There is an Alternative: Rethinking Socialist Economic Planning

The following is the text of a presentation I gave at the Western Canada Communication Graduate Students Conference on Saturday February 18th.

Today I would like to present my research on a topic I have been studying for some months now – socialist planning.  This is a topic that I believe to be of particular significance considering the depth, severity, and duration of the structural crisis of global capitalism we are current undergoing.  In recent years the movement of historical forces has left capitalist hegemony in tatters, and now like those cast out of Plato’s cave, we are left grasping for answers in the blinding light of open historical horizons. There is an imperative for change.

The conclusion to a recent speech that David Harvey gave at the University of Pennsylvania is most indicative of this new historical openness:

“Compound growth forever is impossible. An alternative has to exist in which there’s a zero-growth economy. Economic inequality has to be eradicated. Environmental degradation has to be stopped.

And there’s only one way to do it, and that’s to end capitalism.”

That such an unequivocal statement of the facts of our current situation was positively received by a large crowd speaks to how eroded capitalist hegemony has become.  Yet it also raises the question of what the alternative to capitalism is to be.  In the same speech Harvey addressed this question with a similar lack of equivocation, stating that socialist planning is the way forward, and that serious investigation of how to plan a socialist economy ought to be our top priority, complementing the struggle to overcome neo-classical and Keynesian economic orthodoxies.  Intrigued by Harvey’s statement, I set about investigating socialist planning, where I stumbled upon the work of Paul Cockshot and Allin Cottrell, which  will be the subject of my presentation.

Cockshot and Cottrell’s most significant work Towards a New Socialism, was written as an attempt to provide a left-wing alternative to neo-liberal reform programs that were being proposed in the USSR during the late 1980s, but was only published in 1993.  This was well after the beginning of the USSR’s catastrophic transition towards capitalism, which resulted in a huge rise in the mortality rate; brought about by poverty, hunger, homelessness and alcoholism, and marking the USSR’s fall in status from a superpower to a minor bankrupt economy.  While Cockshot and Cottrell’s reform program was clearly not going to be implemented in the now-defunct USSR, they chose to rewrite their book for a more general audience rather than abandon it as a failure.

Towards a New Socialism was not written as a utopian text, addressed as it was to the Soviet reform project, but it reads as one today.  Not lacking in ambition, it attempts to provide a comprehensive description of the structure of a socialist society that actually fulfils the promises of equality and democracy that the socialist movement has striven to achieve, but has thus far failed to realize.  Cockshot summarizes this structure as follows:

1. The economy is based on the deliberate and conscious application of the labour theory of value as developed by Adam Smith and Karl Marx. It is a model in which consumer goods are priced in terms of the hours and minutes of labour it took to make them, and in which each worker is paid labour credits for each hour worked. The consistent application of this principle eliminates economic exploitation.

2. Industry is publicly owned, run according to a plan and not for profit. Stage retail enterprises for example, work on a break even rather than profit making basis.

3. Decisions are taken democratically, both at a local and a national basis. This applies in particular to decisions about the level of taxation and state expenditure. Such democratic decision making is vital to prevent the replacement of private exploitation with  exploitation by the state.

Like the economy of the USSR, Cockshot and Cottrell’s proposed economic system operates on the basis of an economic plan and not a capitalist market.  However it also differs significantly from the Soviet system, which Cockshot and Cottrell criticize on a number of grounds.

The Soviet planning system was based on the setting of semi-arbitrary production targets by a central planning agency.  As is well known, this lead to significant economic inefficiencies, as the information collected by the central planning agency was never really adequate to produce goods according to consumer demand.  In contrast to this system, Cockshot and Cottrell propose that a market in consumer goods be used in order to better understand where resources need to be allocated, and to better meet people’s needs.  In such a market, prices would initially be set at the value of their labour content, and would rise and fall based on demand.  When the price of a good rose above its labour content, the planning agency would allocate more resources to produce that good, whereas if it fell below its labour content the planning agency would remove resources from the production of said good.  In this way prices would be matched to labour content and supply would meet demand.

Because workers would be paid the full value of their labour, there would be no extraction of surplus value in this system, and therefore no business cycle with which to contend, implying a much greater degree of economic stability.

Workers would also be paid in labour credits that could be credited to contactless smart cards similar to the Paypass system introduced by Mastercard.  These credits would be erased upon usage, and if not used or deposited in a bank as savings would expire after a certain period.  They would also be non-transferrable.  This would remove the possibility of hoarding cash as a basis for the return of capitalist accumulation.

The systemic impulse of this economy would not be to maximize profits, but rather to minimize labour time, making it likely that the socialist economy would be superior at labour-saving than its capitalist counterpart, which relies upon exploited labour, reducing the incentive towards automation.  Under the proposed socialism, automation would be used to reduce the length of the working week, therefore ensuring the elimination of unemployment and the maximization of free time.  Under capitalism advancements in automation are only used to reduce the working week under extreme working class pressure, with capitalists preferring to pocket productivity gains as profits.  This is not only inhuman, in the sense that it maximizes both unemployment and the working time of those who are employed, but also economically irrational, in that it contributes to an imbalance between production and consumption.

Furthermore the socialist economy would not be plagued by parasitic rentier interests such as those that have come to dominate global capitalism through the process of financialization.  This would mean more resources would be devoted to productive investment and consumer goods, and less towards banker’s bonuses, landlords’ rents, and lawyers’ fees in copyright suits.

