been generally far less successful in agriculture than in industry. This relative failure is connected, in part, with the very high rates of investment in industry which have continued up to the present time; but it also requires, and is now receiving, a thorough reassessment of the kind of economic regime most appropriate to agricultural production (which would include individual cultivation and small partnerships of cooperatives, as well as state farms) and to the distribution of the product.

Second, the quality as well as the quantity and νariety of goods and services in many of the socialist countries is notoriously unsatisfactory, and this is connected partly with the absence from the central planning mechanism of adequate quality inspection (except, as is generally recognized, in the privileged spheres of the space programme and military production), partly with failures of management, and partly, as free-market critics would insist, with the lack of alternative sources of supply and of some degree of competition between producers.

These critical reflections raise a host of questions about management and incentives, about bureaucratic regulation, and about the place of market mechanisms in a socialist economy.

 

There is a second issue, however, related to all of these, and quite central to the revived calculation debate which should be considered at this point; namely, the capacity for innovation in socialist economies. Lavoie (1985), as Ι noted earlier. has claimed that the later socialist arguments against Μises and Hayek ignored 'all the problems of alertness to new opportunities, of futurity, and of knowledge dispersal' which are 'crucial to any analysis of choice in the real world' (ρ. 182), and a number of other writers have emphasized the importance of this problem in the Soviet economy.

 

Berliner (1988), for example, in essay's written in the 1970s, discusses the question of 'bureaucratic creativity', particularly of the 'planning bureaucracy', with respect to technological innovation, and while recognizing that 'the system has been effective in generating an enormous volume of new technology' (ρ. 20 1), observes that there are many factors inhibiting innovation, above all the conservatism of the planning bureaucracy and an aversion to excessive risk-taking, so that new technology is less rapidly and less comprehensively introduced than would be desirable. In a later essay (ρρ. 246-66) he considers the prospects for technological progress in the context of the sharp decline in the rate of economic growth which became apparent in the 1970s. and notes the conclusion of most Western research that in the post-war period technological progress in the Soviet Union was considerably less rapid than in the advanced capitalist countries, where technological advances became a much more important source of growth tan increases in labour and capital inputs (ρ. 249).

 

·         Overall,  it may be concluded, central planning has been successful in most of the European socialist countries in achieving fast and stable economic growth (Buck and Cole 1987, ch. 8) and transforming them into major industrial producers who now account for about one-third of the world's industrial output, but it has not yet raised per capita income and living standards, except in one or two cases, to the level of the advanced capitalist countries, and since the 1970s the rate of growth has declined (though this has also happened in most of the capitalist countries, and it is a widely held view that economic growth is likely to be slower in mature economies).

 

Two other considerations should be borne in mind in assessing the results of socialist planning thus far. First, successes have occurred alongside massive increases in state intervention and expenditure and a considerable extension of national economic planning in a variety of forms; and that a broad view of post-war development suggests that the advanced capitalist countries which have had more comprehensive national planning, and in some cases more extensive public ownership of industry, have been more successful than others (two good examples being the contrast in economic performance between Japan and the United States and between France and Britain).

 

However, a second point that we have to consider is the nature and consequences of innovation and growth. Many people in the capitalist countries (and, for that matter, increasingly in some socialist countries) have become uncomfortably aware that technological progress is not an unmixed blessing, and share the doubts expressed by Gabor (1970) about 'compulsive innovation' and 'growth addiction'. From this aspect, the slower rate of innovation in socialist societies, if such is the case, may not be altogether a disadvantage. But this is not  the main issue. The question is rather: what kinds of new technology and economic growth are likely to add most to the sum of human happiness and to the quality of life.

 

 

Chapter 5 The state, bureaucracy and self-management

·        The economic role of the state has been greatly extended in all modern societies, and most of all in the socialist planned societies, where the process gave rise to all the familiar, and quite justified, criticisms of totalitarianism and dictatorship. But there is not a necessary connection between the expansion of the state's economic activities and the emergence of political dictatorship or authoritarian rule. Everything depends upon the nature of the political system.

·        It remains the case, however, that many Marxist and other socialist thinkers, belonging to diverse schools, took for granted that an organized working-class party would rule the new society, more or less unchanged, at least during a period of transition which might be quite prolonged, and their ideas were remote from those now being expressed in the discussions about 'political pluralism'.

not simply as a process of 'democratization' but as an essential element in the reform; and reinvigoration of the economy.

 

No one can be sure in advance how the current changes will evolve, or what policies will emerge from the new structure of politics. It is possible, though perhaps not very likely in the foreseeable future in most of the socialist countries, that competition for political leadership on an extensive scale will lead to the emergence of influential pro-capitalist forces tending towards a restoration, or partial restoration of capitalism.

 

The idea of political pluralism should not be confined, as it often seems to be, to the subject of free elections and competing parties. Just as important is the decentralization of political power by enhancing the role of local and regional government within nation states, and the working out of electoral systems which allow the widest possible representation of diverse interests and of preferences in social policy. It was never reasonable to suppose that in a socialist society all conflicts of interest or diversity of aims would disappear, even after the abolition of major class differences (which, for that matter, may reappear in new forms), and it may well be the case in the future that political power in socialist societies will not only be more decentralized, but will frequently be exercised by coalition governments which change their complexion and orientation from time to time as circumstances change.

 

But there is still another element of vital importance in a pluralistic system; namely, the development of a great variety of active associations in civil society. The ideas of 'participatory democracy' and 'self-management' both express the immense importance of this dense network of non-state associations as the substratum and condition of effective democratic pluralism.

 

·         The aspect of the state in a planned socialist society that has attracted most attention and criticism ever since Max Weber wrote of the 'dictatorship of the official' is the growth of bureaucracy and its consequences. This has both a political and an economic dimension, and in the following discussion Ι shall concentrate on the latter, since, as Ι have already argued, the question of political power and the emergence of a new dominant class or elite in socialist societies requires an analysis of the nature of the state and of the monopolization of power by a single party, rather than of bureaucracy in its most general sense. To be sure, there has also grown up a party bureaucracy which has a significant role in the economy, and its influence will be considered in the relevant contexts, but Ι shall begin by examining the bureaucratic phenomenon as it manifests itself in the planning and regulation of economic life by state officials and managers.

 

Α useful starting point is to be found in the discussion by Berliner (1988, ch. 8), who distinguishes two levels of bureaucracy in the Soviet system : a 'planning bureaucracy' which is 'interposed between the firms and the Party leadership and comprises the economic ministries, organizations dealing with the planning process and finance, and segments of the Party bureaucracy; and the management bureaucracy in individual firms, which is comparable with that in capitalist corporations and hence referred to as the 'corporate bureaucracy’.

·          

Berliner then goes on to consider the conservatism or creativity of these two bureaucracies, in relation to the problem of motivation, and notes that they tend to make 'those decisions which contribute to a higher score on the standards by which their own work is evaluated. In some cases, this leads to creative behaviour; in others to conservative behaviour. The crux of the issue is the standard of evaluation.' (ρ.193) But there is also a general obstacle to creativity: namely, the lack of satisfactory quantitative indicators of the relative value of commodities as implied by the preferences of the party leadership, since the 'shadow prices' which express the relative values are not in fact known by the central planners, the planning bureaucracy, or the firms.

