1980s >> 1982 >> no-940-december-1982

Socialism and the free market

We look forward to a society where buying and selling have no place, to a truly social world where each contributes such work as they are able and all may take freely from the store of wealth created. But capitalism still has many apologists who assert that a socialist system would not work; often they are pie-eyed over the virtues of the market place, where freedom, equality of opportunity and property are supposed to reign supreme. In reality there is nothing equal about the major transaction that most of us have to endure throughout our lives. On the labour market the capitalist confronts the worker and after an average working lifetime of this “equal” transaction, the boss still owns the factory, the office, the shop and the profit made on the goods; while it is a lucky worker who manages to retain a house, a few sticks of furniture and a car through retirement and up to death.


The drive for profits and the capture of markets, which sets people against people, factory against factory and nation against nation, is the force that excludes a majority of the world’s population from the potential abundance of wealth that the modern industrial system is capable of producing. Endless wars and endless famines, with millions of guns and no bread, have been normal someplace in the world throughout this century. Socialists look with horror on this direct effect of the capitalist market and do what they can to make the revolution in consciousness that is needed before a system of free access can be introduced.


Yet there are some who see clearly what capitalism is and what it does, but who say “yes, give us a lot more of that! Let the free market be supreme. Give full and unfettered capitalism a chance!”


Communication among people of different political persuasion is never easy and this is the extreme case. It’s like the rhyme about the convicts:

Two men look through prison bars,
One sees mud, the other sees stars.


Chicken or egg?
Just what is so special about the capitalist market that it makes some people become starry-eyed at the wonders performed when buyers and sellers squabble over the price of a commodity? Because the market is an open place its apologists can see the crafty entrepreneurs shake hands on a price and imagine that something final and necessary is determined in this price formation. By contrast, what takes place in production, in the factory, is hidden and often secret; yet it is to production that you must look to discover the secret of profit making. For the prices realised in the market are determined by what took place earlier, in the closed confines of the shopfloor. Put at its simplest, the value of the bundle of goods produced by a workforce must greatly exceed the value of the bundle of goods they can buy with their wages. The surplus of these two values is the source of capitalist profit to be realised through a price.


At this the free marketeers present us with a chicken-and-egg argument. “To be sure”, they say, ‘‘prices reflect productive efficiency (what you would call levels of exploitation of the workforce) but prices also function as the final measure of productive efficiency. A socialist society without prices would lack any means of evaluating alternative methods for producing the same article. It would be a society where sensible choices about the most economic methods for production could not be made. Therefore a socialist society would be an irrational society”.


This argument often comes dressed up in a mathematical form as the von Mises supreme objection to socialism. Yet on examination it is easy to show that it is not an argument at all — just a series of assertions, comprising:

1. prices allow sensible choices to be made;
2. choices made without prices would be non-sensible;
3. socialist production would be non- sensible or irrational;
4. capitalist production is the only rational system.


The slide from no prices, to the non- sensible, to the irrational is an amusing ideological subterfuge. For, of course, any production system not using capitalism’s criterion must be non-sensible by that same criterion; it would not be a different society otherwise. So the von Mises argument has to assume what it needs to prove.


Overproduction everywhere
The thing which strikes socialists as being funny is how anyone can assume that the price system is rational in any super-social sense. When American grain growers face a world glut of wheat and a famine in Africa or Asia, it is rational for them to burn their surplus and maintain prices and profits. It would also be rational for them to allow the price of grain to fall to what production conditions dictate — providing they can persuade their government to subsidise production to the extent of the lost profit. What would not be rational for capitalist grain-growers is to allow the free distribution of grain wherever it is needed. Such free distribution of unlimited production is precisely what would be rational about a socialist society.


On another level it is absurd to imagine that only prices allow sensible choices to be made over alternative production processes. The most famous illustration of this absurdity is the public inquiry into the Cow Green reservoir in Cumbria over a decade ago.