The end of company secrets and the copyright system would promote a much greater degree of sharing of innovations, facilitating a more rapid pace of advancement, whether it be in labour saving, environmental protection, or the arts.  Innovation could be promoted through the creation of state funded laboratories, similar to the famous DARPA, Xerox PARC Lab, and the MIT Media Lab.  A concrete example of such a state laboratory can be found in the work of the Chilean State Technology Institute, which during the Chilean Revolution produced a wide range of consumer products in an often successful attempt to democratize technology for the masses.  This is exactly the sort of production that a 21st century socialist economy would seek to recreate.

A socialist economy would also not require infinite growth in the way that capitalism does, meaning that it could form the basis for a serious program to address our wanton destruction of the environment and our reckless acceleration of global warming.

Finally this proposed economy would see an end to class society, as workers would only be paid according to the length of their working time (with bonuses allocated to extremely productive workers) and not according to their job type, as was the case in the USSR.  This would mean that a highly productive plumber would earn more than an unproductive state planner.  Post-secondary students would also be paid for their time spent studying, meaning that professionals would not be able to claim that they deserve higher compensation because of their education.  This would vouchsafe the legitimacy of the equal pay system.

While this all sounds quite wonderful, given this previous failures of socialism why should we believe that it will work?  Pro-capitalist economists would typically claim that effective socialist planning is impossible, based on the arguments of the Austrian School economist Ludwig Von Mises.  This was the substance of the so-called “socialist calculation debate” that took place during the existence of the USSR.

In fact advances in ICTs have greatly expanded our capacity for labour value calculations compared to when Von Mises originally advanced his criticisms.  First our advances in sheer computing power have reduced the time required for calculations from a matter of years to one of fractions of a second.  Second advances in planning theory have allowed for the work of calculation to be significantly reduced, and third advances in communication technology, in particular that of the internet means that production and consumption data can be collected with an ease that would have been inconceivable in the past.  This is not a technological determinist argument, social relations remain much more important than technological capacity, but it does recognize that economic problems cannot be considered in an ahistorical vacuum.  There are new possibilities available to us now that simply did not exist in the past.

If the economists’ arguments against socialism have been debunked, what about those of the philosophers and political scientists?  Is this “the road to serfdom,” no matter how well organized and efficient it might be?  To begin with, anyone with a passing familiarity with the generalized debt peonage towards which all capitalist states are today heading might question whether we are not already on the road to serfdom, courtesy of the heroic captains of industry and finance who dominate our present society.  However Cockshot and Cottrell’s proposed system does have some more substantial responses to this objection, recognizing as it does the bureaucratic despotism that came to characterize the USSR.

Cockshot and Cottrell propose that the socialist state be organized according to the principles of radical democracy, or what they call “demarchy.”  This would be a truly democratic political system that would follow Aristotle’s classic definition of democracy as rule by the demos – the common people.  This would be in contrast to both the system of parliamentary “democracy” familiar to the inhabitants of advanced capitalist states, and the system of “democratic-centralism” that was implemented by Marxist-Leninist parties, both of which essentially follow the principle of aristocracy, rule by the aristoi: “the best” who are elected by their peers in a system that inevitably perpetuates class domination and leads to oligarchy.  This point that can readily be proven by looking at the history of any social democratic party.

Cockshot and Cottrell’s proposed commonwealth would contain two main levels of democratic control. As in ancient Athens, citizens of would be regularly selected for planning juries by lottery, ensuring that a representative sample of the population is vested with authority over its detailed affairs.  The central planning agency would be subordinated to these juries, and would only be able to present them with proposals from which they might choose.  Proposals would also be accepted from independent economists, to whom the central planning agency’s data would be made available.  The arbiter between these different proposals would be the planning juries.

A second and higher level of democratic control would be provided through the holding of regular referendums on broad matters of social importance.  These referendums would be be conducted through the use of ICTs, allowing anyone with phone or internet access to participate.  They would fulfill a function similar to that of the Athenian assembly, allowing the whole population to play a role in governing its affairs. For example referendums would be held on what proportion of the social surplus product would be allocated to investment in the means of production, versus the amount that would be spent on consumer goods.  Other referendums would be held on issues such as how much should be invested in education relative to health care, and other matters of social expenditure.  This would mean that the people would be directly responsible for the direction of their own society.  It would no longer be any use complaining about taxation when the tax rate was set by popular decree.

While some of you are no doubt questioning the competency of the demos in running its own affairs, I would first ask you to compare your current sentiments with your no doubt passionate objections to the lack of “democracy” under state socialism, and second ask you if upon meeting your local MP or MLA you have ever been astounded by their exceptional competence. (Pause)

If you still are offended by the notion of the riff-raff running things, I would suggest that you have no business calling yourselves socialists or democrats.

In summary then, Cockshot and Cottrell have proposed a socialist system based upon a critical analysis of the actual historical development of socialism in the 20th century that is economically sound, thoroughly democratic, and extensively theorized.  I hope that you have enjoyed this presentation, and that you consider conceptualizing your future work in light of the ideas presented today.  Given the breadth and depth of the crisis of capitalism we face today, it is not sufficient to contemplate the world, we must change it.

Thank you.



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3 responses to “There is an Alternative: Rethinking Socialist Economic Planning

  1. Have you considered including some social bookmarking buttons to these sites. At least for myspace.

  2. Pablo Cocksure

    Interesting presentation. I happened to chance upon a criticism online:

    This is quite pathetic indeed. The Mises response posted can be summarized thusly: The world is unfair. If you try this you will be attacked.

    Now is this supposed to motivate me to read any of that Austian economics? As I go through life, wondering about how I am going to improve my life and I think that even if things got better for me, the millions of other people in the same or worse circumstances, I have to wonder what makes people gravitate towards a theory that answers this question like that.

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