 

In general, there is little doubt that the rate of technological innovation and of productivity growth (which reflects greater efficiency) has been unsatisfactory, and since the 1960s a succession of major reforms and minor changes have been introduced, revised, and sometimes reversed again, in an effort to improve efficiency and increase the rate of economic growth (Berliner 1988, ch. 12). What has changed most fundamentally is the conception of central planning. Whereas the Stalinist leadership, as Berliner (ibid., ρ. 280) remarks, had great faith in the ability of the central planners, who had after all achieved the transformation of the Soviet Union into a great industrial power, to direct the economy in every detail, 'that naive optimism has long since vanished' and the aim of all the subsequent reforms has been to find a way of decentralizing local decisions in the framework of a central plan.

 

·         Elsewhere, notably in Yugoslavia from the 1950s and in Hungary since 1960s, there have been more fundamental changes in enterprise structure as well as in the economic system generally, with the development of diverse forms of 'market socialism'; and the current policy of restructuring the economy in the Soviet Union points in the same direction. The aim is to create new opportunities and incentives for efficient management, leading to more rapid technological innovation and higher productivity, less wasteful use of resources, and the elimination of all kinds of bottlenecks in the supply of materials to productive enterprises and in the distribution of consumer goods, both by liberating enterprises from detailed central regulation and by introducing an element of competition.

·         One consequence of deregulation and the greater autonomy of enterprises is quite clearly a reduction in the size of the bureaucracy, which itself represents a considerable saving of resources. Νuti suggests, the success of the restructuring process may mean that 'the traditional problems of centrally planned economics will have been alleviated or perhaps solved, but at the cost of introducing at least some of the problems of capitalist economics.

 

·         The first major break with the Stalinist system took place in Yugoslavia with the introduction of a new economic and social policy based upon the self-management of enterprises and other social and cultural institutions. The Yugoslav economy can be characterized briefly by saying that property is managed directly by the workers themselves, in a system of social ownership which is contrasted with state ownership in other socialist countries.  The latter separates the means of production from the producers in a new way and creates new dominant groups of party officials, bureaucrats and managers; whereas social ownership approaches more closely the conception of a 'society of associated producers" formulated abstractly by Marx, but influenced by the experience of cooperative factories in the nineteenth century.

 

·         In a system of state ownership, the coordination of the economy as a whole is assured by some central authority - the central planners and the party leadership; but where enterprises are in principle autonomous and self-managed, the relations between them have to be established in a different way, namely through the market and exchange, though in an economy which is still planned and subject to a general regulation by the state. The economic advantages of this system were seen as being that the producers are no longer directly subordinated to external political authorities, that incomes are determined by output and productivity instead of by administrative decisions, and that the independence of the producers provides greater incentives for economic development. But the restructuring of the Yugoslav economy also had the wider aim of encouraging the full participation of citizens in determining their social life and achieving responsible self-government in a genuine socialist democracy.

 

The initial achievements of Yugoslavia under the new regime were impressive, with very high growth rates and a high level of accumulation and investment, and they attracted widespread attention. But unemployment remained high, resulting in large-scale emigration of labour, mainly to West Germany, and economic disparities between regions tended to grow, as did income differences generally. More recently, economic performance has greatly deteriorated, the country is burdened with massive external debt, and the economic failures along with the continuing disparities between regions have exacerbated cultural and political tensions within this multinational state.

 

·         The major problems of self-management seem to be the following.

 

First, economic efficiency varies considerably', for diverse reasons, between enterprises, and this results in significant differences in income and social benefits between the workers in these enterprises. It also raises the question of whether the least efficient enterprises should be allowed to go bankrupt and, in that case. what becomes of their employees and of socialist policies of full and stable employment. Beyond this, according to some critics, there has developed in the more successful enterprises a 'group-egoism' and the property relations that have been established could more accurately be described as 'group ownership' rather than 'social ownership’.

Second, the full participation of employees in self-management is rarely achieved. Just as in self-managed associations of various types in other societies (for example, voluntary associations created for charitable and educational purposes), most members are passive supporters, whereas there is always an active minority of individuals who are ready, or eager, to take on administrative tasks and exercise some authority.

 

Third, in an economy in which the basic productive units are independent self-managed enterprises the coordination of economic activity as a whole is effected partly by market relations, partly by central and regional planning, giving rise to a major problem concerning the relationship between the autonomous activity of production collectives and rational economic planning.

 

·         Α principal feature of the new Yugoslav economy was what came to be called 'market socialism', though a better term might be 'socialism with markets', as has been suggested by Tomlinson (in Hindess 1989), and this has become a fashionable phrase in recent studies and debates. In the Yugoslav case, however, it was only a part of the overall project to create a socialist society, the main pillar of which was to be the self-management of enterprises and institutions as a way of involving the whole population in the determination of economic and social policy and countering the growth of new elites.

 But these two elements were inseparably connected, for the autonomy of enterprises necessitated the development of market relations among them, within a framework of regulation which included national economic planning, the protection of consumer interests, and the provision of general infrastructural and welfare services. Moreover, market relations and competition among independent producers were seen as valuable in themselves in so far as they promoted greater economic efficiency and higher growth rates.

 

·         What is evident from the Yugoslav experience, however, is that the attainment of socialism as a 'society of associated producers' is an infinitely more difficult process than was ever imagined. On one side, central planning implemented by a single party which claims a monopoly of power as the maker of the revolution facilitates the growth of a new dominant and priviliged group in society, and the planning itself may be less effective once the initial phase of rapid industrialization has been completed, and the planners themselves become increasingly concerned with the promotion of their own sectional interests. On the other side, as has been seen in considering the Yugoslav system, self-management may also give rise to new sectional interest of the enterprises themselves and result in great inequalities of income and difficulties in coordinating economic development as a whole.

 

·         Α major study of the problems ίπ Yugoslavia by Horvart (1982) proposes personal taxation as a means of reducing disparities (as has now been undertaken in Hungary), the exclusion of culture, education and health from the market. and a restructuring of the functions of government. There is also now an animated debate throughout Eastern Europe on the establishment of a multiparty system already partially implemented in Hungary and Poland, or at the least a system in which various groups, not formally constituted as parties, can contest elections and express public criticism of economic and social policies.

 

·         Competition and markets may bring benefits to consumers, increase the efficiency of producers, and stimulate economic growth ; but at the same time they are likely to bring greater instability and economic inequality and perhaps a deterioration of collective provision and the sense of community.

 

With the development of markets and the greater independence of enterprises, many socialist countries have become increasingly involved in the capitalist world market and hence exposed to the economic cycles characteristic of capita1ism. With the recession in the capitalist countries in the 1980s, some of the East European socialist countries have faced major problems of adverse foreign trade balances and large external debts, the latter resulting from ill-advised large-scale borrowing at a time when Western banks were only too ready to lend their massive cash resources all over the world.

 

Chapter 6 Plan and Market

 ·        Ever since the debates about central planning and socialist calculation in the 1930s, and more particularly since the formulation by Lange and Dickinson of what Hayek called the 'competitive solution', according to which prices and the allocation of productive resources were to be determined by a combination of market mechanisms and central planning, there has been continued discussion of the ways in which planning and markets can be successfully integrated in a socialist society. The discussion has been especially intense in Yugoslavia, where critics have singled out as a major problem the relation between self-managed enterprises operating in a market situation and the requirements of rational economic planning.

 

·        But the general question is one of great complexity, which has many different aspects, and we should begin by distinguishing some of the separate issues involved.

 

First, there is a great difference between those societies in which the greater part of productive resources arc publicly owned and central planning has a major role in the economy, and on the other hand, the societies in which there is only limited public ownership and planning and the construction of a socialist economy involves some extension of planning in diverse forms, along with restrictions on market mechanisms.

