Socialist Planning or “Market Socialism”?

Part 1

by Raymond Lotta

Revolutionary Worker #1166, September 15, 2002, posted at

The following article by Maoist political economist Raymond Lotta originally appeared on the website, which is dedicated to discussion and debate on the Revolutionary Communist Party's Draft Programme. The article appears as five posts on the website. The RW is running it in three parts.

I have been following the debate on the website with great interest—and have been especially interested in what several people have posted on planning and markets. This has also been a topic in exchanges I've had with political economists and others about the Draft Programme.

As a Maoist political economist, I consider the question of “planning versus markets” to be a highly important one. It has everything to do with understanding and changing the world. So I thought I would make some comments, based on some of my discussions and also in response to points raised by participants on the site.

One person on the site, BrightRedLight (BRL), articulates a viewpoint opposed to comprehensive socialist planning (the phrase used is “strong command economies”). BRL says there's nothing wrong with markets as such, and writes: “There is nothing straight forwardly contradictory or unjust about a market-socialist society that ended capitalist appropriation of surplus value by governmental regulations ensuring the full appropriation of the product by the workers in a given factory. I think that we as socialists, need to seriously criticize command economic models.”

He and others argue that a modified form of a market economy, one without exploitation, could be a useful counterweight to out-of-touch or arbitrary central planners. Like anarchists, BRL thinks that socialist state planning is undemocratic and results in bureaucrats ripping off workers. Like “market socialists” (people who feel that the market can be reshaped to serve worker interests), BRL argues that centralized planning might be useful for some big projects but that when it comes to other things, like consumer goods, it doesn't work.

I understand that real concerns are bound up with these positions, but I strongly disagree with the argumentation and the conclusions. I believe that commodity production and the market have to be transcended—because they are obstacles to people consciously taking hold of and transforming society.

I also think history has shown that a revolutionary system of planning can work in a way that both meets social need and empowers people. Put differently, socialist planning is not fundamentally a question of what planners and planning agencies do, important as that is. Rather it is a question first and foremost of developing the means and mechanisms by which society can consciously regulate social production—in the service of overall political, social, and economic objectives and on the basis of the conscious activity of the masses. The proletarian state is indispensable to this process. But things are not so simple.

First of all, it's not possible to abolish commodity-market relations overnight. The new socialist economy will have to utilize certain aspects of these relations. For instance, distribution of some consumer goods will involve forms of commerce and exchange through money. But, at the same time, the new society has to restrict the role and influence of commodity-market relations.

Second, there is real potential for socialist state structures to become divorced from the masses, for the socialist state to be turned into a capitalist state, and for state planning to become a tool of a new state capitalist class. But that's not an argument to abandon socialist planning in favor of the market. It's a warning to take the problem of bureaucratism and the danger of capitalist restoration seriously.

This article has five main sections.

1) The first discusses what markets are and why you can't have the rule of the market in the distribution of goods without ultimately having a market in means of production and labor power, i.e. capitalist exploitation.

2) The second deals with what's wrong with a market-based economy and why the market is an obstacle to the full emancipation of humanity.

3) The third answers some of the charges made by critics of the “command economy.” For example, in this website discussion, BrightRedLight writes, “Lotta seems to think that only options available to a modern world are capitalism or a socialist command economy... If you take Marx's theory of exploitation seriously: then you have to ask yourself why a worker in a command economy isn't being exploited in the same way as in a capitalist economy? After all, in a command economy, a worker is not receiving the full product of his labor. Just like under capitalism, the state is siphoning off surplus value in order to support the bureaucracy, the parasitic bureaucracy, the military, research, infrastructure, etc.... I think that history has shown that the strong command economies of the past were failures, at least in regards to providing the a diverse array of day to day consumer products and minor luxuries that ordinary people want.”

In reply to this, and similar views from other people, I argue that the whole idea of a “command economy” is a distortion of the experience of socialist economics and that the term itself is closely connected with the assumptions and analyses of pro-capitalist economics. I discuss the methods and successes of the years when revolutionary communists actually led the creation of the socialist planned economy of Maoist China.