Further water supplies for north east coast industries could have been taken from rivers or reservoir sites (pumped storage or catchment). Official choice fell on a catchment reservoir at the Cow Green site—the economically sensible choice. At the inquiry water authority officials and environmentalists clashed in mutual incomprehension, for the site of Cow Green was an ecological relic from the Ice Ages. It was a basin with powdery slopes of sugar-limestone covered with inter-glacial flora in unique combinations. Despite vociferous protest the sugar-limestone site was flooded. A society where economic efficiency and price-effectiveness reign supreme must discount scientific interest, beauty and uniqueness of habitat, because none of these last factors will bear an economic quantification,


Making use of it
The myopia of capitalist decision-making impoverishes the full natural and human complexities involved over alternative production processes. By contrast a socialist society would make its production choices on the bases of usefulness, desirability and the needs of the population. Productive efficiency in units of direct output can be weighed and ranged alongside usefulness, desirability, needs, beauty and scientific interest. The factors that will govern production in a socialist society are commensurable factors; and it is the similarities between material, aesthetic and scientific needs which will allow socialist society to compare them directly and make sensible choices about alternative production processes, based on overall needs. In a capitalist society the “sensible”choice is made by cost-evaluation, economic efficiency predictions and profitability; such choices seem obviously rational because this society grants those factors the highest place anyway.


If anyone doubts the wisdom of allowing non-economic factors full play in production decisions they need only consider the subsequent history of Cow Green reservoir. Capitalism went into a slump and industry had little need of the extra water. Any other decision than the economic one actually taken would have been more sensible. As an amenity the reservoir is useless; the fishing is neglected and those who use the new road to Cow Green go only to see the waterfall of Cauldron Snout, now despoiled by the huge concrete dam above it.


Reductio ad absurdum
So just what do capitalist costs and prices represent? The explanations put forward by economists are versions of an abstinence theory, where the cost of any goods produced from invested capital is equal to the cost of what could best have been produced otherwise. Now this is useless, both as an explanation of costs and as a means of making a choice over alternative production processes. Most environmentalists object very strongly to paying 30 per cent of their electricity bills (by conventional accounting) for the funding of nuclear-powered electricity generating, when nuclear installations provide only 8 per cent of the electricity. They say that 30 per cent of their bills would be better used to fund the 30 per cent of electricity which could be generated from wind, wave, solar and geothermal power. But apologists for the nuclear power investment programme, while agreeing that their baby is over-capitalised compared to its net electricity contribution, still argue that when fossil fuels run out the contribution of nuclear power will exceed its capitalisation by as much as it now falls short of it. Thus, both environmentalists and fissionists use the same theory of costs to arrive at “sensible” yet contradictory conclusions.


In brief, costs cannot be calculated without regard for the social system they are related to. No major nation may give up nuclear generating without cost to its independence in providing armed forces with weapons-grade plutonium. Such considerations apply, in a different way, to the whole of capitalist production. For all goods must realise sufficient surplus value to enable a government to tax profits and provide the armed forces which ultimately will be used to secure the markets where the profits may be realised. In addition the capitalist system has built into it an incredible set of socially necessary costs, including the entire range of fiscal activities that ensure the circulation of commodities over the globe; to a socialist, treasuries, mints, banks, underwriters and vast armies of cashiers, ticket issuers/collectors and accountants, constitute just one great big unproductive drain down which capitalism pours the suprabundant energies of the working class.


The free society
Free market advocates may object to some of the examples used above because they are culled from the real capitalist world and not from some imaginary state where the government does not levy taxes, where cartels are not formed, where state investment does not exist and where laissez faire is triumphant. Yet the market is not and never can be “free”, for the simple reason that the capitalist class is divided itself; each part of the class tries to enforce the trading conditions it prefers and the whole class only unites against the working class, or when threatened by another national capitalism. The peculiarity of the position held by the free marketeers is that they accuse socialists of “copping-out” and having no world to defend; yet they themselves do not defend capitalism as it is, but only as it might be, in their auctioneering dreams.


Socialist society is not a dream, but something for which the development of capitalism has prepared production. Remove the vast unproductive apparatus referred to above and you can see what a flood of labour power and resources would be available for useful production in a socialist society. Socialist freedom means the ability to accommodate all the many and varied styles of living, production systems, special and overall concerns that grab people in their interactions with the social and physical environment. Without the drag of private property and the market an abundant future is secure anyway.


B. K. McNeeney