 

Second, the restructuring of the socialist economies raises questions not only about the scope and nature of central planning, but also about the forms of ownership of productive resources, and in particular the extent to which private ownership will be permitted or encouraged. Α clear distinction was always made between personal property - which would only be affected by the transition to socialism to the extent that a greater equality between individuals became established - and ownership of productive resources; the divergences of view concerned essentially the latter kind of property, above all in the basic spheres of economic activity and where ownership was highly concentrated in the hands of small groups of people through the development of large corporations in industry and finance. Marx's legacy - the conception of the 'associated producers' - seemed to imply a very wide extension of social ownership, and a virtual extinction of individual ownership. but as we saw in the case of Kautsky, those early Marxists who gave any attention to the practical organization of a socialist economy were quite ready to envisage very diverse forms of ownership, including a sphere of individual ownership and private production. Furthermore, there was from the beginning, among Marxists and other socialists, a powerful current of thought which favoured relatively independent self-managed enterprises.

 

Third, the debate about property ownership is intimately connected with the question of central planning and state industries. Many socialists, and writers on socialism, have recognized that a socialist economy cannot simply be equated with central planning. In the writings of some of the Utopian socialists, it was assumed or hoped, as in the case of Morris, that a spontaneous order would emerge from the activities of responsible, cooperative individuals, without any elaborate machinery of government, administration of economic management, though other Utopians, like BelIamy, envisaged a powerful central authority which would regulate social life. The supporters of workers' councils and self-management, in a less extreme way, advocated the autonomy of productive enterprises on the basis of social ownership, but they did not consider in detail how the diverse economic activities would be coordinated, and, as we have seen, the self-management system implies the existence of markets and, in practice, creates difficult problems of the kind that I discussed earlier, in particular the specific problem of a symbiosis between plan and market.

 

·        At all events, in the mainstream of socialist thought and practice the concept of planning came to be closely identified with socialism, and as Dickinson (1939, ρ. 9) wrote:

The definition of socialism that was generally accepted during the half-century between 1875 and 1925 is 'social ownership of the means of production" Since that time the phrase 'planned production' has been tending to take its place. There is a close connexion between these two definitions .... One fundamental difference between socialism and capitalism will be the existence of an authority able to view the economic system as a whole and with power to make decisions involving the system as a whole.

 

Another half-century later the question of planning has become much more complicated and the subject of renewed controversy. Om one side, the continued development of 'organized capitalism" has enlarged the sphere of planning and the role of the state in capitalist economies, particularly in the most dynamic societies, such as Japan. On the other side, comprehensive central planning in the socialist countries seems to have run into serious difficulties, and to be less effective in a more complex advanced industrial society than it was in the earlier stage of rapid industrialization. Hence the present more radical policies of reform and restructuring.  

 

·         The current reforms are, in a broad sense, an extension of those which were implemented in Yugoslavia in the 1950s, but in the interim there have been many changes in the world economy, the Yugoslav system itself has encountered serious difficulties, and the present reforms in the socialist world are being undertaken in societies which differ profoundly among themselves in size, resources, history and culture, The fundamental re-examination of the nature of a socialist economy and socialist planning is proceeding, therefore, in the midst of widespread controversy.

 

·        An appropriate starting point is the experience of Yugoslavia, which was the first socialist country to introduce major innovations, through an alternative conception of social ownership, a decentralization of the economy and especially of management, and the development of market relations.

 

The first phase of this new system, up to the early 19605, was one of considerable achievement in economic growth and rapid industrialization, and in the liberalization of social and cultural life; but in the view of its critics, its further development was compromised by unresolved contradictions in its ideological heritage between the idea of self-management, which become increasingly confined to the economic sphere, and the Leninist view of the ‘leading role’ of the Communist Party in a one-party side. In spite of the reforms of 1965, which established a legal framework for an extended market system, the economic system deteriorated rapidly from the mid-1970s, profoundly affected by the rise in oil prices and the economic recession in the West, and has reached crisis proportions in the last few years, with low or zero growth, rapidly increasing unemployment, high inflation, and a massive external debt which now dominates economic policy.

 

·        The economic problems of Yugoslavia have given rise to a vigorous debate about future policies in which very divergent views have appeared. The essential questions concern the regime of property ownership, the benefits and disadvantages of socialism with markets, and the appropriate planning mechanisms in a restructured socialist economy, but at the same time they are closely related to political issues and have provoked widespread discussion of 'political pluralism' as a means by which citizens can exercise greater influence and control in the formulation and implementation of economic and social policy.

 

·        The recent reforms in socialist countries have not generally moved towards self-management of the Yugoslav type, but have concentrated upon two issues: a possible extension of private ownership, and greater independence in the management of enterprises by relaxing central planning controls and permitting the development of market relations.

 

The expansion of private production, trade and services, has various consequences and implications. In the present context its main significance is that it represents one form in which a greater autonomy of enterprises and individual economic agents can be achieved. ln short, it is a way of decentralizing economic decision-making, for producers and consumers.

Clearly, however, decentra1ization can also be brought about in other ways, by giving greater independence to publicly owned enterprises and extending the sphere in which market prices determine the levels and types of production and consumption;

 

·         What we have to examine, therefore, are the models of a decentralized socialist economy which have been worked out, and to some extent, in Hungary and Yugoslavia particularly, implemented in economic reforms. The starting point for the reforms in Eastern Europe has been described by Richet (1981, ρρ. 24-5) in the following terms:

 

According to the centralised conception of economic management. the dynamic behaviour of the economy is governed by the accumulation process, and this in turn is directed by the central authorities (the government and the central planners) acting through a vertically structured organisational system (branch ministries, directorates ΟΓ associations, and enterprises). Ιn this system the 'central will' largely displaces horizontal regulation through the market mechanism. The resulting process of development relies on extensive growth of the economy and requires for its operation only fairly rough and ready economic measures and indicators ....

 

Richet goes on to say that this hierarchically organized structure 'may well be the most appropriate one when the main tasks of economic policy are concerned with the early stages of accumulation', but it seems less suitable when the economy is more advanced. development becomes more intensive, and 'a more efficient system of information and control is needed’.

 

·         Ι have already given some account of the Yugoslav self-management system, and critical evaluation of it and now turn to examine more specifically the relation between planning and markets which it embodies or is supposed to embody. The theoretical relationship has been clearly formulated by Horvat (1982, ch. 12) who, after rejecting the eclecticism of a mixed economy', continues:

 

We wish to preserve essential consumer sovereignty because socialism is based on the preferences of the individuals who constitute the society. We also wish to preserve the autonomy of producers, since this is the precondition for self-management. When these are taken together we need a market. But not a Laissez-faire market. We need a market that will perform the two function, just stated, neither less nor more. in other words. we need the market as a planning device in a strictly defined sphere of priorities , . , [and] planning as a precondition for an efficient market ... in order to increase the economic welfare of the community (ρ. 332)

 

According to this model, planning and markets are complementary, not contradictory, and Horνat goes on to consider the basic functions of a social plan, beyond the formulation of actual plans which have expert and social (normative) components: as a forecasting instrument, as an instrument for coordinating economic decisions and for guiding economic development, and as an obligation for the body that has adopted it and a directive for its organs (ρρ. 333-4). Having outlined the functions of planning in this way, Horvat then considers the regulatory mechanisms that will be needed, the behaviour of worker-managed firms, the optimum rate of investment, and the basic institutions required for macro-economic organization, comprising a planning bureau, a national bank, a development fund and an arbitration board for incomes and prices.

 

But the institutions and mechanisms to create an effective connection between planning and markets, as envisaged by Horvat, have not been established in Yugoslavia, … . It is certain that the economic development of Yugoslavia and other socialist societies has been adversely affected in some respects - whatever the initial advantages may have been or seemed to be - by their close links, in foreign trade and investment, with the capitalist world, and by the failure of policy-makers to take due account of the cycle of growth and recession in capitalist economies which is, after all, at the heart of Marxist economic analysis.