4) The fourth section continues the examination of “socialist planned economy” by looking more closely at the economic approach advocated by the Revolutionary Communist Party's Draft Programme.

5) The fifth deals with issues of consumer goods and markets, and the “politics of consumption.” BrightRedLight raised some important questions when he wrote: “If you get rid of markets, of supply and demand, then you need an alternative way of assessing what the people want. Do they want to put more resources into household goods or do you want to put more into AIDS research? Do you want more heavy or light industry?...What is the MECHANISM that Lotta purposes for making these big decisions? Are polls to be taken? a vote? What if the workers vote for luxury goods over social spending?... Or will the decisions be made by specialists and bureaucrats (as in the USSR and China)?” In this section, I argue that the socialist economy needs various mechanisms for feedback from the people who use the products but that this has to happen in the context of a sweeping revolutionary movement to break with consumerism.

I hope this stimulates further thinking and dialogue about some key themes in the Draft Programme.

1. What Is the Market?

Okay, to start with some basics.

When the greater portion of society's output is produced for sale, when relations between the various sectors and “actors” of the economy take the form of buyer-seller relations—you have a capitalist market. The market is the site and mechanism of exchange: buying and selling between individuals and between individual units of capital (companies, corporations, etc.).

Markets existed before capitalism. But capitalism represents the full flowering of the market. Under capitalism all elements entering into production—land, raw materials, buildings, machines, computers, and people—are monetized or marketized. They are bought and sold as part of an integrated system of social production.

In a commodity-producing society, products are the property of particular economic agents and are exchanged through bargaining between owners of property. Buying and selling involves transfer of ownership and control. Ownership not only confers power over things, but over effect treating people as things.

Basically, there are three interrelated types of markets under capitalism: a) product markets ; b) capital markets (money, stock, credit, and currency markets, as well as markets for means of production); and c) labor markets (that's what want ads, the hiring and letting go of workers, and the whole cycle of employment and unemployment are all about).

I hope this is not getting too abstract. But the reason I'm getting into this is that we have to be clear as to what we're talking about: If you say the market should continue in a revolutionary society, you have to specify whether you're talking about all or some of these types of markets.

Will means of production, like factories and equipment, be privately owned, and be bought and sold on the market?

The Draft Programme makes clear that the means of production, now monopolized by the capitalist class, will become the property of society and used to benefit society.

Many anarchists say that factories and the means of production in general should be controlled by independent groups of workers. But as Nando pointed out in his post on the site: “If production is controlled at the factory level, you can't have society-wide socialist planning—and in fact you have individual factories interacting with each other through the market, reproducing capitalism.”

If you have worker co-ops or autonomous factories, you begin to have something that resembles separate commodity-producing units. You won't have society-wide mechanisms to foster cooperation between enterprises. If you fall back on market principles, you begin to have competing interests over resources and sales. You begin to have a situation in which stronger enterprises pull ahead of weaker enterprises. It is impossible for society to pull in a unified direction—towards meeting larger social goals and with the needs of world humanity in mind.

A. What does the market do?

The market plays the decisive organizing role in the capitalist economy. It provides the signals (prices and earnings) by which resources are allocated and production is carried out and adjusted. As I explained in my essay posted on the site by Enigma (“Visionary Socialism: On the Anarchy of Capitalism and the Need for Socialism”), the market resolves a built-in and moving contradiction of capitalism.

On the one hand, capitalism is a highly developed and interdependent system of social production, with highly advanced technology and a complex division of labor. The different units of production, let's say, steel mills and computer makers, depend on each other—both as suppliers of raw materials, machines, etc., and as customers.

On the other hand, the system of production is fragmented into privately owned and controlled units. So the connections between producers are not, and cannot, be consciously and directly worked out. Instead, the links among units are spontaneously arrived at through endless processes of exchange. If something sells, fine; if it doesn't, something is wrong. If earnings rise, fine; if they plummet, the capitalist responds and adjusts. There is no “before-the-fact” planning.