 

·         The experience of Hungary in past two decades has been similar in some respects to that of Yugoslavia. The New Economic Mechanism which came into force in January 1968, after three years of careful preliminary research, was intented to decentralize economic decision-making and to introduce elements of market competition. The main features of the reforms was

 

... its abolition of the standard Soviet-type procedures of operative annual planning. Enterprises were no longer to receive any complusory indicators from higher levels of planning hierachy. Five-years and annual plans were still to be formulated within the central agencies … but annual plans would no longer be implemented by means of direct instructions to enterprises. Instead, plans were implemented indirectly by means of so-called economic regulation, which influenced the financial environment within which enterprises operated. Enterprises themselves were supposed to respond to market signals, essentially the price system, in order to maximize their profits. (Hare. Radice and Swain. ρ. 14)

 

But, in 1971, an element of labour direction was introduced, and in 1974 central control over investment plans was strengthened, because the release of market forces led to problems in the markets for labour and investment; and in later years there were further measures of re-centralization, mainly, as Hare et αl. (ρ. 15) note, 'in response to the economic effects of the dramatic rise in the price of oil and other raw materials in 1974-5, coupled with the Western recession [which] led to a serious deterioration in the terms of trade and the balance of payments'.     

 

The reform policy, however, was only temporarily interrupted; in January 1980 much of the original mechanism was reinstated, and since then further radical changes have been undertaken, including monetary and fiscal reforms which introduced personal income tax and value added tax, and most recently the first steps in the development of a multi-party political system. The Hungarian reforms, however have not followed the Yugoslav model of workers' self-management; on the contrary, they are much mor individualistic and market-orientated in their approach.

 As I noted earlier, the 'second economy' is already a major clement in economic life, and the economic reform plan adopted in 1988 envisages the development of a 'genuine market economy' in which the share of the private sector might rise to some 30 per cent; there would be more extensive shareholding (in state enterprises too, though in a collective form) and a more widely functioning stock exchange, closer to the Western capitalist model, would develop. The introduction of personal income tax was itself an 'individualizing measure, partly in response to the growth of income inequality, resulting from private enterprise in the second economy, and it was strongly opposed by critics (not necessarily advocates of more centralized planning) who saw it as a substantial departure from the values of a socialist society.

 

·         In China, the economic changes since 1976 have been much more sweeping than in the East European countries, and, in the view of some commentators and socialist critics, can be regarded as the first stages in a process of 'restoring capitalism '. The main elements in this process have been the rapid development of market mechanism which profoundly modify the social objectives of the planning system and result in growing inequality, a 'de-collectivization' of agriculture which increasingly favours rich private farmers, and the 'open door' policy with regard to foreign capital, in the form of joint νentures and extra-territorial 'special economic zones’ which promotes development above all in the foreign trade sectors of the economy, The outcome so far of these economic changes is unclear.

·         'Socialism with markets' seems to be here to stay, and it is welcomed by most socialist thinkers as well as by the overwhelming majority of the population in socialist countries. But it is not without its own problems and dubious aspects and it will be useful now to attempt a provisional summary of the main issues.

 

First, the question of markets has to be distinguished clearly from that of the ownership of means of production. The markets we are talking about, in a socialist society, are markets in which socially owned enterprises are major participants. Without social ownership on an extensive scale there can be, in my view, no socialism. But this still leaves a large sphere in which small-scale private production can flourish - in the arts and cultural activities generally (including book publishing), in services of all kinds to consumers, in local trade, and in some areas of agriculture. The case of agriculture is particularly interesting because there seems to be a fairly widespread agreement that the economic reforms should begin with agriculture and that this involves to a greater or lesser extent a privatization of agricultural production. But this question needs careful examination (examples of Poland and Soviet). The reform of agriculture in socialist countries therefore requires, above all, more efficient management of collective farms, the decentralization of decision-making and the introduction of elements of self-management, together with a better supply of modern machinery (which of course depends upon the success of the reforms in industrial production); but this still leaves an important area in which production by individuals, families and small- or medium-size cooperatives is appropriate and desirable.

 

A second major point is that market in a socialist society should be conceived, in Horvat's sense, as a 'planning device' within a general economic plan, and hence regulated in accordance with social objectives. The problem is how to accomplish this regulation effectively.

 

·         Two particular issues are closely connected with the development of greater enterprise autonomy, market competition and a more indirect system of planning and regulation. One is that of improving management efficiency, and more widely of encouraging a kind of socialist entrepreneurship which would bring about more rapid technological innovation. And a second issue concerns the response, and the attitudes, of workers. Here, too, incentives of various kinds are required, among them opportunities for greater participation in decision-making through reforms which may tend towards an effective system of self-managed enterprises.

 

·         Νot all the socialist societies are moving towards a self-management system (which has, as we have seen, its own problems), but there is an unmistakable desire for, and growth of, participation at all levels of society. Thus, there is a third issue involved in the present reforms: namely, the development of a greater 'openness' in society accompanying the restructuring of the economy and now widely regarded as being crucially important for the success of the whole reforming process.

 

The economic changes, it is recognized, require a new political climate in which the population can have greater confidence in their leaders, express their wishes and criticisms more freely and effectively, and take a larger part in the determination of social policy; for it is only in such a climate that a new enthusiasm, animation and readiness to innovate can flourish. ΑΙΙ these changes diminish the absolute power of the Communist party, which has existed in the Soviet Union since Ι1917 and in most other socialist countries since the end of the Second World War; and they point perhaps towards an eventual socialist political system in which coalitions of various independent parties are a normal feature of government, while other parties function effectively as a critical opposition. But the greater 'openness' of the socialist societies involves much more than just the formation of new political parties. It represents, as some observers have noted, a recreation of 'civil society'; that is to say, a revival of the network of autonomous associations of all kinds in which citizens can pursue their interests, express their ideas and construct a style of life, free from government intervention and regulation (within the limits set by law). And this development of civil society is also of vital importance for renewing the active involvement of citizens in the whole process of reform.

 

·         Conclusion:

 

First, it should be clearly stated that centrally planned socialist economies have undoubtedly been successful in several important respects: in mobilizing resources for development, especially rapid industrialization, and in some periods attaining very high rates of growth, as well as achieving greater economic stability than is the case in capitalist countries. And since the mid-1970s the socialist countries have gone through a period of stagnation, or even decline, which is the proximate source of the reform movement.

 

The main objective of all the reforms is to decentralize economic decision-making by giving more freedom and responsibility to managers and workers, in order to increase efficient use of resources, stimulate technological innovation, raise productivity and especially improve the supply of consumer goods and services. This necessarily involves the growth of market relations, in which enterprises and other agencies negotiate their own contracts with other bodies. It does not, however, necessitate any considerable expansion of private production, since socially owned enterprises can operate perfectly well in a market situation; and the scale of private production is a matter to be determined on other criteria, as Ι argued earlier, and as many socialists have long recognized.

 

On the other hand, the extension of market relations needs also to be regulated within the framework of a general planning process, in order to preserve the benefits of economic stability and long-term projects or investment and growth, and also to counter such ill effects of market forces as growing inequality or the spread of an unbridled acquisitiveness. The major problem, then, is to devise a new and more sophisticated planning machinery, a task which should be much easier in the intellectual climate of debate and criticism which is now emerging.

 

 

Chapter 7 Problems of socialism today

First, it is necessary to distinguish between the kinds of society which I have called 'socialist' and 'socialistic', the former group comprising the Soviet Union and the countries of Eastern Europe, China and some Third World countries, the latter including those countries, mainly in Western Europe but also in the Third World, which have had for longer or shorter periods socialist or social democratic governments committed to an extension of public ownership, ahigh level of public expenditure, and some degree of central planning.

The socialist countries

·        They are socialist, first, in the fundamental sense which has been the distinctive feature of the whole socialist movement since its beginnings: namely, that the major means of production (other than human labour) are socially owned. But they are also socialist, in a second and later sense, in being 'planned' societies. Third, they began with the aspiration to create a broad economic and social equality among their citizens and to liberate the individual human being, or as Marx and some later Marxists expressed it, to 'end alienation'; but in these respects they failed signally (though Yugoslavia was an exception) during the Stalinist period and less blatantly in the following decades until the recent reforms were initiated.

 

·        The importance of social ownership is that it embodies one of the central values of socialism; the attainment of a practical form of collective self-determination in which a community of free and equal citizens decides consciously and deliberately upon the general framework of its economic and social life, and is no longer dominated by a particular class - the owners of capital. But the actual realization of this value - which has been expressed in diverse forms, from Marx's 'associated producers' to 'self-management' and 'participatory democracy' - encounters, as the historical experience of socialism in the twentieth century should teach us, immense and fundamental difficulties.

In the first place, individual citizens or groups of citizens may want very different things which are, to say the least, difficult to reconcile. Second, it is impossible that a community of several million people, such as even the smaller modern nations are, should decide and act collectively in a direct and immediate way; hence some kind of representative system must necessarily be created (though it may take many forms, with varying degrees of participation). Α representative system not only gives expression to existing particular interests, but also produces new interests and divisions out of which there may emerge either a compromise negotiated between different groups or an authoritarian solution imposed by a particular group.

 

These are the problems, long familiar in political philosophy, of the 'general will', on which Hobhouse (19 Ι 8, ρ. 126), with a clear awareness of sociological realities, commented that 'the real objection to the term is that in so far as it is will it is not general, and in so far as it is general it is not Will.’ The same problems have been restated in a different way by Hayek in the course of his log-sustained critique of socialism, and most fully in his recent work (Hayek 1982), where he expounds his ideal of a 'spontaneous order' as the only form of society that can provide the condition of freedom, 'in which each can use his knowledge for his purposes', in opposition to the vision of a rationally planned society which has as its goal the achievement of social justice. The latter, he argues, is doomed to failure since 'society, in the strict sense in which it must be distinguished from the apparatus of government, is incapable of acting for a specific purpose' (νοl. 11, ρ. 64), precisely because it does not have a 'general will' or a general consciousness in which the dispersed knowledge and purposes of individuals can be brought together. It is on these grounds that Hayek, in his more strictly economic writings, always refers the decisions of central planning agencies as 'arbitrary’.

 

·         The idea of planning was implicit in almost all socialist thought from the end of the nineteenth century, and necessarily so, because it was (or appeared to be) the only alternative to capitalist markets as a mechanism for coordinating the economic system as a whole. But it was only after the creation in 1917 of the first socialist society that central planning came to occupy a major place in the definition of socialism and that the idea of a 'planned society' began to be widely diffused, as Durbin (1949) and many others recognized. From the 1930s onwards socialism became virtually identified with central planning, and planning itself acquired a new significance as the main element in the project of creating a 'rational society' in which the instability, waste, frustration and inequality of a capitalist economy would be overcome.

 

Some of the issues have been examined in the previous chapter, among them the growth of bureaucracy, which may resu1t, on one side, in the diffusion of a cautious and conservative outlook and the stifling of enterprise and innovation, and on the other, in the emergence of a new privileged stratum which dominates society; and also the difficulties experienced by the kind of central planning which attempts to control direct1y, and in detail, the activities of individual enterprises in an advanced, complex and rapidly changing economy.

 

In discussing Utopian thought in the novels of BeIIamy and Morris, Ι observed that their vision of the functioning of a new society presupposed a radical transformation of human nature, as a result of which the sentiments favourable to peaceful cooperation, social responsibility and non-acquisitiveness would come to predominate in shaping human behaviour; and for all the disclaimers that were made, Utopian ideas also profoundly affected the views of Marx and later Marxists, as well as other socialists. From one aspect it may be conceived as the statement of 'an ideal end which gives a sense of direction to human self-creation in history' (Markovic 1983, ρ. 217), and in this form it remains an essential and inexpugnable element in the movement towards socialism. Α realistic form of socialism, or what Nove (1983) has termed 'feasible socialism', cannot begin, however, from the unreal presumption that in a socialist society - as it might exist in any forseeable future- all individuals, or even a substantial majority of them, will be devoted to the public good, that there will be no individuals who single-mindedly and ruthlessly seek power, wealth and privilege, or that no clashes of individual or group interest will occur or require mediation.

 

These rather general and abstract considerations have a very direct and practical bearing on the problems of the existing socialist societies, for it has been a constant theme in the criticisms (both internal and external) of their economics in the past few decades that they are relatively inefficient in their use of resources, insufficiently enterprising and innovative, and have not moved rapidly enough from 'extensive' to 'intensive' development. The current reforms are intended to overcome these deficiencies, above all by a decentralization of economic decision-making, so that managers and workers in individual enterprises have greater independence and responsibility, and also more incentives (which need not be exclusively monetary) to produce efficiently. Such a decentralized economy implies the existence of a market and an element of competition among producers, which itself would be a stimulus to greater efficiency.

Such wide-ranging and fundamental changes are bound to produce difficulties of their own: uncertainty, a degree of confusion. and resistance from some individuals and groups whose particular interests are threatened, as well as specific problems of unemployment and the development of new kinds of inequality. The difficulties can only be countered by the retention of an effective planning system, which will, however, assume a different character, so that 'greater use is to be made of indirect financial "levers" such as prices, taxes, and credit, in place of detailed output assignments and input authorizations enforced by central allocation of supplies' (Bornstein 1973, ρ. 8).

 

·         The issue of decentralization, expanded market relations and a new type of planning (which will also, of course, embrace local and regional planning) is quite separate from that of public or private ownership of economic resources, although the two things have frequently been associated, or strictly connected, in the arguments of anti-socialist critics (for example, Mises). Publicly or socially owned enterprises can operate perfectly well in a system of market relations with central planning, and the questions which may be raised about them are basically of two kinds.

 

First, what can or should be the extent of private production of goods and services in a socialist economy?

 

The second major question that has frequently been raised with reference to publicly owned enterprises concerns their efficiency and ability to innovate, which is related in most of the discussions to the question of incentives for both management and workers. In principle. there seems to be no reason that publicly owned enterprises and public services should not be as efficient as those which are privately owned and managed Nevertheless, there are two considerations which suggest that central planners and political leaders in a socialist society may be led to opt for a somewhat lower level of efficiency, in order to attend other social goals.

 

First, the drive for greater efficiency, and especially the growth of productivity through technological innovation in a more competitive economic climate, may come into conflict with the basic socialist policy of full employment. It is very unlikely that these societies will accept a growth of unemployment to the levels that exist in many capitalist countries, and consequently they will not readily permit the closure of less efficient enterprises, unless alternative employment is available. The second major issue is the role of competition in a socialist society. On one side, increased competition between independently managed enterprises in a market situation is seen as a means of increasing efficiency, encouraging innovation, and ensuring, in particular, a better, more varied supply of consumer goods. On the other side, it is evident that the competitive spirit, certainly in its more extreme forms, is incompatible with the distinctive emphasis that is placed, in all forms of socialist thought, on the value of cooperation and the good of the community. At all events, the celebration of the unalloyed virtues of competition indulged in by latter-day advocates of laissez-faire capitalism, which Ι have criticized elsewhere (Bottomore 1986- 7), is totally alien to socialist thought, and the practice of competition in this manner is incompatible with a socialist form of society.