So the market (and really I am talking about the law of value) coordinates the different components of the economy. But this happens indirectly and in a roundabout way behind the producers' backs. Each owner goes his or her own way, and then sees what the market.

Money rules in the capitalist market. Not only is money the medium by which prices are paid and goods obtained. Money is the goal of production. The units of production are organized around profit. No capitalist is in the business of making soap or lighting fixtures or cars; they're in the business of making money. The capitalist aims to come out of the process of production and exchange with more money (profit) than he started with.

And somebody, some class of laborers, has to produce that wealth. The producing class under capitalism is the proletariat.

Why are proletarians working for capitalists? That has everything to do with market and ownership relations. The capitalist class owns (monopolizes) the major means of production. Proletarians have no choice but to sell their labor power (their ability to work—their energy, skill, and creativity) in the labor market, or they starve. Wages enable workers to obtain the means of survival—to buy back in the market a portion of the wealth they have produced. The rest belongs to the capitalists.

Quiet as it is kept, the most fundamental market transaction under capitalism is the sale and purchase of labor power. The exploitation of wage labor is the source of capitalist wealth and power.

BRL made a correct point when he wrote: “According to Marx's theory of exploitation ... markets are NOT the source of exploitation, rather, extraction of worker surplus value by the capitalist is the source of exploitation under capitalism.”

The market mechanism is not the same as the exploitation of wage labor. Exploitation takes place at the point of production. But what BRL fails to see is that the market is integral to this process.

On the one hand, a pool of laborers (a labor market) is available for exploitation, because these laborers have no means of production. The labor market represents a form of coercion unique to capitalism—the worker is not forced at gunpoint, or by feudal obligation, to work—but he or she is compelled to seek work (and laborers can work only insofar as the capitalist can make profit off their labor).

On the other hand, the market is the mechanism through which the capitalist carries out and completes the cycle of production and exchange: buying means of production and labor, and then realizing (converting into money form) the surplus value produced by social labor.

So let me continue with the question I posed earlier. If people say that the market should be allowed to do its job under socialism, does that include the market for labor power?

The RCP Draft Programme says that under socialism, labor power will no longer be a commodity that can be bought and sold. A minority class of owners will no longer have the “freedom” to hire and fire workers.

Socialism will put an end to the situation where people have to scuffle for employment and income. That requires that the working class, through its state, control the means of production. The Draft Programme explains how people will work in a different social environment, move between a variety of jobs, and be able to mobilize and cooperate in ways and on a scale that promotes the common good.

B. Regulating Production

The market regulates capitalist production in two fundamental ways.

First, the market imposes norms (standards) of efficiency . Each capitalist is in battle with others. Each seeks a larger market share (at the expense of others), and the chief weapon in the battle is to expand production, raise productivity, and reduce cost. That means getting workers to work harder, faster, and longer. If an individual capitalist doesn't operate at a certain level of efficiency, he loses out—he can't sell at the prevailing market price—and he either raises efficiency or goes under.

Second, the market guides investment. When the market and profits are growing in a particular sector or product line, capital moves in. For instance, big returns could be gotten in telecommunications a few years back, so huge amounts of investment capital flowed in (you can see the moral of the story). But when the economy gets out of whack, the market imposes discipline and dictates reorganization: companies go under or merge, assets get sold or liquidated, workers are laid off, wage levels are pushed down—and stronger capitals and speculators move in like sharks in a feeding frenzy. This is a highly wasteful, anarchic, and oppressive process of regulation.

C. Accountability and Control

The market is impersonal. It isn't accountable to people. It doesn't consult with you about your needs. It doesn't care whether you lose your job, house, retirement pension, or your health coverage. Hey, if those things stand in the way of market efficiency, so be it.