 

·         The problems involved in restructuring the socialist economies are multiform and complex, and the process of solving them is likely to be long and difficult. In this process, as Ι have argued, what is important is not the question of ownership (although in some spheres it may be desirable to expand small-scale private production) or the excessive promotion of competition, but the decentralization of economic decision-making by giving enterprises greater independence in a controlled system of market relations (which of course implies an element of competition) and developing new, indirect methods of planning the economy as a whole.

 

Decentralization itself will bring somewhat greater control over their immediate conditions of life to the personnel of individual enterprises, because they will no longer be directly subordinate to regional or central bureaucratic organizations; but the process may nevertheless have very different outcomes depending upon how the internal structure of the enterprises evolves.

 It is possible, for example, that the system of management will be reconstructed in such a way that a new elite of technocrats and managers will emerge in the economy as a whole and begin to acquire political power (or even that a new class of capitalists will appear).

Alternatively, the process of democratization may lead in a more socialist direction towards some kind of self-management which. for all its current difficulties in Yugoslavia, has shown itself, over a fairly long period, to be a viable, and in earlier periods very successful, type of economic organization.

 

The restructuring of the socialist economics is, therefore, not only profoundly affected by political reforms, but is itself a political as well as an economic phenomenon. οn which the socialist future of these countries depends.

 

 

 

 

The 'socialistic' countries

The countries, mainly in Western Europe, which Ι have called 'socialistic', face problems which are very different from those in the socialist countries, although some issues are of common concern. In these countries the movement towards socialism has been gradual, often checked (or in the case of Britain during the past ten years violently reversed) by the advent of conservative governments, although Sweden and Austria constitute an exception in this respect. These two countries can indeed be regarded as particularly socialistic, in several senses, and Ι shall begin with a brief account of the main features of their economies and social policies.

·         In Sweden, the socialist party (SAP) has been in power almost continuously since 1932, and in that time has brought about substantial changes in Swedish society, especially since 1945. The 1950s and 1960s were decades of rapid economic growth, as they were generally in Western Europe, and in Sweden they were also marked by a sustained movement towards socialism, in the sense of greater economic equality, more industrial democracy, and a substantial expansion of the public sector.

 

 The 1970s, following the oil crisis, brought harsher economic conditions throughout the Western world, with weaker economic growth and rising unemployment, but Sweden has weathered this critical period better than most countries (and notably better than Britain), while maintaining its socialistic policies. As Ryden and Bergstrom (1982, ρ. Ι) note. the democratization of working life, increasing the power of the unions and diminishing that of corporate owners, the expansion of the public sector, more public regulation and participation in industry, have all continued; and they conclude that this 'has meant increased importance for everything we refer to when talking of th<: quality of lίfe - a better environment, more leisure, incrcas><:d possibilities for making the decisions that affect e quality of life – a better environment, more leisure, increased possibilities for making the decisions that affect one's life. But it has also meant continued centralization, bureaucratization, intensified efficiency and a sense of alienation in the individual facing large private and public bureaucracies"

 

 They go on to discuss the major problem of the disproportion between the demands on society and its productive capacity (especially if there were a serious energy crisis), and its relation to the traditional system of wage formation through free negotiation.  Nevertheless, while recognizing the seriousness of the economic problems, they also point out that "the international economic crisis of the 1970s touched the average Swedish consumer relatively mildly [and] open unemployment never rose above 2.5 per cent', and conclude that, overall, 'Swedish society and the Swedish economy - the welfare state - have proved enormously strong against the instability and crises of the 1970s'. It is noteworthy also that, during this period of economic difficulties, the government pressed ahead with a project that would gradually extend the collective ownership of productive resources through the employee investment funds and thus maintained, to some extent, the impetus of the movement towards socialism.

 

·         In Austria the implementation of socialist policies on a national scale is a post-war phenomenon, although the socialist party (SPO) could draw upon the earlier experience of the socialist administration of Vienna in the years Ι1918-34, and it has occurred in a different context. For historical reasons, there has been a considerable expansion of public ownership of industry and financial institutions, beginning with the nationalization of Austria's largest bank, the Credit-Anstalt, following its collapse in 1931, and continuing after the war with the nationalization of two other banks and of the 'German Property' (acquired by the German Reich after the annexation of 1938). The latter was taken over by the Allies in 1945 and then returned to Austria as nationalized enterprises, in the Western sectors in 1946/7, and in the Russian sector in 1955 when Austria regained its sovereignty.

 

 As a result of these nationalizations a public sector of major importance was created in the Austrian economy; as Ziegler, Reissner and Bender (1985, ρ. 75) note

Almost 100 percent of utilities, about two-thirds of mining, iron and mineral oil production (measured either by number of people employed or output) is within the public sector. It contributes about quarter to total output of manufacturing industry and about 31% to gross domestic product (excluding agriculture).

 

The nationalizations were carried out and maintained by coalition governments of the People’s Party (OVP) and the Socialist Party (SPO) which were in power for twenty-one years from the end of the war; and when one-party government returned in 1966 this did not change fundamentally the importance of public sector in the economy. Since 1970 Austria has had socialist government - sometimes in a coalition with the Freedom Party (FPO) and more recently with the OVP again – which have not sought to extend public ownership by direct nationalization, but have embarked on economic and social policies inspired by a new statement of socialist principles that was strongly influenced by Swedish social democracy: modernization of the industrial structure, the establishment of a new ministry for health and the environment (ίη 1972), reform of the archaic penal code, extension of the social welfare programme, and a progressive democratization of society by increasing the participation of workers in the management of industry, improving the dissemination of information, and encouraging wide-ranging debates on social and political questions.

 

·         However, in these (Western Europe) countries (which include, besides France, Britain, Norway, the Federal Republic οΓ Germany, Spain and Greece) the periods of socialist government have generally been too short and intermittent, and in some case~ their policies have been too limited or ill-prepared, to make possible any substantial advance towards socialism. Britain provides a striking example.

 

The Labour government of 1945 carried out several nationalizations, established a national health service, and expanded the educational system, and to that extent it created conditions favourable to a further advance towards socialism. But it failed lamentably in two major respects: first, it did not bring the leading financial institutions into public ownership, and second, unlike France, it did not create an effective system of central planning. Hence, the socialist project came to a standstill, not even at a 'half-way house' (more like a quarter-way house), and subsequent Labour governments were largely confined to managing the existing system, a weak form of mixed economy in which private capital remained absolutely dominant (aided by Britain's special subordinate relationship with the United States), and to coping as far as possible with its recurrent economic crises.

 

·         Sweden and Austria have been able to pursue their distinctive policies in specific conditions which Ι have briefly described, and also because, as small economies, they do not present a major threat to international capital. The circumstances are very different when a major European economy begins to move in a socialist direction, as was dramatically illustrated by the difficulties encountered by the French government in 1981, when it tried to overcome the recession by reflating the economy unilaterally. This policy, in the absence of supporting action by other major European economies, produced a balance of payments crisis for France while bringing some benefits in increased trade and production to other countries.