I've heard lots of rants about the socialist “command economy.” But what could be more commandist than the market dictating that 500,000 workers (yes, half a million workers!) lose their jobs in the U.S. telecommunications industry over the last 18 months?

If you want the market—let's call it a “Market with a Human Face”—to be the organizing mechanism of the economy, you have to explain how the market can function according to market rules and yet not do the horrible things that the market does.

Let's say market mechanisms are allowed to operate fairly freely in the consumer goods sector. Different enterprises are producing goods and winning or losing in the marketplace, based on what people buy.

If you don't want the market to do those things and you want it to act according to other rules, let's say safeguarding people's basic interests, then what is the market doing that keeps it a market?

Market mechanisms do not promote meaningful work that serves the social good, and they do not promote social equality. These values are totally contrary to competition.

2. What's Wrong with the Market?

There are five major problems built in to the market.

A. Anarchy vs. Conscious Planning

There is no plan for social production in the capitalist market economy. Society as a whole is not figuring what its requirements are: its social needs, the equipment and technology to carry out production, the housing requirements of the population, the resources called for to deal with an AIDS epidemic.

Instead, this is left to the market to work out (of course, the government plays a role, but the market reigns supreme). What happens is that capitalists enter different fields and product lines. Each capitalist producer decides what and how much to produce, whether to expand or cut back, whether to hire new workers and build new facilities. These decisions are guided by the capitalists' ability to sell products at profitable prices and by the expectation of finding profitable markets in the future.

The capitalist produces and then sees what happens. As I said in my article, it's a hit-and-miss, shoot- and-overshoot, trial-and-error process. In boom times, investment is expanded too much. In periods of economic slowdown, there is too little investment. Great numbers of people can no longer work, resources lie idle, and urgent social needs go unmet. All this is tremendously wasteful and destructive.

BRL used a discussion of AIDS research as an example, writing: “It seems that a socialist market would be more in touch with the diverse needs of people in a way that central planning isn't. There may always need to be a bit of centralism, especially with regards to AIDS research, etc.. But, these kinds of BIG projects are only a fraction of what working people want. Just because, as Lotta correctly says, central planning works good for BIG projects, doesn't mean that it works for consumer goods, etc.”

In other words, he suggests that “a bit of centralism” could function like “state intervention” in a society where the market is allowed a wide scope of control for large parts of the economy.

But can you really solve the AIDS problem with a “little bit” of state intervention? Doesn't solving the AIDS problem require unified direction and orientation of pharmaceuticals and medical equipment production? Doesn't it require a revamped medical training and health care delivery system? And, most of all, doesn't it require that you mobilize people to deal with this problem in a multidimensional way (workplace, community, schools, etc.)?

How can you accomplish this without planning and society-wide coordination? (Not that it's all done from the top planning levels on down—I'll have more to say about that.)

B. The “bottom line” vs. the social good

The market rewards the minimization of cost in pursuit of the maximization of profit. This is the “bottom line,” what it all comes down to in the market.

The capitalists equate the “bottom line” with efficiency. But efficiency has definite class content under capitalism. It is the efficient exploitation of wage labor. It is the calculation of what is cost- efficient and profitable in a narrow and short-term sense.

A factory might belch out pollution, but that cost to society is not a worry for the factory owner—you see, air is not within his boundary of ownership, not part of the cost structure that the market rewards and penalizes.

Or take agriculture: Recently I went to visit some folks in Kansas who have this institute devoted to sustainable agriculture. They are researching, developing, and demonstrating feasible alternatives to the high-input and ecologically damaging system of agriculture that we now have. They're proving that is possible to grow food-grains in an ecologically sound way.

But they pointed out to me that in narrow market terms, this approach would not win out over agribusiness. It's actually cost-effective for agribusiness to grow annual grain crops that require huge amounts of herbicides and pesticides. You manage these crops in a certain way, you get huge, standardized output, and on the cost and profit side, it works— for agribusiness , not for the farmer who does the actual growing. But once you start considering the effects on ground water, soil erosion, and public health, then the social costs go way up.