 

As the authors of a study outlining a socialist policy for economic development in Western Europe (Holland 1983) argue, what is needed is a joint reflation of the main European economies, with complementary policies of public spending, planning and economic democracy, and public and co-operative enterprise; and since 'the strongest and clearest pressure group against reflation comprises the financial institutions, both official and private ... methods must be found by which governments can resist the pressure of financial markets' (ρρ. 63-5)

 

 

Chapter 8 Modes of transition a socialist economy

·        It is the instability of capitalism, characterized by the cycle of boom and slump, its inability to ensure consistent full employment, the gross inequality of wealth and income that it produces, and the impoverished and tawdry culture dominated by money that it creates in its more extreme laissez-faire forms, which account for the continued growth of the socialist movement in Western Europe since the war: a growth which has accelerated in recent years as the troubles of capitalism have multiplied.

 

An indication of capitalism's continuing instability was given first by the recession of the late 1970s. then by the stock market crash of October 1987; and Some observers expect another, perhaps worse, collapse in the near future, unless it is averted by a profound reform of financial institutions that would involve more public regulation.

 

·        In these conditions, the question of a transition to socialism becomes more argent again and we must begin an examination of this question by outlining the kind of future socialist society to which it is reasonable to aspire. Such u society would be characterized by a substantial degree of public ownership, economic and social planning at a national, regional and local level and eventually on a transnational scale (as is already the case to a limited but increasing extent); and at the same time a decentralized economy in which the transactions among producers, and between producers and final consumers, would take place in a regulated market system, while the internal structure of enterprises would comprise a large element of self-management. The practice of self-management would indeed be an essential component of socialist democracy, and the latter would be further reinforced by the greater equality of economic and social condition among citizens which it is a primary aim of socialism to establish.

 

·        The transition to such a society will necessarily take a different course in Eastern and Western Europe, but there will also be great variations between individual countries, resulting from the diversity of economic and cultural conditions: in the East, the size and strength of different economies, political and cultural traditions, the particular problems of multi-national states; in the West, the existing extent of public ownership, the presence or absence of a planning system, the strength or weakness of individual national economies.

 

Ιπ Eastern Europe the two major changes that are needed, and already beginning to be implemented, are the decentralization of the economy and the extension of democracy (pluralism).

 

·         The growth of socialism in Western Europe after the Second World War was checked to a large extent by the unappealing spectacle of the societies of' 'real socialism' in Eastern Europe, which remained authoritarian and oppressive even after the death of Stalin, though the active opposition of international capitalism, led by the United States, was also a major factor. It is misleading to conceive the democratic movement in the socialist countries as simply a belated transformation of these societies into Western-style democracies, with a multi-party system and free elections.

 

As to the first point, it needs to be strongly asserted that socialist democracy in its most distinctive form, would be committed to the widest possible participation by citizens in decision-making in all spheres of life. Thus, alongside an electoral system in which various groups and /or parties compete (at national, regional and local levels) on the basis of alternative economic and social policies, there would be institutions ensuring participation in the management of productive enterprises and of educational and cultural organizations. In short, a democratic socialist society would move steadily towards the practical achievement of those ideals formulated in the idea of 'participatory democracy" however long and gradual that process might be. It is a corollary of this view that political power would be less monolithic than it has been until now in the socialist societies.

 

It is quite conceivable that government (at all levels) in the socialist societies of the future would be carried on, during some periods, by coalitions of various groups of parties. Moreover, there should be, and as Ι conceive it there would be, a considerable devolution of powers from the central government to regional and local governments, while the existence of democratic participation in a multitude of other independent organizations, from enterprises to cultural bodies, would be a further limit on the role of government. This is the manner in which the famous 'withering away of the state' is most likely to be achieved; though today it may be more illuminating to describe it as the socialist version of 'minimum government'.

 

·         And the second point concerns more particularly the socialist parties in advanced capitalist countries. In the first place there is a need to provide for better representation of the diverse interests and cultural values that exist in a modern society, and this can be met in several ways: by reforming electoral systems to allow for proportional representation (as has been done already in many European countries), and by giving greater powers to regional and local elected assemblies, which are closer to the immediate everyday concerns of citizens.

 

·         In the socialist countries, as Ι have emphasized, political reform is an essential part of the transition, and it is inextricably interwoven with the economic changes, which require for their success a new spirit of individual enterprise, commitment, and responsibility in production and administration that can only be achieved by enlarging the sphere of free debate, critical judgement and participation in policy-making. The restructuring of management at all levels, from the central ministries to individual enterprises and services, is therefore a crucial feature of the economic reforms. Another fundamental aspect is the development of a coherent and systematic relationship between planning and markets, which is likely to be a gradual and tentative process.

 

·         It is evident, however, that conceptions of the scope and nature of public ownership have been changing, and with them the kinds of policy that socialist parties should advocate and can hope to implement in the long term. It will be useful to begin a discussion of this question by expunging from the socialist vocabulary the term 'nationalization " which now connotes a system in which large centrally administered state corporations dominate the economy. Instead, we should always refer to 'socialization' and 'social ownership', as Ι have done throughout this book, which may take a variety of forms in accordance with economic circumstances and public policy decisions: state corporations, self-managed enterprises, co-operatives, and perhaps in some spheres mixed private and public undertakings.

 

·         State corporations are no doubt the most appropriate form in some basic industries and services - airlines, railway, telecommunications, postal services, oil, gas and electricity, engineering, chemicals, car manufacture, and others - but there can well be some regional devolution, and the management of such corporations should always include a large element of self-management by employes, as well as representation of consumer interests. It is not necessary, moreover, that there should be only one state corporation in each sector, and it is indeed desirable that several corporations, competing with each other, should exist in some spheres; for example, in engineering, the car industry, and largescale retail trade. This point is especially germane to the question of ownership of financial institutions, which is crucial for the development of a socialist economy.

 

The alternative to private ownership is not a single state bank, with ancillary financial services, but a number of socially owned banks and insurance companies, which would, like manufacturers and service industries, compete with each other to some extent; and we must even consider, however shocking this may appear to fundamentalists of one sort or other, the forms which a socialist stock exchange (ί.e. a capital market) might take.

 

There is a further issue concerning ownership of productive resources which is of very great importance for the future of socialism, though it has been strangely neglected by socialist parties in recent times: namely, land ownership, which is very unequal in capitalist societies (and particularly so in Britain).  The ownership of land is an important element in the wealth and power of the capitalist class, and it is clear that radical changes would be necessary in a socialist society to bring about social ownership. In principle, the land should be regarded as being owned by the community as a whole, but this does not exclude a variety of forms of ownership or possession in practice: medium or long-term leases for agricultural, industrial and commercial purposes; national, municipal and local community ownership of 'common land' for recreational use; individual ownership for dwellings.

 

·         The second general form of social ownership, autonomous self-managed enterprises, seems appropriate over a wide range of economic activities, mainly in the field of medium-size producers of goods and services, including much agricultural production as well as in cultural and leisure activities of all kinds. In other spheres, and especially in small-scale production and provision of services. cooperative enterprises have an important role to play. Their particular value is that they are voluntary creations which can be established rapidly (within an appropriate legal framework) to meet new or neglected needs, and of course easily dissolved again if they are not successful. At the same time, individual cooperatives can well form connections with each other, or extend their activities into new fields, thus creating larger cooperative federations which will facilitate and stimulate the overall growth of cooperative production and trade.

 

·         But there will also be, in any conceivable socialist society, a relatively large sphere of private production. Exactly how large it will be. and what forms it will take, are questions that cannot be decided in advance, in precise numerical terms, or for the indefinite future.

 

Two considerations are important in this context.

The first is that in the advanced industrial countries the number of self-employed persons has tended to increase, along with the expansion of the service sector of the economy, and this trend seems likely to continue.

Second, there are benefits to be gained, as Ι argued earlier, from encouraging small-scale private economic activity in many different fields - in agriculture, artisan production, retail trade and services - and this may be carried on by self-employed individuals, families or enterprises employing a small number of workers (though some of the latter could equally well be cooperatives).

 

The persistence, and even expansion, of private economic activity may be seen by some socialists as nurturing an excessive individualism and hence the danger of a rebirth of capitalism; but Ι think such concerns are exaggerated. Socialism should not be regarded as the antithesis of individualism, but as a specific conception - one which, moreover, has to be continually revised and restated - of the balance to be sought between individual achievement and self-fulfilment, and the attainment of a 'good society', that is to say, a society whose institutions enable all individuals, and not simply a privileged minority, to develop as fully as possible their powers of creation and enjoyment. The idea of such a relation between the individual and society is present in all socialist thought, and notably in Marxist thought, although it has sometimes been obscured by an emphasis on the shaping of human nature by impersonaI social forces; and some versions of Marxism, as Sartre (1960, ρ. 58) observed, had 'completely lost the sense of what a human being is".

 

It is true that private production does not socialize individuals in the production process, does not incorporate them into the body of 'associated producers' in any direct manner, but they would still participate in the cooperative life of a socialist community in many other ways, through their relations with the sphere of socialized production and public services, and their involvement in numerous processes of democratic decision-making in public affairs. In any event, the sphere of socialized production, in the form of state corporations, self-managed enterprises, and cooperatives, would have a predominant place in the economy, accounting perhaps for at least half of all manufacture, a substantial part of agriculture and trade, and a very large part of the provision of basic services such as health, education; transport and general public utilities; and there would be social ownership or effective control of land and financial institutions.

 

·         But the movement towards the kind of society Ι have sketched here is bound to be gradual, and very uneven between countries, in the economic conditions of the late twentieth century. In Britain, after the wholesale privatizations, the extension of public ownership and central planning will be exceptionally difficult; but in Western Europe generally, even in more favourable circumstances, it seems unlikely that the old-style method of buying out the shareholders in private industry will play a major part in the process of socialization, although it can still be used effectively in some cases, particularly where capitalist enterprises run into economic difficulties during a recession, or where public opinion turns strongly against private monopolies.

 

In any case, there are alternative methods, among them the Swedish project for collective capital formation through employee or wage-earner investment funds, which emerged from discussions at the 1971 Congress of the Swedish Confederation of Trade Unions (LΟ) and the resulting detailed study by Meidner (1978). Briefly, Meidner's original scheme proposed a method of accumulating 'collective capital' by a levy on the pre-tax profits of companies employing more than fifty workers, the proceeds of which would be paid into a central fund in the form of newly issued shares. The capital accumulated in this way, and by the purchase of additional shares out of the income on shareholdings, would eventually give employees a substantial holding in the companies, leading to the nomination of board members in individual companies and a more general control through the administration of this collective capital by regional or sectoral funds (Meidner 1978, ch.7). As a result of subsequent discussions and studies, however, Meidner's plan was considerably modified, and the legislation introduced in 1983 established a much less radical scheme, which applied only to large companies (with 500 or more employees), involved a tax only on 'excess profits' plus a payroll tax, accumulated funds in cash instead of shares, created regional rather than sectoral funds (though with a majority of employees on their boards), and changed the main emphasis of the plan from socialization and workers' control to the accumulation of investment capital (Olsen 1989, ch.2).

 

·         Among other methods of extending social ownership we should consider, particularly, increased support for small-scale cooperative production, which can be provided very effectively at the municipal or local level, and the creation' of new enterprises where this is necessary, especially in the financial sphere. For example, in Britain, where none of the commercial banks, or other major financial institutions, were ever taken into public ownership, a significant beginning might be made in extending social ownership by the estab1ishment of new banks, particularly an investment bank and perhaps also some community banks, and at the same time applying to the existing privately owned banks some appropriate version of the employee investment funds scheme. In other countries of Western, Europe, where there is more extensive social ownership of financial institutions, of major infrastructural services, and to some extent of manufacturing industry, the development of a socialist economy will be relatively easier.

 

·         The task is all the more complex and daunting because socialist governments must try to achieve, over a period of time, a number of different aims which are not easily reconciled and coordinated.

 

First. they have to maintain the comfortable standards of living which can now be regarded as customary for a majority of the population in the developed industrial countries, while at the same time extending such conditions of life to the still considerable numbers of those in poverty, and reducing the wealth of a small privileged minority. And a socialist government will not necessarily be committed to unlimited aggregate economic growth regardless of what is growing and what social and environmental costs it entails. The emphasis in all socialist policies should be on improving the quality of life for the whole population, not on sheer economic growth.

 

This question is especially relevant in considering a second concern of socialist governments: namely, how they can best contribute to overcoming poverty in the poorer countries of the Third World, where economic development is undoubtedly needed. There are two aspects of this situation to be considered. In the first place, what are the policies and mechanisms that can most effectively help the poor countries? Second, a serious and thorough consideration of the consequences of economic development on a global scale and their implications for the industrial countries themselves.

 

It is evident - and we can picture the situation most vividly by imagining that every country in the world eventually attained living standards equal to those in the prosperous West European societies - that economic development on this scale, coupled with population growth, would place an enormous burden on the earth's resources, in land, energy, food and minerals, and would add massively to the problems of pollution and damage to the earth 's atmosphere. So there is an obvious need, in considering the longer term, for a great deal more planning, with an international scope, based on policies which would tackle simultaneously the overcoming of poverty in the Third World, limiting the growth of population, and restricting or eliminating non-sustainable and damaging types of economic growth.

 

·         The decentralization of economic decision-making through the development of self-managed enterprises, cooperatives and individual self-employment, would encourage in various ways the growth of smaller, more local productive enterprises; and even though some enterprises must necessarily be organized on a large scale - railways, car manufacture, some engineering and chemical plants - there is no reason why large enterprises themselves should be brought together in giant corporations, whether private or public. The recent wave of mergers and takeovers in the Capitalist world has been dictated more by financial speculation, boundless profit-seeking, and the desire to eliminate competition, than by any very obvious economic need, or benefit to the population at large.

 

The development of small-scale production and provision of services, wherever this is feasible, would, on the contrary, bring considerable social and environmental benefits. Socially, it would enlarge the sphere in which individuals can have some real control over their working lives and participate effectively in decision making. Environmentally, in conjunction with the greater powers of local government, it would be likely to increase concern for the natural surroundings in which people live and work, and to reduce the congestion resulting from long journeys to work.

 

·         Any transition to socialism will require extensive and flexible planning, of an indirect, indicative kind, if the diverse aims Ι have sketched here - greater equality of wealth and income in each country and in the world as a whole, more extensive public ownership and democratic participation in all the affairs of social life, and a reorientation of economic development to accord with these aims and also with the protection and renewal of the human habitat - are to be achieved, however gradually.

 There is one aspect of planning which should be particularly stressed; namely, the need to take account, in constructing social and economic plans, not only of the market prices or 'accounting prices' derived from them, of all the elements - material resources and labour - which constitute the 'productive forces" but also of the ways of valuing the exhaustible resources which can be allocated between generations.

 

These questions are of great importance for socialists, but they have received little attention until very recently. One of these who considered them at an earlier time was Otto Neurath, who specifically raised in his discussion of a 'natural economy' the issue of valuing, and making a choice between, the present and future use of non-renewable resources.

 

·         Prepared (Notes taken from book) By:  M.S. Bhusal

·         e-mail: antarmukhibhusal@gmail.com

·         Blog: https://www.msbhusal.blogspot.com

 

THANK YOU!