The problem— and this is built in to the market mechanism —is that the market doesn't register the long-term and social effects of economic activity. Health and pollution don't show up in the supply- demand and profit maximization framework of price and profit.

That's what happens when profit is the starting and end-point.

Going back to pharmaceuticals: It is not profitable for the pharmaceutical industry to develop cheap drugs for diseases that affect the vast majority of humanity. The market returns are too low. So people go untreated and die of curable diseases. But it is profitable to develop “life- style” drugs and to slightly modify existing drugs to get new patents.

Housing as an example: In the U.S., there is an obvious and felt need for affordable and decent housing. But the market doesn't respond to social need or social demand. It only recognizes monetary demand—“show me the money.” So you have the problem of homelessness; you have a public housing crisis; you have a situation, and I just found these incredible statistics, where the average worker in retail in the U.S. can afford the rent for a one-bedroom apartment in only three of the largest 20 housing markets in the country.

Globalization is all about the “bottom line.” In the anti-globalization movement, they call it the “race to the bottom.” The global investor scans the global market in search of low costs, high productivity, and big returns. Sweatshops, lax environmental regulations, few worker benefits—all this makes “good market sense.” It's the Nike success story.

C. Competition vs. Cooperation

Each capitalist seeks to outmaneuver and out-position others. They keep technical and scientific knowledge from one another through trade secrets and patents and intellectual property rights. Ideas can become private property, and the “rights to these ideas” are bought and sold—just like everything else.

To win in the market is to maximize competitive advantage and gain. And this totally infiltrates our lives and psyches. We can't eat, put a roof over our heads, or work without going through the market. But when you relate to the market for a house or for a job, you are relating to other people in very definite ways. You are competing for jobs, for housing, etc.

The market breeds a mind-set of “me-first,” of “look out for number one.” The market is cold and cruel. It's about “winners and losers.” And in such a world, our world, it's just not “cost-effective” to show concern for others.

Of course, we do try to care about others (today, even in this world dominated by the capitalist market), and we organize on the job and in the community. But the fact remains: capitalism and market exchange pit us against each other; the system of private ownership and the market fragment and atomize people.

D. Distorting and Mystifying Reality

What do most urban consumers know about how food is grown and processed? We know to find it on grocery shelves. But we don't know about the actual social process of production—that's not listed on the ingredients. We know price. That's the essential market information.

I buy a chocolate bar. But do I know that the Ivory Coast is the world's leading cocoa exporter and supplies most of the chocolate I crave? Do I know that Nestle and Hershey's work through a web of cocoa exporters, purchasing agents, and labor contractors linked to plantations that rely on child labor? The market doesn't convey this crucial information.

Not only do commodity production and market relations hide exploitation and oppressive class relations rooted in the system of production. They also distort and obscure the real social relations that bind individuals to one another. We are not free-floating consumers but are in fact part of an economic and social “matrix.”

E. Alienation and Powerlessness

The situation of exploitation and market relations alienates workers from the means of production, from the goals of production, and from work itself. Work is an alienating and oppressive activity. We work for an impersonal market and we work to obtain life's rewards in the market. There's nothing intrinsically rewarding about work, nor is work about serving meaningful social purposes.

We “market ourselves” for jobs, for education...even for relationships.

Happiness in the market society is measured by wealth and by the acquisition of things. Okay, there is the cornucopia of products. This, however, is not a market response to consumer want. Logos and brands are not about satisfying real material and social needs, and advertising is not a public service announcement. It's all about manipulating wants, stimulating and steering demand, and fighting for market share.

Yes, “we get to choose things.” But three points have to be said about that. First, it's a “sliding scale of choice” based on class position and income. Second, as I have emphasized, the market does not respond to social need. And, third, like the ritual of elections, the “illusion of choice” masks and reinforces the basic powerlessness of the great majority of society. The ideology of consumerism is part of the psychology of control exercised in the capitalist market economy.

The RW will publish the rest of this piece. It is also available now at

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